UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549









FORM
10-Q





x  QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For the
period ended March 31,
2009





 ̈  TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





Commission
file Number: 000-50995







Enable
Holdings, Inc.


(Formerly
known as uBid.com Holdings, Inc.)


(Exact
name of registrant as specified in its charter)




Delaware
            52-2372260(State
      or Other Jurisdiction of
            (IRS
      EmployerIncorporation
      or Organization)
            Identification
      No.)





8725
W. Higgins Road, Suite 900, Chicago, Illinois 60631


(Address
of principal executive offices and zip code)





Registrant’s
telephone number including area code:


(773)
272-5000





Indicate
by check mark whether the registrant (1) has filed all reports to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to filing requirements for the past 90
days. Yes x No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
the Exchange Act. (Check one):


Large accelerated filer o
            Accelerated filer o
            Non-accelerated filer o
            Smaller reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2). Yes o No x





The number of shares outstanding of the
registrant’s Common Stock, par value $0.001, as of April 30, 2009 was
19,726,678.





ENABLE
HOLDINGS, INC.


TABLE
OF CONTENTS




PART
      I. FINANCIAL INFORMATIONItem
      1
                          Financial
      StatementsConsolidated
      Condensed Balance Sheets - March 31, 2009 (unaudited) and December 31,
      2008
                          3Consolidated
      Condensed Statements of Operations – Three Months Ended March 31, 2009 and
      2008 (unaudited)
                          4Consolidated
      Condensed Statement of Shareholders Equity – Three Months Ended March 31,
      2009 (unaudited)
                          5Consolidated
      Condensed Statements of Cash Flows – Three Months ended March 31, 2009 and
      2008 (unaudited)
                          6Notes
      to Consolidated Financial Statements
                          7Item
      2
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          16Item
      3
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          24Item
      4
                          Controls
      and Procedures
                          24PART
      II. OTHER INFORMATIONItem
      1
                          Legal
      Proceedings
                          25Item
      1A
                          Risk
      Factors
                          25Item
      2
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          25Item
      3
                          Default
      Upon Senior Securities
                          25Item
      4
                          Submission
      of Matters to a Vote of Security Holders
                          25Item
      5
                          Other
      Information
                          25Item
      6
                          Exhibits
      Index
                          25Signatures
                          26


2


PART
1. FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS





ENABLE
HOLDINGS, INC. and Subsidiaries


Consolidated
Condensed Balance Sheets


(Dollars
in Thousands, except par value data)





March
      31, 2009
                                        
                                        
                                        December
      31, 2008(unaudited)AssetsCurrent
      AssetsCash
      and cash equivalents
                                        
                                        $
                                        103
                                        
                                        
                                        $
                                        99Restricted
      investments
                                        
                                        
                                        284
                                        
                                        
                                        
                                        462Accounts
      receivable, less allowance for doubtful accounts of $497 and $635, respectively
                                        
                                        
                                        346
                                        
                                        
                                        
                                        820Merchandise
      inventories, less reserve for obsolescence of $199 and $548,
      respectively
                                        
                                        
                                        696
                                        
                                        
                                        
                                        2,274Prepaid
      expenses and other current assets
                                        
                                        
                                        644
                                        
                                        
                                        
                                        384Total
      Current Assets
                                        
                                        
                                        2,073
                                        
                                        
                                        
                                        4,039Property
      and equipment, net
                                        
                                        
                                        2,274
                                        
                                        
                                        
                                        2,143Purchased
      intangible assets, net
                                        
                                        
                                        202
                                        
                                        
                                        
                                        202Total
      Assets
                                        
                                        $
                                        4,549
                                        
                                        
                                        $
                                        6,384Liabilities
      and Shareholders' DeficitCurrent
      LiabilitiesAccounts
      payable
                                        
                                        $
                                        4,493
                                        
                                        
                                        $
                                        4,016Flooring
      facility
                                        
                                        
                                        545
                                        
                                        
                                        
                                        370Bridge
      loan payable, net of discount of $457 and $987,
    respectively
                                        
                                        
                                        1,993
                                        
                                        
                                        
                                        1,563Accrued
      expenses:Product
      cost
                                        
                                        
                                        -
                                        
                                        
                                        
                                        619Other
                                        
                                        
                                        767
                                        
                                        
                                        
                                        692Deferred
      rent
                                        
                                        
                                        13
                                        
                                        
                                        
                                        30Total
      Current Liabilities
                                        
                                        
                                        7,811
                                        
                                        
                                        
                                        7,290Derivative
      liability
                                        
                                        
                                        121
                                        
                                        
                                        
                                        -Total
      Liabilities
                                        
                                        
                                        7,932
                                        
                                        
                                        
                                        7,290Shareholders'
      Equity DeficitCommon
      stock, $.001 par value (200,000,000 shares authorized; 19,726,678 &
      18,826,678 shares issued and outstanding, respectively
                                        
                                        
                                        21
                                        
                                        
                                        
                                        20Treasury
      stock, 2,135,550 shares of common stock
                                        
                                        
                                        (2,242
                                        )
                                        
                                        
                                        (2,242
                                        )Stock
      warrants
                                        
                                        
                                        2,101
                                        
                                        
                                        
                                        10,249Additional
      paid-in-capital
                                        
                                        
                                        45,082
                                        
                                        
                                        
                                        39,368Accumulated
      deficit
                                        
                                        
                                        (48,345
                                        )
                                        
                                        
                                        (48,301
                                        )Total
      Shareholders' Equity Deficit
                                        
                                        
                                        (3,383
                                        )
                                        
                                        
                                        (906
                                        )Total
      Liabilities and Shareholders' Deficit
                                        
                                        $
                                        4,549
                                        
                                        
                                        $
                                        6,384




The
accompanying notes are an integral part of these consolidated condensed
financial statements.


3





ENABLE
HOLDINGS, INC. and Subsidiaries


Consolidated
Condensed Statements of Operations


(Dollars
in Thousands, except per share amounts)


(Unaudited)





Three Months Ended
                              March 31,2009
                            
                            
                            2008Net
      Revenues
                            
                            $
                            5,094
                            
                            
                            $
                            7,141Cost
      of Revenues
                            
                            
                            3,865
                            
                            
                            
                            5,269Gross Profit
                            
                            
                            1,229
                            
                            
                            
                            1,872Operating ExpensesGeneral
      and administrative
                            
                            
                            2,867
                            
                            
                            
                            3,753Sales
      and marketing
                            
                            
                            295
                            
                            
                            
                            495Total
      Operating Expenses
                            
                            
                            3,162
                            
                            
                            
                            4,248Loss From Operations
                            
                            
                            (1,933
                            )
                            
                            
                            (2,376
                            )Other
      Income (Expense)Interest
      (Expense) Income, net
                            
                            
                            (692
                            )
                            
                            
                            (9
                            )Loss
      on financial instruments
                            
                            
                            (48
                            )
                            
                            
                            -Total Other Expense
                            
                            
                            (740
                            )
                            
                            
                            (9
                            )Net Loss
                            
                            $
                            (2,673
                            )
                            
                            $
                            (2,385
                            )Net
      Loss per share - Basic and Diluted
                            
                            $
                            (0.14
                            )
                            
                            $
                            (0.13
                            )Weighted
      Average Shares - Basic and Diluted
                            
                            
                            18,986,678
                            
                            
                            
                            18,197,783


4





ENABLE
HOLDINGS, INC. and Subsidiaries


Consolidated
Statement of Shareholders’ Equity


(Dollars
in Thousands)


(Unaudited)





Common Stock
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  Treasury StockShares
                                                                  
                                                                  
                                                                  Dollars
                                                                  
                                                                  
                                                                  Stock
                                                                    Warrants
                                                                  
                                                                  
                                                                  Paid-in
                                                                    Capital
                                                                  
                                                                  
                                                                  Shares
                                                                  
                                                                  
                                                                  Dollars
                                                                  Accumulated
                                                                      Deficit
                                                                  
                                                                  
                                                                  TotalBalance,
      December 31, 2008
                                                                  
                                                                  
                                                                  18,826,678
                                                                  
                                                                  
                                                                  $
                                                                  20
                                                                  
                                                                  
                                                                  $
                                                                  10,249
                                                                  
                                                                  
                                                                  $
                                                                  39,367
                                                                  
                                                                  
                                                                  
                                                                  2,135,550
                                                                  
                                                                  
                                                                  $
                                                                  (2,242
                                                                  )
                                                                  $
                                                                  (48,300
                                                                  )
                                                                  
                                                                  $
                                                                  (906
                                                                  )Cumulative effect of
      change in accounting principle – 1/1/2009 reclassification of equity
      linked financial instruments to derivative liabilities1
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (7,486
                                                                  )
                                                                  
                                                                  
                                                                  5,386
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  2,028
                                                                  
                                                                  
                                                                  
                                                                  (72
                                                                  )Stock
      compensation expense
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  30
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  30Common stock
      issuance2
                                                                  
                                                                  
                                                                  900,000
                                                                  
                                                                  
                                                                  
                                                                  1
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  269
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  270Warrants issued for
      services3
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  15
                                                                  
                                                                  
                                                                  
                                                                  30
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  45Warrants
      surrendered4
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (77
                                                                  )
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (77
                                                                  )Warrants expired5
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (600
                                                                  )
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  600
                                                                  
                                                                  
                                                                  
                                                                  -Net
      Loss
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  (2,673
                                                                  )
                                                                  
                                                                  
                                                                  (2,673
                                                                  )Balance,
      March 31, 2009
                                                                  
                                                                  
                                                                  19,726,678
                                                                  
                                                                  
                                                                  $
                                                                  21
                                                                  
                                                                  
                                                                  $
                                                                  2,101
                                                                  
                                                                  
                                                                  $
                                                                  45,082
                                                                  
                                                                  
                                                                  
                                                                  2,135,550
                                                                  
                                                                  
                                                                  $
                                                                  (2,242
                                                                  )
                                                                  $
                                                                  (48,345
                                                                  )
                                                                  
                                                                  $
                                                                  (3,383
                                                                  )





The
accompanying notes are an integral part of these consolidated financial
statements.


