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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 June 30, 2005
                                       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 an  accelerated
filer (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 August 12, 2005:

                                                            NUMBER OF SHARES
            TITLE OF CLASS                                    OUTSTANDING
     -----------------------------                          ----------------
     Common Stock, $0.01 par value                            34,653,104

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               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES

                                      INDEX

                                                                                PAGE

PART I FINANCIAL INFORMATION

Item 1.   Interim Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets - June 30, 2005 (Unaudited)
           and December 31, 2004...............................................   3

          Unaudited Condensed Consolidated Statements of Operations -
           For the Three and Six Months ended June 30, 2005 and 2004...........   4

          Unaudited Condensed Consolidated Statements of Comprehensive
           Income (Loss) - For the Three and Six Months ended June 30,
           2005 and 2004.......................................................   5

          Unaudited Condensed Consolidated Statements of Cash Flows -
           For the Six Months ended June 30, 2005 and 2004.....................   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....................................................  16

Item 4.   Submission of Matters to a Vote of Security Holders..................  18

Item 6.   Exhibits.............................................................  18

SIGNATURE......................................................................  19

                                       2





                          PART I FINANCIAL INFORMATION

           ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

                                                                             JUNE 30,    DECEMBER 31,
                                                                              2005          2004
                                                                          ------------   ------------
                                                                          (UNAUDITED)

                                    ASSETS

Current assets:
  Cash and cash equivalents ..........................................     $      6      $  1,716
  Prepaid expenses and other current assets ..........................          829           145
  Short-term investments .............................................       13,830        12,895
                                                                           --------      --------
   Total current assets ..............................................       14,665        14,756

Property and equipment, net ..........................................            3             7

Other non-current assets .............................................            6             6
Investments ..........................................................           --           326
                                                                           --------      --------
  Total assets .......................................................     $ 14,674      $ 15,095
                                                                           ========      ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ...................................................     $     50      $     45
  Accrued liabilities ................................................          374           283
                                                                           --------      --------
Total current liabilities ............................................          424           328

Other non-current liabilities ........................................            2             2
                                                                           --------      --------
   Total liabilities .................................................          426           330
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 ................................................      (61,570)      (61,107)
  Accumulated other comprehensive income (loss) ......................           (5)           49
                                                                           --------      --------
   Total stockholders' equity ........................................       14,248        14,765
                                                                           --------      --------
     Total liabilities and stockholders' equity ......................     $ 14,674      $ 15,095
                                                                           ========      ========

              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         SIX MONTHS ENDED
                                                                   JUNE 30,                 JUNE 30,
                                                          -------------------------   -----------------------
                                                             2005          2004          2005         2004
                                                          -----------   ----------    ----------    ---------

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

Operating expenses:
   Selling, general and administrative expenses .....          244         3,613           597         4,258
   Depreciation and amortization expense ............            2             5             4            21
                                                          --------      --------      --------      --------

Operating loss ......................................         (246)       (3,618)         (601)       (4,279)

Other income (expense):
   Interest income, net .............................          100            16           181            26
   Equity in net loss of affiliate ..................         --          (1,785)         --          (2,985)
   Gain on sale of equity affiliate .................         --           5,817          --           5,817
   Other (expense) income, net ......................           57            (2)           57            (3)
                                                          --------      --------      --------      --------

Total other income, net .............................          157         4,046           238         2,855
                                                          --------      --------      --------      --------

Net income (loss) ...................................          (89)          428          (363)       (1,424)

Preferred stock dividend ............................          (50)           (7)         (100)           (7)
                                                          --------      --------      --------      --------
Net income (loss) applicable to
   common stockholders ..............................     $   (139)     $    421      $   (463)     $ (1,431)
                                                          ========      ========      ========      ========

Basic and diluted net income (loss) per common share:
    Net income (loss) ...............................     $  (0.01)     $   0.01      $  (0.02)     $  (0.04)
                                                          ========      ========      ========      ========

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

                                                        THREE MONTHS ENDED         SIX MONTHS ENDED
                                                              JUNE 30,                 JUNE 30,
                                                        --------------------     --------------------
                                                          2005        2004         2005        2004
                                                        --------     -------     --------     -------

Net income (loss) .................................     $   (89)     $   428     $  (363)     $(1,424)

