**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      DC 20549








FORM
      10-Q





**(Mark
      One)**





**x QUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**




**For
      the Quarterly Period Ended June 30, 2006**


**OR**





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


**EXCHANGE
      ACT OF 1934** ****





**For
      the Transition Period From** **** **to** **** **.**







**Commission
      File Number: 000-25781**





**NET
      PERCEPTIONS, INC.**


(Exact
      Name of Registrant as Specified in its Charter)





**Delaware**
            
            **41-1844584**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                Number)





**One
      Landmark Square**


**Stamford,
      Connecticut 06901**


(Address
      of principal executive offices, Zip Code)








**(203)
      428-2040**


(Registrant’s
      telephone number, including area code)








Indicate
      by check mark whether the registrant: (1) has filed all reports required 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 such 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. 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 Rule
      12b-2 of the Exchange Act) YES o NO x





**As
      of August 1, 2006, there were outstanding 29,078,755 shares of the registrant’s
      Common Stock, $0.0001 par value.**











**NET
      PERCEPTIONS, INC.**


FORM
      10-Q


For
      the
      Quarter Ended June 30, 2006











**TABLE
      OF CONTENTS**








******Page****PART
              I. FINANCIAL INFORMATION**Item 1.
            Financial
                StatementsConsolidated
                Balance Sheets as of June 30, 2006 and December 31, 2005
            1Consolidated
                Statements of Operations for the Three and Six Months Ended June
                30, 2006
                and 2005
            2Consolidated
                Statements of Cash Flows for the Six Months Ended June 30, 2006and
                2005
            3Notes
                to the Consolidated Financial Statements
            4Item 2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            10Item 3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            16Item 4.
            Controls
                and Procedures
            16**PART
              II. OTHER INFORMATION**Item 4.
            Submission
                of Matters to a Vote of Security Holders
            16Item 6.
            Exhibits
            17**SIGNATURES**
            18**EXHIBIT
              INDEX**
            19













**PART
              I.**
            **FINANCIAL
                INFORMATION**





**Item
              1.**
            **Financial
                Statements**








**NET
      PERCEPTIONS, INC.**


CONSOLIDATED
      BALANCE SHEETS


(UNAUDITED)


(in
      thousands)





June
                30,
              2006
            
            December
                31,
              2005**Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            2,804
            
            $
            203Marketable
                securities
            
            
            11,784
            
            
            14,659Prepaid
                expenses and other current assets
            
            
            132
            
            
            123Total
                current assets
            
            
            14,720
            
            
            14,985Other
                assets
            
            
            225
            
            
            210Total
                assets
            
            $
            14,945
            
            $
            15,195**Liabilities
                and Stockholders’ Equity**Current
                liabilities:Accounts
                payable and accrued liabilities
            
            $
            98
            
            $
            267Total
                current liabilities
            
            
            98
            
            
            267Accrued
                interest payable
            
            
            113
            
            
            87Note
                payable
            
            
            2,533
            
            
            2,533Total
                liabilities
            
            
            2,744
            
            
            2,887Commitments
                and contingenciesStockholders’
                equity:Common
                stock
            
            
            2
            
            
            2Additional
                paid-in capital
            
            
            234,288
            
            
            234,400Unearned
                stock compensation
            
            
            --
            
            
            (108
            )Accumulated
                other comprehensive loss
            
            
            (4
            )
            
            (4
            )Accumulated
                deficit
            
            
            (222,085
            )
            
            (221,982
            )Total
                stockholders’ equity
            
            
            12,201
            
            
            12,308Total
                liabilities and stockholders’ equity
            
            $
            14,945
            
            $
            15,195








See
      accompanying notes to the consolidated financial statements.





1





**NET
      PERCEPTIONS, INC.**





CONSOLIDATED
      STATEMENTS OF OPERATIONS


(Unaudited,
      in thousands, except per share amounts)








Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,**2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenues:Service,
                maintenance and royalties
            
            $
            1
            
            $
            32
            
            $
            20
            
            $
            43Total
                revenues
            
            
            1
            
            
            32
            
            
            20
            
            
            43Cost
                of revenues:Service
                and maintenance
            
            
            --
            
            
            --
            
            
            --
            
            
            --Total
                cost of revenues
            
            
            --
            
            
            --
            
            
            --
            
            
            --Gross
                margin
            
            
            1
            
            
            32
            
            
            20
            
            
            43Operating
                expenses:General
                and administrative
            
            
            261
            
            
            109
            
            
            349
            
            
            169Gain
                on litigation settlement
            
            
            --
            
            
            --
            
            
            --
            
            
            (229
            )Transaction
                expenses
            
            
            50
            
            
            --
            
            
            50
            
            
            --Total
                operating expenses
            
            
            311
            
            
            109
            
            
            399
            
            
            (60
            )Operating
                income (loss)
            
            
            (310
            )
            
            (77
            )
            
            (379
            )
            
            103Other
                income (expense):Interest
                income
            
            
            176
            
            
            104
            
            
            335
            
            
            187Interest
                expense
            
            
            (13
            )
            
            (15
            )
            
            (26
            )
            
            (42
            )Other
                income (expense)
            
            
            (17
            )
            
            49
            
            
            (33
            )
            
            72Total
                other income (expense), net
            
            
            146
            
            
            138
            
            
            276
            
            
            217Net
                income (loss)
            
            $
            (164
            )
            $
            61
            
            $
            (103
            )
            $
            320Net
                income (loss) per share:Basic
            
            $
            (0.01
            )
            $
            0.00
            
            $
            (0.00
            )
            $
            0.01Diluted
            
            $
            (0.01
            )
            $
            0.00
            
            $
            (0.00
            )
            $
            0.01Shares
                used in computing basic and diluted net income (loss) per
                share:Basic
            
            
            29,060
            
            
            28,918
            
            
            29,026
            
            
            28,355Diluted
            
            
            29,060
            
            
            29,217
            
            
            29,026
            
            
            29,195





See
      accompanying notes to the consolidated financial statements.







