Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies

Greg Manning Auctions, Inc. (GMAI), together with its operating subsidiaries
(wholly owned unless otherwise indicated), Ivy and Manning (formerly Mader)
Philatelic Auctions, Greg Manning Galleries, Greg Manning Nutmeg Auctions, (d/b/a Nutmeg Stamp Sales), Teletrade, Spectrum Numismatics International, North American Certified Trading, Kensington Associates, Superior Sports Auctions, Bowers & Merena Galleries, Kingswood Coin Auctions, Corinphila Auktionen (65% owned by GMAI), Heinrich Kohler Berliner Briefmarken-Auktionen (66.67% owned by GMAI), Heinrich Kohler Auktionshaus, Heinrich Kohler Briefmarkenhandel, Heinrich Kohler Verwaltungs, Auctentia Deutschland, Auctentia Subastas and GMAI Auctentia Central de Compras (CdC) (collectively, the Company), is a traditional and e-commerce - Internet, interactive telephone, and Internet and live simulcast - auctioneer and merchant/dealer of collectibles, including rare stamps, stamp collections and stocks, coins, sports trading cards and memorabilia, and fine art. The Company conducts both in-person event auctions and electronic auctions via the Internet and touch-tone telephone.

Afinsa Bienes Tangibles, S.A. (Afinsa) owns 100% of the outstanding stock of Auctentia, S.L. (Auctentia). At June 30, 2004 and 2003, Afinsa and Auctentia collectively beneficially owned approximately 69% and 43%, respectively, of the Company's outstanding common stock at June 30, 2004 and 2003.

The Company is a party to separate supply agreements with Afinsa, dated August 1, 2003, as amended, pursuant to which the Company and CdC act as exclusive suppliers of collectibles - primarily stamps and coins - for Afinsa on a worldwide basis, with GMAI acting in the United States and Hong Kong, and CdC acting in all other geographic locations. Afinsa is engaged, among other things, in commercial and trading activities involving tangible investment products throughout Europe. As amended, the supply agreements have a ten-year term, terminable by either party upon six months' notice. In addition to paying the purchase price for the goods sold under the contracts, Afinsa pays to the Company an amount equal to 10% of the aggregate purchase price of all such goods sold.

As a result of transactions under the supply agreements, for the year ended June 30, 2004 Afinsa was the Company's significant customer, accounting for $102,215 or 48% of revenues for the period. Transactions under the supply agreements have had a significant effect on the business, financial condition and results of operations of the Company.

See Notes 2 and 12 for additional information.

The consolidated financial statements of the Company include the accounts of its wholly and majority owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The Company accounts for revenue recognition in accordance with Staff Accounting Bulletin No. 101 and No. 104, ("SAB No.'s 101/104"), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements, and Emerging Issues Task Force ("EITF") Issue No. 99-19 "Reporting Revenue Gross as a Principal vs. Net as an Agent" which provides guidance on the recognition of revenue gross as a principal versus net as an agent.

The Company derives revenues from two primary sources:

1. Private Treaty Sales:

Private treaty sales represent sales of consigned property and sales of owned inventory which include sales to Afinsa (related party) pursuant to the exclusive supplier agreement as further described above (Description of Business).

Private treaty sales of consigned property occur when an owner of property arranges with the Company to sell such consigned property to a third party at a privately negotiated price. In such a transaction, the owner may set selling price parameters for the Company, or the Company may solicit selling prices for the owner, and the owner may reserve the right to reject any selling price. The Company does not guarantee a fixed price to the owner, which would be payable regardless of the actual sales price ultimately received. The Company recognizes as private treaty revenue an amount equal to a percentage of the sales price. Such amounts of revenue are recorded on a net basis as commission revenue and are recognized when sold.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

Private treaty sales of owned inventory occur when the Company sells its goods directly to a customer. Revenue with respect to private treaty revenues is recognized when delivered or released to the customer for acceptance or to a common carrier for delivery. Such amounts of revenue are recorded on a gross basis as sales of merchandise. Sales returns have not been material.

2. Auction Revenue:

Revenue is recognized when the collectibles are sold at auction and is represented by an auction commission received from the buyer and seller. Auction commissions represent a percentage of the hammer price at auction sales as paid by the buyer and the seller. Such amounts of revenue are recorded on a net basis as commission revenue.

The Company also sells its own inventory at auction. Revenue of owned inventory is recognized when sold at auction. Such amounts of revenue are recorded on a gross basis as sales of merchandise. Additionally, the Company is entitled to auction commissions paid by the buyer. Sales returns have not been material.

The Company does not provide any guarantee with respect to the authenticity of property offered for sale at auction. Each lot is sold as genuine and as described by the Company in the catalogue. When however, in the opinion of a competent authority mutually acceptable to the Company and the purchaser, a lot is declared otherwise, the purchase price will be refunded in full if the lot is returned to the Company within a specified period. In such event, the Company will return such lot to the consignor before a settlement payment has been made to such consignor for the lot in question. To date, returns have not been material. Large collections are generally sold on an "as is" basis.

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company frequently extends trade credit in connection with its auction sales, which are held throughout the United States. The Company evaluates each customer's creditworthiness on a case-by-case basis; generally the customers who receive trade credit are professional dealers who have regularly purchased property at the Company's auctions or whose reputation within the industry is known and respected by the Company. The Company makes judgments as to the ability to collect outstanding auction and consignor advances receivables and provides allowances for the portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. The Company continuously monitors payments from its customers and maintains allowances for doubtful accounts for estimated losses in the period they become known.

In situations where trade credit is extended, the purchaser generally takes possession of the property before payment is made by the purchaser to the Company, and the Company is liable to the consignor for the net sales proceeds (auction hammer price less commission to the Company). The Company pays the consignor generally no later than the 45th day after the sale, and when trade credit is extended, the Company assumes all risk of loss associated with the trade credit, and the responsibility of collection of the trade credit amount from the purchaser. Losses to date under these situations have not been material.

Certain sales of inventory owned by the Company are made with extended payment terms (up to twelve months). Certain assets held by the Company collateralize these receivables.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

The functional currency of the Company's foreign operations is the applicable local currency. The foreign subsidiaries' assets and liabilities are translated into United States dollars using exchange rates in effect at the balance sheet date and their operations are translated using the average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a component of other comprehensive income (loss).

Foreign currency transaction gains and losses are included in the accompanying Statements of Operations.

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash with high quality financial institutions, located primarily in the United States and Spain. To the extent that such cash exceeds the maximum insurance levels, the Company is uninsured. The Company has not experienced any losses in such accounts.

Inventories are stated at the lower of cost or market ("LCM"), which reflects management's estimates of net realizable value. Inventories are accounted for under the specific identification method. In instances where bulk purchases are made, the cost allocation is based on the estimated market values of the respective goods. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has declined in value and incurs a charge to operations for such declines. The Company records write-downs based on two methodologies; specific write-downs on certain items based on declines in the marketplace, and estimated write-downs based on a percentage of the inventory aging by category type, unless the Company implores a marketing strategy to sell goods over time. If actual market conditions are less favorable than those projected by management and the Company's estimates prove to be inaccurate, additional write-downs or adjustments to recognize additional cost of sales may be required.

In certain instances, the Company holds inventory for a period of time in excess of one year, which is generally based on a marketing strategy to sell collectibles over time in order to avoid flooding the marketplace. Inventories, which are not expected to be sold within one year, are classified with other Non-Current Assets in the Consolidated Balance Sheets in the accompanying consolidated financial statements.

The Company has agreements with certain suppliers to share the net profits or losses attributable to the sale of specific items of inventory. As of June 30, 2004 and 2003 the amount of inventories subject to these arrangements was approximately $9,144 and $7,600, respectively, which is included in Inventory in the accompanying Consolidated Balance Sheets.

