SECURITIES EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

[_]   TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                   For Quarter Ended: Commission File Number:
                              June 30, 2006 0-7722


                           NEW CENTURY COMPANIES, INC.
          ------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



                       DELAWARE                      061034587
          -------------------------------      -----------------------
          (State or other jurisdiction of          (IRS Employer
           Incorporation or organization)      Identification Number)


                           9835 Santa Fe Springs Road
                           Santa Fe Springs, CA 90670
          ------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)


                                 (562) 906-8455
          ------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                       1
<PAGE>


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 filing  requirements
for the past 90 days.

                                Yes [X]   No[_]

Indicate by check mark whether the  registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act). Yes [_] No [X]

The number of shares of Common Stock, par value $ .10 per share,  outstanding as
of June 30, 2006 was 11,314,654.

Transitional Small Business Disclosure Format (check one):  Yes [_]  No [X]


                                       2
<PAGE>


ITEM 1.  FINANCIAL STATEMENTS (Unaudited)                                      4

      The condensed  consolidated  Financial Statements are set forth at the end
of this document.

   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                  ----

   Condensed Consolidated Balance Sheet                                      F-1

   Condensed Consolidated Statements of Operations                           F-2

   Condensed Consolidated Statements of Cash Flows                           F-3

   Notes to Condensed Consolidated Financial Statements               F-4 - F-15


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS             4

ITEM 3. CONTROLS AND PROCEDURES                                               10

PART II OTHER INFORMATION                                                     11

ITEM 1. LEGAL PROCEEDING                                                      11

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS           11

ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                       11

ITEM 4. SUBMISSION OF MATERS TO A VOTE OF SECURITY HOLDERS                    11

ITEM 5. OTHER INFORMATION                                                     11

ITEM 6. EXHIBITS                                                              11


                                       3
<PAGE>


ITEM 1.  FINANCIAL STATEMENTS

     The condensed consolidated Financial Statements are set forth at the end of
this document.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

     The following  discussion  should be read in conjunction with the Company's
condensed  consolidated  financial  statements  and the notes thereto  appearing
elsewhere in this Form 10-QSB.  Certain statements contained herein that are not
related  to  historical  results,  including,  without  limitation,   statements
regarding the  Company's  business  strategy and  objectives,  future  financial
position,  expectations about pending litigation and estimated cost savings, are
forward-looking  statements  within the meaning of Section 27A of the Securities
Act and Section 21E of the  Securities  Exchange  Act of 1934,  as amended  (the
"Securities  Exchange  Act") and involve risks and  uncertainties.  Although the
Company believes that the assumptions on which these forward-looking  statements
are based are reasonable,  there can be no assurance that such  assumptions will
prove to be accurate  and actual  results  could  differ  materially  from those
discussed  in the  forward-looking  statements.  Factors  that  could  cause  or
contribute  to such  differences  include,  but are not limited  to,  regulatory
policies,  and market  and  general  policies,  competition  from other  similar
businesses,  and  market  and  general  economic  factors.  All  forward-looking
statements contained in this Form 10-QSB are qualified in their entirety by this
statement.

OVERVIEW

The Company is engaged in  acquiring,  re-manufacturing  and  selling  pre-owned
Computer   Numerically   Controlled   ("CNC")  machine  tools  to  manufacturing
customers.  The Company provides rebuilt,  retrofit and remanufacturing services
for numerous  brands of machine tools.  The  remanufacturing  of a machine tool,
typically consisting of replacing all components, realigning the machine, adding
updated CNC capability and  electrical  and mechanical  enhancements,  generally
takes two to four months to complete.  Once completed,  a remanufactured machine
is a "like new," state-of-the-art  machine with a price ranging from $275,000 to
$1,000,000,  which is  substantially  less then the price of a new machine.  The
Company  also  manufactures  original  equipment  CNC large  turning  lathes and
attachments under the trade name Century Turn.

CNC  machines use commands  from onboard  computers to control the  movements of
cutting tools and rotation speeds of the parts being produced. Computer controls
enable operators to program operations such as part rotation,  tooling selection
and tooling  movement for  specific  parts and then store the programs in memory
for future use. The machines  are able to produce  parts while left  unattended.
Because of this ability,  as well as superior speed of operation,  a CNC machine
is able to  produce  the same  amount  of work as  several  manually  controlled
machines, as well as reduce the number of operators required,  generating higher
profits  with less  re-work  and scrap.  Since the  introduction  of CNC tooling
machines,  continual  advances in computer  control  technology have allowed for
easier programming and additional machine capabilities.


                                       4
<PAGE>


A vertical  turning machine  permits the production of larger,  heavier and more
oddly  shaped parts on a machine,  which uses less floor space when  compared to
the  traditional  horizontal  turning  machine  because  the spindle and cam are
aligned on a vertical plane, with the spindle on the bottom.

The primary  industry  segments in which the Company's  machines are utilized to
make component  parts are in aerospace,  power  generation  turbines,  military,
component  parts for the energy sector for natural gas and oil  exploration  and
medical  fields.  The Company sells its products to customers  located in United
States, Canada and Mexico.

Over the last four  years,  the  Company  has  designed  and  developed  a large
horizontal CNC turning lathe with productivity  features new to the metalworking
industry.  The Company  believes  that a potential  market for the Century  Turn
Lathe, in addition to the markets mentioned above, is aircraft landing gear.

We provide our manufactured and  remanufactured  machines as part of the machine
tool industry. The machine tool industry worldwide is approximately a 30 billion
dollar  business  annually.  The industry is sensitive to market  conditions and
generally trends downward prior to poor economic conditions,  and improves prior
to an improvement in economic conditions.

Our machines  are  utilized in a wide  variety of industry  segments as follows:
aerospace,  energy, valves,  fittings, oil and gas, machinery and equipment, and
transportation. With the recent downturn in the aerospace industry, we have seen
an  increase  in  orders  from  new  industries  such  as  defense  and  medical
industries.



PLAN OF OPERATIONS

     The  earnings of the Company for the three  months ended June 30, 2006 were
positive as a result of an increase in revenues.

The  Company's  current  strategy is to expand its customer  sales base with its
present line of machine  products.  The Company's  growth strategy also includes
strategic  acquisitions in addition to growing the current  business.  Plans for
expansion will be funded through current working capital from ongoing sales and,
to the  extent  available,  additional  funds  in the  form of  debt or  equity.
Currently, the Company's management has attracted additional funding in the form
of  subordinated  debt.  However,  there is no guarantee that the capital raised
will be sufficient to execute the  Company's  business  plan. To the extent that
the  capital  raised is not  sufficient,  the  Company's  business  plan will be
required to be substantially modified and its operations curtailed.


                                       5
<PAGE>


RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO JUNE
30, 2005.

           Revenues.  The Company generated revenues of $2,297,773 for the three
months  ended June 30,  2006,  which was a  $1,089,794  or a 90%  increase  from
$1,207,979  for the three months ended June 30, 2005. The increase is the result
of a growth in customer  orders,  based on an increased demand in the market for
machine  tools and on the  capability  to sell the  Company's  product at higher
contract amounts.


