**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 **September
      30, 2006**





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





**Commission
      file Number: 000-50995**


________________




**uBid.com
      Holdings, Inc.**


*(Exact
      name of registrant as specified in its charter)*





**Delaware**
            **52-2372260***(State
                or Other Jurisdiction of*
            *(IRS
                Employer**Incorporation
                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 o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. 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 **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 September 30, 2006 was 20,333,333.


























**TABLE
      OF CONTENTS**





PagePART
                I
            Financial
                InformationItem
                1. Consolidated Condensed Financial Statements (Unaudited)Consolidated
                Condensed Balance Sheets (Unaudited)
            3Consolidated
                Condensed Statements of Operations (Unaudited)
            4Consolidated
                Condensed Statement of Shareholders' Equity (Unaudited)
            5Consolidated
                Condensed Statements of Cash Flows (Unaudited)
            6Notes
                to Consolidated Condensed Financial Statements
            7-12Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            13-19Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            19Item
                4. Controls and Procedures
            19PART
                II
            Other
                InformationItem
                1. Legal Proceedings
            20Item
                1A. Risk Factors
            20Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            20Item
                3. Default Upon Senior Securities
            20Item
                4. Submission of Matters to a Vote of Security Holders
            20Item
                5. Other Information
            20Signatures
            21-25






2




**uBid.com
          Holdings, Inc. and Subsidiaries**
 **Consolidated
            Condensed Balance Sheets**
 **(Dollars
            in Thousands, except par value data)**
   **September
                      30, 2006**
                  
                  **December
                      31, 2005**(Unaudited)**Assets****Current
                      Assets**Cash
                      and cash equivalents
                  
                  $
                  12,459
                  
                  $
                  21,176Restricted
                      investments
                  
                  
                  213
                  
                  
                  7,003Accounts
                      receivable, net
                  
                  
                  1,767
                  
                  
                  1,306Merchandise
                      inventories
                  
                  
                  6,855
                  
                  
                  5,989Prepaid
                      expenses and other current assets
                  
                  
                  871
                  
                  
                  646**Total
                      Current Assets**
                  
                  
                  22,165
                  
                  
                  36,120**Property
                      and Equipment, net**
                  
                  
                  866
                  
                  
                  524**Intangible
                         Assets**
                  
                  
                  692
                  
                  
                  -**Total
                      Assets**
                  
                  $
                  23,723
                  
                  $
                  36,644**Liabilities
                      and Shareholders' Equity****Current
                      Liabilities**Flooring
                      facility
                  
                  $
                  358
                  
                  $
                  1,612Accounts
                      payable
                  
                  
                  2,068
                  
                  
                  4,456Accrued
                      expensesAdvertising
                  
                  
                  318
                  
                  
                  397Merger
                      and offering costs
                  
                  
                  -
                  
                  
                  2,000Other
                  
                  
                  1,014
                  
                  
                  1,187Current
                      maturities of long-term debt
                  
                  
                  102
                  
                  
                  410**Total
                      Current Liabilities**
                  
                  
                  3,860
                  
                  
                  10,062******Redeemable
                      Common Stock**$.001
                      par value (0 and 2,666,668 shares issued
                    &
                      outstanding respectively)
                  
                  
                  -
                  
                  
                  12,000**Shareholders'
                      Equity**Common
                      stock, $.001 par value (200,000,000 shares authorized;20,333,333
                      and 16,732,666 issued and outstanding, respectively)
                  
                  
                  20
                  
                  
                  17Stock
                      warrants
                  
                  
                  8,086
                  
                  
                  6,322Additional
                      paid-in-capital
                  
                  
                  48,806
                  
                  
                  25,907Treasury
                      stock, at cost (2,666,668 and 0 shares, respectively)
                  
                  
                  (12,000
                  )
                  
                  -Retained
                      deficit
                  
                  
                  (25,049
                  )
                  
                  (17,664
                  )**Total
                      Shareholders' Equity**
                  
                  
                  19,863
                  
                  
                  14,582**Total
                      Liabilities and Shareholders' Equity**
                  
                  $
                  23,723
                  
                  $
                  36,644
 The accompanying notes are an integral part of these condensed
                      consolidated financial
                      statements.







3


**uBid.com
                  Holdings, Inc. and
                  Subsidiaries****Consolidated
                  Condensed Statements of
                  Operations****(Dollars
                  in Thousands, except for per share
                  data)****(Unaudited)****Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****Net
                  Revenues**
              
              $
              14,366
              
              $
              18,594
              
              $
              53,551
              
              $
              65,297**Cost
                  of Revenues**
              
              
              12,425
              
              
              15,497
              
              
              46,583
              
              
              56,756Gross
                  Profit
              
              
              1,941
              
              
              3,097
              
              
              6,968
              
              
              8,541**Operating
                  Expenses**General
                  and administrative
              
              
              3,454
              
              
              3,111
              
              
              10,439
              
              
              9,860Sales
                  and marketing
              
              
              1,160
              
              
              1,247
              
              
              4,122
              
              
              3,657Total
                  operating expenses
              
              
              4,614
              
              
              4,358
              
              
              14,561
              
              
              13,517**Loss
                  From Operations**
              
              
              (2,673
              )
              
              (1,261
              )
              
              (7,593
              )
              
              (4,976
              )**Interest
                  Income (Expense), net**
              
              
              12
              
              
              (572
              )
              
              208
              
              
              (1,496
              )**Net
                  Loss**
              
              
              (2,661
              )
              
              (1,833
              )
              
              (7,385
              )
              
              (6,472
              )Preferred
                  Stock Dividends
              
              
              -
              
              
              (15
              )
              
              -
              
              
              (45
              )**Net
                  Loss Available to Common Shareholders**
              
              $
              (2,661
              )
              $
              (1,848
              )
              $
              (7,385
              )
              $
              (6,517
              )**Net
                  Loss per share - Basic and****Diluted**
              
              $
              (0.13
              )
              $
              (0.74
              )
              $
              (0.37
              )
              $
              (2.62
              )**Weighted
                  Average Shares Outstanding - Basic and Diluted**
              
              
              20,333,333
              
              
              2,487,107
              
              
              20,213,589
              
              
              2,487,107The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.








4







**uBid.com
                  Holdings, Inc. and Subsidiaries****Consolidated
                  Condensed Statements of Shareholders' Equity****(Dollars
                  in Thousands, except share data)****(Unaudited)****Common
                  Stock**
              
              
              
              
              
              **Treasury
                  Stock****Stock**
              
              **Paid-in**
              
              
              
              
              
              **Retained****Shares**
              
              **Dollars**
              
              **Warrants**
              
              **Capital**
              
              **Shares**
              
              **Dollars**
              
              **Deficit**
              
              **Total**Balance,
                  December 31, 2005
              
              
              16,732,666
              
              $
              17
              
              $
              6,322
              
              $
              25,907
              
              
              —
              
              $
              —
              
              $
              (17,664
              )
              $
              14,582Second
                  private offering
              
              
              3,000,000
              
              
              3
              
              
              1,560
              
              
              11,937
              
              
              —
              
              
              —
              
              
              —
              
              
              13,500Redemption
                  of common stock
              
              
              —
              
              
              —
              
              
              —
              
              
              12,000
              
              
              2,666,668
              
              
              (12,000
              )
              
              —
              
              
              —Stock
                  Compensation Expense
              
              
              —
              
              
              —
              
              
              —
              
              
              666
              
              
              —
              
              
              —
              
              
              —
              
              
              666Second
                  private offering costs
              
              
              600,667
              
              
              —
              
              
              204
              
              
              (1,704
              )
              
              —
              
              
              —
              
              
              —
              
              
              (1,500
              )Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (7,385
              )
              
              (7,385
              )Balance,
                  September 30, 2006
              
              
              20,333,333
              
              $
              20
              
              $
              8,086
              
              $
              48,806
              
              
              2,666,668
              
              $
              (12,000
              )
              $
              (25,049
              )
              $
              19,863The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.






