**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 **June
      30, 2006**





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





**Commission
      file Number: 000-50995**


________________




**uBid.com
      Holdings, Inc.**


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





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





**8550
      West Bryn Mawr, Suite 200, Chicago, Illinois 60631**


*(Address
      of principal executive offices and zip code)*





**Registrant’s
      telephone number including area code:**


**(773)
      272-5000**





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





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




Large
      accelerated filer o Accelerated filer o Non-accelerated filer x





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





The
      number of shares outstanding of the registrant’s Common Stock, par value $0.001,
      as of June 30, 2006 was 20,333,333.









**TABLE
      OF CONTENTS**





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




2


**uBid.com
        Holdings, Inc.**
 **Consolidated
        Balance Sheets**
 **(Dollars
        in Thousands, except par value data)**
  **June
                  30,
                  2006**
              
              
              **December
                  31, 2005**(Unaudited)**Assets****Current
                  Assets**Cash
                  and cash equivalents
              
              $
              13,564
              
              $
              21,176Restricted
                  investments
              
              
              212
              
              
              7,003Accounts
                  receivable, net
              
              
              3,010
              
              
              1,306Merchandise
                  inventories, net
              
              
              9,460
              
              
              5,989Prepaid
                  expenses and other current assets
              
              
              926
              
              
              646**Total
                  Current Assets**
              
              
              27,172
              
              
              36,120**Property
                  and Equipment, net**
              
              
              478
              
              
              524**Total
                  Assets**
              
              $
              27,650
              
              $
              36,644**Liabilities
                  and Shareholders' Equity****Current
                  Liabilities**Note
                  payable to bank
              
              $
              500
              
              $
              -Flooring
                  facility
              
              
              481
              
              
              1,612Accounts
                  payable
              
              
              2,607
              
              
              4,456Accrued
                  expensesAdvertising
              
              
              362
              
              
              397Merger
                  and offering costs
              
              
              72
              
              
              2,000Other
              
              
              1,104
              
              
              1,187Current
                  maturities of long-term debt
              
              
              205
              
              
              410**Total
                  Current Liabilities**
              
              
              5,331
              
              
              10,062******Redeemable
                  Common Stock,**$.001 par value (2,666,668 shares issued and outstanding)
              
              
              -
              
              
              12,000**Shareholders'
                  Equity**Common
                  stock, $.001 par value (200,000,000 shares authorized;20,333,333
                  and 16,732,666 issued and outstanding, respectively)
              
              
              20
              
              
              17Stock
                  warrants
              
              
              8,086
              
              
              6,322Additional
                  paid-in-capital
              
              
              48,601
              
              
              25,907Treasury
                  stock, at cost 2,666,668 shares
              
              
              (12,000
              )
              
              -Retained
                  deficit
              
              
              (22,388
              )
              
              (17,664
              )**Total
                  Shareholders' Equity**
              
              
              22,319
              
              
              14,582**Total
                  Liabilities and Shareholders' Equity**
              
              $
              27,650
              
              $
              36,644





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




3





**uBid.com
        Holdings, Inc.**
 **Condensed
        Consolidated Statements of Operations**
 **(Dollars
        in Thousands, except for per share data)**
 **(Unaudited)**
  **Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****Net
                  Revenues**
              
              $
              19,097
              
              $
              19,885
              
              $
              39,185
              
              $
              46,703**Cost
                  of Revenues**
              
              
              16,980
              
              
              17,095
              
              
              34,159
              
              
              41,259Gross
                  Profit
              
              
              2,117
              
              
              2,790
              
              
              5,026
              
              
              5,444**Operating
                  Expenses**General
                  and administrative
              
              
              3,451
              
              
              3,602
              
              
              6,984
              
              
              6,749Sales
                  and marketing
              
              
              1,436
              
              
              1,127
              
              
              2,961
              
              
              2,410Total
                  operating expenses
              
              
              4,887
              
              
              4,729
              
              
              9,945
              
              
              9,159**Loss
                  From Operations**
              
              
              (2,770
              )
              
              (1,939
              )
              
              (4,919
              )
              
              (3,715
              )**Interest
                  Income (Expense), net**
              
              
              49
              
              
              (507
              )
              
              195
              
              
              (924
              )**Net
                  Loss**
              
              
              (2,721
              )
              
              (2,446
              )
              
              (4,724
              )
              
              (4,639
              )Preferred
                  Stock Dividends
              
              
              -
              
              
              (15
              )
              
              -
              
              
              (30
              )**Net
                  Loss Available to Common Shareholders**
              
              $
              (2,721
              )
              $
              (2,461
              )
              $
              (4,724
              )
              $
              (4,669
              )**Net
                  Loss per share - Basic and****Diluted**
              
              $
              (0.13
              )
              $
              (0.99
              )
              $
              (0.23
              )
              $
              (1.88
              )**Weighted
                  Average Shares - Basic and Diluted**
              
              
              20,333,333
              
              
              2,487,107
              
              
              20,156,911
              
              
              2,487,107


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




4


**uBid.com
        Holdings, Inc.**
 **Consolidated
        Statement of Shareholders' Equity**
 **(Dollars
        in Thousands)**
 **(Unaudited)**
  **Common
                  Stock**
              
              
              
              
              
              **Treasury
                  Stock****Stock**
              
              **Paid-in**
              
              
              
              
              