     Gross  Profit.  Gross profit for the three months ended June 30, 2006,  was
$806,721 or 35% of revenues,  compared to  $372,168,  or 31% of revenues for the
three months ended June 30, 2005, a 117% increase.  The increase of gross profit
is the result of increased sales.

     Operating  Income.  Operating  income for the three  months  ended June 30,
2006,  was  $360,379  compared to an operating  loss of $(58,632)  for the three
months ended June 30, 2005. The increase of $419,011 or 715% in operating income
is due to 117% increase in sales.

     Interest Expense. Interest expense for the three months ended June 30, 2006
was $813,110 compared with $70,218 for the three months ended June 30, 2005. The
$742,892 increase in interest expense is due primarily to $459,000  amortization
of  beneficial   conversion  feature  and  $113,000  discount  on  warrants  and
conversion  option  associated to two convertible notes payable and amortization
of deferred  financing  costs  related to warrants and common  stock  granted to
third parties as financing cost on convertible notes. Secondarily,  the increase
in  interest  expense  is due to  $119,000  liquidated  damages  accrued on $3.5
million convertible debt (See Note 5).

Derivative  liability expense.  As of June 30, 2006, a decrease in fair value of
the derivative  liability associated with the warrants to purchase common stock,
granted  in  connection  with  the  $3.5  million  convertible  debenture,   was
$(799,524).  The  decrease in fair value was  reversed to  derivative  liability
expense (See Note 1).

RESULTS OF  OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2006  COMPARED TO JUNE
30, 2005.

           Revenues.  The Company  generated  revenues of $3,997,620 for the six
months  ended June 30,  2006,  which was a  $1,357,752  or a 51%  increase  from
$2,639,868 for the six months ended June 30, 2005. The increase is the result of
an increase in customer  orders,  based on a better market for machine tools and
on the capability to sell the Company's product at higher contract amounts.


                                       6
<PAGE>


     Gross  Profit.  Gross profit for the six months  ended June 30,  2006,  was
$1,209,960 or 30% of revenues,  compared to $758,187, or 29% of revenues for the
six months ended June 30, 2005, a 60% increase.  The increase of gross profit is
the result of increased sales.

     Operating Income.  Operating income for the six months ended June 30, 2006,
was $308,589  compared to operating  income of $101,568 for the six months ended
June 30, 2005.  The  increase of $207,021 or 203% in operating  income is due to
the increase in sales.

     Interest  Expense.  Interest expense for the six months ended June 30, 2006
was  $1,208,938  compared  with $119,285 for the six months ended June 30, 2005.
The  $1,089,653  increase  in  interest  expense is due  primarily  to  $708,123
amortization of beneficial  conversion feature and $170,466 discount on warrants
and  conversion  option  associated  with  two  convertible  notes  payable  and
amortization  of deferred  financing  costs related to warrants and common stock
granted to third parties as financing  cost on convertible  notes.  Secondarily,
the increase in interest expense is due to $162,500  liquidated  damages accrued
on $3.5  million  convertible  debt  (See Note 5 to the  condensed  consolidated
financial statements).

Derivative  liability expense.  As of June 30, 2006, a decrease in fair value of
the derivative  liability associated with the warrants to purchase common stock,
granted  in  connection  with  the  $3.5  million  convertible  debenture,   was
$(34,762).  The  decrease  in fair value was  reversed to  derivative  liability
expense (See Note 1 to the condensed consolidated financial statements).

FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES

     The net cash  decrease of the Company  during the six months ended June 30,
2005 was $(14,813) (bank overdraft). The decrease is due to net cash provided by
financing  activities of $1,052,687,  used to increase its inventory of machines
for stock and debt  reduction.  Currently,  the Company's  management  attracted
additional  funding  in the  form of  subordinated  debt.  However,  there is no
guarantee  that the capital  raised will be  sufficient  to execute its business
plan.  To the extent that the capital  raised is not  sufficient,  the Company's
business plan will be required to be  substantially  modified and its operations
curtailed.


The Company is currently improving its liquidity by the following actions:

o The Company continues to implement plans to increase revenues.
o The Company continues its program for selling inventory that has been produced
or is currently in  production.  o The Company  continues to implement  plans to
further  reduce   operating  costs  by  improved  process  control  and  greater
productivity.
o The  Company is  continually  seeking  investment  capital  through the public
markets.


                                       7
<PAGE>


However,  there is no  guarantee  that any of these  strategies  will enable the
Company to meet its financial obligations for the foreseeable future.

INFLATION AND CHANGING PRICES

      The Company  does not foresee  any  adverse  effects on its  earnings as a
result of inflation or changing prices.


CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with accounting  principles  generally  accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the consolidated  financial  statements and the accompanying
notes.  The amounts of assets and liabilities  reported on our balance sheet and
the amounts of revenues and expenses reported for each of our fiscal periods are
affected by estimates and  assumptions,  which are used for, but not limited to,
the accounting for revenue recognition,  accounts receivable, doubtful accounts,
inventories and derivative  liabilities.  Actual results could differ from these
estimates. The following critical accounting policies are significantly affected
by judgments, assumptions and estimates used in the preparation of the financial
statements:

REVENUE RECOGNITION

Service  revenues  are billed and  recognized  in the  period the  services  are
rendered.

The Company accounts for shipping and handling fees and costs in accordance with
EITF 00-10  "Accounting for Shipping and Handling Fees and Costs." Such fees and
costs incurred by the Company are immaterial to the operations of the Company.

In accordance with SFAS 48, "Revenue  Recognition  when Right of Return Exists,"
revenue is recorded  net of an  estimate of  markdowns,  price  concessions  and
warranty costs.  Such reserve is based on management's  evaluation of historical
experience, current industry trends and estimated costs.

Staff Accounting Bulletin 104 ("SAB 104"), "Revenue  Recognition,"  outlines the
basic criteria that must be met to recognize  revenue and provides  guidance for
presentation  of revenue  and for  disclosure  related  to  revenue  recognition
policies  in  financial  statements  filed  with  the  Securities  and  Exchange
Commission.  Management  believes that the Company's revenue  recognition policy
for  services  and product  sales  conforms to SAB 104.  The Company  recognizes
revenue of long-term contracts pursuant to SOP 81-1.


                                       8
<PAGE>

METHOD OF ACCOUNTING FOR LONG-TERM CONTRACTS

The Company uses the  percentage-of-completion  method of  accounting to account
for long-term contracts and, therefore,  takes into account the cost,  estimated
earnings  and revenue to date on  fixed-fee  contracts  not yet  completed.  The
percentage-of-completion  method is used because management considers total cost
to be the best  available  measure  of  progress  on the  contracts.  Because of
inherent  uncertainties in estimating costs, it is at least reasonably  possible
that the estimates used will change within the near term.

The amount of revenue  recognized  at the  statement  date is the portion of the
total  contract  price that the cost  expended to date bears to the  anticipated
final cost, based on current estimates of cost to complete. It is not related to
the progress billings to customers. Contract costs include all materials, direct
labor, machinery, subcontract costs and allocations of indirect overhead.

