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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 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 March 31, 2006

                                       or

|_|   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 0-28536

                        NEW CENTURY EQUITY HOLDINGS CORP.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                           74-2781950
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)

300 CRESCENT COURT, SUITE 1110, DALLAS, TEXAS                    75201
   (Address of principal executive offices)                    (Zip code)

                                 (214) 661-7488
              (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. |X| Yes |_| No

      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 |_|   Accelerated Filer |_|   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 |X| No

      Indicated  below is the number of shares  outstanding of the  registrant's
only class of common stock at May 12, 2006:

                                                    Number of Shares
                Title of Class                         Outstanding
         -----------------------------              ----------------
         Common Stock, $0.01 par value                 34,653,104

               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES

                                      INDEX

                                                                            PAGE

PART I FINANCIAL INFORMATION

Item 1.    Financial Statements

           Condensed Consolidated Balance Sheets - March 31, 2006
              (Unaudited) and December 31, 2005 ...........................   3

           Unaudited Condensed Consolidated Statements of Operations -
              For the Three Months ended March 31, 2006 and 2005 ..........   4

           Unaudited Condensed Consolidated Statements of Comprehensive
              Loss - For the Three Months ended March 31, 2006 and 2005 ...   5

           Unaudited Condensed Consolidated Statements of Cash Flows -
              For the Three Months ended March 31, 2006 and 2005 ..........   6

           Notes to Unaudited Interim Condensed Consolidated Financial
              Statements ..................................................   7

Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations ...................................  14

Item 3.    Quantitative and Qualitative Disclosures about Market Risk .....  16

Item 4.    Controls and Procedures ........................................  16

PART II OTHER INFORMATION

Item 1.    Legal Proceedings ..............................................  17

Item 1A.   Risk Factors ...................................................  18

Item 6.    Exhibits .......................................................  20

SIGNATURE  ................................................................  21

                                       2

                          PART I FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                                                    March 31,       December 31,
                                                                                      2006             2005
                                                                                  -------------    -------------
                                                                                   (Unaudited)

                                                          ASSETS

Current assets:
  Cash and cash equivalents.....................................................  $      12,011    $      12,487
  Accounts receivable...........................................................             13               33
  Insurance receivable and other assets.........................................          1,006            1,637
  Settlement fund receivable....................................................          3,200               --
                                                                                  -------------    -------------

   Total current assets.........................................................         16,230           14,157

Other non-current assets........................................................             --                6
Revenue interest................................................................            803              415
                                                                                  -------------    -------------
  Total assets..................................................................  $      17,033    $      14,578
                                                                                  =============    =============

                                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable..............................................................  $           6    $          53
  Accrued liabilities...........................................................            458              550
  Accrued settlement............................................................          3,200               --
                                                                                  -------------    -------------
Total current liabilities.......................................................          3,664              603

Other non-current liabilities...................................................             --                2
                                                                                  -------------    -------------
   Total liabilities............................................................          3,664              605
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.01 par value, 10,000,000 shares authorized;
   4,807,692 shares designated as Series A convertible preferred stock
   issued and outstanding.......................................................             48               48
  Common stock, $0.01 par value, 75,000,000 shares authorized;
   34,653,104  shares issued and outstanding....................................            347              347
  Additional paid-in capital....................................................         75,428           75,428
  Accumulated deficit...........................................................        (62,454)         (61,850)
                                                                                  -------------    -------------
   Total stockholders' equity...................................................         13,369           13,973
                                                                                  -------------    -------------
    Total liabilities and stockholders' equity..................................  $      17,033    $      14,578
                                                                                  =============    =============

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

                                       3

               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                           Three Months Ended
                                                               March 31,
                                                       ------------------------
                                                         2006             2005
                                                       --------        --------

Operating revenues .............................       $     13        $     --

Operating expenses:
   General and administrative expenses .........             91             353
   Depreciation and amortization expense .......             --               2
                                                       --------        --------
Operating income (loss) ........................            (78)           (355)

Other income (expense):

   Derivative settlement costs .................           (600)             --
   Interest income .............................            124              81
                                                       --------        --------
Total other income (expense), net ..............           (476)             81
                                                       --------        --------
Net loss .......................................           (554)           (274)

Preferred stock dividend .......................            (50)            (50)
                                                       --------        --------
Net loss applicable to common stockholders .....       $   (604)       $   (324)
                                                       ========        ========

Basic and diluted net loss per common share:
   Net loss ....................................       $  (0.02)       $  (0.01)

Weighted average common shares outstanding .....         34,653          34,653
                                                       ========        ========

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

                                        4

               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                 (IN THOUSANDS)

                                                           Three Months Ended
                                                               March 31,
                                                        -----------------------
                                                          2006           2005
                                                        --------       --------
Net loss .........................................      $   (554)      $   (274)

Other comprehensive income:

  Unrealized holding gains, net of $0 tax ........            --             45
                                                        --------       --------

Comprehensive loss ...............................      $   (554)      $   (229)
                                                        ========       ========

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

                                       5

               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

                                                           Three Months Ended
                                                               March 31,
                                                        -----------------------
                                                          2006           2005
                                                        --------       --------
Cash flows from operating activities:
Net loss .........................................      $   (554)      $   (274)
Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation and amortization expenses .........            --              2
  Accretion of discount on securities ............            --            (74)
  Changes in operating assets and liabilities:
   Decrease in accounts receivable ...............            20             --
   Decrease in prepaid and other assets ..........           637             48
   Increase in settlement fund receivable ........        (3,200)            --
   Decrease in accounts payable ..................           (47)            --
   Increase (decrease) in accrued liabilities ....          (144)            69
   Increase in accrued settlement ................         3,200             --
                                                        --------       --------
Net cash used in operating activities ............           (88)          (229)

Cash flows from investing activities:
  Purchase of revenue interest ...................          (388)            --
                                                        --------       --------
Net cash used in investing activities ............          (388)            --

Cash flows from financing activities .............            --             --
                                                        --------       --------

Net decrease in cash and cash equivalents ........          (476)          (229)
Cash and cash equivalents, beginning of period ...        12,487          1,716
                                                        --------       --------

Cash and cash equivalents, end of period .........      $ 12,011       $  1,487
                                                        ========       ========

Supplemental disclosure of financial information:
  Cash paid for interest .........................      $     --       $     --
  Cash paid for income taxes .....................      $     --       $     --