Property and equipment are carried at cost. Depreciation is computed using the straight-line method. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in results of operations for the period. Leasehold improvements are amortized over the shorter of the estimated useful lives or the remaining life of the lease, which is generally 5 years. Equipment, furniture and fixtures, and vehicles are amortized over a period of generally 5 years or less. Properties under capital leases are amortized over the life of the lease, which are normally three to five years. The cost of repairs and maintenance is charged to operations as incurred.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

In the year ended June 30, 2004, the Company completed three acquisitions, as further described in Note 2. In these acquisitions, the purchase price of the acquired business was allocated to the assets acquired and liabilities assumed at their fair values on the date of the acquisition. The fair values of these items were based upon management's estimates. Certain of the acquired assets were intangible in nature, including trademarks and customer lists. The excess purchase price over the amounts allocated to the assets is recorded as goodwill. All such valuation methodologies, including the determination of subsequent amortization periods, involve significant judgments and estimates. Different assumptions and subsequent actual events could yield materially different results.

Goodwill primarily includes the excess purchase price paid over the fair value of net assets acquired. Effective July 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS"), No. 142, "Goodwill and Other Intangible Assets". Under SFAS 142, the Company ceased amortization of goodwill and tests its goodwill on an annual basis using a two-step fair value based test.

The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test must be performed to measure the amount of the impairment loss, if any. Management has determined that it operates as one reporting unit and therefore assesses goodwill for impairment on an enterprise -wide basis. Management evaluates the recoverability of goodwill using the Company's market capitalization, which determines if the carrying value of goodwill is impaired. If impairment is determined, the Company will recognize additional charges to operating expenses in the period in which they are identified, which would result in a reduction of operating results and a reduction in the amount of goodwill.

Prior to the adoption of SFAS 142 on July 1, 2002, the Company amortized goodwill over its estimated useful life and evaluated goodwill for impairment in conjunction with its other long-lived assets.

Other purchased intangibles consisting of trademarks and customer list, purchased as part of business acquisitions are presented net of related accumulated amortization and are being amortized on a straight-line basis over the remaining useful lives. (The Company records impairment losses on other intangible assets when events and circumstances indicate that such assets might be impaired and the estimated fair value of the asset is less than its recorded amount in accordance with SFAS No 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Company reviews the value of its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Conditions that would necessitate an impairment assessment include material adverse changes in operations, significant adverse differences in actual results in comparison with initial valuation forecasts prepared at the time of acquisition, a decision to abandon certain acquired products, services or marketplaces, or other significant adverse changes that would indicate the carrying amount of the recorded asset might not be recoverable.

Annually, the Company performs this analysis with assistance from an independent valuation expert. The Company evaluates the recoverability of other purchased intangibles using undiscounted cash flows whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In performing these analyses uses the best information available in the circumstances including reasonable and supportable assumptions and projections.

The Company accounts for marketable securities pursuant to the SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Under this Statement, the Company's marketable securities with a readily determinable fair value have been classified as available for sale and are carried at fair value with an offsetting adjustment to Stockholders' Equity. Net unrealized gains and losses on marketable securities are credited or charged to a separate component of Stockholders' Equity, net of tax.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

The Company accounts for all investments in investees under the cost method of accounting when such investment ownership is less than 20%. The Company accounts for investments in investees under the equity method of accounting when the Company owns more than 20% of the entity, but less than majority owned and not otherwise controlled by the Company.

For the years ended June 30, 2004 and 2003 the Company's investments were accounted for under the cost method of accounting. For the year ended June 30, 2002, the Company's investments were accounted for under the equity method of accounting.

Advances payable are cash advances on inventory consigned to a third party for sale by the third party at a later date at which time the advance will be deducted from the proceeds.

The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of June 30, 2004 and 2003 because of the relative short maturity of these instruments. The carrying value of notes receivable, demand notes payable to bank and loans payable approximated fair value at June 30, 2004 and 2003 based upon quoted market prices for the same or similar instruments.

The Company accounts for stock options in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123"), which allows companies an option to either record compensation expense based on the fair value of stock options granted, as determined by using an option valuation model, or to continue following the accounting guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its stock options and other stock-based employee awards. Because the Company has elected this treatment, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123") and Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation Transition and Disclosure," ("SFAS No. 148") require disclosure of pro forma information which provides the effects on net income (loss) and net income
(loss) per share as if the Company had accounted for its employee stock awards under the fair value method prescribed by SFAS 123. Under APB No. 25, compensation cost for stock options is measured as the excess, if any, of the market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. No stock-based employee compensation cost is reflected in net income (loss), as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

In accordance with SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," the effect on net income (loss) and net income
(loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation is as follows:

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

                                                                             June 30,
                                                         ------------------------------------------------
                                                             2004              2003              2002

Net income (loss) as reported                            $    29,366         $  2,823         $  (13,177)

Deduct:

Total stock-based employee
  compensation expense determined
  under fair value based method
  for all awards, net of related
  tax effects                                                 (2,214)          (1,333)            (1,998)
                                                         -----------         --------         ----------
Pro forma net income (loss)                              $    27,152         $  1,490         $  (15,175)
                                                         ===========         ========         ==========

Net income (loss) per share:
Basic earnings (loss) per share - as
reported                                                 $      1.22         $    .22         $    (1.06)
                                                         ===========         ========         ==========

Basic earnings (loss) per share - proforma               $      1.13         $    .12         $    (1.22)
                                                         ===========         ========         ==========

Net income (loss) per share:
Diluted earnings (loss) per share - as
reported                                                 $      1.14         $    .22         $    (1.06)
                                                         ===========         ========         ==========

Diluted earnings (loss) per share -
proforma                                                 $      1.05         $    .12         $    (1.22)
                                                         ===========         ========         ==========

The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2004, 2003 and 2002, respectively; risk-free interest rates of 4.0%, 5.0% and 5.1%; dividend yields of 0%; volatility factors of the expected market price of the Company's common stock of 76%; and weighted-average expected life of the option of five years for 2004, 2003 and 2002. There was no compensation expense recorded from employee stock options for the years ended June 30, 2004, 2003 and 2002.

The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and the EITF Issue No. 96-18, "Accounting for Equity Instruments that are Issued to other than Employees for Acquiring, or in Conjunction with Selling Goods or Services".

Advertising and catalogue costs are included in marketing costs and are expensed as incurred, which occurs in the same quarter that the related auction takes place. As a result, assets of the Company do not include any of these costs. Such expenses for the years ended June 30, 2004, 2003 and 2002 were approximately $3,037, $1,166 and $1,370, respectively.

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in Thousands Except for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

Realization of a deferred tax asset is dependent on generating future taxable income. During the fiscal years ended June 30, 2002 and 2003 the Company provided a valuation allowance against deferred tax assets since we believed at the time that enough uncertainty existed regarding the realizability of our deferred tax assets. However, because of the current and expected future results of the Company, we have concluded that a certain portion of the valuation allowance against the deferred tax assets is no longer necessary, and have accordingly reduced the allowance against the provision for taxes in the fiscal year ended June 30, 2004, as further discussed in Note 9.

Basic earnings (loss) per share are computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. The dilutive effect of the outstanding options would be reflected in diluted earnings (loss) per share by application of the treasury stock method.

The following table sets forth the computations of basic earnings (loss) per share and diluted earnings (loss) per share:

                                                       2004              2003            2002
                                                     --------          --------        --------
Years ended June 30,
Numerator:
           Net Income (Loss)                         $ 29,366          $  2,823        $(13,177)
                                                     ========          ========        ========

Denominator:
          Weighted average common
          shares outstanding                           23,985            12,739          12,469

Earnings (Loss) per share - Basic                    $   1.22          $   0.22        $  (1.06)
                                                     ========          ========        ========

Denominator:
          Weighted average common
          shares outstanding                           23,985            12,739          12,469

          Common share equivalents
            of outstanding stock options
            and warrants                                1,802                77            --
                                                     --------          --------        --------

          Total Shares                                 25,787            12,816          12,469

Earnings (Loss) per share - Diluted                  $   1.14          $   0.22        $  (1.06)
                                                     ========          ========        ========

Common share equivalents consist of employee stock options using the treasury stock method. For the years ended June 30, 2004 and 2003, 357,000 and 983,000 employee stock options, respectively, were excluded from the computation of diluted net income per share because the exercise price of these options was greater than the average market price of the Company's common stock during the period, and therefore the effect is antidilutive. For the year ended June 30, 2002, all employee stock options were excluded from the computation of diluted net loss per share because the effect would have been antidilutive.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in ThousandsExcept for Per Share Amounts or as noted)

(1) Description of Business and Summary of Significant Accounting Policies
(continued)

Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Accumulated other comprehensive income, as presented on the accompanying Consolidated Balance Sheets consist of the net unrealized gains (losses) on securities, net of tax and the impact of unrealized foreign currency translation adjustments.