Because  long-term  contracts  may extend over a period of time,  changes in job
performance,  changes in job  conditions  and revisions of estimates of cost and
earnings during the course of the work are reflected in the accounting period in
which the facts that require the revision  become known. At the time a loss on a
contract  becomes  known,  the entire amount of the  estimated  ultimate loss is
recognized in the consolidated financial statements.

Contracts that are substantially complete are considered closed for consolidated
financial statement purposes.  Revenue earned on contracts in progress in excess
of billings (under billings) is classified as a current asset. Amounts billed in
excess of revenue earned (overbillings) are classified as a current liability.

ESTIMATES

Critical  estimates  made by management  are,  among others,  deferred tax asset
valuation  allowances,  realization of inventories,  collectibility of contracts
receivable, the estimating of costs for long-term construction contracts and the
valuation of derivative liabilities. Actual results could materially differ from
those estimates.


CLASSIFICATION OF WARRANT OBLIGATION

In connection with the issuance of the 12% Senior Secured Convertible Notes (See
Note 3), the Company has an obligation to file a registration statement covering
the resale of 125% of the Registrable Securities, as defined in the Registration
Rights  Agreement.  The obligation to file the registration  statement meets the
criteria of an embedded  derivative to be  bifurcated  pursuant to SFAS No. 133,
"Accounting  for Derivative  Instruments  and Hedging  Activities",  as amended.
Under this  transaction,  the Company is  obligated  to register  for resale the
common shares underlying the warrants,  and as a result, the embedded derivative
associated  with this warrant  obligation  does not meet the scope  exception of
paragraph  11(a) of SFAS No. 133.  Specifically,  at March 31, 2006, the Company
did not have any uncommitted  registered shares to settle the warrant obligation
and accordingly,  such obligation has been classified as a liability (outside of
stockholders' deficit) in accordance with EITF Issue No. 00-19,  "Accounting for
Derivative  Financial  Instruments  Indexed  to, and  Potentially  Settled in, a
Company's  Own Stock." The  classification  of the  warrant  obligation  will be
evaluated at each reporting date and as such, it will continue to be reported as
a  liability  until  such  time  all  of  the  criteria   necessary  for  equity
classification have been met.


                                       9
<PAGE>


OTHER SIGNIFICANT ACCOUNTING POLICIES

Other  significant   accounting   policies  not  involving  the  same  level  of
measurement  uncertainties as those discussed above, are nevertheless  important
to an  understanding  of the  financial  statements.  The  policies  related  to
consolidation  and loss  contingencies  require  difficult  judgments on complex
matters that are often subject to multiple  sources of  authoritative  guidance.
Certain of these  matters are among  topics  currently  under  reexamination  by
accounting  standards setters and regulators.  Although no specific  conclusions
reached by these  standards  setters appear likely to cause a material change in
our accounting policies,  outcomes cannot be predicted with confidence. Also see
Note 1 of Notes to  Condensed  Consolidated  Financial  Statements,  Summary  of
Significant  Accounting Policies,  which discusses accounting policies that must
be selected by management when there are acceptable alternatives.



ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF CONTROLS AND PROCEDURES

Under the supervision and with the  participation  of our management,  including
our Chief  Executive  Officer ("CEO") and Chief Financial  Officer  ("CFO"),  we
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls  and  procedures  (as defined in Rule  13a-15(e)  and  15d-15(e) of the
Exchange Act as of a date (the "Evaluation Date") within 90 days prior to filing
the Company's June 30, 2006 Form 10-Q. Based upon that  evaluation,  the CEO and
CFO concluded that, as of June 30, 2006, our disclosure  controls and procedures
were not effective in timely  alerting  management  to the material  information
relating to us (or our consolidated subsidiaries) required to be included in our
periodic filings with the SEC.

CHANGES IN CONTROLS AND PROCEDURES

There were no changes made in our internal  controls  over  financial  reporting
during the  quarter  ended June 30,  2006 that have  materially  affected or are
reasonably likely to materially affect these controls.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROL

The Company's management, including the CEO, does not expect that our disclosure
controls and procedures or our internal  control over  financial  reporting will
necessarily  prevent all fraud and material errors.  An internal 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. Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints,  and the benefits of controls must be considered  relative to their
costs.  Because of the inherent  limitations on all internal control systems, no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud,  if any,  within the Company have been  detected.  These
inherent limitations include the realities that judgments in decision-making can
be faulty,  and that  breakdowns  can occur  because of simple error or mistake.
Additionally,  controls  can be  circumvented  by the  individual  acts  of some
persons,  by collusion of two or more people,  and/or by management  override of
the control.  The design of any system of internal control is also based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance  that any design will  succeed in achieving  its stated goals under
all  potential  future  conditions.  Over time,  controls may become  inadequate
because of changes in  circumstances,  and/or the degree of compliance  with the
policies and procedures may deteriorate.  Because of the inherent limitations in
a cost-effective internal control system,  financial reporting misstatements due
to error or fraud may occur and not be detected on a timely basis.


                                       10
<PAGE>


PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings

      None.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

      During the quarter ended June 30, 2006,  the Company  issued 19,318 shares
of common stock to Motivated Minds LLC, as a conversion of $12,750 interest on a
$300,000  convertible note. The shares were issued pursuant to an exemption from
the registration  rights of the Securities Act of 1933, as amended,  pursuant to
Section 4(2) thereof and are included in the current Registration Statement.

Item 3.     Defaults Upon Senior Securities

During November 2004, the Company  borrowed  $80,816 on two notes payable to one
individual. The Note is unsecured, matured in January 2005, has an interest rate
of 6% and is  currently  in  default.  At June 30,  2006 the  total  outstanding
principal balance on this Note was $80,816.


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

      None.

Item 5.     Other Information


                          WAIVER OF PREFERRED DIVIDEND


At June 30, 2006,  the Company had a total of 27,780  preferred  shares Series C
and 11,640 preferred shares Series D issued and outstanding.  As of December 31,
2005, the Company  accumulated  dividends  payable totaling  $565,875.  In March
2006, ten of the Company's preferred  shareholders elected to waive their rights
to receive  dividends.  Therefore,  the Company recorded a decrease in dividends
payable of $287,875.


