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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

                                  FOR ANNUAL AND TRANSITION REPORTSREPORT
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      For the Fiscal Year ended December 31, 20042005

|_|   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                         (IRS 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)

        Securities Registered Pursuant to Section 12(b) of the Act: NONE

           Securities Registered Pursuant to Section 12(g) of the Act:

                     -----------------------------------------------------------
                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
          SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
                                (Title of Class)

      Indicate by check mark if the registrant is a well-known  seasoned issuer,
as defined in Rule 405 of the Securities Act. |_| Yes |X| No

      Indicate by check mark if the  registrant  is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. |_| Yes |X| No

      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


                                       1


      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. |X|

      Indicate by check mark whether the Registrant is an accelerated  filer (as
defined in Exchange Act Rule 12b-2). |_| Yes |X| No

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

      The aggregate  market value of the Registrant's voting and non-voting
common equityregistrant's  outstanding  Common Stock
held by non-affiliates  of the Registrantregistrant  computed by reference to the price at
which  the  Common  Stock  was  last  sold as of June 30, 2004the  last  business  day of the
registrant's most recently completed second fiscal quarter was $11,386,024.


$7,935,714.

      As of March 30, 2005,2006, the Registrant had 34,653,104 shares of Common Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

The  information   required  byItems  10,  11,  12,  13 and 14 of Part III of this  Form  10-K  is
incorporatedincorporate  by
reference to portions of the  Registrant'san amendment to this Form 10-K or portions of a definitive
proxy statement (the "Proxy  Statement") of the Registrant's  2005registrant for its 2006 Annual Meeting of Stockholders which is expected to
be held on a date to be determined,  which in either case will be filed bywith the
RegistrantSecurities and Exchange  Commission  within 120 days after itsthe end of the fiscal
year ended December 31, 2004.

================================================================================2005.


                                       2


               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES

                           ANNUAL REPORT ON FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 20042005

                                                                            PAGE
                                                                            ----

                                     PART I

Item 1.    Business........................................................   34
Item 1A.   Risk Factors....................................................   6
Item 1B.   Unresolved Staff Comments.......................................  11
Item 2.    Properties......................................................  911
Item 3.    Legal Proceedings...............................................  911
Item 4.    Submission of Matters to a Vote of Security Holders.............  1013

                                     PART II

Item 5.    Market for Registrant's Common Equity, and Related Stockholder
           Matters and Issuer Purchases of Equity Securities... 10Securities...............  13
Item 6.    Selected Financial Data.........................................  1214
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations...........................................  1315
Item 7A.   Quantitative and Qualitative Disclosure About Market Risk.......  1920
Item 8.    Financial Statements and Supplementary Data.....................  2021
Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure............................................  4546
Item 9A.   Controls and Procedures.........................................  4546
Item 9B.   Other Information...............................................  4546

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant..............  4647
Item 11.   Executive Compensation..........................................  4647
Item 12.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters...................... 46Matters.................................  47
Item 13.   Certain Relationships and Related Transactions..................  4647
Item 14.   Principal Accountant Fees and Services..........................  4647

                                     PART IV

Item 15.   Exhibits and Financial Statement Schedules......................  4647

           Signatures......................................................  50


                                       3


                                     PART I

ITEM 1. BUSINESS

      THIS  ANNUAL  REPORT  ON  FORM  10-K  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,
PRODUCT INTRODUCTIONS AND ACCEPTANCE,  TECHNOLOGICAL CHANGE,  CHANGES IN
INDUSTRY  PRACTICES,  ONE-TIME EVENTS AND OTHER FACTORS  DESCRIBED HEREIN AND IN
OTHER FILINGS MADE BY THE COMPANY WITH THE  SECURITIES  AND EXCHANGE  COMMISSION
("SEC").  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.

INTRODUCTION

      New Century Equity  Holdings Corp.  ("NCEH" or the "Company") 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.  In June  2004,On October 5, 2005,  the  Company  sold allmade an
investment  in  ACP  Investments   L.P.  (d/b/a  Ascendant   Capital   Partners)
("Ascendant"),  pursuant  to which the  Company  currently  receives  50% of the
revenues  generated  by  Ascendant.  Ascendant is a Berwyn,  Pennsylvania  based
alternative asset management  company whose funds have investments in long/short
equity  funds and which  distributes  its  registered  funds  primarily  through
various financial intermediaries and related channels. The Company's interest in
Princeton eCom Corporation  ("Princeton"),  which offers  electronic
bill  presentment and payment  services viaAscendant currently represents the Internet and telephone,  for $10
million.  The  Company  continues  to hold a small  equity  interest in publicly
traded  Sharps  Compliance  Corp.  ("Sharps"),   which  provides  cost-effective
medical-related disposal solutions for the healthcare,  retail,  residential and
hospitality industries.Company's sole operating business.

HISTORICAL OVERVIEW

      The Company,  which was formerly known as Billing Concepts Corp.  ("BCC"),
was  incorporated  in the  state of  Delaware  in  1996.  BCC was  previously  a
wholly-owned  subsidiary of U.S. Long Distance  Corp.  ("USLD") and  principally
provided third-party billing  clearinghouse and information  management services
to the  telecommunications  industry (the  "Transaction  Processing and Software
Business").   Upon  its  spin-off   from  USLD,   BCC  became  an   independent,
publicly-held  company.  In October  2000,  the  Company  completed  the sale of
several wholly-owned  subsidiaries that comprised the Transaction Processing and
Software  Business  to  Platinum  Holdings  ("Platinum")  for  consideration  of
$49.7
million$49,700,000  (the "Platinum  Transaction").  The Company also received  payments
totaling  $7.5 million$7,500,000  for  consulting  services  provided to  Platinum  over the
twenty-four month period subsequent to the Platinum Transaction.

      Beginning in 1998, the Company made multiple investments in Princeton eCom
Corporation  ("Princeton") totaling approximately $77.3  million$77,300,000 before selling all
of its interest for $10 million$10,000,000 in June 2004. The Company's strategy,  beginning
with its investment in Princeton, of making investments in high-growth companies
was also facilitated through several other investments.


                                       4
In November 1999, the Company  completed the  acquisition of FIData,
Inc. ("FIData"),  a company that provided Internet-based automated loan approval
products  to the  financial  services  industry.  Total  consideration  for  the
acquisition was  approximately  $4.2 million in cash and debt assumption and 1.1
million shares of the Company's common stock, par value $0.01 per share ("Common
Stock").  In October 2001, the Company exchanged 100% of its stock of FIData for
a  9%  equity  interest  in  Microbilt  Corporation  ("Microbilt"),   which  was

                                       3




surrendered  in October 2003 in settlement  of a related  lawsuit (see Note 3 to
the Consolidated Financial Statements).

            In March  2000,  the  Company  completed  the  purchase  of a voting
preferred  stock  investment  of $6.0 million in  CoreINTELLECT,  a company that
developed  and  marketed  internet-based  business-to-business  products for the
acquisition,  classification,  retention and dissemination of  business-critical
knowledge  and  information.  During  the year  ended  December  31,  2001,  the
Company's investment in CoreINTELLECT was reduced to $0 by the Company's portion
of CoreINTELLECT's net losses. CoreINTELLECT ceased operations in August 2001.

            In August 2001, the Company  purchased  1,060,000  shares of Tanisys
Technology Inc.  ("Tanisys")  Series A Preferred Stock for $1.00 per share, in a
private  placement  financing.  Tanisys  designed,   manufactured  and  marketed
production  level  automated test equipment for a wide variety of  semiconductor
memory  technologies.  The Company sold its interest in Tanisys in February 2003
for approximately $200,000.

            In October  2001,  the Company  purchased  700,000  shares of common
stock of Sharps  for  $770,000.  In  January  2003,  the  Company  purchased  an
additional  200,000  shares of common stock of Sharps for  $200,000.  In January
2004,  under the terms of a settlement  agreement in  connection  with a lawsuit
against the Company,  the Company transferred 525,000 shares of the common stock
of Sharps valued at approximately  $389,000 to a third party. As of December 31,
2004, the Company held 375,000 shares of the common stock of Sharps.

RECENT DEVELOPMENTS

            In March 2004, the Company filed  preliminary  proxy  materials with
the SEC seeking stockholder approval of a liquidation of the Company. On June 2,early  2004,  the  Company  announced  that it had  been in  discussions  with  various
organizations that had expressed an interest in exploring strategic alternativeswould  seek  stockholder
approval to liquidate  the Company's  previously  proposed  planCompany.  In June of liquidation.  The  contemplated
transactions, proposed as alternatives to2004,  the previous planboard of liquidation, were
focused  on the  usedirectors of
the Company's  cash  and  operating  and  capital  loss
carryforwards.  On June  10,  2004,Company  determined  that it would be in the best interest of the Company amended  its  July  10,  1996
Shareholder  Rights  Agreement by reducing the Common Stock ownership  threshold
for  triggering  the  distributionto
accept an investment from Newcastle Partners, L.P. ("Newcastle"),  an investment
fund with a long track record of rights under such  agreement from fifteen
percent to five  percent.  The purpose of such  amendment was to help ensure the
preservation of the Company's net operating lossinvesting in public and capital loss carryforwards.private  companies.  On
June 18, 2004, the Company sold approximately 4.8 million4,807,692 newly issued shares of its Series A 4%
Convertible  Preferred  Stock (the "Series A Preferred  Stock") to Newcastle Partners,  L.P.  ("Newcastle")  for
$5.0  million$5,000,000  (the  "Newcastle  Transaction").  Newcastle was exempted from the five percent ownership limitation
in the Shareholder Rights Agreement.  In connection with the announcement of the
Newcastle  Transaction,  the  Company  announced  that the  Board  of  Directors
determined  that it was not in the best interests of the Company's  stockholders
to liquidate  the Company and withdrew  all proxy  materials  filed with the SEC
related to the proposed liquidation.  At the time of the aforementioned  events,
the Company's board of directors consisted of C. Lee Cooke, Jr., Gary D. Becker,
Justin L. Ferrero, Parris H. Holmes, Jr. and Stephen M. Wagner.

