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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 September 30, 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)

200 CRESCENT COURT, SUITE 1400, 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 November 20, 2006:

                                                 Number of Shares
             Title of Class                        Outstanding
      -----------------------------              ----------------
      Common Stock, $0.01 par value                 53,883,872

                              NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES

                                                     INDEX

                                                                                                           PAGE
                                                                                                           ----
PART I FINANCIAL INFORMATION

Item 1.    Financial Statements

           Condensed Consolidated Balance Sheets - September 30, 2006 (Unaudited)
              and December 31, 2005.......................................................................   3

           Unaudited Condensed Consolidated Statements of Operations - For the Three
              and Nine Months ended September 30, 2006 and 2005...........................................   4

           Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) -
              For the Three and Nine Months ended September 30, 2006 and 2005.............................   5

           Unaudited Condensed Consolidated Statements of Cash Flows - For the
              Nine Months ended September 30, 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...................................................................................  19

Item 5.    Other Information..............................................................................  20

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)

                                                                                   September 30,   December 31,
                                                                                       2006            2005
                                                                                   -------------   ------------
                                                                                   (Unaudited)

                                     ASSETS

Current assets:
  Cash and cash equivalents ....................................................     $12,284         $12,487
  Accounts receivable, net .....................................................        --                33
  Insurance receivable and other assets ........................................         489           1,637
                                                                                     -------         -------

Total current assets ...........................................................      12,773          14,157

  Other non-current assets .....................................................        --                 6
  Revenue interest .............................................................         803             415
                                                                                     -------         -------
Total assets ...................................................................     $13,576         $14,578
                                                                                     =======         =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable .............................................................     $     5         $    53
  Accrued liabilities ..........................................................         132             550
                                                                                     -------         -------
Total current liabilities ......................................................         137             603

  Other non-current liabilities ................................................        --                 2
                                                                                     -------         -------
  Total liabilities ............................................................         137             605
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.01 par value, 10,000,000 shares authorized;
   0 and 4,807,692 shares designated as Series A convertible preferred stock
   issued and outstanding.......................................................        --               48
  Common stock, $0.01 par value, 75,000,000 shares authorized;
   53,883,872 and 34,653,104  shares issued and outstanding ....................        539             347
  Additional paid-in capital ...................................................     75,340          75,451
  Accumulated deficit ..........................................................    (62,440)        (61,873)
                                                                                   --------        --------
Total stockholders' equity .....................................................     13,439          13,973
                                                                                   --------        --------
Total liabilities and stockholders' equity .....................................   $ 13,576        $ 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               Nine Months Ended
                                                                   September 30,                   September 30,
                                                             -------------------------       -------------------------
                                                               2006            2005            2006            2005
                                                             ---------       ---------       ---------       ---------

Operating revenues ........................................  $   --          $   --          $     69        $   --

Operating expenses:
   General and administrative expenses ....................       235             284             367             881
   Depreciation and amortization expense ..................      --                 3            --                 7
                                                             --------        --------        --------        --------

Operating loss ............................................      (235)           (287)           (298)           (888)

Other income (expense):
   Derivative settlement costs ............................      --              --              (600)           --
   Interest income, net ...................................       153             108             430             289
   Other, net .............................................      --               (14)           --                43
                                                             --------        --------        --------        --------

Total other income (expense), net .........................       153              94            (170)            332
                                                             --------        --------        --------        --------

Net loss ..................................................       (82)           (193)           (468)           (556)

Preferred stock dividend ..................................      --               (50)           (100)           (150)
                                                             --------        --------        --------        --------
Net loss applicable to
   common stockholders ....................................  $    (82)       $   (243)       $   (568)       $   (706)
                                                             ========        ========        ========        ========

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

Weighted average common shares outstanding ................    53,883          34,653          41,063          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 INCOME/ (LOSS)
                                         (IN THOUSANDS)

                                                        Three Months Ended    Nine Months Ended
                                                          September 30,           June 30,
                                                        ------------------    -----------------
                                                         2006       2005       2006       2005
                                                        -------   -------    -------    -------

Net loss .............................................   $ (82)    $(193)     $(468)     $(556)