Item 6.     Exhibits

Exhibits:

            Exhibit 31.1 Section 302 Sarbanes Oxley Certification

            Exhibit 31.2 Section 906 Sarbanes Oxley Certification



                                       11
<PAGE>

--------------------------------------------------------------------------------
                    NEW CENTURY COMPANIES, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   June 30, 2006
                                    (Unaudited)
--------------------------------------------------------------------------------

                                      ASSETS

Current Assets
  Restricted cash                                                 $ 1,500,000
  Contracts receivable                                                750,269
  Inventories, net                                                  1,286,087
  Costs and estimated earnings in excess
    of billings on uncompleted contracts                              600,019
  Deferred financing costs, net                                       335,067
  Prepaid expenses and other current assets                            36,229
                                                                  -----------
            Total current assets                                    4,507,671

PROPERTY AND EQUIPMENT, NET                                           354,057
DEFERRED FINANCING COSTS, NET                                         558,444
                                                                  -----------

                                                                  $ 5,420,172
                                                                  ===========

                       LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Bank overdraft                                                  $    12,836
  Accounts payable and accrued expenses                             1,325,258
  Dividends payable                                                   320,400
  Billings in excess of costs and estimated
    earnings on uncompleted contracts                                 381,896
  Warrant liability                                                 2,155,238
  Notes payable                                                       200,816
  Convertible notes payable                                           300,000
                                                                  -----------
            Total current liabilities                               4,696,444

CONVERTIBLE NOTES PAYABLE, NET OF DISCOUNT                            388,890

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
  Cumulative, convertible, Series B preferred
    stock, $1 par value, 15,000,000 shares authorized,
    no shares issued and outstanding (liquidation
    preference of $25 per share)                                           --
  Cumulative, convertible, Series C preferred stock,
    $1 par value, 75,000 shares authorized, 27,780 shares
    issued and outstanding (liquidation preference of $903,000)        27,780
  Cumulative, convertible, Series D preferred stock,
    $25 par value, 75,000 shares authorized, 11,640 shares
    issued and outstanding (liquidation preference of $403,000)       291,000
  Common stock, $0.10 par value, 50,000,000 shares authorized;
    11,314,654 shares issued and outstanding                        1,131,466
  Subscriptions receivable                                           (462,500)
  Notes receivable from stockholders                                 (505,639)
  Deferred consulting fees                                           (126,385)
  Additional paid-in capital                                        7,558,675
  Accumulated deficit                                              (7,579,559)
                                                                  -----------
       Total stockholders' deficit                                    334,838
                                                                  -----------

                                                                  $ 5,420,172
                                                                  ===========

--------------------------------------------------------------------------------

See accompanying notes to the condensed consolidated financial statements.

                                      F-1
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
<S>                       <C>
                                NEW CENTURY COMPANIES, INC. AND SUBSIDIARY
                              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         For the Three and Six Months Ended June 30, 2006 and 2005
                                                (Unaudited)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                     FOR THE THREE                    FOR THE SIX
                                                                  MONTHS ENDED JUNE 30,           MONTHS ENDED JUNE30,
                                                                  2006             2005           2006            2005
                                                              ------------    ------------    ------------    ------------

<S>                                                           <C>             <C>             <C>             <C>
CONTRACT REVENUES                                             $  2,297,773    $  1,207,979    $  3,997,620    $  2,639,868

COST OF SALES                                                    1,491,052         835,811       2,787,660       1,881,681
                                                              ------------    ------------    ------------    ------------

GROSS PROFIT                                                       806,721         372,168       1,209,960         758,187
                                                              ------------    ------------    ------------    ------------

OPERATING EXPENSES
  Consulting and other compensation                                124,900         153,407         327,958         198,379
  Salaries and related                                              61,791          40,362         126,122          97,552
  Selling, general and administrative                              259,651         237,031         447,291         360,688
                                                              ------------    ------------    ------------    ------------
TOTAL OPERATING EXPENSES                                           446,342         430,800         901,371         656,619
                                                              ------------    ------------    ------------    ------------

OPERATING INCOME (LOSS)                                            360,379         (58,632)        308,589         101,568
                                                              ------------    ------------    ------------    ------------

OTHER (INCOME) EXPENSES
  Derivative liability                                            (799,524)             --         (34,762)             --
  Interest, including debt discount amortization                   813,110          70,218       1,208,938         119,285
                                                              ------------    ------------    ------------    ------------

TOTAL OTHER (INCOME) EXPENSES                                       13,586          70,218       1,174,176         119,285
                                                              ------------    ------------    ------------    ------------

INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES                                                       346,793        (128,850)       (865,587)        (17,717)

PROVISION FOR INCOME TAXES                                              --              --              --              --
                                                              ------------    ------------    ------------    ------------

NET INCOME (LOSS)                                             $    346,793    $   (128,850)   $   (865,587)   $    (17,717)
                                                              ============    ============    ============    ============

NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS           $    304,393    $   (234,375)   $   (620,112)   $   (123,242)
                                                              ============    ============    ============    ============

BASIC NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
PER COMMON SHARE                                              $       0.03    $      (0.03)   $      (0.06)   $      (0.02)
                                                              ============    ============    ============    ============

DILUTED NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
PER COMMON SHARE                                              $       0.02    $      (0.03)   $      (0.06)   $      (0.02)
                                                              ============    ============    ============    ============

BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                11,291,359       7,978,932      11,047,485       7,635,598
                                                              ============    ============    ============    ============

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING              12,222,041       7,978,932      11,047,485       7,635,598
                                                              ============    ============    ============    ============
</TABLE>


--------------------------------------------------------------------------------

See accompanying notes to the condensed consolidated financial statements.


                                      F-2
<PAGE>

--------------------------------------------------------------------------------
                   NEW CENTURY COMPANIES, INC. AND SUBSIDIARY
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Six Months Ended June 30, 2006 and 2005
                                   (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     2006            2005
                                                                  -----------    -----------
<S>                                                               <C>            <C>
Cash flows from operating activities:
  Net loss                                                        $  (865,587)   $   (17,717)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization of property and equipment          77,594        127,487
      Amortization of deferred financing costs                        170,779             --
      Amortization of deferred consulting fees                        221,332         52,566
      Amortization of BCFs and other debt discounts                   707,790         29,687
      Estimated fair market value of common stock
        issued for penalties and settlement                                --        110,000
      Derivative liability expense (credit)                           (34,762)            --
      Changes in operating assets and liabilities:
        Contracts receivable                                         (462,700)            --
        Inventories                                                  (357,140)        49,630
        Costs and estimated earnings in excess of billings on
          uncompleted contracts                                      (182,264)      (255,696)
        Prepaid expenses and other current assets                     (34,669)            --
        Accounts payable and accrued expenses                        (153,572)        56,470
        Billings in excess of costs and estimated earnings on
          uncompleted contracts                                      (119,488)      (207,136)
                                                                  -----------    -----------
     Net cash used in operating activities                         (1,032,687)       (54,709)
                                                                  -----------    -----------
Cash flows from investing activities:
  Purchases of property and equipment                                 (20,000)            --
                                                                  -----------    -----------
     Net cash used in investing activities                            (20,000)            --
                                                                  -----------    -----------
Cash flows from financing activities:
  Restricted cash                                                  (1,500,000)            --
  Bank overdraft                                                      (14,813)            --
  Proceeds from issuance of convertible notes payable               3,800,000             --
  Principal payments on notes payable                                (810,000)            --
  Deferred financing costs                                           (422,500)            --
  Principal repayments on obligations under capital lease                  --        (41,531)
                                                                  -----------    -----------
     Net cash provided by (used in) financing activities            1,052,687        (41,531)
                                                                  -----------    -----------
Net decrease in cash                                                       --        (96,240)
Cash at beginning of period                                                --        129,087
                                                                  -----------    -----------
Cash at end of period                                             $        --    $    32,847
                                                                  ===========    ===========

Supplemental disclosure of non-cash activities:

  Common stock and warrants issued for deferred financing costs   $   641,790    $        --
                                                                  ===========    ===========

  Conversion of notes payable and interest to common stock        $   170,250    $        --
                                                                  ===========    ===========

  BCF and other debt discount on convertible notes payable        $ 3,800,000    $        --
                                                                  ===========    ===========

  Debt discount on notes payable for note extension               $    18,900    $    47,500
                                                                  ===========    ===========

  Accrued cumulative dividends on preferred stock                 $    42,400    $   105,525
                                                                  ===========    ===========

  Cumulative preferred dividends waived                           $   287,875    $        --
                                                                  ===========    ===========

  Conversion of Series C preferred stock to common stock          $     2,000    $        --
                                                                  ===========    ===========
</TABLE>

--------------------------------------------------------------------------------

See accompanying notes to the condensed consolidated financial statements.