2


**NET
      PERCEPTIONS, INC.**





CONSOLIDATED
      STATEMENTS OF CASH FLOWS


(Unaudited,
      in thousands)





Six
                Months Ended
              June
                30,2006
            
            2005**Cash
                flows from operating activities:**Net
                income (loss)
            
            $
            (103
            )
            $
            320Reconciliation
                of net income (loss) to net cash (used in) provided by operating
                activities:Amortization
                of debt issuance costs
            
            
            15
            
            
            14Amortization
                of discount on debt
            
            
            --
            
            
            16Stock-based
                compensation
            
            
            52
            
            
            36Amortization
                of discounts on investments, net
            
            
            (260
            )
            
            (7
            )Changes
                in assets and liabilities:Prepaid
                expenses and other current assets
            
            
            (9
            )
            
            (118
            )Accounts
                payable and accrued liabilities
            
            
            (199
            )
            
            (50
            )Other
                assets
            
            
            (30
            )
            
            --Net
                cash (used in) provided by operating activities
            
            
            (534
            )
            
            211**Cash
                flows from investing activities:**Proceeds
                from maturity of marketable securities
            
            
            17,550
            
            
            --Purchase
                of marketable securities
            
            
            (14,415
            )
            
            (2,998
            )Net
                cash provided by (used in) investing activities
            
            
            3,135
            
            
            (2,998
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            2,601
            
            
            (2,787
            )Cash
                and cash equivalents at beginning of period
            
            
            203
            
            
            14,444Cash
                and cash equivalents at end of period
            
            $
            2,804
            
            $
            11,657SUPPLEMENTAL
                DISCLOSURE:Deferred
                compensation
            
            $
            51
            
            $
            35Restricted
                stock
            
            $
            (56
            )
            $
            50Cash
                paid for taxes
            
            $
            64
            
            $
            3





See
      accompanying notes to the consolidated financial statements.




3





NET
      PERCEPTIONS, INC.


NOTES
      TO
      THE CONSOLIDATED FINANCIAL STATEMENTS


(amounts
      in thousands, except per share amounts)








**Note
      1. Basis of Presentation**





The
      accompanying unaudited consolidated financial statements of Net Perceptions,
      Inc. (“Net Perception” or the “Company” which may be referred to as “we”, “us”
or “our”) as of and for the three and six months ended June 30, 2006 and 2005,
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America and instructions to Form 10-Q and Article 10
      of
      Regulation S-X. Accordingly, they do not included all of the information in
      notes required by accounting principles generally accepted in the United States
      of America for complete financial statements. In the opinion of management,
      all
      adjustments (consisting of normal recurring accruals) necessary for a fair
      presentation of the unaudited consolidated financial statements have been
      included. The results of the three and six months ended June 30, 2006 are not
      necessarily indicative of the results to be obtained for the year ending
      December 31, 2006. These interim financial statements should be read in
      conjunction with the Company’s audited consolidated financial statements and
      footnotes thereto included in the Company’s Form 10-K for the fiscal year ended
      December 31, 2005, filed with the Securities and Exchange Commission on March
      31, 2006.





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries. All inter-company accounts and transactions have
      been
      eliminated. Certain prior period balances have been reclassified to conform
      with current period presentation.








**Note
      2. Stock-based compensation**





On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payments” (“FAS 123R”), requiring
      recognition of expense related to the fair value of stock option awards. The
      Company recognizes the cost of the share-based awards on a straight-line basis
      over the requisite service period of the award. Prior to January 1, 2006, the
      Company accounted for stock option plans under the recognition and measurement
      provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees” (“APB 25”) and related interpretations, as permitted by
      Statement of Financial Accountant Standard No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS 123”). Effective January 1, 2006, the Company adopted the
      fair value provisions of FAS 123R, using the modified prospective transition
      method. Under this transition method, compensation cost recognized during the
      first six months of 2006 includes compensation cost for all share-based payments
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123. Results for prior periods have not been restated.





We
      will
      continue to estimate the fair value of our option awards granted after January
      1, 2006, using a Black-Scholes option pricing model. No options were granted
      during the three- or six-month periods ended June 30, 2006. As of June 30,
      2006,
      there were 168 unvested shares and compensation expense of $5 recognized from
      these unvested stock options. The remaining compensation expense for these
      unvested options is $79 as of June 30, 2006. The expected life of the options
      granted is management’s estimate and represents the period of time that options
      granted are expected to be outstanding. We currently do not pay dividends.
      Volatility is based on the historical volatility of our stock price. The
      risk-free interest rate for periods within the contractual life of the option
      is
      based on the U.S. Treasury yield curve in effect at the time of grant. The
      fair
      value of each option grant during the six months ended June 30, 2005 is
      estimated on the date of grant with the following weighted-average
      assumptions:





Expected
                  life of option
              5
                  yearsDividend
                  yield
              0.0%Volatility
              57.0%Risk
                  free interest rate
              4.0%


4


The
      weighted average fair value of options granted during the six months ended
      June
      30, 2005 is as follows:





Fair
                  value of each option grant
              $
                  0.39Total
                  number of options granted
              65Total
                  fair value of all options granted
              $
                  25





Outstanding
      options, consisting of incentive and non-qualified stock options, generally
      vest
      and become exercisable over a one- to three-year period from the date of grant.
      The outstanding options generally expire ten years from date of grant or upon
      retirement from the Company and are contingent upon continued employment during
      the applicable ten-year period. The following assumptions were utilized under
      FAS 123R for the outstanding options as of June 30, 2006:





Expected
                  life of options
              5.65
                  yearsDividend
                  yield
              0.0%Volatility
              52.8%Risk
                  free interest rate
              3.4%Fair
                  value of each option grant
              $0.28




The
      following table shows what the effect on net income and income per share if
      we
      had applied the fair value recognition provisions of SFAS 123, to options
      granted under our stock option plans during the three- and six-month period
      ended June 30, 2005. For purposes of this pro forma disclosure, the value of
      the
      options is amortized to expense on a straight-line basis over the vesting period
      and forfeitures are recognized as they occur.





