**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, 2008**





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





**Commission
      file Number: 000-50995**


________________




**Enable
      Holdings, Inc.**


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


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





**Delaware**
            **52-2372260***(State
                or Other Jurisdiction of*
            *(IRS
                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, a non-accelerated filer or a smaller reporting company.
      See
      definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
      the Exchange Act. (Check one):


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





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





The
      number of shares outstanding of the registrant’s Common Stock, par value $0.001,
      as of November 4, 2008 was 18,676,190 .





**ENABLE
      HOLDINGS, INC.**


**TABLE
      OF CONTENTS**


**PART
                  I. FINANCIAL INFORMATION**Item
                  1
              Financial
                  StatementsConsolidated
                  Condensed Balance Sheets - September 30, 2008 (unaudited) and December
                  31,
                  2007
              3Consolidated
                  Condensed Statement of Operations – Three and Nine Months Ended September
                  30, 2008 and 2007 (unaudited)
              4Consolidated
                  Condensed Statement of Shareholders Equity – Nine Months Ended September
                  30, 2008 (unaudited)
              5Consolidated
                  Condensed Statements of Cash Flows – Nine Months ended September 30, 2008
                  and 2007 (unaudited)
              6Notes
                  to Consolidated Financial Statements
              7-13Item
                  2
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              14-23Item
                  3
              Quantitative
                  and Qualitative Disclosures About Market Risk
              24Item
                  4
              Controls
                  and Procedures
              24**PART
                  II. OTHER INFORMATION**Item
                  1
              Legal
                  Proceedings
              24Item
                  1A
              Risk
                  Factors
              24Item
                  2
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              25Item
                  3
              Default
                  Upon Senior Securities
              25Item
                  4
              Submission
                  of Matters to a Vote of Security Holders
              25Item
                  5
              Other
                  Information
              25Item
                  6
              Exhibits
                  Index
              25Signatures
              26


2


**PART
      1. FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**ENABLE
                HOLDINGS, INC. and Subsidiaries****Consolidated
                Condensed Balance Sheets****(Dollars
                in Thousands, except per value per
                share)**


**As
                  of**
              
              **As
                  of****September 30, 2008**
              
              **December 31, 2007****(Unaudited)****Assets****Current
                  Assets**Cash
                  and cash equivalents
              
              $
              4,998
              
              $
              7,724Restricted
                  investments
              
              
              212
              
              
              212Accounts
                  receivable, less allowance for doubtful accounts of $750 and $467,
                  respectively
              
              
              614
              
              
              648Merchandise
                  inventories, less reserve for obsolesence of $500 and $409, respectively
              
              
              3,766
              
              
              5,156Prepaid
                  expenses and other current assets
              
              
              982
              
              
              759**Total
                  Current Assets**
              
              
              10,572
              
              
              14,499**Property
                  and Equipment, net**
              
              
              1,643
              
              
              725**Purchased
                  Intangible Assets, net**
              
              
              203
              
              
              107**Total
                  Assets**
              
              $
              12,418
              
              $
              15,331**Liabilities
                  and Shareholders' Equity****Current
                  Liabilities**Due
                  on credit line
              
              $
              4,550
              
              $
              -Accounts
                  payable
              
              
              4,177
              
              
              2,766Accrued
                  expenses:Advertising
              
              
              243
              
              
              205Other
              
              
              1,458
              
              
              1,194Flooring
                  facility
              
              
              285
              
              
              314**Total
                  Current Liabilities**
              
              $
              10,713
              
              $
              4,479**Shareholders'
                  Equity**Common
                  stock, $.001 par value (200,000,000 shares authorized as of September
                  30,
                  2008 and December 31, 2007; 18,676,190 and 18,197,783 shares issued
                  and
                  outstanding, respectively as of September 30, 2008 and December
                  31, 2007)
              
              $
              20
              
              $
              20Treasury
                  stock, 2,135,550 shares of common stock
              
              
              (2,242
              )
              
              (2,242
              )Stock
                  warrants
              
              
              8,274
              
              
              8,086Additional
                  paid-in-capital
              
              
              37,960
              
              
              37,248Accumulated
                  deficit
              
              
              (42,307
              )
              
              (32,260
              )**Total
                  Shareholders' Equity******
              
              $
              1,705
              
              $
              10,852**Total
                  Liabilities and Shareholders' Equity**
              
              $
              12,418
              
              $
              15,331




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


3





**ENABLE
      HOLDINGS, INC. and Subsidiaries**


**Consolidated
      Condensed Statement of Operations**


**(Dollars
      in Thousands, except per share amounts)**


**(Unaudited)**


**Three Months Ended September 30,**
              
              **Nine Months Ended September 30,**2008
              
              2007
              
              2008
              
              2007Net
                  Revenues
              
              $
              8,917
              
              $
              9,720
              
              $
              24,484
              
              $
              32,990Cost
                  of Revenues
              
              
              (8,428
              )
              
              (7,533
              )
              
              (20,809
              )
              
              (25,382
              )**Gross
                  Profit**
              
              
              489
              
              
              2,187
              
              
              3,675
              
              
              7,608**Operating
                  Expenses**General
                  and administrative
              
              
              3,916
              
              
              3,313
              
              
              11,087
              
              
              9,661Sales
                  and marketing
              
              
              1,059
              
              
              1,117
              
              
              2,353
              
              
              3,317**Total
                  operating expenses**
              
              
              4,975
              
              
              4,430
              
              
              13,440
              
              
              12,978**Loss
                  From Operations**
              
              
              (4,486
              )
              
              (2,243
              )
              
              (9,765
              )
              
              (5,370
              )Interest
                  Expense
              
              
              (219
              )
              
              (83
              )
              
              (377
              )
              
              (294
              )Interest
                  Income
              
              
              20
              
              
              133
              
              
              95
              
              
              458Other
                  Income, net
              
              
              -
              
              
              -
              
              
              -
              
              
              60**Net
                  Loss**
              
              $
              (4,685
              )
              $
              (2,193
              )
              $
              (10,047
              )
              $
              (5,146
              )Net
                  Loss per share -Basic and Diluted
              
              $
              (0.25
              )
              $
              (0.12
              )
              $
              (0.55
              )
              $
              (0.27
              )Weighted
                  Average Shares -Basic and Diluted
              
              
              18,638,678
              
              
              18,197,783
              
              
              18,387,426
              
              
              19,089,551




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


4





**ENABLE
      HOLDINGS, INC. and Subsidiaries**


**Consolidated
      Statement of Shareholders’ Equity**


**(Dollars
      in Thousands)**


**(Unaudited)**


**Common
                  Stock**
              
              **Stock**
              
              **Paid-in**
              
              **Treasury
                  Stock**
              
              **Accumulated****Shares**
              
              **Dollars**
              
              **Warrants**
              
              **Capital**
              
              **Shares**
              
              **Dollars**
              
              **Deficit**
              
              **Total**Balance,
                  December 31, 2007
              
              
              18,197,783
              
              $
              20
              
              $
              8,086
              
              $
              37,248
              
              
              2,135,550
              
              $
              (2,242
              )
              $
              (32,260
              )
              $
              10,852Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              
              109
              
              
              -
              
              
              -
              
              
              -
              
              
              109Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,385
              )
              
              (2,385
              )Balance,
                  March 31, 2008
              
              
              18,197,783
              
              $
              20
              
              $
              8,086
              
              $
              37,357
              
              
              2,135,550
              
              $
              (2,242
              )
              $
              (34,645
              )
              $
              8,576Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              
              114
              
              
              -
              
              
              -
              
              
              -
              
              
              114Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              188
              
              
              (156
              )
              
              -
              
              
              -
              
              
              -
              
              
              32Common
                  stock issuance1
              
              
              150,000
              
              
              -
              
              
              -
              
              
              203
              
              
              -
              
              
              -
              
              
              -
              
              
              203Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,977
              )
              
              (2,977
              )Balance,
                  June 30, 2008
              
              
              18,347,783
              
              $
              20
              
              $
              8,274
              
              $
              37,518
              
              
              2,135,550
              
              $
              (2,242
              )
              $
              (37,622
              )
              $
              5,948Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              
              92
              
              
              -
              
              
              -
              
              
              -
              
              
              92Common
                  stock issuance2
              
              
              230,074
              
              
              -
              
              
              -
              
              
              350
              
              
              -
              
              
              -
              
              
              -
              
              
              350Common
                  stock issuance3
              
              
              98,333
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,685
              )
              
              (4,685
              )Balance,
                  September 30, 2008
              
              
              18,676,190
              
              $
              20
              
              $
              8,274
              
              $
              37,960
              
              
              2,135,550
              
              $
              (2,242
              )
              $
              (42,307
              )
              $
              1,705




1150,000 shares of common stock issued for the acquisition of
      www.redtag.com URL at $1.35/share.