1
Reclassify warrants from equity to liability in conjunction with the
implementation of EITF 07-5. See Note 2 for additional
discussion.


2 900,000
shares of common stock issued to an investor relations firm.


3 Warrants
issued to purchase 150,000 shares of common stock at
$0.10/share.


4
1,600,000 warrants surrendered by an investor that were originally issued in
conjunction with the bridge loan in October 2008.


5 333,333
warrants expired that were originally issued in December 2005 with an exercise
price of $4.50.


5





ENABLE
HOLDINGS, INC. and Subsidiaries


Consolidated
Condensed Statements of Cash Flows


(Dollars
in Thousands)


(Unaudited)





Three
      months ended March 31,2009
                              
                              
                              2008Cash
      Flows From Operating ActivitiesNet
      loss
                              
                              $
                              (2,673
                              )
                              
                              $
                              (2,385
                              )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
      and amortization
                              
                              
                              119
                              
                              
                              
                              206Provision
      for bad debts
                              
                              
                              (138
                              )
                              
                              
                              -Non-cash
      stock compensation expense
                              
                              
                              30
                              
                              
                              
                              109Interest
      on 90 day Bridge Loan
                              
                              
                              455
                              
                              
                              
                              -Common
      stock and warrants issued for services
                              
                              
                              315
                              
                              
                              
                              -Loss
      on derivative liability
                              
                              
                              48
                              
                              
                              
                              -Changes
      in assets and liabilities:Accounts
      receivable
                              
                              
                              612
                              
                              
                              
                              (285
                              )Merchandise
      inventories
                              
                              
                              1,579
                              
                              
                              
                              (116
                              )Prepaid
      expenses and other current assets
                              
                              
                              (261
                              )
                              
                              
                              (15
                              )Accounts
      payable
                              
                              
                              477
                              
                              
                              
                              370Accrued
      expenses
                              
                              
                              (545
                              )
                              
                              
                              (111
                              )Deferred
      rent
                              
                              
                              (17
                              )
                              
                              
                              (70
                              )Net
      cash provided by (used in) operating activities
                              
                              
                              1
                              
                              
                              
                              (2,297
                              )Cash
      Flows From Investing ActivitiesCapital
      expenditures
                              
                              
                              (251
                              )
                              
                              
                              (245
                              )Change
      in restricted investments
                              
                              
                              179
                              
                              
                              
                              -Net
      cash used in investing activities
                              
                              
                              (72
                              )
                              
                              
                              (245
                              )Cash
      Flows From financing ActivitiesChange
      in flooring facility
                              
                              
                              175
                              
                              
                              
                              102Credit
      line borrowings
                              
                              
                              -
                              
                              
                              
                              1,617Payments
      on bridge loan
                              
                              
                              (100
                              )
                              
                              
                              -Net
      cash provided by financing activities
                              
                              
                              75
                              
                              
                              
                              1,719Net
      increase (decrease) in Cash and Cash Equivalents
                              
                              
                              4
                              
                              
                              
                              (823
                              )Cash
      and Cash Equivalents, beginning of period
                              
                              
                              99
                              
                              
                              
                              7,724Cash
      and Cash Equivalents, end of period
                              
                              $
                              103
                              
                              
                              $
                              6,901Supplemented
      Cash Flow DisclosureCash
      paid for interest
                              
                              $
                              290
                              
                              
                              $
                              31





The
accompanying notes are an integral part of these consolidated condensed
financial statements.


6


Notes
to Consolidated Financial Statements





Note
1. Basis of presentation





Enable
Holdings, Inc. (the "Company" or "Enable"), formerly uBid.com
Holdings, Inc., operates leading on-line websites that enable itself,
certified merchants, manufacturers, retailers, distributors and small businesses
to offer high quality excess, new, overstock, close-out, refurbished and limited
supply brand name merchandise to consumer and business customers. Through the
Company's websites, located at www.uBid.com and www.RedTag.com, the Company
offers merchandise across a wide range of product categories including but not
limited to computer products, consumer electronics, apparel, housewares,
watches, jewelry, travel, sporting goods, home improvement products and
collectibles. The Company's marketplace employs a combination of auction style
and fixed price formats.





During
the first quarter of 2008, Enable Holdings commenced its efforts to change its
business model. Concurrent with this change, we changed the name of the Company
to Enable Holdings and reorganized the segments based on the business units.
Each segment provides a combination of seller solutions for sellers to
efficiently liquidate their excess inventory. The segments are listed
below:





·
            uBid.com: Our flagship
      website, which has operated for 11 years. The website allows
      merchants to sell excess inventory and allows consumers to buy products in
      an auction as well as fixed price
format.





·
            RedTag.com: Our new
      fixed price internet site launched in August 2008, offers name brand
      merchandise with a low shipping and handling fee of only
      $1.95.





·
            RedTag Live: Our live
      liquidation group, dedicated to selling through the traditional in-store
      sales and live liquidation sales.





·
            Dibu Trading Company: A
      wholesale inventory liquidation company dedicated to Business-to-Business
      solutions, providing manufacturers and distributors the ability to sell
      large quantities of excess inventory. For example, when a retailer needs
      to liquidate a large quantity of inventory, they contact us to find a
      buyer that will buy the entire inventory in a single transaction. Our B2B
      experience allows us to present deals to multiple interested buyers to get
      the most profitable one.





·
            Commerce
      Innovations:A
      software service company which licenses auction software to third party
      companies. Companies, businesses and governments can use our platform to
      sell excess furniture, appliances, autos, and other surplus. This allows
      them to utilize a trusted platform while reducing live auction costs, as
      well as an efficient way to reach a wider target audience. The Company is
      currently in the process of developing and testing this hosted solution
      and anticipates its launch in the second half of
    2009.





The
Company’s unaudited consolidated condensed financial statements reflect normal
recurring adjustments that are necessary to present fairly the Company’s
financial position and results of operations on a basis consistent with that of
the prior audited consolidated financial statements. As permitted by rules and
regulations of the Securities and Exchange Commission applicable to quarterly
reports on Form 10-Q, the Company has condensed or omitted certain information
and disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
(“GAAP”). Results for interim periods are not necessarily indicative of the
results that may be expected for a full year. These interim financial statements
should be read along with the audited consolidated financial statements included
in our Form 10-K for the year ended December 31, 2008. The consolidated
condensed financial statements include the accounts of the Company and its
wholly owned subsidiaries. All material intercompany accounts and transactions
have been eliminated in the consolidated financial statements.





The
preparation of financial statements in accordance with GAAP requires management
to make estimates and assumptions that affect the amounts reported in the
Company’s Consolidated Condensed Financial Statements and accompanying notes.
Actual results could differ materially from those estimates.





Note
2. Recent accounting pronouncements





In June
2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity's Own Stock"
("EITF 07-5"). EITF 07-5 provides that an entity should use a two-step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument's
contingent exercise and settlement provisions. EITF 07-5 is effective for
financial statements issued for fiscal years beginning after December 15,
2008. The Company adopted EITF 07-5 in the first quarter of fiscal year 2009. In
accordance with EITF 07-5, the Company identified three tranches of warrants
that were not indexed to the Company’s common stock and thus were required to be
reclassified as a liability, as stated in Note 3 below.


7





In
September 2006, the FASB issued SFAS 157, “Fair Value Measurements” (“SFAS
157”), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. The provisions of
SFAS 157 were effective January 1, 2008. The FASB also issued Staff
Position (FSP) SFAS 157-2 (FSP No. 157-2), which delayed the effective date
of SFAS 157 for nonfinancial assets and liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually), until fiscal years beginning after November 15,
2008. The application of this standard did not have a material impact on the
results of our operations or financial condition.





In
May 2008, the FASB issued FSP APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).” FSP APB 14-1 requires issuers of convertible debt that may be
settled wholly or partly in cash upon conversion to account for the debt and
equity components separately. The FSP is effective for fiscal years, and interim
reporting periods within those fiscal years, beginning on or after
December 15, 2008. The Company evaluated FSP APB 14-1 against the
outstanding debt, including the bridge loan, and concluded that it does not need
to account for any changes since the current outstanding debt is
non-convertible. The Company does not have any outstanding convertible
debt.





In June
2008, the FASB issued EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities.” The provisions
of FSP No. EITF 03-6-1 require that all outstanding unvested share-based
payment awards that contain rights to non-forfeitable dividends or dividend
equivalents (such as restricted stock units granted by the Company) be
considered participating securities. Because the awards are participating
securities, the Company is required to apply the two-class method of computing
basic and diluted earnings per share (the “Two-Class Method”). The Company
does not have any outstanding unvested restricted stock as all of the Company’s
restricted stock was vested in October 2008. Moreover, the Company’s restricted
stock does not contain rights to non-forfeitable dividends. Thus, the Company
will not state its EPS using the two-class method stated above.





Note
3. Summary of significant accounting policies




Revenue
recognition


Our
business model currently consists of three distinct business channels: Certified
Merchant (CM), Managed Supply and Cash Recovery. We sell merchandise through the
CM Program channel by allowing prescreened third party merchants to sell their
product through our online marketplace to consumers and business. On this
merchandise, we do not take title and therefore do not bear the related
inventory risk. In the CM Program, we are the primary obligor to whom payment is
due, but we bear no inventory or returns risk, so we record only our commission
as revenue. Through the Managed Supply channel, we sell inventory that is
consigned to us. The inventory is either stored at our warehouse or at the
sellers’. We purchase merchandise outright in the Cash Recovery channel and sell
to consumers and businesses. On this merchandise, we bear the inventory, return
and credit risk. The full sales amount is recorded as revenue upon verification
of the credit card transaction and shipment of the merchandise. In all instances
where the credit card authorization has been received but merchandise has not
been shipped, we defer revenue recognition until the merchandise is
shipped.