5






**uBid.com
                  Holdings, Inc. and Subsidiaries****Consolidated
                  Condensed Statements of Cash Flows****(Dollars
                  in Thousands, except for share and per share
                  data)****(Unaudited)**
  **Nine
                  Months Ended **September 30,******2006**
              
              **2005****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (7,385
              )
              $
              (6,472
              )Adjustments
                  to reconcile net loss to net cash used inOperating
                  activities:Depreciation
                  and amortization
              
              
              253
              
              
              127Non-cash
                  compensation expense
              
              
              666
              
              
              475Changes
                  in assets and liabilitiesAccounts
                  receivable
              
              
              (461
              )
              
              260Merchandise
                  inventories
              
              
              (866
              )
              
              680Prepaid
                  expenses and other current assets
              
              
              (225
              )
              
              (115
              )Accounts
                  payables
              
              
              (2,388
              )
              
              (665
              )Accrued
                  expenses
              
              
              (2,252
              )
              
              (393
              )**Net
                  cash used in operating activities**
              
              
              (12,658
              )
              
              (6,103
              )**Cash
                  Flows From Investing Activities**Capital
                  expenditures
              
              
              (541
              )
              
              (118
              )Purchased
                  intangible assets
              
              
              (746
              )
              
              -Change
                  in restricted investments
              
              
              6,790
              
              
              -**Net
                  cash provided by (used in) investing activities**
              
              
              5,503
              
              
              (118
              )**Cash
                  Flows From Financing Activities**Change
                  in flooring facility
              
              
              (1,254
              )
              
              274Proceeds
                  from issuance of related-party debt
              
              
              -
              
              
              6,500Proceeds
                  from second private placement, net of cash expenses
              
              
              12,000
              
              
              -Redemption
                  of common stock
              
              
              (12,000
              )
              
              -Payments
                  on notes payable
              
              
              -
              
              
              (1,000
              )Repayment
                  of related-party debt
              
              
              -
              
              
              (500
              )Payments
                  on long-term debt
              
              
              (308
              )
              
              (308
              )**Net
                  cash (used in) provided by financing activities**
              
              
              (1,562
              )
              
              4,966**Net
                  (Decrease) in Cash and Cash Equivalents**
              
              
              (8,717
              )
              
              (1,255
              )**Cash
                  and Cash Equivalents, beginning of period**
              
              
              21,176
              
              
              1,734**Cash
                  and Cash Equivalents, end of period**
              
              $
              12,459
              
              $
              479**Supplemented
                  Cash Flow Disclosure**Cash
                  paid for interest
              
              $
              333
              
              $
              1,474Warrants
                  issued in second offering
              
              $
              1,560
              
              $
              -Shares
                  and warrants issued as stock issuance costs
              
              $
              204
              
              $
              -The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.




6


**UBID.COM
      HOLDINGS, INC.** **and Subsidiaries**


**NOTES
      TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**


**September
      30, 2006**


**(Unaudited)**








**1.**  **Basis
      of Presentation**





uBid.com
      Holdings, Inc. and subsidiaries (the “Company”) operate a leading on-line
      business to consumer and business to business marketplace that enables 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 primarily
      located in the United States. Through the Company’s website, located at
      www.ubid.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.





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 (“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
      amended Form 10-K/A for the year ended December 31, 2005.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 U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the amounts reported in the Company’s Consolidated Financial Statements
      and accompanying notes. Actual results could differ materially from those
      estimates.





**2.**  **Summary
      of Significant Accounting Policies**




Since
      December 31, 2005, none of the critical accounting policies, or the Company’s
      application thereof, as more fully described in the Company’s 2005 Annual
      Report, has significantly changed. Certain critical accounting policies have
      been presented below due to the significance of related transactions during
      the
      nine months ended September 30, 2006.





***Revenue
      Recognition***





The
      Company sells merchandise under two types of arrangements; direct purchase
      sales
      and revenue sharing arrangements.





For
      direct purchase sales to consumer and business customers, the Company is
      responsible for conducting the auction or listing the fixed sale price for
      merchandise owned by the Company, billing the customer, shipping the merchandise
      to the customer, processing merchandise returns and collecting accounts
      receivable. In accordance with the provisions of Staff Accounting Bulletin
      104,
      the Company recognizes revenue when the following revenue recognition criteria
      are met: (1) persuasive evidence of an arrangement exists; (2) the product
      has
      been shipped (FOB Shipping Point) and the customer takes ownership and assumes
      the risk of loss; (3) the selling price is fixed or determinable; and (4)
      collection of the resulting receivable is reasonably assured.





For
      sales
      of merchandise under revenue-sharing agreements, the Company is responsible
      for
      conducting the auction for merchandise owned by third parties, billing the
      customer, arranging for a third party to complete delivery to the customer,
      processing merchandise returns and collecting accounts receivable. The Company
      bears no physical inventory loss or return risk related to these sales. The
      Company records commission revenue at the time of shipment.


7


***Long-Lived
      Assets***




The
      Company records impairment losses on other intangible assets when events and
      circumstances indicate that such assets might be impaired and the estimated
      fair
      value of the asset is less than its recorded amount in accordance with Statement
      of Financial Accounting Standards No. 144, "Accounting for the Impairment or
      Disposal of Long-Lived Assets". The Company reviews the value of its long-lived
      assets for impairment whenever events or changes in business circumstances
      indicate that the carrying amount of the assets may not be fully recoverable
      or
      that the useful lives of these assets are no longer appropriate. Conditions
      that
      would necessitate an impairment assessment include material adverse changes
      in
      operations, significant adverse differences in actual results in comparison
      with
      initial valuation forecasts prepared at the time of acquisition, a decision
      to
      abandon certain acquired products, services, or marketplaces, or other
      significant adverse changes that would indicate the carrying amount of the
      recorded asset might not be recoverable.





***Stock
      Based Compensation***





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 (typically
      stock options) 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”). Prior to 2006, the Company accounted for employee stock options
      using the method of accounting prescribed by Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees, and associated interpretations
      using the intrinsic method. Generally, no expense was recognized related to
      its
      stock options under this method because the stock option’s exercise price was
      set at the stock’s fair market value on the date the option was granted. 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. The total compensation expense related to the stock option plan
      for the three and nine months ended September 30, 2006 was approximately $0.2
      million, and $0.7 million, respectively.