2230,074 shares of common stock issued to Fusion Capital Fund II LLC
        at
        $1.52/share.
 398,333 shares of restricted common stock issued in exchange for previously
        issued stock options. 765,000 stock options were converted into a total of
        255,000 shares of restricted common stock, 98,333 of which are vested as
        of
        September 30, 2008. The stock options were cancelled upon issuance of such
        restricted common stock.
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.




5




**ENABLE
      HOLDINGS, INC. and Subsidiaries**


**Consolidated
      Condensed Statement of Cash Flows**


**(Dollars
      in Thousands)**


**(Unaudited)**


**Nine Months Ended September 30,****2008**
              
              **2007****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (10,047
              )
              $
              (5,146
              )Adjustments
                  to reconcile net loss to net cash used in operating activitiesDepreciation
                  and amortization
              
              
              419
              
              
              642Non-cash
                  stock compensation expense
              
              
              315
              
              
              365Warrants
                  issued for services
              
              
              32
              
              
              -Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              33
              
              
              (70
              )Merchandise
                  inventories
              
              
              1,390
              
              
              (947
              )Prepaid
                  expenses and other current assets
              
              
              127
              
              
              350Accounts
                  payable
              
              
              1,411
              
              
              1,300Accrued
                  expenses and other liabilities
              
              
              302
              
              
              5**Net
                  cash used in operating activities**
              
              
              (6,018
              )
              
              (3,501
              )**Cash
                  Flows From Investing Activities**Capital
                  expenditures
              
              
              (1,229
              )
              
              (158
              )Change
                  in restricted investments
              
              
              -
              
              
              2**Net
                  cash used in investing activities**
              
              
              (1,229
              )
              
              (156
              )**Cash
                  Flows From financing Activities**Change
                  in flooring facility
              
              
              (29
              )
              
              490Credit
                  line borrowings
              
              
              4,550
              
              
              -Common
                  stock and warrant repurchase
              
              
              -
              
              
              (2,242
              )**Net
                  cash provided by (used in) financing activities**
              
              
              4,521
              
              
              (1,752
              )**Net
                  Decrease in Cash and Cash Equivalents**
              
              
              (2,726
              )
              
              (5,409
              )**Cash
                  and Cash Equivalents, beginning of period**
              
              
              7,724
              
              
              14,785**Cash
                  and Cash Equivalents, end of period**
              
              $
              4,998
              
              $
              9,376**Supplemented
                  Cash Flow Disclosure**Cash
                  paid for interest
              
              $
              171
              
              $
              205Non-cash
                  Investing Activity1
              
              
              203
              
              
              -




1 Issuance
        of common stock for www.RedTag.com URL
  The
        accompanying notes are an integral part of these consolidated financial
        statements.


6


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





Enable
      Holdings, Inc. and subsidiaries (the “Company”) has operated a leading online
      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, recertified and limited
      supply brand name merchandise to the consumer and business customers primarily
      located in the United States. Through the Company’s online market place, located
      at www.ubid.com and www.redtag.com ,
      the
      Company offers merchandise across a wide range of product categories including,
      but not limited to, computer products, consumer electronics, apparel,
      housewares, watches, jewelry, travel, sporting goods, home improvement products
      and collectibles. The Company’s marketplace employs a combination of auction
      style and fixed price formats.




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





For
      manufacturers and retailers, the Company offers excess inventory asset recovery
      solutions. For consumers, the Company is a connection to excess name brand
      inventory through the Company’s seven proprietary inventory selling solutions.
      The seven proprietary selling solutions are utilized within the following five
      operating divisions:





·
            **uBid.com**–
                The Company’s historical auction site which has operated for ten years.
                This division focuses solely on auction
                format.


·
            **RedTag.com**–
A
                fixed price internet site offering reduced shipping on all merchandise,
                launched in August 2008.


·
            **RedTag
                Live**–
                An inventory liquidation company dedicated to physical location sales.
                RedTag Live was launched in the third quarter of 2008 and held successful
                Labor Day and Columbus Day sales
                events.


·
            **Dibu
                Trading Co.**–
A
                wholesale inventory liquidation company dedicated to Business-to-Business
                solutions. This division was formed in the fourth quarter of 2007
                and
                dedicated staff was hired in the first quarter of
                2008.


·
            **Commerce
                Innovations**–
A
                software service company which licenses auction software to third
                party
                companies. The Company is currently developing this hosted solution
                which
                is expected to launch in the first quarter of
                2009.





The
      Company’s unaudited consolidated condensed financial statements reflect normal
      recurring adjustments that are necessary to present fairly the Company’s
      financial position and results of operations on a basis consistent with that
      of
      the prior audited consolidated financial statements. As permitted by rules
      and
      regulations of the Securities and Exchange Commission applicable to quarterly
      reports on Form 10-Q, the Company has condensed or omitted certain information
      and disclosures normally included in financial statements prepared in accordance
      with accounting principles generally accepted in the United States of America
      (“GAAP”). Results for interim periods are not necessarily indicative of the
      results that may be expected for a full year. These interim financial statements
      should be read along with the audited consolidated financial statements included
      in our Form 10-K for the year ended December 31, 2007. The consolidated
      condensed financial statements include the accounts of the Company and its
      wholly owned subsidiaries. All material intercompany accounts and transactions
      have been eliminated in the consolidated financial statements.





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





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




Since
      December 31, 2007, none of the critical accounting policies, or the Company’s
      application thereof, as more fully described in the Company’s 2007 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, 2008.





***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.


7





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.





***Shipping
      and Handling Costs***





Shipping
      costs that are billable to the customer are included in revenue and shipping
      costs that are payable to vendors are included in the cost of revenues in the
      accompanying consolidated statements of operations. Handling costs consisting
      primarily of the third party logistics warehouse costs are included in general
      and administrative expenses and for the quarters ended September 30, 2008 and
      2007, were $237,000 and $189,000, respectively.





***Intangibles***





On
      June
      13, 2008, the Company entered into an agreement with a holder of greater than
      5%
      of the Company’s voting common stock, for the purchase of an internet domain
      name or Universal Resource Locator or URL, www.redtag.com ,
      in
      exchange for 150,000 shares of the Company’s common stock. The URL has an
      indefinite useful life and thus in accordance with the Statement of Financial
      Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”),
      the intangible asset need not be amortized. Each reporting period, the Company
      will evaluate the useful life of the intangible asset to determine whether
      events and circumstances continue to support an indefinite useful life, and
      record impairment if needed. No impairment was recorded at September 30,
      2008.





**Note
      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.


**September
                  30,**
              
              **2008**
              
              **2007**Shares
                  subject to stock warrants
              
              
              3,412,398
              
              
              3,232,939Shares
                  subject to stock options
              
              
              1,705,000
              
              
              1,924,8005,117,398
              
              
              5,157,739





The
      EPS
      for the three months ended September 2008 and 2007 was $(0.25) and $(0.12),
      respectively.





**Note
      4. Private Offerings**





On
      April
      25, 2007, the Company entered into a stock repurchase agreement with a group
      of
      private investors under common management to repurchase 2,135,550 shares of
      the
      Company’s common stock and warrants to purchase 580,937 shares of the Company’s
      common stock held by such private investors at a combined price of $1.05 for
      the
      company stock and for the warrants for an aggregate purchase price of
      $2,242,000. These shares and warrants repurchased in this privately negotiated
      transaction were originally acquired by the private investors in the Company’s
      private placement that initially closed on December 29, 2005. The repurchase
      represented 11% of the common stock and warrants outstanding.





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


8





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





The
      Company issued the initial 230,074 shares as a commitment fee, at the agreed
      upon price of $1.52 per share, determined based on the 20-day moving average
      as
      of the agreement acceptance date of June 25, 2008. The Company filed the
      registration statement on September 5, 2008 and recorded the common stock
      transaction in the quarter ended September 30, 2008. In a letter dated October
      3, 2008, the SEC notified the Company that the S-1 registration statement has
      been selected for review. The Company will begin amortization of the fair value
      of the common stock issuance once the registration statement has been declared
      effective by the SEC.





**Note
      5. Stock Based Compensation**





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





A
      total
      of 2,500,000 shares of common stock have been reserved for issuance under the
      2005 Equity Incentive Plan. If an Incentive Award granted pursuant to the 2005
      Equity Incentive Plan expires, terminates, expires and is unexercised or is
      forfeited, or if any shares are surrendered to the Company in
      connection with an Incentive Award, the shares subject to such award and the
      surrendered shares will become available for future awards under the 2005 Equity
      Incentive Plan. Options generally vest over a period of four years and have
      a
      ten year contractual life.