The Company operates principally in one segment consisting of various collectibles. All of the Company's sales and identifiable assets are located in the United States and Europe. For the year ended June 30, 2004, there was one significant customer, Afinsa, which accounted for 48% of the revenue for that year. There was one major customer other than Afinsa, for the year ended June 30, 2003, which accounted for 12% of the revenue for that year.

Major customers are those that accounted for more than 10% of revenues.

In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition" ("SAB No. 104"), which codifies, revises and rescinds certain sections of SAB No. 101, "Revenue Recognition", in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have a material effect on our consolidated results of operations, consolidated financial position or consolidated cash flows.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN No. 46"), which addresses consolidation by business enterprises of variable interest entities ("VIEs"). FIN No.46 is applicable immediately for VIEs created after January 31, 2003 and are effective for reporting periods ending after December 15, 2003, for VIEs created prior to February 1, 2003. In December 2003, the FASB published a revision to FIN 46 ("FIN 46R") to clarify some of the provisions of the interpretation and to defer the effective date of implementation for certain entities. Under the guidance of FIN 46R, public companies that have interests in VIE's that are commonly referred to as special purpose entities are required to apply the provisions of FIN 46R for periods ending after December 15, 2003. A public company that does not have any interests in special purpose entities but does have a variable interest in a VIE created before February 1, 2003, must apply the provisions of FIN 46R by the end of the first interim or annual reporting period ending after March 14, 2004. The Company adopted FIN 46 and FIN 46R during the year ended June 30, 2004. The adoption of FIN 46 had no impact on the financial condition or results of operations since the Company does not have investments in VIE's.

On April 30, 2003, the FASB issued SFAS 149, Amendment of SFAS 33 on Derivative Instruments and Hedging Activities. Statement 149 is intended to result in more consistent reporting of contracts as either freestanding derivative instruments subject to SFAS 133 in its entirety, or as hybrid instruments with debt host contracts and embedded derivative features. In addition, SFAS 149 clarifies the definition of a derivative by providing guidance on the meaning of initial net investments related to derivatives. There was no impact from the adoption of SFAS 149.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." This standard requires an issuer to classify certain financial instruments as liabilities. It also changes the classification of certain common financial instruments from either equity or presentation to liabilities and requires an issuer of those financial statements to recognize changes in fair value or redemption amount, as applicable, in earnings. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and with one exception, is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150 at this time has had no impact on the Company's results of operations, financial position or cash flows.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in ThousandsExcept for Per Share Amounts or as noted)

(2) Acquisitions

Auctentia, S.L.

On September 8, 2003, the Company consummated three separate transactions with Auctentia, S.L. ("Auctentia"), a wholly owned subsidiary of Afinsa Bienes Tangibles, S.A. ("Afinsa"), pursuant to agreements executed on January 23, 2003. In connection with these transactions, the Company issued an aggregate of 13 million shares of its common stock to Auctentia. The three transactions are described below.

Share Purchase Agreement

The Company issued to Auctentia 3,729,226 shares of its common stock in exchange for all of Auctentia's equity interests in seven of its European-based operating subsidiaries. These entities are engaged in the business of providing intermediation for high-level collectors, with auctions and sales in primarily philatelic assets. The acquisition was accounted for under the purchase method of accounting, and accordingly the consolidated financial statements include the operations of these subsidiaries from the date of acquisition, September 8, 2003.

The aggregate purchase price was approximately $6,004 (3,729,226 at $1.61 per common share) plus acquisition costs of approximately $1,100. The price per share of $1.61 was based on the average market price per share from January 21, 2003 through January 27, 2003, two days before and after January 23, 2003, the date the transaction agreements were entered into. The purchase price allocation of assets purchased and liabilities assumed of approximately $1,717 were based upon management's estimate of the fair value at the date of acquisition. In accordance with SFAS 141, Business Combinations, the excess of the purchase price over the net assets acquired was assigned to goodwill.

Tangible and intangible assets acquired:

Current assets.............................................  $3,164
Property and equipment, net................................     642
Goodwill...................................................   4,287
                                                             ------
Total tangible and intangible assets acquired....            $8,093
                                                             ======
Less liabilities assumed:

Current liabilities........................................   2,089
Non-Current liabilities....................................       -
                                                             -------

Total liabilities assumed..................................  $2,089
                                                             ======

Total purchase price.......................................  $6,004
                                                             ======

In addition the Company incurred acquisition costs of $1,100 which increased the goodwill total for this acquisition to $5,387.

Greg Manning Auctions, Inc. Notes to Consolidated Financial Statements

($ in ThousandsExcept for Per Share Amounts or as noted)

(2) Acquisitions (continued)

The following unaudited pro forma consolidated results of operations for the period assumes the acquisition of the subsidiaries had occurred as of July 1, 2001, giving effect to purchase accounting adjustments. The proforma data is for informational purposes only and may not necessarily reflect the results of operations had those companies been operated as part of the Company since July 1, 2001.

                                      (Unaudited)
                                 Years Ended June 30,
                                 2004        2003       2002
                            -----------------------------------

Net revenues                 $ 213,779   $ 107,636   $  87,111
Net income  (loss)              28,913       2,491     (12,785)

Basic earnings (loss) per
share - Proforma                  1.17        0.15       (0.79)
Diluted earnings (loss) per
share - Proforma                  1.09        0.15       (0.79)

Inventory Purchase Agreement

The Company issued to Auctentia 6,444,318 shares of its common stock in exchange for Auctentia's 100% equity interest in a newly formed subsidiary, GMAI Auctentia Central de Compras, S.L. ("CdC"), whose sole assets consisted of an inventory of certain philatelic and art assets. Prior to the consummation of this transaction, CdC did not have any business operations. CdC is engaged in the sale, marketing, brokering, distribution, promotion and production of owned and third party collectibles, with an emphasis on specialized philatelic material.

The value of the inventory was recorded based upon the closing trading price of the Company's common stock on the NASDAQ National Market on January 23, 2003, which is the date on which the agreement was entered into, which was $1.57; as such, the fair value of the inventory is approximately $10,118 (based upon 6,444,318 shares at $1.57 per share).

Subscription Agreement

Pursuant to the subscription agreement, the Company issued to Auctentia 2,826,456 shares of its common stock for a purchase price equal to the Euro equivalent of $5,000 based on the Euro/US dollar exchange rate as of the close of business on the business day immediately preceding the closing date. The proceeds received by the Company pursuant to the subscription agreement were used to purchase inventory, fund auction advances and for other working capital purposes of CdC.

Prior to the consummation of these transactions, Auctentia and Afinsa collectively owned approximately 43% of the Company's common stock. As a result of the transactions, Auctentia and Afinsa increased their ownership to 72% of the Company's outstanding common stock. The percentage of outstanding common stock owned by Auctentia and Afinsa decreased to 69% as of June 30, 2004 as a result of the exercise of employee stock options during the year.

The financial results of the above transactions are included in the Company's consolidated financial statements from and after September 8, 2003.

In addition, Greg Manning Auctions, Inc. and CdC are parties to separate agreements with Afinsa, each dated August 1, 2003, pursuant to which GMAI and CdC have agreed to act as exclusive suppliers of collectibles for Afinsa, on a worldwide basis. See Note 1.

Nutmeg Stamp Sales, Inc.

On February 11, 2004, GMAI acquired the business assets of Nutmeg Stamp Sales of Danbury, Connecticut, which is engaged in the sale of primarily owned inventory to mid- and upper-end collectors. The purchase price for the assets was $1,093, which was paid at closing. The business will be operated through a recently formed subsidiary, Greg Manning Nutmeg Auctions, Inc., d/b/a Nutmeg Stamp Sales, Inc.