Other comprehensive income:
  Reclassification of unrealized gain on investment...    --           5       --          (94)
  Unrealized holding gains (losses), net of $0 tax....    --        --         --           45
                                                         -----     -----      -----      -----

Comprehensive loss ...................................   $ (82)    $(188)     $(468)     $(605)
                                                         =====     =====      =====      =====

 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)

                                                                Nine Months Ended
                                                                  September 30,
                                                             -----------------------
                                                               2006          2005
                                                             ---------     ---------
Cash flows from operating activities:
Net loss .................................................   $   (468)   $   (556)
Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation and amortization expenses .................       --               7
  Share based payment expense ............................         17          --
  Bad debt expense .......................................         34          --
  Loss on sale of treasury bill ..........................       --              14
  Gain on sale of Sharps Compliance Corp. common stock ...       --             (57)
  Accretion of discount on securities ....................       --            (185)
  Fair market value of services...........................         17          --
  Changes in operating assets and liabilities:
   Increase in accounts receivable .......................         (1)         --
   Decrease (increase) in prepaid and other assets .......      1,154        (1,307)
   Increase (decrease) in accounts payable ...............        (48)            6
   Increase (decrease) in accrued liabilities ............       (313)          238
                                                             --------      --------
Net cash provided by (used in) operating activities ......        392        (1,840)

Cash flows from investing activities:
  Proceeds from sale of short-term investments ...........       --          27,186
  Purchase of short-term investments .....................       --         (13,786)
  Purchase of revenue interest ...........................       (388)         --
                                                             --------      --------

Net cash provided by (used in) investing activities ......       (388)       13,400

Cash flows from financing activities:
  Cash dividends paid on preferred stock .................       (207)         (200)
                                                             --------      --------

Net cash used in financing activities ....................       (207)         (200)

Net increase (decrease) in cash and cash equivalents .....       (203)       11,360
Cash and cash equivalents, beginning of period ...........     12,487         1,716
                                                             --------      --------

Cash and cash equivalents, end of period .................   $ 12,284      $ 13,076
                                                             ========      ========

Supplemental disclosure of non-cash transactions:
  Increase in fair market value of investments ...........   $   --        $     40
  Preferred stock dividend ...............................   $    100      $    100
  Reclassification of gain on investment .................   $   --        $    (94)

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 actively  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  has the right to receive 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 was
convertible into approximately thirty-five percent of the Company's Common Stock
(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
were  entitled  to  a  four  percent   annual  cash  dividend  (the   "Preferred
Dividends"). Following the investment by Newcastle, the management team resigned
and new executives and board members were appointed.  On July 3, 2006, Newcastle
converted  its Series A  Preferred  Stock into  19,230,768  shares of the Common
Stock.

         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").   On  June  23,  2006,  the  Chancery  Court  approved  the
Settlement,   and  on  July  25,   2006,   the   Settlement   became  final  and
non-appealable.  As part  of the  Settlement,  the  Company  set up a fund  (the
"Settlement  Fund"),  which was distributed to stockholders of record as of July
28, 2006,  with a payment date of August 11, 2006. The portion of the Settlement
Fund  distributed to Stockholders  pursuant to the Settlement was  approximately
$2,270,000  or  approximately  $.04 per common share on a fully  diluted  basis,
provided  that any  Common  Stock held by  defendants  in the  Lawsuit  who were
formerly directors of the Company would not be entitled to any distribution from
the Settlement Fund. The total Settlement  proceeds of $3,200,000 were funded by
the  Company's  insurance  carrier and by Parris H. Holmes,  Jr., the  Company's
former Chief Executive Officer, who contributed  $150,000.  Also included in the
total  Settlement   proceeds  is  $600,000  of   reimbursement   for  legal  and
professional  fees paid to the Company by its insurance carrier and subsequently
contributed  by the Company to the  Settlement  Fund.  The Company has therefore
recognized  a loss of $600,000  related to the Lawsuit for the nine months ended
September  30,  2006.  As part of the  Settlement,  the  Company  and the  other
defendants in the Lawsuit agreed not to oppose the request for fees and expenses
by counsel to the plaintiff of approximately $930,000. 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.