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


9


*Stock
      options*





Stock
      option activity under the Company’s 2005 Equity Incentive Plan for the
      nine-months ended September 30, 2008 is summarized as follows:


**Weighted-Average****Shares**
              
              **exercise price per share****Outstanding
                  at December 31, 2007**
              
              
              1,984,100
              
              $
              2.68Granted
              
              
              214,000
              
              
              0.74Exercised
              
              
              -
              
              
              -Forfeited/Cancelled/Surrendered
              
              
              (31,100
              )
              
              4.38Converted
              
              
              (765,000
              )
              
              4.60**Outstanding
                  at March 31, 2008**
              
              
              1,402,000
              
              
              1.30Granted
              
              
              296,500
              
              
              0.92Exercised
              
              
              -
              
              
              -Forfeited/Cancelled/Surrendered
              
              
              (5,000
              )
              
              6.74**Outstanding
                  at June 30, 2008**
              
              
              1,693,500
              
              
              1.22Granted
              
              
              19,000
              
              
              2.57Exercised
              
              
              -
              
              
              -Forfeited/Cancelled/Surrendered
              
              
              (7,500
              )
              
              1.54**Outstanding
                  at September 30, 2008******
              
              
              1,705,000
              
              $
              1.30**Exercisable
                  at September 30, 2008**
              
              
              279,500
              
              $
              1.44





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


**Three
                  months ended**
              
              **Nine
                  months ended****September
                  30,**
              
              **September
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Risk
                  - free interest rate
              
              
              5.0
              %
              
              5.0
              %
              
              5.0
              %
              
              5.0
              %Dividend
                  yield
              
              
              0.0
              %
              
              0.0
              %
              
              0.0
              %
              
              0.0
              %Expected
                  volatility
              
              
              68.0
              %
              
              68.0
              %
              
              68.0
              %
              
              68.0
              %Expected
                  life (years)
              
              
              6.0
              
              
              6.0
              
              
              6.0
              
              
              6.0Weighted
                  average grant date fair value
              
              $
              1.68
              
              $
              0.71
              
              $
              0.95
              
              $
              0.77Estimated
                  forfeiture rate
              
              
              5.0
              %
              
              31.8
              %
              
              5.0
              %
              
              31.8
              %





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





The
      following table summarizes additional information regarding outstanding and
      exercisable options at September 30, 2008.


10


**Outstanding**
              
              **Exercisable****Number**
              
              **Weighted**
              
              **Number**
              
              **Weighted****Outstanding at**
              
              **Average**
              
              **Exercisable at**
              
              **Average****Exercise Price**
              
              **September 30, 2008**
              
              **Exercise Price**
              
              **September 30, 2008**
              
              **Exercise Price**.01
                  - 2.00
              
              
              1,614,500
              
              $
              1.13
              
              
              257,750
              
              $
              1.272.01
                  - 4.00
              
              
              78,500
              
              
              2.93
              
              
              15,750
              
              
              3.034.01
                  - 6.00
              
              
              11,000
              
              
              4.50
              
              
              5,500
              
              
              4.506.01+
              
              
              1,000
              
              
              6.15
              
              
              500
              
              
              6.151,705,000
              
              $
              1.30
              
              
              279,500
              
              $
              1.44




As
      of
      September 30, 2008 there was $1,843 of total unrecognized compensation cost
      related to the non-vested option awards and restricted stock under the 2005
      Equity Incentive Plan. That cost is expected to be recognized over the 3.2
      year
      remaining vesting period of the non-vested option awards.





*Restricted
      Stock*





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





The
      number of restricted stock rights granted in exchange for each eligible option
      surrendered was based upon an exchange ratio of 3 to 1. The 3 to 1 exchange
      ratio was determined because at the origination of the offer the fair value
      of
      the eligible options approximated the share price at a 3 to 1 conversion rate.
      The incremental stock compensation expense resulting from the offer is $109
      to
      be amortized over the remaining life of the original options granted.





Pursuant
      to the offer, 16,000 options were canceled and cashed out by individuals who
      had
      500 or fewer options. There were an additional 20 individuals that tendered
      765,000 options for an aggregate of 255,000 restricted stock rights, of which
      98,333 are vested.





The
      Company’s unvested restricted stock rights outstanding as of September 30, 2008
      totaled 155,000, determined as follows:


**Number of**
                **Shares****Outstanding
                  at December 31, 2007**
              
              
              -Granted
              
              
              255,000Forfeited
              
              
              (1,667
              )Vested
              
              
              (98,333
              )**Unvested
                  at September 30, 2008**
              
              
              155,000





*Stock
      –based Compensation Expense*





Stock-based
      compensation expense recognized under SFAS No. 123(R), related to the 2005
      Equity Incentive Plan for the three and nine months ended September 30, 2008
      and
      2007 was as follows (in thousands):


**(Dollars
                  in Thousands)****Three months ended**
              
              **Nine months ended****September
                  30,**
              
              **September
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Stock
                  Options
              
              $
              33
              
              $
              -
              
              $
              138
              
              $
              365Restricted
                  Common Stock
              
              
              59
              
              
              -
              
              
              177
              
              
              -**Total
                  Stock-based Compensation expense**
              
              $
              92
              
              $
              -
              
              $
              315
              
              $
              365





The
      Company incurred no expense in the quarter ended September 2007 due to changes
      in the forfeiture rate during the quarter.


11




**Note
      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 provided for advances to the Company of up to a maximum of
      $25.0 million. The obligations under the Credit Agreement and all related
      agreements were secured by all of the Company assets. The initial term of the
      Agreement was three years, expiring on April 28, 2009. Up to $7.0 million
      of the maximum amount was available for irrevocable, standby and documentary
      letters of credit. The Credit Agreement required a prepayment fee of $125,000
      if
      the Company terminated the Credit Agreement during the third year. The Credit
      Agreement required the Company, among other things, to limit capital
      expenditures and maintain minimum availability on the line. Also, the Company
      was obligated contractually by a restrictive lock box arrangement. The Credit
      Agreement also required the Company to pay a variety of other fees and expenses,
      including minimum annual interest of $120,000.





On
      July
      25, 2008, Wells Fargo Bank notified the Company of the Company’s failure to meet
      the minimum excess availability requirement of $3.5 million. Since the Company
      did not meet the minimum excess availability requirement as stated in the
      agreement, the financial covenants went into effect which required that we
      demonstrate net earnings at the levels stated in the agreement. Due to the
      restructuring of the Company in 2008, the Company was unable to meet the
      covenants. The outstanding loan balance as of September 30, 2008 was $4.5
      million.





On
      October 15, 2008, the Company paid-off the outstanding balance owed to Wells
      Fargo Bank terminating the Credit Agreement specified above. Pursuant to the
      pay-off agreement, the Company paid a forbearance agreement fee of $50,000
      and
      early termination fee of $125,000. Wells Fargo has also released its security
      interest in the Company’s collateral.





**Note
      7. Segment Information**





The
      Company is organized into five operating segments but is changing its business
      model as previously discussed in **Note
      1** (Basis
      of Presentation): Direct sales channel, uBid Certified Merchant (“UCM”) sales
      channel, Business to Business sales channel, Live Events sales channel and
      Other. In classifying its operational entities into a particular segment, the
      Company segregated its operations with similar economic characteristics,
      products and services, customers and methods of distribution into distinct
      operating groups. Prior to March 31, 2007, all operating segments were
      aggregated into one reportable segment. The Company’s management reviews the
      five operating segments revenue and gross profits to evaluate segment
      performance and allocate resources. Operating expenses are not analyzed by
      segment.





For
      the
      Direct sales channel, 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, collecting accounts receivable and assuming inventory
      risk.





For
      the
      UCM sales channel, 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.





For
      the
      Business to Business sales channel, the Company sells purchased product directly
      to other businesses. Revenues are recognized upon shipment.





Live
      Events consists of physical inventory liquidation sales held at various times
      during the year. The merchandise is owned by the Company and it is responsible
      for arranging for the sales facility, processing the orders and assuming the
      inventory risk.





All
      other
      revenues consist primarily of advertising revenue. Advertising revenues are
      derived principally from the sale of online advertisements. Advertising revenues
      on contracts are recognized as “impressions” (i.e., the number of times that an
      advertisement appears in pages viewed by users of the Company’s websites).
      Impressions are delivered over the term of the agreement where such agreements
      provide for minimum monthly, quarterly or annual advertising
      commitments.





12


The
        table
        below presents our Revenues and Gross profits as a percentage of total revenues
        and total gross profits.