              **Retained****Shares**
              
              **Dollars**
              
              **Warrants**
              
              **Capital**
              
              **Shares**
              
              **Dollars**
              
              **Deficit**
              
              **Total**Balance,
                  December 31, 2005
              
              
              16,732,666
              
              $
              17
              
              $
              6,322
              
              $
              25,907
              
              
              —
              
              $
              —
              
              $
              (17,664
              )
              $
              14,582Second
                  private offering
              
              
              3,000,000
              
              
              3
              
              
              1,560
              
              
              11,937
              
              
              —
              
              
              —
              
              
              —
              
              
              13,500Redemption
                  of common stock
              
              
              —
              
              
              —
              
              
              —
              
              
              12,000
              
              
              2,666,668
              
              
              (12,000
              )
              
              —
              
              
              —Stock
                  Compensation Expense
              
              
              —
              
              
              —
              
              
              —
              
              
              461
              
              
              —
              
              
              —
              
              
              
              
              
              461Second
                  private offering costs
              
              
              600,667
              
              
              —
              
              
              204
              
              
              (1,704
              )
              
              —
              
              
              —
              
              
              —
              
              
              (1,500
              )Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (4,724
              )
              
              (4,724
              )Balance,
                  June 30, 2006
              
              
              20,333,333
              
              $
              20
              
              $
              8,086
              
              $
              48,601
              
              
              2,666,668
              
              $
              (12,000
              )
              $
              (22,388
              )
              $
              22,319


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




5


**uBid.com
        Holdings, Inc.**
 **Consolidated
        Statements of Cash Flows** **(Dollars
          in Thousands)**
 **(Unaudited)**
  **Six
                  Months Ended****June
                  30,**
              
              **June
                30,****2006**
              
              **2005****Cash
                  Flows From Operating Activities**Net
                  loss
              
              $
              (4,724
              )
              $
              (4,639
              )Adjustments
                  to reconcile net loss to net cash used inOperating
                  activitiesDepreciation
              
              
              143
              
              
              81Non-cash
                  compensation expense
              
              
              461
              
              
              475Changes
                  in assets and liabilitiesAccounts receivable
              
              
              (1,704
              )
              
              (1,438
              )Merchandise inventories
              
              
              (3,471
              )
              
              (321
              )Prepaid expenses and other current assets
              
              
              (280
              )
              
              (159
              )Accounts payables
              
              
              (1,849
              )
              
              1,734Accrued expenses
              
              
              (2,046
              )
              
              (817
              )**Net
                  cash used in operating activities**
              
              
              (13,470
              )
              
              (5,084
              )**Cash
                  Flows From Investing Activities**Capital
                  expenditures
              
              
              (97
              )
              
              (68
              )Change
                  in restricted investments
              
              
              6,791
              
              
              -**Net
                  cash provided (used in) by investing activities**
              
              
              6,694
              
              
              (68
              )**Cash
                  Flows From Financing Activities**Change
                  in flooring facility
              
              
              (1,131
              )
              
              705Proceeds
                  from issuance of short-term debt
              
              
              -
              
              
              5,000Proceeds
                  from second private placement, net of cash expenses
              
              
              12,000
              
              
              -Proceeds
                  from note payable to bank
              
              
              500
              
              
              -Redemption
                  of common stock
              
              
              (12,000
              )
              
              -Other
                  financing activities
              
              
              (205
              )
              
              (205
              )**Net
                  cash (used in) provided by financing activities**
              
              
              (836
              )
              
              5,500**Net
                  (Decrease) Increase in Cash and Cash Equivalents**
              
              
              (7,612
              )
              
              348**Cash
                  and Cash Equivalents, beginning of period**
              
              
              21,176
              
              
              1,734**Cash
                  and Cash Equivalents, end of period**
              
              $
              13,564
              
              $
              2,082**Supplemented
                  Cash Flow Disclosure**Cash
                  paid for interest
              
              $
              136
              
              $
              1,068Warrants
                  issued in second offering
              
              $
              1,560
              
              $
              -Shares
                  and warrants issued as stock issuance costs
              
              $
              204
              
              $
              -




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




6




**UBID.COM
      HOLDINGS, INC.**


**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2006**


**(Unaudited)**





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





uBid.com
      Holdings, Inc. and subsidiaries (the “Company”) operate a leading on-line
      Business to Consumer and Business to Business marketplace that enables itself,
      certified merchants, manufacturers, retailers, distributors and small businesses
      to offer high quality excess, new, overstock, close-out, refurbished and limited
      supply brand name merchandise to consumer and business customers primarily
      located in the United States. Through the Company’s website, located at
      www.ubid.com, the Company offers merchandise across a wide range of product
      categories including but not limited to computer products, consumer electronics,
      apparel, housewares, watches, jewelry, travel, sporting goods, home improvement
      products and collectibles. The Company’s marketplace employs a combination of
      auction style and fixed price formats.





The
      Company’s unaudited consolidated financial statements reflect normal recurring
      adjustments that are necessary to present fairly the Company’s financial
      position and results of operations on a basis consistent with that of the prior
      audited consolidated financial statements. As permitted by rules and regulations
      of the Securities and Exchange Commission applicable to quarterly reports on
      Form 10-Q, the Company has condensed or omitted certain information and
      disclosures normally included in financial statements prepared in accordance
      with accounting principles generally accepted in the United States (“GAAP”).
      Results for interim periods are not necessarily indicative of the results that
      may be expected for a full year. These interim financial statements should
      be
      read along with the audited consolidated financial statements included in our
      amended Form 10-K/A for the year ended December 31, 2005.