            The  Series A  Preferred  Stock issued to Newcastle is
convertible into approximately  thirty-five  percent of the Common Stock, at any
time after the  expiration  of twelve  months from the date of its issuance at a
conversion  price of $0.26 per share of Common Stock,  subject to adjustment for
dilution.  The  holders of the Series A Preferred  Stock are  entitled to a four
percent  annual  cash  dividend  (the  "Preferred  Dividends").   The  Preferred
Dividends shall accrue and shall be cumulative from the date of initial issuance
of the shares of the Series A Preferred  Stock,  whether or not  declared by the
Company's board of directors. In lieu of cash dividends, the holders of Series A
Preferred Stock may elect to receive such number of shares of Series A Preferred
Stock that is equal to the aggregate dividend amount divided by $1.04. Following
the investment by Newcastle, the management team resigned and new executives and
board members were appointed.

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

RECENT DEVELOPMENTS

      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 Company is a nominal defendant.  Mr. Davis alleges in the Complaint
that  different  director  defendants  breached  their  fiduciary  duties to the
Company.  The allegations  involve,  among other things,  transactions with, and
payments to, Parris H. Holmes, Jr., a former executive officer and director, and
whether the Company operated as an unregistered  investment  company.  Mr. Davis
seeks the  appointment of a receiver for the Company under Section 226(a) of the
Delaware General Corporation Law and other remedies.

      Management has spent  extensive  amounts of time and expense  dealing with
matters related to the Complaint and has been diligently  working to resolve the
asserted claims.  The Company has had extensive  meetings with the other parties
to the  litigation  in an  attempt  to settle  the  litigation.  There can be no
assurance that the Company will be able to effect a settlement.


                                       5


ALTERNATIVE ASSET MANAGEMENT OPERATIONS

      On October 5, 2005, the Company  entered into an agreement (the "Ascendant
Agreement")  with Ascendant to acquire an interest in the revenues  generated by
Ascendant. Pursuant to the Ascendant Agreement, the Company is entitled to a 50%
interest,  subject  to  certain  adjustments,   in  the  revenues  generated  by
Ascendant,  which interest  declines if the assets under management of Ascendant
reach certain  levels.  Revenues  generated by Ascendant  include  revenues from
assets under  management or any other sources or investments,  net of any agreed
commissions.  The Company also agreed to provide various  marketing  services to
Ascendant.  Steven J. Pully, CEO of the Company, was appointed to the Investment
Advisory  Committee of Ascendant.  The total potential  purchase price under the
terms  of  the  Ascendant  Agreement  is  $1,550,000,   payable  in  four  equal
installments of $387,500.  The first installment was paid at the closing and the
second installment was paid on January 5, 2006. Subject to the provisions of the
Ascendant  Agreement,  the third installment is payable on April 5, 2006 and the
fourth installment is payable on July 5, 2006. The Ascendant  Agreement provides
for the repurchase of a portion of the revenue  interest by Ascendant  beginning
two years after October 5, 2005, under certain  circumstances,  at a price which
would yield a 25% annualized return to the Company.

      If the Company does not make an  installment  payment and Ascendant is not
in breach of the Ascendant  Agreement,  Ascendant will have the right to acquire
the  Company's  revenue  interest at a price which would yield a 10%  annualized
return to the Company.  If Ascendant were to materially  breach its  obligations
under the  Ascendant  Agreement,  Ascendant  could be obligated to refund to the
Company the amount of its  investment.  Such refund would not reduce the revenue
interest acquired by the Company.

      Ascendant had assets under  management of  approximately  $17,800,000  and
$13,577,000 as of December 31, 2005 and 2004,  respectively.  Ascendant  manages
funds of funds with investments in long/short equity funds.

      In connection with the Ascendant Agreement,  the Company also entered into
a Principals  Agreement  with  Ascendant  and certain  limited  partners and key
employees  of  Ascendant  (the  "Principals  Agreement")  pursuant  to which the
Company has the option to purchase  limited  partnership  interests of Ascendant
under certain  circumstances.  Effective  March 14, 2006, in accordance with the
terms of the Principals Agreement, the Company acquired a 7% limited partnership
interest from a limited partner of Ascendant for a nominal amount.

EMPLOYEES

      As of  December  31,  2005,  the Company  had two  employees.  None of the
Company's  employees are represented by a union.  The Company  believes that its
employee relations are good.

ITEM 1A. RISK FACTORS

      The  following  paragraphs  discuss  certain  factors  that may affect the
Company's business,  financial condition and operating results. For the purposes
of the following  paragraphs,  unless the context otherwise requires,  the terms
"we", "us" and "our" refer to NCEH. You should consider  carefully the risks and
uncertainties  described  below and the other  information  in this report.  The
risks  set  forth  below  are not the only  ones we face.  Additional  risks and
uncertainties that we are not aware of or that we currently deem immaterial also
may become  important  or impair our  business.  If any of the  following  risks
actually occur, our business, financial condition and operating results could be
materially  adversely  affected,  the  trading  price of our Common  Stock could
decline and the likelihood of there being any potential  return to  stockholders
would diminish.


                                       6


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

      As  discussed  in "Item 3. Legal  Proceedings",  certain of the  Company's
former and existing  directors are  defendants  in a derivative  action filed by
Craig Davis,  who  allegedly is a stockholder  of the Company.  The Company is a
nominal  defendant.  An adverse outcome in the lawsuit filed by Mr. Davis or any
other claim, which may arise in the ordinary course of our business,  may result
in  significant  monetary  damages,  a liquidation  of the  Company's  assets or
injunctive relief against us, among other remedies.  While management  currently
believes that  resolving the lawsuit filed by Mr. Davis will not have a material
adverse impact on our financial position or results of operations, litigation is
subject to inherent  uncertainties  and  management's  view of these matters may
change in the future.  There exists the possibility of a material adverse impact
on our financial  position and the results of operations for the period in which
the effect of an  unfavorable  final  outcome  becomes  probable and  reasonably
estimable.

      The  Company  is  currently  funding  legal and  professional  fees of the
defendants  pursuant to  indemnification  arrangements that were in place during
the respective terms of each of the defendants. The Company has met the $500,000
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 December 31,  2005,  the Company has recorded a receivable
from the insurance  carrier of  approximately  $1,522,000 for  reimbursement  of
legal and  professional  fees  incurred in excess of the policy  deductible,  in
accordance  with the  provisions  of the insurance  policy.  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. Nonpayment of the claim for reimbursement of legal and
professional  fees  could  have a  material  adverse  effect  on  the  financial
condition  and results of  operations  of the  Company.  The Company  intends to
vigorously seek enforcement of its rights under the policy.

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

WE MAY BE UNABLE TO REDEPLOY OUR ASSETS SUCCESSFULLY.

      As part of our strategy to limit  operating  losses and enable the Company
to  redeploy  its assets and use its cash and  short-term  investment  assets to
enhance  stockholder  value, we are pursuing a strategy of identifying  suitable
acquisition  candidates,  merger  partners or otherwise  developing new business
operations.  We may  not be  successful  in  acquiring  such  a  business  or in
operating  any  business  that we acquire,  merge with or  develop.  Although we
recently made an investment in Ascendant,  we may not be successful in investing
in or acquiring other  businesses.  Failure to redeploy our assets  successfully
will prevent us from becoming profitable.  Future cash expenditures are expected
to consist of funding corporate expenses, the cost associated with maintaining a
public  company,  expenses  incurred  in pursuing  and  operating  new  business
activities  and  litigation  expenses,  during which time  operating  losses are
likely to be generated.


                                       7


ANY ACQUISITIONS  THAT WE ATTEMPT OR COMPLETE COULD PROVE DIFFICULT TO INTEGRATE
OR REQUIRE A SUBSTANTIAL COMMITMENT OF MANAGEMENT TIME AND OTHER RESOURCES.

      Our strategy of  acquiring  other  businesses  involves a number of unique
risks  including:  (i) completing due diligence  successfully;  (ii) exposure to
unforeseen liabilities of acquired companies; and (iii) increased risk of costly
and time-consuming litigation,  including stockholder lawsuits. We may be unable
to address these problems  successfully.  Moreover, our future operating results
will depend to a significant degree on our ability to integrate acquisitions (if
any) successfully and manage operations while also controlling our expenses.  We
may be unable to select,  manage or absorb or integrate any future  acquisitions
successfully,  particularly  acquisitions of large  companies.  Any acquisition,
even if effectively integrated, may not benefit our stockholders.