**(Dollars
                  in Thousands)****Three months Ended September 30,**
              
              **Nine months Ended September 30,****Net
                  Revenue**
              
              
              **2008**
              
              
              
              
              
              **2007**
              
              
              
              
              
              **2008**
              
              
              
              
              
              **2007**Direct
              
              $
              3,914
              
              
              43.9
              %
              $
              7,008
              
              
              72.1
              %
              $
              12,080
              
              
              49.3
              %
              $
              23,778
              
              
              72.1
              %UCM
              
              
              1,011
              
              
              11.3
              %
              
              1,447
              
              
              14.9
              %
              
              3,471
              
              
              14.2
              %
              
              4,244
              
              
              12.9
              %Business
                  to Business
              
              
              2,708
              
              
              30.4
              %
              
              973
              
              
              10.0
              %
              
              7,458
              
              
              30.5
              %
              
              4,069
              
              
              12.3
              %Live
                  Events
              
              
              1,284
              
              
              14.4
              %
              
              -
              
              
              0.0
              %
              
              1,284
              
              
              5.2
              %
              
              -
              
              
              -Other
              
              
              -
              
              
              -
              
              
              292
              
              
              3.0
              %
              
              191
              
              
              0.8
              %
              
              899
              
              
              2.7
              %**Total**
              
              $
              8,917
              
              
              100.0
              %
              $
              9,720
              
              
              100.0
              %
              $
              24,484
              
              
              100.0
              %
              $
              32,990
              
              
              100.0
              %**Gross
                  Profit**Direct
              
              $
              275
              
              
              56.2
              %
              $
              358
              
              
              16.4
              %
              $
              138
              
              
              3.8
              %
              $
              1,991
              
              
              26.2
              %UCM
              
              
              1,011
              
              
              206.7
              %
              
              1,447
              
              
              66.2
              %
              
              3,471
              
              
              94.4
              %
              
              4,244
              
              
              55.8
              %Business
                  to Business
              
              
              (986
              )
              
              (201.6
              )%
              
              90
              
              
              4.1
              %
              
              (314
              )
              
              (8.5)
              %
              
              474
              
              
              6.2
              %Live
                  Events
              
              
              189
              
              
              38.7
              %
              
              -
              
              
              -
              
              
              189
              
              
              5.1
              %
              
              -
              
              
              -Other
              
              
              -
              
              
              -
              
              
              292
              
              
              13.4
              %
              
              191
              
              
              5.2
              %
              
              899
              
              
              11.8
              %**Total**
              
              $
              489
              
              
              100.0
              %
              $
              2,187
              
              
              100.0
              %
              $
              3,675
              
              
              100.0
              %
              $
              7,608
              
              
              100.0
              %**Gross
                  Profit %**Direct
              
              
              7.0
              %
              
              
              
              
              5.1
              %
              
              
              
              
              1.1
              %
              
              
              
              
              8.4
              %UCM
              
              
              100.0
              %
              
              
              
              
              100.0
              %
              
              
              
              
              100.0
              %
              
              
              
              
              100.0
              %Business
                  to Business
              
              
              (36.4
              )%
              
              
              
              
              9.2
              %
              
              
              
              
              (4.2
              %)
              
              
              
              
              11.6
              %Live
                  Events
              
              
              14.7
              %
              
              
              
              
              -
              
              
              
              
              
              14.7
              %
              
              
              
              
              -Other
              
              
              -
              
              
              
              
              
              100.0
              %
              
              
              
              
              100.0
              %
              
              
              
              
              100.0
              %**Total**
              
              
              5.5
              %
              
              
              
              
              22.5
              %
              
              
              
              
              15.0
              %
              
              
              
              
              23.1
              %





**Note
      8. Subsequent Events**





On
      October 9, 2008, the Company received a $400,000 bridge loan provided by an
      individual accredited investor. The bridge loan, due on January 9, 2009, is
      in
      the form of an Unsecured Debenture and bears interest at the rate of 18% per
      annum. In consideration, the investor received warrants to purchase an aggregate
      of 3,200,000 shares of the Company’s common stock at an exercise price of $0.25
      per share. The warrants are immediately exercisable for a period of 5 years
      from
      the agreement date. The investor may elect to convert the accrued and unpaid
      interest into the common stock of the Company. This $400,000 bridge loan was
      subsequently rolled into a $2 million bridge loan received on October 14, 2008,
      as described below.





On
      October 14, 2008, the Company received a $2.0 million bridge loan from a limited
      number of accredited investors, as described below:





·
            $1.4
                million bridge loan provided by an investor in the form of a Senior
                Secured Debenture. The debenture bears interest at the rate of 18%
                per
                annum and is due on January 14, 2009. In consideration, the investor
                received warrants to purchase 7,000,000 shares of the Company’s common
                stock at an exercise price of $0.20 per share and warrants to purchase
                14,000,000 shares of the Company’s common stock at an exercise price of
                $0.10 per share, for an aggregate of 21,000,000 shares of the Company’s
                common stock. The warrants are exercisable immediately for a period
                of 5
                years from the agreement date. The investor may elect to convert
                the
                accrued and unpaid interest into the common stock of the Company.
                As
                mentioned above, the $400,000 bridge loan, dated October 9, 2008,
                was
                converted into the $1.4 million bridge loan, dated October 14, 2008.
                As
                part of the conversion, the investor did not have to surrender the
                initial
                3,200,000 warrants issued by the Company as part of the October 9,
                2008
                agreement.





·
            $600,000
                bridge loan provided by an investor in the form of a Senior Secured
                Debenture. The debenture bears interest at the rate of 18% per annum
                and
                is due on January 14, 2009. In consideration, the investor received
                warrants to purchase 3,000,000 shares of the Company’s common stock at an
                exercise price of $0.20 per share and warrants to purchase 6,000,000
                shares of the Company’s common stock at an exercise price of $0.10 per
                share for an aggregate of 9,000,000 shares of the Company’s common stock.
                The warrants are exercisable immediately for a period of 5 years
                from the
                agreement date.Prior
                to this loan, the investor owned greater than 10% of Company’s issued
                common stock.




On
      October 15, 2008, the Company utilized a portion of the bridge loan proceeds
      to
      pay-off the outstanding balance owed to Wells Fargo Bank, resulting in the
      termination of the Credit Agreement. Pursuant to the pay-off agreement, the
      Company paid a forbearance agreement fee of $50,000 and early termination fee
      of
      $125,000. Wells Fargo has released its security interest in the Company’s
      collateral.


13




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




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with our consolidated condensed
      financial statements and related notes included in Item 1 of Part 1 of this
      Quarterly Report and the audited consolidated financial statements and notes
      thereto and Management’s Discussion and Analysis of Financial Condition and
      Results of Operations contained in the Company’s Annual Report on Form 10-K for
      the fiscal year ended December 31, 2007. Enable Holdings, Inc. is a holding
      company for uBid, Inc., Dibu Trading Corp., RedTag, Inc., RedTag Live, Inc.,
      Enable Payment Systems, Inc. and uSaas, Inc., our operating businesses. For
      purposes of this Quarterly Report, unless otherwise indicated or the context
      otherwise requires, all references herein to “Enable,” “we,” “us,” and “our”
refer to Enable Holdings, Inc. and our subsidiaries.





Information
      in the following Management's Discussion and Analysis of Financial Condition
      and
      Results of Operations and elsewhere in this quarterly report contains
      forward-looking statements within the meaning of Section 27A of the Securities
      Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
      Forward-looking statements provide current expectations or forecasts of future
      events and can be identified by the use of terminology such as “believe,”
“estimate,” “expect,” “intend,” “may,” “could,” “will,” and similar words or
      expressions. Any statement that is not a historical fact, including statements
      regarding estimates, projections, future trends and the outcome of events that
      have not yet occurred, is a forward-looking statement. Actual results could
      differ materially from those projected in the forward-looking statements as
      a
      result of a number of factors, including but not limited to the risk factors
      detailed in our filings with the SEC, including our Annual Report on Form 10-K
      for the year ended December 31, 2007. 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 a leading online marketplace and a fixed price website located at www.ubid.com and www.redtag.com ,
      respectively. The two websites offer high quality excess, new, overstock,
      close-out, recertified and limited supply brand name merchandise to both
      consumers and businesses using auction style and fixed price formats. We offer
      consumers a trustworthy buying environment in which we continually monitor
      and
      certify activity to 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, house wares,
      watches, jewelry, travel, sporting goods, home improvement products and
      collectibles.





Our
      current business model provides value for consumers, manufacturers,
      distributors, retailers and other approved third party merchants. Consumers
      shop
      in a trustworthy and secure online 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
      historical business model currently consists of five distinct business channels:
      uBid Direct, UCM, Business to Business, Live Events and Other.




We
      purchase merchandise outright in the uBid Direct and Business to Business
      channels 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 we
      currently offer over 200,000 items each day. Since the first offer of product
      in
      December 1997, our marketplace has facilitated over $1 billion in net revenues
      and has registered over five million members.