Other comprehensive income:
  Reclassification of unrealized gain on investment         (94)        --           (94)        --
  Unrealized holding gains (losses), net of $0 tax           (5)           4          40           15
                                                        -------      -------     -------      -------

Comprehensive income (loss) .......................     $  (188)     $   432     $  (417)     $(1,409)
                                                        =======      =======     =======      =======

              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)

                                                                                       SIX MONTHS ENDED
                                                                                           JUNE 30,
                                                                                      2005          2004
                                                                                   -----------   ---------
Cash flows from operating activities:
Net loss .....................................................................     $   (363)     $ (1,424)
Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation and amortization expenses .....................................            4            21
  Equity in net loss of affiliate ............................................            -         2,985
  Gain on sale of equity affiliate ...........................................            -        (5,817)
  Loss on disposition of property and equipment ..............................            -            28
  Gain on sale of Sharps Compliance Corp. common stock .......................          (57)            -
  Accretion of discount on securities ........................................         (150)            -
  Changes in operating assets and liabilities:
   Decrease in accounts receivable ...........................................            -             9
   Decrease (increase) in prepaid and other assets ...........................         (684)          247
   Increase in accounts payable ..............................................            5            26
   Increase (decrease) in accrued liabilities ................................          188          (430)
                                                                                   --------      --------
Net cash used in operating activities ........................................       (1,057)       (4,355)

Cash flows from investing activities:
  Proceeds from sale of short-term investments ...............................       13,334             -
  Purchase of short-term investments .........................................      (13,787)            -
  Purchases of property and equipment ........................................            -            (3)
  Proceeds from sale of property and equipment ...............................            -            12
  Proceeds from sale of equity affiliate (all holdings in Princeton) .........            -        10,000
  Proceeds from sale of equity affiliate (all holdings in Princeton) allocated
  to former chief executive officer ..........................................            -          (600)
  Other investing ............................................................            -            40
                                                                                   --------      --------

Net cash provided by (used in) investing activities ..........................         (453)        9,449

Cash flows from financing activities:
  Cash dividends paid on preferred stock .....................................         (200)            -
  Proceeds from sale of preferred stock ......................................            -         5,000
                                                                                   --------      --------

Net cash provided by (used in) financing activities ..........................         (200)        5,000

Net increase (decrease) in cash and cash equivalents .........................       (1,710)       10,094
Cash and cash equivalents, beginning of period ...............................        1,716         5,330
                                                                                   --------      --------

Cash and cash equivalents, end of period .....................................     $      6      $ 15,424
                                                                                   ========      ========

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 ...............................     $     40      $      -
  Preferred stock dividend ...................................................     $    100      $      7
  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. and  subsidiaries
(collectively,  the  "Company"),  without  audit,  pursuant  to  the  rules  and
regulations  of  the  Securities  and  Exchange  Commission   ("SEC").   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 such rules
and regulations.  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, 2004.  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. The Company was formerly known as Billing Concepts Corp. ("BCC") and
was  incorporated  in the  state of  Delaware  in  1996.  BCC was  previously  a
wholly-owned  subsidiary of U.S. Long Distance Corp. ("USLD"). Upon its spin-off
from USLD, BCC became an independent,  publicly-held company. 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.  During the period  from April 1, 2005
through May 5, 2005, the Company sold its equity  interest in Sharps  Compliance
Corp. ("Sharps") for approximately $334,000.

NOTE 3. STOCK BASED COMPENSATION

            The Company  adopted  Statement  of Financial  Accounting  Standards
("SFAS") No. 123,  "Accounting  for  Stock-Based  Compensation,"  but elected to
apply Accounting  Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees,"  and related  interpretations  in accounting for its stock
option plans.  Accordingly,  the Company has not recognized compensation expense
for stock options  granted where the exercise  price is equal to or greater than
the market price of the underlying stock at the date of grant.

            The following table  illustrates the effect on net income (loss) and
net income  (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.