         During the quarter ended  September  30, 2006,  in connection  with the
resolution of the Lawsuit,  the Company ceased funding of legal and professional
fees of the current  and former  director  defendants.  The funding of legal and
professional fees was made 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

                                       8

policy carries a maximum coverage limit of $5,000,000. As of September 30, 2006,
the  Company  has  recorded  a  receivable   from  the   insurance   carrier  of
approximately $435,000 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  is  currently
negotiating a settlement  with the  insurance  carrier with respect to remaining
reimbursement  amounts.  Although the Company is vigorously pursuing enforcement
of its rights under the policy and  believes its claims to be valid,  during the
quarter  ended   September  30,  2006,   management   determined  to  write  off
approximately  $85,000 of the insurance  receivable as unlikely to be collected.
Nonpayment of the claim for  reimbursement of legal and professional  fees could
have a material adverse effect on the results of operations of the Company.

NOTE 3. STOCK BASED COMPENSATION

         Effective  January 1, 2006,  the  Company  adopted  the  provisions  of
Statement of Financial  Accounting Standards No. 123(R),  "Share-Based  Payment"
(SFAS 123R) using the modified prospective transition method. Under this method,
previously  reported amounts should not be restated to reflect the provisions of
SFAS 123R. SFAS 123R requires the Company to record compensation expense for all
awards  granted  after the date of  adoption,  and for the  unvested  portion of
previously granted awards that remain  outstanding at the date of adoption.  The
fair value concepts have not changed  significantly  in SFAS 123R;  however,  in
adopting this standard, companies must choose among alternative valuation models
and amortization  assumptions.  After assessing alternative valuation models and
amortization assumptions, the Company will continue using both the Black-Scholes
valuation model and straight-line  amortization of compensation expense over the
requisite  service period for each separately  vesting portion of the grant. The
Company will  reconsider  use of this model if  additional  information  becomes
available in the future that indicates  another model would be more appropriate,
or if grants  issued in  future  periods  have  characteristics  that  cannot be
reasonably  estimated using this model. The Company utilizes  stock-based awards
as a form of compensation for employees, officers and directors.

            Amortization  of the fair value of the stock option  grants has been
included in the Company's results since the grant date and totaled approximately
$0 and  $17,000  for the  quarter and nine  months  ended  September  30,  2006,
respectively.  The expense relates to the unvested portion of previously granted
awards that remain outstanding at the date of adoption.

         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).

         For the quarter and nine months ended September 30, 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.

                                       9

                                                      Three Months Ended  Nine Months Ended
                                                        September 30,       September 30,
 (in thousands, except per share data)                      2005                2005
                                                      ------------------  -----------------
Net income (loss), as reported ......................     $   (193)           $   (556)
Less: Total stock based employee compensation
   expense determined under fair value based method
   for all awards, net of related tax effects .......           (4)                (32)
                                                          --------            --------

Net income (loss), pro forma.........................     $   (197)           $   (588)
                                                          ========            ========

Basic net income (loss) per common share:
   Net income (loss), as reported ...................     $  (0.01)           $  (0.02)
   Net income (loss), pro forma .....................     $  (0.01)           $  (0.02)

Diluted net income (loss) per common share:
   Net income (loss), as reported ...................     $  (0.01)           $  (0.02)
   Net income (loss), pro forma .....................     $  (0.01)           $  (0.02)

   The fair value for these stock options was estimated at the respective  grant
   date using the Black-Scholes option-pricing model with the following weighted
   average  assumptions for the nine months ended  September 30, 2005:  expected
   volatility  of 99.22%,  no  dividend  yield,  expected  life of 2.5 years and
   risk-free interest rates of 4.75%.

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
was payable on July 5, 2006.  As of April 5, 2006,  the  Company  elected not to
make the April  installment  payment and, as of this time, has determined not to
make any additional installment payments.

         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  Ascendant is  exercising  this right as a
result of the  Company's  election not to make its third and fourth  installment
payments.  The Company  believes that  Ascendant has not satisfied the requisite
conditions to repurchase the Company's revenue interest.