14





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





As
      a
      result, the Company changed its business model from a seller marketplace to
      an
      excess inventory solutions company. The Company began restructuring its business
      operations in the first quarter of 2008 and continued implementing those changes
      through the third quarter of 2008. The seven proprietary selling solutions
      within the five operating divisions are:





·
            **uBid.com**–
                The Company’s historical auction site which has operated for ten years.
                This division focuses solely on auction
                format.


·
            **RedTag.com**–
A
                fixed price internet site offering reduced shipping on all merchandise,
                launched in August 2008.


·
            **RedTag
                Live**–
                An inventory liquidation company dedicated to physical location sales.
                RedTag Live was launched in the third quarter of 2008 and held successful
                Labor Day and Columbus Day sales
                events.


·
            **Dibu
                Trading Co.**–
A
                wholesale inventory liquidation company dedicated to Business-to-Business
                solutions. This division was formed in the fourth quarter of 2007
                and
                dedicated staff was hired in the first quarter of
                2008.


·
            **Commerce
                Innovations**–
A
                software service company which licenses auction software to third
                party
                companies. The Company is currently developing this hosted solution
                which
                is expected to launch in the first quarter of
                2009.





The
      Company’s financial results for the nine months ended September 30, 2008 have
      been negatively impacted by the planned restructuring and the severe economic
      downturn. To achieve the objective of becoming the leading excess inventory
      provider, the Company has made significant investments in increased staffing
      levels and information technology infrastructure, particularly in the first
      six
      months of 2008. We have also made major changes to our traditional operations
      as
      we transition to the new business model.





As
      part
      of the restructuring efforts, we significantly reduced our marketing spending
      while realigning the marketing and advertising resources to better position
      them
      to each new operating division. The result was a significant decline in the
      visitor traffic to our website and decreased revenue volume. The visitor traffic
      in the quarter ended September 30, 2008 decreased 11.4% compared to the same
      period of the prior year.





The
      Company also made the strategic decision to eliminate outside advertisement
      on
      its website. Historically advertisement sales have added a revenue stream but
      have negatively impacted overall sales by redirecting visitor traffic from
      the
      Company’s website to competing websites. As a result of the elimination of
      advertisement sales, outside advertisement revenues decreased $708 or 78.8%
      in
      the nine months ended September 30, 2008 compared to the same period in 2007.





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





To
      further facilitate the restructuring of the business model we are in the process
      of implementing a new ERP system to enable us to expand both in the U.S. and
      internationally.





In
      line
      with the above changes, we have suffered increased losses compared to the prior
      year. The losses were consistent with management projections as we strategically
      transform the Company to a leading excess inventory solutions company. The
      Company expects all aspects of the new business model will be fully implemented
      by the end of 2008.





**Executive
      Commentary**





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




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





*Gross
      Merchandise Sales (GMS):* ****** Gross
      Merchandise Sales differ from GAAP revenue in that gross bookings represents
      the
      gross sales price of goods sold by us (including sales through our 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.


15




*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.




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





*Auction
      Success:* A
      successful auction is a closed auction that received at least one
      bid.





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





*Approved
      UCM Program Vendors:* Vendors
      that have gone through the approval process to sell merchandise through our
      website.


**(In
                  Thousands except Average Order Value and Approved UCM
                  Vendors)****Q3**
              
              **Q2**
              
              **Q1**
              
              **Q4**
              
              **Q3**
              
              **Q2**
              
              **Q1**
              
              **Q4**
              
              **Q3****2008**
              
              **2008**
              
              **2008**
              
              **2007**
              
              **2007**
              
              **2007**
              
              **2007**
              
              **2006**
              
              **2006****Measure****GMS
                  (in thousands)**Direct
              
              $
              4,939
              
              $
              5,523
              
              $
              4,027
              
              $
              8,458
              
              $
              8,323
              
              $
              10,254
              
              $
              9,048
              
              $
              11,008
              
              $
              11,310UCM
              
              
              9,749
              
              
              11,594
              
              
              12,645
              
              
              13,307
              
              
              14,408
              
              
              13,079
              
              
              14,292
              
              
              13,799
              
              
              11,576Business
                  to Business
              
              
              2,709
              
              
              2,537
              
              
              2,213
              
              
              1,188
              
              
              973
              
              
              3,044
              
              
              62
              
              
              1,469
              
              
              3,642**Total
                  GMS**
              
              $
              17,397
              
              $
              19,654
              
              $
              18,885
              
              $
              22,953
              
              $
              23,704
              
              $
              26,377
              
              $
              23,402
              
              $
              26,276
              
              $
              26,528**Number
                  of orders (in thousands)**Direct
              
              
              18
              
              
              20
              
              
              15
              
              
              21
              
              
              20
              
              
              29
              
              
              21
              
              
              24
              
              
              23uBid
                  Certified Merchant
              
              
              72
              
              
              71
              
              
              73
              
              
              86
              
              
              101
              
              
              98
              
              
              104
              
              
              99
              
              
              89**Total
                  orders**
              
              
              90
              
              
              91
              
              
              88
              
              
              107
              
              
              121
              
              
              127
              
              
              125
              
              
              123
              
              
              112**Average
                  Order Value**Direct
              
              $
              258
              
              $
              242
              
              $
              242
              
              $
              370
              
              $
              355
              
              $
              336
              
              $
              390
              
              $
              424
              
              $
              424uBid
                  Certified Merchant
              
              $
              126
              
              $
              151
              
              $
              160
              
              $
              142
              
              $
              129
              
              $
              119
              
              $
              120
              
              $
              126
              
              $
              128Visitors
                  (in thousands)
              
              
              6,400
              
              
              5,050
              
              
              5,755
              
              
              5,980
              
              
              7,224
              
              
              6,901
              
              
              6,744
              
              
              6,529
              
              
              6,488Bidders
                  (in thousands)
              
              
              204
              
              
              198
              
              
              181
              
              
              173
              
              
              218
              
              
              231
              
              
              235
              
              
              239
              
              
              211Bidders
                  to Visitors Percentage
              
              
              3.2
              %
              
              3.9
              %
              
              3.1
              %
              
              2.9
              %
              
              3.0
              %
              
              3.3
              %
              
              3.5
              %
              
              3.7
              %
              
              3.3
              %Auctions
                  Closed (in thousands)
              
              
              230
              
              
              181
              
              
              455
              
              
              780
              
              
              715
              
              
              619
              
              
              539
              
              
              579
              
              
              562Auction
                  Success (in thousands)
              
              
              59
              
              
              56
              
              
              59
              
              
              67
              
              
              78
              
              
              77
              
              
              76
              
              
              65
              
              
              58Auction
                  Success rate
              
              
              25.7
              %
              
              30.9
              %
              
              13.0
              %
              
              8.6
              %
              
              10.9
              %
              
              12.4
              %
              
              14.1
              %
              
              11.2
              %
              
              10.3
              %Approved
                  UCM Vendors
              
              
              3,948
              
              
              3,854
              
              
              3,737
              
              
              3,588
              
              
              3,321
              
              
              2,873
              
              
              2,513
              
              
              2,049
              
              
              1,716





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





Our
      revenue is dependent in part on sales of products produced by or purchased
      from
      several vendors. The following table represents the respective vendors’
percentage of sales for the three months and nine months ended September 30,
      2008 and September 30, 2007. No other supplier represented more than 5% of
      our
      net revenues for any period presented.


16


**Three months ended**
                **September 30,**
              
              **Nine months ended**
                **September 30,****Vendor**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**Hewlett-Packard
              
              
              30.5
              %
              
              28.0
              %
              
              36.9
              %
              
              24.6
              %Dealtree
              
              
              6.9
              %
              
              0.0
              %
              
              4.3
              %
              
              0.0
              %Always
                  at Market
              
              
              5.7
              %
              
              4.9
              %
              
              6.5
              %
              
              5.5
              %Westinghouse
              
              
              5.5
              %
              
              0.0
              %
              
              2.1
              %
              
              0.0
              %Sony
              
              
              2.5
              %
              
              6.1
              %
              
              2.8
              %
              
              11.9
              %Recoupit
              
              
              2.0
              %
              
              8.4
              %
              
              3.2
              %
              
              7.8
              %EHS
              
              
              0.2
              %
              
              6.4
              %
              
              1.3
              %
              
              3.0
              %





***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.


17


**Reconciliation
      of (Gross Merchandise Sales) GMS to GAAP**


**(Dollars
                  in Thousands)****Three Months Ended**
                **September 30,**
              
              **Nine Months Ended**
                **September 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Direct
              
              $
              4,939
              
              $
              8,323
              
              $
              14,490
              
              $
              27,626UCM
              
              
              9,749
              
              
              14,408
              
              
              33,988
              
              
              41,778Business
                  to Business
              
              
              2,709
              
              
              973
              
              
              7,458
              
              
              4,069**Total
                  GMS**1
              
              $
              17,397
              
              $
              23,704
              
              $
              55,936
              
              $
              73,473Cancellations2
              
              
              (1,670
              )
              
