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

Overview

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Executive Commentary

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

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

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

RedTag.com 1
GMS (in
thousands)         $    143     $    474     $    304            -            -            -            -            -
Number of Orders
(in thousands)            2            5            3            -            -            -            -            -
Average Order
Value              $     83     $     96     $    119            -            -            -            -            -
Visitors to
Bidders %              9.60 %      30.19 %      15.14 %          -            -            -            -            -
Auctions Closed
(in thousands)           25           36           14            -            -            -            -            -
Auction Success
Rate                   5.47 %       8.46 %       8.68 %          -            -            -            -            -

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

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

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

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

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

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

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

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

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

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

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

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

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

Results of Operations

Comparison of three months ended March 31, 2009 and 2008
(Dollars in thousands, except per share data and average order value)

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

                                                       Three months ended March 31,
                                             2009          2008           Increase (Decrease)
Net Revenues:
uBid.com                                   $   2,686     $   4,928     $    (2,242 )       (45.5 %)
RedTag.com                                       127             -             127             -
RedTag LIVE                                      792             -             792             -
Dibu Trading Co.                               1,489         2,213            (724 )       (32.7 %)
Total Net Revenues                             5,094         7,141          (2,047 )       (28.7 %)

Gross Profit:
uBid.com                                         914         1,485            (571 )       (38.5 %)
RedTag.com                                        17             -              17             -
RedTag LIVE                                      185             -             185             -
Dibu Trading Co.                                 113           387            (274 )       (70.8 %)
Total Gross Profit                             1,229         1,872            (643 )       (34.3 %)

General and administrative                     2,867         3,753            (886 )       (23.6 %)
Sales and marketing                              295           495            (200 )       (40.4 %)
Total operating expenses                       3,162         4,248          (1,086 )       (25.6 %)
Loss from operations                          (1,933 )      (2,376 )           443         (18.6 %)
Interest Income / (Expense), net                (692 )          (9 )          (629 )      7588.9 %
Loss on derivative financial instruments         (48 )           -             (48 )           -

Net Loss                                   $  (2,673 )   $  (2,385 )   $      (240 )        12.1 %

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

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

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

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

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

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

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

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

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

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

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

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

Liquidity and Capital Resources

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

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

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

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

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

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

In consideration for entering into the agreement, upon execution of the common stock purchase agreement the Company issued to Fusion Capital 230,074 shares of the Company's common stock as a commitment fee. Also, the Company will issue to Fusion Capital an additional 230,074 shares as a commitment fee pro rata as the Company receives the $1,000 of future funding. The purchase price of the shares related to the $1,000 of future funding will be based on the prevailing market prices of the Company's common stock at the time of sales without any fixed discount, and the Company will control the timing and amount of any sales of shares to Fusion Capital. Fusion Capital shall not have the right or the obligation to purchase any shares of the Company's common stock on any business day that the price of the Company's common stock is below $0.75 per share. The common stock purchase agreement may be terminated by the Company at any time at . . .