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Phillip Kim, Esq. (PK 9384) Laurence Rosen, Esq. (LR 5733) THE ROSEN LAW FIRM, P.A. 350 Fifth Avenue, Suite 5508 New York, NY 10118 Phone: (212) 686-1060 Fax: (212) 202-3827 Counsel for Plaintiff

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT

OF NEW YORK

____________, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, Plaintiff(s), v. ESCALA GROUP, INC., f/n/a GREG MANNING AUCTIONS, INC., AFINSA BIENES TANGIBLES, S.A., JOSE MIGUEL HERRERO, ESEBAN PEREZ, GREG MANNING, CARLOS DE FIGUEIREDO, RAMON EGURBIDE, LARRY CRAWFORD, LAURENCE GIBSON, and RAFAEL GUITAN, Defendants.

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Master File No. CLASS ACTION COMPLAINT FOR VIOLATION OF SECURITIES LAWS JURY TRIAL DEMANDED

Plaintiff, individually and on behalf of all other persons similarly situated, by plaintiff’s

undersigned attorneys, for plaintiff’s complaint, alleges upon the investigation made by and

through plaintiff’s counsel, which included, relevant public filings made by Escala Group, Inc.

f/k/a Greg Manning Auctions, Inc. (“Escala” or the “Company”) with the Securities and

Exchange Commission (the "SEC"), as well as press releases, news articles, analyst reports,

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court filings, and media reports concerning the Company. This complaint is based upon

plaintiff’s personal knowledge as to plaintiff’s own acts, and upon information and belief as

to all other matters, except where indicated otherwise.

NATURE OF ACTION

1. Plaintiff brings this action as a class action on behalf of himself and all other

persons or entities who purchased Escala common stock on the open market, other than

defendants and certain related persons and entities, during the period beginning on September 5,

2003 through May 8, 2006 (the "Class Period"), all to recover damages caused to the Class by

defendants' violations of the federal securities laws.

JURISDICTION AND VENUE

2. This action arises under Section 10(b) and 20(a) of the Securities Exchange Act of

1934 (the “Exchange Act”), 15 U.S.C. § 78j(b) and 78t, and Rule 10b-5, 17 C.F.R. § 240.10b-5.

3. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. § 1331 and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

4. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and

28 U.S.C. § 1391(b). Defendants maintain their principal executive offices in this District and

many of the acts, practices and transactions complained of herein occurred in substantial part in

this District.

5. In connection with the acts alleged in this complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications and the facilities of the national

securities markets.

PARTIES

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6. Plaintiff, ______ purchased Escala shares during the Class Period. His PSLRA

certification is attached hereto.

7. Defendant Escala formerly known as Greg Manning Auctions, Inc. is a Delaware

Corporation with its principal place of business located at 623 Fifth Avenue, 27th Floor, New

York, New York 10017. On September 28, 2005, the Company announced that it had changed

its name from Greg Manning Auctions, Inc. to Escala Group, Inc. The Company through its

various operating subsidiaries purports to be a global integrated network of companies in the

collectables market in North America, Europe, Asia, and on the Internet. The Company purports

to operate on the following sales platforms: auctions, merchant/dealer operations and trading,

and in two segments, collectibles and trading. The Company operates through numerous

subsidiaries, including:

a. Central de Compras Coleccionables, S.L. (CDC); and

b. Greg Manning Auctions.

8. Afinsa Bienes Tangibles, S.A. (“Afinsa”) is a controlling entity of the Company.

As of December 31, 2005 and 2004 Afinsa collectively and beneficially owned approximately

67% and 69% of the Company’s outstanding stock, respectively. Afinsa, is engaged in, inter

alia, commercial and trading activities involving tangible investment products throughout

Europe. The Company and Afinsa have been involved in various transactions, including:

a. On July 15, 2005, the Company and Auctentia, S.L. (“Auctentia”), a

subsidiary of Afinsa, acquired all the issued and outstanding capital stock of

A-Mark Precious Metals, Inc., as a result of this purchase the Company now

purports to operate in “two segments-collectibles and trading”; and

b. The Company is a party to separate supply agreements with Afinsa, dating to

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August 2003. Under the agreements the Company is to act on behalf of

Afinsa in the U.S. and Hong Long, and CDC is to act in all other geographic

locations. In addition to paying the purchase price for the goods sold under

the agreements, Afinsa agreed to pay the Company 10% of the aggregate

purchase price of all such goods sold.

9. Defendant Jose Miguel Herrero, (“Herrero”) is the Company’s President and

CEO since is appointment on September 28, 2005. Herrero is also a Director of the Company

since September 2003.

10. Defendant Esteban Perez, (“Perez”) is the Chairman and Director of the Company

since December 2002 and January 2001, respectively. Perez also serves as the Chief Corporate

Strategy Officer for the Company. Perez is also the Chairman of Auctentia.

11. Defendant Greg Manning (“Manning”) is the President of the Company’s North

American and Asian Philatelic Auction Division, since September 2005. From the Company’s

inception in 1981 to December 2002, Manning was the Company’s First Vice Chairman and also

served as the Company’s CEO from December 1992 to September 28, 2005. Manning also

served as the Company’s President from 1981 to 1993, and from March 1995 to September 27,

2005.

12. Defendant Carlos de Figueiredo, (“Figueiredo”) is the Company’s Second Vice

Chairman and Director, since September 2003. He also serves as a director of Afinsa since

1998.

13. Defendant Ramon Egurbide, (“Egurbide”) is the Company’s President of

European Operations, which includes Auctentia Subastas/Afinsa Auctions in Spain. Egurbide is

responsible for all of the Company’s sales to Afinsa. Egurbide has also served as the CFO of

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Afinsa, and CEO Auctentia, as well as the sole Administrator of several companies of Afinsa.

14. Defendant Larry Crawford, (“Crawford”) is the Company’s CFO and Executive

Vice President since April 2001.

15. Defendant Laurence Gibson (“Gibson”) is the Company’s Chief Operating

Officer, North American Asian Philatelic Auction Division since June 2003.

16. Defendant Rafael Guitian, (“Guitian”), is the Company’s Vice President of

European Operations. Prior to joining the Company, he was employed at Afinsa.

17. Defendants Herrero, Perez, Manning, Figueiredo, Egurbide, Crawford, Gibson,

and Guitian are collectively referred herein as the “Individual Defendants.”

18. By virtue of their positions at Escala, the Individual Defendants had access to the

adverse and undisclosed information about Escala’s business condition and financial results. The

Individual Defendants directly participated in the management of Escala, were directly involved

in the operations of Escala at the highest levels, were privy to information concerning he

undisclosed business conditions and financial results of Escala and were involved in the

dissemination of the materially false and misleading statements and information alleged herein.

19. By reason of their positions as executive officers and/or directors of Escala, the

Individual Defendants were at all relevant times controlling persons within the meaning of

Section 20(a) of the Exchange Act. Because of their executive and directorial positions with

Escala, the Individual Defendants had access to the adverse and undisclosed information about

Escala’s business conditions and financial results. Further, as particularized herein, the

Individual Defendants were culpable participants and did control the contents of various reports

and public statements regarding Escala. Any acts attributed to Escala were caused and/or

influenced by the Individual Defendants by virtue of their controlling-person positions at Escala.

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20. Additionally Afinsa is a controlling entity of the Company within the meaning of

Section 20(a) of the Exchange Act. Afinsa holds in excess of 60% of the Company’s

outstanding stock. Afinsa, at all relevant times, directly or indirectly controlled the activities,

business, management and affairs of the Company. Because of overlap of Afinsa’s and the

Company’s management, Afinsa had access to the adverse and undisclosed information about

Escala’s business conditions and financial results. Further, as particularized herein, the Afinsa

was a culpable participant and did control the contents of various reports and public statements

regarding Escala. Any acts attributed to Escala were caused and/or influenced by Afinsa by

virtue of its controlling entity status.

21. As the senior officers and/or directors of a publicly-held company whose

securities were, and are, registered with the SEC pursuant to the Exchange Act, traded on The

NASDAQ National Market, and governed by the provisions of the federal securities laws, the

Individual Defendants have a duty to promptly disseminate accurate and truthful information

about the undisclosed and material business conditions of Escala, so that the market price of

Escala publicly-traded securities would be based upon truthful and accurate information. The

Individual Defendants and Afinsa’s misrepresentations and omissions during the Class Period

violated these specific requirements and obligations. By virtue of their positions of control and

authority at Escala, the Individual Defendants and Afinsa had the power to and did control the

content of the various public statements concerning Escala, its business conditions and financial

results during the Class Period and indeed made many of the challenged statements described

herein. Accordingly, the Individual Defendants were responsible for the accuracy of the public

statements and releases detailed herein and are primarily liable for the misrepresentations

contained therein.

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PLAINTIFF’S CLASS ACTION ALLEGATIONS

22. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of all those who purchased or otherwise acquired the

securities of Escala during the Class Period and who suffered damages (the "Class").

Excluded from the Class are defendants, the officers and directors of the Company,

members of their immediate families and their legal representatives, heirs, successors, or

assigns and any entity in which defendants have or had a controlling interest.

23. The members of the Class are so numerous that joinder of all members is

impracticable. While the exact number of Class members is unknown to plaintiffs at this time

and can only be ascertained through appropriate discovery, plaintiffs believe that there are

hundreds or thousands of members in the proposed Class. Record owners and other members

of the Class may be identified from records maintained by Escala or its transfer agent and may

be notified of the pendency of this action by mail, using the form of notice similar to that

customarily used in securities class actions.

24. Plaintiffs’ claims are typical of the claims of the members of the Class as

plaintiffs purchased Escala shares during the Class Period and all members of the Class are

similarly affected by defendants' wrongful conduct in violation of federal law that is complained

of herein.

25. Plaintiff will fairly and adequately protect the interests of the members of the

Class and have retained counsel competent and experienced in class and securities litigation.

26. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

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(a) whether the federal securities laws were violated by defendants' acts as

alleged herein;

(b) whether defendants misrepresented material facts and omitted to state

material facts necessary to prevent the statements made to the investing public from being

misleading during the Class Period concerning its financial statements;

(c) whether defendants acted knowingly or recklessly in making materially

misleading representations or omitting to state material facts during the Class Period;

(d) whether the market prices of the Company's common share was artificially

inflated or distorted during the Class Period because of defendants' conduct complained of

herein; and

(e) whether the members of the Class have sustained damages and the proper

measure of such damages.

27. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

SUBSTANTIVE ALLEGATIONS

28. The Class Period begins on September 5, 2003, when the Company, then known

as Greg Manning Auctions, Inc., announced financial results for its fiscal year ended June 30,

2003. The press release summarized the earnings as follows:

Net revenues for fiscal 2003 reached a record $101.2 million, up 25% from the prior fiscal year's total of $80.8 million. The company also achieved a record

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gross profit of $14.5 million, an increase of 65% from last year's $8.8 million. Net income for fiscal 2003 totaled$2.8 million, or $0.22 per share, compared to a loss of $13.2 million, or $1.06 per share, for the prior year. The results for fiscal 2002 included a non-cash intangible asset impairment charge of $4.7 million and a non-cash write-off of deferred tax assets of $3.2 million.

* * * The increase in revenue, aggregate sales and gross profit in fiscal 2003 was attributable to a number of factors. The company's Philatelic Division experienced growth in the auction sector through its initial auction in Hong Kong, and increased its market share in its specialty auctions of collections and dealers' inventories. It also completed a number of significant "private treaty" transactions, including the multi- million dollar placement of a significant portion of the United Nations Philatelic Archives, recently deaccessioned by the U.N. On a pro-forma basis, before interest and non-cash expenses, the company's operating income for fiscal 2003 totaled $4.4 million versus a loss of $2.9 million in fiscal 2002. On a pro-forma basis, the company's income in fiscal 2003 totaled $0.34 per diluted share versus a loss of $0.24 per diluted share the previous year.

29. The press release attributes defendant Manning as commenting on the results as

follows:

We are very pleased to report the results of our fourth quarter and fiscal year 2003. For the fiscal year, we achieved a record $118.2 million in aggregate sales, an increase of 19% from last year's $99.2 million; for the fourth quarter aggregate sales were $34.2 million, compared to aggregate sales of $27.8 million in the same period in fiscal 2002. The turnaround we have achieved from fiscal 2002 and 2001 underscores the progress our management team has made in returning the company to profitability. Our growth during the second half of fiscal 2003 was particularly strong and steady, involving virtually all areas of the company's operations.

* * *

All of us at GMAI are particularly enthusiastic about our pending transactions with Auctentia, S.L., which will add approximately $23 million in equity to the company. Our fourth quarter revenues were also significantly enhanced by several sales to Afinsa Bienes Tangibles, S.A., the parent company of Auctentia.

30. 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. As a result of these

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transactions, Auctentia and its affiliates increased their ownership of Escala common stock from

43% to 72%, further entrenching their control over Escala. Subsequent to, and including, the

financial results reported on September 5, 2003, the Company’s purported financial growth and

success would be intertwined with transactions made with its affiliate, and controlling entity,

Afinsa.

31. On September 13, 2003, the Company filed its Form 10-K for the fiscal year

ended June 30, 2003 which stated, in relevant part:

For the year ended June 30, 2003, operating revenues increased by approximately $20,414 (25%) from approximately $80,777 for the year ended June 30, 2002 to approximately $101,191 for the year ended June 30, 2003. This increase is almost exclusively attributable to an increase in sales of owned inventory of approximately $20,306 (27%). This increase was in part the result of higher sales of coins of approximately $14,063 as well as an increase in stamp revenue of approximately $4,671. The increase in stamp sales was due to sales to Afinsa Bienes Tangibles S.A. ("Afinsa"), a related party, in the amount of $7,654. The combined gains from coin and stamps were reduced by $2,652 due to the sale of the comic and movie poster division in September 2001. For the year ended June 30, 2002, operating revenues contained comic book sales and auctions of $2,650. Also there was a decrease of $774 due to a softening of the sports market. The Company has entered into an agreement with Afinsa pursuant to which it, or one of its subsidiaries, will act as exclusive supplier of collectibles for Afinsa on a worldwide basis. It is expected that commencing in the year ended June 30, 2004, the Company will generate additional revenues earned under that agreement.

* * * Gross profit increased to approximately $14,519 for the year ended June 30, 2003 from approximately $8,811 for the year ended June 30, 2002. This represents an increase of approximately $5,708 (65%). Included in the Cost of Merchandise Sold are reserves recorded to reflect management's estimate of net realizable value of inventories relating to price variability of approximately $0 and $1,400 for the years ended June 30, 2003 and 2002, respectively. A significant amount of the increased gross profit was derived from direct sales of two large specialty collections to Afinsa (a related party) in the fourth quarter. Stamp sales to Afinsa are expected to continue in the ensuing quarters although the amount may fluctuate. Additional gross profit from higher coin sales was approximately $932.

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Gross profit percentage increased from 11% for the fiscal year end 2002 to 14% for fiscal year end 2003. The largest contributing factor to the increase in gross profit percentage was $7,350 in direct sales of two large specialty collections to Afinsa (a related party) in the fourth quarter. Exclusive of sales to Afinsa, the gross profit percentage for fiscal 2003 would be 12% as compared to 11% for fiscal 2002. The increase was the result of higher gross profit margins on auction sales of owned stamp inventory, which is reflective of the improvement in quality and pricing of stamp purchases by the Company.

32. On October 23, 2003, the Company issued a press release announcing financial

results for the Company’s fiscal 2004 first quarter that stated, in relevant part:

For the period, aggregate sales increased 41% to $41.3 million from $29.2 million in last year's first quarter. Revenue rose 36% to $34.5 million from $25.4 million, setting a new company record. Net income reached an all-time high of $2.5 million compared to a net loss of $339,000 in last year's first quarter. Earnings per share on a fully diluted basis were $0.14 versus a loss of $0.03 in the first quarter of fiscal 2003.

33. In the press release, defendant Manning commented on the financial results as

follows:

Our first-quarter results demonstrate the dramatic growth in sales, revenues and profits that we expected as a result of the transactions we recently closed with Auctentia, S.L., our 72% stockholder, and its parent, Afinsa Bienes Tangibles, S.A. As a result of the delay in consummating certain private treaty transactions, which we had anticipated to occur in September but instead took place during the second quarter, we fell slightly short of our expectations in terms of aggregate sales and revenues. Nevertheless, the company's net income of $2.5 million still significantly exceeded our forecast. These positive results were due in part to the major auctions held in September by one of our new subsidiaries, Kohler Auctions of Wiesbaden and Berlin. Our two new sole source supplier agreements with Afinsa also had a positive impact on our first quarter results. Total revenues attributable to sales to Afinsa during the quarter totaled $10.7 million. To more accurately reflect the growth we expect GMAI to realize this year, we are raising our forecast for fiscal 2004 from $160 million in aggregate sales to $165-170 million, as compared to $118 million in fiscal 2003. We now expect revenue to total $138-140 million, up from our original estimate of $135 million and last year's level of $101 million. We also estimate that net income will total $9-10 million for fiscal 2004, compared to the previously announced estimate of $8 million and last year's net income of $2.8 million.

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We expect a very strong second quarter as a result of major auctions that will be held in the U.S., Zurich, Madrid and Hong Kong. As noted above, our recently signed sole source supplier agreement with Afinsa will add significantly to our earnings growth potential, both in the second quarter and beyond. In addition, the rare coin market continues to be strong and steady, and we are experiencing an increase in third party consignments of stamps, which we expect to result in greater commission income in fiscal 2004.

34. On December 16, 2003, the Company announced it was revising higher its

financial guidance for its fiscal year 2004. The press release stated, in relevant part:

Due to the strong forecast for second quarter, the company's guidance for fiscal year 2004 has been increased. Aggregate sales for fiscal 2004 are now forecast to grow to $170-175 million, compared to the previous estimate of $165-170 million and to $118 million in fiscal 2003. Revenue is now expected to reach $140-145 million, compared to the previous estimate of $138-$140 million and last year's level of $101 million. Net income is forecast to grow to $10-11 million, compared to the previously announced estimate of $9-10 million and last year's net income of $2.8 million.

* * *

Approximately 25-35% of GMAI's revenue for fiscal 2004 is expected to be attributable to revenues generated under two agreements with Afinsa Bienes Tangibles, S.A. of Madrid, Spain. One of these contracts is with GMAI directly and the other with its wholly owned subsidiary, GMAI Auctentia Central de Compras, S.L. (CdC) Under these recently signed agreements, GMAI and CdC will act as exclusive suppliers of collectibles, primarily stamps and coins, for Afinsa on a worldwide basis. Afinsa is the parent company of Auctentia, S.L., the majority shareholder of GMAI. Afinsa is engaged, among other things, in commercial and trading activities involving collectibles throughout Europe, and has business relationships with a substantial number of long-term clients, the ultimate purchasers of the goods to be provided by GMAI and CdC. Under the five-year agreements (which are terminable by either party upon notice after the first year), GMAI and CdC will both sell directly to Afinsa as well as act as agent for Afinsa in procuring requested material. Afinsa has agreed to pay a commission equal to 10% of the aggregate purchase price of all goods supplied by GMAI and CdC to Afinsa during the year. It is estimated that these contracts will generate $200 million to $250 million in revenue to GMAI over the term of the agreements.

35. In the press release, defendant Manning commented on the Company’s outlook as

follows:

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October and November both exceeded our internal projections as auctions held company-wide in Europe, Hong Kong and the United States were successful beyond their pre-sale estimates. In addition, our sole source contract to supply stamps and coins to Afinsa Bienes Tangibles, S.A., our major shareholder, has also exceeded projections. The rare coin market continues to be favorably impacted by the strong price of gold bullion, and the demand for rare coins has continued to increase, thus creating greater sales for Spectrum and Teletrade, our coin-related companies."

36. On February 3, 2004, the Company issued a press release entitled “Greg Manning

Auctions Announces Record Second Quarter for Fiscal 2004; Aggregate Sales $59.7 Million,

Revenue $53.2 Million, Net Profit $4.0 Million - All Quarter Records” announcing earnings for

its fiscal 2004 second quarter. The press release states, in relevant part:

Greg Manning Auctions, Inc. (Nasdaq: GMAI) announced today that the company's financial results for the second quarter of fiscal 2004 exceeded its forecasts and set records for the company's quarterly performance. For the period ending December 31, 2003, aggregate sales rose 154% to $59.7 million from $23.5 million in last year's second quarter, revenue increased 174% to $53.2 million from $19.4 million, and net profit rose to $4.0 million versus a loss of $1.0 million. Earnings per share on a fully diluted basis were 14(cents) compared to a loss of 8(cents) per share in the second quarter of fiscal 2003. EBITDA earnings on a fully diluted basis were 24(cents) per share for the second quarter.