Current assets............................................  $   93
Property and equipment, net...............................      50
Intangible Assets.........................................     450
Goodwill..................................................     500
                                                            ------
Total tangible and intangible assets acquired,
purchase price.                                             $1,093
                                                            ======

      Bowers  and Merena  Galleries,  Kingswood  Coin  Auctions  and  Superior
Sports Auctions

On February 19, 2004, Spectrum Numismatics International, Inc. ("Spectrum"), a wholly owned subsidiary of GMAI, acquired the business assets of Bowers and Merena Galleries, Kingswood Coin Auctions and Superior Sports Auctions from Collectors Universe, Inc. ("CUI"), which had previously operated such businesses through separate divisions. Bowers and Merena Galleries and Kingswood Coin Auctions are engaged in the acquisition (by purchase and consignment) and sale (by auction and otherwise) of collectible coins, and Superior Sports Auctions is engaged in the acquisition (by purchase and consignment) and sale (by auction and otherwise) of collectible sports cards and other sports memorabilia.

Pursuant to an Asset Purchase Agreement, dated February 19, 2004 (the "Asset Purchase Agreement"), by and between Spectrum and CUI, Spectrum acquired certain business assets, consisting primarily of trade names and other intangible assets and furniture and equipment but excluding accounts receivable and inventory, for an aggregate purchase price of $2,510. Pursuant to the Asset Purchase Agreement, $1,025 of the purchase price was paid at the closing, and the balance is to be paid in installments over the next 12 months. Payment of those installments has been guaranteed by GMAI. As of June 30, 2004 the remaining amount of the purchase price to be paid is $460. Such amount is included in accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.

Tangible and intangible assets acquired:

Property and equipment, net...........................   $   150
Intangible Assets.....................................       600
Goodwill..............................................     1,760
                                                         -------

Total tangible and intangible assets acquired,
purchase price.                                          $ 2,510
                                                         =======

(3) Accounts Receivable

Accounts receivable consists of auction or trade receivables and consignor advances.

Auction or trade receivables represent sales made to customers for which short-term credit extensions are granted, which generally are not extended beyond 90 days.

Advances to consignors represent advance payments, or loans, to the consignor prior to the auction sale, collateralized by the items received and held by the Company for the auction sale and the proceeds from such sale. Interest on such amounts is generally charged at an annual rate of 12%. Such advances generally are not outstanding for more than six months from the date of the note.

As of June 30, 2004 and 2003, the allowance for doubtful accounts included in auction receivables was approximately $1,095 and $873, respectively.

                              Cost       Market     Unrealized
                                         Value      Gain
                                                    (Loss)
                           ----------   ---------  ----------

Common Stock - 2004        $     285    $     186  $     (99)
                           ==========   =========  ==========

Common Stock - 2003        $     285    $      49  $     (236)
                           ==========   =========  ==========

The unrealized loss is classified as a separate component of stockholders' equity, net of tax, as of June 30, 2004 and 2003, respectively. In connection with its ownership of this common stock, the Company was granted stock options for 21,000 shares of common stock under the terms of a nonqualified stock option agreement. The options are exercisable on April 1, 2006 at $5 per share. During the year ended June 30, 2003 the Company sold 20,000 shares for approximately $13, resulting in a pretax loss of marketable securities of approximately $87.

(5) Inventories

                                     June 30, 2004
                                     -------------
                           Current    Non-Current      Total
                          ----------- -------------  ----------
Stamps                     $  28,774   $     7,111    $ 35,885
Coins                         11,555             -      11,555
Sports Collectibles              484             -         484
Art                                3           225         228
                          ----------- -------------  ----------
                           $  40,816   $     7,336    $ 48,152
                          =========== =============  ==========

                                     June 30, 2003
                                     -------------
                           Current     Non-current     Total
                          ----------- -------------  ----------
Stamps                     $   3,389   $      230    $   3,619
Coins                         11,891            -       11,891
Sports Collectibles              461          370          831
Art                               34          250          284
Other                             96            -           96
                          ----------- ------------- ----------
                           $  15,871   $      850    $  16,721
                          =========== =============  ==========

The non-current inventory represents an estimate of total inventory, which is not expected to be sold within one year.

At June 30, 2004 and 2003, the above inventory amounts reflect net realizable ("LCM") allowances of $1,439 and $1,885, respectively. The reduction in the net realizable ("LCM") allowance was due to the selling of a significant amount of inventory with carrying values that were previously reduced by the allowances.

                                          June             June
                                           30,              30,
                                          2004             2003
                                        --------         --------

Equipment                               $ 5,418          $ 3,285
Furniture and fixtures                    1,310              271
Vehicles                                     84               68
Property under capital leases
(computers and office equipment)            186              186
Leasehold improvements                      534              503
                                        --------         --------
                                          7,532            4,313
Less: accumulated depreciation
and amortization                          5,596            3,569
                                        --------         --------
Net property and equipment               $1,936          $   744
                                        ========         ========

Depreciation and amortization expense for the years ended June 30, 2004, 2003 and 2002 was approximately $746, $435 and $605 respectively.

(7) Intangible Assets

Balance - July 1, 2002            $  1,516
Net Activity                             -
                                  ---------

    Balance - June 30, 2003       $  1,516
                                  =========


Balance - July 1, 2003            $  1,516
Purchased Goodwill - Auctentia       5,387
Purchased Goodwill - Nutmeg Stamp      500
Purchased  Goodwill  - Bowers &      1,760
Merena                                   -
                                  ---------

    Balance - June 30, 2004       $  9,163
                                  =========

Prior to the adoption of SFAS 142 on July 1, 2002, the Company amortized goodwill over its estimated useful life and evaluated goodwill for impairment in conjunction with its other long-lived assets.

(7) Intangible Assets (continued)

The following table provides comparative disclosure of adjusted net income
(loss) excluding goodwill amortization expense, net of taxes for the periods presented:

(Dollars in thousands, except per share

data)
                                             For the Years Ended June 30,
                                                2004     2003    2002
------------------------------------------------------------------------
Reported net income (loss)                    $ 29,366    2,823 (13,177)
Add back: Amortization of goodwill                   -       -      523
                                               -------------------------
Adjusted net income (loss)                    $ 29,366    2,823 (12,654)
                                               =========================

BASIC EARNINGS(LOSS) PER COMMON SHARE:
Reported net income (loss)                    $   1.22      .22  (1.06)
Add back: Amortization of goodwill                   -        -    .04
                                               -------------------------
Adjusted net income (loss)                    $    1.22      .22  (1.02)
                                               =========================

DILUTED EARNINGS(LOSS) PER COMMON SHARE:
Reported net income (loss)                    $    1.14      .22  (1.06)
Add back: Amortization of goodwill                    -        -    .04
                                               -------------------------
Adjusted net income (loss)                    $    1.14      .22  (1.02)
                                               =========================

During the year ended June 30, 2002 the Company recorded $3,083 for goodwill impairment. There were no impairment charges for the years ended June 30, 2004 and 2003.

               Estimated
                 Useful        Gross
                 Lives        Carrying     Accumulated    Net Book
                (Years)        Amount      Amortization   Value
------------------------------------------------------------------

Trademarks         5 - 16 $        3,500 $    (2,172) $     1,328
Customer Lists     3 -  5          1,730      (1,160)         570
                            -------------  -----------  ----------
                          $        5,230 $    (3,332) $     1,898
                            =============  ===========  ==========

June 30, 2003
               Estimated
                 Useful         Gross
                 Lives        Carrying     Accumulated    Net Book
                (Years)        Amount      Amortization   Value
------------------------------------------------------------------

Trademarks         16      $       3,000   $  (2,077)   $     923
Customer Lists      5              1,105      (1,085)          20
                            -------------  -----------  ----------
                           $       4,105   $  (3,162)   $     943
                            =============  ===========  ==========

All of the Company's acquired intangible assets are subject to amortization. Amortization expense (exclusive of impairment charges) for acquired intangible assets for the years ended June 30, 2004, 2003 and 2002 were approximately $169, $122 and $288 respectively.

(7) Intangible Assets (continued)

The Company recorded impairment charges for other purchased intangibles of $0, $0 and $1,658 for the years ended June 30, 2004, 2003 and 2002.