                                        7





                                                           Three Months Ended         Six Months Ended
                                                         ----------------------   --------------------------
                                                                June 30,                   June 30,
 (in thousands, except per share data)                     2005         2004        2005           2004
                                                        -----------  -----------  ----------   -------------
Net income (loss), as reported .................        $      (89)  $     428    $    (363)   $    (1,424)
Less: Total stock based employee compensation
   expense determined under fair value based method
   for all awards, net of related tax effects .....            (20)        (67)         (27)           (68)
                                                        ----------   ---------    ---------    -----------

Net income (loss), pro forma ...................        $     (109   $     361         (390)   $    (1,492)
                                                        ==========   =========    =========    ===========

Basic net income (loss) per common share:
   Net income (loss), as reported .................     $    (0.01)  $    0.01   $    (0.01)  $      (0.04)
   Net income (loss), pro forma ...................     $    (0.01)  $    0.01   $    (0.01)  $      (0.04)

Diluted net income (loss) per common share:
   Net income (loss), as reported .................     $    (0.01)  $    0.01   $    (0.01)  $      (0.04)
   Net income (loss), pro forma ...................     $    (0.01)  $    0.01   $    (0.01)  $      (0.04)

            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 six months ended June 30, 2005
and 2004: expected volatility of 99.22%, no dividend yield, expected life of 2.5
years and risk-free interest rates of 4.75%.

            In  December  2004,  the FASB issued  SFAS No. 123  (revised  2004),
SHARE-BASED  PAYMENT,  which established  accounting  standards for transactions
where the  entity  exchanges  equity  instruments  for goods and  services.  The
revision of this statement focuses on the accounting for transactions  where the
entity obtains  employee  services in  share-based  payment  transactions.  This
statement  revision  eliminates the  alternative  use of APB 25 intrinsic  value
method  and  requires  that  entities  adopt  the  fair-value   method  for  all
share-based  transactions.  This  statement  is  effective  the next fiscal year
following  June 15, 2005. The Company will adopt the provisions of this standard
on a modified  prospective  basis in the first quarter of 2006,  and the Company
believes that the overall impact to the financial statements will be immaterial.

NOTE 4. INVESTMENTS

        Investments consist of the following:

                                                                     June 30,
        (in thousands)                                                2005
                                                               ---------------
        Investment in Sharps Compliance Corp:
          Cash investments.................................    $           970
          Settlement.......................................               (389)
          Impairment of investment.........................               (306)
          Gain on sale.....................................                 57
          Other............................................                  2
          Proceeds from sale...............................               (334)
                                                               ---------------
          Total investments ...............................    $             -
                                                               ===============

            In January  2004,  the Company  entered into an  agreement  with the
former majority  stockholders of Operator  Service Company ("OSC") to settle all
claims related to the April 2000  acquisition  of OSC by the Company.  Under the
terms of the  agreement,  the  Company  transferred  to the former OSC  majority

                                       8





stockholders  525,000 shares of the common stock of Sharps owned by the Company,
valued at approximately  $389,000.  During the period from April 1, 2005 through
May 5, 2005,  the Company sold its equity  interest in Sharps for  approximately
$334,000,  resulting in a $57,000 gain for financial reporting purposes,  net of
$94,000 reclassified from other comprehensive income.

NOTE 5. COMMITMENTS AND CONTINGENCIES

            In  October  2000,  the  Company   completed  the  sale  of  several
wholly-owned   subsidiaries  that  principally   provided   third-party  billing
clearinghouse  and  information  management  services to the  telecommunications
industry  (the  "Transaction  Processing  and  Software  Business")  to Platinum
Holdings  ("Platinum"),  for  consideration  of  approximately  $49,700,000 (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  $2,431,000 at
June 30, 2005.  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  $6,383,000 at
June 30, 2005. 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 August 11, 2004,  Craig  Davis,  allegedly a  stockholder  of the
Company, filed a complaint in the Chancery Court of New Castle County,  Delaware
(the  "Complaint").  The Complaint  asserts direct claims,  and also  derivative
claims on the Company's behalf,  against five former and three current directors
of the Company.  The individual  defendants named in the Complaint are Parris H.
Holmes,  Jr., C. Lee Cooke,  Jr., Justin L. Ferrero,  Gary D. Becker, J. Stephen
Barley,  Stephen M. Wagner, Mark E. Schwarz, and Steven J. Pully; the Company is
a nominal  defendant.  In his  Complaint,  Mr. Davis seeks the  appointment of a
receiver  for  the  Company  under  Section  226(a)  of  the  Delaware   General
Corporation  Law and other remedies.  Mr. Davis alleges that different  director
defendants  breached  their  fiduciary  duties to the Company.  The  allegations
involve, among other things, transactions with, and payments to, Mr. Holmes, and
whether the Company operated as an unregistered investment company.