37. In the press release, defendant Manning commented on the financial results as

follows:

Our second-quarter performance well exceeded the high end of our projections, which we believe reflects the synergies achieved through our European and Asian expansion. Our results also illustrate the solid foundation our sole source contracts with our major shareholder, Afinsa Bienes Tangibles, S.A. of Madrid, Spain, provide to GMAI. The Afinsa contract accounted for 30% of our aggregate sales in the first half of the fiscal year. Our auction businesses and rare coin operations in the U.S. also experienced considerable internal growth during the period, positively impacting our second quarter results.

38. On March 22, 2004, the Company announced that it anticipated “record breaking”

results for its fiscal third quarter 2004 and raised its guidance for its fiscal year 2004 financial

performance. The press release states, in relevant part:

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Greg Manning Auctions, Inc. (Nasdaq: GMAI) announced today that for its fiscal 2004 third quarter ending March 31, 2004, the company is forecasting $66-$68 million in aggregate sales, $53-$55 million in revenue and $4.8-$5.2 million in net income, all potential records. These numbers compare with the actual results for the third quarter of fiscal 2003 of $31.3 million in aggregate sales, $26.5 million in revenue, and $2.3 million in net profit. Due to the anticipated record breaking third quarter, GMAI has revised its guidance upward for fiscal year 2004. Aggregate sales for fiscal 2004 are now forecast to grow to $205-$210 million compared to the previous estimate of $170-$175 million, and to actual sales of $118 million in fiscal 2003. Revenue is now expected to reach $170-$175 million compared to the earlier estimate of $140-$145 million, and the fiscal 2003 results of $101 million. Net income for fiscal 2004 is now expected to reach $14-$15 million compared to the previously announced estimate of $10-$11 million, and last year's net income of $2.8 million for fiscal 2003. Greg Manning, First Vice Chairman, CEO and President, commented, "Our results to date in our third quarter have greatly exceeded expectations in all major areas; sales, revenues and profit are well ahead of forecast. The auction business volume and profitability has been augmented this quarter by the acquisition of Bowers & Merena coin auctions and Nutmeg Stamp Sales, as well as our record-setting auctions in Hong Kong in January. The market for rare coins and stamps continues to exceed our most optimistic projections, and has dictated that we again revise our annual guidance upward." He continued, "Our market share and the level of business in many of our companies continues to outpace last year's results and this, combined with four recent acquisitions that have become almost immediately accretive, bodes well for our future."

39. On April 16, 2004, the Company issued a press release entitled “Greg Manning

Auctions and Afinsa Bienes Tangibles Look to Enter China Market; Focus of Long-Term

Business Strategy Expands to Encompass Asia” that states, in relevant part:

Greg Manning Auctions, Inc. (NASDAQ: GMAI) and Afinsa Bienes Tangibles, S.A. of Madrid, Spain, the majority shareholder of GMAI, today announced that they are jointly exploring the opportunities presented in the People's Republic of China (PRC), both regarding the acquisition of stamps that are valid for use in investment programs and, looking to the future, for the marketing of portfolios tailored to the characteristics of this immense Asian market. Greg Manning, First Vice Chairman, CEO and President of GMAI, stated,

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"GMAI has had considerable experience in the PRC and, most recently, also in Hong Kong. We conducted the PRC's first on-line auctions of stamps in 1999 in concert with a major stamp exhibition, which drew over 500,000 stamp enthusiasts to Beijing. It is clear that the stamp market in China is both collector- and investor-oriented, as the Chinese have used stamps as an investment vehicle in the past. "We believe this philatelic awareness offers a unique opportunity for our proposed joint venture, whether for the acquisition of fine stamps or for the possible marketing of investment plans similar to those sold so successfully by Afinsa Bienes Tangibles in Spain and Portugal. The model GMAI recently used in Hong Kong - of identifying a local auction firm with considerable assets and experience with which to form a profitable joint venture - is similar to the model we will attempt to initiate in the PRC, with an important local firm having the ability to take to market investment systems based on collectible tangible assets." Mr. Manning continued, "Today, China is ranked second in the world in terms of purchasing power parity and gross domestic product (GDP), according to nationmaster.com, and its 2003 GDP was estimated at $1.3 trillion by the People's Daily of November 23, 2003. We believe these numbers reflect a major market opportunity that warrants both seeking a PRC-based partner and exploring the legal and regulatory environment for this long-term undertaking." Juan Antonio Cano, Chairman and CEO of Afinsa, which owns 72% of GMAI's stock, commented, "Afinsa's knowledge of the tangible investment field has enabled our company to grow to approximately one billion Euros in transactions in 2003, with our investment products being offered throughout Spain and Portugal. In our opinion, the Chinese market can in the near future become one of the world's largest for investments in collectible tangible assets. "This early stage venture with GMAI is designed to unite our experience in building our model in Europe - which encompasses 2,400 sales representatives, 600 full-time employees, 120,000 clients and 200 offices - with GMAI's abilities to source the appropriate stamps and coins and deliver them on a timely basis. I believe that our strengths, combined with a major PRC company as a partner, can over the long-term create a business venture with great prospects for success. Our strategy will be to minimize risk by building slowly with tight controls and staying power through a strong local partner."

40. On May 6, 2004, the Company announced “record” results for its fiscal third

quarter 2004. The results, which far exceeded even the Company’s earlier upwardly revised

guidance, were announced in a press release that states, in relevant part:

Greg Manning Auctions, Inc. (NASDAQ:GMAI) announced today that the

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company's financial results for the third quarter of fiscal 2004 exceeded forecasts and set records for GMAI's performance. For the quarter ending March 31, 2004, aggregate sales rose 158% to $80.9 million from $31.3 million for the third quarter of fiscal 2003. Revenue was also up sharply, rising 143% to $64.5 million from $26.6 million for last year's comparable period; and net profit increased 215% to $6.5 million from the $2.1 million posted for the same quarter last year. Earnings per share on a fully diluted basis were $0.23 compared to $0.16 in the previous year's third quarter. EBITDA earnings on a fully diluted basis for the fiscal third quarter were $0.32 per share, versus $0.19 for the prior year's third quarter. First Vice Chairman, CEO and President Greg Manning stated, "Our third quarter results greatly exceeded our in-house forecasts, as the companies we recently acquired performed well above expectations and the collectibles marketplace continued to reflect the strong demand, on a worldwide basis, for rare coins and stamps. In addition, results from our European operations were buoyed by increased sales to Afinsa Bienes Tangibles, S.A. of Madrid, our majority shareholder, under our sole source contracts to supply Afinsa with quality collectibles. For the third quarter, the Afinsa contract sales totaled $34.9 million. "During the fourth quarter, we will have a number of important auction sales in our coin and stamp companies in Hong Kong, Europe and North America. While it is still too early to provide specific guidance for the quarter, we are currently reviewing our estimates for the year and, based on our strong results to date and our schedule of approximately 43 auction sales, we expect to revise our guidance upward in mid-June." For the first nine months of fiscal 2004, GMAI's aggregate sales totaled $181.8 million, up 116% from $84 million for last year's same period; revenue for the current period increased 113% to $152.2 million from $71.4 million for the first nine months of fiscal 2003. Net profit rose to $13 million for the nine months of fiscal 2004, up from $764,000 for last year's same period. EBIDTA reached $19.4 million against $1.8 million for the same period last year. Net profit per fully diluted share for the first nine months of fiscal 2004 totaled $0.52 versus $0.06 per share in fiscal 2003. EBITDA earnings per fully diluted share reached $0.78 against $0.14 for the year ago period. (See the attached table for an EBITDA reconciliation schedule.)

41. On May 19, 2004, the Company issued a press release entitled “Greg Manning

Auctions Announces Extension of Afinsa Supply Contracts; Value Estimated at $1 Billion over

Ten Years” that states, in relevant part:

Greg Manning Auctions, Inc. (NASDAQ: GMAI) announced today that the company has reached an agreement with Afinsa Bienes Tangibles, S.A., the

17

majority shareholder of GMAI, to extend their five-year sole source supply contracts to ten years. The two agreements with Afinsa are with GMAI and GMAI-Auctentia Central de Compras, S.L. (CdC), a wholly owned subsidiary of GMAI. The agreements call for GMAI and CdC to supply Afinsa with collectibles, primarily stamps and coins, which Afinsa then offers its 120,000 clients in Europe through its tangible asset investment programs. Greg Manning, First Vice Chairman, CEO and President, stated, "Although the contracts do not specify a minimum level of sales, based on our sales to Afinsa over the past eight months, which totaled more than $65 million, we estimate that the contracts will generate more than $1 billion in revenue to GMAI over the full ten-year term of the agreements. "Afinsa's unparalleled growth over the past 23 years to more than 1 billion Euros in annual transactions in tangible investments, including direct and intermediary sales, requires an ever-growing quantity of quality collectibles. The worldwide contacts we have developed over the past 45 years to source high-quality stamps and coins make us uniquely suited to meet Afinsa's ongoing demand. Afinsa's significant purchase orders, which we fulfill on a monthly basis, enhance GMAI's stability, providing a firm base on which to grow our company. Coupled with our other core businesses of auctions in coins and stamps, as well as our major rare coin wholesale operations, these contracts give us an important long-term resource for continuing to expand GMAI's operations." Juan Antonio Cano, Chairman and President of Afinsa, stated, "GMAI and CdC have provided Afinsa with a secure and steady supply of collectibles, greatly increasing our efficiency and our ability to grow Afinsa's business in an orderly manner. In recognition of the success of our initial sole source agreements with GMAI, which we entered into eight months ago, we are pleased to extend the term of the contracts for an additional five years." During the term of the contracts, which are terminable by either party upon notice after one year, Afinsa will continue to pay, in addition to the purchase price, an additional sourcing fee equal to 10% of the aggregate purchase price of all goods supplied by GMAI and CdC.