Prior
      to
      January 1, 2006, the Company had a Phantom Stock Appreciation Plan in which
      certain employees had been issued phantom shares which were subject to certain
      vesting provisions. The plan was implemented on July 1, 2003 and issued phantom
      shares were scheduled to vest over four years. Effective July 2005, the Company
      terminated the Phantom Stock Appreciation Plan. The total expense incurred
      and
      recorded in conjunction with the plan termination was $0.5 million in accordance
      with the plan agreement based on an independent third-party valuation. Payouts
      required under the plan were made on December 31, 2005 with a portion of the
      proceeds from the first private offering described in Note 4.





***Recent
      Pronouncements***




In
      July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
      Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
      clarifies the accounting for uncertainty in income taxes by prescribing the
      recognition threshold a tax position is required to meet before being recognized
      in the financial statements. It also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure, and transition. FIN 48 is effective for fiscal years beginning
      after December 15, 2006 and is required to be adopted by the Company in the
      first quarter of fiscal 2007. The cumulative effects, if any, of applying FIN
      48
      will be recorded as an adjustment to retained earnings as of the beginning
      of
      the period of adoption. The Company is currently evaluating the effect that
      the
      adoption of FIN 48 will have on its consolidated results of operations and
      financial condition and is not yet in a position to determine such
      effects.








8













**3.**  **Net
      Loss Per Share (“EPS”)**





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. Considering the retroactive impact of
      the
      share exchange (at a ratio of 2,320 to 1 as described in Note 4), no common
      stock equivalents were outstanding until December 29, 2005.





**September
                30, 2006**Shares
                  subject to stock warrants
              
              
              3,813,336Shares
                  subject to stock options
              
              
              1,863,7005,677,036





**4.**  **Merger
      and Private Offerings**





On
      December 29, 2005 (the “Closing Date”), Cape Coastal Trading Corporation (or
“Cape Coastal”), uBid Acquisition Co., Inc. (“Acquisition Sub”) and uBid, Inc.
      entered into a Merger Agreement and Plan of Reorganization (the “Merger
      Agreement”). Under the Merger Agreement, Acquisition Sub merged with and into
      uBid, Inc., with uBid, Inc. remaining as the surviving corporation and a 100%
      owned subsidiary of Cape Coastal Trading Corporation. Just prior to the
      Closing Date, all outstanding convertible preferred shares and warrants to
      acquire shares of uBid, Inc. before the merger were converted and exercised
      such
      that, just prior to the merger, 3,793 shares of common stock were outstanding
      which were exchanged on a 2,320 to 1 basis on the closing date
      into 8,800,000 shares of common stock of Cape Coastal, with up to 444,444
      shares of such common stock subject to redemption at a redemption price of
      $4.50
      (the Financial Statements reflect the impact of the merger and the resulting
      exchange of the Company’s common stock outstanding before the conversion and
      exercise of the convertible preferred stock and warrants). The stockholders
      of
      Cape Coastal before the merger retained 599,331 shares of common stock of Cape
      Coastal after the merger. Before the merger, Cape Coastal was a public shell
      company.  Concurrent with the merger, the Company amended its
      Certificate of Incorporation to change its name from Cape Coastal Trading
      Corporation to “uBid.com Holdings, Inc.”





The
      merger was treated as a recapitalization of uBid, Inc. for financial accounting
      purposes. Accordingly, the historical financial statements of Cape Coastal
      before the merger were replaced with the historical financial statements of
      uBid, Inc. before the merger. All share and per share data has been
      retroactively restated to reflect the implicit conversion ratio related to
      the
      exchange of shares in the merger.





Concurrent
      with the merger, the Company completed the first part of a private offering
      to accredited investors. The Company sold 10,000,003 shares of 
its common stock (of which 2,222,224 shares were subject to redemption) and
      warrants to purchase 2,500,003 shares of its common stock at $5.85 for a period
      of 5 years (the shares and warrants are collectively referred to as “Units”),
      for aggregate consideration of approximately $45.0 million. These warrants
      were valued at $2.08 per warrant for an aggregate of $5.2
      million using a Black-Scholes option-pricing model using a 5 year
      expected life, a risk free interest rate of 5.0%, no expected dividends and
      a
      68.0% volatility. Some of the investors participating in the first part of
      the
      private offering held notes that were issued by uBid before the merger,
      including $10.5 million of debt held by the Petters Group, a holder greater
      than
      5% of our voting common stock, (“Petters Group”) and $5.0 million of debt held
      by the bridge loan holders. Rather than accepting cash consideration for the
      Units acquired by these investors, the Company agreed to issue Units at a
      rate of one Unit for each $4.50 of debt for consideration of the note holders’
cancellation of the existing notes. Therefore, the consideration the
      Company received on the Closing Date consisted of approximately $29.5 million
      in
      cash and $15.5 million in cancelled debt. In addition, on the Closing
      Date, the Company issued warrants to purchase 333,333 shares of our common
      stock to the bridge note holders as a financing fee, which warrants are
      exercisable for three years at an exercise price of $4.50 and the value of
      which, $0.6 million, was recorded as interest expense. The Company also issued
      warrants to purchase 230,000 shares of its common stock to its
      placement agents in the offering, which warrants are exercisable for five years
      at an exercise price of $4.50 and the value of which, $0.5 million, was recorded
      as a cost of the equity issuance. These warrants were valued at $1.80 and $2.27
      respectively per warrant for an aggregate of $1.1 million using a
      Black-Scholes option-pricing model using the warrants respective life, a risk
      free interest rate of 5.0%, no expected dividends and a 68.0% volatility.
      Issuance costs, including the value of the warrants, were $4.7
      million.





9


On
      February 3, 2006, the Company completed the second part of the
      private offering of Units to accredited investors. In this offering, the
      Company sold 3,000,000 shares of its common stock and warrants to
      purchase 750,002 shares of its common stock on the same terms as
      described above for an aggregate of $13.5 million. The Company also
      redeemed the 2,666,668 shares of common stock issued in connection with the
      merger and the first private offering that were subject to
      redemption at a price of $4.50 per share and issued 600,667 shares of common
      stock (valued at $4.50 per share) to shareholders of Cape Coastal prior to
      the
      merger and uBid’s financial advisor, Calico Capital Group. In addition, the
      Company issued additional warrants to purchase 90,000 shares of its
      common stock to its placement agents on the same terms as described above.
      The second part of the private offering resulted in no net cash proceeds being
      retained by the Company. Issuance costs, including the value of the warrants
      and
      the shares issued to Calico Capital Group, were $3.2
      million.




The
      Company’s registration statement on Form S-1 originally filed on February 28,
      2006 was declared effective by the Securities and Exchange Commission on July
      21, 2006. The Registration Statement includes 20,210,109 shares of common stock
      which are held by existing shareholders of the Company. The Company currently
      has 20,333,333 shares of common stock outstanding. The registration statement
      also includes 3,903,338 shares of common stock issuable upon exercise of
      warrants held by investors of the Company. The Company's shares will continue
      to
      trade under the symbol UBHI on the NASD OTC Bulletin Board.