Supplemental disclosure of non-cash transactions:
  Increase in fair market value of investments ...      $     --       $     45
  Preferred stock dividend .......................      $     50       $     50

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

                                       6

               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
                   NOTES TO THE INTERIM CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

      The interim condensed  consolidated  financial  statements included herein
have  been  prepared  by New  Century  Equity  Holdings  Corp.  ("NCEH"  or "the
Company") and subsidiaries without audit,  pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Although, certain information
and footnote  disclosures  normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted  pursuant to those rules and regulations,
all adjustments  considered  necessary in order to make the financial statements
not misleading,  have been included. In the opinion of the Company's management,
the accompanying interim condensed consolidated financial statements reflect all
adjustments,  of a  normal  recurring  nature,  that  are  necessary  for a fair
presentation of the Company's financial position, results of operations and cash
flows  for  such  periods.  It  is  recommended  that  these  interim  condensed
consolidated  financial  statements be read in conjunction with the consolidated
financial  statements  and the notes thereto  included in the  Company's  Annual
Report on Form 10-K for the year ended December 31, 2005.  Results of operations
for the interim  periods are not  necessarily  indicative of results that may be
expected for any other interim periods or the full fiscal year.

NOTE 2. HISTORICAL OVERVIEW AND RECENT DEVELOPMENTS

      New Century Equity Holdings Corp. is a company in transition.  The Company
is currently seeking to redeploy its assets to enhance  stockholder value and is
seeking,  analyzing and evaluating potential  acquisition and merger candidates.
On October 5, 2005,  the Company  made an  investment  in ACP  Investments  L.P.
(d/b/a Ascendant Capital Partners) ("Ascendant"),  pursuant to which the Company
currently  receives 50% of the revenues  generated by Ascendant.  Ascendant is a
Berwyn, Pennsylvania based alternative asset management company whose funds have
investments  in long/short  equity funds and which  distributes  its  registered
funds primarily through various financial  intermediaries  and related channels.
The Company's revenue interest in Ascendant  currently  represents the Company's
sole operating business.

      The Company,  which was formerly known as Billing Concepts Corp.  ("BCC"),
was  incorporated  in the  state of  Delaware  in  1996.  BCC was  previously  a
wholly-owned  subsidiary of U.S. Long Distance  Corp.  ("USLD") and  principally
provided third-party billing  clearinghouse and information  management services
to the  telecommunications  industry (the  "Transaction  Processing and Software
Business").   Upon  its  spin-off   from  USLD,   BCC  became  an   independent,
publicly-held  company.  In October  2000,  the  Company  completed  the sale of
several wholly-owned  subsidiaries that comprised the Transaction Processing and
Software  Business  to  Platinum  Holdings  ("Platinum")  for  consideration  of
$49,700,000  (the "Platinum  Transaction").  The Company also received  payments
totaling  $7,500,000  for  consulting  services  provided to  Platinum  over the
twenty-four month period subsequent to the Platinum Transaction.

      Beginning in 1998, the Company made multiple investments in Princeton eCom
Corporation  ("Princeton") totaling approximately $77,300,000 before selling all
of its interest for $10,000,000 in June 2004. The Company's strategy,  beginning
with its investment in Princeton, of making investments in high-growth companies
was also facilitated through several other investments.

                                       7

      In early  2004,  the  Company  announced  that it would  seek  stockholder
approval to liquidate  the Company.  In June of 2004,  the board of directors of
the Company  determined  that it would be in the best interest of the Company to
accept an investment from Newcastle Partners, L.P. ("Newcastle"),  an investment
fund with a long track record of investing in public and private  companies.  On
June 18, 2004, the Company sold 4,807,692 newly issued shares of its Series A 4%
Convertible  Preferred  Stock (the "Series A Preferred  Stock") to Newcastle for
$5,000,000  (the  "Newcastle  Transaction").  The  Series A  Preferred  Stock is
convertible into approximately  thirty-five  percent of the Common Stock, at any
time after the  expiration  of twelve  months from the date of its issuance at a
conversion  price of $0.26 per share of Common Stock,  subject to adjustment for
dilution.  The  holders of the Series A Preferred  Stock are  entitled to a four
percent  annual  cash  dividend  (the  "Preferred  Dividends").   The  Preferred
Dividends shall accrue and shall be cumulative from the date of initial issuance
of the shares of the Series A Preferred  Stock,  whether or not  declared by the
Company's board of directors. In lieu of cash dividends, the holders of Series A
Preferred Stock may elect to receive such number of shares of Series A Preferred
Stock that is equal to the aggregate dividend amount divided by $1.04. Following
the investment by Newcastle, the management team resigned and new executives and
board members were appointed.

      During May 2005, the Company sold its equity interest in Sharps Compliance
Corp.  ("Sharps") for approximately  $334,000.  Following the sale of its Sharps
interest,  the Company no longer holds any investments made by former management
and which  reflected  former  management's  strategy of investing in high-growth
companies.

      On August 11, 2004,  Craig Davis,  allegedly a stockholder of the Company,
filed a lawsuit  in the  Chancery  Court of New  Castle  County,  Delaware  (the
"Lawsuit").  The Lawsuit asserted direct claims,  and also derivative  claims on
the Company's  behalf,  against five former and three  current  directors of the
Company.  On April 13, 2006, the Company  announced that it reached an agreement
with all of the  parties to the  Lawsuit to settle all claims  relating  thereto
(the  "Settlement").  As part of the Settlement,  the Company will set up a fund
(the  "Settlement  Fund"),  which will be distributed to stockholders  following
final  approval of the  Settlement  by the  Delaware  Chancery  Court,  which is
expected to occur in July of 2006. The portion of the Settlement Fund which will
be  distributable  to all  holders of common  stock of the Company on the record
date for the  Settlement is expected to be  approximately  $2,265,000,  provided
that any common stock of the Company held by  defendants in the Lawsuit who were
formerly  directors of the Company will not be entitled to any distribution from
the Settlement Fund. A record date will be established following approval of the
Settlement by the Delaware  Chancery Court.  The  distribution of the Settlement
Fund to stockholders of record is expected to approximate  $.04 per common share
on a fully diluted basis. The total Settlement  proceeds of $3,200,000 are being
funded by the  Company's  insurance  carrier and by Parris H.  Holmes,  Jr., the
Company's former Chief Executive Officer, who is contributing $150,000. Included
in the total  Settlement  proceeds is $600,000  of  reimbursement  for legal and
professional fees submitted to the Company's  insurance carrier.  The Company is
contributing  the  $600,000 of  reimbursed  legal and  professional  fees to the
Settlement Fund and, therefore, has recognized a loss of $600,000 related to the
Lawsuit  for the  quarter  ended  March  31,  2006.  The  Company  and the other
defendants  in the  Lawsuit  have  agreed not to oppose the request for fees and
expenses by counsel to the  plaintiff of  $935,000.  Under the  Settlement,  the
plaintiff, the Company and the other defendants (including Mr. Holmes) have also
agreed  to  certain  mutual  releases  of  claims  arising  out of  transactions
referenced in the Lawsuit.

