Escala to Restate Financial Statements, Discloses Results of Internal Investigation

Business Wire, Dec 19, 2006

-- Based on the evidence available to it, the Committee concluded that certain of the historical disclosures regarding certain aspects of the transactions between the Company and Afinsa were inaccurate or incomplete. The Audit Committee also concluded that any such disclosure inadequacies were unintentional and were not made with any intent to mislead Escala's investors. As a result, the Committee recommended that it be left to the Company to consider what, if any, additional action needs to be taken with respect to those disclosures.

-- Based on the evidence and professional advice available to it, the Committee concluded that the Company should restate certain of its historical financial statements with respect to its reporting of certain transactions with Afinsa, and recommended that the Company consider and determine the scope of such restatement.

The Audit Committee also made certain recommendations to the Board, which are designed to strengthen the Company's internal controls and provide for an increased review of related party transactions. The Board has adopted these recommendations and is in the process of implementing them.

Matthew Walsh, President, CFO and acting CEO commented, "Our Board of Directors was committed to ensuring that the Audit Committee investigation was thorough, complete and conducted with the utmost integrity. The Committee was given complete freedom to consider any matters it felt were appropriate, and the Committee and its counsel received the full cooperation of the Company. I am pleased to report that no present or former employees declined to cooperate with the investigation. In addition, we continue to cooperate fully with the SEC formal investigation."

Mr. Walsh continued, "Our goal now is to move quickly to completing the accounting review and restatement process, file our 10-K for the period ended June 30, 2006 and 10-Q for the quarter ended September 30, 2006, and refocus our efforts towards our core operations with a view towards maximizing shareholder value. We intend to implement the remedial measures recommended by the Audit Committee as promptly as possible, and we will continue to look for other ways to ensure that our operations are conducted with complete transparency and adherence to the highest standards."

Greg Roberts, President of the Numismatics and Precious Metals Trading Divisions, stated, "We are grateful to our customers, shareholders and valued employees for their commitment to the Company during this challenging time. Our company has significant continuing operations in collectibles -- stamps, coins, arms, armor and militaria -- and precious metals trading that we are committed to growing. Speaking for myself and for everyone at Escala and its Group Companies, we are eager to pursue the growth plans that we have developed for our core businesses."

About Escala Group, Inc.

Escala Group is a consolidated global collectibles network. The Company is a leading auctioneer of stamps, coins, arms, armor and militaria, and other memorabilia, targeting both collectors and dealers. Escala is also a merchant/dealer of certain collectibles and trader of precious metals. The Company's collectibles offerings span the modest to ultra high-end price spectrum. Escala conducts its operations in two business segments: collectibles and trading.