**5.**  **2005
      Equity Incentive Plan**





The
      2005
      Equity Incentive Plan (the “Plan”) is an equity-based compensation plan to
      provide incentives to, 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 Company’s Board of Directors to provide
      equity-based incentives through grants or awards of stock options and restricted
      stock awards (collectively, "Incentive Awards") to consultants, directors,
      and
      other third party service providers.





A
      total
      of 2,500,000 shares of common stock have been reserved for issuance under the
      Plan. If an incentive award granted pursuant to the Plan expires, terminates,
      or
      is forfeited, or if any shares are surrendered to uBid in connection with an
      incentive award, the shares subject to such award and the surrendered shares
      will become available for future awards under the Plan. On December 29, 2005,
      uBid granted options under the Plan to purchase 1,721,700 shares of common
      stock
      to certain officers and other employees.





All
      of
      the options issued on December 29, 2005 under the Plan vest over a four year
      period and will expire on December 29, 2015 if not exercised prior to that
      date.
      None of the options granted under the Plan on December 29, 2005 were issued
      for
      cash consideration collected from the participants. The options were granted
      to
      participants on the basis of services to be provided to the Company by the
      participants. Prior to December 29, 2005, there were no outstanding stock
      options.





The
      fair
      value of the 413,500 options awarded during the nine months ended September
      30,
      2006 was estimated using the Black-Sholes option pricing model with the
      following assumptions:




**Nine
                  Months****Ended****September
                  30, 2006**Significant
                  assumptions (weighted average):Risk
                  -free rate
              
              
              5.0
              %Dividend
                  yield
              
              
              0.0
              %Expected
                  volatility
              
              
              68.0
              %Expected
                  life (years)
              
              
              4





The
      risk-free interest rate is based on the U.S. Treasury Bill rates at the time
      of
      grant. The dividend reflects the fact that the Company has never paid a dividend
      on its common stock and does not expect to in the future. The Company estimated
      the volatility of its common stock at the date of grant based on the historical
      volatility of its industry and competitors’ stock. The expected term of the
      options is based on what the Company believes will be representative of future
      behavior.








10





The
      following is a summary of all of the Company’s stock option activity and related
      information for the nine months ended September 30, 2006:





**Shares
                under****option**
            
            **Weighted-  average exercise
                    price per share**December
                31, 2005
            
            
            1,721,700
            
            $
            4.50Granted
            
            
            413,500
            
            
            6.35Exercised
            
            
            -
            
            
            -Surrendered
            
            
            (271,500
            )
            
            4.69September
                30, 2006
            
            
            1,863,700
            
            $
            4.88




**Exercise
                  Price**
              
              
              **Number
                  of Options Outstanding at September 30, 2006**
              
              
              **Weighted
                  Average Remaining Contractual Life**
              
              
              **Weighted
                  Average Exercise Price**
              
              
              **Number
                  of Options Exercisable at September 30, 2006**
              
              
              **Weighted
                  Average Exercise Price**$4.50
              
              
              1,476,200
              
              
              9.1
              
              $
              4.50
              
              
              -
              
              $
              -$7.10
              
              
              1,600
              
              
              9.2
              
              $
              7.10
              
              
              -
              
              $
              -$6.50
              
              
              300
              
              
              9.3
              
              $
              6.50
              
              
              -
              
              $
              -$6.75
              
              
              70,000
              
              
              9.4
              
              $
              6.75
              
              
              -
              
              $
              -$6.25
              
              
              400
              
              
              9.5
              
              $
              6.25
              
              
              -
              
              $
              -$6.50
              
              
              1,000
              
              
              9.7
              
              $
              6.50
              
              
              -
              
              $
              -$6.49
              
              
              263,200
              
              
              9.8
              
              $
              6.49
              
              
              -
              
              $
              -$4.99
              
              
              50,000
              
              
              9.9
              
              $
              4.99
              
              
              -
              
              $
              -$3.65
              
              
              1,000
              
              
              10.0
              
              $
              3.65
              
              
              -
              
              $
              -1,863,700
              
              
              
              
              $
              4.88
              
              
              -
              
              $
              -





The
      aggregate intrinsic value of the outstanding options (the difference between
      the
      closing stock price on the last trading day of the third quarter of 2006 of
      $3.65 per share and the exercise price, multiplied by the number of in the
      money
      options) that would have been received by the option holders had all the option
      holders exercised their options on September 30, 2006 was zero. This amount
      will
      change based on changes in the fair market value of the Company’s common
      stock.








11





The
      following is a summary of non-vested stock option activity:







Shares
                  under option
              
              **Weighted-averageGrant DateFair
                  Value**December
                  31, 2005
              
              
              1,721,700
              
              $
              2.08Granted
              
              
              413,500
              
              
              3.51Exercised
              
              
              -
              
              
              -Surrendered
              
              
              (271,500
              )
              
              2.99September
                  30, 2006
              
              
              1,863,700
              
              $
              2.37





As
      of
      September 30, 2006, $4.2 million of total unrecognized compensation cost related
      to stock options is expected to be recognized over a weighted-average vesting
      period of 3.25 years.







**6.**  **Note
      Payable –
      Bank**





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 provides for advances to the Company of up to a maximum of
      $25.0 million. The amount actually available to the Company will vary 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 are secured by all of the
      Company assets. The initial term of the Agreement is three years, expiring
      on April 28, 2009. Up to $7.0 million of the maximum amount is available for
      irrevocable, standby and documentary letters of credit. Advances under the
      Credit Agreement bear interest at a base rate (Wells Fargo Bank's prime rate)
      or
      LIBOR plus 2.5%. The Credit Agreement requires a prepayment fee of $0.5 million
      if the Company terminates the Credit Agreement during its first year, $0.4
      million if it terminates the Credit Agreement during its second year and $0.1
      million if the Company terminates the Credit Agreement during the third year.
      The Credit Agreement requires the Company, among other things, to limit capital
      expenditures and maintain minimum availability on the line. Also, the Company
      is
      obligated contractually by a restrictive lock box arrangement. The Credit
      Agreement also requires the Company to pay a variety of other fees and expenses,
      including minimum monthly interest of $0.01 million. The Company as of September
      30, 2006 had $0.2 million in deferred financing fees being amortized over the
      life of the Credit Agreement. As of September 30, 2006, the effective loan
      rate
      was 8.25% and the Company had no outstanding balance and was in compliance
      with
      all the loan covenants.





**7** . **Purchase
      of Bidville Assets**





On
      July
      26, 2006, the Company purchased certain assets for cash of the online auction
      company, Bidville, Inc. which included the company’s customer file, URL and
      related online technologies. Bidville, Inc., a Nevada corporation, was founded
      in 1999 primarily as a sport card auction site but began expanding its
      merchandise offerings over the last few years to compete as an online auction
      alternative to eBay. Bidville provides unique user features, such as
      storefronts, watch list, image gallery, and fixed price marketplaces. The
      purchase price was $746,000.