42. On June 16, 2004, the Company raised its financial guidance for its fourth quarter

and fiscal year 2004 in a press release entitled “Greg Manning Auctions Raises Guidance for

Fiscal 2004; Record-breaking Fourth Quarter and Year Forecast for GMAI; 20-30% Growth in

Aggregate Sales Targeted for Fiscal 2005” that states the following, in relevant part:

Greg Manning Auctions, Inc. (Nasdaq: GMAI) announced today that the company is raising its guidance for the fiscal year ending June 30, 2004. The

18

company is now forecasting aggregate sales (inventory sales plus consignment sales) of $250-255 million, compared to a previous forecast of $205-210 million, and to $118 million in fiscal 2003. Revenue (inventory sales plus commission income) is forecast to grow to $205-210 million compared to the previous forecast of $170-175 million, and actual revenue in fiscal 2003 of $101 million. Net income is now forecast to reach $22-23 million, compared to the previously announced estimate of $14-15 million and last year's actual net income of $2.8 million for fiscal 2003. For the fourth quarter ending June 30, 2004, GMAI is forecasting record aggregate sales, revenue and net profit. Aggregate sales are forecast to reach $70-75 million for the fiscal 2004 fourth quarter, versus the $34 million achieved in fiscal 2003. Revenue is forecast at $55-60 million versus $29.8 million actual revenue in last year's fourth quarter. Net income is forecast to be between $9-10 million for the 2004 fourth quarter, well above the actual $2.1 million achieved in the fourth quarter of fiscal 2003. Greg Manning, First Vice Chairman, CEO and President, commented, "We have forecast that our fourth quarter results will continue to reflect the solid growth we have achieved throughout fiscal 2004. Our goal has been to increase our net profits through organic growth as well as acquisitions, and the first nine months of fiscal 2004 clearly demonstrate the success GMAI has had in this area. "We expect to continue this very positive trend in fiscal year 2005 as our recently acquired companies operate under the GMAI banner for a full year. In fact, we believe aggregate sales will grow at least 20 - 30% to more than $300 million. We anticipate releasing a more detailed forecast for fiscal 2005 during the first quarter of our 2005 fiscal year, which begins on July 1." Esteban Perez, Chairman of the Board of GMAI, stated, "The synergy created by bringing together 12 collectibles-related companies over the past 10 months has resulted in a strong international group. A number of the individual companies have performed better than forecast, leading us to revise our guidance upwards on several occasions. Our goal for fiscal 2005 is continued in-house growth, as well as identifying additional profitable acquisition candidates around the world."

43. On July 26, 2004, prior to having announced its financial results for its fourth

quarter and fiscal year 2004, the Company issued a press release forecasting “record” 2005

results that states, in relevant part:

Greg Manning Auctions, Inc. (NASDAQ:GMAI) today announced the company's forecast for fiscal year 2005, which began on July 1, 2004 and ends on June 30, 2005. The company anticipates releasing its fiscal year 2004 earnings in early September.

19

GMAI currently forecasts aggregate sales for fiscal 2005 to be $300 to $305 million, compared to the current guidance for fiscal 2004 of $250 to $255 million, and actual aggregate sales of $118 million for fiscal 2003. Revenue in fiscal 2005 is forecast to reach $265 to $270 million, compared to the forecast of $205 to $210 million for fiscal 2004, and actual revenue of $101 million in fiscal 2003. Net profit for fiscal 2005 is expected to reach $30 to $31 million versus the $22 to $23 million forecast for fiscal 2004, and actual net profit of $2.8 million in fiscal 2003. Earnings per fully diluted share are forecast to be $1.07 for fiscal 2005 compared to current guidance of 89(cents) for fiscal 2004 and the 22(cents) achieved in fiscal 2003. Greg Manning, First Vice Chairman, CEO and President, stated, "We believe that in fiscal 2005, GMAI will continue the excellent growth we achieved in fiscal year 2004. This summer's Bowers & Merena coin auctions have already proved to be an important new source of sales and revenues for our first quarter, placing GMAI well ahead of the first quarter of fiscal 2004. We have also been very successful this summer in sourcing both consignments and inventory for our fall stamp auctions. Our financial strength and our status as a public company have enabled GMAI to greatly increase our market share in both our core competencies -- rare coins and stamps -- in our auction companies, as well as our retail and wholesale divisions, through both organic growth and acquisitions." Larry Crawford, Chief Financial Officer, added, "Over the past two years we have turned GMAI into a highly profitable company, having completed twelve acquisitions that are accretive to our long-term goal of double-digit annual growth in our top and bottom line. We look forward to fiscal year 2005 and beyond, so that we can further validate what has proven to be a very successful strategy for GMAI, which, we believe, can be sustained for the continued long-term growth of GMAI."

44. On September 9, 2004, the Company announced the financial results for its fourth

quarter and fiscal year 2004. The press release, entitled “Greg Manning Auctions Reports

Record Year-End and Fourth Quarter Financial Results; Strong Market Demand Leads to Record

Revenue, Aggregate Sales and Net Income in Fiscal 2004,” states, in relevant part:

Greg Manning Auctions, Inc. (Nasdaq: GMAI) today announced record financial results for the fourth quarter and fiscal year ended June 30, 2004. Revenue, which includes inventory sales plus commission income, climbed 110% in fiscal 2004 to $212.9 million from $101.2 million in the corresponding period a year ago. Aggregate sales, which include inventory sales plus consignment sales, rose 119% to $258.4 million in fiscal 2004 from $118.2 million in the previous

20

fiscal year. Net income for the year was $29.4 million, or $1.14 per diluted share, compared to $2.8 million, or $0.22 per diluted share, in fiscal 2003. Net income in fiscal 2004 included a non-cash tax credit of $4.9 million resulting from a change in deferred tax valuation recognized in the fourth quarter. Excluding this tax credit, pro-forma net income in fiscal 2004 was $24.5 million, or $0.95 per diluted share. In the fourth quarter, revenue rose 103% to $60.7 million from $29.8 million in the same period last year. Aggregate sales increased 120% to $75.4 from $34.2 million in the fiscal 2003 fourth quarter. Net income in the quarter was $16.3 million, or $0.57 per diluted share, compared to $2.1 million, or $0.17 per diluted share. Net income in the fiscal 2004 fourth quarter included the aforementioned tax credit of $4.9 million. Excluding this benefit, net income in the 2004 fourth quarter was $11.4 million, or $0.39 per diluted share. Greg Manning, First Vice Chairman, President and Chief Executive Officer, said, "Our record financial performance in fiscal 2004 exceeded our expectations and reflects the strong demand in the philatelic and numismatic markets. In addition, during the year we completed several major acquisitions that we believe will complement our core competencies in the multibillion-dollar global collectible market for rare coins and stamps. The Company expanded its global presence across the U.S., Europe and Asia this past year and currently operates a total of 16 subsidiaries in six countries, plus Internet auctions. Our exclusive supplier agreements with Afinsa Bienes Tangibles, SA of Madrid, Spain, our majority shareholder, contributed approximately $102.2 million in non-auction sales. Although the agreements do not specify a minimum level of sales, based on our sales to Afinsa over the past year, we estimate that the contracts, which can be terminated by either party under certain circumstances, will generate more than $1 billion in revenue to GMAI over the full ten-year term of the agreements." Manning continued, "Our rapid growth also reflects management's ability to execute its strategic growth plan. In fiscal 2004, pretax profit climbed to $32.6 million from $3.0 million in fiscal 2003. In addition, gross profit grew to $61.5 million, or 28.9% of revenue, compared to $14.5 million, or 14.3% of revenue, in fiscal 2003." Esteban Perez, Chairman of the Board, added, "We are confident in our ability to sustain strong internal growth as well as growth through additional complementary acquisitions. The successful platform we have built provides substantial growth opportunities that will enable management to drive future performance and maximize shareholder returns." In the fourth quarter, Greg Manning Auctions realized approximately $22.1 million in aggregate sales through its coin and stamp companies located in North America, Europe and Hong Kong as compared to $8.2 million in aggregate sales in the same period last year. Pretax profit in the fourth quarter totaled $14.4

21

million compared to $2.3 million in the same period last year and gross profit was $23.6 million, or 38.9% of revenue, compared to $6.4 million, or 21.5% of revenue. Larry Crawford, Chief Financial Officer, said, "Fiscal 2004 was a breakthrough year for GMAI. In addition to record revenue, aggregate sales and net income, the Company ended the year in the strongest financial position in its history. As of June 30, the Company reported a cash position of $16.3 million and $48.4 million in working capital. "We look forward to fiscal 2005 which will reflect a full year of operations from our recently acquired companies, including the renowned auction house of H.R. Harmer of New York, whose acquisition was completed on July 30, 2004. Our auction line-up for the first half of 2005 is our strongest ever for this period, with numerous live event sales already scheduled as well as a full line of Internet auctions. We also recognize the benefits of operating as a public company, which has manifest itself as a competitive advantage in securing business with prospective consignors and those who prefer to sell their collectibles for immediate payment. We intend to continue to enhance our overall operating leverage as we strengthen our presence in the global marketplace, particularly in Europe and Asia. Finally, we believe we will solidify our position as one of the leading collectible companies in the world as exemplified by our fiscal 2004 results and our excellent prospects for continued growth in fiscal 2005 and beyond."

45. On September 10, 2004 the Company filed it Form 10-K for the fiscal year

ended June 30, 2004 with the SEC which states in relevant part:

Revenues:

The Company recorded an increase in total revenues of approximately $111,699 (110%), to approximately $212,890 for the year ended June 30, 2004 from approximately $101,191 for the year ended June 30, 2003.

Revenues from Existing Operations were $95,888 for the fiscal year ended June 30, 2004, an increase of $2,351 (or 3%) from $93,537 for the fiscal year ended June 30, 2003.

Revenues attributable to Expanded Operations for the fiscal year ended June 30, 2004 were as follows: $12,225 from the seven European subsidiaries; $2,532 from the four U.S. subsidiaries; and $102,215 under the exclusive supply contracts with Afinsa (a related party). The revenue attributable to transactions under the exclusive supply contracts with Afinsa includes the 10% see provided for under the contracts.

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The Company recognized revenue from sales to Afinsa of $7,654 in the year ended June 30, 2003. Those revenues, however, were not derived from the exclusive supply contracts with Afinsa and as such were included in our Existing Operations last year. In the above table, these revenues are reported as Expanded Operations for comparative purposes only.

For the year ended June 30, 2004, the total revenue of approximately $212,890 comprised approximately $199,903 of revenue from sales of owned inventory and approximately $12,987 of commissions resulting from sales of consigned materials.

* * * *

Gross profit increased approximately $46,972 (324%), to approximately $61,491 for the year ended June 30, 2004 from approximately $14,519 for the year ended June 30, 2003. The increased gross profit was the result of an increase in revenue of $111,699, coupled with an increase in gross profit percentage from 14% for the year ended June 30, 2003 to 29% for the year ended June 30, 2004.

The largest contributing factor to the increase in gross profit percentage was $102,215 in direct sales to Afinsa (a related party) in the year ended June 30, 2004 under the exclusive supply contracts (part of Expanded Operations).