Three
                Months Ended
            
            Six
                Months EndedJune
                30, 2005
            
            June
                30, 2005Net
                income, as reported
            
            $
            61
            
            $
            320Add:
                Stock-based employee compensation expense included in reported net
                income
            
            
            21
            
            
            36Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for all awards
            
            
            (26
            )
            
            (46
            )Pro
                forma net income
            
            $
            56
            
            $
            310Net
                income per share:BasicAs reported
            
            $
            0.00
            
            $
            0.01Pro forma
            
            $
            0.00
            
            $
            0.01DilutedAs reported
            
            $
            0.00
            
            $
            0.01Pro forma
            
            $
            0.00
            
            $
            0.01








A
      summary
      of the status of stock option grants as of June 30, 2006, and changes during
      the
      six months ended June 30, 2006, is presented below:





WeightedAverageOptions
              
              Exercise
                  PriceOutstanding
                  at December 31, 2005
              
              
              321
              
              $
              0.68Granted
              
              
              --
              
              
              --Exercised
              
              
              --
              
              
              --Forfeited
              
              
              --
              
              
              --Outstanding
                  at June 30, 2006
              
              
              321
              
              $
              0.68Options
                  exercisable at June 30, 2006
              
              
              153
              
              $
              0.64






5





The
      following table summarizes information about stock options outstanding as of
      June 30, 2006:


Weighted




WeightedRemaining
                  Life
              
              AverageExercise
                  Price Range
              
              Outstanding
              
              Exercisable
              
              In
                  Years
              
              Exercise
                  Price$0.23
              
              
              6
              
              
              6
              
              
              4.75
              
              $
              0.23$0.48
              
              
              50
              
              
              50
              
              
              7.81
              
              $
              0.48$0.69
              
              
              100
              
              
              --
              
              
              9.36
              
              $
              0.69$0.74
                  - $0.75
              
              
              165
              
              
              97
              
              
              8.20
              
              $
              0.74Total
              
              
              321
              
              
              153
              
              
              7.78
              
              $
              0.64





Remaining
      non-exercisable options as of June 30, 2006, become exercisable as
      follows:




Remainder
                  of 2006
              572007
              552008
              5




The
      fair
      value of unvested shares is determined based on the market price of our shares
      on the grant date.








**Note
      3. Per Share Data**








Basic
      earnings per share is computed using net income (loss) and the weighted average
      number of common shares outstanding. Diluted earnings per share reflects the
      weighted average number of common shares outstanding plus any potentially
      dilutive shares outstanding during the period. Potentially dilutive shares
      consist of shares issuable upon the exercise of stock options, convertible
      notes
      and restricted stock awards. Diluted net loss per share does not differ from
      basic net loss per share since potential shares of common stock from conversion
      of stock options, convertible note and restricted stock are anti-dilutive for
      the three and six months ended June 30, 2006. Shares used in the diluted net
      income (loss) per share for the three and six months ended June 30, 2006,
      exclude the impact of 279 potential common shares from the exercise of stock
      options, 5,628 potential common shares from the conversion of the convertible
      note and 95 and 136, respectively, of common shares from restricted stock
      awards.





6


Shares
      used in the diluted net income (loss) per share for the three and six months
      ended June 30, 2005, include the impact of 299 and 277 potential common shares
      from the exercise of stock options and restricted stock awards, respectively,
      which were dilutive.




Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,2006
            
            2005
            
            2006
            
            2005**Basic
                earnings per share calculation:**Net
                income (loss)
            
            $
            (164
            )
            $
            61
            
            $
            (103
            )
            $
            320Weighted
                averagecommon
                shares - basic
            
            
            29,060
            
            
            28,918
            
            
            29,026
            
            
            28,355Basic
                net income (loss)per
                share
            
            $
            (0.01
            )
            $
            0.00
            
            $
            (0.00
            )
            $
            0.01**Diluted
                earnings per share calculation:**Net
                income (loss)
            
            $
            (164
            )
            $
            61
            
            $
            (103
            )
            $
            320Weighted
                averagecommon
                shares - basic
            
            
            29,060
            
            
            28,918
            
            
            29,026
            
            
            28,355Effect
                of dilutive stockoptions
            
            
            --
            
            
            54
            
            
            --
            
            
            50Effect
                of convertible note
            
            
            --
            
            
            --
            
            
            --
            
            
            --Effect
                of restrictedstock
                awards
            
            
            --
            
            
            245
            
            
            --
            
            
            227Weighted
                averagecommon
                sharesdiluted
            
            
            29,060
            
            
            29,217
            
            
            29,026
            
            
            29,195Diluted
                net income(loss)
                per share
            
            $
            (0.01
            )
            $
            0.00
            
            $
            (0.00
            )
            $
            0.01








**Note
      4. Commitments & Contingencies**





Contingencies





Except
      as
      set forth below, we are not a party to nor are any of our properties subject
      to
      any pending legal, administrative or judicial proceedings other than routine
      litigation incidental to our business.





Public
      Offering Securities Litigation





On
      November 2, 2001, Timothy J. Fox filed a purported class action lawsuit against
      the Company; FleetBoston Robertson Stephens, Inc., the lead underwriter of
      the
      Company’s April 1999 initial public offering; several other underwriters who
      participated in the initial public offering; Steven J. Snyder, the Company’s
      then president and chief executive officer; and Thomas M. Donnelly, the
      Company’s then chief financial officer. The lawsuit was filed in the United
      States District Court for the Southern District of New York and was assigned
      to
      the pretrial coordinating judge for substantially similar lawsuits involving
      more than 300 other issuers. An amended class action complaint, captioned *In
      re
      Net Perceptions, Inc. Initial Public Offering Securities*  *Litigation,* 01
      Civ.
      9675 (SAS), was filed on April 22, 2002, expanding the basis for the action
      to
      include allegations relating to the Company’s March 2000 follow-on public
      offering in addition to those relating to its initial public offering.  The
      action against the Company was thereafter coordinated with the other
      substantially similar class actions as *In
      re
      Initial Public Offering Securities Litigation* ,
      21 MC
      (SAS) (the “Coordinated Class Actions”).