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





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




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





***Revenue
      Recognition***





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





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





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





7




***Stock
      Based Compensation***





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123(R) (“SFAS 123R”). This pronouncement requires companies to measure the
      cost of employee service received in exchange for a share based award (typically
      stock options) based on the fair value of the award. The Company has elected
      to
      use the “modified prospective” transition method for stock options granted prior
      to January 1, 2006, but for which the vesting period is not complete. Under
      this
      transition method, the Company accounts for such awards on a prospective basis,
      with expense being recognized in its statement of operations beginning in the
      first quarter of 2006 and continuing over the remaining requisite service period
      based on the grant date fair value estimated in accordance with Statement of
      Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
      (“SFAS 123”). Prior to 2006, the Company accounted for employee stock options
      using the method of accounting prescribed by Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees, and associated interpretations
      using the intrinsic method. Generally, no expense was recognized related to
      its
      stock options under this method because the stock option’s exercise price was
      set at the stock’s fair market value on the date the option was granted. The
      Company recognizes these compensation costs on a straight-line basis over the
      requisite service period of the award which is generally the option vesting
      term
      of four years. The total compensation expense related to the stock option plan
      for the three and six months ended June 30, 2006 was approximately $0.2 million
      and $0.5 million, respectively.





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








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





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





Due
      to
      losses in each period presented, the Company has not included the following
      common stock equivalents in its computation of diluted loss per share as their
      input would have been anti-dilutive. Considering the retroactive impact of
      the
      share exchange (at a
      ratio of 2,320 to 1 as discussed in Note 4) ,
      no
      common stock equivalents were outstanding until December 29, 2005.


**June
                  30, 2006**Shares
                  subject to stock warrants
              
              
              3,813,336Shares
                  subject to stock options
              
              
              1,768,1005,581,436




8




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





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





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





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





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







9




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





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





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





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





The
      fair
      value of the 94,300 options awarded during the six months ended June 30, 2006
      was estimated using the Black-Sholes option pricing model with the following
      assumptions:


**Six
                  Months****Ended****June
                  30, 2006**Significant
                  assumptions (weighted average):Risk
                  -free rate
              
              
              5
              %Dividend
                  yield
              
              
              0.0
              %Expected
                  volatility
              
              
              68.0
              %Expected
                  life (years)
              
              
              4


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





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


**Shares
                      under**
                    **option**
              
              **Weighted-****average**
                **exercise
                  price per**
                **share**Outstanding
                  at December 31, 2005
              
              
              1,721,700
              
              $
              2.08Granted
              
              
              94,300
              
              
              3.70Exercised
              
              
              -
              
              
              -Surrendered
              
              
              (47,900
              )
              
              2.08Outstanding
                  at June 30, 2006
              
              
              1,768,100
              
              $
              2.17





10




**Weighted****Average**
              
              **Weighted**
              
              
              
              **Weighted****Number**
              
              **Remaining**
              
              **Average**
              
              **Number**
              
              **Average****Exercise**
              
              **Outstanding
                        at**
              
              **Contractual**
              
              **Exercise**
              
              **Exercisable
                  at**
              
              **Exercise****Price**
              
              **June
                  30, 2006**
              
              **Life**
              
              **Price**
              
              **June
                  30,
                  2006**
              
              **Price**$
              4.50
              
              
              1,673,800
              
              
              9.4
              
              $
              2.08
              
              
              -
              
              $
              2.08$
              7.10
              
              
              1,600
              
              
              9.5
              
              $
              3.92
              
              
              -
              
              $
              3.92$
              6.50
              
              
              1,300
              
              
              9.6
              
              $
              3.59
              
              
              -
              
              $
              3.59$
              6.75
              
              
              70,500
              
              
              9.7
              
              $
              3.73
              
              
              -
              
              $
              3.73$
              6.25
              
              
              10,400
              
              
              9.8
              
              $
              3.45
              
              
              -
              
              $
              3.45$
              6.69
              
              
              10,500
              
              
              9.9
              
              $
              3.69
              
              
              -
              
              $
              3.691,768,100
              
              
              9.4
              
              $
              2.17
              
              
              -
              
              $
              2.17




The
      aggregate intrinsic value of the outstanding options (the difference between
      the
      closing stock price on the last trading day of the second quarter of 2006 of
      $6.47 per share and the exercise price, multiplied by the number of in the
      money
      options) that would have been received by the option holders had all the option
      holders exercised their options on June 30, 2006 was $3.3 million. This amount
      will change based on changes in the fair market value of the Company’s common
      stock.





The
      following is a summary of nonvested stock option activity (in
      thousands):


**Number
                    of**Shares
              
              **Weighted**Average
                  Grant **Date
                  Fair Value**Nonvested
                  at December, 31, 2005
              
              
              1,721,700
              
              $
              2.08Granted
              
              
              94,300
              
              
              3.70Vested
              
              
              -
              
              
              -Canceled
              
              
              (47,900
              )
              
              2.08Nonvested
                  at June 30, 2006
              
              
              1,768,100
              
              $
              2.17





As
      of
      June 30, 2006, $3.7 million of total unrecognized compensation cost related
      to
      stock options is expected to be recognized over a weighted-average vesting
      period of 3.50 years.