THE SUCCESS OF THE INVESTMENT IN ASCENDANT WILL BE IMPACTED BY THE GROWTH OF ITS
ASSETS UNDER  MANAGEMENT  AND THE SUCCESS OF THE  PERFORMANCE  OF ITS UNDERLYING
FUNDS, WHICH MAY BE IMPACTED BY THE SECURITIES MARKETS.

      In the event that Ascendant does not meet growth targets,  the Company may
cease to make or delay additional  funding,  which could cause Ascendant to seek
financial  support from other  sources.  The  operations  of  Ascendant  will be
affected by many economic  factors,  including the performance of the securities
markets. Declines in the securities markets, in general, and the equity markets,
in  particular,  would likely reduce  Ascendant's  assets under  management  and
consequently  reduce our revenues.  In addition,  any continuing  decline in the
equity markets, failure of these markets to sustain their prior rates of growth,
or continued  volatility in these markets could result in investors  withdrawing
from the equity markets or decreasing their rate of investment,  either of which
would likely adversely affect Ascendant which, in turn, could negatively  impact
our revenues.

WE MAY BE UNABLE TO REALIZE THE BENEFITS OF OUR NET  OPERATING  LOSS ("NOL") AND
CAPITAL LOSS CARRYFORWARDS.

      NOLs and capital losses may be carried forward to offset federal and state
taxable  income and capital gains,  respectively,  in future years and eliminate
income taxes otherwise payable on such taxable income and capital gains, subject
to certain adjustments. Based on current federal corporate income tax rates, our
NOL and capital loss carryforwards,  if fully utilized,  could provide a benefit
to us of future tax savings.  However,  our ability to use these tax benefits in
future  years will depend upon the amount of our  otherwise  taxable  income and
capital gains. If we do not have sufficient  taxable income and capital gains in
future  years to use the tax  benefits  before  they  expire,  we will  lose the
benefit of these NOL and capital loss carryforwards,  permanently. Consequently,
our ability to use the tax  benefits  associated  with our NOL and capital  loss
carryforwards will depend largely on our success in identifying  suitable merger
partners and/or  acquisition  candidates,  and once  identified,  consummating a
merger with and/or acquisition of these candidates.


                                       8


      Additionally,  if we underwent an ownership  change  within the meaning of
Sections  382 and 383 of the  Internal  Revenue  Code,  the NOL and capital loss
carryforward  limitations  would  impose  an annual  limit on the  amount of the
taxable  income and capital  gain that may be offset by our NOL and capital loss
generated prior to the ownership  change.  If an ownership change were to occur,
we would be unable to use a  significant  portion  of our NOL and  capital  loss
carryforwards  to offset  taxable  income and  capital  gains.  In  general,  an
ownership  change  occurs when,  as of any testing  date,  the  aggregate of the
increase in percentage points of the total amount of a corporation's stock owned
by  "5-percent  shareholders"  (within the meaning of Section 382 and 383 of the
Internal Revenue Code) whose percentage  ownership of the stock has increased as
of such  date  over the  lowest  percentage  of the  stock  owned  by each  such
"5-percent  shareholder" at any time during the three-year period preceding such
date, is more than 50 percentage points. In general,  persons who own 5% or more
of a corporation's stock are "5-percent shareholders," and all other persons who
own less than 5% of a  corporation's  stock are  treated,  together as a single,
public  group  "5-percent  shareholder,"  regardless  of  whether  they  own  an
aggregate of 5% of a corporation's stock.

      The amount of NOL and capital loss carryforwards that we have claimed have
not been audited or otherwise  validated by the U.S.  Internal  Revenue Service.
The IRS could  challenge  our  calculation  of the amount of our NOL and capital
loss or our  determinations as to when a prior change in ownership  occurred and
other  provisions  of the  Internal  Revenue Code may limit our ability to carry
forward our NOL and capital loss to offset  taxable  income and capital gains in
future years. If the IRS was successful with respect to any such challenge,  the
potential tax benefit of the NOL and capital loss  carryforwards  to us could be
substantially reduced.

ANY TRANSFER RESTRICTIONS IMPLEMENTED BY THE COMPANY TO PRESERVE OUR NOL MAY NOT
BE EFFECTIVE OR MAY HAVE SOME UNINTENDED NEGATIVE EFFECTS.

      The board of directors  adopted an amendment  to our  Shareholders  Rights
Plan ("Rights Plan") which reduces the triggering of the Rights Plan from 15% of
the Common Stock to 5% percent of the Common Stock. The amendment was adopted to
help preserve our NOL and capital loss carryforwards. There is no guarantee that
the amendment of the Rights Plan will prevent a stockholder  from acquiring more
than 5% of the Common Stock.

      Any transfer  restrictions will require any person attempting to acquire a
significant  interest  in the  Company  to seek  the  approval  of our  board of
directors.  This  may  have an  "anti-takeover"  effect  because  our  board  of
directors may be able to prevent any future takeover.  Similarly,  any limits on
the amount of capital stock that a stockholder  may own could have the effect of
making  it more  difficult  for  stockholders  to  replace  current  management.
Additionally,  because transfer restrictions will have the effect of restricting
a stockholder's ability to dispose of or acquire our Common Stock, the liquidity
and market value of our Common Stock might suffer.


                                       9


OUR STOCK IS ILLIQUID.

      Our stock is currently quoted on the OTC Bulletin Board ("OTCBB"), and has
traded  as low as $0.18 per  share  during  2005.  Since  our  Common  Stock was
delisted  from a national  exchange  and is trading at a price  below  $5.00 per
share,  it is subject to certain other rules of the  Securities  Exchange Act of
1934, as amended.  Such rules require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a "penny stock".  "Penny
stock" is defined as any non-Nasdaq  equity  security that has a market price of
less than $5.00 per share, subject to certain exceptions. Such rules require the
delivery of a  disclosure  schedule  explaining  the penny stock  market and the
risks  associated  with  that  market  before  entering  into  any  penny  stock
transaction.  Disclosure is also required to be made about compensation  payable
to  both  the  broker-dealer  and  the  registered  representative  and  current
quotations  for the  securities.  The rules also impose  various sales  practice
requirements  on  broker-dealers  who sell penny  stocks to  persons  other than
established customers and accredited investors. For these types of transactions,
the  broker-dealer  must  make  a  special  suitability  determination  for  the
purchaser and must receive the  purchaser's  written  consent to the transaction
prior  to  the  sale.  Finally,  monthly  statements  are  required  to be  sent
disclosing recent price information for the penny stocks. The additional burdens
imposed upon broker-dealers by such requirements could discourage broker-dealers
from effecting  transactions in our Common Stock.  This could severely limit the
market  liquidity of our Common Stock and the ability of a  stockholder  to sell
the Common Stock.

OUR SUCCESS IS DEPENDENT ON OUR KEY PERSONNEL WHOM WE MAY NOT BE ABLE TO RETAIN,
AND WE MAY NOT BE ABLE TO HIRE ENOUGH ADDITIONAL QUALIFIED PERSONNEL TO MEET OUR
GROWING NEEDS.

      Our  performance  is  substantially  dependent  on the services and on the
performance of our officers and directors.  Our performance  also depends on the
Company's ability to attract,  hire,  retain,  and motivate our officers and key
employees.  The loss of the services of any of the  executive  officers or other
key employees  could have a material  adverse effect on the Company's  business,
prospects,  financial condition, and results of operations.  We have not entered
into  employment  agreements with any of our key personnel and currently have no
"Key Man" life  insurance  policies.  Our future  success may also depend on our
ability to identify,  attract,  hire, train,  retain,  and motivate other highly
skilled  technical,   managerial,  marketing  and  customer  service  personnel.
Competition  for such personnel are intense,  and there can be no assurance that
we will be able to  successfully  attract,  assimilate  or  retain  sufficiently
qualified personnel.  The failure to attract and retain the necessary technical,
managerial,  marketing  and  customer  service  personnel  could have a material
adverse effect on our business.

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

      As of December 31, 2005, our total assets were approximately  $14,578,000,
of which $415,000 were  intangible  assets  relating to the revenue  interest in
Ascendant.  We cannot be  certain  that we will ever  realize  the value of such
intangible  assets. If we were to record an intangible  impairment  charge,  our
results of operations and financial position could be adversely affected.


                                       10


ITEM 1B. UNRESOLVED STAFF COMMENTS

      Not applicable

ITEM 2. PROPERTIES

      In February 2004, the Company  leased  approximately  1,700 square feet of
space at 10101 Reunion Place, Suite 970, San Antonio, Texas, which served as the
corporate headquarters from April 2004 until September 2004. On October 8, 2004,
the Company entered into a sublease agreement to sublet the office space located
at 10101 Reunion Place,  Suite 970, San Antonio,  Texas.  Under the terms of the
original lease, the Company is obligated to make monthly rental  installments of
approximately  $3,000 through January 31, 2007, the expiration of the lease. The
sublease   agreement   provides  for  the  subtenant  to  make  monthly   rental
installments  of  approximately  $2,500 per month through  January 31, 2007. The
Company's  corporate  headquarters are currently  located at 300 Crescent Court,
Suite 1110, Dallas, Texas 75201, which are also the offices of Newcastle Capital
Management,  L.P. ("NCM"). NCM is the general partner of Newcastle.  Pursuant to
an  oral  agreement,  the  Company  occupies  a  portion  of  NCM's  space  on a
month-to-month basis at no charge.