Exclusive of sales to Afinsa, the gross profit percentage increased from 12% for the year ended June 30, 2003 to 22% for the year ended June 30, 2004. The increase, exclusive of sales to Afinsa, was the result of higher gross profit margins on auction sales of owned stamp inventory, which reflects an improvement in the quality and pricing of stamp purchases by the Company, as well as, to a lesser extent, revenue attributable to the operations of the seven European and four U.S. subsidiaries acquired by the Company during the year ended June 30, 2004 (part of Expanded Operations); this revenue consisted almost entirely of commissions, with respect to which there is no corresponding cost of goods sold.

46. On November 4, 2004, the Company issued a press release announcing fiscal

2005 first quarter financial results that states, in relevant part:

Greg Manning Auctions, Inc. (Nasdaq: GMAI) today announced record financial results for the fiscal 2005 first quarter ended September 30, 2004. Aggregate sales, which includes inventory sales plus consignment sales, increased 58% to $65.2 million, up from $41.3 million in last year's first quarter. Revenue,

23

which includes inventory sales plus commission income, rose to $48.1 million, up 39% from the prior year's first quarter results of $34.5 million. Pre-tax income for the fiscal 2005 first quarter was $9.1 million, a 214% increase over the $2.9 million achieved in the similar period in fiscal 2004. Net income for the first quarter was $5.1 million, up 104% from $2.5 million achieved in the first quarter last year. Earnings per share on a fully diluted basis were $0.18 up 29%, compared to $0.14 posted in the comparable period of the prior year. EBITDA earnings per share reached $0.33, up 83% from $0.18 in the first quarter of fiscal 2004. Greg Manning, First Vice Chairman, CEO and President, stated, "Our record first quarter results exceeded projections. Fiscal 2005 first quarter sales to our majority shareholder, Afinsa Bienes Tangibles, S.A., under our exclusive supplier agreement, contributed 33% of our aggregate sales, down as a percentage of total sales from the fiscal 2004 average of 40%. In fiscal 2005 and beyond, we expect continued steady growth in our non-Afinsa related businesses, as we fully develop the synergies and ultimate potential of the 11 acquisitions completed in fiscal 2004." Manning continued, "In the first quarter, the company conducted 5 live 'event' auctions for both coins and stamps, as well as 45 additional Internet auctions. Gross profit in the first quarter was $17.2 million, or 35.8% of revenue, compared to $7.5 million or 21.6% of revenue, in the same period a year ago. We look forward to another strong performance in our current second quarter, which has commenced with the first of a series of auctions of the famed Edward M. Gilbert collections. The Gilbert Newfoundland collection, sold by H.R. Harmer of New York on October 22, 2004, carried a pre-sale estimate of $552,000 and realized $773,000 or 40% over the estimate, with a 100% sell through rate. Part II of the Gilbert collection, France & Colonies, will be sold in Monaco on December 4-7, 2004, as will the John R. Boker Jr. collection of the Reunion Islands. These auctions are estimated to realize in excess of $2.1 million. The first Bowers & Merena 2nd quarter coin auction, held October 29, 2004, achieved aggregate sales of $5.4 million; their next coin auction will be held December 1-4 in conjunction with the Baltimore Coin and Currency Convention. In addition, Greg Manning Auctions will hold a major specialized auction of intact stamp collections valued at $2 million on December 11, 2004 in New Jersey. Combined, we have a record number of major auctions scheduled in our second quarter. Consignments for our third and fourth quarter auctions are also strong, including additional sections of the Gilbert collections and a major Hong Kong auction."

47. On January 21, 2005, the Company issued a press release announcing that the

Company was projecting “record” financial results for its fiscal 2005 second quarter. The press

release states, in relevant part:

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Greg Manning Auctions, Inc. (NASDAQ:GMAI) announced today the company's guidance for the fiscal 2005 second quarter, which ended on December 31, 2004. The company anticipates a record second quarter of $70-71 million in aggregate sales (inventory sales plus consignment sales), compared to $59.7 million in the same quarter of fiscal 2004. Revenue (inventory sales plus commission income) is estimated to reach a record $58-60 million against $54.3 million achieved in the previous year's second quarter. Net income is expected to be a record $7.4-7.6 million, well above the $4.0 recorded in last year's second quarter. Greg Manning, First Vice Chairman, CEO and President, stated, "Several areas of financial performance were positively addressed in the second quarter of fiscal 2005. We anticipate dramatically improved cash flow for the quarter of $22-24 million, and cash on hand at the quarter end is expected to be $28-30 million. In addition, pre-tax profit is estimated at $11-12 million, compared to last year's $6.6 million in actual pre-tax income. "While we are pleased that aggregate sales, revenue and net profit are all expected to set new second quarter records, our area of focus in this quarter was to greatly improve our cash flow. To this end, we successfully established new accounts receivable collection procedures relating to our supply contracts with Afinsa, which had an extremely positive influence on both cash flow and cash on hand in the second quarter. We expect these newly implemented procedures will continue to positively impact future results in the cash flow area." Mr. Manning continued, "I am also pleased to report that our third quarter has begun with a significant Bowers & Merena coin auction on January 9th, which achieved sales of $7.3 million, a new single auction sale record for a GMAI company-conducted auction. The third quarter auction line-up includes another important Bowers & Merena sale on March 9-11, plus major stamp auctions at Koehler in Wiesbaden, Germany and Corinphila in Zurich, Switzerland in January, as well as an important H.R. Harmer of New York auction in February. A substantial auction sale in Hong Kong will also be held during the third quarter. A superb auction of intact stamp collections will be held on March 19th in New Jersey. In addition to these event auctions, the company's on-line coin sales at Teletrade have increased from 2 auctions to 3 auctions every week, featuring approximately 1,000 lots per auction. Collector-oriented stamp auctions at Nutmeg Stamp Sales are also occurring at a rate of 2-3 auctions per month, with a record 14,000 auction lots being offered by Nutmeg in January alone. "Historically, the second half of our fiscal year is our busiest. This fiscal year will continue this trend. We expect strong third and fourth quarters based on the consignments and inventory already on hand for sale through our fiscal year end. In addition, a highlight of the fourth quarter will be the auction sale of important British Empire stamps and postal history from the famed collections formed by Edward M. Gilbert. This auction, estimated to realize well over $3 million, will be conducted in London through a collaboration with Spink, a prominent London

25

auction house founded in 1666, and the holder of three Royal Warrants. The Gilbert auction will feature many of the greatest rarities of the British Empire, including three Bermuda Perot stamps valued at over $200,000, and the "Missing Virgin" stamp issued in 1867 by the Virgin Islands, and valued at over $100,000." Mr. Manning concluded, "We are looking forward to a year of sustained organic growth as we continue to implement our strategy for long-term progress and growth, both organic and through future complementary acquisitions, which will enhance both our market share and strength in the global marketplace."

48. On February 9, 2005, the Company issued a press release, headlined “Greg

Manning Auctions Reports Record Second Quarter Results; Net Income Up 88%, Aggregate

Sales Rise 19%, Revenue Climbs 11%” announcing its financial results for its fiscal 2005 second

quarter. The press release provided, in relevant part:

Greg Manning Auctions, Inc. (NASDAQ:GMAI) today announced record financial results for the fiscal 2005 second quarter ended December 31, 2004. Aggregate sales, which include inventory sales plus consignment sales, increased 19% to $70.8 million, up from $59.7 million in last year's second quarter. Revenue, which includes inventory sales plus commission income, rose to $59 million, up 11% from results in the prior year of $53.2 million. Pre-tax income for the fiscal 2005 second quarter was $12.4 million, up 88% from $6.6 million achieved in fiscal 2004. Net income also rose to $7.7 million from $4.1 million in the same period last year. Earnings per share on a fully diluted basis reached $0.27, up 87% from $0.14 posted in the fiscal 2004 second quarter. EBITDA earnings per share were $0.45 in the fiscal 2005 second quarter, compared to $0.24 in the prior year. Greg Manning, First Vice Chairman, CEO and President, stated, "While our net income and aggregate sales figures surpassed the high end of our internal forecast, we are particularly pleased that our cash on hand increased to $31.8 million on December 31, 2004 from $6.1 million at the end of our first quarter on September 30, 2004, an increase of 424% quarter-to-quarter. In addition, enhanced accounts receivable collection procedures allowed us to grow our operating cash flow for the second quarter to $24.7 million, which is a new company record for any quarter. "Our fiscal second quarter gross profit increased sharply to $19.4 million, up 45% from $13.4 million achieved last year. Our second quarter results are especially meaningful because they represent the first comparable quarter-to-quarter results of the company after the September acquisitions and the signing of the Afinsa supply contract in fiscal 2004."

26

In the second quarter, Greg Manning Auctions realized approximately $70.8 million in aggregate sales through its coin and stamp companies in North America and Europe, up 19% from $59.7 million in aggregate sales in the same period last year. The company's exclusive supply agreement with Afinsa contributed approximately $27.5 million in non-auction sales compared to $20.0 million in direct sales in the year-earlier period. "Our improved cash position greatly enhances our ability to fund profitable and accretive acquisitions," Manning added. "We will continue to review appropriate acquisition candidates to augment our organic growth, as well as to increase the scope of our operations in our core competencies of philately and numismatics. Virtually every company in the collectibles field is privately held, and there are a number of companies that we believe would complement our long-term strategy and provide operating synergies, such as our recently announced acquisition of John Bull Stamp Auctions, Ltd., a leading Hong Kong and Far Eastern Philatelic Auction House. "We look forward to strong third and fourth quarter results, which typically eclipse the first half of our fiscal year. The collectibles market for rare coins and stamps has been strong and steady, with a definite upward bias in prices and liquidity. The strength of the coin market was readily apparent in January when, during one week of auctions by multiple auction houses, more than $80 million in aggregate sales was achieved. We believe that GMAI is well positioned to take advantage of the increasing opportunities in the collectibles field, both in the short- and long-term." Larry Crawford, Chief Financial Officer, stated, "Our results for the first half of fiscal 2005 included 35% growth in aggregate sales to $136 million from $101 million in fiscal 2004. Revenue rose 22% to $107 million, up from $87.7 million in the prior year's first half and net income grew 97% to $12.8 million from $6.5 million last year. EPS on a fully diluted basis increased 58% to $0.45 per share for the first six months compared to $0.28 per share achieved in fiscal 2004. Equally impressive is the EBITDA increase to $0.79 from $0.44 in the prior year's first half. This performance is testament to the successful execution of our business strategy of sustained organic growth coupled with complementary acquisitions selected to be accretive to our financial results."