Fair
value measurements


As a
result of the adoption of EITF 07-5, the Company is required to disclose the
fair value measurements required by SFAS No. 157. The derivative liability
recorded at fair value in the balance sheet at March 31, 2009 is categorized
based upon the level of judgment associated with the inputs used to measure
their fair value. Hierarchical levels, defined by SFAS 157, directly related to
the amount of subjectivity associated with the inputs to fair valuation of these
liabilities are as follows:





Level 1 —
Inputs are unadjusted, quoted prices in active markets for identical assets or
liabilities at the measurement date;


Level 2 —
Inputs other than Level 1 inputs that are either directly or indirectly
observable; and


Level 3 —
Unobservable inputs, for which little or no market data exist, therefore
requiring an entity to develop its own assumptions.





The
following table summarizes the financial liabilities measured at fair value as
of March 31, 2009, segregated by the level of the valuation inputs within the
fair value hierarchy utilized to measure fair value:





(Dollars
      in thousands)
                  
                  Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3
                  
                  
                  TotalDerivative
      liability
                  
                  
                  -
                  
                  
                  $
                  121
                  
                  
                  
                  -
                  
                  
                  $
                  121





Shipping
and handling costs


Shipping
costs that are billable to the customer are included in revenue and shipping
costs that are payable to vendors are included in the cost of revenues in the
accompanying consolidated statements of operations. Handling costs consisting
primarily of the third party logistics warehouse costs are included in general
and administrative expenses and for the quarters ended March 31, 2009 and 2008,
were $160 and $126, respectively.


8





Intangibles


On June
13, 2008, the Company entered into an agreement with a holder of greater than 5%
of the Company’s voting common stock, for the purchase of an internet domain
name or Universal Resource Locator or URL, www.redtag.com, in
exchange for 150,000 shares of the Company’s common stock. The URL has an
indefinite useful life and thus in accordance with the Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”),
the intangible asset need not be amortized.  Each reporting period,
the Company will evaluate the useful life of the intangible asset to determine
whether events and circumstances continue to support an indefinite useful life,
and record impairment if needed. No impairment was recorded at March 31,
2009.





Note
4. Derivative Liability





The
derivative liability on the balance sheet consists of stock warrants issued by
the Company that contain a strike price adjustment feature, as stated below. In
accordance with EITF 07-5, we calculated the fair value of the warrants using
the Black–Scholes–Merton valuation model, at January 1, 2009, with a
corresponding reduction of additional paid in capital and accumulated deficit of
$5,386 and $2,028, respectively. At March 31, 2009, we revalued the estimated
liability and recorded the additional liability as a loss on financial
instruments in the Statement of Operations, as follows:





(Dollars
in thousands, except per share price)


Warrants
                
                Original exercise
                  price
                
                
                Adjusted
                  warrants
                
                
                Adjusted
                  exercise price
                
                
                Liability recorded
                  1/1/2009
                
                
                Additional liability
                  recorded 3/31/2009
                
                
                Fair value
                  3/31/20092,669,065
                
                $
                5.85
                
                
                
                8,485,885
                
                
                $
                1.84
                
                
                $
                61
                
                
                $
                40
                
                
                $
                101320,000
                
                $
                4.50
                
                
                
                1,014,085
                
                
                $
                1.42
                
                
                $
                12
                
                
                $
                8
                
                
                $
                202,989,065
                
                
                
                
                
                
                9,499,970
                
                
                
                
                
                
                $
                73
                
                
                $
                48
                
                
                $
                121





The
Company used the following assumptions in the Black-Scholes model calculation:
no expected dividend yield, estimated volatility of 66.7%, risk-free interest
rate of 1.82% and maturity of 2 years.





The total
loss resulting from the implementation of EITF 07-5, for the quarter ended March
31, 2009 is $48. The Company will evaluate the liability each reporting period
and record the appropriate gain or loss resulting from the change in the fair
value of such warrants.





Note
5. Earnings (loss) per share





The
Company computes loss per share under Statement of Financial Accounting
Standards (“SFAS”) No. 128, “Earnings per Share.” The statement requires
presentation of two amounts: basic and diluted loss per share. Basic loss per
share is computed by dividing the loss available to common shareholders by the
weighted average common shares outstanding. Dilutive earnings per share would
include all common stock equivalents unless anti-dilutive.





Due to
losses in each period presented, the Company has not included the following
common stock equivalents in its computation of diluted loss per share as their
input would have been anti-dilutive.





March 31,
                    
                    2009
                    
                    
                    2008Shares
      subject to stock warrants
                    
                    
                    49,589,970
                    
                    
                    
                    3,232,939Shares
      subject to stock options
                    
                    
                    1,544,500
                    
                    
                    
                    1,402,00051,134,470
                    
                    
                    
                    4,634,939





The EPS
for the three months ended March 2009 and 2008 was ($0.14) and ($0.13),
respectively.





Note
6. Private Offerings





On July
15, 2008 the Company signed a $10.0 million common stock purchase agreement with
Fusion Capital Fund II, LLC, an Illinois limited liability company (“Fusion
Capital”). Concurrently with entering into the common stock purchase agreement,
the Company entered into a registration rights agreement with Fusion Capital.
Under the registration rights agreement, the Company agreed to file a
registration statement related to the transaction with the U.S. Securities and
Exchange Commission (“SEC”) covering the shares that have been issued or may be
issued to Fusion Capital under the common stock purchase agreement. In
accordance with the agreement, once the SEC has declared effective the
registration statement related to the transaction, as long as the Company’s
common stock is trading above $0.75 per share, the Company has the right over a
24-month period to sell shares of common stock to Fusion Capital from time to
time in amounts ranging from $60,000 to $1.0 million, depending on certain
conditions set forth in the agreement, up to an aggregate of $10.0
million.


9





In
consideration for entering into the agreement, upon execution of the common
stock purchase agreement the Company issued to Fusion Capital 230,074 shares of
the Company’s common stock as a commitment fee. Also, the Company will issue to
Fusion Capital an additional 230,074 shares as a commitment fee pro-rata as the
Company receives the $10.0 million of future funding. The purchase price of the
shares related to the $10.0 million of future funding will be based on the
prevailing market prices of the Company’s common stock at the time of sales
without any fixed discount, and the Company will control the timing and amount
of any sales of shares to Fusion Capital. Fusion Capital shall not have the
right or the obligation to purchase any shares of the Company’s common stock on
any business day that the price of the Company’s common stock is below $0.75 per
share. The common stock purchase agreement may be terminated by the Company at
any time at the Company’s discretion without any cost to the Company. There are
no negative covenants, restrictions on future funding, penalties or liquidated
damages in the agreement. The proceeds received by the Company under the common
stock purchase agreement will be used to provide working capital to further
implement the Company’s recently announced strategic change to focus on
liquidating excess inventories.





The
Company issued the initial 230,074 shares as a commitment fee, at the agreed
upon price of $1.52 per share, determined based on the 20-day moving average as
of the agreement acceptance date of June 25, 2008. The Company filed the
registration statement on September 5, 2008 and recorded the common stock
transaction in the quarter ended September 30, 2008. In a letter dated October
3, 2008, the SEC notified the Company that the S-1 registration statement has
been selected for review. The Company elected not to respond to the SEC
notification because the stock price of the Company was trading well below the
agreed upon price of $0.75, which would have obliged Fusion Capital to not
provide the capital. In December 2008, the Company wrote off the commitment fee
issued in conjunction with this agreement.





During
the fourth quarter of 2008, the Company received a $2,550 bridge loan provided
by multiple accredited investors. The bridge loan is in the form of an Unsecured
Debenture and bears interest at the rate of 18% per annum. In consideration, the
investors received warrants to purchase 12,750,000, 25,500,000 and 3,200,000
shares of the Company’s common stock at an exercise price of $0.20, $0.10 and
$0.25 per share, respectively, for an aggregate of 41,450,000 shares of the
Company’s common
stock. The warrants are exercisable immediately for a period of 5 years from the
agreement date. The investor may elect to convert the accrued and unpaid
interest into the common stock of the Company. See Note 8 for details on the
bridge loan.





In March
2009, the Company initiated a private placement offering to accredited
investors. Investors may purchase units, with each unit consisting of a senior
convertible debenture for one share of common stock of the Company, and a
warrant, depending on the date of investment, to acquire either two shares or
one share of common stock for ten years at a purchase price of $0.25 per share.
The Debentures will pay interest at a rate of 12% per annum, have a term of 30
months and are convertible into the Company’s common stock at any time at the
option of the investor. The minimum and maximum number of units that must be
sold for the private placement to initially close is 2,000,000 units and
15,000,000 units, respectively. As of April 30, 2009, the Company has received
investments in aggregate of $1,190 which were held in an escrow account until
April 29, 2009. The Company will determine the best use of the proceeds based on
the corporate strategy and immediate inventory needs.





Note
7. Equity issued for services





In March
2009, the Company entered into independent twelve month consulting agreement
with Salzwedel Financial Communications, Inc (Salzwedel), with the term expiring
May 15, 2010. Salzwedel will represent the Company in investors’ communications
and relations with existing shareholders, brokers, dealers and other investment
professionals as to the Company’s current and proposed activities and to consult
with management concerning such Company activities. For undertaking the
engagement, for previous services rendered and for other good and valuable
consideration, the Company has agreed to issue Salzwedel a Commencement Bonus of
900,000 shares of Common Stock and a five-year warrant to purchase 3,000,000
shares of Common Stock at $0.25 per share. Additionally the Company has agreed
to pay Salzwedel $8 cash per month, during the term of the engagement, unless
terminated early. Pursuant to the terms of the engagement at no time will
Salzwedel beneficially own 5 percent or more of the Company.





Note
8. 2005 Equity Incentive Plan and Stock Based Compensation





The
Company’s 2005 Equity Incentive Plan (“2005 Equity Incentive Plan”) is an
equity-based compensation plan in-place to provide incentives, and to attract,
motivate and retain the highest qualified employees, directors, consultants and
other third party service providers. The 2005 Equity Incentive Plan enables the
board to provide equity-based incentives through grants or awards of stock
options and restricted stock (collectively, “Incentive Awards”) to present and
future employees, consultants, directors, and other third party service
providers.