ITEM 3. LEGAL PROCEEDINGS

      On August 11, 2004,  Craig Davis,  allegedly a stockholder of the Company,
filed the Complaint in the Chancery  Court of New Castle County,  Delaware.  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. Mr. Davis alleges in the Complaint that different director defendants
breached their fiduciary duties to the Company. The allegations  involve,  among
other things, transactions with, and payments to, Mr. Holmes, a former executive
officer  and  director,  and whether  the  Company  operated as an  unregistered
investment company in violation of the Investment Company Act of 1940. Mr. Davis
seeks the  appointment of a receiver for the Company under Section 226(a) of the
Delaware General Corporation Law and other remedies.

      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.  The Company has had extensive  meetings with the other parties to the
litigation  in an attempt to settle the  litigation.  There can be no  assurance
that the Company will be able to effect a settlement.

      The  Company  is  currently  funding  legal and  professional  fees of the
defendants  pursuant to  indemnification  arrangements that were in place during
the respective terms of each of the defendants. The Company has met the $500,000
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 December 31,  2005,  the Company has recorded a receivable
from the insurance carrier of approximately $1,522,000 for reimbursement of


                                       11


legal and  professional  fees  incurred in excess of the policy  deductible,  in
accordance  with the  provisions  of the insurance  policy.  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. Nonpayment of the claim for reimbursement of legal and
professional  fees  could  have a  material  adverse  effect  on  the  financial
condition  and results of  operations  of the  Company.  The Company  intends to
vigorously seek enforcement of its rights under the policy.

      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 6 to the
accompanying  financial  statements) 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 6 to the
accompanying 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.

      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.

      On December 12, 2005, the Company received a letter from the SEC, based on
a review of the Company's  Form 10-K filed for the year ended December 31, 2004,
requesting  that the  Company  provide a written  explanation  as to whether the
Company is an  "investment  company" (as such term is defined in the  Investment
Company Act of 1940).  The Company provided a written response to the SEC, dated
January 12, 2005,  stating the reasons why it believes it is not an  "investment
company".  The Company  continues to provide  certain  confirmatory  information
requested by the SEC. See Item 1A. "Risk  Factors--OUR  BUSINESS COULD BE HARMED
IF  THERE IS A  NON-FAVORABLE  RESOLUTION  TO THE  DERIVATIVE  ACTION  COMMENCED
AGAINST  US BY CRAIG  DAVIS OR IN OTHER  LITIGATION  OR  REGULATORY  PROCEEDINGS
AGAINST THE COMPANY."

      During  February 2006, the Company entered into an agreement with a former
employee to settle a dispute  over a severance  agreement  that the employee had
entered into with the Company.  The severance  agreement,  which was executed by
former  management,  provided  for a payment of  approximately  $98,000 upon the
occurrence of certain events. The Company paid  approximately  $85,000 to settle
all claims associated with the severance agreement.


                                       12


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

      During the fourth  quarter of fiscal 2005,  no matter was submitted by the
Company to a vote of its  stockholders  through the  solicitation  of proxies or
otherwise.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

      The Company's Common Stock, par value $0.01 per share, is currently quoted
on the OTCBB under the symbol "NCEH.OB". The table below sets forth the high and
low bid prices for the Common Stock from  January 1, 2004  through  December 31,
2005.  These  price  quotations  reflect  inter-dealer  prices,  without  retail
mark-up,  mark-down or  commission,  and may not  necessarily  represent  actual
transactions:

                                                          High         Low
                                                          ----         ---
      Year Ended December 31, 2004:
        1st Quarter                                       $0.39       $0.20
        2nd Quarter                                       $0.35       $0.22
        3rd Quarter                                       $0.34       $0.24
        4th Quarter                                       $0.34       $0.23

      Year Ended December 31, 2005:
        1st Quarter                                       $0.31       $0.23
        2nd Quarter                                       $0.25       $0.21
        3rd Quarter                                       $0.28       $0.19
        4th Quarter                                       $0.31       $0.18

STOCKHOLDERS

      As of March 29,  2006,  there  were  34,653,104  shares  of  Common  Stock
outstanding, held by 509 holders of record. The last reported sales price of the
Common Stock on March 29, 2006 was $0.21 per share.

DIVIDEND POLICY

      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 Preferred Dividends have been paid. In addition, whenever the Company
shall declare or pay any dividend on its Common  Stock,  the holders of Series A
Preferred Stock are entitled to receive such Common Stock dividends on a ratably
as-converted basis.


                                       13


ITEM 6. SELECTED FINANCIAL DATA

      The following  table  presents  selected  financial and other data for the
Company. The statement of operations data for the years ended December 31, 2005,
2004,  2003,  2002, and 2001 and the balance sheet data as of December 31, 2005,
2004,  2003,  2002  and 2001  presented  below  are  derived  from  the  audited
Consolidated  Financial  Statements of the Company. The data presented below for
the years ended  December 31, 2005,  2004 and 2003 should be read in conjunction
with the Consolidated  Financial Statements and the notes thereto,  Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
other financial information included in this report.

                                                                            YEAR ENDED DECEMBER 31,
                                                         -----------------------------------------------------------

(in thousands, except per share data)                       2005         2004         2003         2002         2001
                                                            ----         ----         ----         ----         ----
Consolidated Statement of Operations Data:
Operating revenues ..................................    $     33     $     --     $     --     $     --     $    502
Gross (loss) profit .................................          33           --           --           --          (62)
Operating loss from continuing operations ...........      (1,009)      (4,854)      (3,174)      (3,560)     (14,590)
Net loss from continuing operations .................        (543)      (1,903)      (6,486)     (18,538)     (38,328)
Net loss from discontinued
  operations, net of income taxes ...................          --           --           --         (962)         (98)
Net (loss) income from disposal of
  discontinued operations, net of income
  taxes .............................................          --           --          (30)       2,254        2,385
Net loss ............................................        (543)      (1,903)      (6,516)     (17,246)     (36,041)
Preferred stock dividend ............................        (200)        (107)          --           --           --
Net loss applicable to common stockholders ..........        (743)      (2,010)      (6,516)     (17,246)     (36,041)

Basic and diluted net (loss) income per common share:
  Net loss from continuing operations ...............    $   (.02)    $   (.06)    $  (0.19)    $  (0.54)    $  (1.10)
  Net loss from discontinued
   operations, net of income taxes ..................          --           --           --        (0.03)          --
  Net (loss) income from disposal of
   discontinued operations, net of
   income taxes .....................................          --           --           --         0.07         0.07
  Net loss ..........................................    $   (.02)    $   (.06)    $  (0.19)    $  (0.50)    $  (1.03)

Dividends per common share ..........................    $     --     $     --     $     --     $     --     $     --

Weighted average common shares
  outstanding .......................................      34,653       34,653       34,379       34,217       34,910

                                                                                  DECEMBER 31,
                                                         -----------------------------------------------------------
(in thousands)                                              2005         2004         2003         2002         2001
                                                            ----         ----         ----         ----         ----
Consolidated Balance Sheet Data:
Working capital .....................................    $ 13,554     $ 14,428     $  4,357     $  8,454     $  9,532
Total assets ........................................      14,578       15,095       13,036       20,124       39,577
Long-term obligations and redeemable
   preferred stock ..................................           2            2           --           --           --
Additional paid-in capital ..........................      75,428       75,428       70,476       70,346       70,342
Accumulated deficit .................................    $(61,850)    $(61,107)    $(59,097)    $(52,581)    $(35,335)


                                       14


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The following  discussion  should be read in conjunction with the Business
section discussion,  the Consolidated Financial Statements and the Notes thereto
and the other financial information included elsewhere in this Report.

CONTINUING OPERATIONS

OPERATING REVENUES

      On October 5, 2005,  the Company  entered  into the  Ascendant  Agreement,
whereby the Company is currently entitled to a 50% interest,  subject to certain
adjustments,  in the revenues generated by Ascendant, which interest declines as
the assets that Ascendant  manages reach certain levels.  Revenues  generated by
Ascendant  include revenues from assets under management or any other sources or
investments,  net of any agreed commissions.  The total potential purchase price
under the terms of the Ascendant Agreement is $1,550,000,  payable in four equal
installments of $387,500.  The first installment was paid at the closing and the
second installment was paid on January 5, 2006. Subject to the provisions of the
Agreement,  the third  installment  is  payable  on April 5, 2006 and the fourth
installment  is  payable  on July 5,  2006.  If the  Company  does  not  make an
installment and Ascendant is not in breach of the Ascendant Agreement, Ascendant
will have the right to acquire the Company's  revenue  interest at a price which
would  yield a 10%  annualized  return  to the  Company.  If  Ascendant  were to
materially  breach  its  obligations  under the  Agreement,  Ascendant  could be
obligated to refund the Company the amount of its investment.  Such refund would
not reduce the revenue interest acquired by the Company.