      The  Company  is  currently  funding  legal and  professional  fees of the
current and former director defendants pursuant to indemnification  arrangements
that were in place during the respective  terms of each of the  defendants.  The
Company has met the $500,000 retention as stipulated in the Company's directors'
and officers' liability insurance policy. The directors' and officers' liability
insurance policy carries a maximum coverage limit of $5,000,000. As of March 31,
2006,  the Company  has  recorded a  receivable  from the  insurance  carrier of

                                       8

approximately $912,000 for reimbursement of legal and professional fees incurred
in excess of the policy retention,  net of the $600,000  reimbursement  from the
insurance  carrier as part of the  Settlement.  The  Company  continues  to have
ongoing discussions with the insurance carrier regarding  reimbursement of legal
and  professional  fees under the  provisions  of the policy.  Nonpayment of the
claim for  reimbursement  of legal and  professional  fees could have a material
adverse  effect on the  financial  condition  and results of  operations  of the
Company.  The Company intends to vigorously seek enforcement of its rights under
the  policy.   The  Settlement  does  not  preclude  the  Company  from  seeking
reimbursement  of legal and  professional  fees up to an amount remaining within
the policy limit, which is approximately  $1,950,000 after considering the terms
of the Settlement.

NOTE 3. STOCK BASED COMPENSATION

      During  the  quarter  ended  March  31,  2006,  the  Company  adopted  the
provisions  of  Statement  of  Financial   Accounting   Standards  No.   123(R),
"Share-Based  Payment"  (SFAS 123R) using the modified  prospective  application
transition method. Under this method,  previously reported amounts should not be
restated to reflect the provisions of SFAS 123R. SFAS 123R requires  measurement
of all employee  stock-based  compensation  awards using a fair-value method and
recording  of such expense in the  consolidated  financial  statements  over the
requisite service period.  Previously, the Company had applied the provisions of
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  (APB 25) and  related  interpretations  and  elected to utilize  the
disclosure  option of  Statement  of  Financial  Accounting  Standards  No. 123,
"Accounting  for Stock-Based  Compensation"  (SFAS 123). In the first quarter of
fiscal 2006, the Company recorded  stock-based  compensation expense of $0 under
the fair-value  provisions of SFAS 123R. The Company utilizes stock-based awards
as a form of compensation for employees, officers and directors.

      For the quarter ended March 31, 2005, the following table  illustrates the
effect on net loss and net loss per common  share had  compensation  expense for
the Company's stock option grants been determined based on the fair value at the
grant dates  consistent  with the  methodology of SFAS No. 123 and SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  - Transition and  Disclosure".  For
purposes of the pro forma  disclosures,  the estimated  fair value of options is
amortized to pro forma  compensation  expense over the options' vesting periods.
No stock options were issued during the three months ended March 31, 2005.

                                       9

                                                                            Three Months Ended
                                                                                 March 31,
                                                                            ------------------
(in thousands, except per share data)                                             2005
                                                                                 ------
Net loss, as reported .....................................................      $ (274)
Less: Total stock based employee compensation expense determined
   under fair value based method for all awards, net of related tax effects          (8)
                                                                                 ------

Net loss, pro forma .......................................................      $ (282)
                                                                                 ======

Basic and diluted net loss per common share:
   Net loss, as reported ..................................................      $(0.01)
   Net loss, pro forma ....................................................      $(0.01)

NOTE 4. REVENUE INTEREST

      On October 5, 2005, the Company  entered into an agreement (the "Ascendant
Agreement")  with Ascendant to acquire an interest in the revenues  generated by
Ascendant.  Pursuant  to the  Ascendant  Agreement,  the  Company  is  currently
entitled to a 50% interest,  subject to certain adjustments,  in the revenues of
Ascendant,  which interest  declines if the assets under management of Ascendant
reach certain  levels.  Revenues  generated by Ascendant  include  revenues from
assets under  management or any other sources or investments,  net of any agreed
commissions.  The Company also agreed to provide various  marketing  services to
Ascendant.  Steven J. Pully, CEO of the Company, was appointed to the Investment
Advisory  Committee of Ascendant.  The total potential  purchase price under the
terms  of  the  Ascendant  Agreement  is  $1,550,000,   payable  in  four  equal
installments of $387,500.  The first installment was paid at the closing and the
second installment was paid on January 5, 2006. Subject to the provisions of the
Ascendant Agreement,  including  Ascendant's  compliance with the terms thereof,
the third installment was payable on April 5, 2006 and the fourth installment is
payable on July 5, 2006. As of May 12, 2006, the Company has elected not to make
the third installment payment.

      Subject to the terms of the Ascendant  Agreement,  if the Company does not
make an  installment  payment and  Ascendant  is not in breach of the  Ascendant
Agreement,  Ascendant has the right to acquire the Company's revenue interest at
a price which would yield a 10%  annualized  return to the Company.  The Company
has been  notified  by  Ascendant  that it intends to  exercise  this right as a
result of the Company's election not to make its third installment  payment. The
Company  believes that  Ascendant has not satisfied the requisite  conditions to
repurchase the Company's revenue interest.

      Ascendant had assets under  management of  approximately  $19,600,000  and
$17,800,000 as of March 31, 2006 and December 31, 2005, respectively.  Ascendant
notified  the Company that its  calculation  of net  revenues  (after  deducting
certain  third  party  expenses)  for the  quarter  ended  March  31,  2006  was
approximately  $26,000,  and  accordingly  made  a  payment  to the  Company  of
approximately  $13,000.  Under the Ascendant  Agreement,  revenues earned by the
Company from the Ascendant  revenue  interest (as determined in accordance  with
the terms of the Ascendant  Agreement)  are payable in cash within 30 days after
the end of each quarter.