10





A total
grant of 2,500,000 shares of common stock were originally reserved for issuance
under the 2005 Equity Incentive Plan.  At the Company's Annual Meeting
of Stockholders held on May 8, 2009, an increase in the number of shares of
common stock reserved for issuance under the 2005 Equity Incentive
Plan was approved.  Now under the 2005 Equity Incentive Plan, a minimum of
7,000,000 shares and a maximum of 10,500,000 shares, subject to the
discretion of the Company's Board of Directors, is authorized for issuance under
the 2005 Equity Incentive Plan. If an Incentive Award granted pursuant to the
2005 Equity Incentive Plan expires, terminates, expires and is unexercised or is
forfeited, or if any shares are surrendered to the Company in
connection with an Incentive Award, the shares subject to such award and the
surrendered shares will become available for future awards under the 2005 Equity
Incentive Plan. Options generally vest over a period of four years and have a
ten year contractual life.





Effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123(R) (“SFAS 123R”). This pronouncement requires companies to measure the
cost of employee service received in exchange for a share based award (stock
options  and restricted stock) based on the fair value of the award.
The Company has elected to use the “modified prospective” transition method for
stock options granted prior to January 1, 2006, but for which the vesting period
is not complete. Under this transition method, the Company accounts for such
awards on a prospective basis, with expense being recognized in its statement of
operations beginning in the first quarter of 2006 and continuing over the
remaining requisite service period based on the grant date fair value estimated
in accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (“SFAS 123”). The Company recognizes
these compensation costs on a straight-line basis over the requisite service
period of the award which is generally the option vesting term of four
years.





Stock
options





Stock
option activity under the Company’s 2005 Equity Incentive Plan for the three
months ended March 31, 2009 is summarized as follows:





Shares
                              
                              
                              Weighted-
                                Average
                                exercise
      price
                                per
      shareOutstanding
      at December 31, 2008
                              
                              
                              1,568,500
                              
                              
                              $
                              1.18Granted
                              
                              
                              56,000
                              
                              
                              
                              0.29Exercised
                              
                              
                              -
                              
                              
                              
                              -Surrendered
                              
                              
                              (80,000
                              )
                              
                              
                              0.99Outstanding
      at March 31, 2009
                              
                              
                              1,544,500
                              
                              
                              $
                              1.15Exercisable
      at March 31, 2009
                              
                              
                              1,158,875
                              
                              
                              $
                              1.15





The fair
value of the stock options granted under the Company’s 2005 Equity Incentive
Plan was estimated using the Black-Scholes option pricing model with the
following weighted average assumptions:





March
      31,2009
                          
                          
                          2008Risk
      - free interest rate
                          
                          
                          4.0
                          %
                          
                          
                          5.0
                          %Dividend
      yield
                          
                          
                          0.0
                          %
                          
                          
                          0.0
                          %Expected
      volatility
                          
                          
                          85.8
                          %
                          
                          
                          68.0
                          %Expected
      life (years)
                          
                          
                          6.0
                          
                          
                          
                          6.0Weighted
      average grant date fair value
                          
                          $
                          0.22
                          
                          
                          $
                          1.36Estimated
      forfeiture rate
                          
                          
                          0.0
                          %1
                          
                          
                          5.0
                          %


1 The
stock compensation expense during the quarter ended March 2009 is insignificant,
thus the Company will forego adjusting the expense for estimated forfeitures.
The Company will evaluate the expense for future periods for actual
forfeitures.


11





The
risk-free interest rate is based on the U.S. Treasury Bill rates. The dividend
reflects the fact that the Company has never paid a dividend on its common stock
and does not expect to do so in the foreseeable-future. Expected volatility was
based on a market-based implied volatility. The expected term of the options is
based on what the Company believes will be representative of future behavior. In
addition, the Company is required to estimate the expected forfeiture rate and
recognize expense only for those shares expected to vest. If the Company’s
actual forfeiture rate is materially different from its estimate, the
stock-based compensation expense could be significantly different from what the
Company has recorded in the current period.





The following table summarizes
additional information regarding outstanding and exercisable options at March
31, 2009.





Outstanding
                      
                      
                      ExercisableNumber
                      
                      
                      Weighted
                      
                      
                      Weighted
      Average
                      
                      
                      Number
                      
                      
                      WeightedOutstanding
      at
                      
                      
                      Average
      Exercise
                      
                      
                      Remaining
                      
                      
                      Exercisable
      at
                      
                      
                      Average
      ExerciseExercise
      Price
                      
                      March
      31, 2009
                      
                      
                      Price
                      
                      
                      Contractual
      Life
                      
                      
                      March
      31, 2009
                      
                      
                      Price.01
      - 2.00
                      
                      
                      1,472,000
                      
                      
                      $
                      1.06
                      
                      
                      
                      8.63
                      
                      
                      
                      1,122,500
                      
                      
                      $
                      1.092.01
      - 4.00
                      
                      
                      61,500
                      
                      
                      
                      2.87
                      
                      
                      
                      7.98
                      
                      
                      
                      28,125
                      
                      
                      
                      2.904.01
      - 5.00
                      
                      
                      11,000
                      
                      
                      
                      4.50
                      
                      
                      
                      6.75
                      
                      
                      
                      8,250
                      
                      
                      
                      4.501,544,500
                      
                      
                      $
                      1.15
                      
                      
                      
                      8.59
                      
                      
                      
                      1,158,875
                      
                      
                      $
                      1.15





As of
March 31, 2009 there was $258 of total unrecognized compensation cost related to
the non-vested option awards under the 2005 Equity Incentive Plan. That cost is
expected to be recognized over the remaining vesting period of the non-vested
option awards.





Restricted
Stock





On
February 19, 2008 the Company offered eligible employees the opportunity to
exchange on a grant by grant basis, their outstanding eligible options for
shares of restricted stock. Options eligible for the exchange in this offer were
granted under the Company’s 2005 Equity Incentive Plan that were granted in 2005
and 2006 and had an exercise price per share that is greater than $2.00.
Individuals that held 500 or fewer eligible options were cashed
out.





The
number of restricted stock rights granted in exchange for each eligible option
surrendered was based upon an exchange ratio of 3 to 1. The 3 to 1 exchange
ratio was determined because at the origination of the offer the fair value of
the eligible options approximated the share price at a 3 to 1 conversion rate.
The incremental stock compensation expense resulting from the offer was $109 to
be amortized over the remaining life of the original options granted. Pursuant
to the offer, 16,000 options were canceled and cashed out by individuals who had
500 or fewer options. There were an additional 20 individuals that tendered
765,000 options for an aggregate of 255,000 restricted stock rights, of which
98,333 are vested.





In
October 2008, in conjunction with the issuance of bridge notes (discussed in
Note 5), the vesting on all of the remaining unvested restricted stock was
accelerated due to the change in control. As of March 2009, there was no
unvested restricted common stock outstanding.





Stock
–based Compensation Expense





Stock-based
compensation expense recognized under SFAS No. 123(R), related to the 2005
Equity Incentive Plan for the three months ended March 31, 2009 and 2008 was as
follows (in thousands):





(Dollars
      in Thousands)Quarter
      ended March 31,2009
                    
                    
                    2008Stock
      Options
                    
                    $
                    30
                    
                    
                    $
                    109





The
Company incurred no compensation expense related to the restricted common stock,
due to the accelerated vesting in 2008, as described above.


12





Note
9. Common Stock warrants





Warrants
issued in conjunction with the private offering in 2005, with a 3-year term
expired in October 2008. These warrants were issued to purchase 333,333 shares
of common stock with an exercise price of $4.50/share and had a life of 3
years.





In March
2009, the Company issued a warrant to purchase 3,000,000 shares of common stock
to an investor relations firm. See Note 5 for further discussion. Pursuant to
this agreement, an investor who owns greater than 5% of our common stock,
surrendered 1,600,000 warrants that were issued in conjunction with the bridge
loan in 2008.





In March
2009, the Company issued a 5 year warrant to purchase 150,000 shares of common
stock as compensation for consulting services.





In
conjunction with stock warrant issuances in 2008 and 2009, the Company adjusted
the exercise price and the shares of warrants that were issued in December 2005
and February 2006. The warrants that are adjusted are as follows:





Shares
                  
                  Original
                    exercise price
                  
                  
                  Adjusted
                    shares
                  
                  
                  Adjusted
                    exercise price2,669,065
                  
                  $
                  5.85
                  
                  
                  
                  8,485,885
                  
                  
                  $
                  1.84320,000
                  
                  $
                  4.50
                  
                  
                  
                  1,014,085
                  
                  
                  $
                  1.42


Note 10. Debt





On
May 9, 2006, the Company and its subsidiaries entered into a Credit and
Security Agreement with Wells Fargo Bank, National Association acting through
Wells Fargo Business Credit and related security agreements and other agreements
described in the Credit and Security Agreement (the “Credit Agreement”). The
Credit Agreement provided for advances to the Company of up to a maximum of
$25.0 million. The obligations under the Credit Agreement and all related
agreements were secured by all of the Company assets. The initial term of the
Agreement was three years, expiring on April 28, 2009. Up to $7.0 million
of the maximum amount was available for irrevocable, standby and documentary
letters of credit. The Credit Agreement required a prepayment fee of $125 if the
Company terminated the Credit Agreement during the third year. The Credit
Agreement required the Company, among other things, to limit capital
expenditures and maintain minimum availability on the line. Also, the Company
was obligated contractually by a restrictive lock box arrangement. The Credit
Agreement also required the Company to pay a variety of other fees and expenses,
including minimum annual interest of $120.





On July
25, 2008, Wells Fargo Bank notified the Company of the Company’s failure to meet
the minimum excess availability requirement of $3.5 million. Since the Company
did not meet the minimum excess availability requirement as stated in the
agreement, the financial covenants went into effect which required that we
demonstrate net earnings at the levels stated in the agreement. Due to the
restructuring of the Company in 2008, the Company was unable to meet the
covenants.





On
October 15, 2008, the Company paid off-the outstanding balance owed to Wells
Fargo Bank terminating the Credit Agreement specified above. Pursuant to the
pay-off agreement, the Company paid a forbearance agreement fee of $50 and early
termination fee of $125. Wells Fargo has also released its security interest in
the Company’s collateral.