7


The
      amended complaint generally alleges that the defendants violated federal
      securities laws by not disclosing certain actions taken by the underwriter
      defendants in connection with the Company’s initial public offering and
      follow-on public offering. The amended complaint alleges specifically that
      the
      underwriter defendants, with the Company’s direct participation and agreement
      and without disclosure thereof, conspired to and did raise and increase their
      underwriters’ compensation and the market prices of the Company’s common stock
      following its initial public offering and in its follow-on public offering
      by
      requiring their customers, in exchange for receiving allocations of shares
      of
      the Company’s common stock sold in its initial public offering, to pay excessive
      commissions on transactions in other securities, to purchase additional shares
      of the Company’s common stock in the initial public offering aftermarket at
      pre-determined prices above the initial public offering price, and to purchase
      shares of the Company’s common stock in its follow-on public offering. The
      amended complaint seeks unspecified monetary damages and certification of a
      plaintiff class consisting of all persons who acquired the Company’s common
      stock between April 22, 1999 and December 6, 2000. The plaintiffs have since
      agreed to dismiss the claims against Mr. Snyder and Mr. Donnelly without
      prejudice, in return for their agreement to toll any statute of limitations
      applicable to those claims; and those claims have been dismissed without
      prejudice.





On
      August
      31, 2005, the Court gave preliminary approval to a settlement reached by the
      plaintiffs and issuer defendants in the Coordinated Class Actions. A fairness
      hearing took place April 24, 2006, but the Court has not yet made a final
      determination whether to approve the settlement as fair, adequate and
      reasonable.  In the opinion of management, the ultimate disposition of this
      matter will not have a material effect on the Company’s financial position,
      results of operation or cash flows.





**Note
      5. Income Taxes**





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the
      accounting for uncertainty in tax provisions. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006. The Company is
      currently evaluating the impact of FIN 48 on its financial statements and
      currently plans to adopt this interpretation in the first quarter of 2007.





The
      Company has incurred significant operating losses for all periods from inception
      through June 30, 2006. For income tax purposes, the Company has available
      federal net operating loss carry-forwards of approximately $121,100 and research
      and development credit carry-forwards of $151 at June 31, 2006. The net
      operating loss and research and development credit carry-forwards expire in
      2011
      through 2022 if not previously utilized. The utilization of these carry-forwards
      may be subject to limitations based on past and future changes in ownership
      of
      the Company pursuant to Internal Revenue Code Section 382. If the Company
      were to be acquired at its recent stock value such that Section 382 is
      applicable, this would eliminate the ability to use a substantial majority
      of
      these carry-forwards. Future tax benefits have not been recognized in the
      financial statements, as their utilization is not considered probable based
      on
      the weight of available information.




**Note
      6. Note Payable**





On
      April
      21, 2004, the Company announced that it had closed on an investment into the
      Company by Olden Acquisition LLC (“Olden”), an affiliate of Kanders &
Company, Inc., an entity owned and controlled by the Company's Executive
      Chairman, Warren B. Kanders, for the purpose of initiating a strategy to
      redeploy the Company's assets and use its cash and cash equivalents and
      marketable securities to enhance stockholder value. The Company issued and
      sold
      to Olden a 2% ten-year Convertible Subordinated Note (the “Convertible
      Subordinated Note”), which is convertible after one year (or earlier upon a call
      by the Company and in certain other circumstances) at
      a
      conversion price of $0.45 per share of the Company’s common stock into
      approximately 19.9% of the outstanding common equity of the Company as of the
      closing date. Proceeds to the Company from this transaction totaled
      approximately $2,533 before transaction costs of $288. The transaction costs
      are
      being amortized over ten years, the term of the debt. Interest on the note
      accrues semi-annually but is not payable currently or upon conversion of the
      note. The Convertible Subordinated Note matures on April 21, 2014. The
      Convertible Subordinated Note was deemed to include a beneficial conversion
      feature. At the date of issue, the Company allocated $56 to the beneficial
      conversion feature, which has been fully amortized as of June 30, 2005. Also
      in
      connection with this transaction, the Company entered into a Registration Rights
      Agreement, which requires the Company, upon request of the purchaser of the
      note
      or its assignee, to register under the Securities Act of 1933, as amended,
      the
      resale of the shares of common stock into which the note is convertible. In
      connection with this transaction, the Board of Directors adopted an amendment
      to
      the Company’s Rights Agreement such that the transaction would not trigger the
      rights thereunder.





8


**Note
      7. Gain on litigation settlement**





In
      February 2005, the Company received $229 from the settlement of its lawsuit
      with
      i2 Technologies Inc., resulting from a breach of contract claim. The Company
      recorded the gain on the settlement in the first quarter of 2005.








**Note
      8. Restricted Stock**





On
      April
      1, 2005, Mr. Nigel Ekern, the Company’s Chief Administrative Officer, received a
      restricted stock grant of 66,667 shares of the Company’s common stock under the
      Company’s 1999 Equity Plan, having an aggregate value of $50 based upon the
      average stock price of the Company’s closing stock on such date of $0.75 per
      share. The shares underlying the grant vest in two years. On April 21, 2004,
      Mr.
      Ekern received a restricted stock grant of 364,583 shares of the Company’s
      common stock under the Company’s 1999 Equity Plan, having an aggregate value of
      $175 based upon the closing price of the Company’s common stock on such date of
      $0.48 per share. The shares underlying the grant will vest over three years.
      The
      Company recorded compensation expense of $21 and $42 relating to the restricted
      stock during the three-and six-month periods ended June 30, 2006, respectively.
      The Company recorded compensation expense of $21 and $36 relating to the
      restricted stock during the three-and six-month periods ended June 30, 2005,
      respectively.