                                       10

         Ascendant had assets under management of approximately  $24,000,000 and
$17,800,000 as of September 30, 2006 and December 31, 2005, respectively.  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.
Under the terms of the  Ascendant  Agreement,  Ascendant  has 45 days  following
notice by the Company to cure any material  breach by Ascendant of the Ascendant
Agreement,  including with respect to payment  obligations.  Ascendant failed to
make the required revenue sharing payment for the quarter ended June 30, 2006 in
a timely manner and did not cure such failure  within the 45 day  period.  Under
the terms of the Ascendant Agreement, upon notice of an uncured material breach,
Ascendant is required to fully  refund all amounts paid by the Company,  and the
Company's revenue interest remains outstanding.

         As part of the parties'  discussions  regarding  non-payment of amounts
under the Ascendant Agreement,  the Company has proposed an amendment that would
permit Ascendant to temporarily defer certain payments to the Company, including
the payment  owed in respect of the  quarter  ended June 30,  2006.  There is no
assurance  that  an  amendment  will  be  effected  on such  terms  or that  any
resolution of the foregoing matter will be reached.

         Based on its review of Ascendant's  financial  position and cash flows,
the Company  currently  believes that Ascendant does not have the available cash
to pay the  $34,000  accrued by the  Company at June 30, 2006 for its portion of
the 50%  revenue  interest  for that  quarter.  Therefore,  the Company has fully
reserved  the  receivable  during the  quarter  ended  September  30,  2006.  In
addition,  the  Company  had not  recorded  any  revenue  for the  quarter  ended
September  30, 2006  from  the  revenue  interest.  The  Company  is  currently
evaluating its investment in the revenue interest for impairment.

         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, among
other  things,  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 nominal
consideration.   The  Principals   Agreement  contains  certain  noncompete  and
nonsolicitation obligations of the partners of Ascendant that apply during their
employment and the twelve month period following the termination thereof.

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  $152,000 at September 30, 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   $4,610,000  at  September  30,  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.

         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 has provided certain confirmatory  information
requested  by the SEC.  Should  the SEC or a court  take 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

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 19,380,768 shares
of Common Stock.

         The  Company's  corporate  headquarters  are  currently  located at 200
Crescent Court, Suite 1400,  Dallas,  Texas 75201, which are also the offices of
NCM.  Pursuant to an oral  agreement,  the  Company  occupied a portion of NCM's
space on a  month-to-month  basis at no charge  through  September 30, 2006. The
Company also received  accounting and administrative  services from employees of
NCM at no charge through September 30, 2006. The Company will begin to pay a fee
to NCM for office  space and for certain  administrative  services  beginning on
October 1, 2006

         In September 2006, the SEC staff issued Staff  Accounting  Bulletin No.
108 ("SAB 108"), which provides  interpretive guidance on how the effects of the
carryover  or  reversal  of prior year  misstatements  should be  considered  in
quantifying  a current year  misstatement.  SAB 108 requires the use of both the
"iron  curtain"  and  "rollover"  approach in  quantifying  the  materiality  of
misstatements.  SAB 108 provides  transitional  guidance for the  correction  of
errors in prior periods.

         SAB 108 is  effective  for the  Company no later  than the year  ending
December 31, 2006.  The Company  adopted SAB 108 as of September 30, 2006.  Upon
initial application of SAB 108, the Company evaluated the uncorrected  financial
statement  misstatements  that were previously  considered  immaterial under the
"rollover" method using the dual methodology required by SAB 108. As a result of
this dual methodology  approach of SAB 108, the Company corrected the cumulative
error in its accounting for the fair market value of space provided at no charge
and accounting and administrative  services received for the current fiscal year
by  recording an expense of $16,500 with a  corresponding  credit to  additional
paid-in capital.  In accordance with the  transitional  guidance in SAB 108, the
Company also made an  adjustment  of $22,500  within  stockholders'  equity that
increased  additional  paid-in  capital and  increased  accumulated  deficit for
such costs prior to January 1, 2006.