**6.**  **Note
      Payable - Bank**





On
      May 9, 2006, the Company and its 100%-owned subsidiary, uBid, Inc. entered
      into a Credit and Security Agreement with Wells Fargo Bank, National Association
      acting through Wells Fargo Business Credit and related security agreements
      and
      other agreements described in the Credit and Security Agreement (the “Credit
      Agreement”). The Credit Agreement provides for advances to uBid, Inc. of up
      to a maximum of $25.0 million. The amount actually available to the Company
      will vary from time to time, depending on, among other factors, the amount
      of
      eligible inventory and the amount of eligible accounts receivable. The
      obligations under the Credit Agreement and all related agreements are secured
      by
      all of uBid, Inc.’s assets. The initial term of the Agreement is
      three years, expiring on April 28, 2009. Up to $7.0 million of the maximum
      amount is available for irrevocable, standby and documentary letters of credit.
      Advances under the Credit Agreement bear interest at a base rate (Wells Fargo
      Bank's prime rate) or LIBOR plus 2.5%. The Credit Agreement requires a
      prepayment fee of $0.5 million if the Company terminates the Credit Agreement
      during its first year, $0.4 million if it terminates the Credit Agreement during
      its second year and $0.1 million if the Company terminates the Credit Agreement
      during the third year. The Credit Agreement requires the Company, among other
      things, to limit capital expenditures and maintain minimum availability on
      the
      line. Also, the Company is obligated contractually by a restrictive lock box
      arrangement. The Credit Agreement also requires the Company to pay a variety
      of
      other fees and expenses, including minimum monthly interest of $0.01 million.
      The Company as of June 30, 2006 had $0.2 million in deferred financing fees
      being amortized over the life of the Credit Agreement. As of June 30, 2006,
      the
      effective loan rate was 8.25% and the Company had an outstanding balance of
      $0.5
      million and was in compliance with all the loan covenants.




11




**7.**  **Subsequent
      Events**





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





On
      April
      28, 2006 the Company became obligated to pay $0.4 million monthly for liquidated
      damages until the registration statement was declared effective. The Securities
      Purchase Agreement was amended on June 30, 2006 by the required 66 2/3
      stockholder vote to change the required effective date to July 31, 2006. As
      a
      result of the registration statement being declared effective on July 21, 2006,
      no liquidated damages were due.





On
      July
      26, 2006, DIBU Trading Corp., a subsidiary of the Company purchased certain
      assets for cash of the online auction company Bidville, Inc. which includes
      the
      company’s customer file, brand name, and URL and related online technologies.
      Bidville, Inc., a Nevada corporation, was founded in 1999 primarily as a sport
      card auction site but began expending its merchandise offerings over the last
      few years to compete as an online auction alternative to eBay. Bidville provides
      unique user features, such as storefronts, watch list, image gallery, and fixed
      price marketplaces. The
      purchase price was less than 10% of total assets of the
      Company .




12





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





The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with our condensed consolidated
      financial statements and related notes included in Item 1 of Part 1 of this
      Quarterly Report and the audited consolidated financial statements and notes
      thereto and Management’s Discussion and Analysis of Financial Condition and
      Results of Operations contained in the Company’s Annual Report on Form 10-K as
      amended for the fiscal year ended December 31, 2005. uBid.com Holdings, Inc.
      is
      a holding company for uBid, Inc., our operating business. For purposes of this
      Quarterly Report, unless otherwise indicated or the context otherwise requires,
      all references herein to “uBid,” “we,” “us,” and “our” refer to uBid.com
      Holdings, Inc. and our subsidiaries.





**Overview**





We
      operate an online marketplace located at www.ubid.com, offering new, close-out,
      overstock and refurbished merchandise to both consumers and businesses using
      auction style and fixed price formats. We offer consumers a trustworthy buying
      environment in which we continually monitor and certify activity to eliminate
      the potential for fraud by certifying all merchants and processing 100% of
      all
      transactions between buyers and sellers. Our marketplace offers brand-name
      merchandise from over 200 product categories including computer products,
      consumer electronics, apparel, housewares, watches, jewelry, travel, sporting
      goods, home improvement products and collectibles.




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




Our
      business model consists of two distinct business channels: uBid Direct and
      the
      UCM Program.




We
      purchase merchandise outright in the uBid Direct channel and sell to consumers
      and businesses. On this merchandise, we bear the inventory, return and credit
      risk. The full sales amount is recorded as revenue upon verification of the
      credit card transaction and shipment of the merchandise.




We
      also
      sell merchandise through the UCM Program channel by allowing prescreened third
      party merchants to sell their product through our online marketplace to
      consumers and business. On this merchandise, we do not take title and therefore
      do not bear the related inventory risk. In the UCM Program, we are the primary
      obligor to whom payment is due, but we bear no inventory or returns risk, so
      we
      record only our commission as revenue.




In
      all
      instances where the credit card authorization has been received but merchandise
      has not been shipped, we defer revenue recognition until the merchandise is
      shipped.




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








13





**Executive
      Commentary**




***Success
      Measures*** :
      Our
      management believes that the most important financial and non-financial measures
      that track our progress include sales, orders shipped, website traffic, number
      of orders, inventory turnover, average order value, gross margin, customer
      acquisition costs, advertising expense, personnel costs, and fulfillment
      costs.