Estimated amortization expense on an annual basis for the succeeding five years is as follows (in thousands):

For The Fiscal Years Ended

June 30,                    Amount

2005                       $  297
2006                          297
2007                          278
2008                          272
2009                          202
Thereafter                    552
                            -----
Total                     $ 1,898
                            =====

(8) Investment in Investee

In March 1999, the Company, along with other investors, formed GMAI-Asia.com, Inc., a Delaware corporation ("GMAI-Asia"), with the intent to expand the Company's philatelic and collectible auction and merchant/dealer businesses into China and South-East Asia through the Internet. The Company's original investment in this investee was approximately $5,300 and the Company maintained an original equity ownership percentage (on an undiluted basis) in GMAI-Asia of 48%. During May 2001, the

Company sold 500,000 shares of its GMAI-Asia common shares, which reduced the Company's investment from 48% to 45%. The Company accounted for this investment under the equity method of accounting.

The Company's accumulated losses for GMAI-Asia at June 30, 2001 were approximately $11,200. The Company's portion of these accumulated losses exceeded its total investment. As a result, the investment in this investee was reduced to $0 at June 30, 2001.

During 2002, the Company increased its investment by $250 by issuing additional GMAI common stock. Since the Company's portion of this entity's accumulated losses continued to exceed its total investment, this amount was recorded in the accompanying Statement of Operations as Loss from Operations of Investee.

During March 2003, the Company sold all of its interest in GMAI-Asia, which it then held, consisting of approximately 8,140,000 shares of GMAI-Asia.com, to Afinsa Bienes Tangibles, S.A. ("Afinsa"), a related party, for $2,035. Such amount is included in the accompanying consolidated Statement of Operations as Gain on Sale of Investee-Related Party (See Note 12).

During May 2003, the Company purchased 2,707,239 shares of GMAI-Asia stock in exchange for 243,718 shares of GMAI common stock valued at approximately $500 (See Note 14). As of June 30, 2003 and 2004, the Company now owns approximately 3% of GMAI-Asia and as such accounts for this investment under the cost method of accounting.

During the year ended June 30, 2004 the Company recorded an impairment charge of its investment in investee of $500 after the Company's review of this investee's financial prospects for the future.

(9) Income Taxes

Deferred tax attributes resulting from differences between financial accounting amounts and tax basis of assets and liabilities at June 30, 2004 and 2003 are as follows:

                                                        2004        2003
                                                     ----------- -----------
Current assets and liabilities

             Allowance for doubtful accounts        $       160 $       349
             Inventory valuation reserve                    522         754
             Inventory uniform capitalization               352         479
             Accrued expenses                                 -          32
             Net federal, state operating loss
             carry-forwards                               2,787           -
                                                     ----------- -----------
                                                          3,821       1,614
             Valuation allowance, provision for
             income taxes                                     -      (1,614)
                                                     ----------- -----------
Net current deferred tax asset                      $     3,821 $         -
                                                     =========== ===========

Non-current assets and liabilities
             Goodwill and intangible amortization
             and impairment                         $     1,611 $     2,521
             Depreciation                                   100         128
             Net state operating and capital loss
             carry-forwards                               1,746       7,484
             Investments in equity-method investees         204           -
             Investments in marketable securities            40          67
                                                     ----------- -----------
                                                          3,701      10,200
             Valuation allowance, provision for
             income taxes                                (1,742)     (9,300)
             Valuation allowance, equity                      -        (900)
                                                     ----------- -----------
Net non-current deferred tax asset                  $     1,959 $         -
                                                     =========== ===========

The realization of the above deferred tax assets is dependent on generating sufficient taxable income in the future to offset the deductibility of temporary differences generating the deferred tax assets.

During fiscal 2002 the Company believed uncertainty existed regarding the realizability its deferred tax assets, and accordingly established a 100% valuation allowance, based on management's estimates, against all deferred tax assets. As a result of the increase in the valuation allowance during 2002, approximately $3,200 was charged to deferred tax expense in the accompanying Statement of Operations and $900 was applied as reduction of Stockholder's Equity. This reduction of Stockholder's Equity consists of deferred tax assets previously recorded relating to net operating losses generated from to the exercise of employee stock options and cumulative unrealized losses of marketable securities. The portion of the valuation allowance which affected equity and which would not be available to offset future provisions of income tax was stated as "Valuation allowance, equity". Such amounts are further discussed in Note 19. As of June 30, 2003, the Company still maintained a 100% valuation allowance against all deferred tax attributes. Therefore there was no net deferred tax expense (benefit) for 2003.

During fiscal 2004, the Company determined that it is more likely than not that the results of future operations will generate sufficient taxable income to realize certain deferred tax assets. The Company reduced its valuation allowance against these deferred tax assets which were provided for in prior years. However, the Company still believes uncertainty exists regarding the realizability of certain deferred tax assets, and accordingly established a valuation allowance, based on management's estimates, against these specific deferred tax assets.

As a result, the Company recorded a net deferred tax benefit (including the net change in valuation allowance) in the amount of $4,880, which was recorded as a deferred tax benefit in the accompanying Statement of Operations. Additionally, $900 was recorded as an increase to Stockholder's Equity since the original valuation allowance was recorded in Stockholder's Equity as noted above.

(9) Income Taxes (continued)

During 2002, both the State of New Jersey and California passed tax legislation, which, among other things, requires the suspension of the use of state net operating loss carry-forwards "NOL's" for two years. As a result, there was no utilization of these state NOL's in the provision for state income taxes for the years ended June 30, 2004 and 2003. In order to compensate for the suspension of the state net operating losses, the period of availability has been extended by two years. Recent New Jersey tax legislation will provide for the utilization of a portion of net operating losses for fiscal year 2005 and thereafter, which will reduce the provision for state income taxes in the future.

The provision for (benefit from) income taxes for the years ending June 30 consist of the following:

                                     ----------------------------------
                                       2004         2003        2002
                                     ----------  ----------  ----------

Current tax expense                  $  8,134    $     192   $      -
Deferred tax expense (benefit)          4,292          888     (3,958)
Net Change in valuation allowance      (9,172)        (888)     7,201
                                     ----------  ----------  ----------
                                     $  3,254    $     192   $  3,243
                                     ==========  ==========  ==========

The above is further comprised of
the following:

Current tax expense
    Federal                         $    1,245    $      -    $      -
    State                                2,339         192           -
    Foreign                              4,550           -           -
                                     ----------  ----------  ----------
                                    $    8,134    $    192    $      -
                                     ==========  ==========  ==========

Deferred tax expense (benefit) - net of
change in valuation allowance

Federal                         $   (4,209)   $      -    $  2,593
State                                 (671)          -         650
Foreign                                  -           -           -
                                 ----------  ----------  ----------
                                $   (4,880)   $      -    $  3,243
                                 ==========  ==========  ==========

(9) Income Taxes (continued)

The effective tax rate (benefit) varied from the statutory rate as follows:

                                       ----------------------------------
                                          2004        2003       2002
                                       ----------  ----------  ----------

Statutory federal and foreign
income tax rate                             34 %        34 %      (34) %
State income taxes, net of federal
benefit                                      5           4         (6)
Certain non-deductible expenses              1           -          5
Tax benefit included in current tax
provision derived from Gain on sale
of equity method investee resulting
in income tax capital loss                   -         (30)         -
Change in valuation allowance              (28)          -         70
Other                                       (2)         (2)        (2)
                                     ----------  ----------  ----------
                                            10 %         6 %       33 %
                                     ==========  ==========  ==========

Our effective tax rate could be adversely affected by several factors, many of which are outside of our control. Our effective tax rate is directly affected by the relative proportions of revenue and income before taxes in the various domestic and international jurisdictions in which we operate. Our effective tax rate can also be influenced by the tax effects of purchase accounting for acquisitions and non-recurring charges, which may cause fluctuations between reporting periods.

The Company has remaining available federal net operating loss carry forwards of approximately $5,600 expiring at various times beginning the fiscal years ending 2019 through fiscal year ended 2022. The future utilization of these net operating loss carry forwards may be significantly limited in under the Internal Revenue Code as a result of ownership changes due to the Company's stock and other equity offerings.

As a result of an increase in stock ownership of the Company by Afinsa (a related party), as discussed in Note 2, the Company was deemed to have a change of ownership for federal income tax purposes. As a result there was a limitation on the amount of

federal net operating loss carry forwards that could be used in the current year to offset federal taxable income. The current tax expense was reduced by approximately $4,000 as a result of utilizing the available federal net operating loss carry forwards after this limitation.