                                      F-3
<PAGE>

                   NEW CENTURY COMPANIES, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 For the Six Months Ended June 30, 2006 and 2005
                                   (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF OPERATIONS

New Century  Companies,  Inc. and Subsidiary  (collectively,  the "Company"),  a
California  corporation,  was incorporated March 1996 and is located in Southern
California.  The Company provides after-market  services,  including rebuilding,
retrofitting and remanufacturing of metal cutting machinery.  Once completed,  a
remanufactured  machine is "like new" with state-of-the-art  computers,  and the
cost to the Company's  customers is  substantially  less than the price of a new
machine.

The Company  currently  sells its services by direct sales and through a network
of machinery  dealers  across the United  States.  Its  customers  are generally
medium to large sized manufacturing  companies in various industries where metal
cutting is an integral part of their  businesses.  The Company  grants credit to
its customers who are predominately located in the western United States.

The Company trades on the OTC Bulletin Board under the symbol "NCNC.OB".

PRINCIPLES OF CONSOLIDATION

The  condensed  consolidated  financial  statements  include the accounts of New
Century   Companies,   Inc.  and  its  wholly  owned  subsidiary,   New  Century
Remanufacturing  (collectively,  the "Company").  All  significant  intercompany
accounts and transactions have been eliminated in consolidation.

BASIS OF PRESENTATION

The accompanying  unaudited interim condensed  consolidated financial statements
have been prepared by the Company,  pursuant to the rules and regulations of the
United  States   Securities  and  Exchange   Commission  (the  "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  ("GAAP") have been omitted  pursuant to such SEC rules
and  regulations;  nevertheless,  the Company  believes that the disclosures are
adequate to make the  information  presented  not  misleading.  These  financial
statements and the notes hereto should be read in conjunction with the financial
statements,  accounting  policies and notes  thereto  included in the  Company's
Annual  Report on Form 10-KSB for the year ended  December 31, 2005,  filed with
the SEC. In the opinion of  management,  all  adjustments  necessary  to present
fairly, in accordance with GAAP, the Company's financial position as of June 30,
2006,  and the  results of  operations  and cash flows for the  interim  periods
presented,  have been made. Such  adjustments  consist only of normal  recurring
adjustments.  The results of operations  for the three moths ended June 30, 2006
are not necessarily indicative of the results for the full year.


                                      F-4
<PAGE>


GOING CONCERN

The accompanying  condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates, among
other things,  the realization of assets and  satisfaction of liabilities in the
normal course of business.  The Company has negative working capital of $188,773
and an accumulated deficit of $7,579,559 at June 30, 2006, and had net cash used
in operating  activities of  $1,032,687  for the six months ended June 30, 2006.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern.  The Company fund operations  through  increased
sales and debt and equity financing  arrangements which management  believes may
be insufficient to fund its capital expenditures, working capital and other cash
requirements  for the fiscal year  ending  December  31,  2006.  Therefore,  the
Company  will be required  to seek  additional  funds to finance  its  long-term
operations.  The successful outcome of future activities cannot be determined at
this time and there is no  assurance  that if  achieved,  the Company  will have
sufficient  funds to execute its  intended  business  plan or generate  positive
operating results.

In response to these problems, management has taken the following actions:

o The Company continues its aggressive program for selling inventory.

o The Company continues to implement plans to further reduce operating costs.

o The Company is seeking investment capital through the public markets.

The condensed  consolidated  financial statements do not include any adjustments
related to recoverability  and  classification of assets carrying amounts or the
amount and classification of liabilities that might result should the Company be
unable to continue as a going concern.

INVENTORY

Inventories  are stated at the lower of cost or net  realizable  value.  Cost is
determined under the first-in,  first-out method.  Inventories represent cost of
work in  process  on units not yet under  contract.  Cost  includes  all  direct
material  and labor,  machinery,  subcontractors  and  allocations  of  indirect
overhead.


                                      F-5
<PAGE>


REVENUE RECOGNITION

The Company's  revenues consist of contracts with vendors.  The Company uses the
percentage-of-completion method of accounting to account for long-term contracts
and, therefore,  takes into account the cost,  estimated earnings and revenue to
date on fixed-fee  contracts  not yet  completed.  The  percentage-of-completion
method is used because management  considers total cost to be the best available
measure of  progress on the  contracts.  Because of  inherent  uncertainties  in
estimating  costs,  it is at least  reasonably  possible that the estimates used
will change within the near term.

Staff Accounting  Bulletin ("SAB") No. 104, "Revenue  Recognition"  outlines the
basic criteria that must be met to recognize  revenue and provides  guidance for
presentation  of revenue  and for  disclosure  related  to  revenue  recognition
policies in financial  statements filed with the SEC.  Management  believes that
the Company's  revenue  recognition  policy conforms to SAB No. 104. The Company
recognizes revenue on contracts pursuant to SOP 81-1.

The amount of revenue  recognized  at the  statement  date is the portion of the
total  contract  price that the cost  expended to date bears to the  anticipated
final cost, based on current estimates of cost to complete. It is not related to
the progress billings to customers. Contract costs include all materials, direct
labor, machinery, subcontract costs and allocations of indirect overhead.

Because contracts may extend over a period of time,  changes in job performance,
changes in job conditions and revisions of estimates of cost and earnings during
the course of the work are reflected in the accounting period in which the facts
that require the revision become known. At the time a loss on a contract becomes
known,  the entire  amount of the  estimated  ultimate loss is recognized in the
consolidated financial statements.

Contracts that are substantially complete are considered closed for consolidated
financial statement purposes.  Costs incurred and revenue earned on contracts in
progress in excess of billings  (under  billings)  are  classified  as a current
asset.  Amounts billed in excess of costs and revenue earned (over billings) are
classified as a current liability.

The Company accounts for shipping and handling fees and costs in accordance with
Emerging Issues Task Force ("EITF") Issue No. 00-10 "Accounting for Shipping and
Handling  Fees and  Costs."  Such fees and costs  incurred  by the  Company  are
immaterial to the operations of the Company.

In accordance with Statements of Financial Accounting Standards ("SFAS") No. 48,
"Revenue Recognition when Right of Return Exists," revenue is recorded net of an
estimate of markdowns,  price  concessions and warranty  costs.  Such reserve is
based on  management's  evaluation of historical  experience,  current  industry
trends and estimated costs.