The
      acquired assets were recorded as intangible assets. Purchased intangibles
      consisting of the customer file, the URL, and related online technologies are
      presented net of accumulated amortization of $31,000 as of September 30, 2006
      and are being amortized on a straight-line basis over the remaining estimated
      useful lives twenty-four months.








12





**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 condensed consolidated
      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 as
      amended for the fiscal year ended December 31, 2005. uBid.com Holdings, Inc.
      is
      a holding company for uBid, Inc., and DiBu Trading Corp., Inc. our operating
      businesses. For purposes of this Quarterly Report, unless otherwise indicated
      or
      the context otherwise requires, all references herein to “uBid,” “we,” “us,” and
“our” refer to uBid.com Holdings, Inc. and our subsidiary.





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 the risk factors
      detailed in our filings with the SEC, including our Annual Report on Form 10-K
      for the year ended December 31, 2005. 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 an online marketplace located at www.ubid.com, offering new, close-out,
      overstock and refurbished 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 eliminate
      the potential for fraud by certifying all merchants and processing 100% of
      all
      transactions between buyers and sellers. Our marketplace offers 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
      business model provides value for consumers, manufacturers, distributors,
      retailers and other approved third party merchants. Consumers shop in a
      trustworthy and secure online marketplace and have the opportunity to bid their
      own prices on popular, brand-name products realizing product savings of
      generally 20% to 80% off retail prices. Our online marketplace 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 consists of two distinct business channels: uBid Direct and
      the
      UCM Program.




We
      purchase merchandise outright in the uBid Direct 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.




We
      also
      sell merchandise through the UCM 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 UCM 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.




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 marketplace is available 24 hours a day, seven days a week and currently
      offers 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.








13





**Executive
      Commentary**




***Success
      Measures*** :
      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:





***Gross
      Merchandise Sales (GMS)***


Gross
      Merchandise Sales differ from GAAP revenue in that gross bookings represents
      the
      gross sales price of goods sold by the Company (including sales through our
      UCM
      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***


A
      Visitor
      is a consumer or business that voluntarily clicks through to the website
      (uBid.com) using both online and offline advertising stimulus. Visitors don’t
      include third party site pops, pop unders, or non converting impressions to
      the
      website. Examples of online marketing channels we advertise on are: affiliate
      banner networks, comparison shopping sites, paid and organic search engines,
      and
      email.





***Bidders***


A
      Bidder
      is a visitor that places a bid on an item up for auction on the website
      (uBid.com).





***Visitors
      to Bidder Conversion***


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




***Approved
      UCM Program Vendors***


Vendors
      that have gone through the approval process to sell merchandise through our
      website.





***Cost
      per Bidder***


Cost
      of
      each bidder during the month computed by dividing the sales and marketing
      expense by number of bidders.





***Cost
      per Registration***


Cost
      of
      each registration obtained during the month computed by dividing the sales
      and
      marketing expense by number of registrations.








14
 
   **Q4**
                
                **Q1**
                
                **Q2**
                
                **Q3**
                
                **Q4**
                
                **Q1**
                
                **Q2**
                
                **Q3****2004**
                
                **2005**
                
                **2005**
                
                **2005**
                
                **2005**
                
                **2006**
                
                **2006**
                
                **2006****Key
                    Business Metrics:****(Unaudited)**GMS
                    (in thousands)
                
                $
                28,059
                
                $
                34,623
                
                $
                28,020
                
                $
                27,215
                
                $
                31,035
                
                $
                31,167
                
                $
                30,286
                
                $
                26,528Number
                    of orders (in thousands):Direct
                
                
                41
                
                
                46
                
                
                39
                
                
                36
                
                
                43
                
                
                36
                
                
                37
                
                
                23UCM
                
                
                50
                
                
                51
                
                
                64
                
                
                72
                
                
                93
                
                
                87
                
                
                88
                
                
                89Total
                    orders
                
                
                91
                
                
                97
                
                
                103
                
                
                108
                
                
                136
                
                
                123
                
                
                125
                
                
                112Average
                    Order Value:Direct
                
                $
                511
                
                $
                443
                
                $
                493
                
                $
                495
                
                $
                398
                
                $
                465
                
                $
                416
                
                $
                424UCM
                
                $
                104
                
                $
                119
                
                $
                106
                
                $
                112
                
                $
                108
                
                $
                107
                
                $
                110
                
                $
                128Visitors
                    (in thousands)
                
                
                7,245
                
                
                6,829
                
                
                7,545
                
                
                8,287
                
                
                7,051
                
                
                6,369
                
                
                7,215
                
                
                6,488Bidders
                    (in thousands)
                
                
                239
                
                
                243
                
                
                251
                
                
                222
                
                
                267
                
                
                241
                
                
                255
                
                
                211Visitors
                    to Bidder Conversion
                
                
                3.3
                %
                
                3.6
                %
                
                3.3
                %
                
                2.7
                %
                
                3.8
                %
                
                3.8
                %
                
                3.5
                %
                
                3.3
                %Approved
                    UCM Vendors
                
                
                70
                
                
                169
                
                
                202
                
                
                401
                
                
                628
                
                
                949
                
                
                1,307
                
                
                1,716Cost
                    Per Bidder
                
                $
                6.38
                
                $
                5.29
                
                $
                4.50
                
                $
                5.61
                
                $
                5.02
                
                $
                6.32
                
                $
                5.03
                
                $
                4.63Cost
                    Per Registration
                
                $
                28.79
                
                $
                20.05
                
                $
                22.10
                
                $
                21.14
                
                $
                23.91
                
                $
                27.73
                
                $
                24.69
                
                $
                17.76Registrations
                    (in thousands)
                
                
                53
                
                
                64
                
                
                51
                
                
                59
                
                
                56
                
                
                55
                
                
                52
                
                
                55











***Revenue
      Source*** :
 
      We derive 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 website and direct business to business
      sales. We further generate revenue from shipping fees we charge our customers.
      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 provided by Sony Electronics,
      Inc (“Sony”) and Hewlett-Packard Company (“HP”). Sony related products
      represented 22.6% and 20.7% of sales for the three and nine months ended
      September 30, 2006, respectively, compared to 44.8% and 40.2% for the three
      and
      nine months ended September 30, 2005, respectively. HP related products
      represented 7.8% and 2.4% of sales for the three and nine months ended September
      30, 2006, respectively, compared to 7.9% and 3.8% for the three and nine months
      ended September 30, 2005, respectively. No other supplier represented more
      than
      5.0% of our net revenues for any period presented.





***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
      percentages are not comparable to gross profit and gross profit percentages
      reported by companies that include order fulfillment costs in the cost of
      revenues.








15











***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. Interest expense
      charges are from our IBM flooring facility at a rate of 1% per month on the
      outstanding balances, interest and amortization of loan origination fees on
      our
      credit facility, and related party interest on borrowings from 2005. Interest
      expense on advances from related parties is primarily based on an annual
      interest rate of 14% and all borrowings were paid off on December, 29,
      2005.





**Results
      of Operations**





The
      following table sets forth, for the periods presented, certain data from our
      statement of operations as a percentage of net revenues. This information should
      be read in conjunction with our financial statements and notes thereto included
      elsewhere in this report.