The Company has remaining available net operating loss carry forwards for state tax purposes of approximately $18,000 expiring at various times beginning in the fiscal years ending 2008 through 2012.

(10)  Debt

Demand Notes Payable and Capital Leases
---------------------------------------
                                                       2004          2003

On May 27, 2004, the Company entered into an
agreement with PNC Bank for a line of credit
not to exceed $10,000. Available borrowings
are based on certain limitations as further
defined in the agreement, and are reduced by
any outstanding letters of credit. The loan
is collaterized by accounts receivable,
consignor advances and inventory. Borrowings
under the line bear interest at the "prime"
rate; provided that the Company has the
right, subject to certain conditions, to
borrow at a rate equal to LIBOR plus 2.5% per
annum. The credit line expires on May 27,
2005. The agreement contains certain
financial covenants; which include a limit on
total debt and capital expenditures; debt to
earnings before depreciation and
amortization, interest, and taxes; fixed
charge coverage; and minimum liquidity; as
further defined in the debt agreement.         $      6,000  $          -

On April 17, 2003, the Company entered into a
revolving credit agreement with Banco
Santander Central Hispano, S.A., providing
for a credit facility of up to $2,500.
Borrowings under this facility bear interest
at a rate of prime plus .25% per annum. The
Company's obligations under the agreement
have been guaranteed by Afinsa. The agreement
contains other financial agreements and
covenants, including the requirement that
Auctentia maintain at least 43% of all of the
authorized issued and outstanding shares of
voting stock of the Company. As extended, the
facility expires on April 12, 2005.                   2,500         2,500
                                               ------------- -------------
Total Demand Notes Payable - Bank              $      8,500  $      2,500
                                               ============= =============

The Company obtained a secured loan from a
privately held capital coin fund which
expires June 30, 2005. This loan is
collateralized by certain inventories and
bears interest at a rate of 10% per annum.     $      4,000  $      4,300

The Company previously had a note payable
collateralized by specific coin inventory
with an interest rate of 9% with quarterly
payments of $500 commencing April 2002 until
the loan was repaid in August 2003.                       -           125

Other                                                    90           140
                                               ------------- -------------
Total Notes Payable and Capital Leases                4,090         4,565

Less: current portion                                 4,090         4,522
                                               ------------- -------------

Notes Payable and Capital Leases -             $          -  $         43

Long-term Portion ============= =============

(11) Leases

The Company conducts its business on premises leased in various locations under leases that expire through the year 2009. The Company utilizes property and equipment under both operating and capital leases. Future minimum lease payments under non-cancelable leases in effect at June 30, 2004 are set forth below:

                       Operating    Capital   Total
                     ----------------------------------
2005                            927      39        966
2006                            633       -        633
2007                            275       -        275
2008                            250       -        250
2009                             97       -         97
                     ----------------------------------

Total future minimum lease
payments $2,182 $39 $2,221

Rent expense was approximately $1,041, $571 and $547 for 2004, 2003 and 2002, respectively.

Interest expense associated with these capital leases was approximately $11, $25 and $25 for fiscal years 2004, 2003 and 2002, respectively.

(12) Related-party Transactions

At June 30, 2004 and 2003, Afinsa and Auctentia collectively beneficially owned approximately 69% and 43%, respectively, of the Company's outstanding common stock. Esteban Perez, Chairman of the Board of Directors of the Company, is Chairman of the Board of Directors and Chief Executive Officer of Auctentia. Carlos de Figueiredo, the First Vice Chairman of the Board of the Company, is also director of Afinsa and an immediate family member of a 50% stockholder of common stock of Afinsa. Emilio Ballester, a director of the Company is the Global Strategic Investment Officer of Afinsa. Ramon Egurbide, CEO of European Operations for the Company, is Managing Director of Auctentia.

On September 8, 2003, the Company consummated three transactions with Auctentia (see Note 2). In addition, In August 2003, GMAI and CdC entered into separate supply agreements with Afinsa, pursuant to which GMAI and CdC act as exclusive suppliers of collectibles for Afinsa on a worldwide basis (see Note 1).

Under an agreement dated March 15, 2003, GMAI sold all of its then-outstanding interest in GMAI-Asia to Afinsa for $2,035, consisting of 8,140,000 shares of GMAI-Asia.com common stock. The proceeds from the sale were used to pay off all amounts outstanding under GMAI's revolving line of credit with Afinsa. Such amount is included in the accompanying Consolidated Statement of Operations as Gain on sale of investee (see Note 8).

On April 17, 2003, the Company entered into a revolving credit agreement with Banco Santander Central Hispano, S.A. The agreement has been guaranteed by Afinsa and requires that Auctentia maintain ownership of at least 43% of all of authorized, issued and outstanding shares of voting stock of the Company (see Note 10).

At June 30, 2004 and 2003, Afinsa had outstanding accounts receivable balances of approximately $27,674 and $4,588, respectively, and such amounts are included in the accompanying Consolidated Balance Sheets as Accounts Receivable-related party. During the years ended June 30, 2004 and 2003, sales to Afinsa were approximately $102,215 and $7,654, respectively, and are included in the accompanying Consolidated Statements of Operations as Sales of Inventory - Related Party. The Company purchased stamp inventory from Afinsa in 2003, which approximated $285.

At June 30, 2004 Afinsa had advanced $3,467 to the Company for the purchase of product relating to the supply contracts referred to above. Such amount is included in the accompanying Consolidated Balance Sheet as Advances Payable - related party.

(12) Related-party Transactions (continued)

During the year ended June 30, 2004, the Company granted options to certain employees of Afinsa for services. Such amounts were recorded at fair value, which amounted to $130. Also during the year ended June 30, 2004, Afinsa granted stock that they owned in the Company to certain employees of the Company. The Company recorded the stock granted to these employees at fair value which amounted to $100 in accordance with Accounting Interpretations of APB Opinion No. 25 ("AIN-APB 25") which requires stock awards granted by a principal stockholder to employees of a Company to be recorded at fair value.

The Company leases office space from Afinsa in Madrid, Spain, of approximately 2,700 square feet at an annual rental of approximately $139,000. The lease is for a five-year term commencing September 8, 2003.

On June 17, 2002, the Company entered into an amendment to the employment agreement with Mr. Roberts, a director of the Company. In connection with the amendment, the Company made available to Mr. Roberts a non-interest bearing loan in the amount of $600. The loan is required to be repaid on an actual basis in three equal installments commencing February 18, 2006; provided that if Mr. Roberts is employed by the Company on the date that an installment is due, that installment payment will be forgiven, and that if his employment is terminated for death, disability, without cause or by Mr. Roberts with good reason (as defined), then the entire loan will be forgiven at the date of termination. If Mr. Robert's employment terminates for cause or by Mr. Roberts without good reason, then the outstanding amount of the loan will accelerate and be due and payable within 30 days of termination. An aggregate of $600 has been disbursed under the loan agreement to date. In addition, in March 2002, the Company made a loan to Mr. Roberts in the amount of $50, bearing interest at the rate of 7% per annum. The board of directors subsequently determined to forgive the repayment of this loan (and all accrued interest) and to allow Mr. Roberts to retain the proceeds as additional compensation.

During the years ended June 30, 2004, 2003 and 2002, the Company paid Mr. Manning approximately $0, $0 and $32, respectively, of debt guarantee fees.

Scott Rosenblum, a director of the Company, is a partner of the law firm Kramer, Levin, Naftalis & Frankel, LLP, which provides legal services to the Company. Anthony L. Bongiovanni, Jr., also a director of the Company, is president of Micro Strategies, Incorporated, which provides computer services to the Company. In relation to Kramer, Levin, Naftalis & Frankel, expenditures for services rendered were approximately $401, $688 and $308 respectively of which approximately $177, $223 and $306, was charged to operations for the years ended June 2004, 2003 and 2002. In relation to Micro Strategies, expenditures for services rendered were approximately $271, $169 and $281, respectively, of which approximately $180, $166 and $239 was charged to operations for the years ended June 2004, 2003 and 2002.