**Key
      Business Metrics**




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





**Gross
      Merchandise Sales (GMS)**


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





***Number
      of Orders***


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




***Average
      Order Value***


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




***Visitors***


A
      Visitor
      is a consumer or business that voluntarily clicks through to the website
      (uBid.com) using an online 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.





***Approved
      UCM Program Vendors***


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


**Q3**
              
              **Q4**
              
              **Q1**
              
              **Q2**
              
              **Q3**
              
              **Q4**
              
              **Q1**
              
              **Q2****2004**
              
              **2004**
              
              **2005**
              
              **2005**
              
              **2005**
              
              **2005**
              
              **2006**
              
              **2006****Measure**GMS
                  (in thousands)
              
              $
              26,640
              
              $
              28,059
              
              $
              34,623
              
              $
              28,020
              
              $
              27,215
              
              $
              31,035
              
              $
              31,167
              
              $
              30,286Number
                  of orders (in thousands)Direct
              
              
              33
              
              
              41
              
              
              46
              
              
              39
              
              
              36
              
              
              43
              
              
              36
              
              
              37UCM
                  Program
              
              
              43
              
              
              50
              
              
              51
              
              
              64
              
              
              72
              
              
              93
              
              
              87
              
              
              88Total
                  orders
              
              
              76
              
              
              91
              
              
              97
              
              
              103
              
              
              108
              
              
              136
              
              
              123
              
              
              125Average
                  Order ValueDirect
              
              $
              613
              
              $
              511
              
              $
              443
              
              $
              493
              
              $
              495
              
              $
              398
              
              $
              465
              
              $
              416UCM
                  Program
              
              $
              101
              
              $
              104
              
              $
              119
              
              $
              106
              
              $
              112
              
              $
              108
              
              $
              107
              
              $
              110Visitors
                  (in thousands)
              
              
              5,523
              
              
              7,245
              
              
              6,829
              
              
              7,545
              
              
              8,287
              
              
              7,051
              
              
              6,369
              
              
              7,215Approved
                  UCM Program Vendors
              
              
              53
              
              
              70
              
              
              169
              
              
              202
              
              
              401
              
              
              628
              
              
              949
              
              
              1,307





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





14





Our
      revenue is dependent in part on sales of products provided by Sony Electronics,
      Inc (“Sony”) and Hewlett-Packard Company (“HP”). Sony related products
      represented 17.1% and 15.6% of sales for the three and six months ended June
      30,
      2006 respectively compared to 36.3% and 36.6% for the three and six months
      ended
      June 30, 2005 respectively. HP related products represented 12.0% and 10.6%
      of
      sales for the three and six months ended June 30, 2006 respectively compared
      to
      9.4% and 12.0% for the three and six months ended June 30, 2005, respectively.
      No other supplier represented more than 5% of our net revenues for any period
      presented.





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





***Gross
      Margin*** :
      Our
      gross 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.





***Expenses*** *:* Sales
      and marketing, general and administrative (“SG&A”) expenses consist
      primarily of sales and marketing expenses, including online marketing
      activities, order fulfillment and other costs, such as personnel, rent,
      warehouse and handling, common area maintenance, depreciation, credit card
      processing charges, insurance, legal and accounting fees. Interest expense
      charges are from our IBM flooring facility at a rate of 1% per month on the
      outstanding balances, interest and amortization of loan origination fees on
      our
      credit facility, and related party interest on borrowings from 2005. Interest
      expense on advances from related parties is primarily based on an annual
      interest rate of 14% and all borrowings were paid off on December, 29,
      2005.




**Results
      of Operations**





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


**(Dollars
                  in thousands)**
              
              **(Dollars
                  in thousands)****Three
                  Months Ended June 30,**
              
              **Six
                  Months Ended June 30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**$
              
              %
              
              $
              
              %
              
              $
              
              %
              
              $
              
              %Net
                  Revenues
              
              $
              19,097
              
              
              100.0
              %
              $
              19,885
              
              
              100.0
              %
              $
              39,185
              
              
              100.0
              %
              $
              46,703
              
              
              100.0
              %Cost
                  of Revenue
              
              
              16,980
              
              
              88.9
              %
              
              17,095
              
              
              86.0
              %
              
              34,159
              
              
              87.2
              %
              
              41,259
              
              
              88.3
              %Gross
                  margin
              
              
              2,117
              
              
              11.1
              %
              
              2,790
              
              
              14.0
              %
              
              5,026
              
              
              12.8
              %
              
              5,444
              
              
              11.7
              %General
                  and administrative
              
              
              3,451
              
              
              18.1
              %
              
              3,602
              
              
              18.1
              %
              
              6,984
              
              
              17.8
              %
              
              6,749
              
              
              14.5
              %Sales
                  and marketing
              
              
              1,436
              
              
              7.5
              %
              
              1,127
              
              
              5.7
              %
              
              2,961
              
              
              7.6
              %
              
              2,410
              
              
              5.2
              %Total
                  operating expenses
              
              
              4,887
              
              
              25.6
              %
              
              4,729
              
              
              23.8
              %
              
              9,945
              
              
              25.4
              %
              
              9,159
              
              
              19.6
              %Loss
                  from operations
              
              
              (2,770
              )
              
              (14.5
              )%
              
              (1,939
              )
              
              (9.8
              )%
              
              (4,919
              )
              