**Three
                  months ended September 30,**
              
              **Nine
                  months ended September 30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****(Dollars
                  in
                  thousands)**
              
              **(Dollars
                  in
                  thousands)**Net
                  Revenues
              
              $
              14,366
              
              
              100.0
              %
              $
              18,594
              
              
              100.0
              %
              $
              53,551
              
              
              100.0
              %
              $
              65,297
              
              
              100.0
              %Cost
                  of Revenue
              
              
              12,425
              
              
              86.5
              %
              
              15,497
              
              
              83.3
              %
              
              46,583
              
              
              87.0
              %
              
              56,756
              
              
              86.9
              %Gross
                  margin
              
              
              1,941
              
              
              13.5
              %
              
              3,097
              
              
              16.7
              %
              
              6,968
              
              
              13.0
              %
              
              8,541
              
              
              13.1
              %General
                  and administrative
              
              
              3,454
              
              
              24.0
              %
              
              3,111
              
              
              16.7
              %
              
              10,439
              
              
              19.5
              %
              
              9,859
              
              
              15.1
              %Sales
                  and marketing
              
              
              1,160
              
              
              8.1
              
              
              1,247
              
              
              6.7
              %
              
              4,122
              
              
              7.7
              
              
              3,657
              
              
              5.6
              %Total
                  operating expenses
              
              
              4,614
              
              
              32.1
              %
              
              4,358
              
              
              23.4
              %
              
              14,561
              
              
              27.2
              %
              
              13,516
              
              
              20.7
              %Loss
                  from operations
              
              
              (2,673
              )
              
              (18.6
              )
              
              (1,261
              )
              
              (6.8
              )%
              
              (7,593
              )
              
              (14.2
              )
              
              (4,975
              )
              
              (7.6
              )%Interest
                  Income / (Expense) & Other, Net
              
              
              12
              
              
              0.1
              %
              
              (572
              )
              
              (3.1
              )%
              
              208
              
              
              0.4
              %
              
              (1,497
              )
              
              (2.3
              )%Net
                  Loss
              
              
              (2,661
              )
              
              (18.5
              )%
              
              (1,833
              )
              
              (9.9
              )%
              
              (7,385
              )
              
              (13.8
              )%
              
              (6,472
              )
              
              (9.9
              )%Preferred
                  Stock Dividend
              
              
              —
              
              
              —
              
              
              (15
              )
              
              —
              
              
              —
              
              
              —
              
              
              (45
              )
              
              —Net
                  Loss Available to Common Shareholders
              
              $
              (2,661
              )
              
              (18.5
              )%
              $
              (1,848
              )
              
              (9.9
              )%
              $
              (7,385
              )
              
              (13.8
              )%
              $
              (6,517
              )
              
              (9.9
              )%


16





**Comparison
      of Three Months ended September 30, 2006 and September 30,
      2005**





***Net
      Revenues:*** Net
      revenues for the quarter ended September 30, 2006 were $14.4 million, a decrease
      of $4.2 million, or 22.5% compared to the quarter ended September 30, 2005.
      Direct consumer revenues decreased $7.3 million or 43.3% while direct business
      revenues increased $2.8 million or 333.0% and UCM revenues increased $0.3
      million or 32.0% over the quarter ended September 30, 2005.





The
      net
      decrease in direct consumer revenues was primarily driven by decreases in both
      volume levels and average selling prices. Desktop computer volume experienced
      a
      41.6% decrease in units sold and a 20.0% decrease in average sales price
      compared to the same period in the prior year. Computer monitor volume decreased
      78.5% and the average sales price decreased 14.0% compared to the same period
      of
      the prior year. Portable computer volume decreased 10.7% while the average
      sales
      price experienced a 25.0% decrease. New gross margin initiatives were
      implemented in the third quarter which decreased the lower margin revenue sales
      through the site impacting total sales. The volume decreases in the desktop,
      monitor, and portable computer categories were partially offset by increased
      sales in the jewelry product category. The increase in the direct business
      channel is attributable to the expansion of the channel by hiring personnel
      specializing in these types of transactions in addition to the direct sale
      to
      businesses of inventory that had been purchased for sale through the direct
      consumer channel. The total number of approved UCM vendors to sell on the
      website grew from 401 in September 2005 to 1,716, or 327.9%, in September
      2006.  We
      will
      continue to drive UCM revenue growth by increasing the participation of
      merchants in our UCM Program.





Total
      orders increased by 4,000 or 8.9% to 112,000 for the three months ended
      September 30, 2006 compared to the quarter ended September 30, 2005. The direct
      consumer orders decreased by 13,000 or 36.1% and UCM orders increased by 17,000
      or 23.6%. Although bidders to visitors improved from 2.7% to 3.3%, overall
      bidders decreased by 11,000 or 5.0% from the third quarter in the prior year.
      The average order value for the direct and UCM channels were $424 and $128
      versus $495 and $112 from a year ago, respectively.




***Gross
      Profit:***  Gross
      profit for quarter ended September 30, 2006 was $1.9 million, a decrease of
      $1.2 million or 38.7% compared to the quarter ended September 30, 2005.
      Gross profit was impacted by a $0.8 million increase in the Company’s inventory
      reserves. A substantial investment was made in certain categories of inventories
      in the first quarter of 2006 in anticipation of increased visitors to the
      website. The anticipated increase in visitors failed to materialize with
      visitors decreasing 10.1% from the second quarter ended June 30, 2006. Also,
      many visitors did not convert to bidders which resulted in a decline in the
      number of orders. Generally, our overall gross margins fluctuate based on
      several factors, including our product mix of sales; sales volumes mix by our
      direct consumer business, direct business to business and UCM merchants; vendor
      pricing; customer pricing and inventory management decisions. The decrease
      was
      primarily a result of the direct consumer margins decreasing in the computer
      related categories. Sales of desktops, monitors and laptops continue to decline
      in average price which results in a corresponding decrease in gross margins.
      The
      lower gross margins experienced by the direct business are primarily the result
      of lowering prices to our customers in an effort to accelerate the reduction
      in
      inventory levels.





The
      decrease in the direct consumer business gross profit and the increase in
      inventory reserves, were offset by an increase in UCM gross profits. The UCM
      gross profit grew from $0.9 million to $1.1 million, or 4.6%. Gross profit
      as a
      percentage of net revenues increased to 19.1% from 16.9%, before the impact
      of
      inventory reserves, from the same period a year ago. The overall gross margin
      as
      a percentage of net revenues decreased to 13.5% from 16.7% in the same period
      a
      year ago.








17





***Sales
      and Marketing, General and Administrative Expenses:*** SG&A
      expenses for the quarter ended September 30, 2006 were $4.6 million, an increase
      of $0.2 million or 4.5%, compared to the quarter ended September 30, 2005.
      Overall, advertising expense was unchanged from the same period in the prior
      year, however during the third quarter the Company launched a $0.2 million
      Direct Response Television (DRTV) test campaign to grow brand awareness and
      website traffic. Although the number of visitors to the website decreased for
      the quarter, visitor traffic and registrations increased an average of 25.0%
      during the test period. The number of visitors was down 1.8 million or 21.7%
      from the same period in the prior year period, and was down 0.7 million or
      10.1%
      from the previous quarter. We continued to eliminate the least effective
      marketing efforts to optimize profitable online campaigns, television and print
      campaigns for the third quarter of 2006. The cost per bidder improved to $4.63
      from $5.03 in the previous quarter. The cost per registration improved to $17.76
      from $24.69 in the previous quarter.