49. On March 21, 2005, the Company issued a press release commenting on the

continued success of its business operations and strength in the marketplaces in which it

operates. The press release stated, in relevant part:

Company's Inaugural Auction in Hong Kong Scheduled for April 8-9, 2005

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Greg Manning Auctions, Inc. (Nasdaq: GMAI) announced today its recent Bowers & Merena coin auction, held as the official exhibition auctioneer at the Baltimore Coin and Currency Show on March 10-11, 2005, realized total sales of $4.7 million. The Company's worldwide stamp auctions have also produced strong results, with an H.R Harmer auction posting $2.4 in sales on February 22-24, 2005. In Europe, Kohler Auctions of Wiesbaden and Berlin realized $3.5 million between their January and March 2005 auctions, and Corinphila Auctions of Zurich, Switzerland conducted a single-owner auction that realized $1.1 million on January 15, 2005. The Company's recently acquired John Bull Stamp Auctions in Hong Kong will hold its first sale under GMAI ownership on April 8-9, 2005. This inaugural auction, comprised of 1,630 lots, is expected to realize sales of more than $1 million, including a single-owner auction of the renowned Edward M. Gilbert Hong Kong collection. This auction is expected to be the strongest in John Bull's rich 30-year history.

* * * On April 7-9, 2005, Bowers & Merena will be the official auctioneer at an exhibition sponsored by the American Numismatic Association in Kansas City, MO. This auction is expected to realize sales in excess of $5 million. Greg Manning Auctions' quarterly sales of collections and dealers' inventories will include a seven-figure auction in June, following a March 19, 2005 sale that realized well over $2 million. In addition, Kohler Auctions in Germany and Corinphila in Switzerland have significant multi-million dollar auctions scheduled in May and June. In the U.S., a large 5,000+ lot Ivy & Manning stamp auction will be held on May 17-20, 2005. Nutmeg Stamp Sales have been offering more than 14,000 lots per month and are currently preparing a single-state revenue stamp auction comprised of more than 10,000 lots to be offered in June 2005. Greg Manning, First Vice Chairman, CEO and President, commented, "Our fiscal third and fourth quarter activity is, as anticipated, extremely robust in both of our core competencies, coins and stamps, reflecting the strength of our overall business as well as the global marketplace. In addition to our live auctions, Internet-based coin auctions at Teletrade have continued their successful schedule of three auctions per week, with up to 1,000 lots per auction. Based on our recent and upcoming events, Greg Manning Auctions is well positioned for strong future growth. Our challenge today, which we are meeting successfully, is not selling material, but rather finding enough to satisfy the unprecedented demand for quality individual coins and stamps, as well as collections."

50. On May 13, 2005, the Company issued a press release announcing earnings for its

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fiscal 2005 third quarter that stated, in relevant part:

Greg Manning Auctions, Inc. (Nasdaq: GMAI) today announced financial results for the fiscal 2005 third quarter ended March 31, 2005. Net income in the third quarter rose 26% to $8.2 million, or $0.29 per diluted share, from $6.5 million, or $0.23 per diluted share, in the same period last year. Aggregate sales, which include inventory sales plus consignment sales, totaled $74.7 million in the third quarter versus $82.0 million in the fiscal third quarter of 2004. Revenue, which includes inventory sales plus commission income, was $55.7 million compared to $64.5 million in the third quarter last year. Pretax profit for the fiscal 2005 third quarter increased 49% to $13.2 million from $8.8 million in the same period a year ago. Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) climbed 48% to $13.7 million, or $0.48 per diluted share, compared to $9.2 million, or $0.32 per diluted share, in the fiscal 2004 third quarter. Greg Manning, First Vice Chairman, CEO and President, stated, "Third quarter results reflect improved profitability from our direct supply agreement with Afinsa Bienes Tangibles, S.A. Gross profit in the third quarter grew to $21.7 million, or 39% of revenue, compared to $17.0 million, or 26% of revenue, last year. Revenue was down from a year ago due to lower inventory sales under our exclusive supply contract with Afinsa which we forecast will be made up in the current fourth quarter. As a result, we anticipate significantly stronger revenue in the fourth quarter than previously forecasted internally." In the third quarter, Greg Manning Auctions realized approximately $74.7 million in aggregate sales through its coin and stamp companies in North America, Europe and Asia versus $82.0 million last year. The Company's exclusive supply agreement with Afinsa contributed approximately $26 million in non-auction sales in the third quarter compared to $34.9 million in direct sales in the year-earlier period. For the nine months ended March 31, 2005, net income climbed 61% to $21 million from $13 million in the corresponding period a year earlier. Earnings per share on a fully diluted basis climbed 40% to $0.73 from $0.52 in the nine months ended March 31, 2004. Aggregate sales increased 15% to $210.7 million from $182.9 million in the previous nine-month period and revenue totaled $162.7 million compared to $152.2 million, an increase of 7%. Pretax profit for the nine months ended March 31, 2005 was $34.7 million compared to $18.3 million in the year-earlier period, an increase of 90%. EBITDA increased to $36.3 million, or $1.27 per diluted share, compared to $19.4 million, or $0.78 per diluted share.

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Larry Crawford, Chief Financial Officer, said, "As of March 31, the Company reported cash and cash equivalents of $29.8 million. Cash flow used in operations in the third quarter was approximately $2.1 million due primarily to a growth in inventories of approximately $3.4 million and a reduction of payables of approximately $5.5 million. We anticipate inventory levels dropping $7-9 million in the fourth quarter. For the nine months, cash flow from operations totaled $13.2 million and we remain on pace to achieve record operating cash for the fiscal year ending June 30, 2005. Our non-Afinsa core auction businesses continued to show strong growth with aggregate sales of consigned and owned inventory at auction for the nine month period ended March 31, 2005 increasing 38% to $69 million from $50 million in the same period last year. We will continue to seek strategic acquisitions that increase operating leverage in our core numismatic and philatelic businesses and add value to our expanding global platform." Manning concluded, "We anticipate a particularly strong finish to fiscal 2005. In the current fourth quarter, we expect solid contributions from our leading subsidiaries including Bowers & Merena, Ivy & Manning, Nutmeg Stamp Sales, John Bull Auctions in Hong Kong as well as Kohler Auctions in Germany and Corinphila in Switzerland. Demand remains robust in the global, multi-billion dollar coin and stamp collectible markets and we are uniquely positioned to capitalize on these positive trends as a result of our market expertise and worldwide reach. We are excited by our future prospects and anticipate a record performance for the fiscal year ending June 30."

51. During June 2005, the Company provided two updates informing investors of the

strong performance of auctions that had then recently been held by the Company and its

subsidiaries. In the first of these releases, issued on June 2, 2005, defendant Manning

summarized recent and near-term events for the Company as follows:

Greg Manning, First Vice Chairman, CEO and President, stated, "Our fourth quarter is normally very busy, but this year is exceptional. In addition to the auctions outlined, our Nutmeg subsidiary is offering its 8,200 clients tens of thousands of auction lots this quarter. The new clients added from our Nutmeg, Harmer and John Bull acquisitions have proven to be a significant force in Ivy & Manning and GMA auction realizations." Manning concluded, "Sales in the fourth quarter thus far to Afinsa, our majority shareholder, under our ten-year sole source supplier agreement have also been exceptional. Additionally, our coin division started the quarter with a successful auction at Bowers & Merena on April 7 and 8, which realized $5.95 million and

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featured the first public auction offering of coins recovered from the S.S. Republic. Coin sales remain robust, and a major fiscal 2006 first quarter coin auction will be the Bowers & Merena rarities auction in San Francisco in July, which will feature Part IV of the exceedingly high quality Rod Sweet Collection. Based on the auction consignments already in house and arriving daily, we also look forward to an active fiscal 2006 first quarter, which begins on July 1, 2005."

52. On September 12, 2005, the Company announced the financial results for its

fourth quarter and fiscal year 2005. The press release, entitled “Greg Manning Auctions

Announces Record Fourth Quarter And Year-End Financial Results; Company Reports Record

Net Income, Revenue and Aggregate Sales for Third Consecutive Year,” stated, in relevant part:

Greg Manning Auctions, Inc. (Nasdaq: GMAI) today announced financial results for the fourth quarter and fiscal year ended June 30, 2005. Net income for the year was a record $38.3 million, or $1.33 per diluted share, compared to $29.4 million, or $1.14 per diluted share, in fiscal 2004. Revenue, which includes inventory sales plus commission income, totaled $240.3 million in fiscal 2005 compared to $212.9 million in the corresponding period a year ago, an increase of 13%. Aggregate sales, which include inventory sales plus consignment sales, rose 21% to $313.2 million in fiscal 2005 from $258.4 million in the previous fiscal year. Net income in fiscal 2005 included a tax benefit of $4.5 million resulting from the divestiture of a certain non-core art investment. Net income in fiscal 2004 included a one-time tax credit of $4.9 million resulting from a change in deferred tax valuation. Excluding these non-recurring events, net income for the fiscal year ended June 30, 2005 was $33.8 million, or $1.18 per diluted share, compared to net income of $24.5 million, or $0.95 per diluted share, in the previous fiscal year. The diluted weighted average common shares outstanding for the year ended June 30, 2005 was approximately 28,688,000 shares compared to 25,787,000 shares for the prior year. In the fourth quarter, revenue rose 28% to $77.6 million from $60.7 million in the same period last year. Aggregate sales increased 36% to $102.6 from $75.5 million in the fiscal 2004 fourth quarter. Fourth quarter results reflect improved profitability from our direct supply agreement with Afinsa Bienes Tangibles, S.A. Gross profit net income in the quarter was $17.3 million, or $0.60 per diluted share, compared to $16.3 million, or $0.57 per diluted share. Excluding the aforementioned tax benefits, net income in the 2005 fourth quarter was $12.8 million, or $0.45 per diluted share, compared to $11.4 million, or $0.40 per diluted share, in the fiscal 2004 fourth quarter.