                                       12

NOTE 7. SHARE CAPITAL

         On July 10, 2006, the Company  entered into a stockholders  rights plan
(the "Rights Plan") that replaced the Company's  stockholders  rights plan dated
July 10, 1996 (the "Old Rights  Plan") that  expired  according  to its terms on
July 10,  2006.  The Rights Plan  provides  for a dividend  distribution  of one
preferred share purchase right (a "Right") for each outstanding  share of Common
Stock.  The dividend was payable on July 10, 2006 to the Company's  stockholders
of record at the close of business on that date (the "Record  Date").  The terms
of the Rights and the Rights Plan are set forth in a Rights Agreement,  dated as
of July 10, 2006, by and between New Century Equity  Holdings Corp. and The Bank
of New York Trust Company, N.A., as Rights Agent.

         The  Company's  Board of  Directors  adopted the Rights Plan to protect
stockholder value by protecting the Company's ability to realize the benefits of
its net operating loss carryforwards ("NOLs") and capital loss carryforwards. In
general terms, the Rights Plan imposes a significant  penalty upon any person or
group that acquires 5% or more of the outstanding Common Stock without the prior
approval  of its  Board of  Directors.  Stockholders  that own 5% or more of the
outstanding  Common  Stock as of the close of  business  on the Record  Date may
acquire up to an additional 1% of the  outstanding  Common Stock without penalty
so long as they  maintain  their  ownership  above the 5% level  (such  increase
subject  to  downward  adjustment  by the  Company's  Board of  Directors  if it
determines  that such increase will endanger the  availability  of the Company's
NOLs and/or its capital loss carryforwards). In addition, the Company's Board of
Directors has exempted  Newcastle,  the Company's largest  stockholder,  and may
exempt  any  person  or group  that  owns 5% or more if the  Board of  Directors
determines  that  the  person's  or  group's  ownership  will not  endanger  the
availability  of the  Company's  NOLs and/or its capital loss  carryforwards.  A
person or group that  acquires  a  percentage  of Common  Stock in excess of the
applicable  threshold  is called an  "Acquiring  Person."  Any Rights held by an
Acquiring  Person  are void and may not be  exercised.  The  Company's  Board of
Directors  authorized  the  issuance of one Right per each share of Common Stock
outstanding  on the Record Date.  If the Rights become  exercisable,  each Right
would allow its holder to purchase from the Company one one-hundredth of a share
of the Company's Series A Junior Participating  Preferred Stock, par value $0.01
(the "Preferred  Stock"),  for a purchase price of $10.00. Each fractional share
of Preferred Stock would give the stockholder  approximately  the same dividend,
voting  and  liquidation  rights  as does one share of  Common  Stock.  Prior to
exercise,  however,  a Right does not give its holder  any  dividend,  voting or
liquidation rights.

         The Company has never declared or paid any cash dividends on its Common
Stock. On June 30, 2006, Newcastle elected to receive the Preferred Dividends in
cash for the period from June 19, 2005 through  June 30, 2006.  On July 3, 2006,
Newcastle elected to convert all of its Series A Preferred Stock into 19,230,768
shares of Common Stock.

                                       13

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

         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.

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 and nine months  ended
September 30, 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 costs
incurred  in direct  support of the  business  operations  of the  Company.  G&A
expenses  decreased  by $49,000 or 17%,  and  $514,000 or 58% for the three and
nine  months  ended  September  30,  2006,  respectively,  as  compared  to  the
corresponding  periods  of  the  prior  fiscal  year.  The  decrease  is  mainly
attributable to a decrease in legal and professional fees. Also, during the nine
months  ended  September  30,  2006,  the  Company  reversed  accrued  legal and
professional  fees of  approximately  $38,000 and recorded a refund of legal and
professional  fees of $125,000 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 $45,000 or 42%, and $141,000 or 49% for
the three and nine months ended September 30, 2006, respectively, as compared to
the  corresponding   periods  of  the  prior  fiscal  year.  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  were  funded  by the  Company's
insurance  carrier and by Parris H.  Holmes,  Jr.,  the  Company's  former Chief
Executive  Officer,  who  contributed  $150,000.  Also  included  in  the  total
Settlement proceeds is $600,000 of reimbursement for legal and professional fees
paid to the Company by its insurance carrier and subsequently contributed by the
Company to the Settlement  Fund. The Company has therefore  recognized a loss of
$600,000 related to the Lawsuit for the nine months ended September 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's  cash balance  decreased to  $12,284,000 at September 30,
2006,  from  $12,487,000  at December  31,  2005.  The  decrease  relates to the
following:  G&A expenses  incurred  during the nine months ended  September  30,
2006;  funding of legal and professional fees related to the Lawsuit,  including
the  $600,000  of  reimbursement  for  legal and  professional  fees paid to the
Company by its  insurance  carrier  which was  subsequently  contributed  by the
Company  to the  Settlement  Fund;  the  settlement  of a dispute  with a former
employee  over a  severance  agreement;  the second  installment  paid under the
Ascendant  Agreement and a cash  dividend paid on the Series A Preferred  Stock;
partially  offset by interest  income,  revenues from  Ascendant and  settlement
proceeds from the  resolution  of a dispute with a law firm that had  previously
been hired by the Company.  There were no capital  expenditures  during the nine
months ended September 30, 2006.