During
the fourth quarter of 2008, the Company received a $2,550 bridge loan provided
by multiple accredited investors. The bridge loan is in the form of an Unsecured
Debenture and bears interest at the rate of 18% per annum. In consideration for
the loan, the investors received warrants to purchase an aggregate of
12,750,000, 25,500,000 and 3,200,000 shares of the Company's common stock at an
exercise price of $0.20, $0.10 and $0.25 per share, respectively, for an
aggregate of 41,450,000 shares of the Company's common stock. The warrants are
exercisable immediately for a period of five years from the agreement date. The
investors may elect to convert the accrued and unpaid interest into common stock
of the Company.




In
accordance with APB 14— Accounting for Convertible Debt and
Debt issued with Stock Purchase Warrants, the Company recorded the fair
value of the warrants using the relative fair value of the warrants and the
debt. The resulting discount of $1,975 will be amortized over a period of
6 months. The Company amortized the discount over 9 months because the
loan was extended for an additional period of 90 days for a total of
9 months.





On
April 16, 2009, the Company received extensions from certain accredited
investors who previously made total commitments for an aggregate of $2,550. The
original maturity date of such loans was January 12, 2009, January 29,
2009 and February 19, 2009. The investors made such extensions pursuant to
Debenture Modification and Extension Agreements which call for an extension of
the loans for 90-days after their original 90-day terms. Although the bridge
loan holders are under no obligation to extend the maturity of the loan and can
call the loan payment upon maturity, the Company expects to request further
extension until it gains access to credit to be able to pay off this
loan.





During
the first quarter of 2009, the Company paid off $100 associated with the bridge
loan and the outstanding balance as of March 31, 2009 is
$2,450.


13





Note
11. Segment Information





During the first quarter of 2008,
Enable Holdings commenced efforts to change its business model. Concurrent with
this change, we reorganized the segments based on the business units. Each
segment provides a combination of seller solutions for sellers to efficiently
liquidate their inventory. The seller solutions offered by the Company are:
Certified Merchant (CM), Managed Supply and Cash Recovery. Each of the business
segments, except commerce innovations, can offer the three seller
solutions.





The
revenue and gross profit breakdown of the Company based on the five business
segments, after the transition is as follows:


(The
Company does not summarize expenses based on the segments).





(Dollars
      in Thousands)Three
      Months ended March 31,Net
      Revenue
                                
                                2009
                                
                                
                                2008uBid.com
                                
                                $
                                2,686
                                1
                                
                                $
                                4,928
                                2RedTag.com
                                
                                
                                127
                                
                                
                                
                                -RedTag
      LIVE
                                
                                
                                792
                                
                                
                                
                                -Dibu
      Trading Co.
                                
                                
                                1,489
                                
                                
                                
                                2,213Commerce
      Innovations
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                $
                                5,094
                                
                                
                                $
                                7,141Gross
      ProfituBid.com
                                
                                $
                                914
                                
                                
                                $
                                1,485RedTag.com
                                
                                
                                17
                                
                                
                                
                                -RedTag
      LIVE
                                
                                
                                185
                                
                                
                                
                                -Dibu
      Trading Co.
                                
                                
                                113
                                
                                
                                
                                387Commerce
      Innovations
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                $
                                1,229
                                
                                
                                $
                                1,872Gross
      Profit %uBid.com
                                
                                
                                34.0
                                %
                                
                                
                                30.1
                                %RedTag.com
                                
                                
                                13.4
                                %
                                
                                
                                -RedTag
      LIVE
                                
                                
                                23.4
                                %
                                
                                
                                -Dibu
      Trading Co.
                                
                                
                                7.6
                                %
                                
                                
                                17.5
                                %Commerce
      Innovations
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                
                                24.1
                                %
                                
                                
                                26.2
                                %





Note
12. Subsequent Events





As
discussed in Note 6, the Company raised capital of approximately $1,190 in a
private offering. These investments were held in an escrow account until all the
contractual requirements were fulfilled. As of April 30, 2009, the Company has
been able to access the funds and will determine the best use of the proceeds
based on the corporate strategy and immediate inventory needs. In
conjunction with this private offering, the Company issued 4,760,000 shares of
common stock and warrants to purchase 4,760,000 shares of common stock
exercisable for 10 years at a price of $0.25 per share. The debt bears interest
at the annual rate of 12%.





1 Includes
$20 and $7 related to customer fees and advertising revenues,
respectively.


2 Includes
$14 and $142 related to Bidville.com and advertising revenues, respectively.
Bidville.com was an intangible asset purchased in 2006 and fully amortized in
2008. Advertising revenues were primarily eliminated during
2008.


14





Note
13. Going Concern





The
accompanying consolidated financial statements have been prepared assuming that
we will continue as a going concern, considering we realize the assets and
liquidate the liabilities in the normal course of business. As of March 31, 2009
we had accumulated a deficit of approximately $48,345. We have incurred losses
in the last 11 years, significantly so in the last 2 years, attributable to
operations and the change in the business model. We have managed our liquidity
during this time through a series of cost reduction initiatives and short-term
financing transactions. However, the current credit market remains volatile
which affects our ability to raise long-term capital financing and inventory
financing needed in our business.





Management’s
plans to alleviate this condition consist of, but are not limited to the
following:





·
            Issuance
      of a private placement memorandum to accredited investors with an estimate
      capital raise of approximately $4,500-$7,500. As of April 30, 2009, we
      have successfully raised approximately
$1,190,


·
            Entered
      in to an asset based lending credit line (ABL) of approximately
      $5,000,


·
            Increase
      revenues through the introduction of diversified product lines to serve
      the asset recovery industry,


·
            Increase
      revenues through the introduction of customer transaction fees and
      restructuring of CM vendor rate
card,


·
            Cost
      reduction plans including consolidating corporate, warehouse and customer
      care facilities and reducing head
count.





However,
there is no assurance that we will be successful in these efforts, which raises
substantial doubt as to our ability to continue as a going
concern.


15


ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.


The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated condensed
financial statements and related notes included in Item 1 of Part 1 of this
Quarterly Report and the audited consolidated financial statements and notes
thereto and Management’s Discussion and Analysis of Financial Condition and
Results of Operations contained in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2008. Enable Holdings, Inc. is a holding
company for uBid, Inc., Dibu Trading Corp., RedTag, Inc., RedTag Live, Inc.,
Enable Payment Systems, Inc. and uSaas, Inc., our operating businesses. For
purposes of this Quarterly Report, unless otherwise indicated or the context
otherwise requires, all references herein to “Enable,” “we,” “us,” and “our”
refer to Enable Holdings, Inc. and our subsidiaries.





Information
in the following Management's Discussion and Analysis of Financial Condition and
Results of Operations and elsewhere in this quarterly report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements provide current expectations or forecasts of future
events and can be identified by the use of terminology such as “believe,”
“estimate,” “expect,” “intend,” “may,” “could,” “will,” and similar words or
expressions. Any statement that is not a historical fact, including statements
regarding estimates, projections, future trends and the outcome of events that
have not yet occurred, is a forward-looking statement. Actual results could
differ materially from those projected in the forward-looking statements as a
result of a number of factors, including but not limited to  the risk
factors detailed in our filings with the SEC, including our Annual Report on
Form 10-K for the year ended December 31, 2008. We assume no obligation to
update such forward-looking statements or to update the reasons actual results
could differ materially from those anticipated in such forward-looking
statements.





Overview





We
operate leading online websites located at www.uBid.com and www.RedTag.com, respectively.
The two websites offer high quality excess, new, overstock, close-out,
recertified and limited supply brand name merchandise to both consumers and
businesses using auction style and fixed price formats. We offer consumers a
trustworthy buying environment in which we continually monitor and certify
activity to minimize the potential for fraud by certifying all merchants and
processing 100% of all transactions between buyers and sellers. Our online
properties offer brand-name merchandise from over 200 product categories
including computer products, consumer electronics, apparel, housewares, watches,
jewelry, travel, sporting goods, home improvement products and
collectibles.





Our
current business model provides value for consumers, manufacturers,
distributors, retailers and other approved third party merchants. Consumers shop
in a trustworthy and secure online environment and have the opportunity to bid
their own prices on popular, brand-name products realizing product savings of
generally 20%-80% off retail prices. Our online properties provides merchants
with an efficient and economical distribution channel for maximizing revenue on
their merchandise. Merchants can monetize overstock and close-out inventory,
expand their customer base and increase sales without compromising existing
distribution channels.





Our
business model currently consists of three distinct business channels: Certified
Merchant (CM), Managed Supply and Cash Recovery.





We
sell merchandise through the CM Program channel by allowing prescreened third
party merchants to sell their product through our online marketplace to
consumers and business. On this merchandise, we do not take title and therefore
do not bear the related inventory risk. In the CM Program, we are the primary
obligor to whom payment is due, but we bear no inventory or returns risk, so we
record only our commission as revenue. Through the Managed Supply channel, we
sell inventory that is consigned to us. The inventory is either stored at our
warehouse or at the sellers'. We purchase merchandise outright in the Cash
Recovery channel and sell to consumers and businesses. On this merchandise, we
bear the inventory, return and credit risk. The full sales amount is recorded as
revenue upon verification of the credit card transaction and shipment of the
merchandise. In all instances where the credit card authorization has been
received but merchandise has not been shipped, we defer revenue recognition
until the merchandise is shipped.





Our
online properties are available 24 hours a day, seven days a week and we
currently offer over 200,000 items each day. Since the first offer of product in
December 1997, our marketplace has facilitated over $1 billion in net
revenues and has registered over five million members.





We
conduct live liquidation events at various times throughout the year. Live sales
are conducted over a short period of time (usually a week) and all the
merchandise is sold locally.





In
the first quarter of 2008, the Company began transforming its business model
from a seller marketplace to an asset recovery solution. Asset recovery is a
rapidly growing industry with revenues of $38.5 billion in 2004 and is
expected to climb to over $63.1 billion in 2009, according to D.F. Blumberg
Associates Inc., a logistics research and consulting firm.