                                       10

      After the  second  anniversary  of the  Ascendant  Agreement  and upon the
occurrence of certain  events,  Ascendant has the option to repurchase a portion
of the Company's  revenue interest at a price which would yield a 25% annualized
return to the Company. In connection with the Ascendant  Agreement,  the Company
also entered into the Principals  Agreement  with Ascendant and certain  limited
partners and key employees of Ascendant (the "Principals Agreement") pursuant to
which the Company has the option to purchase  limited  partnership  interests of
Ascendant under certain  circumstances.  Effective March 14, 2006, in accordance
with the terms of the Principals  Agreement,  the Company  acquired a 7% limited
partnership interest from a limited partner of Ascendant for a nominal amount.

NOTE 5. COMMITMENTS AND CONTINGENCIES

      In October 2000, the Company completed the Platinum Transaction. Under the
terms of the  Platinum  Transaction,  all leases and  corresponding  obligations
associated with the Transaction Processing and Software Business were assumed by
Platinum.  Prior  to  the  Platinum  Transaction,  the  Company  guaranteed  two
operating leases for office space of the divested companies.  The first lease is
related to office  space  located in San  Antonio,  Texas,  and expires in 2006.
Under the original terms of the first lease, the remaining minimum  undiscounted
rent payments total approximately $1,063,000 at March 31, 2006. The second lease
is related to office space located in Austin,  Texas, and expires in 2010. Under
the original terms of the second lease, the remaining minimum  undiscounted rent
payments total  approximately  $5,319,000 at March 31, 2006. In conjunction with
the Platinum  Transaction,  Platinum  agreed to indemnify the Company should the
underlying operating companies not perform under the terms of the office leases.
The Company can provide no assurance as to Platinum's  ability,  or willingness,
to perform its  obligations  under the  indemnification.  The  Company  does not
believe it is probable  that it will be  required  to perform  under these lease
guarantees  and,  therefore,  no  liability  has been  accrued in the  Company's
financial statements.

      Pursuant  to the sale of  4,807,692  newly  issued  shares of the Series A
Preferred  Stock to Newcastle on June 18, 2004,  the Company agreed to indemnify
Newcastle  from any  liability,  loss or  damage,  together  with all  costs and
expenses related thereto that the Company may suffer which arises out of affairs
of the Company,  its board of directors or employees prior to the closing of the
Newcastle Transaction. The Company's obligation to indemnify may be satisfied at
the option of the purchaser by issuing  additional  Series A Preferred  Stock to
the purchaser, modifying the conversion price of the Series A Preferred Stock, a
payment of cash or a redemption of Series A Preferred  Stock or a combination of
the foregoing.  The Company and the purchaser  have not yet  determined  whether
events that have arisen since the closing will trigger the indemnity provisions.

      On December 12, 2005, the Company received a letter from the SEC, based on
a review of the Company's  Form 10-K filed for the year ended December 31, 2004,
requesting  that the  Company  provide a written  explanation  as to whether the
Company is an  "investment  company" (as such term is defined in the  Investment
Company Act of 1940).  The Company provided a written response to the SEC, dated
January 12, 2006,  stating the reasons why it believes it is not an  "investment
company".  The Company  continues to provide  certain  confirmatory  information
requested by the SEC. In the event the SEC or a court took the position that the
Company is an  investment  company,  the  Company's  failure to  register  as an
investment  company would not only raise the  possibility  of an  enforcement or
other legal action by the SEC and potential fines and penalties,  but also could
threaten  the validity of corporate  actions and  contracts  entered into by the
Company  during  the  period  it was  deemed  to be an  unregistered  investment
company, among other remedies.

                                       11

      During  February 2006, the Company entered into an agreement with a former
employee to settle a dispute over a severance agreement the employee had entered
into with the  Company.  The  severance  agreement  which was executed by former
management  provided for a payment of approximately  $98,000 upon the occurrence
of certain events. The Company paid  approximately  $85,000 to settle all claims
associated  with the severance  agreement.  During May 2006, the Company entered
into an agreement to settle a dispute with a law firm that had  previously  been
hired by the Company. In accordance with the terms of the agreement, the Company
received and recorded a refund of legal and professional fees of $125,000 during
May 2006. In addition,  the Company reversed accrued legal and professional fees
of approximately $38,000 during the quarter ended March 31, 2006.

NOTE 6. RELATED PARTY TRANSACTIONS

      In June 2004, in connection with the Newcastle Transaction,  Mark Schwarz,
Chief  Executive  Officer and Chairman of  Newcastle  Capital  Management,  L.P.
("NCM"),  Steven J. Pully,  President of NCM, and John Murray,  Chief  Financial
Officer of NCM,  assumed  positions  as Chairman of the Board,  Chief  Executive
Officer and Chief Financial  Officer,  respectively,  of the Company.  Mr. Pully
receives an annual salary of $150,000 as Chief Executive Officer of the Company.
NCM is the general partner of Newcastle, which owns 4,807,692 shares of Series A
Preferred Stock and 150,000 shares of Common Stock of the Company.

      The Company's corporate headquarters are currently located at 300 Crescent
Court,  Suite  1110,  Dallas,  Texas  75201,  which are also the offices of NCM.
Pursuant to an oral agreement,  the Company occupies a portion of NCM's space on
a month-to-month  basis at no charge.  The Company also receives  accounting and
administrative services from employees of NCM at no charge.

NOTE 7. SHARE CAPITAL

      On July  10,  1996,  the  Company,  upon  authorization  of the  board  of
directors,  adopted a  Shareholder  Rights Plan  ("Rights  Plan") and declared a
dividend of one preferred  share purchase right on each share of its outstanding
Common Stock.  The rights will become  exercisable if a person or group acquires
15% or more of the  Company's  Common  Stock or  announces a tender  offer,  the
consummation  of which would  result in ownership by a person or group of 15% or
more of the Company's Common Stock. These rights, which expire on July 10, 2006,
entitle  stockholders  to buy one  ten-thousandth  of a share of a new series of
participating   preferred   shares  at  a   purchase   price  of  $130  per  one
ten-thousandth of a preferred share. The Rights Plan was designed to ensure that
stockholders  receive  fair and equal  treatment  in the  event of any  proposed
takeover of the Company.