      Ascendant had assets under  management of  approximately  $17,800,000  and
$13,577,000 as of December 31, 2005 and 2004,  respectively.  During the quarter
ended December 31, 2005,  Ascendant generated revenues of approximately  $66,000
of which the  Company  was  entitled to  approximately  $33,000.  Based upon the
assets under  management  of  Ascendant  as of December  31,  2005,  the Company
expects to  initially  receive  revenues  from  Ascendant  on a quarterly  basis
ranging from $30,000 to $35,000,  which amount will increase if the assets under
management of Ascendant increase or will decrease if the assets under management
of Ascendant  decrease.  The revenues  earned by the Company are payable in cash
within 30 days after the end of each quarter.

      After the  second  anniversary  of the  Ascendant  Agreement  and upon the
occurrence of certain  events,  Ascendant has the option to repurchase a portion
of the Company's  revenue interest at a price which would yield a 25% annualized
return to the Company.  The Company also entered into the  Principals  Agreement
with Ascendant and the limited partners and key employees of Ascendant  pursuant
to which the Company has the option to purchase limited partnership interests of
Ascendant under certain circumstances.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative ("SG&A") expenses are comprised of all
selling,  marketing and  administrative  costs incurred in direct support of the
business  operations  of the Company.  During the year ended  December 31, 2005,
SG&A expenses totaled  $1,035,000,  compared to $4,826,000 during the year ended
December 31, 2004 and  $3,021,000  during the year ended  December 31, 2003. The
major  components of SG&A  expenses for the year ended  December 31, 2005 are as
follows:  officers and  directors  compensation  and  benefits of  approximately
$237,000; audit and tax fees of approximately


                                       15


$104,000;  directors and officers insurance coverage of approximately  $150,000;
settlement  costs  associated  with the resolution of a dispute over a severance
agreement with a former employee of approximately  $92,000; legal fees and other
public company cost of approximately  $143,000;  and legal fees of approximately
$260,000 which relate to the derivative action filed by Craig Davis (see "Part I
- - Item 3. Legal  Proceedings"),  and were incurred prior the Company meeting the
deductible  as provider for in the directors  and officers  liability  insurance
policy.

      The decrease in SG&A for the year ended December 31, 2005 when compared to
the year ended  December  31,  2004 and  December  31, 2003 is the result of the
number of salaried  employees  being  reduced from five to one and a significant
reduction in executive  compensation  and  benefits.  SG&A expenses for the year
ended  December  31,  2004  included  a total  of  approximately  $2,600,000  of
severance paid to Parris H. Holmes,  Jr. and David P. Tusa, the Company's former
Chief Executive Officer and Chief Financial Officer, respectively. SG&A expenses
for 2004  also  included  approximately  $700,000  for  legal  and  professional
expenses,  of which  approximately  $240,000  relates to the Complaint  filed by
Craig  Davis  (see  "Part  I - Item 3.  Legal  Proceedings")  and  approximately
$500,000 relates to completing the proposed proxy statement seeking  stockholder
approval  to  liquidate  the  Company  (which was  subsequently  withdrawn)  and
completing the sale of approximately 4,807,692 newly issued shares of the Series
A Preferred  Stock to Newcastle on June 18, 2004. The Company also decreased its
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.

DEPRECIATION AND AMORTIZATION

      Depreciation and amortization  expense is incurred with respect to certain
assets,  including computer  hardware,  software,  office equipment,  furniture,
goodwill  and other  intangibles.  During  the year  ended  December  31,  2005,
depreciation and amortization expense totaled $7,000, compared to $28,000 during
the year ended December 31, 2004 and $153,000 during the year ended December 31,
2003.  The  decrease in  depreciation  and  amortization  from prior  periods is
principally  the result of fixed asset  sales.  The Company  made no fixed asset
purchases during the year ended December 31, 2005.

INTEREST INCOME

      Interest income totaled  $423,000 during the year ended December 31, 2005,
compared to $121,000  and $77,000  during the years ended  December 31, 2004 and
2003, respectively.  The increase in interest income for the year ended December
31, 2005,  as compared  the year ended  December  31, 2004 was  attributable  to
increased yields  available for short-term  investments and higher cash balances
available  for  short-term  investment  as the  Company's  cash  resources  were
increased by the Newcastle  Transaction  and the sale of Princeton  (see Notes 1
and 4 of the accompanying Consolidated Financial Statements).

EQUITY IN NET LOSS OF AFFILIATES

      Equity in net loss of affiliates totaled $0 during the year ended December
31, 2005,  compared to $2,985,000 and $2,723,000 during the years ended December
31,  2004 and 2003,  respectively.  In June 2004,  the  Company  sold all of its
holdings in Princeton,  which offers  electronic  bill  presentment  and payment
services via the Internet and telephone.

GAIN ON SALE OF EQUITY AFFILIATE

      The sale of Princeton  for  $10,000,000  in June 2004  generated a capital
loss for federal  income tax purposes of  approximately  $67,000,000  and a book
gain of approximately $5,817,000 during the year ended December 31, 2004.


                                       16


IMPAIRMENT OF INVESTMENTS

      During the year  ended  December  31,  2003,  the  Company  evaluated  the
realizability  of its  investment  in Sharps in  accordance  with  Statement  of
Financial  Accounting  Standards  ("SFAS")  No.  115,  "Accounting  for  Certain
Investments in Debt and Equity Securities". The Company compared the fair market
value of its  investment  in Sharps to the carrying  value of the  investment to
determine the impairment.  Based upon the current fair market value, the Company
determined  that its investment in Sharps was  permanently  impaired by $306,000
and, accordingly,  recorded an impairment write-down, which is included in other
income (expense) as impairment of investments in affiliates.

LITIGATION SETTLEMENT

      In November 1999, the Company  completed the  acquisition of FIData,  Inc.
("FIData"),  a company that  provided  Internet-based  automated  loan  approval
products  to the  financial  services  industry.  In October  2001,  the Company
exchanged  100% of its stock of FIData  for a 9% equity  interest  in  Microbilt
Corporation  ("Microbilt").  In April  2003,  the Company  received  notice that
Bristol  Investments,  Ltd.  ("Bristol")  and  Microbilt  filed suit against the
Company   and  one  of  its   officers   alleging   breach   of   contract   and
misrepresentation  in  conjunction  with the October  2001 merger of FIData into
Microbilt.  In October 2003, the Company  settled the suit by  surrendering  its
ownership of the common  stock of  Microbilt  to Bristol.  During the year ended
December  31,  2003,  net other  expense  includes a  litigation  settlement  of
$354,000,  representing the transfer of the Company's investment in Microbilt to
Bristol.  This settlement resolves all claims brought by and against the Company
and the officer.

INCOME TAXES

      As a result of the operating losses incurred in recent years, no provision
or benefit for income taxes was recorded for the years ended  December 31, 2005,
2004 and 2003.

DISCONTINUED OPERATIONS

NET LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS

      During the year ended  December 31,  2003, a net loss of $30,000  resulted
from the disposal of the discontinued operations of Tanisys Technology Inc.

LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  cash  balance  and  short-term  investments  decreased  to
$12,487,000  at December 31, 2005,  from  $14,611,000  at December 31, 2004. The
significant  cash  receipts and  disbursements  affecting  the cash balances and
short-term  investments for the year ended December 31, 2005, are as follows:  a
payment of $200,000  dividend on the Series A Preferred Stock;  funding of legal
cost related to the Complaint of  $1,623,000 of which  $1,522,000 is expected to
be reimbursed under the terms of the directors and officers liability  insurance
policy; the first installment under the Ascendant Agreement of $387,500; and the
funding of SG&A  expenses  which was  partially  offset by  $423,000 of interest
income and  $334,000 in proceeds  from the sale of Sharps  during the year ended
December 31, 2005.


                                       17


      The  Company  is  currently  funding  legal and  professional  fees of the
current  and  former   director   defendants  in  the   Complaint   pursuant  to
indemnification  arrangements  that were in place during the respective terms of
each  of the  defendants.  The  Company  has  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
December 31, 2005,  the Company has  recorded a  receivable  from the  insurance
carrier of approximately  $1,522,000 for reimbursement of legal and professional
fees  incurred  in excess  of the  policy  deductible,  in  accordance  with the
provisions of the policy.  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.
Nonpayment of the claim for  reimbursement of legal and professional  fees could
have a  material  adverse  effect on the  financial  condition  and  results  of
operations of the Company. The Company intends to vigorously seek enforcement of
its rights under the policy.

      During the next 12 months,  the Company's  operating cash requirements are
expected  to  consist  principally  of  funding  corporate  expenses,  the costs
associated with  maintaining a public company and expenses  incurred in pursuing
the Company's  business plan.  Additionally,  the total potential purchase price
under the terms of the Ascendant Agreement is $1,550,000,  payable in four equal
installments of $387,500.  Subject to the provisions of the Ascendant Agreement,
the third installment is payable on April 5, 2006 and the fourth  installment is
payable  on July 5,  2006.  If the  Company  does  not make an  installment  and
Ascendant is not in breach of the Ascendant  Agreement,  Ascendant will have the
right to acquire the Company's  revenue  interest at a price which would yield a
10% annualized return to the Company. If Ascendant were to materially breach its
obligations  under the  Ascendant  Agreement,  Ascendant  could be  obligated to
refund the Company the amount of its  investment.  Such refund  would not reduce
the revenue  interest  acquired by the Company.  The Company is not obligated to
make the third or fourth  installment and has not determined  whether or not the
installment payments will be made.