(13) Commitments and Contingencies

As part of the purchase of the Bowers and Merena Galleries, Kingswood Coin Auctions and Superior Sports Auctions (see Note 2), the Company is required to pay additional amounts for a period of time through 2006 if certain milestones are met. In the event, during each of the two (2) twelve (12) month periods subsequent to the acquisition date (which was February 19, 2004) that aggregate sales for these entities exceed a certain amount as further defined in the agreement, the Company will be obligated to pay a stated percentage above the aggregate sales threshold. As of June 30, 2004 such milestones were not met and as such there was no additional payments or accruals for the potential future payments.

As part of the purchase of the Ivy & Mader Philatelic Auctions, Inc. (now known as Ivy & Manning Philatelic Auctions, Inc.) ("Ivy") in 1993, the Company is required to pay additional amounts for a period of time through 2009 based on the financial performance of Ivy. These additional amounts were approximately $27, $18 and $19 for the years ended June 30, 2004, 2003 and 2002, respectively. For the years ended June 30, 2004 and 2003 the payments were charged to operating expenses, and for the year ended 2002 and prior the amounts were accounted for as an increase to goodwill.

(14) Stockholders' Equity

The Company's Certificate of Incorporation authorizes a total of 10 million shares of preferred stock.

The Company's Certificate of Incorporation authorizes a total of 40 million shares of common stock.

In late January and early February 2000, GMAI issued in a private placement to The Tail Wind Fund Ltd. ("Tail Wind"), LBI Group Inc., and Lombard Odier & Cie an aggregate of 750,000 shares of the Company's common stock for approximately $11,273, net of expenses. In connection with this transaction, warrants to acquire 142,500 shares of the Company's common stock were issued to these investors and their advisors. Thereafter, on May 14, 2001, the Company entered into an agreement with these investors, which amended certain provisions of the original purchase agreement. Under the amendment, the investors waived rights to receive additional stock of the Company pursuant to the terms of the original agreement (which they had received as anti-dilution protection) in exchange for the issuance to the investors of an aggregate of 627,500 shares of the Company's common stock, par value $.01 per share, and subject to certain other conditions. The warrants to acquire 142,500 shares were also cancelled. In addition, on that same date, the Company entered into a purchase agreement (the "Purchase Agreement") with Tail Wind pursuant to which the Company sold an aggregate of 500,000 shares of common stock of GMAI-Asia, par value $1.00 per share, owned by it to such investor.

During the year ended June 30, 2001, the Company entered into two stock purchase agreements with Auctentia, S.A. Under the first agreement, dated as of May 16, 2001, the Company issued to Auctentia 1,000,000 shares of the Company's common stock, for an aggregate purchase price of $2 million. All proceeds from this agreement were received in the year ended June 30, 2001. Under the second agreement, dated as of May 23, 2001, the Company agreed to issue an additional 1,000,000 shares of the Company' common stock for an aggregate purchase of $2 million. During fiscal 2001 and 2002 Afinsa paid $300 and $1,700 for 150,000 and 850,000 shares, respectively.

During the year ended June 30, 2002, the Company entered into a private placement agreement with Afinsa for the sale of 125,000 shares of the Company's common stock, for an aggregate of $250.

On May 20, 2003, the Company issued to Tail Wind 243,239 shares of stock of the Company in exchange for 2,707,718 shares of stock of GMAI-Asia.com, Inc. owned by Tail Wind. This transaction was entered into in accordance with the Purchase Agreement. The shares of stock of the Company were valued at $2.06 per share in accordance with the terms of the Purchase Agreement (see Note 8). The shares of stock of the Company issued to Tail Wind are subject to certain registration rights under the Purchase Agreement and a Registration Rights Agreement between the Company and Tail Wind, among others, dated as of January 25, 2000.

On September 8, 2003, the Company consummated three transactions with Auctentia, pursuant to which the Company issued an aggregate of 13 million shares of its common stock. See Notes 2 and 12. Auctentia has the right to cause these securities to be registered under the Securities Act of 1933, as amended, subject to certain conditions.

Pursuant to its Repurchase Plan, the Company repurchased 99,900 shares of its common stock on the open market for $1,333 during the year ended June 20, 2000, and 268,100 shares for approximately $1,215 during the year ended June 30, 2001. There were no common stock purchases for the years ended June 30, 2004, 2003 and 2002.

In 1997, GMAI's, board of directors adopted and GMAI's shareholders approved the 1997 Stock Incentive Plan, as amended (the "1997 plan"). Awards under the 1997 plan may be made in the form of (1) incentive stock options, (2) non-qualified stock options, (3) stock appreciation rights, (4) restricted stock, (5) restricted stock units, (6) dividend equivalent rights and (7) other stock-based awards. Awards may be made to such directors, officers and other employees of GMAI and its subsidiaries (including employees who are directors and prospective employees who become employees), and to such consultants to GMAI

(14) Stockholders' Equity (continued)

and its subsidiaries, as the stock option committee of GMAI's board of directors in its discretion selects. As a result of subsequent amendments adopted by GMAI's board of directors and approved by GMAI's shareholders, the aggregate number authorized to be issued under the plan is currently 5,000,000 in the aggregate. The 1997 Plan allows the Company to grant to an individual in any given year options representing an aggregate of 500,000 shares of common stock. The option exercise price is determined by the stock option committee in its sole discretion; provided, however, that generally, the exercise price of an option shall be not be less than the fair market value (as defined) of a share of common stock on the date of grant. Options granted have a maximum ten-year term and, unless otherwise determined by the stock option committee, vest in substantially equal installments over a four-year period. All options granted through June 30, 2004 have been granted with exercise price equal to market value on the date of grant.

The following table summarizes information about options outstanding and exercisable as of June 30, 2002, 2003 and 2004:

                            2002                2003                   2004
                    -------------------    ------------------  -----------------
                               Weighted              Weighted           Weighted
                               Average               Average            Average
                               Exercise              Exercise           Exercise
                    Options    Price      Options    Price     Options  Price
                    -------------------   -------------------  -----------------
Outstanding -
beginning           1,548,000    10.19     2,509,750    6.92   2,705,500  2.06
Granted through       928,000     1.87     1,901,875    1.95   1,122,500  7.58
stock option plan
Granted outside of    145,000     1.77             -       -           -     -
stock option plan
Exercised                   -        0      (102,500)   1.38  (1,298,623) 2.19
Forfeited            (111,250)    8.70    (1,603,625)   6.83     (83,812) 3.08
                     ---------            -----------          ---------
Outstanding -
end of year         2,509,750     6.92     2,705,500    2.06   2,445,565  6.19
                    ==========            ===========          =========
Exercisable -
end of year       1,048,250       9.68     1,179,563    2.14   1,201,440  7.57
                  =========               ===========          =========

The weighted average fair value of options granted during 2002, 2003 and 2004 was $1.87, $1.95 and $7.58, respectively.

Following is a summary of the status of stock options outstanding at June 30, 2004:

------------------------------------------------    -------------------
              Options Outstanding                        Options
                                                       Exercisable
------------------------------------------------    -------------------
                               Weighted
                                Average
                               Remaining
   Exercise Price    Number                 Weighted      Number     Weighted
      Ranges          of                     Average        of        Average
                    Shares     Contractual  Exercise      Shares     Exercise
   From      To   Outstanding     Life       Price     Exercisable     Price
--------------------------------------------------    --------------------------

    $1.00   $5.00  1,669,650       8.5      $2.58          734,525     $2.60
     5.01   10.00    117,415       9.0       8.24           27,165      7.30
    10.01   25.00    658,500       7.8      15.10          439,750     15.89
                   ----------                          -----------
                   2,445,565                             1,201,440
                   ==========                          ===========

(14) Stockholders' Equity (continued)

On July 2, 2002, the Company commenced a tender offer to certain eligible employees to exchange outstanding options to purchase shares of the Company's common stock granted under the GMAI 1997 Stock Incentive Plan that had an exercise price of $2.00 or more, for new options to purchase shares of the Company's common stock to be granted under the 1997 Plan on or about February 4, 2003. The offer expired on July 30, 2002. Pursuant to the terms and conditions of the offer, the Company accepted for exchange on July 31, 2002 tendered old options exercisable for a total of 1,380,375 shares of common stock and canceled all such old options. Subject to the terms and conditions of the offer, the Company granted new options to purchase a total of 1,380,375 shares of common stock on February 4, 2003. The exercise price of the new options was $2.00, which was the closing price of the Company's common stock as reported on the NASDAQ National Market on the date of grant. There was no effect on the consolidated financial statements of the Company as a result of this exchange offer.