            The Company and certain of the defendants responded to the Complaint
by filing a motion to  dismiss or stay the  action on  October  18,  2004 and on
November 3, 2004 filed a  memorandum  of law in support of such  positions.  The
motion to dismiss filed by the Company and various  defendants  was heard by the
Chancery  Court of New Castle  County,  Delaware on January 18, 2005.  The court
denied the motion to  dismiss.  On May 6, 2005,  the  Company and certain of the
defendants  filed a response in opposition to  plaintiff's  motion for receiver.
Mediation  among  parties  named in the  Complaint  took  place  in  Wilmington,
Delaware on May 13, 2005.  On May 31, 2005,  Mr. Davis filed an amendment to the
Complaint to include James Risher, a current director,  and Newcastle  Partners,
L.P.  ("Newcastle") as additional  defendants.  On July 8, 2005, the Company and
certain  of the  defendants  filed a  supplemental  response  in  opposition  to
plaintiff's  motion for  appointment of receiver.  A trial date is currently set
for December 5, 2005.

            The Company is currently  funding legal  expenses of the  defendants
pursuant  to  indemnification   arrangements  that  were  in  place  during  the
respective terms of each of the defendants. As of June 30, 2005, the Company had
met the  $500,000  deductible  as  stipulated  in the  Company's  directors  and

                                       9





officers  liability  insurance  policy.  The  directors  and officers  liability
insurance  policy carries a maximum  coverage limit of $5,000,000.  Because this
case is in the early  stages,  it is not possible to evaluate the  likelihood of
exceeding  the policy  limit.  As of June 30,  2005,  the Company has recorded a
receivable   from  the   insurance   carrier  of   approximately   $781,000  for
reimbursement  of legal and  professional  fees incurred in excess of the policy
deductible,  in accordance  with the provisions of the insurance  policy.  As of
August 12,  2005,  the  Company  had not  received  any  reimbursement  from the
insurance  carrier and continues to have ongoing  discussions with the insurance
carrier regarding  reimbursement  under the provisions of the policy. If for any
reason the  insurance  carrier does not fulfill its  obligation to reimburse the
Company under the insurance 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.

            On October 27, 2004 the board of directors appointed Messrs.  Pully,
Risher and Schwarz to a special  litigation  committee to investigate the claims
of the  plaintiff.  Prior  to the  filing  of the  Complaint,  the  Company  had
commenced an investigation of various transactions  involving former management,
including,  among other  things,  the payment of  approximately  $600,000 to Mr.
Holmes in  connection  with a restricted  stock  agreement  (see Note 7) and the
reimbursement of various expenses involving meals and entertainment,  travel and
other reimbursed  expenses.  As part of the investigative  work commenced by the
Company prior to the filing of the Complaint,  the Company sought  reimbursement
from Mr. Holmes for various amounts paid to him. The Company and Mr. Holmes were
unable to agree on the amount that Mr. Holmes should reimburse the Company.

            The  Company  has been  notified  by counsel to both Mr.  Holmes and
David P. Tusa (former chief financial  officer) that each of Messrs.  Holmes and
Tusa believe that approximately $60,000 and $34,000,  respectively,  are owed to
each of them under  their  respective  consulting  agreements.  In  addition  to
notifying both Messrs.  Holmes and Tusa that their consulting  services were not
required  and  that no  obligation  therefore  existed  under  their  respective
agreements,  both have also been  notified  that the  Company  is  investigating
various   transactions,   including,   among  other   things,   the  payment  of
approximately  $600,000 to Mr.  Holmes in  connection  with a  restricted  stock
agreement (see Note 7) and the reimbursement of various expenses involving meals
and entertainment,  travel and other reimbursed  expenses.  The Company disputes
that any  additional  amounts  are owed  under the  consulting  agreements  and,
therefore,  has not  provided  for such  amounts in the  accompanying  financial
statements for the period ended June 30, 2005.

            Pursuant  to the sale of  approximately  4.8  million  newly  issued
shares of the Company's  Series A 4% Convertible  Preferred Stock (the "Series A
Preferred  Stock") to Newcastle on June 18, 2004 (the  "Newcastle  Transaction")
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.