16





The
Company began changing its business model in the first quarter of 2008 and
continued implementing those changes through the end of 2008. The seven
proprietary selling solutions within the five operating divisions
are:





·
            uBid.com:
        Our flagship website, which has operated for 11 years.
      The website allows merchants to sell excess inventory and allows consumers
      to buy products in an auction as well as fixed price
    format.





·
            RedTag.com
      :  Our new fixed price internet site launched in August 2008,
      offers name brand merchandise with a low shipping and handling fee of only
      $1.95.





·
            RedTag Live:
        Our live liquidation group, dedicated to selling through the
      traditional in-store sales and live liquidation
  sales.





·
            Dibu Trading Co.:
        A wholesale inventory liquidation company dedicated to
      Business-to-Business solutions, providing manufacturers and distributors
      the ability to sell large quantities of excess inventory. For example,
      when a retailer needs to liquidate a large quantity of inventory, they
      contact us to find a buyer that will buy the entire inventory in a single
      transaction. Our B2B experience allows us to present deals to multiple
      interested buyers to achieve the most profitable
    transaction.





·
            Commerce Innovations:
        A software service company which licenses auction software to
      third party companies. Companies, businesses and governments can use our
      platform to sell excess furniture, appliances, autos, and other surplus.
      This allows them to utilize a trusted platform while reducing live auction
      costs, as well as an efficient way to reach a wider target audience. The
      Company is currently in the process of developing and testing this hosted
      solution and anticipates its launch in the second half of
      2009.




The
Company's financial results in 2008 and the first quarter of 2009 were
negatively impacted by the planned change in the business model and the severe
global economic downturn. To achieve the objective of becoming the leading
excess inventory provider, the Company made significant investments in increased
staffing levels and information technology infrastructure, specifically in the
first nine months of 2008. We have also made major changes to our traditional
operations as we transition to the new business model.




As
part of the transition to a new business model, we significantly reduced our
marketing spending while realigning the marketing and advertising resources to
better position them to each new operating division. The Company also made
the strategic decision to eliminate outside advertisement on its website.
Historically advertisement sales have added a revenue stream but have negatively
impacted overall sales by redirecting visitor traffic from the Company's website
to competing websites.




The
transition from an auction marketplace to an asset solutions company also
required that operationally we improve the efficiency of our platform to enhance
the user experience. The Company significantly decreased the number of listings,
eliminating the unprofitable listings, while preparing to migrate fixed price
listings to the RedTag platform based on the new business model. The reduction
in the number of unprofitable listings improved our auction success rate and
provides efficiencies to both buyers and sellers on our
platform.


17


Executive
Commentary





Our
management believes that the most important financial and non-financial measures
that track our progress include sales, website traffic, total average order
value, gross margin, customer acquisition costs, advertising expense, personnel
costs, and fulfillment costs.




Key Business
Metrics:We
periodically review key business metrics to evaluate the effectiveness of our
operational strategies and the financial performance of our business. These key
metrics include the following:





2009
                      
                      
                      2008
                      
                      
                      2007uBid.com
                      
                      Quarter
                        1
                      
                      
                      Quarter
                        4
                      
                      
                      Quarter
                        3
                      
                      
                      Quarter
                        2
                      
                      
                      Quarter
                        1
                      
                      
                      Quarter
                        4
                      
                      
                      Quarter
                        3
                      
                      
                      Quarter
                        2GMS
      (in thousands)
                      
                      $
                      11,821
                      
                      
                      $
                      12,374
                      
                      
                      $
                      14,385
                      
                      
                      $
                      17,117
                      
                      
                      $
                      16,671
                      
                      
                      $
                      21,765
                      
                      
                      $
                      22,731
                      
                      
                      $
                      23,304Number
      of Orders (in thousands)
                      
                      
                      81
                      
                      
                      
                      94
                      
                      
                      
                      95
                      
                      
                      
                      97
                      
                      
                      
                      95
                      
                      
                      
                      115
                      
                      
                      
                      129
                      
                      
                      
                      136Average
      Order Value
                      
                      $
                      145
                      
                      
                      $
                      131
                      
                      
                      $
                      152
                      
                      
                      $
                      176
                      
                      
                      $
                      175
                      
                      
                      $
                      188
                      
                      
                      $
                      177
                      
                      
                      $
                      171Visitors
      to Bidders %
                      
                      
                      3.11
                      %
                      
                      
                      2.93
                      %
                      
                      
                      3.32
                      %
                      
                      
                      3.61
                      %
                      
                      
                      4.08
                      %
                      
                      
                      3.09
                      %
                      
                      
                      2.70
                      %
                      
                      
                      2.88
                      %Auctions
      Closed (in thousands)
                      
                      
                      377
                      
                      
                      
                      383
                      
                      
                      
                      215
                      
                      
                      
                      181
                      
                      
                      
                      455
                      
                      
                      
                      780
                      
                      
                      
                      715
                      
                      
                      
                      619Auction
      Success Rate
                      
                      
                      14.36
                      %
                      
                      
                      15.03
                      %
                      
                      
                      26.64
                      %
                      
                      
                      30.85
                      %
                      
                      
                      12.94
                      %
                      
                      
                      8.55
                      %
                      
                      
                      10.88
                      %
                      
                      
                      12.54
                      %RedTag.com1GMS
      (in thousands)
                      
                      $
                      143
                      
                      
                      $
                      474
                      
                      
                      $
                      304
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Number
      of Orders (in thousands)
                      
                      
                      2
                      
                      
                      
                      5
                      
                      
                      
                      3
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Average
      Order Value
                      
                      $
                      83
                      
                      
                      $
                      96
                      
                      
                      $
                      119
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Visitors
      to Bidders %
                      
                      
                      9.60
                      %
                      
                      
                      30.19
                      %
                      
                      
                      15.14
                      %
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Auctions
      Closed (in thousands)
                      
                      
                      25
                      
                      
                      
                      36
                      
                      
                      
                      14
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Auction
      Success Rate
                      
                      
                      5.47
                      %
                      
                      
                      8.46
                      %
                      
                      
                      8.68
                      %
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -





(1)
            RedTag.com
      was first launched in August 2008.




(Auctions
in these metrics refer to auctions and fixed price listings)




Gross
Merchandise Sales (GMS):     Gross Merchandise Sales
differ from GAAP revenue in that gross bookings represents the gross sales price
of goods sold by us (including sales through our CM Program) before returns,
sales discounts, and cancellations.




Number
of Orders: This represents the total number of orders shipped in a
specified period. We analyze the number of orders by category to evaluate the
effectiveness of our merchandising and advertising strategies as well as to
monitor our inventory management.




Average
Order Value:Average order value is the ratio of gross sales divided by
the number of orders shipped within a given time period. We analyze average
order value by category primarily to manage costs and other operating
expenses.




Visitors
to Bidder %:The percentage of visitors that bid on an auction item. We
use this as a measure of the effectiveness of advertising.




Auctions
Closed: A closed auction is an auction that has ended because it reached
the scheduled closing time for that auction. Auctions closed include both
successful auctions and auctions with no bids.




Auction
Success Rate:The percentage of closed auctions that were successful and
received at least one bid.


18




Revenue Source:We derive most of our revenue from sales of products to consumers and
businesses as well as commission revenue earned for sales of merchandise under
revenue sharing agreements with third party sellers. We believe that the
principal drivers of our revenue consist of the average order value placed by
our customers, the number of orders placed by both existing and new customers,
special offers we make available that result in incremental orders, our ability
to attract new customers and advertising that impacts our revenue drivers. Sales
consist of orders placed through our uBid.com and restag.com websites, live
sales events and direct business to business sales. We further generate revenue
from shipping fees we charge our customers and advertising sales. We record our
revenue net of returns and other discounts. Our revenues may fluctuate from
period to period as a result of special offers we provide such as free shipping,
and other special promotions.





Our
revenue is dependent in part on sales of products produced by or purchased from
several vendors.  The following vendors accounted for revenues greater than 5%
of our total revenues in the three months ended March 2009 and 2008.No
other supplier represented more than 5% of our net revenues for any period
presented.





Three
      months ended
                    March
      31,Vendor
                  
                  2009
                  
                  
                  2008Hewlett
      Packard Company
                  
                  
                  42.2
                  %
                  
                  
                  38.7
                  %Always-at-Market
                  
                  
                  6.5
                  %
                  
                  
                  6.7
                  %





Cost of
Revenues:Cost
of revenues primarily consists of the cost of the product and inbound and
outbound shipping. There is no cost of revenues for UCM Program revenue. Cost of
revenues does not include order fulfillment costs, which are included in general
and administrative expenses.





Gross Profits:Our gross profit margins are impacted by a number of factors including
the category of merchandise, the introduction of new product categories, the mix
of sales among our product categories, pricing of products by our vendors,
pricing strategies, promotional programs, market conditions, packaging, excess
and obsolete inventory charges and other factors. Gross profits and gross profit
margins are not comparable to gross profit and gross profit margins reported by
companies that include order fulfillment costs in the cost of
revenues.


19


Results
of Operations





Comparison
of three months ended March 31, 2009 and 2008


(Dollars
in thousands, except per share data and average order value)





The table below sets forth certain data from our statement of operations as a
percentage of net revenues as well as the increase (decrease) in quarter ended
March 2009 as compared to March 2008. This information should be read in
conjunction with our financial statements and notes thereto included elsewhere
in this report.





Three
      months ended March 31,2009
                                
                                
                                2008
                                
                                
                                Increase
      (Decrease)Net
      Revenues:uBid.com
                                
                                $
                                2,686
                                
                                
                                $
                                4,928
                                
                                
                                $
                                (2,242
                                )
                                
                                
                                (45.5
                                %)RedTag.com
                                
                                
                                127
                                
                                
                                
                                -
                                
                                
                                
                                127
                                
                                
                                
                                -RedTag
      LIVE
                                
                                
                                792
                                
                                
                                
                                -
                                
                                
                                
                                792
                                
                                
                                
                                -Dibu
      Trading Co.
                                