      The Company expects to incur  additional  operating  losses through fiscal
2006 which will  continue  to have a negative  impact on  liquidity  and capital
resources.  Capital  expenditures  totaled $0 and $3,000  during the years ended
December 31, 2005 and 2004, respectively.

LEASE GUARANTEES

      In October 2000, the Company completed the Platinum Transaction. Under the
terms of the  Platinum  Transaction,  all leases and  corresponding  obligations
associated with the Transaction Processing and Software Business were assumed by
Platinum.  Prior  to  the  Platinum  Transaction,  the  Company  guaranteed  two
operating leases for office space of the divested companies.  The first lease is
related to office  space  located in San  Antonio,  Texas,  and expires in 2006.
Under the original terms of the first lease, the remaining minimum  undiscounted
rent payments  total  approximately  $1,519,000 at December 31, 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   $5,674,000  at  December  31,  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.

OFF-BALANCE-SHEET ARRANGEMENTS

      The Company  guaranteed two operating  leases for office space for certain
of  its  wholly-owned  subsidiaries  prior  to  the  Platinum  Transaction  (see
Liquidity and Capital Resources-Lease Guarantees above).


                                       18


CONTRACTUAL OBLIGATIONS

      The Company's contractual obligations are as follows (in thousands):

                                                                Payments due by period
                                       ------------------------------------------------------------------------
                                                        Less than                                     More than
       Contractual Obligations             Total         1 year        1-3 years     3-5 years        5 years
- -------------------------------------  -----------     -----------    -----------    ----------      ----------

Long-term debt obligations...........  $         -     $         -    $         -    $        -      $        -
Capital lease obligations............            -               -              -             -               -
Operating lease obligations..........           39              36              3             -               -
Purchase obligations.................            -               -              -             -               -
Other long-term liabilities
  reflected on balance sheet
  under GAAP.........................            2               -              2             -               -
                                       -----------     -----------    -----------    ----------      ----------
Total................................  $        41     $        36    $         5    $        -      $        -
                                       ===========     ===========    ===========    ==========      ==========

      The operating lease obligations reflected in the table above represent the
Company's  lease for office  space,  which is discussed  further under Item 2 of
this annual report.

SEASONALITY

      The  Company's  current  operations  are  not  significantly  affected  by
seasonality.

EFFECT OF INFLATION

      Inflation has not been a material factor affecting the Company's business.
General operating expenses, such as salaries,  employee benefits,  insurance and
occupancy costs, are subject to normal inflationary pressures.

NEW ACCOUNTING STANDARDS

      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.

      In March 2005, the SEC issued Staff Accounting  Bulletin No. 107 regarding
the SEC's  interpretation  of SFAS No.  123R and the  valuation  of  share-based
payments for public  companies.  The Company is evaluating the  requirements  of
SFAS No. 123R and SAB No. 107 and expects  that the adoption of SFAS No. 123R on
January  1,  2006  will not have a  material  adverse  effect  on its  financial
position, results of operation and cash flows.

      In May 2005,  the FASB issued SFAS No. 154,  ACCOUNTING  CHANGES AND ERROR
CORRECTIONS--A  REPLACEMENT OF APB OPINION NO. 20 AND FASB STATEMENT NO. 3. SFAS
No. 154 changes the  requirements  for the  accounting  for and  reporting  of a
change  in  accounting   principle.   This  statement   requires   retrospective
application  to prior  periods'  financial  statements  of changes in accounting
principle,  unless it is impracticable  to determine either the  period-specific
effects or the cumulative effect of the change.


                                       19


This  statement  redefines  restatements  as the revising of  previously  issued
financial  statements  to  reflect  the  correction  of an error.  SFAS No.  154
requires that retrospective  application of a change in accounting  principle be
limited to the direct effects of the change. This statement also requires that a
change in  depreciation,  amortization,  or  depletion  method  for  long-lived,
non-financial  assets  be  accounted  for as a  change  in  accounting  estimate
affected by a change in  accounting  principle.  SFAS No. 154 is  effective  for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after  December  15,  2005.  The  Company  does not expect the  adoption of this
standard  to have a  material  effect  on its  financial  position,  results  of
operations or cash flows.

      In  November  2005,  the FASB  issued  FSP FAS 115-1 and FAS  124-1,  "The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments"  ("FSP  115-1"),   which  provides  guidance  on  determining  when
investments  in certain  debt and equity  securities  are  considered  impaired,
whether  that  impairment  is   other-than-temporary,   and  on  measuring  such
impairment loss. FSP 115-1 also includes accounting considerations subsequent to
the  recognition  of an  other-than-temporary  impairment  and requires  certain
disclosures   about   unrealized   losses  that  have  not  been  recognized  as
other-than-temporary  impairments.  FSP  115-1  is  required  to be  applied  to
reporting periods beginning after December 15, 2005. The Company does not expect
the  adoption  of the  standard  to  have a  material  effect  on its  financial
position, results of operations or cash flows.

CRITICAL ACCOUNTING POLICIES

IMPAIRMENT OF INVESTMENTS

      The Company evaluates its investments in affiliates when events or changes
in circumstances,  such as a significant  economic  slowdown,  indicate that the
carrying value of the investments may not be recoverable.  Reviews are performed
to  determine  whether  the  carrying  value is impaired  and if the  comparison
indicates that impairment  exists, the investment is written down to fair value.
Significant  management  judgment  based on  estimates  is required to determine
whether and how much an investment is impaired.

CONSOLIDATION OF SUBSIDIARIES

      In general, the accounting rules and regulations require the consolidation
of entities in which the company holds an equity  interest  greater than 50% and
the use of the equity  method of  accounting  for  entities in which the company
holds an interest between 20% and 50%.  Exceptions to these rules are (i) when a
company does not exercise control over the decision making of an entity although
the  company  does own over 50% of the  entity  and  (ii)  when a  company  does
exercise  control  over the  decision  making of an entity but the company  owns
between 20% and 50% of the entity.

      As of December 31, 2003, the Company owned 34.0% of the outstanding shares
of  Princeton.  In June 2004,  the Company sold all of its interest in Princeton
for $10,000,000.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to interest rate risk through its portfolio of cash
equivalents and short-term investments. The Company does not believe that it has
significant  exposure to market risks associated with changing interest rates as
of December 31, 2005,  because the  Company's  intention is to maintain a liquid
portfolio.  The Company has not used  derivative  financial  instruments  in its
operations.


                                       20


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The  Consolidated  Financial  Statements  of the Company,  and the related
reports of the Company's independent  registered public accounting firm thereon,
are included in this report at the page indicated.

                                                                            Page
                                                                            ----
Report of Management........................................................  22
Report of Independent Registered Public Accounting Firm.....................  23
Consolidated Balance Sheets as of December 31, 2005 and 2004................  24
Consolidated Statements of Operations for the Years Ended December 31,
  2005, 2004 and 2003.......................................................  25
Consolidated Statements of Stockholders' Equity for the Years Ended
  December 31, 2005, 2004 and 2003..........................................  26
Consolidated Statements of Cash Flows for the Years Ended December 31,
  2005, 2004 and 2003.......................................................  27
Notes to Consolidated Financial Statements..................................  28


                                       21


                              REPORT OF MANAGEMENT

      The financial  statements included herein have been prepared in conformity
with accounting  principles  generally accepted in the United States of America.
Management is responsible for preparing the  consolidated  financial  statements
and  maintaining  and  monitoring  the Company's  system of internal  accounting
controls.  The Company  believes that the existing  system of internal  controls
provides  reasonable  assurance  that  errors or  irregularities  that  could be
material to the  financial  statements  are  prevented or would be detected in a
timely manner. Key elements of the Company's system of internal controls include
careful   selection  of  management   personnel,   appropriate   segregation  of
conflicting  responsibilities,  periodic  evaluations  of Company  financial and
business practices, communication practices that provide assurance that policies
and managerial  authorities are understood  throughout the Company, and periodic
meetings  between the Company's audit  committee,  senior  financial  management
personnel and independent public accountants.

      The  consolidated  financial  statements  as of and  for the  years  ended
December 31, 2005 and 2004,  were audited by Burton  McCumber & Cortez,  L.L.P.,
independent  public   accountants,   who  have  also  issued  a  report  on  the
consolidated financial statements.


/s/ STEVEN J. PULLY

Steven J. Pully
   CHIEF EXECUTIVE OFFICER


/s/ JOHN P. MURRAY

John P. Murray
  CHIEF FINANCIAL OFFICER


                                       22


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
New Century Equity Holdings Corp.

We have  audited the  accompanying  consolidated  balance  sheets of New Century
Equity Holdings Corp. (a Delaware  corporation)  and Subsidiaries as of December
31,  2005 and 2004,  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash flows for the years ended December 31, 2005, 2004
and 2003.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting  Oversight  Board (U.S.).  Those  standards  require that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of New
Century Equity Holdings Corp. and Subsidiaries as of December 31, 2005 and 2004,
and the  consolidated  results of their operations and their  consolidated  cash
flows for the years ended  December 31, 2005,  2004 and 2003 in conformity  with
accounting principles generally accepted in the United States of America.