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Greg Manning, First Vice Chairman, President and Chief Executive Officer, said, "We are pleased to announce another record year for Greg Manning Auctions. Our ability to drive sales through our core expertise in the multi-billion dollar philatelic and numismatic collectible markets combined with complementary, strategic acquisitions led to record earnings per share of $1.33 on a fully diluted basis, including the impact of a one-time tax benefit. The synergies from our various businesses including Spectrum Numismatics, Bowers & Merena, Ivy & Manning, Nutmeg Stamp, H.R. Harmer of New York, John Bull Stamp Auctions in Hong Kong, Kohler Auctions in Germany, Corinphila in Switzerland, Internet auctions and more, have significantly strengthened our global operating platform and opportunities for future growth. "In addition, the acquisition of A-Mark Precious Metals (APM) in July 2005 positions GMAI as the leading vertically integrated distributor, wholesaler and retailer of collectibles in the world. APM provides strong cross-selling opportunities for our numismatic business and increases the company's annual revenue run rate to approximately $2.8 billion. With this acquisition, Greg Manning Auctions now operates a total of 18 businesses located in North America, Europe and Asia." Esteban Perez, Chairman of the Board, added, "The execution of our business plan has led to a record financial performance for the third consecutive year. The strong organic growth achieved through the integration of our coin and stamp businesses as well as accretive acquisitions has provided strong returns for our shareholders with additional potential for significant long-term growth." Gross profit for fiscal 2005 increased to $90 million, or 37% of revenue, compared to $61.5 million, or 29% of revenue, in the prior year. The company's exclusive supply agreement with Afinsa Bienes Tangibles, SA of Madrid, Spain, the company's majority shareholder, contributed approximately $123.3 million in non-auction sales for the year ended June 30, 2005, compared to $102.2 million in direct sales in fiscal 2004. Pretax profit for the year rose 67% to $54.3 million from $32.6 million in the same period a year ago. Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) climbed 64% to $56.7 million, or $1.98 per diluted share, compared to $34.5 million, or $1.34 per diluted share, in fiscal 2004. Larry Crawford, Chief Financial Officer, said, "In addition to another year of record net income, aggregate sales, and revenue, our company ended fiscal 2005 in the strongest financial position in its history. As of June 30, 2005 the company reported a cash position of $54.3 million cash. Cash flow from operations totaled $42.2 million for the year ended June 30 as inventory leveled off from the previous quarter, as planned, and as collections of accounts receivable substantially improved during the period.

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"Our financial results reflect our unique standing as one of the leading collectible companies in the world. Demand for rare coins and stamps remains robust, and we expect to increase our market share as we continue to expand our global presence. For the current fiscal year, we anticipate continued benefits from our strong operating leverage and look forward to the successful integration of APM, and delivering another year of record performance on behalf of our shareholders."

53. On September 13, 2005 the Company filed it Form 10-K for the fiscal year

ended June 30, 2005 with the SEC which states in relevant part:

Revenues The Company recorded an increase in total revenues of approximately $111,699 (or 110%), to approximately $212,890 for the year ended June 30, 2004 from approximately $101,191 for the year ended June 30, 2003.

For the year ended June 30, 2004, the total revenue of approximately $212,890 comprised approximately $199,903 of revenue from sales of owned inventory and approximately $12,987 of commissions resulting from sales of consigned materials. This was an increase of $102,981 (or 106%) in sales of owned inventory and an increase of $8,718 (or 204%) in commissions resulting from sales of consigned materials.

Revenues under the exclusive supply contracts with Afinsa (a related party) were $102,215 for the year ended June 30, 2004, an increase of $94,561 (or 1235%) from $7,654 for the year ended June 30, 2003. The revenue attributable to transactions under the exclusive supply contracts with Afinsa includes the 10% fee provided for under the contracts.

* * * * Gross Profit

Gross profit increased approximately $46,972 (or 324%), to approximately $61,491 for the year ended June 30, 2004 from approximately $14,519 for the year ended June 30, 2003. The increased gross profit was the result of an increase in revenue of $111,699, coupled with an increase in gross profit percentage from 14% for the year ended June 30, 2003 to 29% for the year ended June 30, 2004.

The largest contributing factor to the increase in gross profit percentage was $102,215 in direct sales to Afinsa (a related party) in the year ended June 30, 2004 under the exclusive supply contracts. Gross profit on related party sales decreased from 38% in the year ended June 30, 2003 to 36% for the year ended June 30, 2004. However, the volume of sales to related party had a positive effect on overall gross profit. Exclusive of sales to Afinsa, the gross profit percentage increased from 12% for the

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year ended June 30, 2003 to 22% for the year ended June 30, 2004. The increase, exclusive of sales to Afinsa, was the result of higher gross profit margins on auction sales of owned stamp inventory, which reflects an improvement in the quality and pricing of stamp purchases by the Company, as well as, to a lesser extent, revenue attributable to the operations of the seven European and four U.S. subsidiaries acquired by the Company during the year ended June 30, 2004; this revenue consisted almost entirely of commissions, with respect to which there is no corresponding cost of goods sold.

54. On September 28, 2005, the Company announced that it was changing its name to

Escala Group, Inc. Commenting on this change, defendant Perez was attributed with making the

following statement issued in the press release:

"Over the past few years, starting with the integration of the auction businesses of Greg Manning Auctions and Auctentia, S.L., we have brought together a global network of premier international collectibles companies which now make up the Escala Group. These companies position us as a global powerhouse in the collectibles market. Our businesses now include Auctions, Merchant/Dealer Operations and Trading, all of which will operate under the Escala Group umbrella. Our new name reflects the evolution of our company and is an integral part of the implementation of our overall growth strategy. Going forward, under the capable leadership of Jose Miguel, we look to expand our presence and market share worldwide."

55. In the same press release, defendant Herrero commented on the Company’s

prospects as follows:

I am excited about Escala Group's future prospects. We have a strong foundation and we all believe that there are numerous opportunities to take our company to its next level of growth. I look forward to working with the management team to further develop our business both organically and through acquisitions. We will continue to seek strategic synergistic opportunities worldwide in our current areas of business. We will also look to make selective art acquisitions in the U.S. and Europe.

56. On November 8, 2005, the Company issued a press release announcing financial

results for its fiscal 2006 first quarter. The press release states, in relevant part:

Escala Group, Inc. (Nasdaq: ESCL) today announced financial results for the first quarter of the 2006 fiscal year.

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Net income for the quarter was $9.3 million or $0.32 per diluted share. This compares with net income of $5.1 million or $0.18 per diluted share for the first quarter of the 2005 fiscal year, an increase of 81.6%. In calculating earnings per share, the diluted weighted average common shares outstanding for the quarter was 28,790,000 compared to 28,767,000 in the first quarter of fiscal 2005. Revenue, which includes inventory sales plus commission income, was $558.9 million versus $48.1 million in the previous year period. Aggregate sales, which include inventory sales plus consignment sales and commission income, were $576.6 million versus $65.2 million for the prior year period. The increase in aggregate sales was due largely to the inclusion of $494.3 million of sales revenues from Escala's A-Mark unit which conducts its business in Trading. On July 15, 2005, Escala Group acquired 80% of the issued and outstanding shares of A-Mark Precious Metals. Given the date of the acquisition, A-Mark contributed only eleven weeks of trading revenues to the period ended September 30, 2005. The company recorded an increase in total revenues in Collectibles of approximately $16.6 million to approximately $64.7 million for the three months ended September 30, 2005 from approximately $48.1 million for the same period of fiscal 2005. Jose Miguel Herrero, President and Chief Executive Officer said, "We are delighted with our first quarter performance. The results of our A-Mark trading operations for the period bode well in terms of achieving our expectations with this acquisition. Commissions from auction sales were very strong in the quarter as well, and we continue to see strong results in Related Party sales from our exclusive supply contract with Afinsa." Mr. Herrero continued, "The Company made a number of moves in the quarter that reflect our global aggregation strategy. Among other things, we changed our name to Escala Group and relocated our headquarters to Midtown Manhattan as we continue to integrate our global operations under our new umbrella brand. Our recent acquisition of Greg Martin Auctions exhibits our commitment to expanding and diversifying into new opportunities in collectibles. This company will be included in the newly formed Arts and Antiques Division. Our financial results continue to validate our global strategy as gross profit percentage on Collectibles for the quarter increased to 40.5% from 35.7% for the comparable period in the last fiscal year. At the same time, our operating cash flow for the first quarter was 93% of net income, which reflects the continued results of our significantly tighter controls on receivables."

57. On February 8, 2006, the Company issued a press release announcing financial

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results for its fiscal 2006 second quarter. The press release states, in relevant part:

Escala Group, Inc. (NASDAQ:ESCL) today announced financial results for the fiscal 2006 second quarter and six months ended December 31, 2005. Net income for the second quarter was $10.1 million, or $0.35 per diluted share, compared with net income of $7.7 million, or $0.27 per diluted share, for the second quarter of fiscal 2005. These figures reflect an increase of 32.0% in net income and 30% in diluted earnings per share. In calculating earnings per share, the diluted weighted average common shares outstanding for the second quarter of fiscal 2006 was 28,963,000 compared with 28,760,000 for the corresponding quarter of fiscal 2005. For the first half of fiscal 2006, net income rose 52% to $19.4 million in fiscal 2006 compared with $12.8 million for the same period in fiscal 2005. Diluted earnings per share grew 49% to $0.67 in the first half of fiscal 2006, versus $0.45 in the corresponding period in fiscal 2005. Total revenues, which include inventory sales plus commission income, were $877.1 million for the second quarter of fiscal 2006, versus $58.9 million for the same quarter in fiscal 2005. Aggregate sales, which include inventory sales plus consignment sales and commission income, were $894.5 million, versus $70.8 million for the same quarterly fiscal comparisons. Total revenues in the first half of fiscal 2006 were $1.4 billion, compared with $107.0 million during the first half of fiscal 2005. Aggregate sales for the same period increased to $1.5 billion in fiscal 2006, versus $136.0 million in fiscal 2005. The growth in total revenues for the second quarter and the first half of fiscal 2006 is largely due to the acquisition of A-Mark Precious Metals completed on July 15, 2005. Gross profit in the second quarter of fiscal 2006 increased $7.9 million, or 41%, to $27.3 million, from $19.4 million for the comparable period in fiscal 2005. The increase in gross profit is largely attributable to related-party sales to Afinsa. In Collectibles, Escala recorded a 20% increase in revenues to $70.8 million for the three months ended December 31, 2005, from $58.9 million for the same period in fiscal 2005. The gross profit percentage for the second quarter of fiscal 2006 increased to 36% versus 33% for the second quarter of 2005. Aggregate sales from auction operations increased 33% to $54.6 million for the first half of fiscal 2006 from $41.1 million for the comparable period in fiscal 2005. Jose Miguel Herrero, President and Chief Executive Officer commented, "We are pleased with Escala's strong financial performance which is due to both acquisitions as well as organic growth. The second quarter continued to receive

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the benefit of the Company's strategic acquisition of A-Mark Precious Metals, and we are seeing solid demand in our core businesses of stamps and coins. "As we continue to build on our aggregation strategy," Mr. Herrero continued, "Escala achieved one of its stated goals of expanding into arts and antiques in the second quarter by completing the acquisition of Greg Martin Auctions, the specialty arms, military and Western memorabilia auction house based in San Francisco, on October 14, 2005. Greg Martin Auctions conducted a successful arms and Native American auction in the second quarter, and they will be holding a key auction of the Howard Collection on the East Coast in the fourth quarter. This relationship demonstrates the power of our group network -- a diverse collectibles product offer that can be deployed in the appropriate market for the collector."