**Note
      9. Related Party Transactions**





We
      occupy
      space made available to us by Kanders & Company, Inc., an entity owned and
      controlled by the Company's Executive Chairman, Warren B. Kanders. This
      arrangement can be terminated at any time. In connection with the consummation
      of an asset redeployment transaction, it is expected that management and/or
      Kanders & Company, Inc. will be awarded cash and/or equity compensation
      based upon the completion of the redeployment transaction.





Certain
      telecommunication, professional and general office expenses are incurred on
      behalf of Net Perceptions by Clarus Corporation (“Clarus”). Warren B. Kanders,
      our Executive Chairman, also serves as the Executive Chairman of Clarus. Such
      expenses aggregated $5 during each of the quarters ended June 30, 2006 and
      2005;
      and $6 and $9 for the six months ended June 30, 2006 and 2005,
      respectively.





As
      of
      June 30, 2006, the Company had an outstanding payable to Clarus of $5. The
      outstanding amount was paid in July 2006. As of June 30, 2005, the Company
      had
      outstanding payables of $10 to Clarus. The outstanding amount was paid by Net
      Perceptions in September 2005.




9


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





**Forward-Looking
      Statements**





This
      report contains certain forward-looking statements, including information about
      or related to our future results, certain projections and business trends.
      Assumptions relating to forward-looking statements involve judgments with
      respect to, among other things, future economic, competitive and market
      conditions and future business decisions, all of which are difficult or
      impossible to predict accurately and many of which are beyond our control.
      When
      used in this report, the words "estimate," "project," "intend," "believe,"
      "expect" and similar expressions are intended to identify forward-looking
      statements. Although we believe that our assumptions underlying the
      forward-looking statements are reasonable, any or all of the assumptions could
      prove inaccurate, and we may not realize the results contemplated by the
      forward-looking statements. Management decisions are subjective in many respects
      and susceptible to interpretations and periodic revisions based upon actual
      experience and business developments, the impact of which may cause us to alter
      our business strategy or capital expenditure plans that may, in turn, affect
      our
      results of operations. In light of the significant uncertainties inherent in
      the
      forward-looking information included in this report, you should not regard
      the
      inclusion of such information as our representation that we will achieve any
      strategy, objectives or other plans. The forward-looking statements contained
      in
      this report speak only as of the date of this report, and we have no obligation
      to update publicly or revise any of these forward-looking statements.





These
      and
      other statements, which are not historical facts, are based largely upon our
      current expectations and assumptions and are subject to a number of risks and
      uncertainties that could cause actual results to differ materially from those
      contemplated by such forward-looking statements. These risks and uncertainties
      include, among others, our planned effort to redeploy our assets and use our
      substantial cash, cash equivalent assets and marketable securities to enhance
      stockholder value following the sale of substantially of all our electronic
      commerce business, which represented substantially all of our revenue generating
      operations and related assets, and the risks and uncertainties set forth in
      the
      section headed "Factors That May Affect Our Future Results" of Part 1 of our
      Annual Report on Form 10-K, as amended, for the fiscal year ended December
      31,
      2005 and described below. The Company cannot guarantee its future performance.





**OVERVIEW**





**AS
      PART OF OUR PREVIOUSLY ANNOUNCED STRATEGY TO LIMIT OPERATING LOSSES AND ENABLE
      THE COMPANY TO REDEPLOY ITS ASSETS AND USE ITS CASH, CASH EQUIVALENT ASSETS
      AND
      MARKETABLE SECURITIES TO ENHANCE STOCKHOLDER VALUE, ALL OF OUR OPERATIONS OTHER
      THAN ADMINISTRATIVE FUNCTIONS HAVE BEEN TERMINATED. THE INFORMATION APPEARING
      BELOW, WHICH RELATES TO PRIOR PERIODS, IS THEREFORE NOT INDICATIVE OF THE
      RESULTS THAT MAY BE EXPECTED FOR ANY SUBSEQUENT PERIODS. THE THREE- AND
      SIX-MONTH PERIODS ENDED JUNE 30, 2006 PRIMARILY REFLECTS, AND FUTURE PERIODS
      PRIOR TO A REDEPLOYMENT OF OUR ASSESTS ARE EXPECTED TO PRIMARILY REFLECT,
      GENERAL AND ADMINISTRATIVE EXPENSES AND TRANSACTION EXPENSES ASSOCIATED WITH
      THE
      CONTINUING ADMINISTRATION OF THE COMPANY AND ITS EFFORTS TO REDEPLOY ITS ASSETS.
      FOR A DISCUSSION OF RISKS RELATING TO NET PERCEPTIONS, INC. AND OWNERSHIP OF
      OUR
      COMMON STOCK, PLEASE SEE THE DISCUSSION UNDER PART 1 OF OUR ANNUAL REPORT ON
      FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005.**





The
      following discussion and analysis should be read in conjunction with the
      consolidated financial statements and notes thereto appearing elsewhere in
      this
      report.





CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES





The
      Company’s discussion of financial condition and results of operations are based
      on the consolidated financial statements, which have been prepared in accordance
      with accounting principles generally accepted in the United States. The
      preparation of these consolidated financial statements require management to
      make estimates and assumptions that affect the reported amounts of assets,
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the consolidated financial statements. Estimates also affect the reported
      amounts of revenues and expenses during the reporting periods. The Company
      continually evaluates its estimates and assumptions including those related
      to
      contingences and litigation. The Company bases its estimates on historical
      experience and other assumptions that are believed to be reasonable under the
      circumstances. Actual results may differ from these estimates.





10


A
      description of the Company’s critical accounting polices was provided in the
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations section of the Company’s Annual Report on Form 10-K for the year
      ended December 31, 2005. There were no changes to these accounting policies
      during the quarter and period ended June 30, 2006 except for the adoption of
      FAS
      123R.