                                      F-6
<PAGE>


BASIC AND DILUTED LOSS PER COMMON SHARE

Under SFAS No. 128,  "Earnings  Per Share,"  basic  earnings per common share is
computed  by  dividing   income   available  to  common   stockholders   by  the
weighted-average  number of common shares assumed to be  outstanding  during the
period of computation.  Diluted  earnings per share is computed similar to basic
earnings  per share  except that the  denominator  is  increased  to include the
number of  additional  common  shares  that would have been  outstanding  if the
potential common shares had been issued and if the additional common shares were
dilutive.  There were  903,659  potentially  dilutive and  13,372,330  potential
common shares at June 30, 2006, which include common stock purchase warrants and
shares underlying convertible preferred stock and convertible notes payable.

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted  earnings per share  computations  for the three and six month
periods ended June 30, 2006 and 2005:

For the Three Months Ended June 30,

<TABLE>
<CAPTION>
                                                                                             2006            2005
                                                                                         ------------    ------------

<S>                                                                                      <C>             <C>
Net income (loss)                                                                        $    346,793    $   (128,850)

Cumulative preferred dividends accrued                                                        (42,400)       (105,525)
                                                                                         ------------    ------------
Numerator for basic and diluted net income (loss) per common share:
Net income (loss) applicable to common stockholders                                           304,393        (234,375)

Denominator for basic net income (loss) per common share:
Basic weighted average common shares outstanding                                           11,291,359       7,978,932
                                                                                         ------------    ------------
Denominator for diluted net income (loss) per common share:
Diluted weighted average common shares outstanding                                         12,222,041       7,978,932
                                                                                         ------------    ------------

Basic net income (loss) per common share                                                 $       0.03    $      (0.03)
                                                                                         ============    ============
Diluted net income (loss) per common share                                               $       0.02    $      (0.03)
                                                                                         ============    ============
</TABLE>


                                      F-7
<PAGE>


For the Six Months Ended June 30,

<TABLE>
<CAPTION>
                                                                          2006           2005
                                                                      ------------    ------------

<S>                                                                   <C>             <C>
Net income (loss)                                                     $   (865,587)   $    (17,717)

Cumulative preferred dividends accrued                                     (42,400)       (105,525)

Waiver of accrued cumulative preferred
dividends                                                                  287,875              --
                                                                      ------------    ------------
Numerator for basic and diluted net income (loss) per common share:
Net income (loss) available to common stockholders                        (620,112)       (123,242)

Denominator for basic net income (loss) per common share:
Basic weighted average common shares outstanding                        11,047,485       7,635,598
                                                                      ------------    ------------
Denominator for diluted net income (loss) per common share:
Diluted weighted average common shares outstanding                      11,047,485       7,635,598
                                                                      ------------    ------------

Basic net income (loss) per common share                              $      (0.06)   $      (0.02)
                                                                      ============    ============
Diluted net income (loss) per common share                            $      (0.06)   $      (0.02)
                                                                      ============    ============
</TABLE>


STOCK BASED COMPENSATION

Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123-R,
"Share-Based  Payment,"  ("SFAS No.  123-R").  SFAS No. 123-R requires  employee
stock options and rights to purchase shares under stock  participation  plans to
be  accounted  for under the fair value method and requires the use of an option
pricing model for estimating fair value.  Accordingly,  share-based compensation
is measured at the grant date, based on the fair value of the award. The Company
previously  accounted for awards  granted under its equity  incentive plan under
the intrinsic value method prescribed by Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations, and
provided  the  required  pro  forma  disclosures  prescribed  by SFAS  No.  123,
"Accounting for  Stock-Based  Compensation,"  as amended.  The exercise price of
options is  generally  equal to the market price of the  Company's  common stock
(defined as the closing price as quoted on the  Over-the-Counter  Bulletin Board
administered  by  Nasdaq)  on the date of  grant.  Accordingly,  no  share-based
compensation  was  recognized  in the financial  statements  prior to January 1,
2006.

Under the  modified  prospective  method of  adoption  for SFAS No.  123-R,  the
compensation  cost recognized by the Company  beginning January 1, 2006 includes
(a) compensation  cost for all equity incentive awards granted prior to, but not
yet vested as of April 1, 2006,  based on the grant-date fair value estimated in
accordance  with the original  provisions of SFAS No. 123, and (b)  compensation
cost for all equity  incentive  awards  granted  subsequent  to January 1, 2006,
based on the grant-date  fair value  estimated in accordance with the provisions
of SFAS No. 123-R.


                                      F-8
<PAGE>


From time to time, the Company's Board of Directors grants common share purchase
options or warrants to selected directors, officers, employees,  consultants and
advisors  in  payment  of  goods  or  services  provided  by such  persons  on a
stand-alone  basis outside of any of the Company's formal stock plans. The terms
of these grants are  individually  negotiated  and generally  expire within five
years from the grant date.

Under the  terms of the  Company's  Incentive  Stock  Option  Plan,  options  to
purchase an aggregate  of 1,000,000  shares of common stock may be issued to key
employees, as defined. The exercise price of any option may not be less than the
fair market value of the shares on the date of grant.  No options granted may be
exercisable  more than ten years after the date of grant.  The  options  granted
generally vest evenly over a one-year period, beginning from the date of grant.

Under the terms of the  Company's  Non-Statutory  Stock Option Plan,  options to
purchase  an  aggregate  of  1,350,000  shares of common  stock may be issued to
non-employees  for  services  rendered.  These  options are  non-assignable  and
non-transferable,  are  exercisable  over a  five-year  period  from the date of
grant, and vest on the date of grant.

At June 30, 2006, the Company had 936,500 options  available for future issuance
under their equity  compensation plans. All of these options vested prior to the
adoption of SFAS No. 123-R.

The effects of share-based  compensation  resulting from the application of SFAS
No. 123-R to options granted outside of the Company's Stock Option Plan resulted
in zero  expense  for the three  and six  month  periods  ended  June 30,  2006.
Share-based  compensation  recognized  as a result of the  adoption  of SFAS No.
123-R as well as pro forma disclosures  according to the original  provisions of
SFAS No. 123 for periods  prior to the  adoption of SFAS No. 123-R use the Black
Scholes option pricing model for estimating fair value of options granted.

In accordance with SFAS No. 123-R, the Company's policy is to adjust share-based
compensation  on a quarterly basis for changes to the estimate of expected award
forfeitures based on actual forfeiture  experience.  The effect of adjusting the
forfeiture  rate  for  all  expense  amortization  after  December  31,  2006 is
recognized in the period the forfeiture  estimate is changed.  Since the Company
had no unvested  options  during the six month period  ended June 30, 2006,  the
effect of  forfeiture  adjustments  in the three and six month  periods  was not
applicable.