      On June 10, 2004, the Company amended its July 10, 1996 Shareholder Rights
Agreement by reducing the Common Stock  ownership  threshold for  triggering the
distribution  of rights  under  such  agreement  from  fifteen  percent  to five
percent.  Newcastle  and its  successors  and assigns are exempted from the five
percent ownership  limitation.  The purpose of such amendment was to help ensure
the   preservation  of  the  Company's  net  operating  loss  and  capital  loss
carryforwards.

      The  Company has never declared or paid any cash dividends on its
Common  Stock.  The Company may not pay dividends on its Common Stock unless all
declared and unpaid dividends on the Series A Preferred Stock have been paid. In
addition,  whenever the Company shall declare or pay any dividends on its Common
Stock,  the holders of the Series A Preferred Stock are entitled to receive such
Common Stock dividends on a ratably as-converted basis.

                                       12

      The Series A Preferred Stock is convertible into approximately thirty-five
percent of the Common Stock,  at any time after the  expiration of twelve months
from the date of its issuance at a conversion price of $0.26 per share of Common
Stock, subject to adjustment for dilution. The holders of the Series A Preferred
Stock are entitled to the Preferred  Dividends.  The Preferred  Dividends  shall
accrue and shall be cumulative  from the date of initial  issuance of the shares
of the Series A Preferred Stock,  whether or not declared by the Company's board
of directors. In lieu of cash dividends, the holders of Series A Preferred Stock
may elect to receive  such number of shares of Series A Preferred  Stock that is
equal to the aggregate  dividend  amount divided by $1.04. On June 18, 2005, the
holders of the  Series A  Preferred  Stock  elected  to  receive  the  Preferred
Dividends in cash for the annual period ended June 18, 2005.

      So long as any shares of the Series A Preferred Stock remain  outstanding,
(1) the  Company's  board of directors  shall not exceed four  members,  (2) the
Company may not increase its authorized  capitalization  and (3) the Company may
not create  rights,  rankings or preferences  that adversely  affect the rights,
rankings and  preferences of the Series A Preferred  Stock,  without the written
consent  of the  holders  of at  least a  majority  of the  shares  of  Series A
Preferred  Stock then  outstanding,  voting as a separate  class. So long as any
shares of the Series A Preferred Stock remain outstanding, the holders of shares
of Series A Preferred Stock shall be entitled (1) to vote as a separate class to
elect two  directors to the  Company's  board of directors  and to pass upon any
matters that affect the rights, value or ranking of the Series A Preferred Stock
and (2) to vote on all other  matters on which  holders of Common Stock shall be
entitled  to vote,  casting  such  number of votes in respect of such  shares of
Series A Preferred  Stock as shall equal the largest  whole  number of shares of
Common  Stock  into  which  such  shares  of Series A  Preferred  Stock are then
convertible.   The  other  powers,  preferences,   rights,   qualifications  and
restrictions  of the  Series A  Preferred  Stock are more fully set forth in the
Certificate of Designations  of Series A Convertible  Preferred Stock filed with
the Secretary of State of the State of Delaware  simultaneously with the closing
of the Newcastle Transaction.

      On April  10,  2006,  Newcastle  delivered  a  letter  to the  Company  of
Newcastle's  irrevocable  intent to convert all of its Series A Preferred  Stock
into 19,230,768  shares of Common Stock of the Company  following and subject to
final confirmation by the Delaware Chancery Court of a Stipulation and Agreement
dated as of February  21,  2006 in  connection  with a pending  lawsuit in which
derivative  and other  claims  have been made by a  stockholder  of the  Company
against various parties. See Part II, Item 1. "Legal Proceedings."

                                       13

ITEM 2.

      THIS  QUARTERLY  REPORT ON FORM 10-Q  CONTAINS  CERTAIN  "FORWARD-LOOKING"
STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE  SECURITIES  LITIGATION REFORM
ACT OF 1995 AND INFORMATION  RELATING TO THE COMPANY AND ITS  SUBSIDIARIES  THAT
ARE BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ASSUMPTIONS MADE
BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY'S MANAGEMENT. WHEN USED IN
THIS  REPORT,  THE  WORDS  "ANTICIPATE",  "BELIEVE",  "ESTIMATE",  "EXPECT"  AND
"INTEND" AND WORDS OR PHRASES OF SIMILAR  IMPORT,  AS THEY RELATE TO THE COMPANY
OR  ITS   SUBSIDIARIES   OR  COMPANY   MANAGEMENT,   ARE  INTENDED  TO  IDENTIFY
FORWARD-LOOKING   STATEMENTS.   SUCH  STATEMENTS   REFLECT  THE  CURRENT  RISKS,
UNCERTAINTIES  AND  ASSUMPTIONS  RELATED TO CERTAIN FACTORS  INCLUDING,  WITHOUT
LIMITATION,  COMPETITIVE FACTORS, GENERAL ECONOMIC CONDITIONS, THE INTEREST RATE
ENVIRONMENT,  GOVERNMENTAL REGULATION AND SUPERVISION,  SEASONALITY,  CHANGES IN
INDUSTRY  PRACTICES,  ONETIME EVENTS AND OTHER FACTORS  DESCRIBED  HEREIN AND IN
OTHER FILINGS MADE BY THE COMPANY WITH THE SECURITIES  AND EXCHANGE  COMMISSION.
BASED  UPON  CHANGING  CONDITIONS,  SHOULD  ANY ONE OR MORE OF  THESE  RISKS  OR
UNCERTAINTIES MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY  FROM THOSE DESCRIBED  HEREIN AS ANTICIPATED,
BELIEVED, ESTIMATED, EXPECTED OR INTENDED. THE COMPANY DOES NOT INTEND TO UPDATE
THESE FORWARD-LOOKING STATEMENTS.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

GENERAL

      The  following  is  a  discussion  of  the  interim  unaudited   condensed
consolidated  financial  condition  and  results of  operations  for New Century
Equity  Holdings  Corp.  and  subsidiaries  for the three months ended March 31,
2006.  It should be read in  conjunction  with the Unaudited  Interim  Condensed
Consolidated  Financial  Statements of the Company,  the notes thereto and other
financial  information  included  elsewhere  in this report,  and the  Company's
Annual Report on Form 10-K for the year ended December 31, 2005.