STOCK
      COMPENSATION





On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payments” (“FAS 123R”), requiring
      recognition of expense related to the fair value of stock option awards. The
      Company recognizes the cost of the share-based awards on a straight-line basis
      over the requisite service period of the award. Prior to January 1, 2006, the
      Company accounted for stock option plans under the recognition and measurement
      provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees” (“APB 25”) and related interpretations, as permitted by
      Statement of Financial Accountant Standard No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS 123”). Effective January 1, 2006, the Company adopted the
      fair value provisions of FAS 123R, using the modified prospective transition
      method. Under this transition method, compensation cost recognized during the
      first six months of 2006 includes compensation cost for all share-based payments
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123. Results for prior periods have not been restated.





We
      will
      continue to estimate the fair value of our option awards granted after January
      1, 2006, using a Black-Scholes option pricing model. No options were granted
      during the three- or six-month periods ended June 30, 2006. As of June 30,
      2006,
      there were 168 unvested shares and compensation expense of $5 recognized from
      these unvested stock options. The remaining compensation expense for these
      unvested options is $79 as of June 30, 2006. The expected life of the options
      granted is management’s estimate and represents the period of time that options
      granted are expected to be outstanding. We currently do not pay dividends.
      Volatility is based on the historical volatility of our stock price. The
      risk-free interest rate for periods within the contractual life of the option
      is
      based on the U.S. Treasury yield curve in effect at the time of grant.




The
      following table shows what the effect on net income and income per share if
      we
      had applied the fair value recognition provisions of SFAS 123, to options
      granted under our stock option plans during the three- and six-month period
      ended June 30, 2005. For purposes of this pro forma disclosure, the value of
      the
      options is amortized to expense on a straight-line basis over the vesting period
      and forfeitures are recognized as they occur.





Three
                Months Ended
            
            Six
                Months EndedJune
                30, 2005
            
            June
                30, 2005Net
                income, as reported
            
            $
            61
            
            $
            320Add:
                Stock-based employee compensation expense included in reported net
                income
            
            
            21
            
            
            36Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for all awards
            
            
            (26
            )
            
            (46
            )Pro
                forma net income
            
            $
            56
            
            $
            310Net
                income per share:BasicAs reported
            
            $
            0.00
            
            $
            0.01Pro forma
            
            $
            0.00
            
            $
            0.01DilutedAs reported
            
            $
            0.00
            
            $
            0.01Pro forma
            
            $
            0.00
            
            $
            0.01








11


A
      summary
      of the status of stock option grants as of June 30, 2006, and changes during
      the
      six months ended June 30, 2006, is presented below:




WeightedAverageOptions
              
              Exercise
                  PriceOutstanding
                  at December 31, 2005
              
              
              321
              
              $
              0.68Granted
              
              
              --
              
              
              --Exercised
              
              
              --
              
              
              --Forfeited
              
              
              --
              
              
              --Outstanding
                  at June 30, 2006
              
              
              321
              
              $
              0.68Options
                  exercisable at June 30, 2006
              
              
              153
              
              $
              0.64


The
      following table summarizes information about stock options outstanding as of
      June 30, 2006:







WeightedRemaining
                  Life
              
              AverageExercise
                  Price Range
              
              Outstanding
              
              Exercisable
              
              In
                  Years
              
              Exercise
                  Price$0.23
              
              
              6
              
              
              6
              
              
              4.75
              
              $
              0.23$0.48
              
              
              50
              
              
              50
              
              
              7.81
              
              $
              0.48$0.69
              
              
              100
              
              
              --
              
              
              9.36
              
              $
              0.69$0.74
                  - $0.75
              
              
              165
              
              
              97
              
              
              8.20
              
              $
              0.74Total
              
              
              321
              
              
              153
              
              
              7.78
              
              $
              0.64





Remaining
      non-exercisable options as of June 30, 2006, become exercisable as
      follows:




Remainder
                  of 2006
              572009
              552010
              56




The
      fair
      value of unvested shares is determined based on the market price of our shares
      on the grant date.





INCOME
      TAXES





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the
      accounting for uncertainty in tax provisions. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006. The Company is
      currently evaluating the impact of FIN 48 on its financial statements and
      currently plans to adopt this interpretation in the first quarter of
      2007




12





RESULTS
      OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30,
      2005





The
      following table sets forth certain items in the Company’s consolidated
      statements of operations as a percentage of total revenues for the periods
      indicated *:*





Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,2006
            
            2005
            
            2006
            
            2005Revenues:Service
                maintenance and royalties
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %Total
                revenues
            
            
            100
            
            
            100
            
            
            100
            
            
            100Cost
                of revenues:Service
                and maintenance
            
            
            --
            
            
            --
            
            
            --
            
            
            --Total
                cost of revenues
            
            
            --
            
            
            --
            
            
            --
            
            
            --Gross
                margin
            
            
            100
            
            
            100
            
            
            100
            
            
            100Operating
                expenses:General
                and administrative
            
            
            26,100
            
            
            341
            
            
            1,745
            
            
            393Gain
                on litigation settlement
            
            
            --
            
            
            --
            
            
            --
            
            
            (532
            )Transaction
                expenses
            
            
            5,000
            
            
            --
            
            
            250
            
            
            --Total
                operating expenses
            
            
            31,100
            
            
            341
            
            
            1,995
            
            
            (139
            )Income
                (loss) from operations
            
            
            (31,000
            )
            
            (241
            )
            
            (1,895
            )
            
            239Interest
                income
            
            
            17,600
            
            
            325
            
            
            1,675
            
            
            434Interest
                expense
            
            
            (1,300
            )
            
            (47
            )
            
            (130
            )
            
            (98
            )Other
                income, net:
            
            
            (1,700
            )
            
            153
            
            
            (165
            )
            
            169Net
                income (loss)
            
            
            (16,400
            )%
            
            190
            %
            
            (515
            )%
            
            744
            %








REVENUES





*Total
      revenues* .
      Total
      revenues decreased 97% to $1,000 for the three months ended June 30, 2006 from
      $32,000 for the same period in 2005. Total revenues decreased 53% to $20,000
      for
      the six months ended June 30, 2006 from $43,000 for the same period in 2005.
      There were no revenues from international sales for the three and six months
      ended June 30, 2006 or 2005. As a result of our downsizing of our business
      and
      operations, we no longer maintain a direct sales force and there currently
      is no
      sales generating activity.