              (12.6
              )%
              
              (3,715
              )
              
              (8.0
              )%Interest
                  Income / (Expense) & Other, Net
              
              
              49
              
              
              0.3
              %
              
              (507
              )
              
              (2.5
              )%
              
              195
              
              
              0.5
              %
              
              (924
              )
              
              (2.0
              )%Net
                  Loss
              
              
              (2,721
              )
              
              (14.2
              )%
              
              (2,446
              )
              
              (12.3
              )%
              
              (4,724
              )
              
              (12.1
              )%
              
              (4,639
              )
              
              (10.0
              )%Preferred
                  Stock Dividend
              
              
              —
              
              
              —
              
              
              (15
              )
              
              —
              
              
              —
              
              
              —
              
              
              (30
              )
              
              —Net
                  Loss Available to Common Shareholders
              
              $
              (2,721
              )
              
              (14.2
              )%
              $
              (2,461
              )
              
              (12.3
              )%
              $
              (4,724
              )
              
              (12.1
              )%
              $
              (4,669
              )
              
              (10.0
              )%





15




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





***Net
      Revenues:*** Net
      revenues for the quarter ended June 30, 2006 were $19.1 million, a decrease
      of
      $0.8 million, or 4.0%. Direct consumer revenues decreased $3.6 million or 19.4%
      while direct business revenues increased $2.5 million or 400% and UCM revenues
      increased $0.3 million or 37.5% over the quarter ended June 30, 2005.





Direct
      revenues decreased primarily as a result of decreased volumes and average sales
      prices of desktop computers and monitors. Desktop computer and monitor sales
      decreased 61.9% and 65.0%, respectively, over the same prior year period. The
      decrease in desktops and monitors was offset by increased sales in video
      categories of 62.9%. The increase in the direct business channel was related
      to
      the hiring of personnel who specialize in these types of transactions and the
      direct sale to businesses of inventory that had been bought for the direct
      consumer channel.





Total
      orders increased by 2,000 or 1.6% to 125,000 for the three months ended June
      30,
      2006. The direct consumer orders increased by 1,000 or 2.8% and UCM orders
      increased by 1,000 or 1.1%. The average order value for the direct and UCM
      channels were $416 and $110 versus $493 and $106 from a year ago, respectively.
      The total number of approved UCM vendors to sell on the website grew from 202
      in
      June 2005 to 1,307, or 547%, in June 2006.  We
      will
      continue to drive UCM revenue growth by increasing the participation of
      merchants in our UCM Program.




***Gross
      Margin:***  Gross
      margin for quarter ended June 30, 2006 was $2.1 million, a decrease of
      $0.7 million or 24.1% compared to the quarter ended June 30, 2005. The
      decrease was primarily a result of the direct consumer margins decreasing in
      the
      computer related categories. Sales of desktops and laptops continue to decline
      in average price which results in decreasing margins
      accordingly.




Generally,
      our overall gross margins fluctuate based on several factors, including our
      product mix of sales; sales volumes mix by our direct consumer business, direct
      business to business and UCM merchants; vendor pricing; customer pricing and
      inventory management decisions.




In
      addition, gross profit was affected due to an increase in the Company’s
      inventory reserves. A substantial investment was made in certain categories
      of
      inventories in the first quarter of 2006 in anticipation of increased visitors
      to the website. While visitors increased 17.9% from the first quarter ended
      March 31, 2006, the increased visitors did not convert to bidders which resulted
      in declining average order values. The Company expects that gross margins may
      continue to be affected in the third quarter of 2006 as the Company continues
      to
      manage overall inventory levels.





The
      decrease in the direct consumer business gross profit and the increase in
      inventory reserves, were offset by the increase in UCM gross profits. The UCM
      gross profit grew from $0.8 million to $1.1 million, or 37.5%. Overall gross
      profit as a percentage of net revenues decreased to 11.1% from 14.0% from the
      same period a year ago.





16




***Sales
      and Marketing, General and Administrative Expenses:*** SG&A
      expenses for the quarter ended June 30, 2006 were $4.9 million, an increase
      of
      $0.2 million or 4.3%, compared to quarter ended June 30, 2005. Advertising
      expenses increased $0.3 million or 30.0% for the three month period ended June
      30, 2006 primarily due to the increased focus on growing the number of visitors
      to the website through online marketing channels, such as sponsored search,
      portal advertising, and e-mail campaigns. The number of visitors was down
      687,000 or 9.1% from prior year period, but was up 7.7 %
      from
      the previous quarter. The
      increased number of visitors did not convert into bidders. During
      the quarter ended June 30, 2006 we discontinued the least effective marketing
      efforts to optimize profitable online campaigns and are focusing on television,
      print and radio campaigns for the third quarter of 2006.




General
      & Administrative expenses decreased by $0.1million or 2.7% from the quarter
      ended June 30, 2005. The decrease for the quarter ended June 30, 2006 was due
      to
      a reduction of $0.1 million in telecommunications, hardware and storage fees,
      stock-based compensation of $0.3 million and related party management fees
      of
      $0.1 million. These decreases are related to the expiration of some equipment
      leases and other favorable pricing with storage fees, cancellation of the
      Phantom stock plan in preparation of the merger, and the elimination of related
      party management fees. The decreases were offset by an increase of $0.1 million
      in legal, accounting, and increased director and officer insurance expenses
      required for being a public company. In addition, other G&A, warehouse, and
      depreciation increased $.01 million, $.01 million and $.01 million ,
      respectively due to increased headcount and warehouse space in growing the
      direct business to business channel.