RESULTS OF OPERATIONS

CONTINUING OPERATIONS

      General and administrative ("G&A") expenses are comprised of all marketing
and administrative  costs incurred in direct support of the business  operations
of the Company. G&A expenses decreased by $262,000,  or 74%, to $91,000,  during
the three  months  ended March 31,  2006,  as compared to the three months ended
March  31,  2005.  The  decrease  is  attributable  to a  decrease  in legal and
professional  fees.  As of  March  31,  2005,  the  Company  had not yet met the
$500,000  retention as  stipulated  in the  Company's  directors'  and officers'
liability  insurance  policy  related  to  the  Lawsuit.  The  Company  expensed
approximately  $229,000 in legal and  professional  fees  related to the Lawsuit
during the quarter  ended March 31, 2005.  Also,  the Company  reversed  accrued
legal and professional  fees of  approximately  $38,000 during the quarter ended
March 31, 2006 in accordance  with the terms of an agreement to settle a dispute
with a law firm that had previously been hired by the Company.

INTEREST INCOME

      Interest  income  increased by $43,000,  or 53%, to  $124,000,  during the
three months  ended March 31, 2006,  as compared to the three months ended March
31, 2005.  This  increase was  attributable  to higher  yields on cash  balances
available for short-term investment.

                                       14

DERIVATIVE SETTLEMENT COSTS

      On April 13, 2006, the Company announced that it reached an agreement with
all of the parties to the  Lawsuit to settle all claims  relating  thereto.  The
total  Settlement  proceeds  of  $3,200,000  are being  funded by the  Company's
insurance  carrier and by Parris H.  Holmes,  Jr.,  the  Company's  former Chief
Executive  Officer,  who  is  contributing  $150,000.   Included  in  the  total
Settlement proceeds is $600,000 of reimbursement for legal and professional fees
submitted to the Company's  insurance  carrier.  The Company is contributing the
$600,000 of reimbursed legal and  professional  fees to the Settlement Fund and,
therefore,  has  recognized  a loss of  $600,000  related to the Lawsuit for the
quarter ended March 31, 2006. See Part II, Item 2. "Legal Proceedings."

LIQUIDITY AND CAPITAL RESOURCES

      The Company's  cash balance  decreased to  $12,011,000  at March 31, 2006,
from  $12,487,000 at December 31, 2005.  The decrease  relates to the following:
G&A expenses  incurred  during the three months ended March 31, 2006;  continued
funding of legal and professional fees related to the Lawsuit; the settlement of
a dispute  with a former  employee  over a  severance  agreement  and the second
installment  paid under the Ascendant  Agreement;  partially  offset by interest
income and revenues from Ascendant.  There were no capital  expenditures  during
the three months ended March 31, 2006.

      During the quarter  ended March 31, 2006,  the Company  continued  funding
legal and professional fees of the current and former director defendants in the
Lawsuit pursuant to  indemnification  arrangements that were in place during the
respective  terms of each of the  defendants.  The Company has met the  $500,000
retention as  stipulated  in the Company's  directors'  and officers'  liability
insurance  policy.  The  directors'  and officers'  liability  insurance  policy
carries a maximum  coverage  limit of  $5,000,000.  As of March  31,  2006,  the
Company has recorded a receivable  from the insurance  carrier of  approximately
$912,000 for  reimbursement of legal and professional fees incurred in excess of
the  policy  retention,   net  of  the  $600,000   reimbursement  of  legal  and
professional  fees from the  insurance  carrier as part of the  Settlement.  The
Company  continues  to have  ongoing  discussions  with  the  insurance  carrier
regarding  reimbursement of legal and professional  fees under the provisions of
the policy.  Nonpayment of the claim for reimbursement of legal and professional
fees could have a material adverse effect on the financial condition and results
of operations of the Company. The Company intends to vigorously seek enforcement
of its rights  under the policy.  The  Settlement  does not preclude the Company
from  seeking  reimbursement  of legal  and  professional  fees up to an  amount
remaining  within the policy  limit,  which is  approximately  $1,950,000  after
considering the terms of the Settlement.

      During the next 12 months,  the Company's  operating cash requirements are
expected  to  consist  principally  of  funding  corporate  expenses,  the costs
associated with  maintaining a public company and expenses  incurred in pursuing
the Company's  business plan.  Additionally,  the total potential purchase price
under the terms of the Ascendant Agreement is $1,550,000,  payable in four equal
installments of $387,500.  Subject to the provisions of the Ascendant Agreement,
the third installment was payable on April 5, 2006 and the fourth installment is
payable on July 5, 2006. As of May 12, 2006,  the Company has not made the third
installment.  Subject to the terms of the  Ascendant  Agreement,  if the Company
does not make an  installment  payment  and  Ascendant  is not in  breach of the
Ascendant  Agreement,  Ascendant has the right to acquire the Company's  revenue
interest at a price which would yield a 10%  annualized  return to the  Company.
The Company  has been  notified by  Ascendant  that it intends to exercise  this
right as a result of the  Company's  election not to make its third  installment
payment.  The Company  believes  that  Ascendant has not satisfied the requisite
conditions to repurchase the Company's revenue interest.

      The Company expects to incur  additional  operating  losses through fiscal
2006 which will  continue  to have a negative  impact on  liquidity  and capital
resources.

                                       15

LEASE GUARANTEES

      In October 2000, the Company completed the Platinum Transaction. Under the
terms of the  Platinum  Transaction,  all leases and  corresponding  obligations
associated with the Transaction Processing and Software Business were assumed by
Platinum.  Prior  to  the  Platinum  Transaction,  the  Company  guaranteed  two
operating leases for office space of the divested companies.  The first lease is
related to office  space  located in San  Antonio,  Texas,  and expires in 2006.
Under the original terms of the first lease, the remaining minimum  undiscounted
rent payments total approximately $1,063,000 at March 31, 2006. The second lease
is related to office space located in Austin,  Texas, and expires in 2010. Under
the original terms of the second lease, the remaining minimum  undiscounted rent
payments total  approximately  $5,319,000 at March 31, 2006. In conjunction with
the Platinum  Transaction,  Platinum  agreed to indemnify the Company should the
underlying operating companies not perform under the terms of the office leases.
The Company can provide no assurance as to Platinum's  ability,  or willingness,
to perform its  obligations  under the  indemnification.  The  Company  does not
believe it is probable  that it will be  required  to perform  under these lease
guarantees  and,  therefore,  no  liability  has been  accrued in the  Company's
financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The  Company  is exposed  to  interest  rate risk  primarily  through  its
portfolio of cash equivalents and short-term marketable securities.  The Company
does not believe that it has  significant  exposure to market  risks  associated
with  changing  interest  rates as of  March  31,  2006  because  the  Company's
intention is to maintain a liquid portfolio. The Company has not used derivative
financial instruments in its operations.