As
      described in this Item 2 under “Overview”, we are no longer directly marketing
      our products, and we do not expect that future revenues from these products
      or
      services related to these products if any, will be significant.





*Service,
      maintenance and royalties.* Service
      and maintenance revenues consisted primarily of professional and maintenance
      services. Our professional service revenues included business consulting,
      implementation support and educational services and were generally offered
      on a
      time and materials basis. Maintenance revenues were generally derived from
      annual service agreements and were recognized ratably over the term of the
      agreement. On April 1, 2004, we entered into an agreement with Tornago, Inc.
      to
      fulfill our existing prepaid customer support obligations. Royalty revenues
      are
      derived from resales of our product by Tornago, Inc. Service, maintenance and
      royalty revenues decreased 97% to $1,000 for the quarter ended June 30, 2006
      from $32,000 for the quarter ended June 30, 2005. Service, maintenance and
      royalty revenues decreased 43% to $20,000 for the six-month period ended June
      30, 2006 from $43,000 for the six-month period ended June 30, 2005. Service,
      maintenance and royalty revenues comprised 100% and 100% of total revenues
      for
      the quarters ended June 30, 2006 and 2005, respectively *.* Service,
      maintenance and royalty revenues comprised 100% and 100% of total revenues
      for
      the six-month period ended June 30, 2006 and 2005, respectively. ** We
      do not
      anticipate entering into additional service and maintenance agreements with
      customers as the Company terminated its revenue generating operations as
      discussed above. Therefore, we expect there will be no service and maintenance
      revenues in 2006. The agreement with Tornago, Inc. has expired effective April
      1, 2006.





13


COST
      OF
      REVENUES





*Cost
      of service and maintenance revenues* .
      Cost of
      service and maintenance revenues consisted primarily of personnel-related and
      infrastructure costs incurred in providing telephone and Web-based support
      of
      our software products, as well as professional, consulting and educational
      related services to customers. As we had no service and maintenance revenues
      in
      the three- and six-month periods ended June 30, 2006 and 2005, respectively,
      cost of service and maintenance revenues for all periods were zero. We do not
      expect to incur costs of product revenues for the foreseeable
      future.





OPERATING
      EXPENSES





At
      June
      30, 2006, we had six employees, two of whom are executive officers. As described
      in this Item 2 under "Overview", we are no longer actively marketing our
      products and do not expect to incur any operating expenses in 2006 relating
      to
      sales and marketing of our products.





As
      part
      of our asset redeployment strategy, we are currently working to identify
      suitable merger or acquisition opportunities that can serve as a platform for
      future growth. Although we are not targeting specific business industries for
      potential mergers or acquisitions, we plan to seek businesses with cash flow,
      experienced management teams, and operations in markets offering stability
      and
      growth potential. We anticipate that we may incur significant expenses in
      connection with this process, consisting principally of professional fees and
      expenses, as well as costs associated with maintaining our public company
      status.





*General
      and administrative* .
      General
      and administrative expenses consist primarily of salaries, other
      employee-related costs professional service fees and expenses. General and
      administrative expenses increased 139% to $261,000 for the three months ended
      June 30, 2006 compared to $109,000 for the three months ended June 30, 2005.
      General and administrative expenses increased 107% to $349,000 for the six
      months ended June 30, 2006 compared to $169,000 for the six months ended June
      30, 2005. General and administrative expenses were 26,100% and 341% of total
      revenue for the three months ended June 30, 2006 and 2005, respectively. General
      and administrative expenses were 1,745% and 393% of total revenue for the six
      months ended June 30, 2006 and 2005, respectively. The increase in general
      and
      administrative expenses during the three and six months ended June 30, 2006
      was
      primarily due to professional fees and expenses, salaries for current management
      and deferred compensation. Although we expect personnel-related and other
      general and administrative expenses to remain stable or decrease in 2006
      compared to the previous year, continued high levels of outside professional
      fees, and other costs associated with continuing as a public reporting company,
      such as directors and officers liability insurance, may offset some of these
      decreases.





*Transaction
      expenses.* The
      Company incurred approximately $50,000 of transaction expenses during the
      quarter ended June 30, 2006, arising out of an acquisition negotiation and
      due
      diligence process that terminated in June 2006 without the consummation of
      the
      acquisition. There was no comparable expense during the quarter ended June
      30,
      2005. Transaction expenses increased to $50,000 during the six-month period
      ended June 30, 2006. There was no comparable expense during the six-month period
      ended June 30, 2005. Transaction expenses represent the costs incurred during
      due diligence and negotiation of potential acquisitions, such as legal,
      accounting, appraisal and other professional fees and related
      expenses.





*Gain
      on litigation settlement.* In
      February 2005, the Company received $229,000 from the settlement of its lawsuit
      for a breach of contract claim with i2 Technologies Inc. The Company recorded
      the gain on this settlement in the first quarter of 2005. There is no comparable
      gain for the three and six months ended June 30, 2006.





*Interest
      income.* Interest
      income increased 69% to $176,000 for the three months ended June 30, 2006
      compared to $104,000 for the three-month period ended June 30, 2005. For the
      period ended June 30, 2006, interest income increased 79% to $335,000 compared
      to $187,000 for the same period in June 30, 2005. The increase in interest
      income was due to an increase in the interest rates we received on our cash
      and
      cash equivalents and marketable securities.





14


*Interest
      expense.* Interest
      expense decreased 13% to $13,000 for the three months ended June 30, 2006
      compared to $15,000 in the three months ended June 30, 2005. For the six months
      ended June 30, 2006 interest expense decreased 38% to $26,000 compared to
      $42,000 for the same period in 2005. The decrease in interest expense was due
      to
      the beneficial conversion portion of the note to Olden Acquisition LLC being
      fully amortized during fiscal 2005.