Pro forma  information  required under SFAS No. 123 for periods prior to 2006 as
if the Company had applied the fair value recognition provisions of SFAS No. 123
to options granted under and outside of the Company's equity incentive plans was
as follows:


                                      F-9
<PAGE>

                                                     Three            Six
                                                  Months Ended    Months Ended
                                                    June 30,        June 30,
                                                      2005             2005
                                                  ------------    ------------

Net loss as reported                              $   (128,850)   $    (17,717)
  Less: Total stock-based employee compensation
    expense determined under the Black Scholes
    option pricing model, net of tax                        --              --
                                                  ------------    ------------
Pro forma net loss                                $   (128,850)   $    (17,717)
                                                  ============    ============

Basic and diluted loss per common share:
  As reported                                     $      (0.03)   $      (0.02)
                                                  ============    ============
  Pro forma                                       $      (0.03)   $      (0.02)
                                                  ============    ============

Pro forma compensation expense reported in the above table is generally based on
the vesting  provisions  in the related stock option  grants.  Since all options
granted prior to January 1, 2005 had been completely  vested prior to such date,
there is no pro forma  compensation  expense to  disclose  for the three and six
months  ended June 30, 2005,  as reflected in the above table,  nor any weighted
average assumptions to disclose.

The expected volatility is based on the historical volatility. The expected life
of options  granted is based on the "simplified  method"  described in the SEC's
Staff  Accounting  Bulletin  No.  107 due to changes  in the  vesting  terms and
contractual  life of current option grants compared to the Company's  historical
grants.

Options and warrants outstanding that have vested and are expected to vest as of
June 30, 2006 are as follows:
                                                       Weighted
                                          Weighted      Average
                                          Average      Remaining      Aggregate
                              Number of   Exercise    Contractual     Intrinsic
                               Shares      Price     Term in Years    Value (1)
 --------------------------  ---------   --------   -------------    ---------

Vested                       1,460,000    $  0.35        2.09        $ 482,800
Expected to vest                    --         --          --        $      --
                             ---------                               ---------
     Total                   1,460,000                               $ 482,800
                             ==========                              =========


(1) These amounts represent the difference between the exercise price and $0.62,
the  closing  market  price of the  Company's  common  stock on June 30, 2006 as
quoted on the Over-the-Counter Bulletin Board under the symbol "NCNC.OB" for all
in-the-money options outstanding.


                                      F-10
<PAGE>


The Company's  policy for options  outstanding that are expected to vest are net
of estimated  future  forfeitures in accordance  with the provisions of SFAS No.
123-R,  which are estimated when compensation  costs are recognized.  Additional
information with respect to stock option activity is as follows:

                                                    Outstanding Options
                                            ------------------------------------
                                Shares                   Weighted      Aggregate
                              Available     Number of     Average      Intrinsic
                              for Grant     Shares     Exercise Price  Value (1)
---------------------------  ---------     ------     --------------   ---------

December 31, 2005               936,500   1,468,500      $ 0.40       $  482,800
                                                                      ==========
Grants                               --          --          --
Exercises                            --          --          --
Cancellations                        --       8,500      $10.00
                             ----------  ----------      ------
June 30, 2006                   936,500   1,460,000      $ 0.35       $  482,800
                             ==========  ==========      ======       ==========

Options exerciseable at:
December 31, 2005                         1,468,500      $ 0.40
June 30, 2006                             1,460,500      $ 0.35


(1) Represents  the  difference  between the exercise price and the December 31,
2005 or June 30, 2006 market  price of the  Company's  common  stock,  which was
$0.62 on both dates.

The Company  follows SFAS No. 123 (R) (as  interpreted  by EITF Issue No. 96-18,
"Accounting for Equity  Instruments  That Are Issued To Other Than Employees for
Acquiring,  or in Conjunction  with Selling,  Goods or Services") to account for
transactions  involving  services  provided by third  parties  where the Company
issues  equity  instruments  as part of the  total  consideration.  Pursuant  to
paragraph 7 of SFAS No. 123 (R),  the  Company  accounts  for such  transactions
using the fair value of the consideration  received (i.e. the value of the goods
or services) or the fair value of the equity  instruments  issued,  whichever is
more  reliably  measurable.  The  Company  applies  EITF  Issue  No.  96-18,  in
transactions,  when the  value of the  goods  and/or  services  are not  readily
determinable  and (1) the fair value of the equity  instruments is more reliably
measurable  and (2) the  counterparty  receives  equity  instruments  in full or
partial settlement of the transactions, using the following methodology:

a) For  transactions  where  goods  have  already  been  delivered  or  services
rendered, the equity instruments are issued on or about the date the performance
is complete (and valued on the date of issuance).

b) For  transactions  where  the  instruments  are  issued  on a  fully  vested,
non-forfeitable basis, the equity instruments are valued on or about the date of
the contract.

c) For any  transactions  not  meeting  the  criteria  in (a) or (b) above,  the
Company  re-measures the  consideration at each reporting date based on its then
current stock value.


                                      F-11
<PAGE>


DEFERRED FINANCING COSTS

Direct costs of securing debt financing are  capitalized  and amortized over the
term of the related debt using the straight-line  method. When a loan is paid in
full, any unamortized  financing costs are removed from the related accounts and
charged to operations.  During the three months ended June 30, 2006, the Company
amortized approximately $113,000.

STOCK PURCHASE WARRANTS ISSUED WITH NOTES PAYABLE

The Company  granted  warrants in connection  with the issuance of certain notes
payable.  Under  Accounting  Principles  Board Opinion No. 14,  "Accounting  for
Convertible  Debt and Debt Issued With Stock  Purchase  Warrants,"  the relative
estimated fair value of such warrants represents a discount from the face amount
of the notes payable.  Such discounts are amortized to interest expense over the
term of the notes.

BENEFICAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE

The  convertible  feature  of  certain  notes  payable  provides  for a rate  of
conversion that is below market value. Such feature is normally characterized as
a  "Beneficial  Conversion  Feature"  ("BCF").  Pursuant to EITF Issue No. 98-5,
"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently  Adjustable  Conversion Ratio" and EITF No. 00-27,  "Application of
EITF Issue No. 98-5 To Certain  Convertible  Instruments,"  the  estimated  fair
value of the BCF is  recorded  in the  consolidated  financial  statements  as a
discount  from the face amount of the notes.  Such  discounts  are  amortized to
interest expense over the term of the notes.

CLASSIFICATION OF WARRANT OBLIGATION

In connection with the issuance of the 12% Senior Secured Convertible Notes (See
Note 3), the Company has an obligation to file a registration statement covering
the resale of 125% of the Registrable Securities, as defined in the Registration
Rights  Agreement.  The obligation to file the registration  statement meets the
criteria of an embedded  derivative to be  bifurcated  pursuant to SFAS No. 133,
"Accounting  for Derivative  Instruments  and Hedging  Activities",  as amended.
Under this  transaction,  the Company is  obligated  to register  for resale the
common shares underlying the warrants,  and as a result, the embedded derivative
associated  with this warrant  obligation  does not meet the scope  exception of
paragraph  11(a) of SFAS No. 133.  Specifically,  at the  commitment  date,  the
Company  did not have any  uncommitted  registered  shares to settle the warrant
obligation and  accordingly,  such obligation has been classified as a liability
(outside of  stockholders'  deficit) in  accordance  with EITF Issue No.  00-19,
"Accounting  for Derivative  Financial  Instruments  Indexed to, and Potentially
Settled in, a Company's Own Stock." The classification of the warrant obligation
will be evaluated at each  reporting  date and as such,  it will  continue to be
reported as a liability until such time all of the criteria necessary for equity
classification have been met.