ITEM 4. CONTROLS AND PROCEDURES

      Disclosure controls are procedures that are designed with the objective of
ensuring  that  information  required to be disclosed in the  Company's  reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such
as this  Form  10-Q,  is  reported  in  accordance  with  the  rules of the SEC.
Disclosure  controls are also  designed with the objective of ensuring that such
information  is  accumulated   appropriately  and  communicated  to  management,
including the chief executive officer and chief financial officer as appropriate
to allow timely decisions regarding required disclosures.

      As of the end of the period  covered by this report,  the Company  carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Company's management,  including the Company's chief executive officer and chief
financial  officer,  of the  effectiveness  of the design and  operation  of the
Company's  disclosure  controls  and  procedures  pursuant to Exchange Act Rules
13a-15(e) and 15d-15(e). Based upon that evaluation, the chief executive officer
and chief financial officer concluded that the Company's disclosure controls and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to the Company (including its consolidated subsidiaries) required to be
included in the  Company's  periodic  SEC  filings.  No change in the  Company's
internal  control over financial  reporting (as defined in Rule 13a-15(f) of the
Exchange Act) occurred  during the period covered by this report that materially
affected or is  reasonably  likely to materially  affect the Company's  internal
control over financial reporting.

      A control system,  no matter how well conceived and operated,  can provide
only  reasonable,  not absolute,  assurance  that the  objectives of the control
system are met.  Because of  inherent  limitations  in all control  systems,  no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud, if any, within a company have been detected.

                                       16

                            PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      On August 11, 2004,  Craig Davis,  allegedly a stockholder of the Company,
filed a lawsuit  in the  Chancery  Court of New  Castle  County,  Delaware  (the
"Lawsuit").  The Lawsuit asserted direct claims,  and also derivative  claims on
the Company's  behalf,  against five former and three  current  directors of the
Company.  On April 13, 2006, the Company  announced that it reached an agreement
with all of the  parties to the  Lawsuit to settle all claims  relating  thereto
(the  "Settlement").  As part of the Settlement,  the Company will set up a fund
(the  "Settlement  Fund"),  which will be distributed to stockholders  following
final  approval of the  Settlement  by the  Delaware  Chancery  Court,  which is
expected to occur in July of 2006. The portion of the Settlement Fund which will
be  distributable  to all  holders of common  stock of the Company on the record
date for the  Settlement is expected to be  approximately  $2,265,000,  provided
that any common stock of the Company held by  defendants in the Lawsuit who were
formerly  directors of the Company will not be entitled to any distribution from
the Settlement Fund. A record date will be established following approval of the
Settlement by the Delaware  Chancery Court.  The  distribution of the Settlement
Fund to stockholders of record is expected to approximate  $.04 per common share
on a fully diluted basis. The total Settlement  proceeds of $3,200,000 are being
funded by the  Company's  insurance  carrier and by Parris H.  Holmes,  Jr., the
Company's former Chief Executive Officer, who is contributing $150,000. Included
in the total  Settlement  proceeds is $600,000  of  reimbursement  for legal and
professional fees submitted to the Company's  insurance carrier.  The Company is
contributing  the  $600,000 of  reimbursed  legal and  professional  fees to the
Settlement Fund and, therefore, has recognized a loss of $600,000 related to the
Lawsuit  for the  quarter  ended  March  31,  2006.  The  Company  and the other
defendants  in the  Lawsuit  have  agreed not to oppose the request for fees and
expenses by counsel to the  plaintiff of  $935,000.  Under the  Settlement,  the
plaintiff, the Company and the other defendants (including Mr. Holmes) have also
agreed  to  certain  mutual  releases  of  claims  arising  out of  transactions
referenced in the Lawsuit.

      The  Company  is  currently  funding  legal and  professional  fees of the
current and former director defendants pursuant to indemnification  arrangements
that were in place during the respective  terms of each of the  defendants.  The
Company has met the $500,000 retention as stipulated in the Company's directors'
and officers' liability insurance policy. The directors' and officers' liability
insurance policy carries a maximum coverage limit of $5,000,000. As of March 31,
2006,  the Company  has  recorded a  receivable  from the  insurance  carrier of
approximately $912,000 for reimbursement of legal and professional fees incurred
in excess of the policy retention,  net of the $600,000  reimbursement  from the
insurance  carrier as part of the  Settlement.  The  Company  continues  to have
ongoing discussions with the insurance carrier regarding  reimbursement of legal
and  professional  fees under the  provisions  of the policy.  Nonpayment of the
claim for  reimbursement  of legal and  professional  fees could have a material
adverse  effect on the  financial  condition  and results of  operations  of the
Company.  The Company intends to vigorously seek enforcement of its rights under
the  policy.   The  Settlement  does  not  preclude  the  Company  from  seeking
reimbursement  of legal and  professional  fees up to an amount remaining within
the policy limit, which is approximately  $1,950,000 after considering the terms
of the Settlement.

                                       17

      Pursuant  to the sale of  4,807,692  newly  issued  shares of the Series A
Preferred  Stock to Newcastle on June 18, 2004,  the Company agreed to indemnify
Newcastle  from any  liability,  loss or  damage,  together  with all  costs and
expenses related thereto that the Company may suffer which arises out of affairs
of the Company,  its board of directors or employees prior to the closing of the
Newcastle Transaction. The Company's obligation to indemnify may be satisfied at
the option of the purchaser by issuing  additional  Series A Preferred  Stock to
the purchaser, modifying the conversion price of the Series A Preferred Stock, a
payment of cash or a redemption of Series A Preferred  Stock or a combination of
the foregoing.  The Company and the purchaser  have not yet  determined  whether
events that have arisen since the closing will trigger the indemnity provisions.

      On December 12, 2005, the Company received a letter from the SEC, based on
a review of the Company's  Form 10-K filed for the year ended December 31, 2004,
requesting  that the  Company  provide a written  explanation  as to whether the
Company is an  "investment  company" (as such term is defined in the  Investment
Company Act of 1940).  The Company provided a written response to the SEC, dated
January 12, 2006,  stating the reasons why it believes it is not an  "investment
company".  The Company  continues to provide  certain  confirmatory  information
requested by the SEC. In the event the SEC or a court took the position that the
Company is an  investment  company,  the  Company's  failure to  register  as an
investment  company would not only raise the  possibility  of an  enforcement or
other legal action by the SEC and potential fines and penalties,  but also could
threaten  the validity of corporate  actions and  contracts  entered into by the
Company  during  the  period  it was  deemed  to be an  unregistered  investment
company, among other remedies.