**Three
                  months ended****June
                  30****SG&A
                  Expenses:**
              
              **2006**
              
              **2005**
              
              **Increase
                  (Decrease)****(Dollars
                  in millions)**Stock-based
                  Compensation
              
              $
              0.2
              
              $
              0.5
              
              $
              (0.3
              )Salary
                  and Benefits
              
              
              1.5
              
              
              1.5
              
              
              -Warehouse
                  Expense
              
              
              0.3
              
              
              0.2
              
              
              0.1Depreciation
              
              
              0.1
              
              
              —
              
              
              0.1Advertising
                  Expense
              
              
              1.3
              
              
              1.0
              
              
              0.3Credit
                  Card Fees
              
              
              0.6
              
              
              0.6
              
              
              —Telecommunications,
                  Hardware and Storage
              
              
              0.3
              
              
              0.4
              
              
              (0.1
              )Legal,
                  Audit, Insurance, and other Regulatory Fees
              
              
              0.3
              
              
              0.2
              
              
              0.1Facilities
                  Expense
              
              
              0.2
              
              
              0.2
              
              
              —Related
                  Party Management Fees
              
              
              —
              
              
              0.1
              
              
              (0.1
              )Other
                  SG&A
              
              
              0.1
              
              
              —
              
              
              0.1$
              4.9
              
              $
              4.7
              
              $
              0.2





***Other
      Expense:*** Interest
      income was $0.05 million for the quarter ended June 30, 2006 versus interest
      expense of $0.5 million for the quarter ended June 30, 2005. The Company retired
      all debt after receiving the capital raised on December 29, 2005 and invested
      excess proceeds in CD’s and overnight funds, resulting in a reduction of
      interest expense and an increase in interest income in the second quarter of
      2006.





***Net
      Losses:*** The
      Company experienced a net loss of $2.7 million or $.13 per share for the quarter
      ended June 30, 2006 compared to a net loss of $2.5 million or $.99 per share
      for
      the quarter ended June 30, 2005.




**Comparison
      of Six Months ended June 30, 2006 and June 30, 2005**





***Net
      Revenues:*** Net
      revenues for six months ended June 30, 2006 were $39.2 million, a decrease
      of
      $7.5 million or 16.1%. Direct consumer revenues decreased $7.8 million or 19.9%,
      direct business revenues decreased $0.4 million and UCM revenues increased
      $0.7
      million or 50.0% over the same six month period a year ago. Desktops and
      monitors were down 66.5% and 49.2%, respectively, due to a decrease in the
      volume of units sold and average sales prices of computer-related
      products.




Total
      orders increased by 48,000 or 24% to 248,000 for the six months ended June
      30,
      2006. The direct consumer orders decreased 12,000 or 14.1% and UCM orders
      increased 60,000 or 52.2%. Traffic to the website was 13.2 million
      visitors for the six months ended 2006 versus 14.4 million visitors for the
      same
      period in 2005. The average order value for the direct and UCM channels were
      $440 and $107 versus $469 and $112 from a year ago, respectively.





17




***Gross
      Margin:*** Gross
      margin for the six months ended June 30, 2006 was $5.0 million, compared to
      $5.4
      million for the same period a year ago. The direct consumer business decreased
      $1.3 million due to an increase in inventory reserves of $0.4 million and
      decreases of $0.9 million in the desktops, monitors and laptop computer
      categories. The decrease was offset by increases of $0.7 million in the UCM
      channel and $0.2 million in the direct business channel.




***Sales
      and Marketing, General and Administrative Expenses:*** SG&A
      expenses for the six months ended June 30, 2006 were $9.9 million, an increase
      of $0.7 million, or 7.6%, compared to six months ended June 30, 2005.
      Advertising expenses increased $0.5 million, or 23.8%, for the six months ended
      June 30, 2006 primarily due to the increased focus and costs related to growing
      internet visitors to the website. Visitors to the website were 13.2 million
      for the six months ended 2006 versus 14.4 million for the same period in
      2005.





General
      & Administrative expenses increased by $0.2 million, or 2.2%, from the six
      months ended June 30, 2005. The increase for the six months ended June 30,
      2006
      was due to an increase of $0.3 million in legal, accounting, and increased
      director and officer insurance expenses required for being a public company.
      In
      addition, other G&A, credit card fees, and depreciation increased $.01
      million, $.01 million and $.01 million, respectively due to increased headcount
      and warehouse space in growing the direct business to business channel. The
      increases were offset by decreases of $0.2 million in telecommunications,
      hardware and storage fees, and related party management fees of $0.2 million.
      These decreases are related to the expiration of some equipment leases and
      other
      favorable pricing with storage fees, cancellation of the Phantom stock plan
      in
      preparation of going public, and the elimination of related party management
      fees.