NOTE 6. INVESTMENT IN UNCONSOLIDATED AFFILIATE

            In June 2004,  the Company sold all of its interest in Princeton for
$10,000,000.  The sale of Princeton  generated a capital loss for federal income
tax purposes of approximately $67,000,000.  Prior to the selling of its interest
in Princeton in June 2004, the Company accounted for its investment in Princeton

                                       10





under the equity  method of  accounting  and  recorded the equity in net loss of
Princeton  on a  three-month  lag.  As a  result  of the  sale of the  Company's
holdings in  Princeton,  during the six months ended June 30, 2004,  the Company
accelerated  the recording of its equity in net loss of Princeton to the date of
sale.  Princeton's  statement of  operations  for the eight months ended May 31,
2004,  has  been  used to  calculate  the  equity  in net loss  recorded  in the
Company's statement of operations for the six months ended June 30, 2004.

            Princeton's summarized statement of operations was as follows:

                                                           Eight
                                                           Months
                                                           Ended
                                                          May 31,
            (in thousands)                                 2004
                                                        -----------
            Total revenues...........................   $  16,965
            Gross profit.............................       7,258
            Loss from operations.....................      (9,188)
            Net loss.................................      (9,214)

NOTE 7. RELATED PARTY TRANSACTIONS

            Parris  H.  Holmes,  Jr.  (former  Chairman  of the  Board and Chief
Executive  Officer  of the  Company)  served  on the  Board  of  Princeton  from
September  1998 until March 2004.  Mr. Holmes served as Chairman of the Board of
Princeton  from January 2002 until  December  2002.  David P. Tusa (former Chief
Financial  Officer of the Company)  served as a member of the Board of Princeton
from August 2001 until June 2002.

            According  to public  filings,  Mr.  Holmes has been a member of the
board of  directors  of Sharps  since July 1998.  Mr. Tusa was  appointed  Chief
Financial  Officer of Sharps in February  2003. A former member of the Company's
board of directors,  Lee Cooke,  served on the board of directors of Sharps from
March 1992 until November 2004.

            In August 2003,  the Company  issued 435,484 shares of the Company's
Common  Stock,  par  value  $.01 per share  ("Common  Stock")  to Mr.  Holmes in
exchange for a salary reduction of $135,000 for the employment period of October
1, 2003 to September  30,  2004.  These shares were issued under the New Century
Equity Holdings Corp. 1996 Employee  Comprehensive  Stock Plan, which allows for
this type of issuance without any material amendments.

            In November 2001,  the Company  entered into an Amended and Restated
Employment  Agreement  ("Employment  Agreement") with Mr. Holmes. As part of the
Employment  Agreement,  the Company  entered into a Split-Dollar  Life Insurance
Agreement ("Insurance  Agreement") with a trust beneficially owned by Mr. Holmes
pursuant to which the Company paid the annual insurance premium of approximately
$172,000.  The underlying  life insurance  policy had a face value of $4,500,000
and required  remaining  annual premium  payments  through March 2012,  totaling
$1,500,000.  In December  2003,  Mr. Holmes and the Company  agreed to amend the
Employment  Agreement and terminate the provisions of the  Employment  Agreement
related to the  Insurance  Agreement in exchange for payments by the Company to,
and  on  behalf  of,  Mr.  Holmes  totaling   approximately  $700,000  in  cash.
Accordingly,  the Company  assigned to Mr. Holmes,  and Mr. Holmes assumed,  all
future obligations and benefits related to the Insurance  Agreement.  Mr. Holmes
released and  discharged  the Company from any further  obligation to provide or
fund any life insurance for the benefit of Mr.  Holmes,  including the Insurance
Agreement.  The entire  $700,000  was  included  in general  and  administrative

                                       11





expenses during the year ended December 31, 2003. In December 2003,  $200,000 of
the total $700,000 was paid. The remaining  $500,000 was accrued at December 31,
2003 and paid in January 2004. In conjunction with the Insurance Agreement,  the
Company  relinquished  its rights under two other  split-dollar  life  insurance
policies  previously  entered into with Mr.  Holmes.  All premiums had been paid
under the two policies prior to 2004. The Company paid  approximately  $3,800 on
behalf of Mr. Holmes in connection with the transfer of rights to Mr. Holmes.