              (2,385
              )
              
              (8,333
              )
              
              (8,320
              )Backlog3
              
              
              (395
              )
              
              (853
              )
              
              (395
              )
              
              (853
              )Returns4/
                  Credits5/GAAP Entry6
              
              
              6,043
              
              
              4,635
              
              
              18,722
              
              
              14,537**Net
                  Sales**
              
              $
              8,917
              
              $
              9,720
              
              $
              24,484
              
              $
              32,990




1**GMS**
              Total
                  revenue in auctions closed and Business to Business transactions.2**Cancellations**
              Auctions
                  that will not be shipped due to credit and other issues.3**Backlog**
              Auctions
                  & orders pending review in credit & approved orders at warehouse
                  pending shipment.4**Returns**
              Credits
                  issued to customers for return products and related reserves.5**Credits**
              Miscellaenous
                  credits issued to customers such as customer satisfaction .6**GAAP
                  Entry**
              Entry
                  required to eliminate sales under revenue sharing and commission
                  arrangementsunder
                  accounting principles generally accepted in the United States of
                  America
                  ("GAAP").
 **(Dollars in Thousands)****Three months ended September 30,**
                
                **Nine months ended September 30,****2008**
                
                **2007**
                
                **Increase (Decrease)**
                
                **2008**
                
                **2007**
                
                **Increase (Decrease)****Net
                    Revenues:**
                
                
                
                
                
                
                
                
                
                
                
                **%**
                
                
                
                
                
                
                
                
                
                
                
                **%**Direct
                
                $
                3,914
                
                $
                7,008
                
                $
                (3,094
                )
                
                (44.1)
                %
                $
                12,080
                
                $
                23,778
                
                $
                (11,698
                )
                
                (49.2
                )%UCM
                
                
                1,011
                
                
                1,447
                
                
                (436
                )
                
                (30.1)
                %
                
                3,471
                
                
                4,244
                
                
                (773
                )
                
                (18.2
                )%Business
                    to Business
                
                
                2,708
                
                
                973
                
                
                1,735
                
                
                178.3
                %
                
                7,458
                
                
                4,069
                
                
                3,389
                
                
                83.3
                %Live
                    Events
                
                
                1,284
                
                
                -
                
                
                1,284
                
                
                0.0
                %
                
                1,284
                
                
                -
                
                
                1,284
                
                
                0.0
                %Other
                
                
                -
                
                
                292
                
                
                (292
                )
                
                (100.0)
                %
                
                191
                
                
                899
                
                
                (708
                )
                
                (78.8
                )%**Total
                    Net Revenues**
                
                
                8,917
                
                
                9,720
                
                
                (803
                )
                
                (8.3
                )%
                
                24,484
                
                
                32,990
                
                
                (8,506
                )
                
                (25.8
                )%**Gross
                    Profit:**Direct
                
                
                275
                
                
                358
                
                
                (83
                )
                
                (23.2
                )%
                $
                138
                
                
                1,991
                
                
                (1,853
                )
                
                (93.1
                )%UCM
                
                
                1,011
                
                
                1,447
                
                
                (436
                )
                
                (30.1
                )%
                
                3,471
                
                
                4,244
                
                
                (773
                )
                
                (18.2
                )%Business
                    to Business
                
                
                (986
                )
                
                90
                
                
                (1,076
                )
                
                (1195.6)
                %
                
                (314
                )
                
                474
                
                
                (788
                )
                
                (166.2
                )%Live
                    Events
                
                
                189
                
                
                -
                
                
                189
                
                
                0.0
                %
                
                189
                
                
                -
                
                
                189
                
                
                0.0
                %Other
                
                
                -
                
                
                292
                
                
                (292
                )
                
                (100.0)
                %
                
                191
                
                
                899
                
                
                (708
                )
                
                (78.8
                )%**Total
                    Gross Profit**
                
                
                489
                
                
                2,187
                
                
                (1,698
                )
                
                (77.6)
                %
                
                3,675
                
                
                7,608
                
                
                (3,933
                )
                
                (51.7
                )%General
                    and administrative
                
                
                3,916
                
                
                3,313
                
                
                603
                
                
                18.2
                %
                
                11,087
                
                
                9,661
                
                
                1,426
                
                
                14.8
                %Sales
                    and marketing
                
                
                1,059
                
                
                1,117
                
                
                (58
                )
                
                (5.2)
                %
                
                2,353
                
                
                3,317
                
                
                (964
                )
                
                (29.1
                )%**Total
                    operating expenses**
                
                
                4,975
                
                
                4,430
                
                
                545
                
                
                12.3
                %
                
                13,440
                
                
                12,978
                
                
                462
                
                
                3.6
                %**Loss
                    from operations**
                
                
                (4,486
                )
                
                (2,243
                )
                
                (2,243
                )
                
                100.0
                %
                
                (9,765
                )
                
                (5,370
                )
                
                (4,395
                )
                
                81.8
                %Interest
                    Income / (Expense) & Other, Net
                
                
                (199
                )
                
                50
                
                
                (249
                )
                
                (498.0
                )%
                
                (282
                )
                
                164
                
                
                (446
                )
                
                (272.0
                )%Other
                    Income / (Expense)
                
                
                -
                
                
                -
                
                
                -
                
                
                0.0
                %
                
                -
                
                
                60
                
                
                (60.00
                )
                
                0.0
                %**Net
                    Loss**
                
                $
                (4,685
                )
                $
                (2,193
                )
                $
                (2,492
                )
                
                113.6
                %
                $
                (10,047
                )
                $
                (5,146
                )
                $
                (4,901
                )
                
                95.2
                %




18


**Results
      of Operations (Dollars in Thousands)**





The
      above
      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.





***Direct
      Channel:*** Direct
      channel sales and gross profit, for the three and nine months ended September
      2008, decreased as compared to the respective periods in 2007. This decline
      in
      sales and gross profit is primarily attributable to a lower number of Direct
      channel orders in 2008 as compared to the number of orders in 2007. The Direct
      channel orders amounted to 18,000 in the quarter ended September 2008 as
      compared to 20,000 in the quarter ended September 2007. The decrease in the
      number of orders is due to a decreased number of visitors. The number of
      visitors decreased to 6.4 million in the third quarter 2008 from 7.2 million
      in
      the same quarter in 2007. The Company sold a lesser number of items but at
      higher margins which resulted in the lower sales and gross profit compared
      to
      the same period in 2007.





***UCM
      Channel:*** UCM
      sales
      and gross profit, for the three and nine months ended September 2008, decreased
      as compared to the previous periods. The number of UCM orders decreased to
      72,000 in the quarter ended September 2008 as compared to 101,000 in the quarter
      ended September 2007. This decrease is also attributable to the change in
      strategy undertaken by the Company. During the first six months of 2008,
      the Company realigned the marketing efforts and eliminated the unprofitable
      auctions and vendors, resulting in lower sales and gross profit but an improved
      auction success rate and a high bidder to visitor percentage. The Company added
      additional certified merchants in our UCM program as the number of vendors
      increased to 3,948 in the quarter ended September 2008 from 3,321 in the quarter
      ended September 2007.





***Business
      to Business:*** The
      Business to Business Sales, for the three and nine months ended September 2008
      increased from prior year due to the addition of dedicated staff in the first
      quarter of 2008. The Company brokered a greater number of business-to- business
      transactions in 2008 compared to the prior year. The gross profit declined
      in
      2008 as compared to 2007 due to the liquidation of inventory at a loss. The
      Company had a large amount of business-to-business inventory on-hand, which
      was
      expected to be sold over a specified period of time. The Company decided to
      sell
      the inventory in a short time-frame in order to generate operating capital,
      which resulted in a negative gross profit.





***Live
      Events:*** In 2008,
      the Company expanded into live events and held two successful sales events
      in
      the third quarter 2008. Live Events provide an instant buying opportunity for
      shoppers compared to buying through the internet channel. The increase in
      revenues and gross profits reflect the success and market demand for these
      types
      of events.





***Other
      Revenue:***  Other
      revenue, comprised primarily of online advertising revenue, decreased in 2008
      as
      compared to 2007. The Other revenue decrease in 2008 was due to the strategic
      decision to eliminate advertisement revenue. In the past, the Company sold
      advertising space on its website to various companies. Although this strategy
      added a revenue stream, it impacted sales on the Company’s website since it
      directed visitors away to competing websites. As a result of the elimination
      of
      advertisement revenues, visitors spent more time shopping on the Company’s
      website, as evidenced by the increased bidder to visitor
      percentage.