**Six
                  months ended**
              
              ******June
                  30****SG&A
                  Expenses:**
              
              **2006**
              
              **2005**
              
              **Increase
                  (Decrease)****(Dollars
                  in millions)**Stock-based
                  Compensation
              
              $
              0.5
              
              $
              0.5
              
              $
              —Salary
                  and Benefits
              
              
              3.1
              
              
              3.1
              
              
              —Warehouse
                  Expense
              
              
              0.5
              
              
              0.5
              
              
              —Depreciation
              
              
              0.2
              
              
              0.1
              
              
              0.1Advertising
                  Expense
              
              
              2.6
              
              
              2.1
              
              
              0.5Credit
                  Card Fees
              
              
              1.3
              
              
              1.2
              
              
              0.1Telecommunications,
                  Hardware and Storage
              
              
              0.5
              
              
              0.7
              
              
              (0.2
              )Legal,
                  Audit, Insurance, and other Regulatory Fees
              
              
              0.6
              
              
              0.3
              
              
              0.3Facilities
                  Expense
              
              
              0.4
              
              
              0.4
              
              
              —Related
                  Party Management Fees
              
              
              —
              
              
              0.2
              
              
              (0.2
              )Other
                  SG&A
              
              
              0.2
              
              
              0.1
              
              
              0.1$
              9.9
              
              $
              9.2
              
              $
              0.7




***Other
      Expense:*** Interest
      income was $0.2 million for the six months ended June 30, 2006 versus interest
      expense of $0.9 million for the six months ended June 30, 2005. The Company
      retired all debt after receiving the capital raised on December 29, 2005
      resulting in a reduction of interest expense and an increase in interest income
      for the six month period ended June 30, 2006.




***Net
      Losses:*** The
      Company experienced a net loss of $4.7 million or $.23 per share for the six
      months ended June 30, 2006 compared to a net loss of $4.7 million or $1.88
      per
      share for the same period ended June 30, 2005.





18




***Liquidity
      and Capital Resources***





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





Net
      cash
      used in operating activities for six months ended June 30, 2006 was $13.7
      million, compared to $5.3 million used in the six months ended June 30, 2005.
      Inventory increased $3.5 million or 58% from December 31, 2005. The increase
      in
      inventories was intended to reverse the decline in the direct consumer channel
      sales, but as mentioned above, the declines in sales of computer related
      products stunted the growth and contributed to increased mark downs of inventory
      in these categories in 2006. Accounts receivable increased $1.8 million due
      to
      the growth of the direct business to business channel and the nature of payment
      terms associated with this type of business. Additionally, accounts payable
      and
      accrued expenses decreased $3.9 million due to the timing of payments in 2006
      and the tightening of payment terms with vendors in the direct consumer channel.




Net
      cash
      provided by investing activities was $6.7 million for six months ended
      June 30, 2006 compared to $0.1 million used in the same period last year.
      Restricted investments used primarily as collateral on irrevocable letters
      of
      credit decreased during the quarter as we used our credit facility which
      provides for up to $7.0 million in letters of credit.





Net
      cash
      used in financing activities was $0.6 million for the six months ended June
      30,
      2006 compared to a cash inflow of $5.7 million for the same period last year.
      The cash outflow was primarily made up of payments on the IBM flooring facility
      of $1.1 million offset by borrowing of $0.5 million on the Wells Fargo credit
      line. The cash inflow of $5.7 million for the six months ended June 30, 2005
      was
      from related party borrowings to fund operating losses and working capital
      needs.





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





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





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





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




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





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





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








19




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





*Internal
      Control Over Financial Reporting.* There
      have been no changes in our internal control over financial reporting identified
      in the evaluation that occurred during the second quarter of fiscal year 2006
      that have materially affected, or are reasonably likely to materially affect,
      our internal control over financial reporting.




**PART
      II OTHER INFORMATION**




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





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





**ITEM
      1A. RISK FACTORS**




In
      addition to other information set forth in this report, you should carefully
      consider the factors discussed in Part 1, “Item 1A. Risk Factors” in our Annual
      Report on Form 10-K as amended for the year ended December 31, 2005, which
      could
      materially affect our business, financial condition or future results. The
      risks
      described in our Annual Report on Form 10-K as amended are not the only risks
      facing the Company. Additional risks and uncertainties not currently known
      to us
      or that are currently deemed to be immaterial also may materially adversely
      affect our business, financial conditions and/or operating results.




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





During
      the quarter ended June 30, 2006, options to purchase an aggregate of 94,300
      shares of our common stock were granted to employees. Options to purchase an
      aggregate of 1,600 shares at $7.10 per share were granted on January 15, 2006,
      options to purchase an aggregate of 300 shares at $6.50 per share were granted
      on February 14, 2006, options to purchase an aggregate of 70,500 shares at
      $6.75
      per share were granted on March 15, 2006, options to purchase an aggregate
      of
      10,400 shares at $6.25 per share were granted on April 15, 2006, options to
      purchase an aggregate of 10,500 shares at $6.69 per share were granted on May
      15, 2006, and options to purchase an aggregate of 1,000 shares at $6.50 per
      share were granted on June 15, 2006. The options all have a term of ten years
      and vest in four annual increments beginning on the first anniversary date
      of
      the date of grant. The option grants were exempt from registration under Section
      4(2) of the Securities Act of 1933, as amended, which provides an exemption
      for
      transactions not involving a public offering. All other sales and issuances
      of
      unregistered securities in the quarter ended June 30, 2006 were previously
      reported in our Current Report on Form 8-K filed with the Securities and
      Exchange Commission on February 3, 2006.




**ITEM
      3. DEFAULT UPON SENIOR SECURITIES**





None




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




None




**ITEM
      5. OTHER INFORMATION**





None





20




**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 August 14, 2006.


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







21