58. On March 13, 2006, the Company announced that it had been listed as a top-100

company in creating shareholder value for 2005. In the self-congratulatory press release entitled

“Escala Group Recognized for Creating Shareholder Value and Achieving Operating

Performance” announcing the “honor,” the Company stated, in relevant part:

Escala Group (NASDAQ:ESCL) today announced that investment consultant DeMarche Associates, Inc. has named Escala Group as one of America's 100 Most-Improved Companies for Shareholder Value for 2005, a distinction placing the Company in the top three percent of all major U.S. corporations for operating performance during the three-year period ending December 31, 2005. "We are very honored to be a part of such a select group," commented Jose Miguel Herrero, chief executive officer of Escala. "Escala Group has a well- defined corporate strategy founded on organic growth as well as growth through acquisitions. We continually look at ways to broaden our geographic and collectibles operating platform, and we pursue this objective by maintaining recognized names in the auction, merchant/dealer and trading markets that reinforce Escala Group's global brand. With this focus, we believe we can deliver value to shareholders."

59. Despite the above filings and related public announcements by the Company,

the Company never disclosed to investors that its chief source of operating earnings and the main

source of the Company’s sales margins were realized through questionable and potentially illegal

means by its sole major customer and controlling shareholder, Afinsa. Additionally, the

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Company never disclosed that the questionable and potentially illegal practices by Afinsa, could

put in jeopardy, the credit worthiness of any of the account receivables attributable to Afinsa.

These undisclosed risk materialized, on May 9, 2006 when it was announced over the national

newswires that Spanish officials had raided the offices of Afinsa and the Company in Madrid—

making several arrests. As a result the Company’s stock lost almost over 50% of its value.

ADDITIONAL ALLEGATIONS DEMONSTRATING SCIENTER AND FALSITY

60. As alleged herein, defendants acted with scienter in that defendants knew that

the public documents and statements issued or disseminated in the name of the Company were

materially misleading; knew that such statements or documents would be issued or disseminated

to the investing public; and knowingly and substantially participated or acquiesced in the

issuance or dissemination of such statements or documents as primary violations of the federal

securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of

information reflecting the true facts regarding Escala, their control over, and/or receipt and/or

modification of Escala allegedly materially misleading statements and/or their associations

with the Company which made them privy to confidential proprietary information concerning

Escala, participated in the fraudulent scheme alleged herein.

APPLICABILITY OF PRESUMPTION OF RELIANCE

FRAUD-ON-THE-MARKET DOCTRINE

61. At all relevant times, the market for Escala securities was an efficient market.

62. As a result of the foregoing, the market for Escala securities promptly digested

current information regarding Escala from all publicly available sources and reflected such

information in Escala share price. Under these circumstances, all purchasers of Escala securities

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during the Class Period suffered similar injury through their purchase of Escala securities in

an efficient market at artificially inflated prices and a presumption of reliance applies.

Applicability Of Affiliated Ute Presumption Of Reliance

63. Neither Plaintiff nor the Class need prove reliance – either individually or as a

class –because under the circumstances of this case, involving primarily a failure to disclose,

positive proof of reliance is not a prerequisite to recovery, pursuant to ruling of the United States

Supreme Court in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128; 92 S. Ct. 1456;

31 L. Ed. 2d 741; 1972 U.S. LEXIS 163; Fed. Sec. (1972). All that is necessary is that the facts

withheld be material in the sense that a reasonable investor might have considered them

important in the making of this decision. This complaint is based primarily on defendants’ non-

disclosure of the material fact that Escala’s business could not be sustained as nearly all of the

Company’s operating earnings were derived from sale of its products to its controlling

shareholder that was involved in questionable potentially illegal sales practices of the Company’s

products.

DEFENDANTS CAUSED PLAINTIFFS’ LOSSES

64. During the Class Period, defendants engaged in a scheme to deceive the market

and a course of conduct that artificially inflated Escala’s share price and operated as a fraud or

deceit on purchasers of Escala shares by misrepresenting the Company's financial condition and

business prospects. Once defendants' misrepresentations and fraudulent conduct were disclosed

to the market, Escala’s share price reacted negatively as the artificial inflation was removed from

its share price. As a result of their purchases of Escala’s shares during the Class Period, Plaintiff

and other members of the Class suffered economic loss.

65. During the Class Period, defendants' false and misleading statements had the

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intended effect and caused Escala shares to trade at artificially inflated levels throughout the

Class Period.

66. As investors and the market became aware of Escala’s prior misstatements and

omissions and that Escala’s actual financial condition and business prospects were, in fact, not as

represented, Escala’s share price reacted negatively, damaging investors.

67. On May 9, 2006 before market open, investors were in shock and awe as it

was announced over the national news services that the Company’s that Spanish National Police

Officer raided the offices of Afinsa and the Company in Madrid, Spain. The raids were

conducted as part of an operation and investigation launched by the Spanish National Court, tax

authorities, and financial crime prosecutors over an alleged pyramid-type scheme based on

overpriced stamps and other collectibles. As a result of this information, the Company’s stock

opened trading at $16.39 down from a previous closing price of $32.00 or down 48%. The

Company’s stock eventually closed at $12.23 or a 61.7% decline.

68. Had Plaintiffs known the truth behind the Company’s disclosures they would

not have purchased the Company’s shares.

NO SAFE HARBOR

69. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.

The specific misrepresentations of defendants pleaded herein were not identified as

"forward-looking statements" when made. To the extent there were any forward-looking

statements, there were no meaningful cautionary statements identifying important factors that

could cause actual results to differ materially from those in the purportedly forward-looking

statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-

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looking statements pleaded herein, defendants are liable for those false forward-looking

statements because at the time each of those forward-looking statements was made, the

particular speaker knew that the particular forward-looking statement was false, and/or the

forward-looking statement was authorized and/or approved by an executive officer of Escala

who knew that those statements were false when made.

FIRST CLAIM

Violation Of Section 10(b) Of The Exchange Act

And Rule 10b-5 Promulgated Thereunder as Against All Defendants

70. Plaintiff repeats and re-alleges each and every allegation contained above as

if fully set forth herein.

71. Throughout the Class Period, defendants, individually and in concert, directly or

indirectly, engaged in a common plan, scheme and course of conduct described herein, pursuant

to which they knowingly or recklessly engaged in acts, transactions, practices and a course of

business which operated as a fraud upon plaintiff and the other members of the Class; made

various false statements of material facts and omitted to state material facts to make the

statements made not misleading to plaintiff and the other members of the Class; and employed

manipulative or deceptive devices and contrivances in connection with the purchase and sale of

Escala shares.

72. The purpose and effect of defendants' plan, scheme and course of conduct was to

artificially inflate and maintain the price of Escala shares.

73. Defendants, who are the top officers of the Company, had actual knowledge of

the material omissions and/or the falsity of the material statements set forth above, and intended

to deceive plaintiff and the other members of the Class, or, in the alternative, acted with reckless

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disregard for the truth when they failed to ascertain and disclose the true facts in the statements

made by them or other Escala personnel to members of the investing public, including plaintiff

and the Class, and the securities analysts.

74. As a result of the foregoing, the market price of Escala securities was artificially

inflated during the Class Period. In ignorance of the falsity of the defendants' statements plaintiff

and the other members of the Class relied, to their damage, on the statements described above

and/or the integrity of the market price of Escala securities during the Class Period in purchasing

Escala shares at prices which were artificially inflated as a result of defendants' false and

misleading statements.

75. Had plaintiff and the other members of the Class known of the material adverse

information which defendants did not disclose, they would not have purchased Escala shares at

the artificially inflated prices that they did.

76. By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act, and Rule 10b-5 promulgated thereunder.

77. As a direct and proximate result of defendants' wrongful conduct, plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company's securities during the Class Period.

78. This action is being brought within two years after the discovery of the untrue

statements and omissions and within five years after their issuance.

SECOND CLAIM

Violation Of Section 20(a) Of The Exchange Act Against

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The Individual Defendants and Afinsa.

79. Plaintiff repeats and re-alleges each and every allegation contained above as

if fully set forth herein.

80. This second claim under §20(a) of the Exchange Act is alleged against the

Individual Defendants and Afinsa only, based on the primary violation of §10b and Rule

10b-5 by Escala as stated in the First Claim above.

81. The Individual Defendants and Afinsa acted as controlling persons of Escala

within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of

their high-level positions, and their ownership and contractual rights, participation in and/or

awareness of the Company's operations and/or intimate knowledge of the false and

misleading information disseminated to the investing public, these defendants had the power to

influence and control and did influence and control, directly or indirectly, the decision-

making of the Company, including the content and dissemination of the various

statements which plaintiff contends are false and misleading. These defendants were provided

with or had unlimited access to copies of the Company's reports, press releases, public filings

and other statements alleged by plaintiff to be misleading prior to and/or shortly after these

statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected.

82. In particular, each of these defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and exercised the same,

83. As set forth above. Defendants each violated Section 10(b) and Rule 10b-5 by

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their acts and omissions as alleged in this Complaint. By virtue of their positions as controlling

persons of Escala, the Individual Defendants are liable pursuant to Section 20(a) of the

Exchange Act.

84. As a direct and proximate result of defendants' wrongful conduct, plaintiff and

other members of the Class suffered damages in connection with their purchases of the

Company's securities during the Class Period.

85. This action is being brought within two years after the discovery of the untrue

statements and omissions and within five years after their issuance.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

(A) Determining that this action is a proper class action, certifying plaintiff as a

class representative under Rule 23 of the Federal Rules of Civil Procedure and plaintiff's

counsel as Lead Counsel;

(B) Awarding compensatory damages in favor of plaintiff and the other Class

members against all defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

(C) Awarding plaintiff and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees; and

(D) Such other and further relief as the Court may deem just and proper.

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JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: May 10, 2006 Respectfully submitted,

____________________ Phillip Kim, Esq. (PK 9384) Laurence Rosen, Esq. (LR 5733) THE ROSEN LAW FIRM, P.A. 350 Fifth Avenue, Suite 5508 New York, NY 10118 Phone: (212) 686-1060 Fax: (212) 202-3827 Christopher S. Hinton, Esq. THE HINTON LAW FIRM 350 Fifth Avenue, Suite 5508 New York, New York 10118 Phone: (646) 723-3377 Fax: (212) 202-3827 Counsel for Plaintiffs