                                      F-12
<PAGE>


NEW ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements discussed in the notes to the December 31, 2005
financial   statements   filed  previously  with  the  Securities  and  Exchange
Commission in Form 10-KSB that are required to be adopted during the year ending
December 31, 2006 did not or will not have a significant impact on the Company's
financial statements.

2. CONTRACTS IN PROGRESS

Contracts in progress as of June 30, 2006 which include completed  contracts not
completely billed, approximate:

Cumulative costs to date                                            $ 2,295,000
Cumulative gross profit to date                                       5,476,000
                                                                    -----------
Cumulative revenue earned                                             7,771,000

Less progress billings to date                                       (7,553,000)
                                                                    -----------
      Net under billings                                            $   218,000
                                                                    ===========


The following is included in the  accompanying  condensed  consolidated  balance
sheet under these captions as of June 30, 2006:

Costs and estimated earnings in excess of billings
  on uncompleted contracts                                            $ 600,000

Billings in excess of costs and estimated earnings
  on uncompleted contracts                                             (382,000)
                                                                      ---------
       Net under billings                                             $ 218,000
                                                                      =========



3. DEBT TRANSACTIONS

During the three months ended June 30, 2006, the Company amortized approximately
$459,000  of  debt  discounts,  including  beneficial  conversion  features,  to
interest  expense.  Of such amount,  $309,000 was related to a convertible  note
payable  to  CAMOFI  Master  LDC  ("CAMOFI")  and  $150,000  was  related  to  a
convertible note payable to Motivated Minds, LLC ("Motivated Minds").

During the three months ended June 30, 2006,  the Company made cash  payments of
$36,000 to reduce the principal balance on one of its outstanding  secured notes
payable.


                                      F-13
<PAGE>


4. EQUITY TRANSACTIONS

During the three months ended June 30, 2006, the Company issued 19,318 shares of
restricted  common  stock at $0.66 per share to one of its  creditors  to settle
accrued  interest  totaling  $12,750 on a convertible  note payable.  The common
stock conversion price was recorded at $0.66 in accordance with the terms of the
convertible note agreement.

As  described  in Note 1, the  Company  enters into  equity  based  compensation
arrangements with non-employees  where the value of the services are not readily
determinable  and the fair  value of the  equity  instruments  is more  reliably
measurable. Under most of these arrangements,  the performance criteria required
for a  measurement  date is not  reached  until  the  service  period  has  been
completed.  As a result, the Company is required to re-measure the consideration
at each  reporting  date (or when the services were complete if sooner) based on
its then current stock value.  During the three months ended June 30, 2006,  the
Company  recorded  net  increases  to the  fair  values  of  such  equity  based
compensation arrangements with third parties totaling $149,500. During the three
months  ended June 30,  2006,  the  Company  recorded  approximately  $84,000 of
consulting  expense related to the  amortization of deferred  consulting fees on
such equity based compensation arrangements.

5. CONTINGENCIES

On February 28, 2006, the Company entered into a Securities Purchase Agreement (
"the Note") with CAMOFI  whereby  CAMOFI  agreed to purchase,  up to  $5,000,000
aggregate principal amount of 12% Senior Secured Convertible Notes, due February
28,  2009  (up  to  $3,500,000  to be  purchased  at  the  closing  and up to an
additional  $1,500,000  to be  purchased  pursuant to an  Additional  Investment
Right),  secured by a first  priority  lien on all assets of the Company and its
current  and  future  subsidiaries  (including  a pledge  of the  shares  of the
Company's current and future Subsidiaries).  The Note is convertible into shares
of the Company's  common stock at a fixed price of $0.63 at any time at CAMOFI's
option.  Additionally,  $1,500,000 of the  $3,500,000  proceeds from the closing
were placed into an escrow account, which was originally intended to be used for
a potential private company business acquisition.  Accordingly,  such amount has
been  recorded as restricted  cash in the  accompanying  condensed  consolidated
balance sheet at June 30, 2006. In connection  with the Note, the Company issued
3,476,190  warrants at an exercise price of $0.63 to CAMOFI. The warrants vested
and became fully exercisable on their issuance date.

CAMOFI  has  not  exercised  its   $1,500,000   Additional   Investment   Right.
Additionally,  CAMOFI has  certain  registration  rights  for the  common  stock
underlying both the warrants and the convertible debt. The related  registration
rights agreement includes financial penalties because the Company failed to meet
the registration statement effectiveness deadline, which was June 28, 2006. Such
penalties,  which are 1.5% of the outstanding  principal balance of the Note for
the first 30 days and an additional 1.5% for each 30 day period thereafter,  can
be paid in common stock at the option of the


                                      F-14
<PAGE>


Company.  As of June  30,  2006,  the  Company  has  accrued  $162,500  for such
estimated liquidated damages, which are included in accounts payable and accrued
expenses in the  accompanying  condensed  consolidated  balance  sheet.  Of such
amount,  $43,500 was accrued  during the three  months  ended March 31, 2006 and
$119,000 was accrued during the three months ended June 30, 2006. As a result of
not meeting these deadlines,  this condition may be deemed an "Event of Default"
if not cured to the  satisfaction  of CAMOFI prior to the  expiration  of thirty
days from the Event Date, as defined in the registration  rights agreement,  and
could possibly allow CAMOFI to call the debt or seek other remedy at such time.

6. SUBSEQUENT EVENTS

As noted above, in connection with the CAMOFI  Purchase  Agreement,  the Company
entered into an escrow  agreement,  pursuant to which  $1,500,000  was deposited
into  escrow by  CAMOFI.  Pursuant  to the terms of the  letter  agreement,  the
$1,500,000  deposit was to be released to the Company upon  consummation  of the
acquisition of Quilite  International LLC. Based upon changed  circumstances and
the  immediate  need of the Company for the funds for  general  working  capital
purposes, the parties decided to release the funds held in escrow to the Company
as follows:  (a)  $750,000 on July 10, 2006 and (b)  $750,000 on August 4, 2006.
The Company is utilizing the funds for general working capital purposes.

On July 25, 2006, in connection with the Motivated Minds  convertible note dated
February 15, 2006, the Company issued 45,000  restricted  shares of common stock
to Motivated  Minds for  extension of $150,000 of principal  balance of the note
until August 16, 2006,  and the remaining  principal  balance of $150,000 of the
note until October 16, 2006.


                                      F-15
<PAGE>


SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the Company  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.





Date:  August 14, 2006                 NEW CENTURY COMPANIES, INC.

                                       /s/    DAVID DUQUETTE
                                       ---------------------------------------
                                       Name:  David Duquette
                                       Title: Chairman, President and Director



In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Company  and in the  capacities  and on the
dates indicated.





Date:  August 14, 2006                 /s/    DAVID DUQUETTE
                                       ----------------------------------------
                                       Name:  David Duquette
                                       Title: Chairman, President and Director

Date: August 14, 2006                  /s/    JOSEF CZIKMANTORI
                                       ----------------------------------------
                                       Name:  Josef Czikmantori
                                       Title: Secretary and Director