***Net
      Losses:*** The
      Company experienced a net loss of $4,685 or $0.25 per share for the three months
      ended September 30, 2008 compared to a net loss of $2,193 or $0.12 per share
      for
      the three months ended September 30, 2007. The net loss for the nine months
      ended September 30, 2008 was $10,047or $0.55 per share compared to a net loss
      of
      $5,146 or $0.27 per share for the nine months ended September 30,
      2007.


19


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


**(Dollars in Thousands)****Three Months Ended September 30,**
              
              **Nine Months Ended September 30,****Increase (Decrease)**
              
              
              
              
              
              **Increase (Decrease)****SG&A
                  Expenses:**
              
              
              **2008**
              
              
              **2007**
              
              
              
              
              
              **%**
              
              
              **2008**
              
              
              **2007**
              
              
              
              
              
              **%**Advertising
              
              $
              752
              
              $
              977
              
              $
              (225
              )
              
              -23.0
              %
              $
              1,524
              
              $
              2,938
              
              $
              (1,414
              )
              
              -48.1
              %Salary
                  and benefits
              
              
              1,596
              
              
              1,629
              
              
              (33
              )
              
              -2.0
              %
              
              4,934
              
              
              4,151
              
              
              783
              
              
              18.9
              %Stock-based
                  compensation
              
              
              92
              
              
              -
              
              
              92
              
              
              -
              
              
              315
              
              
              365
              
              
              (50
              )
              
              -13.7
              %Facilities
              
              
              65
              
              
              111
              
              
              (46
              )
              
              -41.4
              %
              
              194
              
              
              376
              
              
              (182
              )
              
              -48.4
              %Warehouse
              
              
              237
              
              
              189
              
              
              48
              
              
              25.4
              %
              
              646
              
              
              549
              
              
              97
              
              
              17.7
              %Credit
                  card fees
              
              
              366
              
              
              516
              
              
              (150
              )
              
              -29.1
              %
              
              1,161
              
              
              1,559
              
              
              (398
              )
              
              -25.5
              %Telecommunications,
                  hardware and storage
              
              
              171
              
              
              150
              
              
              21
              
              
              14.0
              %
              
              518
              
              
              474
              
              
              44
              
              
              9.3
              %Legal,
                  audit, insurance, and other regulatory fees
              
              
              335
              
              
              423
              
              
              (88
              )
              
              -20.8
              %
              
              1,057
              
              
              846
              
              
              211
              
              
              24.9
              %Depreciation
                  & amortization
              
              
              110
              
              
              233
              
              
              (123
              )
              
              -52.8
              %
              
              419
              
              
              642
              
              
              (223
              )
              
              -34.7
              %Bad
                  debt
              
              
              200
              
              
              -
              
              
              200
              
              
              -
              
              
              200
              
              
              352
              
              
              (152
              )
              
              -43.2
              %Consulting
                  and outside services
              
              
              267
              
              
              141
              
              
              126
              
              
              89.4
              %
              
              776
              
              
              484
              
              
              292
              
              
              60.3
              %Redtag
                  Live
              
              
              386
              
              
              -
              
              
              386
              
              
              -
              
              
              1,012
              
              
              -
              
              
              1,012
              
              
              -Dues
                  & Subscriptions
              
              
              61
              
              
              4
              
              
              57
              
              
              1425.0
              %
              
              117
              
              
              12
              
              
              105
              
              
              875.0
              %Travel
              
              
              80
              
              
              18
              
              
              62
              
              
              344.4
              %
              
              211
              
              
              87
              
              
              124
              
              
              142.5
              %Other
                  SG&A
              
              
              257
              
              
              39
              
              
              218
              
              
              559.0
              %
              
              356
              
              
              143
              
              
              213
              
              
              149.0
              %$
              4,975
              
              $
              4,430
              
              $
              545
              
              
              12.3
              %
              $
              13,440
              
              $
              12,978
              
              $
              462
              
              
              3.6
              %




Expense
      fluctuations (dollars in thousands) are summarized below:





***Advertising
      expense*** decreased in the three and nine months ending September 30, 2008 compared to
      the
      same periods of the prior year. The Company restructured its operations in
      the
      first six months of 2008, resulting in the realignment of the Company’s
      marketing and advertising efforts. The realignment was made to better position
      the Company to manufacturers, retailers and consumers. During the realignment,
      the advertising expense for the six month period ended June 30, 2008 decreased
      to $775 from $1,961 for the same period of the prior year.





During
      the third quarter of 2008 the Company re-initiated its advertising and marketing
      efforts based on a restructured marketing model. The third quarter expense
      in
      2008 is in-line with the expense in third quarter 2007 ($752 in third quarter
      2008 compared to $977 in the third quarter of 2007), but the September
      year-to-date expense in 2008 is lower as compared to the September year-to-date
      expense in 2007, which reflects the effect of reduced expenditures during the
      first six months of 2008, as stated earlier.





The
      year-to-date ***Salary
      & Benefits expense*** in 2008
      increased compared to 2007 due to increased staffing levels, primarily in
      information technology and marketing. The expense decreased in the quarter
      ended
      September 2008 as compared to the quarter ended 2007 primarily due to the
      decrease in employee recruitment expenses. The employee recruitment expense
      was
      $0 in the quarter ended September 2008 compared to $173 in the quarter ended
      September 2007.




***Stock-based
      compensation expense*** increased
      in the quarter ended September 2008 as compared to the quarter ended 2007
      because of the change in forfeiture rate in 2007 which resulted in no expense
      being recognized in the quarter ended September 2007.





***Facilities
      expense*** decreased primarily due to the sublet of unused office space at the Company’s
      Chicago corporate headquarters. The sublet of the office space enabled the
      Company to decrease the expenses needed to maintain the facilities.





The
      increased ***Warehouse
      expense*** in the
      current period is primarily driven by the increased Business to Business sales
      volume compared to prior periods. This increase resulted in additional storage
      requirements for merchandise. The increase is also attributable to the live
      liquidation events in 2008 which required special warehouse receiving
      requirements and additional storage costs.





The
      decrease in ***Credit
      card fees*** is
      primarily a result of lower sales volume.





The
      increase in ***Telecommunications,
      hardware and storage costs*** is a
      result of price increases on maintenance contract renewals.





The
      increase in the year-to-date ***legal,
      audit, insurance and other regulatory fees*** in 2008
      as compared to 2007 is because of increased fees associated with capital and
      financing arrangements. These fees also had corresponding increases in the
      legal
      fees. The decrease in quarter ended September 2008 compared to 2007 is due
      to
      the Company incurring expenses associated with the implementation of a Sarbanes
      Oxley compliance program, during the third quarter of 2007.


20





***Depreciation
      and Amortization expense*** decreased in 2008 due to the decrease in the amortization of intangible assets
      as certain intangible assets became fully amortized.





The
      increase in ***Bad debt expense*** for the
      quarter ended September 2008 as compared to September 2007 is attributed to
      the
      writing off of an aged receivable. The Company changed its estimate of
      collectability of an outstanding receivable, resulting in the current period
      expense. The third quarter 2008 and 2007 expense is $200 and $0 respectively.
      The year-to-date expense in 2008 and 2007 is $200 and $352 respectively, the
      decrease resulted from a larger amount of receivables written-off during 2007.





***Consulting
      and outside services*** increased
      in 2008 as new business initiatives were launched and outside services were
      brought in for advertising and IT departments. Outside services for the
      advertising department included projects to facilitate a customer database
      segmentation project and to provide increased market research & analysis.
      Outside services for the IT department consisted of projects related to software
      development and restructuring.





***RedTag
      Live*** ,
      the
      physical liquidation unit of the Company, was implemented in 2008 which resulted
      in an increase in operating expenses compared to 2007. These expenses related
      to
      the opening of a new facility for the RedTag Live division and consisted
      primarily of facility, payroll and advertising expenses.





The
      increase in ***Dues
      & Subscriptions expense*** relates
      to the additional subscription of market research programs. These programs
      aid
      the Company in evaluating the website statistics so the functionality can be
      improved accordingly.





***Travel
      expense*** increased due to the increased travel incurred by the Company executives in
      business development efforts.





***Other
      Expense*** primarily consists of bank fees incurred in the pay-off of the Wells Fargo
      Bank
      credit agreement. The Company paid $50 as a forbearance fee and $125 in early
      termination fee which resulted in the increase in 2008 as compared to
      2007.