         During the quarter ended  September  30, 2006,  in connection  with the
resolution of the Lawsuit,  the Company ceased funding of legal and professional
fees of the current  and former  director  defendants.  The funding of legal and
professional fees was made 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 September 30, 2006,
the  Company  has  recorded  a  receivable   from  the   insurance   carrier  of
approximately $435,000 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  is  currently
negotiating a settlement  with the  insurance  carrier with respect to remaining
reimbursement  amounts.  Although the Company is vigorously pursuing enforcement
of its rights under the policy and  believes its claims to be valid,  during the
quarter ended September 30, 2006,  management determined to write off $85,000 of
the insurance  receivable  as unlikely to be collected.  Nonpayment of the claim
for  reimbursement of legal and professional  fees could have a material adverse
effect on the results of operations of the Company.

         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
was payable on July 5, 2006.  As of April 5, 2006,  the  Company  elected not to

                                       15

make the April  installment  payment and, as of this time, has determined not to
make any additional installment payments.  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  Ascendant is
exercising  this  right as a result of the  Company's  election  not to make its
third and fourth installment  payments.  The Company believes that Ascendant has
not  satisfied the requisite  conditions  to  repurchase  the Company's  revenue
interest,  including  as a result of  Ascendant's  failure to make the  required
revenue  sharing  payment for the quarter ended June 30, 2006,  and at this time
the  Company  believes  it is  not  obligated  to  make  the  third  and  fourth
installment payments to Ascendant.

         As part of the parties'  discussions  regarding  non-payment of amounts
under the Ascendant Agreement,  the Company has proposed an amendment that would
permit Ascendant to temporarily defer certain payments to the Company, including
the payment  owed in respect of the  quarter  ended June 30,  2006.  There is no
assurance  that  an  amendment  will  be  effected  on such  terms  or that  any
resolution of the foregoing matter will be reached.  Based on Ascendant's recent
financial performance and the Company's discussions with Ascendant,  the Company
does not expect to recognize any revenues under the Ascendant  Agreement for the
forseeable  future.  The Company expects to incur  additional  operating  losses
through  fiscal 2006 which will continue to have a negative  impact on liquidity
and capital resources.

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  $152,000 at September 30, 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   $4,610,000  at  September  30,  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 September  30, 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.

                                       16

         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.

                            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").   On  June  23,  2006,  the  Chancery  Court  approved  the
Settlement,   and  on  July  25,   2006,   the   Settlement   became  final  and
non-appealable.  As part  of the  Settlement,  the  Company  set up a fund  (the
"Settlement  Fund"),  which was distributed to stockholders of record as of July
28, 2006,  with a payment date of August 11, 2006. The portion of the Settlement
Fund  distributed to Stockholders  pursuant to the Settlement was  approximately
$2,270,000  or  approximately  $.04 per common share on a fully  diluted  basis,
provided  that any  Common  Stock held by  defendants  in the  Lawsuit  who were
formerly directors of the Company would not be entitled to any distribution from
the Settlement Fund. The total Settlement  proceeds of $3,200,000 were funded by
the  Company's  insurance  carrier and by Parris H. Holmes,  Jr., the  Company's
former Chief Executive Officer, who contributed  $150,000.  Also included in the
total  Settlement   proceeds  is  $600,000  of   reimbursement   for  legal  and
professional  fees paid to the Company by its insurance carrier and subsequently
contributed  by the Company to the  Settlement  Fund.  The Company has therefore
recognized  a loss of $600,000  related to the Lawsuit for the nine months ended
September  30,  2006.  As part of the  Settlement,  the  Company  and the  other
defendants in the Lawsuit agreed not to oppose the request for fees and expenses
by counsel to the plaintiff of approximately $930,000. 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.