*Other
      income (expense)* .
      Other
      income (expense) consists of miscellaneous non income based tax expenses
      partially offset by other miscellaneous income. Net other expense increased
      135%
      for the three months ended June 30, 2006 to $17,000 from net other income of
      $49,000 in 2005. Net other expense increased 146% for the six month period
      ended
      June 30, 2006 to $33,000 from net other income of $72,000 in 2005.





PROVISION
      FOR INCOME TAXES





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the
      accounting for uncertainty in tax provisions. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006. The Company is
      currently evaluating the impact of FIN 48 on its financial statements and
      currently plans to adopt this interpretation in the first quarter of
      2007.





We
      have
      incurred significant operating losses for all periods from inception through
      June 30, 2006. For income tax purposes, the Company has available federal net
      operating loss carry-forwards of approximately $121.1 million and research
      and
      development credit carry-forwards of $151,000 at June 30, 2006. The net
      operating loss and research and development credit carry-forwards expire in
      2011
      through 2022 if not previously utilized. The utilization of these carry-forwards
      may be subject to limitations based on past and future changes in ownership
      of
      the Company pursuant to Internal Revenue Code Section 382. If the Company
      were to be acquired at its recent stock value such that Section 382 is
      applicable, this would eliminate the ability to use a substantial majority
      of
      these carry-forwards. Future tax benefits have not been recognized in the
      financial statements, as their utilization is not considered probable based
      on
      the weight of available information.





LIQUIDITY
      AND CAPITAL RESOURCES





Since
      inception, we have financed our operations primarily through the sale of equity
      securities. At June 30, 2006, we had $2.8 million of cash and cash equivalents
      compared to $0.2 million at December 31, 2005. Marketable securities totaled
      $11.8 million at June 30, 2006 compared to $14.7 million at December 31, 2005.
      The overall decrease of $274,000 in cash and cash equivalents and marketable
      securities is due to payment of expenses incurred during the six months ended
      June 30, 2006.





Cash
      used
      in operations was $0.5 million for the six months ended June 30, 2006, compared
      to cash provided by operations of $0.2 million for the same period of 2005.
      Cash
      used in operations for the six months ended June 30, 2006 resulted from a
      decrease in accrued expenses and an increase in other assets. Cash provided
      by
      operations for the six months ended June 30, 2005 resulted primarily from net
      income, as adjusted for non-cash expenses and a decrease in prepaid and other
      current assets and accrued expenses. We currently do not expect to receive
      any
      significant amounts of cash from future operations until our assets are
      redeployed. We expect that we will continue to incur legal fees, transaction
      costs and other ongoing costs that will constitute a material use of
      cash.





Cash
      provided by investing activates was approximately $3.1 million during the six
      months ended June 30, 2006. A total of $3.0 million in net cash was used by
      investing activities for the six months ended June 30, 2005. Cash provided
      by
      investing activities during the six months ended June 30, 2006 was from the
      maturity of marketable securities partially offset by the purchase of marketable
      securities. Cash used by investing activities during the six months ended June
      30, 2005 was for the purchase of marketable securities.





There
      was
      no cash used or provided by financing activities for the period ended June
      30,
      2006 or 2005.





We
      believe that existing cash and investments will be sufficient to meet our
      expected working capital needs for at least the next twelve months. However,
      uncertainties exist as to the costs of implementing our asset redeployment
      strategy.




15


**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





We
      do not
      hold derivative financial instruments and do not hold any instruments for
      trading purposes.





**Item
      4. Controls and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**





The
      Company's management carried out an evaluation, under the supervision and with
      the participation of the Company's Chief Administrative Officer and Controller,
      its principal executive officer and principal financial officer, respectively,
      of the design and operation of the Company's disclosure controls and procedures
      (as such term is defined in Rules 13a-15 (e) and 15d-15(e) under the Securities
      Exchange Act of 1934 (the "Exchange Act") as of June 30, 2006, pursuant to
      Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief
      Administrative Officer and Controller, concluded that the Company's disclosure
      controls and procedures as of June 30, 2006 are effective.





**Changes
      in Internal Control over Financial Reporting**





There
      have not been any changes in the Company’s internal control over financial
      reporting that have come to management’s attention as of the June 30, 2006
      evaluation that have materially affected, or are reasonable likely to materially
      affect the Company’s internal control over financial reporting.





**PART
      II. OTHER INFORMATION**








**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





We
      held
      our annual meeting of stockholders on June 22, 2006. Of the 28,917,745 shares
      of
      common stock entitled to vote at the meeting, 24,314,167 shares of common stock
      were present in person or by proxy and entitled to vote. Such number of shares
      represented approximately 84.08% of our outstanding shares of common stock.
      Listed below is the matter voted upon at our annual meeting of stockholders
      and
      the voting results:





Voted
              For
            Voted
              AgainstElection
                of DirectorsWarren
                Kanders
            24,192,108
            121,959Nicholas
                Sokolow
            24,245,378
            68,789David
                A. Jones
            24,245,708
            68,459Gianmaria
                Delzanno
            24,243,338
            70,829




16




**Item
      6.**  **Exhibits**




**Exhibit**


**Number**
            **Exhibit**





31.1
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





32.1
            Certification
                of Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





32.2
            Certification
                of Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002







17








**SIGNATURES**





Pursuant
      to the requirements 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.










Net
              Perceptions, Inc.Date:
              August 8, 2006
            By:
            /s/
              Nigel P. EkernNigel
              P. Ekern*Chief
              Administrative Officer*(Principal Executive
              Officer)


By:
            /s/
              Susan LuckfieldSusan
              Luckfield*Controller*(Principal Financial
              Officer)







18


**EXHIBIT
      INDEX**








**Exhibit**


**Number**
            **Exhibit**





31.1
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002





32.1
            Certification
                of Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





32.2
            Certification
                of Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002








19