            Prior to the Newcastle Transaction, during the six months ended June
30,  2004,  the  Company  sold  certain  office  furniture  to  Mr.  Holmes  for
approximately  $7,000 and provided Mr. Holmes with title to the automobile  that
had been  furnished to him by the Company at no cost.  The Company had purchased
the office  furniture for  approximately  $28,000 during the period October 1994
through April 2003 and the furniture had a book value of $4,000. Pursuant to the
terms of his employment  agreement,  Mr. Holmes was provided with an automobile.
The  automobile  was acquired by the Company for $75,000 in 2000. At the time of
transfer,  the net book  value of the  automobile  was zero and the fair  market
value  was  $20,000.  In  accordance  with the terms of Mr.  Holmes'  employment
agreement,  the income taxes  incurred by Mr. Holmes as a result of the transfer
of title to him were borne by the Company.

            The Company paid Mr. Holmes approximately  $600,000 on June 2, 2004,
purportedly as a result of a restricted stock grant as described below. In April
2000, the board of directors of the Company approved a restricted stock grant to
Mr. Holmes.  The restricted stock grant consisted of 400,000 shares of Princeton
common stock and was modified in June 2001 to provide for certain  anti-dilution
and ratchet  protections.  The restricted  stock grant vested on April 30, 2003.
The Company  expensed the fair market value of the  restricted  stock grant over
the  three-year  period  ended April 30,  2003.  The Company  has  commenced  an
investigation of various  transactions  involving former management,  including,
among other things, the $600,000 payment.

            In June 2004, in  connection  with the  Newcastle  Transaction,  Mr.
Schwarz,  Chief Executive Officer and Chairman of Newcastle Capital  Management,
L.P.  ("NCM"),  Mr. Pully,  President of NCM, and Mr.  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  subleases 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 8.  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

                                       12





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.

            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. 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.

NOTE 9. INVESTMENT IN SECURITIES AVAILABLE-FOR-SALE

            In May 2005, the Company  purchased a 26-week U.S. Treasury bill for
approximately $13,786,000. The fair value was $13,830,000 at June 30, 2005.

                                       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,
CUSTOMER RELATIONS,  RELATIONSHIPS WITH VENDORS,  THE INTEREST RATE ENVIRONMENT,
GOVERNMENTAL  REGULATION AND SUPERVISION,  SEASONALITY,  DISTRIBUTION  NETWORKS,
PRODUCTS INTRODUCTIONS AND ACCEPTANCE, TECHNOLOGICAL CHANGE, 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 condensed  consolidated
financial  condition and results of operations for New Century  Equity  Holdings
Corp. and  subsidiaries  (collectively,  the  "Company"),  for the three and six
months ended June 30, 2005. 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, 2004.

RESULTS OF OPERATIONS

CONTINUING OPERATIONS

            Selling,   general  and  administrative  ("SG&A")  expense  includes
management  salaries and benefits,  legal fees,  public  company costs and other
administrative  costs incurred in direct  support of the business  operations of
the Company. SG&A expenses decreased by $3,369,000,  or 93%, and $3,661,000,  or
86% for the three and six months ended June 30, 2005, respectively,  as compared
to the  corresponding  periods of the prior fiscal year.  SG&A  expenses for the
three and six months ended June 30, 2004, included  approximately  $2,600,000 of
severance paid to Messrs.  Holmes and Tusa, the Company's former Chief Executive
Officer and Chief Financial Officer,  respectively. For the three and six months
ended June 30, 2004, SG&A expenses also included approximately $700,000 of legal
and  professional  expenses  related to the  proposed  proxy  statement  seeking
shareholder approval to liquidate the Company (which was subsequently withdrawn)
and completing the Newcastle Transaction.  The remainder of the decrease in SG&A
is due to reduced  salary and benefits as the number of employees have decreased
from five to one and a  decrease  in rent  expense  as a result of the  sublease
entered into on October 8, 2004, to sublet the Company's office space located at
10101  Reunion  Place,  Suite 970, San Antonio,  Texas.  The decrease in SG&A is
partially  offset by  approximately  $21,000  for legal  and  professional  fees
incurred  during the three months  ended June 30,  2005,  related to the lawsuit
filed by Craig Davis.