         During the quarter ended  September  30, 2006,  in connection  with the
resolution of the Lawsuit,  the Company ceased funding of legal and professional
fees of the current  and former  director  defendants.  The funding of legal and
professional fees was made 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 September 30, 2006,

                                      17

the  Company  has  recorded  a  receivable   from  the   insurance   carrier  of
approximately $435,000 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  is  currently
negotiating a settlement  with the  insurance  carrier with respect to remaining
reimbursement  amounts.  Although the Company is vigorously pursuing enforcement
of its rights under the policy and  believes its claims to be valid,  during the
quarter   ended   September  30,  2006   management   determined  to  write  off
approximately  $85,000 of the insurance  receivable as unlikely to be collected.
Nonpayment of the claim for  reimbursement of legal and professional  fees could
have a material adverse effect on the results of operations of the Company.

         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. On July 3, 2006, Newcastle converted its Series A Preferred Stock
into 19,230,768 shares of the Common Stock.

         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.  Should the SEC or a court take 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 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.

                                       18

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 CERTAIN
LITIGATION OR  REGULATORY  PROCEEDINGS  AGAINST THE COMPANY OR MATTERS  RELATING
THERETO.

         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.  On July 25, 2006, the  Settlement  became
final and non-appealable.

         During the quarter ended  September  30, 2006,  in connection  with the
resolution of the Lawsuit,  the Company ceased funding of legal and professional
fees of the current  and former  director  defendants.  The funding of legal and
professional fees was made 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 September 30, 2006,
the  Company  has  recorded  a  receivable   from  the   insurance   carrier  of
approximately $435,000 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  is  currently
negotiating a settlement  with the  insurance  carrier with respect to remaining
reimbursement  amounts.  Although the Company is vigorously pursuing enforcement
of its rights under the policy and  believes its claims to be valid,  during the
quarter   ended   September  30,  2006   management   determined  to  write  off
approximately  $85,000 of the insurance  receivable as unlikely to be collected.
Nonpayment of the claim for  reimbursement of legal and professional  fees could
have a material adverse effect on the results of operations of the Company.

         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 believes that
it has not violated the  Investment  Company Act in the past, or is presently in
violation  of the  Investment  Company Act,  there can be no assurance  that the
Company has not violated or is violating the Investment  Company Act. Should the
SEC or a court take 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.

                                       19

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 September 30, 2006, the Company's total assets were approximately
$13,576,000,  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 could be adversely
affected in the period in which the charge was recorded.

ITEM 5.  OTHER INFORMATION

         As part of the parties'  discussions  regarding  non-payment of amounts
under the Ascendant Agreement,  the Company has proposed an amendment that would
permit Ascendant to temporarily defer certain payments to the Company, including
the payment  owed in respect of the  quarter  ended June 30,  2006.  There is no
assurance  that  an  amendment  will  be  effected  on such  terms  or that  any
resolution on the foregoing  matter will be reached.  Based on the  discussions,
the Company has fully  reserved the receivable of $34,000 which was recorded for
the  quarter   ended  June  30,  2006  and  has  not  recorded  any  revenue  or
corresponding  receivable  for a revenue  sharing  payment for the quarter ended
September 30, 2006. Based on Ascendant's  recent  financial  performance and the
Company's  discussions with Ascendant,  the Company does not expect to recognize
any revenues under the Ascendant Agreement for the forseeable future.

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: November 20, 2006                        By: /s/ John P. Murray
                                                  ------------------------------
                                                  John P. Murray
                                                  CHIEF FINANCIAL OFFICER
                                                  (Duly authorized and principal
                                                  financial officer)

                                       21
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