                                
                                1,489
                                
                                
                                
                                2,213
                                
                                
                                
                                (724
                                )
                                
                                
                                (32.7
                                %)Total
      Net Revenues
                                
                                
                                5,094
                                
                                
                                
                                7,141
                                
                                
                                
                                (2,047
                                )
                                
                                
                                (28.7
                                %)Gross
      Profit:uBid.com
                                
                                
                                914
                                
                                
                                
                                1,485
                                
                                
                                
                                (571
                                )
                                
                                
                                (38.5
                                %)RedTag.com
                                
                                
                                17
                                
                                
                                
                                -
                                
                                
                                
                                17
                                
                                
                                
                                -RedTag
      LIVE
                                
                                
                                185
                                
                                
                                
                                -
                                
                                
                                
                                185
                                
                                
                                
                                -Dibu
      Trading Co.
                                
                                
                                113
                                
                                
                                
                                387
                                
                                
                                
                                (274
                                )
                                
                                
                                (70.8
                                %)Total
      Gross Profit
                                
                                
                                1,229
                                
                                
                                
                                1,872
                                
                                
                                
                                (643
                                )
                                
                                
                                (34.3
                                %)General
      and administrative
                                
                                
                                2,867
                                
                                
                                
                                3,753
                                
                                
                                
                                (886
                                )
                                
                                
                                (23.6
                                %)Sales
      and marketing
                                
                                
                                295
                                
                                
                                
                                495
                                
                                
                                
                                (200
                                )
                                
                                
                                (40.4
                                %)Total
      operating expenses
                                
                                
                                3,162
                                
                                
                                
                                4,248
                                
                                
                                
                                (1,086
                                )
                                
                                
                                (25.6
                                %)Loss
      from operations
                                
                                
                                (1,933
                                )
                                
                                
                                (2,376
                                )
                                
                                
                                443
                                
                                
                                
                                (18.6
                                %)Interest
      Income / (Expense), net
                                
                                
                                (692
                                )
                                
                                
                                (9
                                )
                                
                                
                                (629
                                )
                                
                                
                                7588.9
                                %Loss
      on derivative financial instruments
                                
                                
                                (48
                                )
                                
                                
                                -
                                
                                
                                
                                (48
                                )
                                
                                
                                -Net
      Loss
                                
                                $
                                (2,673
                                )
                                
                                $
                                (2,385
                                )
                                
                                $
                                (240
                                )
                                
                                
                                12.1
                                %





Revenue


Web
Properties-consists of uBid.com and RedTag.com


Gross
sales and revenues for the web properties decreased approximately 28% and 46%,
respectively, for the three months ended March 2009 compared to the respective
period for 2008. The decrease is primarily attributable to the decreased number
of orders of 83,000 from 95,000 in 2008. We added a fixed price online property
in August 2008 which added another revenue stream for the three months ended
March 2009. The decreased number of visitors negatively impacted the average
order value, visitor to bidder ratio and auctions closed.





The
Company also made the strategic decision to eliminate outside advertising on its
website. In the past, the Company sold advertising space on its website to
various companies. Although this strategy added a revenue stream, it impacted
sales on the Company’s website since it directed visitors away to competing
websites. As a result of the elimination of advertisement revenues, visitors
spent more time shopping on the Company’s website, as evidenced by the increase
in auction success rate of 1.5% to 14.4% from 12.9% for the three months ended
March 31, 2009 and 2008, respectively. The advertising revenues were $7 and $142
for the three months ended March 31, 2009 and 2008, respectively, and are
included with uBid.com revenues in the above table.




20


Offline
Sales Channels-consists of Dibu Trading Co. and RedTag Live


Gross
Sales revenues for the offline sales channels increased approximately 3% for the
three months ended March 31, 2009 as compared to the respective period for 2008,
which was due to the addition of a live store format in 2008 – RedTag
Live.





Gross
Profit


Gross
Profit for the three months ended March 31, 2009, decreased $643 as compared to
the same period in 2008. The gross profit decreased 38.5% for uBid.com and 70.8%
for Dibu Trading Co. The realignment of marketing efforts and elimination of
unprofitable vendors resulted in an increase in negative gross margins for
uBid.com but an improved auction success rate of 14.4% from 12.9% in the same
period of 2008. The increase in negative gross profit for Dibu Trading is due to
the liquidation of inventory at a loss.The Company had a large
amount of business-to-business inventory on-hand, which was expected to be sold
over a specified period of time. The Company decided to sell the inventory in a
short time-frame in order to generate operating capital, which resulted in a
negative gross profit.





The
introduction of RedTag.com and RedTag Live divisions resulted in an
increase of $202 in gross profit.





Sales,
General and Administrative Expenses


Sales and
marketing, general and administrative (“SG&A”) expenses consist primarily of
sales and marketing expenses, including online marketing activities, order
fulfillment and other costs, such as personnel, rent, warehouse and handling,
common area maintenance, depreciation, credit card processing charges,
insurance, legal and accounting fees.





SG&A
expenses decreased $1,086 or 25.6% for the three months ended March 31 2009 as
compared to the respective period for 2008.  The primary reason for
the decrease in these expenses was the company-wide transition to an asset
recovery model. The primary categories effected by the chance in the business
model and contributing to the decrease are as follows:





·
            Salary
      and benefits expenses decreased $545 or 31.5% due to staff
      reductions.


·
            Credit
      card fees decreased $120 or 29.9% due to the decrease in sales
      volume.


·
            Consulting
      and outside services decreased $113 or 45.4% as we eliminated outside
      services related to market research and analysis that were engaged in
      2008.


·
            Advertising
      expenses decreased $92 or 31.0% due to the elimination of unprofitable and
      ineffective advertising campaigns.





Net
Losses


The
Company experienced a net loss of $2,673 or $0.14 per share for the three months
ended March 31, 2009 compared to a net loss of $2,385 or $0.13 per share for the
three months ended March 31, 2008. Net loss per share increased due to the
aforementioned change in the business model and the increase in interest
expense. The increase in interest expense relates to the bridge loan
discount amortization of $492 and $0 for the three months ended March 2009
and 2008, respectively.




21


Liquidity
and Capital Resources





Net cash
provided by operating activities for the three months ended March 31, 2009 was
$1 compared to $2,297 used in the three months ended March 31, 2008. The
significant change in net cash provided by operating activities was primarily
due to the decrease in inventories of $1,579, increase in non-cash interest
expense of $455 and increase in non-cash equity compensation of $369 for
consulting services. Cash provided by accounts receivable increased $612 due to
collections of accounts receivable. Cash was used to pay down accrued expenses
while accounts payable increased due to our restricted cash flow
position.





Net cash used in investing activities
was $72 and $245 for the three months ended March 31, 2009 and 2008,
respectively. The decrease in net cash used was due to the cash provided by
restricted investments. The Company utilized $179 of the restricted cash to pay
the outstanding balance with a vendor. Capital expenditures remained relatively
consistent.





Net cash
provided by financing activities was $75 for the three months ended March 31,
2009, compared to $1,719 for the same period last year. The decrease in cash
provided is because the Company no longer has an agreement to borrow on a credit
line from Wells Fargo which accounted for $1,617 of the cash provided last year.
Cash provided was partially offset by the payment on the bridge loan of $100 in
January 2009.





On May 9, 2006, the Company and its
subsidiaries entered into a Credit and Security Agreement with Wells Fargo Bank,
National Association acting through Wells Fargo Business Credit and related
security agreements and other agreements described in the Credit and Security
Agreement (the "Credit Agreement"). The Credit Agreement provided for advances
to the Company of up to a maximum of $25,000. The amount actually available to
the Company varied from time to time, depending on, among other factors, the
amount of eligible inventory and the amount of eligible accounts receivable. The
obligations under the Credit Agreement and all related agreements were secured
by all of the Company's assets. The initial term of the Agreement was three
years, expiring on April 28, 2009. Up to $7,000 of the maximum amount was
available for irrevocable, standby and documentary letters of credit. Advances
under the Credit Agreement incurred interest at a base rate (Wells Fargo Bank's
prime rate) or LIBOR plus 2.5%. The Credit Agreement required a prepayment fee
of $500 if the Company terminated the Credit Agreement during its first year,
$400 if it terminated the Credit Agreement during its second year and $100 if
the Company terminated the Credit Agreement during the third year. The Credit
Agreement required the Company, among other things, to limit capital
expenditures and maintain minimum availability on the line. Also, the Company
was obligated contractually by a restrictive lock box arrangement. The Credit
Agreement also required the Company to pay a variety of other fees and expenses,
including minimum monthly interest of $10.





On July
25, 2008, Wells Fargo Bank notified the Company of the Company's failure to meet
the minimum excess availability requirement of $3,500. Since the Company did not
meet the minimum excess availability requirement as stated in the agreement, the
financial covenants went into effect which required that the Company demonstrate
net earnings at the levels stated in the agreement. Due to the change in the
business model of the Company in 2008, it was unable to meet the covenants. On
October 15, 2008, the Company paid off-the outstanding balance owed to
Wells Fargo Bank terminating the Credit Agreement specified above. Pursuant to
the pay-off agreement, the Company paid a forbearance agreement fee of $50 and
early termination fee of $125. Wells Fargo has also released its security
interest in the Company's collateral.




On
July 15, 2008 the Company signed a $10,000 common stock purchase agreement
with Fusion Capital Fund II, LLC, an Illinois limited liability company
("Fusion Capital"). Concurrently with entering into the common stock purchase
agreement, the Company entered into a registration rights agreement with Fusion
Capital. Under the registration rights agreement, the Company agreed to
file a registration statement related to the transaction with the U.S.
Securities and Exchange Commission ("SEC") covering the shares that have been
issued or may be issued to Fusion Capital under the common stock purchase
agreement. After the SEC has declared effective the registration statement
related to the transaction, as long as the Company's common stock is trading
above $0.75 per share, the Company has the right over a 24-month period to sell
shares of common stock to Fusion Capital from time to time in amounts ranging
from $60 to $1,000, depending on certain conditions set forth in the agreement,
up to an aggregate of $10,000.