General
      & Administrative expenses increased by $0.2 million or 5.9% from the quarter
      ended September 30, 2005. The increase for the quarter ended September 30,
      2006
      was primarily due to increases of $0.2 million in stock based compensation
      expense and $0.2 million increase in severance pay as a result of eliminating
      certain positions in the third quarter 2006. The increases were offset by
      decreases of $0.1 million in Related Party Management Fees, which were
      discontinued in January 2006, in the third quarter 2006 $0.1 million in credit
      card fees related to lower sales volumes.





**SG&A
                Expenses:**
              
              **Three
                  MonthPeriod EndedSeptember 30, 2006**
              ****
              **Three
                  Month Period Eneded September 30, 2005**
              ****
              **Increase(Decrease)****(Dollars
                  in thousands)**Stock-based
                  Compensation
              
              $
              0.2
              
              $
              -
              
              $
              0.2Salary
                  and Benefits
              
              
              1.7
              
              
              1.6
              
              
              0.1Severance
              
              
              0.2
              
              
              -
              
              
              0.2Depreciation
                  & Amortization
              
              
              0.1
              
              
              0.1
              
              
              -Advertising
                  Expense
              
              
              1.0
              
              
              1.0
              
              
              -Credit
                  Card Fees
              
              
              0.5
              
              
              0.6
              
              
              (0.1
              )Telecommunications,
                  Hardware and Storage
              
              
              0.3
              
              
              0.4
              
              
              (0.1
              )Legal,
                  Audit, Insurance, and other Regulatory Fees
              
              
              0.2
              
              
              0.1
              
              
              0.1Facilities
                  Expense
              
              
              0.2
              
              
              0.2
              
              
              -Related
                  Party Management Fees
              
              
              -
              
              
              0.1
              
              
              (0.1
              )Warehouse
                  Expense
              
              
              0.2
              
              
              0.2
              
              
              -Other
                  SG&A
              
              
              -
              
              
              0.1
              
              
              (0.1
              )$
              4.6
              
              $
              4.4
              
              $
              0.2








***Other
      Expense:*** Interest
      income was $0.01 million for the quarter ended September 30, 2006 versus
      interest expense of $0.6 million for the quarter ended September 30, 2005.
      The
      Company retired all debt after receiving the capital raised on December 29,
      2005.





***Net
      Losses:*** The
      Company experienced a net loss of $2.7 million or $.13 per share for the quarter
      ended September 30, 2006 compared to a net loss of $1.8 million or $.74 per
      share for the quarter ended September 30, 2005.




**Comparison
      of Nine Months ended September 30, 2006 and September 30,
      2005**





***Net
      Revenues:*** Net
      revenues for nine months ended September 30, 2006 were $53.6 million, a decrease
      of $11.7 million or 17.9%. Direct consumer revenues decreased $14.9 million
      or
      26.6%, direct business revenues increased $2.3 million and UCM revenues
      increased $0.9 million or 32.8% over the same nine month period a year ago.
      Desktop computer sales volumes decreased 54.5% and average sales prices
      decreased 15.3%. Monitor sales volumes were down 39.1% and Portable computer
      volumes were flat. Average sales prices of monitors and portable computers
      were
      down 15.5% and 17.3% respectively.




Total
      orders increased by 52,000 or 16.9% from 308,000 to 360,000 for the nine months
      ended September 30, 2006. The direct consumer orders decreased 25,000 or 20.7%
      and UCM orders increased 77,000 or 41.2%. Traffic to the website was 20.1
      million visitors for the nine months ended 2006 versus 22.7 million visitors
      for
      the same period in 2005. The average order value for the direct and UCM channels
      were $435 and $110 versus $478 and $112 from a year ago,
      respectively.








18





***Gross
      Profit:*** Gross
      profit for the nine months ended September 30, 2006 was $7.0 million, compared
      to $8.5 million for the same period a year ago. The direct consumer business
      decreased $2.8 million due to an increase in inventory reserves of $1.1 million
      and decreases in the average sales prices in the desktops, monitors and laptop
      computer categories. The decrease was offset by a $0.9 million increase in
      gross
      profit in the UCM category.





***Sales
      and Marketing, General and Administrative Expenses:*** SG&A
      expenses for the nine months ended September 30, 2006 were $14.6 million, an
      increase of $1.1 million, or 8.1%, compared to nine months ended September
      30,
      2005. Advertising expenses increased $0.5 million, or 16.1%, for the nine months
      ended September 30, 2006 primarily due to our attempt to increase internet
      visitors to the website. In addition, the Company launched a $0.2 million Direct
      Response television (DRTV) test campaign in the third quarter trying to grow
      brand awareness and website traffic to the webpage. Visitors to the website
      were
      20.1 million for the nine months ended 2006 versus 22.7 million for the same
      period in 2005.





General
      & Administrative expenses increased by $0.6 million, or 5.8%, from the nine
      months ended September 30, 2005. The increase for the nine months ended
      September 30, 2006 was due to an increase of $0.4 million in legal, accounting,
      and increased director and officer insurance expenses required for being a
      public company, $0.2 million in stock-based compensation, $0.2 million in
      severance compensation as a result of eliminating certain positions, and $0.2
      million in depreciation and amortization. The increases were offset by decreases
      of $0.3 million in related party management fees, $0.2 million in
      telecommunications and hardware due to expiring operating leases and reduction
      in hosting related fees and $0.2 million in other G&A.




**SG&A
                    Expenses:**
              
              **Nine
                      MonthPeriod EndedSeptember 30,
                      2006**
              
              **Nine
                      Month****Period Ended****September 30,
                      2005**
              
              **Increase(Decrease)****(Dollars
                  in thousands)**
              
              **(Dollars
                  in thousands)**Stock-based
                  Compensation
              
              $
              0.7
              
              $
              0.5
              
              $
              0.2Salary
                  and Benefits
              
              
              4.8
              
              
              4.7
              
              
              0.1Severance
              
              
              0.2
              
              
              -
              
              
              0.2Warehouse
                  Expense
              
              
              0.7
              
              
              0.6
              
              
              0.1Depreciation
                  & Amortization
              
              
              0.3
              
              
              0.1
              
              
              0.2Advertising
                  Expense
              
              
              3.6
              
              
              3.1
              
              
              0.5Credit
                  Card Fees
              
              
              1.8
              
              
              1.8
              
              
              0.0Telecommunications,
                  Hardware and Storage
              
              
              1.0
              
              
              1.2
              
              
              (0.2
              )Legal,
                  Audit, Insurance, and other Regulatory Fees
              
              
              0.8
              
              
              0.4
              
              
              0.4Facilities
                  Expense
              
              
              0.6
              
              
              0.5
              
              
              0.1Related
                  Party Management Fees
              
              
              -
              
              
              0.3
              
              
              (0.3
              )Other
                  G&A
              
              
              0.1
              
              
              0.3
              
              
              (0.2
              )$
              14.6
              
              $
              13.5
              
              $
              1.1








***Other
      Expense:*** Interest
      income was $0.2 million for the nine months ended September 30, 2006 versus
      interest expense of $1.5 million for the nine months ended September 30, 2005.
      The Company retired all debt after receiving the capital raised on December
      29,
      2005 resulting in a reduction of interest expense and an increase in interest
      income for the nine month period ended September 30, 2006.