The Company's Certificate of Incorporation and by-laws contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with its Board of Directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company's securities. Certain of such provisions provide for a Board of Directors with staggered terms, allow the Company to issue preferred stock with rights senior to those of the common stock, or impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions.

(15) Significant Agreements

The Company is a party to an employment agreement with Mr. Greg Manning, as amended, which provides for his services as President and Chief Executive Officer. Under the most recent amendment, which is effective July 1, 2002 and terminates on June 30, 2005, Mr. Manning is entitled to receive an annual salary of $400 beginning July 1, 2002, $450 beginning July 1, 2003 and $500 beginning July 1, 2004, plus an annual cash bonus equal to 10% of the Company's pre-tax income (as defined in the agreement), but not to exceed $750.

On February 4, 2003, Mr. Manning was granted an additional 225,000 stock options, exercisable at $2.00 per share and vesting 50% on the date of grant and 25% on each of the first and second anniversaries of the date of grant.

The Company has entered into an employment agreement with Mr. Larry Crawford to serve as Chief Financial Officer, effective April 23, 2001. The agreement provides for a salary of $150 per annum, plus a quarterly bonus of $12 in the event the Company's pre-tax income (as defined) equals or exceeds $50. In October 2002, the Company entered into an amendment to the employment agreement with Mr. Crawford, which extended the term through June 30, 2006. Mr. Crawford's base salary will increase to $160 on May 1, 2003; to $175 on May 1, 2004; and to $190 on May 1, 2005. Mr. Crawford was also granted an additional 75,000 stock options on October 23, 2002 at an exercise price of $1.35 per share, the fair market value on the date of grant. These options vest 33 1/3 % on the date of grant and 33 1/3% on each of the first and second anniversaries of the date of grant.

Mr. Greg Roberts has entered into an employment agreement providing for his services as President of Spectrum, which was to terminate on February 18, 2005. The agreement provides for a salary of $300 per annum, increasing to $400 per annum effective February 18, 2004. In June 2002, the Company entered into an amendment to the employment agreement with Mr. Roberts. Under the terms of the amendment, the employment term has been extended for an additional three years, to February 18, 2008; Mr. Roberts is entitled to receive a salary of $500 for the sixth year, $550 for the seventh year, and $600 for the eighth year; and Mr. Roberts was granted an additional 500,000 stock options, which were exercisable at $2.00 per share and vested over four years. Mr. Roberts also received a loan in the amount of $600 the repayment of which can be forgiven under certain circumstances.

(16) Geographic Information

Geographic revenues based on customer location were as follows:

                                June 30,
                            2004      2003
                          --------  --------

United States             $ 96,868   $ 93,537
Spain                      110,630      7,654
Asia Pacific                 1,552          -
Other Europe                 3,840          -
                          --------   --------
                          $212,890   $101,191
                          ========   ========

Net property, plant and equipment by geographic area was as follows:

                                June 30,
                            2004      2003
                          ---------  ---------

United States             $    861   $    744
Spain                          950          -
Other Europe                   125          -
                         ---------  ---------

                          $  1,936   $    744
                         =========  =========

(17) Retirement Plans

The Company maintains an employee savings plan for United States employees under the Internal Revenue Code Section 401(k). Employees are eligible to participate in the plan after one complete calendar month of service and become fully vested after five years of service. Employee contributions are discretionary to a maximum of 15% of compensation. For all plan members, the Company contributed 10% of all eligible employees contributions to a maximum annual contribution of $500 per employee. The Company's total contribution was approximately $10, $12 and $13 for the years ended June 30, 2004, 2003 and 2002, respectively.

(18) Supplementary Cash Flow Information

Following is a summary of supplementary cash flow information:

                                Years Ended
                                 June 30,
                              (In Thousands)
                                                  2004      2003      2002
                                                --------  --------  --------

 Interest paid                                  $   937   $   855   $  837

Income taxes paid                                   399         -        -

Summary of significant non-cash transactions:

Common stock issued for inventory                10,118         -        -
Common stock issued for acquisition of
Auctentia subsidiaries                            6,004         -        -
Issuance of shares related to the acquisition
of GMD                                                -         -      209
Sale of investee to a related party and
reduction of demand notes payable                     -     2,035        -
Common stock issued in connection with
investment in investee                                -       500        -
 Options issued relating to professional
services                                              -         -      256

(19) Significant Fourth Quarter Adjustments - Special Charges and Asset Impairments (Fiscal 2002)

As a result of unfavorable economic conditions and changes in the collectibles marketplace/industry, the Company during the fourth quarter of 2002, performed impairment assessments of goodwill and other purchased intangibles. As a result of significant losses in the fourth quarter, the Company assessed future discounted cash flows and recorded a impairment pre-tax charge of approximately $4.7 million or $0.38 per share - diluted for the year ended June 30, 2002 which is reflected in Operating Expenses in the accompanying Consolidated Statements of Operations.

Furthermore, as part of the plan, the Company as a result of an analysis of inventory, adjusted the inventory cost value to reflect management's estimate of net realizable value, recorded a pre-tax charge of $1.4 million or $0.11 per share for the year ended June 30, 2002 which is reflected in Cost of Merchandise in the accompanying Consolidated Statements of Operations.

As a result of significant losses in the fourth quarter of fiscal 2002 and cumulative losses in previous years, the Company has reevaluated its ability to realize the future benefit of its net deferred tax assets held in light of the historical operating losses. Accordingly, the Company recorded a valuation allowance against its deferred tax assets of approximately $3.2 million or $0.26 per share for the year ended June 30, 2002 which is recorded in the Provision for income taxes in the accompanying Consolidated Statements of Operations.

There were no significant fourth quarter adjustments of special or impairment charges for 2004 and 2003.

(20) Selected Quarterly Financial Data (unaudited)

                                                          2004
                               -----------------------------------------------------------
                                    1st        2nd         3rd         4th       Total
                                  Quarter    Quarter     Quarter     Quarter
                               -----------------------------------------------------------

Net Revenues                        $34,487    $53,215     $64,505     $60,683   $212,890


Gross Profit                          7,462     13,392      17,001      23,636     61,491


Income from operations                3,041      7,187       8,947      14,632     33,807


Net Income                            2,458      4,058       6,519      16,331     29,366


Earnings per share, basic              0.15       0.15        0.25        0.60       1.22

Earnings per share, diluted            0.14       0.14        0.23        0.57       1.14

                                                          2003
                               -----------------------------------------------------------
                                    1st        2nd         3rd         4th       Total
                                  Quarter    Quarter     Quarter     Quarter
                               -----------------------------------------------------------

Net Revenues                        $25,415    $19,354     $26,595     $29,827   $101,191


Gross Profit                          2,618      2,281       3,209       6,411     14,519


Income (Loss) from operations         (176)      (768)         201       2,512      1,769


Net Income (Loss)                     (339)      (970)       2,071       2,061      2,823

Earnings (Loss) per share, basic     (0.03)     (0.08)        0.16        0.17       0.22
Earnings (Loss) per share, diluted   (0.03)     (0.08)        0.16        0.17       0.22

(21) Other Major Customers (Excluding Afinsa)

The Company had one major customer that accounted for approximately 12% of total revenue for the year ended June 30, 2003 and approximately 5% of accounts receivable at June 30, 2003. Such customer has certain supply and sales agreements with the Company. Major customers (other than Afinsa) are those that accounted for more than 10% of sales. The Company did not have any major customers for the years ended June 30, 2002.

(22) Subsequent Event

On July 30, 2004, GMAI acquired certain of the business assets (consisting primarily of other intangible assets), of H.R. Harmer, LLC, for an aggregate purchase price of $351, all of which was paid at closing. The business will be operated though a newly formed subsidiary, H.R. Harmer, Inc.