                                        /s/ BURTON McCUMBER & CORTEZ, L.L.P.

Brownsville, Texas
March 7, 2006


                                       23


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

                                                                               December 31,
                                                                            2005         2004
                                                                          --------     --------

                                     ASSETS

Current assets:
  Cash and cash equivalents ..........................................    $ 12,487     $  1,716
  Accounts receivable ................................................          33           --
  Insurance receivable and other assets ..............................       1,637          145
  Short-term investments .............................................          --       12,895
                                                                          --------     --------

   Total current assets ..............................................      14,157       14,756
Property and equipment ...............................................         183          183
Accumulated depreciation .............................................        (183)        (176)
                                                                          --------     --------

  Net property and equipment .........................................          --            7
Investments ..........................................................          --          326
Other non-current assets .............................................           6            6
Revenue interest .....................................................         415           --
                                                                          --------     --------

  Total assets .......................................................    $ 14,578     $ 15,095
                                                                          ========     ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ...................................................    $     53     $     45
  Accrued liabilities ................................................         550          283
                                                                          --------     --------

   Total current liabilities .........................................         603          328
Other non-current liabilities ........................................           2            2
                                                                          --------     --------

   Total liabilities .................................................         605          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 ................................................     (61,850)     (61,107)
  Accumulated other comprehensive income .............................          --           49
                                                                          --------     --------

   Total stockholders' equity ........................................      13,973       14,765
                                                                          --------     --------

    Total liabilities and stockholders' equity .......................    $ 14,578     $ 15,095
                                                                          ========     ========

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


                                       24


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

                                                               Year Ended December 31,
                                                           2005         2004         2003
                                                         --------     --------     --------

Operating revenues ..................................    $     33     $     --     $     --

Operating expenses:
  Selling, general and administrative expenses ......       1,035        4,826        3,021
 Depreciation and amortization expense ..............           7           28          153
                                                         --------     --------     --------

Operating loss from continuing operations ...........      (1,009)      (4,854)      (3,174)

Other income (expense):
 Interest income ....................................         423          121           77

 Equity in net loss of affiliates ...................          --       (2,985)      (2,723)
 Gain on sale of equity affiliate ...................          --        5,817           --
 Impairment of investments in affiliates ............          --           --         (306)
 Litigation settlement ..............................          --           --         (354)

 Other (expense) income, net ........................          43           (2)          (6)
                                                         --------     --------     --------

Total other (expense) income, net ...................         466        2,951       (3,312)
                                                         --------     --------     --------

Net loss from continuing operations .................        (543)      (1,903)      (6,486)

Discontinued operations:

  Net loss from disposal of discontinued operations,
   including income tax benefit of $0 ...............          --           --          (30)
                                                         --------     --------     --------

  Net loss from discontinued operations .............          --           --          (30)
                                                         --------     --------     --------

Net loss ............................................        (543)      (1,903)      (6,516)

Preferred stock dividend ............................        (200)        (107)          --
                                                         --------     --------     --------
Net loss applicable to common stockholders ..........    $   (743)    $ (2,010)    $ (6,516)
                                                         ========     ========     ========

Basic and diluted net (loss) income per common share:
 Net loss from continuing operations ................    $   (.02)    $  (0.06)    $  (0.19)
 Net loss from discontinued operations ..............          --           --           --
 Net income from disposal of discontinued operations           --           --           --
                                                         --------     --------     --------

 Net loss ...........................................    $   (.02)    $  (0.06)    $  (0.19)
                                                         --------     --------     --------

Weighted average common shares outstanding ..........      34,653       34,653       34,379
                                                         --------     --------     --------

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


                                       25


               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
                                 (IN THOUSANDS)

                                                                            Additional
                                                      Common Stock            Paid-in    Accumulated
                                                   Shares       Amount        Capital      Deficit
                                                 --------      --------      --------      --------
Balances at December 31, 2002 .............        34,218      $    342      $ 70,346      $(52,581)

  Issuance of common stock ................           435             5           130            --
  Net loss ................................            --            --            --        (6,516)
                                                 --------      --------      --------      --------

Balances at December 31, 2003 .............        34,653           347        70,476       (59,097)

  Issuance of preferred stock .............            --            --         4,952            --
  Comprehensive income (loss):
     Unrealized gain on investment ........            --            --            --            --
     Net loss .............................            --            --            --        (2,010)
  Comprehensive loss ......................            --            --            --        (2,010)
                                                 --------      --------      --------      --------

Balances at December 31, 2004 .............        34,653           347        75,428       (61,107)

  Comprehensive income (loss):
     Reclassification of unrealized gain on
       investment .........................            --            --            --            --
     Net loss .............................            --            --            --          (743)
  Comprehensive loss ......................            --            --            --          (743)
                                                 --------      --------      --------      --------

Balances at December 31, 2005 .............        34,653      $    347      $ 75,428      $(61,850)
                                                 ========      ========      ========      ========

                                                                           Accumulated
                                                                              Other
                                                     Preferred Stock      Comprehensive
                                                  Shares        Amount        Income         Total
                                                 --------      --------      --------       --------
Balances at December 31, 2002 .............            --      $     --      $     --       $ 18,107

  Issuance of common stock ................            --            --            --            135
  Net loss ................................            --            --            --         (6,516)
                                                 --------      --------      --------       --------

Balances at December 31, 2003 .............            --            --            --         11,726

  Issuance of preferred stock .............         4,808            48            --          5,000
  Comprehensive income (loss):
     Unrealized gain on investment ........            --            --            49             49
     Net loss .............................            --            --            --         (2,010)
  Comprehensive loss ......................            --            --            49         (1,961)
                                                 --------      --------      --------       --------

Balances at December 31, 2004 .............         4,808            48            49         14,765

  Comprehensive income (loss):
     Reclassification of unrealized gain on
       investment .........................            --            --           (49)           (49)
     Net loss .............................            --            --            --           (743)
  Comprehensive loss ......................            --            --           (49)          (792)
                                                 --------      --------      --------       --------

Balances at December 31, 2005 .............         4,808      $     48      $     --       $ 13,973
                                                 ========      ========      ========       ========

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

                                       26


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

                                                                                  Year Ended December 31,
                                                                             2005           2004           2003
                                                                           --------       --------       --------

Cash flows from operating activities:
  Net loss from continuing operations ...............................      $   (543)      $ (1,903)      $ (6,486)
  Adjustments to reconcile net loss from continuing operations to
   net cash used in operating activities:
   Depreciation and amortization expense ............................             7             27            153
   Equity in net loss of and impairment of investments in affiliates             --          2,985          3,029
   Gain on sale of equity affiliate .................................            --         (5,817)            --
   Loss on sale of treasury bill ....................................            14             --             --
   Gain on sale of Sharps Compliance Corp. common stock .............           (57)            --             --
   Litigation settlement ............................................            --             --            354
   Loss on disposition of fixed assets ..............................            --             30             17
   Accretion of discount on securities ..............................          (185)           (36)            --
   Changes in operating assets and liabilities:
    (Increase) decrease in accounts receivable ......................           (33)            28            (19)
    (Increase) decrease in insurance receivable and other assets ....        (1,492)           171            156
    Increase (decrease) in accounts payable .........................             8            (13)            28
    Increase (decrease) in accrued liabilities ......................           267           (687)           486
    Increase in other liabilities and other non-cash items ..........            --             --            136
                                                                           --------       --------       --------

Net cash used in continuing operating activities ....................        (1,238)        (5,215)        (2,146)
Net cash provided by discontinued operating activities ..............            --             --             78
                                                                           --------       --------       --------

  Net cash used in operating activities .............................        (1,238)        (5,215)        (1,968)

Cash flows from investing activities:
  Purchases of property and equipment ...............................            --             (3)            (6)
  Proceeds from sale of short-term investments ......................        27,186             --             --
  Purchase of short-term investments ................................       (13,786)       (12,858)            --
  Purchase of revenue interest ......................................          (415)
  Investments in affiliates .........................................            --             --         (1,400)
  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 activities ........................................            --             62             --
                                                                           --------       --------       --------

Net cash provided by (used in) investing activities .................        12,209         (3,399)        (1,406)

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

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

Net increase (decrease) in cash and cash equivalents ................        10,771         (3,614)        (3,374)
Cash and cash equivalents, beginning of period ......................         1,716          5,330          8,704
                                                                           --------       --------       --------

Cash and cash equivalents, end of period ............................      $ 12,487       $  1,716       $  5,330
                                                                           ========       ========       ========

Supplemental disclosure of non-cash transactions:
 Increase in fair market value of investments .......................      $     --       $     49       $     --
 Preferred stock dividend ...........................................      $     --       $    107       $     --

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

                                       27


               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2005, 2004 AND 2003

NOTE 1. BUSINESS ACTIVITY

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

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

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

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

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


                                       28


      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") (See Note 6). The Company has had extensive meetings with the other
parties to the litigation in an attempt to settle the  litigation.  There can be
no assurance that the Company will be able to effect a settlement.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

      The accompanying consolidated financial statements include the accounts of
the Company, its wholly owned subsidiaries and subsidiaries in which the Company
is deemed to have control for accounting  purposes.  The Company's investment in
Princeton was accounted for using the equity method of accounting. The Company's
investment  in  Sharps  was  accounted  for in  accordance  with  SFAS No.  115,
"Accounting  for  Certain  Investments  in  Debt  and  Equity  Securities".  The
Company's  investment in Microbilt  Corporation was accounted for under the cost
method of accounting.  All significant  intercompany  accounts and  transactions
have been eliminated in consolidation.