                                       14





INTEREST INCOME

            Interest  income  increased by $89,000 or 556%, and $160,000 or 615%
for the three and six months ended June 30, 2005,  respectively,  as compared to
the  corresponding   periods  of  the  prior  fiscal  year.  This  increase  was
attributable to increased yields available for short-term investments and higher
cash balances from the proceeds of the Newcastle Transaction and the sale of our
Princeton interest in June 2004.

EQUITY IN NET LOSS OF AFFILIATE

            Equity in net loss of  affiliate  totaled  approximately  $2,985,000
during the six months  ended June 30, 2004.  In June 2004,  the Company sold all
its interest in Princeton for $10,000,000.

LIQUIDITY AND CAPITAL RESOURCES

            The  Company's   cash  and  short-term   investments   decreased  to
approximately  $13,836,000  at June 30, 2005,  from  $14,611,000 at December 31,
2004.  The  significant  items  affecting  the  Company's  cash  and  short-term
investments during the six months ended June 30, 2005, are as follows:  proceeds
of approximately  $334,000 from the sale of the Sharps common stock, the payment
of $200,000 for the annual Preferred  Dividends and approximately  $1,031,000 of
legal and  professional  fees related to the lawsuit filed by Craig Davis. As of
June 30, 2005, the Company had met the $500,000  deductible 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.  Because  this case is in the early  stages,  it is not  possible to
evaluate the likelihood of exceeding the policy limit.  As of June 30, 2005, the
Company has recorded a receivable  from the insurance  carrier of  approximately
$781,000 for  reimbursement of legal and professional fees incurred in excess of
the policy  deductible,  in  accordance  with the  provisions  of the  insurance
policy.  As of August 12, 2005,  the Company has not received any  reimbursement
from the insurance  carrier and continues to have ongoing  discussions  with the
insurance carrier regarding reimbursement under the provisions of the policy. If
for any  reason  the  insurance  carrier  does not  fulfill  its  obligation  to
reimburse the Company under the  insurance  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.

            There were no capital  expenditures during the six months ended June
30, 2005.

            During  the  remainder  of  2005,   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 and operating  new business  activities.  The Company  expects to incur
additional  operating  losses through fiscal 2005, 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 $2,431,000 at June 30, 2005. The second

                                       15





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  $6,383,000  at June 30,  2005.  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 DISCLOSURE 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 June  30,  2005,  because  the  Company's
intention is to maintain a liquid portfolio. The Company does not use derivative
financial instruments in its operations.

ITEM 4. CONTROLS AND PROCEDURES

            Disclosure  controls and  procedures 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.

                            PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

            On August 11, 2004,  Craig  Davis,  allegedly a  stockholder  of the
Company, filed a complaint in the Chancery Court of New Castle County,  Delaware
(the  "Complaint").  The Complaint  asserts direct claims,  and also  derivative
claims on the Company's behalf,  against five former and three current directors
of the Company.  The individual  defendants named in the Complaint are Parris H.
Holmes,  Jr., C. Lee Cooke,  Jr., Justin L. Ferrero,  Gary D. Becker, J. Stephen

                                       16





Barley,  Stephen M. Wagner, Mark E. Schwarz, and Steven J. Pully; the Company is
a nominal  defendant.  In his  Complaint,  Mr. Davis seeks the  appointment of a
receiver  for  the  Company  under  Section  226(a)  of  the  Delaware   General
Corporation  Law and other remedies.  Mr. Davis alleges that different  director
defendants  breached  their  fiduciary  duties to the Company.  The  allegations
involve, among other things, transactions with, and payments to, Mr. Holmes, and
whether the Company operated as an unregistered investment company.

            The Company and certain of the defendants responded to the Complaint
by filing a motion to  dismiss or stay the  action on  October  18,  2004 and on
November 3, 2004 filed a  memorandum  of law in support of such  positions.  The
motion to dismiss filed by the Company and various  defendants  was heard by the
Chancery  Court of New Castle  County,  Delaware on January 18, 2005.  The court
denied the motion to  dismiss.  On May 6, 2005,  the  Company and certain of the
defendants  filed a response in opposition to  plaintiff's  motion for receiver.
Mediation  among  parties  named in the  Complaint  took  place  in  Wilmington,
Delaware on May 13, 2005.  On May 31, 2005,  Mr. Davis filed an amendment to the
Complaint  to  include  James  Risher,  a current  director,  and  Newcastle  as
additional defendants. On July 8, 2005, the Company and certain defendants filed
a supplemental  response in opposition to plaintiff's  motion for appointment of
receiver. A trial date is currently set for December 5, 2005.