      During  February 2006, the Company entered into an agreement with a former
employee to settle a dispute over a severance agreement the employee had entered
into with the  Company.  The  severance  agreement  which was executed by former
management  provided for a payment of approximately  $98,000 upon the occurrence
of certain events. The Company paid  approximately  $85,000 to settle all claims
associated  with the severance  agreement.  During May 2006, the Company entered
into an agreement to settle a dispute with a law firm that had  previously  been
hired by the Company.  In accordance with the terms of the agreement the Company
received a refund of legal and professional fees of $125,000 during May 2006 and
reversed accrued legal and professional fees of approximately $38,000 during the
quarter ended March 31, 2006.

ITEM 1A. RISK FACTORS

      The Risk Factors  included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2005 have not  materially  changed other than
as set forth below.

OUR  BUSINESS  COULD BE HARMED  IF THERE IS A  NON-FAVORABLE  RESOLUTION  TO THE
DERIVATIVE  ACTION COMMENCED AGAINST US BY CRAIG DAVIS OR IN OTHER LITIGATION OR
REGULATORY PROCEEDINGS AGAINST THE COMPANY.

      As discussed in Part II, Item 1. "Legal  Proceedings," on August 11, 2004,
Craig Davis,  allegedly a  stockholder  of the  Company,  filed a lawsuit in the
Chancery  Court of New Castle  County,  Delaware.  The lawsuit  asserted  direct
claims, and also derivative claims on the Company's behalf,  against five former
and three  current  directors  of the Company.  On April 13,  2006,  the Company
announced that it reached an agreement with all of the parties to the lawsuit to
settle all claims relating thereto. As part of the settlement,  the Company will
set up a fund which will be distributed to stockholders following final approval
of the settlement by the Delaware Chancery Court,  which is expected to occur in
July of 2006.

                                       18

In the event the  settlement is not approved by the Delaware  Chancery Court and
there is an adverse outcome to the lawsuit,  the Company may sustain significant
monetary  damages,  a liquidation of the Company's assets or injunctive  relief,
among other remedies.  While  management  currently  believes that resolving the
lawsuit  filed by Mr.  Davis  will not have a  material  adverse  impact  on the
Company's financial position or results of operations,  litigation is subject to
inherent  uncertainties and management's view of these matters may change in the
future.  There  exists  the  possibility  of a  material  adverse  impact on the
Company's  financial  position and the results of  operations  for the period in
which the effect of an unfavorable final outcome becomes probable and reasonably
estimable.

      The  Company  is  currently  funding  legal and  professional  fees of the
current and former director defendants pursuant to indemnification  arrangements
that were in place during the respective  terms of each of the  defendants.  The
Company has met the $500,000 retention as stipulated in the Company's directors'
and officers' liability insurance policy. The directors' and officers' liability
insurance policy carries a maximum coverage limit of $5,000,000. As of March 31,
2006,  the Company  has  recorded a  receivable  from the  insurance  carrier of
approximately $912,000 for reimbursement of legal and professional fees incurred
in excess of the policy retention,  net of the $600,000  reimbursement  from the
insurance  carrier as part of the  settlement.  The  Company  continues  to have
ongoing discussions with the insurance carrier regarding  reimbursement of legal
and  professional  fees under the  provisions  of the policy.  Nonpayment of the
claim for  reimbursement  of legal and  professional  fees could have a material
adverse  effect on the  financial  condition  and results of  operations  of the
Company.  The Company intends to vigorously seek enforcement of its rights under
the  policy.   The  settlement  does  not  preclude  the  Company  from  seeking
reimbursement  of legal and  professional  fees up to an amount remaining within
the policy limit, which is approximately  $1,950,000 after considering the terms
of the settlement.

      Among the claims filed by Mr.  Davis is a claim that the Company  operated
as an illegal  investment  company in violation of the Investment Company Act of
1940 (the "Investment Company Act").  Although the Company does not believe that
it has violated the Investment Company Act in the past, or at present, there can
be no  assurance  that the  Company has not,  or is not,  in  violation  of, the
Investment  Company Act. In the event the SEC or a court took the position  that
the Company is an investment  company,  the Company's  failure to register as an
investment  company would not only raise the  possibility  of an  enforcement or
other legal action by the SEC and potential fines and penalties,  but also could
threaten  the validity of corporate  actions and  contracts  entered into by the
Company  during  the  period  it was  deemed  to be an  unregistered  investment
company, among other remedies.

THE ASSETS ON OUR BALANCE SHEET INCLUDE A REVENUE INTEREST IN ASCENDANT, AND ANY
IMPAIRMENT  OF THE  REVENUE  INTEREST  COULD  ADVERSELY  AFFECT  OUR  RESULTS OF
OPERATIONS AND FINANCIAL POSITION.

      As of March 31,  2006,  the  Company's  total  assets  were  approximately
$17,033,000,  of which approximately $803,000 were intangible assets relating to
the revenue  interest in Ascendant.  The Company  cannot be certain that it will
ever realize the value of such intangible  assets. If the Company were to record
an  intangible  impairment  charge,  its  results of  operations  and  financial
position could be adversely affected.

                                       19

ITEM 6. EXHIBITS

      Exhibits:

      31.1  Certification of Chief Executive  Officer in Accordance with Section
            302 of the Sarbanes-Oxley Act (filed herewith)

      31.2  Certification of Chief Financial  Officer in Accordance with Section
            302 of the Sarbanes-Oxley Act (filed herewith)

      32.1  Certification of Chief Executive  Officer in Accordance with Section
            906 of the Sarbanes-Oxley Act (filed herewith)

      32.2  Certification of Chief Financial  Officer in Accordance with Section
            906 of the Sarbanes-Oxley Act (filed herewith)

                                       20

                                    SIGNATURE

      Pursuant to the  requirements  of the Securities  Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                                          NEW CENTURY EQUITY HOLDINGS CORP.
                                              (Registrant)

Date: May 15, 2006                        By:        /s/ John P. Murray
                                              ----------------------------------
                                                       John P. Murray
                                                  CHIEF FINANCIAL OFFICER
                                                   (Duly authorized and
                                                principal financial officer)

                                       21
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