***Liquidity
      and Capital Resources***





Net
      cash
      used in operating activities for the nine months ended September 30, 2008 was
      $6,018,000 compared to $3,501,000 used in the nine months ended September 30,
      2007. The net cash used in operating activities in 2008 increased primarily
      due
      to the increase in net loss, partially offset by the increases in cash used
      of
      $1,390,000 provided by merchandise inventories, an increase of $302,000 in
      accrued expenses, decrease of $127,000 in prepaid expenses and increase of
      $1,411,000 in accounts payable. The decrease in merchandise inventories resulted
      from the sale of slow moving inventory. The increase in accounts payable is
      attributable to the timing of the accounts payables payment
      processing.




Net
      cash
      used in investing activities was $1,229,000 for the nine months ended September
      30, 2008 due primarily to the purchase of property and equipment. Net cash
      used
      in investing activities was $156,000 for the period ended September 30, 2007.
      The increase in purchases of property and equipment for the nine months ended
      September 30, 2008 related primarily to hardware and software purchases as
      IT
      infrastructure investment increased for the nine months ended September 30,
      2008.





Net
      cash
      provided by financing activities was $4,521,000 for the nine months ended
      September 30, 2008, compared to the net cash used of $1,752,000 for the same
      period last year. The cash inflow in 2008 is due to advances on the Wells Fargo
      Credit Agreement of $4,550,000. Cash provided by financing activities was
      partially offset by a $29,000 decrease in inventory financing through the
      flooring facility.





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
      obligations under the Credit Agreement and all related agreements were secured
      by all of the Company assets. The initial term of the Agreement was
      three years, expiring on April 28, 2009. Up to $7.0 million of the maximum
      amount was available for irrevocable, standby and documentary letters of credit.
      The Credit Agreement required a prepayment fee of $125,000 if the Company
      terminated the Credit Agreement during the third year. The Credit Agreement
      required the Company, among other things, to limit capital expenditures and
      maintain minimum availability on the line. Also, the Company was obligated
      contractually by a restrictive lock box arrangement. The Credit Agreement also
      required the Company to pay a variety of other fees and expenses, including
      minimum annual interest of $120,000.





On
      July
      25, 2008, Wells Fargo Bank notified the Company of the Company’s failure to meet
      the minimum excess availability requirement of $3.5 million. Since the Company
      did not meet the minimum excess availability requirement as stated in the
      agreement, the financial covenants went into effect which required that the
      Company demonstrate net earnings at the levels stated in the agreement. Due
      to
      the restructuring of the Company in 2008, it was unable to meet the covenants.
      The outstanding loan balance as of September 30, 2008 was $4.5 million.


21





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





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





The
      Company issued the initial 230,074 shares as a commitment fee, at the agreed
      upon price of $1.52 per share, determined based on the 20-day moving average
      as
      of the agreement acceptance date of June 25, 2008. The Company filed the
      registration statement on September 5, 2008 and recorded the common stock
      transaction in the quarter ended September 30, 2008. In a letter dated October
      3, 2008, the SEC notified the Company that the S-1 registration statement has
      been selected for review. The Company will begin amortization of the fair value
      of the common stock issuance once the registration statement has been declared
      effective by the SEC.





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





In
      September 2008, the Company resumed efforts to obtain capital financing and
      was
      successful in doing so, as described below.





On
      October 9, 2008, the Company received a $400,000 bridge loan provided by an
      individual accredited investor. The bridge loan, due on January 9, 2009, is
      in
      the form of an Unsecured Debenture and bears interest at the rate of 18% per
      annum. In consideration, the investor received warrants to purchase an aggregate
      of 3,200,000 shares of the Company’s common stock at an exercise price of $0.25
      per share. The warrants are immediately exercisable for a period of 5 years
      from
      the agreement date. The investor may elect to convert the accrued and unpaid
      interest into the common stock of the Company. This $400,000 bridge loan was
      subsequently rolled into a $2 million bridge loan received on October 14, 2008,
      as described below.





On
      October 14, 2008, the Company received a $2.0 million bridge loan from a limited
      number of accredited investors, as described below:





·
            $1.4
                million bridge loan provided by an investor in the form of a Senior
                Secured Debenture. The debenture bears interest at the rate of 18%
                per
                annum and is due on January 14, 2009. In consideration, the investor
                received warrants to purchase 7,000,000 shares of the Company’s common
                stock at an exercise price of $0.20 per share and warrants to purchase
                14,000,000 shares of the Company’s common stock at an exercise price of
                $0.10 per share, for an aggregate of 21,000,000 shares of the Company’s
                common stock. The warrants are exercisable immediately for a period
                of 5
                years from the agreement date. The investor may elect to convert
                the
                accrued and unpaid interest into the common stock of the Company.As
                mentioned above, the $400,000 bridge loan, dated October 9, 2008,
                was
                converted into the $1.4 million bridge loan, dated October 14, 2008.
                As
                part of the conversion, the investor did not have to surrender the
                initial
                3,200,000 warrants issued by the Company as part of the October 9,
                2008
                agreement.


22





·
            $600,000
                bridge loan provided by an investor in the form of a Senior Secured
                Debenture. The debenture bears interest at the rate of 18% per annum
                and
                is due on January 14, 2009. In consideration, the investor received
                warrants to purchase 3,000,000 shares of the Company’s common stock at an
                exercise price of $0.20 per share and warrants to purchase 6,000,000
                shares of the Company’s common stock at an exercise price of $0.10 per
                share for an aggregate of 9,000,000 shares of the Company’s common stock.
                The warrants are exercisable immediately for a period of 5 years
                from the
                agreement date.Prior
                to this loan, the investor owned greater than 10% of Company’s issued
                common stock.





On
      October 15, 2008, the Company paid off-the outstanding balance owed to Wells
      Fargo Bank terminating the Credit Agreement specified above. Pursuant to the
      pay-off agreement, the Company paid a forbearance agreement fee of $50,000
      and
      early termination fee of $125,000. Wells Fargo has also released its security
      interest in the Company’s collateral.





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




To
      improve operating efficiency and to decrease costs, the Company reduced its
      workforce by approximately 31% in October 2008, primarily at the Chicago office.
      The staff reductions will reduce short-term cash flow requirements while the
      Company continues to seek long-term financing.





In
      November 2008, the Company retained an investment banking firm to explore
      financing opportunities and other strategic alternatives. Without the ability
      to
      raise long-term financing at commercially reasonable rates, the operations
      of
      the Company will be severely impacted.


23


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




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





**ITEM
      4.****CONTROLS
      AND PROCEDURES**





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





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





***Internal
      Control Over Financial Reporting.*** There
      have been no changes in the Company’s internal control over financial reporting
      identified in the evaluation that occurred during the third quarter of fiscal
      year 2008 that have materially affected, or are reasonably likely to materially
      affect, the Company’s internal control over financial reporting.




**PART
      II OTHER INFORMATION**





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





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





**ITEM
      1A. RISK FACTORS**





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





In
      addition to other information set forth in this report, you should carefully
      consider the factors discussed in Part 1, “Item 1A. Risk Factors” in the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2007, which
      could materially affect the Company’s business, financial condition or future
      results. The risks described in the Company’s Annual Report on Form 10-K are not
      the only risks facing the Company. Additional risks and uncertainties not
      currently known to the Company or that are currently deemed to be immaterial
      also may materially adversely affect the Company’s business, financial
      conditions and/or operating results.




24


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





For
      the
      nine months ended September 30, 2008, options to purchase an aggregate of
      529,500 shares of the Company’s common stock were granted to individuals, all
      employees of Enable Holdings, Inc. The options have a term of ten years and
      vest
      over a three to four year period either quarterly or annually beginning on
      the
      first quarter or year respectively after the date of grant. The option grants
      were exempt from registration under Section 4(2) of the Securities Act of 1933,
      as amended, which provides an exemption for transactions not involving a public
      offering.





**ITEM
      3. DEFAULT UPON SENIOR SECURITIES**





None




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




None





**ITEM
      5. OTHER INFORMATION**





Effective
      August 8, 2008, the Company changed its name to Enable Holdings, Inc. from
      uBid.com Holdings, Inc. The amendment to the Company’s certificate of
      incorporation was filed with the Secretary of State of the State of Delaware
      on
      August 4, 2008.





The
      name
      change was recommended by unanimous consent of the Company’s Board of Directors
      on July 14, 2008, and was approved by the written action of the Company’s
      stockholders owning more than a majority of the outstanding shares of the
      Company’s common stock. In connection with such name change, the Company’s
      ticker symbol on the NASDAQ OTC bulletin board has been changed to ENAB.OB,
      effective August 12, 2008.





**ITEM
      6. EXHIBITS**





**Exhibit No.**
            
            **Description**31.1
            
            Certification
                of the President and Chief Executive Officer pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of the President and Chief Executive Officer pursuant to 18 U.S.C.
                Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.32.2
            
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.


25


**SIGNATURES**





Pursuant
      to requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the Registrant has duly caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized as of November 14, 2008.





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




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