            The Company is currently  funding legal  expenses of the  defendants
pursuant  to  indemnification   arrangements  that  were  in  place  during  the
respective terms of each of the defendants. As of June 30, 2005, the Company had
met the  $500,000  deductible  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.  Because this
case is in the early  stages,  it is not possible to evaluate the  likelihood of
exceeding  the policy  limit.  As of June 30,  2005,  the Company has recorded a
receivable   from  the   insurance   carrier  of   approximately   $781,000  for
reimbursement  of legal and  professional  fees incurred in excess of the policy
deductible,  in accordance  with the provisions of the insurance  policy.  As of
August 12,  2005,  the  Company  has not  received  any  reimbursement  from the
insurance  carrier and continues to have ongoing  discussions with the insurance
carrier regarding  reimbursement  under the provisions of the policy. If for any
reason the  insurance  carrier does not fulfill its  obligation to reimburse the
Company under the insurance 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.

            On October 27, 2004, the board of directors appointed Messrs. Pully,
Risher and Schwarz to a special  litigation  committee to investigate the claims
of the  plaintiff.  Prior  to the  filing  of the  Complaint,  the  Company  had
commenced an investigation of various transactions  involving former management,
including,  among other  things,  the payment of  approximately  $600,000 to Mr.
Holmes in  connection  with a restricted  stock  agreement  (see Note 7) and the
reimbursement of various expenses involving meals and entertainment,  travel and
other reimbursed  expenses.  As part of the investigative  work commenced by the
Company prior to the filing of the Complaint,  the Company sought  reimbursement
from Mr. Holmes for various amounts paid to him. The Company and Mr. Holmes were
unable to agree on the amount that Mr. Holmes should reimburse the Company.

            The  Company  has been  notified  by counsel to both Mr.  Holmes and
David P. Tusa (former chief financial  officer) that each of Messrs.  Holmes and
Tusa believe that approximately $60,000 and $34,000,  respectively,  are owed to
each of them under  their  respective  consulting  agreements.  In  addition  to
notifying both Messrs.  Holmes and Tusa that their consulting  services were not
required  and  that no  obligation  therefore  existed  under  their  respective
agreements,  both have also been  notified  that the  Company  is  investigating
various   transactions,   including,   among  other   things,   the  payment  of

                                       17





approximately  $600,000 to Mr.  Holmes in  connection  with a  restricted  stock
agreement (see Note 7 to the condensed  consolidated  financial  statements) and
the reimbursement of various expenses involving meals and entertainment,  travel
and other reimbursed expenses.  The Company disputes that any additional amounts
are owed under the consulting  agreements and,  therefore,  has not provided for
such amounts in the accompanying  financial statements for the period ended June
30, 2005.

            Pursuant  to  the  Newcastle  Transaction,  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.

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

            On May 27, 2005, the Company held its Annual Meeting of Stockholders
for the year ended December 31, 2004 for the following purpose:  (a) for holders
of Common Stock and holders of Series A Preferred  Stock to elect  Jonathan Bren
as a director to hold office until the 2007 Annual Meeting of  Stockholders  and
to elect  James A.  Risher as a director  to hold  office  until the 2008 Annual
Meeting of  Stockholders,  and (b) for  holders of Series A  Preferred  Stock to
elect Mark E.  Schwarz and Steven J. Pully as directors to hold office until the
2006 Annual Meeting of Stockholders. The vote on this proposal was as follows:

            ELECTION OF DIRECTORS               FOR                     WITHHELD
            ---------------------               ---                     --------
            Jonathan Bren                   50,209,372                   21,018
            James A. Risher                 50,192,744                    4,390
            Mark E. Schwarz                  4,807,692                        -
            Steven J. Pully                  4,807,692                        -

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).

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                                    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: August 15, 2005                    By:  /s/ John P. Murray
                                            ------------------------------------
                                                  John P. Murray
                                              CHIEF FINANCIAL OFFICER
                                         (Duly authorized and principal financial
                                         officer)

                                       19`