***Net
      Losses:*** The
      Company experienced a net loss of $7.4 million or $0.37 per share for the nine
      months ended September 30, 2006 compared to a net loss of $6.5 million or $2.62
      per share for the same period ended September 30, 2005.


19





***Liquidity
      and Capital Resources***





Historically,
      our primary sources of capital had been cash flow from operations and loans
      from
      affiliated parties. More recently, our primary source of cash flow has been
      from
      operations and the $29.5 million raise in the December 29, 2005 private
      offering.





Net
      cash
      used in operating activities for nine months ended September 30, 2006 was $12.7
      million, compared to $6.1 million used in the nine months ended September 30,
      2005. Inventory increased $0.9 million or 14.5% from December 31, 2005. The
      increase in inventories was intended to reverse the decline in the direct
      consumer channel sales, but as mentioned above, the declines in sales of
      computer related products stunted the growth and contributed to increased mark
      downs of inventory in these categories in 2006. Accounts receivable increased
      $0.5 million due to the growth of the direct business to business channel and
      the nature of payment terms associated with this type of business. Additionally,
      accounts payable and accrued expenses decreased $6.2 million due to the timing
      of payments in 2006.




Net
      cash
      provided by investing activities was $5.5 million for nine months
      ended September 30, 2006 compared to $0.1 million used in the same period last
      year. Restricted investments used primarily as collateral on irrevocable letters
      of credit decreased during the quarter as we used our credit facility which
      provides for up to $7.0 million in letters of credit alleviating the need for
      restricted investments. On July 26, 2006, the Company purchased certain assets
      for $0.7 million of the online auction company, Bidville, Inc. which includes
      the company’s customer file, brand name, URL and related online
      technologies.





Net
      cash
      used in financing activities was $1.6 million for the nine months ended
      September 30, 2006 compared to a cash inflow of $5.0 million for the same period
      last year. The cash outflow in 2006 was primarily made up of payments on the
      IBM
      flooring facility of $1.3 million. The cash inflow of $5.0 million for the
      nine
      months ended September 30, 2005 was from related party borrowings to fund
      operating losses and working capital needs.





On
      February 3, 2006, the Company completed the second part of the
      private offering of its Units to accredited investors. In this
      offering, the Company sold 3,000,000 shares of its common stock
      and warrants to purchase 750,002 shares of its common stock on the
      same terms as described in Note 4 for an aggregate of $13.5
      million. The Company also redeemed the 2,666,668 shares of common
      stock issued in connection with the merger and the first private
      offering that were subject to redemption at a price of $4.50 per share and
      issued 600,667 shares of common stock (valued at $4.50 per share) to
      shareholders of Cape Coastal prior to the merger and uBid’s financial advisor,
      Calico Capital Group. In addition, the Company issued additional
      warrants to purchase 90,000 shares of its common stock to its
      placement agents on the same terms as described in Note 4. The second part
      of
      the private offering resulted in no net cash proceeds being retained by the
      Company.





We
      currently estimate that we will incur material commitments for capital
      expenditures equal to $1.0 million for systems upgrades which shall be made
      within the next calendar year.





We
      believe that current working capital, together with cash flows from operations
      and availability under our credit facility will be adequate to support our
      current operating plans for at least the next 12 months.





**ITEM
      3.****QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




We
      currently have little exposure to risks of fluctuating interest rates or
      fluctuating currency exchange rates. It is our policy not to enter into
      derivative financial instruments. Accordingly, we do not believe that changes
      in
      interest or currency rates will have a material effect on our liquidity,
      financial condition or results of operations.





**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 our Chief Executive Officer and Vice
      President, Finance to allow timely decisions regarding required disclosure.
      Our
      compliance committee is comprised of our principal risk management officer
      and
      other members of our management team.





20





Our
      Chief
      Executive Officer and Vice President, Finance, with the participation of the
      compliance committee, evaluated the effectiveness of the design and operation
      of
      our 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 our disclosure controls and procedures,
      our Chief Executive Officer and Vice President, Finance believe that, as of
      the
      end of the period covered by this Quarterly Report, our disclosure controls
      and
      procedures are effective to ensure that information required to be disclosed
      by
      us in the reports we file or submit 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 our internal control over financial reporting identified
      in the evaluation that occurred during the third quarter of fiscal year 2006
      that have materially affected, or are reasonably likely to materially affect,
      our internal control over financial reporting.




**PART
      II OTHER INFORMATION**


**ITEM
      1.**  **LEGAL
      PROCEEDINGS**





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





**ITEM
      1A. RISK FACTORS**





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 our Annual
      Report on Form 10-K as amended for the year ended December 31, 2005, which
      could
      materially affect our business, financial condition or future results. The
      risks
      described in our Annual Report on Form 10-K as amended are not the only risks
      facing the Company. Additional risks and uncertainties not currently known
      to us
      or that are currently deemed to be immaterial also may materially adversely
      affect our business, financial conditions and/or operating results.




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





For
      the
      nine months ended September 30, 2006, options to purchase an aggregate of
      413,500 shares of our common stock were granted to employees. Options to
      purchase an aggregate of 1,600 shares at $7.10 per share were granted on January
      15, 2006, options to purchase an aggregate of 300 shares at $6.50 per share
      were
      granted on February 14, 2006, options to purchase an aggregate of 70,500 shares
      at $6.75 per share were granted on March 15, 2006, options to purchase an
      aggregate of 10,400 shares at $6.25 per share were granted on April 15, 2006,
      options to purchase an aggregate of 10,500 shares at $6.69 per share were
      granted on May 15, 2006, and options to purchase an aggregate of 1,000 shares
      at
      $6.50 per share were granted on June 15, 2006. Options to purchase an aggregate
      of 268,200 shares at $6.49 were granted on July 15, 2006, options to purchase
      an
      aggregate of 50,000 shares a $4.99 were granted on August 15, 2006. Options
      to
      purchase an aggregate 1,000 shares at $3.65 were granted on September 15, 2006.
      The options all have a term of ten years and vest in four annual increments
      beginning on the first anniversary date of 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**




**ITEM
      5. OTHER INFORMATION**





None





21





**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 November 14, 2006.


**UBID.COM
                HOLDINGS, INC.**By:
            /s/
                Miguel A. Martinez, Jr.Name:  Miguel
                A. Martinez, Jr.
              Title:    
                Vice President, Finance
              (Principal
                Financial Officer and Principal Accounting
                Officer)













22