In
consideration for entering into the agreement, upon execution of the common
stock purchase agreement the Company issued to Fusion Capital 230,074 shares of
the Company's common stock as a commitment fee. Also, the Company will issue to
Fusion Capital an additional 230,074 shares as a commitment fee pro rata as the
Company receives the $1,000 of future funding. The purchase price of the shares
related to the $1,000 of future funding will be based on the prevailing market
prices of the Company's common stock at the time of sales without any fixed
discount, and the Company will control the timing and amount of any sales of
shares to Fusion Capital. Fusion Capital shall not have the right or the
obligation to purchase any shares of the Company's common stock on any business
day that the price of the Company's common stock is below $0.75 per share. The
common stock purchase agreement may be terminated by the Company at any time at
the Company's discretion without any cost to the Company. There are no negative
covenants, restrictions on future funding, penalties or liquidated damages in
the agreement. The proceeds received by the Company under the common stock
purchase agreement will be used to provide working capital to further implement
the Company's recently announced strategic change to focus on liquidating excess
inventories.


22




The
Company issued the initial 230,074 shares as a commitment fee, at the agreed
upon price of $1.52 per share, determined based on the 20-day moving average as
of the agreement acceptance date of June 25, 2008. The Company filed the
registration statement on September 5, 2008 and recorded the common stock
transaction in the quarter ended September 30, 2008. In a letter dated
October 3, 2008, the SEC notified the Company that the S-1 registration
statement has been selected for review. The Company elected not to respond to
the SEC notification because the stock price of the Company was trading well
below the agreed upon price of $0.75, which would have obliged Fusion Capital to
not provide the capital. In December 2008, the Company wrote off the commitment
fee issued in conjunction with this agreement.




Due to
the recent worldwide economic downturn, the Company continues to experience
difficulty raising capital to finance ongoing operations. The difficulty in
raising capital during this severe economic downturn was compounded by the fact
that the Company's largest shareholder, The Petters Group Worldwide and in
particular Thomas J. Petters, is currently the subject of a Federal
investigation. Although the Company is not controlled by the Petters Group
Worldwide, nor does Thomas J. Petters have any control over the Company's
management or day to day operations, the investigation negatively impacted the
Company's financing efforts.




During
the fourth quarter of 2008, the Company received a $2,550 bridge loan provided
by multiple accredited investors, a portion of which was provided by related
parties (See Note 18). The bridge loan is in the form of an Unsecured
Debentures and bear interest at the rate of 18% per annum. In consideration, the
investors received warrants to purchase an aggregate of 12,750,000, 25,500,000
and 3,200,000 shares of the Company's common stock at an exercise price of
$0.20, $0.10 and $0.25 per share, respectively, for an aggregate of 41,450,000
shares of the Company's common stock. The warrants are exercisable immediately
for a period of 5 years from the agreement date. The investors may elect to
convert the accrued and unpaid interest into the common stock of the
Company.





On April
6, 2009, in conjunction with the issuance of our annual report, our auditors
expressed concerns about our ability to continue as a going concern.Management’s plans to
alleviate this condition consist of, but are not limited to the
following:





·
            Issuance
      of a private placement memorandum to accredited investors with an estimate
      capital raise of approximately
$4,500-$7,500,


·
            Enter
      in to an asset based lending credit line (ABL) of approximately
      $5,000,


·
            Increase
      revenues through the introduction of diversified product lines to serve
      the asset recovery industry,


·
            Increase
      revenues through the introduction of customer transaction fees and
      restructuring of CM vendor rate
card,


·
            Cost
      reduction plans including consolidating corporate, warehouse and customer
      care facilities and reducing head
count.





In March
2009, the Company initiated a private placement offering to accredited
investors. Investors may purchase units, with each unit consisting of a senior
convertible debenture for one share of common stock of the Company, and a
warrant, depending on the date of investment, to acquire either two shares or
one share of Common Stock for ten years at a purchase price of $0.25 per share.
The Debentures will pay interest at a rate of 12% per annum, have a term of 30
months and are convertible into the Company’s common stock at any time at the
option of the investor. The minimum and maximum number of units that must be
sold for the private placement to initially close is 2,000,000 units and
15,000,000 units, respectively. As of April 30, 2009, the Company has received
investments in aggregate of $1,190 which were held in an escrow account until
April 29, 2009, for which funds were available to be drawn upon by the Company.
The Company will determine the best use of the proceeds based on the corporate
strategy and immediate inventory needs. Of the $1,190 proceeds received, $25
were utilized as legal expenses while $60 were paid to the brokers who assisted
us with this offering.





On
April 16, 2009, the Company received extensions from certain accredited
investors who previously made total commitments for an aggregate of $2,550 in
the form of a 90 day bridge loan. The original maturity date of such loans
was January 12, 2009, January 29, 2009 and February 19, 2009. The
investors made such extensions pursuant to Debenture Modification and Extension
Agreements which call for an extension of the loans for 90-days after their
original 90-day terms. Although the bridge loan holders are under no obligation
to extend the maturity of the loan and can call the loan payment upon maturity,
the Company expects to request further extension until it gains access to credit
to be able to pay off this loan. During the first quarter of 2009, the Company
paid off $100 associated with the bridge loan.




As a
result of the tightening credit market (including uncertainties with respect to
financial institutions and the global credit markets), extreme volatility in
energy costs and other macro-economic challenges currently affecting the economy
of the United States and other parts of the world, customers or vendors may
experience serious cash flow problems and as a result, may modify, delay or
cancel plans to purchase the Company’s products and vendors may significantly
and quickly increase their prices or reduce their output. Additionally, if the
Company has not been successful in securing financing, we may not be able to
pay, or may delay payment of, accounts payables owed to our vendors which may
adversely affect the Company’s ability to procure additional materials and
services needed to meet our customers’ requirements. If the Company is unable to
secure long-term financing or capital, the operations will be difficult to
continue for the near term. However, there is no assurance that we will be
successful in these efforts, which raises substantial doubt as to our ability to
continue as a going concern.


23


ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK




The
Company has little exposure to risks of fluctuating interest rates or
fluctuating currency exchange rates. Accordingly, the Company does not believe
that changes in interest or currency rates will have a material effect on the
Company’s liquidity, financial condition or results of operations. It is the
Company’s policy not to enter into derivative financial
instruments.




ITEM 4. CONTROLS AND
PROCEDURES





Disclosure
Controls and Procedures. The Company maintains
disclosure controls and procedures that have been designed to ensure that
information related to the Company is recorded, processed, summarized and
reported on a timely basis. We review these disclosure controls and procedures
on a periodic basis. In connection with this review, we have established a
compliance committee that is responsible for accumulating potentially material
information regarding its activities and considering the materiality of this
information. The compliance committee (or a subcommittee) is also responsible
for making recommendations regarding disclosure and communicating this
information to the Company’s Chief Executive Officer and Chief Financial Officer
to allow timely decisions regarding required disclosure. The Company’s
compliance committee is comprised of a principal risk management officer and
other members of its management team.





The
Company’s Chief Executive Officer and Chief Financial Officer, with the
participation of the compliance committee, evaluated the effectiveness of the
design and operation of the Company’s disclosure controls and procedures as of
the end of the period covered by this Quarterly Report, as required by Rule
13a-15 of the Securities Exchange Act of 1934. Based on their evaluation of the
Company’s disclosure controls and procedures, the Company’s Chief Executive
Officer and Chief Financial Officer believe that, as of the end of the period
covered by this Quarterly Report, the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports the Company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and reported within the
time periods specified in the rules and forms of the SEC.





Internal Control
Over Financial Reporting. There have been no changes in the
Company’s internal control over financial reporting identified in the evaluation
that occurred during the first quarter of fiscal year 2009 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.


24


PART
II OTHER INFORMATION





ITEM 1.  LEGAL PROCEEDINGS





From time
to time the Company may be named in claims arising in the ordinary course of
business. Currently, no legal proceedings or claims are pending against the
Company or involve the Company that, in the opinion of the Company’s management,
could reasonably be expected to have a material adverse effect on its business
or financial condition.





ITEM
1A. RISK FACTORS





As a
result of the tightening credit market (including uncertainties with respect to
financial institutions and the global credit markets), increases in energy costs
and other macro-economic challenges currently affecting the economy of the
United States and other parts of the world, customers or vendors may experience
serious cash flow problems and as a result, may modify, delay or cancel plans to
purchase the Company’s products and vendors may significantly and quickly
increase their prices or reduce their output. Additionally, if the Company is
not successful in securing financing, when and as needed, we may not be able to
pay, or may delay payment of, accounts payables owed to our vendors which may
adversely affect the Company’s ability to procure additional materials and
services needed to meet our customer’s requirements. If economic conditions in
the United States and other key parts of the world deteriorate further or do not
show improvement, the Company may experience material adverse impacts to its
business and operating results.





In
addition to other information set forth in this report, you should carefully
consider the factors discussed in Part 1, “Item 1A. Risk Factors” in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008, which
could materially affect the Company’s business, financial condition or future
results. The risks described in the Company’s Annual Report on Form 10-K are not
the only risks facing the Company. Additional risks and uncertainties not
currently known to the Company or that are currently deemed to be immaterial
also may materially adversely affect the Company’s business, financial
conditions and/or operating results.





ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





For the
three months ended March 31, 2009, options to purchase an aggregate of 56,000
shares of the Company’s common stock were granted to individuals, all employees
of Enable Holdings, Inc. The options have a term of ten years and vest over a
three to four year period either quarterly or annually beginning on the first
quarter or year respectively after the date of grant. The option grants were
exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, which provides an exemption for transactions not involving a public
offering.





ITEM
3. DEFAULT UPON SENIOR SECURITIES





None.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS




None.





ITEM
5. OTHER INFORMATION





None.





ITEM
6. EXHIBITS





Exhibit No.
                  
                  Description31.1
                  
                  Certification
      of the President and Chief Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002.31.2
                  
                  Certification
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                  
                  Certification
      of the President and Chief Executive Officer pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                  
                  Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.


25


SIGNATURES





Pursuant
to requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized as of May 15, 2009.





ENABLE
      HOLDINGS, INC.By:
                        /s/
      Miguel A. Martinez, Jr.Name:  Miguel
      A. Martinez, Jr.Title:
        Chief Financial Officer(Principal
      Financial Officer and Principal Accounting
  Officer)




26