ESTIMATES IN THE FINANCIAL STATEMENTS

      The  preparation  of financial  statements in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

CASH AND CASH EQUIVALENTS

      The  Company  considers  all  highly  liquid   investments  with  original
maturities of three months or less to be cash and cash equivalents.

REVENUE RECOGNITION

      The Company's  consolidated  revenues  represent  revenue from the revenue
interest in  Ascendant.  Such  revenues are  recognized  monthly as services are
rendered  and are based upon a  percentage  of the market  value of assets under
management (see Note 3).

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

      Accounts  receivable are accounted for at fair value, do not bear interest
and are  short-term in nature.  The Company  maintains an allowance for doubtful
accounts  for  estimated  losses  resulting  from the  inability  to  collect on
accounts receivables. Based on management's assessment, the Company provides for
estimated uncollectible amounts through a charge to earnings and a credit to the
valuation allowance. Balances that remain outstanding after the Company has used
reasonable  collection efforts are written off through a charge to the valuation
allowance and a credit to accounts  receivable.  The Company  generally does not
require collateral.

FINANCIAL INSTRUMENTS

      SFAS No. 107,  "Disclosures  About Fair Value of  Financial  Instruments",
requires the disclosure of fair value information  about financial  instruments,
whether or not recognized on the balance  sheet,  for which it is practicable to
estimate the value. SFAS No. 107 excludes certain financial instruments from its
disclosure  requirements.  Accordingly,  the aggregate fair market value amounts
are not intended to


                                       29


represent the underlying value of the Company.  The carrying amounts of cash and
cash  equivalents,  current  receivables and payables and long-term  liabilities
approximate fair value because of the nature of these instruments.

REVENUE INTEREST

      The Company has determined that the revenue  interest that it has acquired
in 2005 meets the indefinite life criteria  outlined in SFAS No. 142,  "Goodwill
and Other  Intangible  Assets" ("SFAS 142").  Accordingly,  the Company does not
amortize this  intangible  asset,  but instead  reviews this asset quarterly for
impairment.  Each  reporting  period,  the Company  assesses  whether  events or
circumstances have occurred which indicate that the indefinite life criteria are
no longer met. If the  indefinite  life  criteria are no longer met, the Company
assesses  whether the carrying value of the asset exceeds its fair value, and an
impairment loss is recorded in an amount equal to any such excess.

      The  Company  assesses  whether the entity in which the  acquired  revenue
interest  exists meets the indefinite life criteria based on a number of factors
including:  the  historical  and potential  future  operating  performance;  the
historical and potential future rates of attrition among existing  clients;  the
stability and longevity of existing client relationships; the recent, as well as
long-term,  investment  performance;  the characteristics of the firm's products
and investment  styles;  the stability and depth of the management  team and the
history and perceived franchise or brand value.

PROPERTY AND EQUIPMENT

      Property and equipment are stated at cost.  Depreciation  and amortization
are computed on a  straight-line  basis over the  estimated  useful lives of the
related assets,  which range from three to seven years.  Upon  disposition,  the
cost and related  accumulated  depreciation or amortization are removed from the
accounts and the resulting  gain or loss is reflected in other income  (expense)
for that period. Expenditures for maintenance and repairs are charged to expense
as incurred and major improvements are capitalized.

INVESTMENTS IN EQUITY SECURITIES

      The Company follows the standards of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity  Securities," for those  investments in which the
securities are publicly  traded.  For those  investments in which the securities
are privately  held, the Company  follows the guidance of Accounting  Principles
Board ("APB")  Opinion No. 18, "The Equity Method of Accounting for  Investments
in Common Stock".  The Company accounted for its investment in Sharps under SFAS
No. 115, as Sharps' common stock is publicly  traded.  SFAS No. 115  establishes
standards for accounting and reporting for investments in equity securities that
have  readily   determinable  fair  values  and  for  all  investments  in  debt
securities.  Unrealized  holdings gains and losses,  other than those considered
permanent,  related to the Company's  investment in Sharps are excluded from net
loss and reported as a separate component of other comprehensive income.

SHORT-TERM INVESTMENTS

      The  Company  invests  its  excess  cash in money  market  accounts,  U.S.
Treasury bills,  and short-term debt  securities.  Investments  with an original
maturity  at the time of  purchase  over  three  months but less than a year are
classified as short-term  investments.  Investments with an original maturity at
the time of  purchase  of  greater  than one year are  classified  as  long-term
investments. Management determines the appropriate classification of investments
at the time of purchase and  reevaluates  such  designations  at the end of each
period.


                                       30


CONCENTRATIONS OF CREDIT RISK

      Financial  instruments that potentially subject the Company to significant
concentrations  of credit risk  consist  principally  of cash  investments.  The
Company  maintains cash and cash  equivalents and short-term  investments.  Cash
deposits at a financial institution may from time to time exceed Federal Deposit
Insurance Corporation insurance limits.

TREASURY STOCK

      In 2000,  the  Company's  board of  directors  approved  the adoption of a
common stock repurchase program. Under the terms of the program, the Company may
purchase an  aggregate  $25,000,000  of the  Company's  Common Stock in the open
market or in privately negotiated transactions.  The Company records repurchased
Common Stock at cost (see Note 8).

INCOME TAXES

      Deferred tax assets and  liabilities  are recorded based on enacted income
tax rates that are  expected to be in effect in the period in which the deferred
tax asset or liability  is expected to be settled or  realized.  A change in the
tax  laws or rates  results  in  adjustments  to the  deferred  tax  assets  and
liabilities.  The  effects of such  adjustments  are  required to be included in
income in the period in which the tax laws or rates are changed.

RECLASSIFICATIONS

      Certain amounts have been reclassified in the prior year to conform to the
current year presentation.

DISCONTINUED OPERATIONS

      SFAS No. 144,  "Accounting  for the  Impairment  or Disposal of Long-lived
Assets",  establishes  standards for  accounting  and  reporting for  long-lived
assets to be disposed of by sale.  The Company  previously  adopted SFAS No. 144
and  determined  that the  operations of Tanisys  Technology,  Inc.  ("Tanisys")
qualified as discontinued  operations and, accordingly,  are reported separately
from continuing operations.

NET LOSS PER COMMON SHARE

      SFAS No. 128,  "Earnings Per Share",  establishes  standards for computing
and presenting earnings per share ("EPS") for entities with publicly-held common
stock or potential  common stock.  As the Company had a net loss from continuing
operations  for the years ended  December 31, 2005,  2004 and 2003,  diluted EPS
equals  basic  EPS,  as  potentially   dilutive  common  stock  equivalents  are
anti-dilutive in loss periods.

STOCK-BASED COMPENSATION

      The  Company   adopted   SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation,"  but elected to apply APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees,"  and related  interpretations  in accounting for its stock
option  plans  (see  Note  9).  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.  In accordance with the provisions of APB Opinion No. 25, the Company did
not recognize  compensation  expense for employee stock purchased under the NCEH
Employee Stock Purchase Plan ("ESPP").


                                       31


      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.  The Company  believes that the overall impact to the
financial statements will be immaterial.

      In March 2005, the SEC issued Staff Accounting  Bulletin No. 107 regarding
the SEC's  interpretation  of SFAS No.  123R and the  valuation  of  share-based
payments for public  companies.  The Company is evaluating the  requirements  of
SFAS No. 123R and SAB No. 107 and expects  that the adoption of SFAS No. 123R on
January  1,  2006  will not have a  material  adverse  effect  on its  financial
position, results of operation and cash flows.

      The following  table  illustrates  the effect on net loss and net loss per
common share had compensation  expense for the Company's stock option grants and
ESPP  purchases  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.

                                                                      Year Ended December 31,
(in thousands, except per share data)                              2005          2004          2003
                                                                -------       -------       -------
Net loss, as reported ....................................      $  (743)      $(1,903)      $(6,516)
Less:  Total stock based employee compensation expense
  determined under the fair value based method for all
  awards, net of related tax effects .....................          (32)         (100)         (347)
                                                                -------       -------       -------
Net loss, pro forma ......................................      $  (775)      $(2,003)      $(6,863)
                                                                =======       =======       =======

Basic and diluted net loss per common share:
  Net loss, as reported ..................................      $ (0.02)      $ (0.06)      $ (0.19)
                                                                =======       =======       =======
  Net loss, pro forma ....................................      $ (0.02)      $ (0.06)      $ (0.20)
                                                                =======       =======       =======

      The fair value for these  options was  estimated at the  respective  grant
dates using the Black-Scholes  option-pricing  model with the following weighted
average assumptions: expected volatility of 99.2%, 99.2% and 96.3% for the years
ended  December  31,  2005,  2004 and 2003,  respectively;  no  dividend  yield;
expected  life of 2.5 years  for all  option  grants  and 0.5 years for all ESPP
purchases;  and risk-free interest rates of 4.75%, 4.75%, and 1.8% for the years
ended December 31, 2005, 2004 and 2003, respectively.

NOTE 3. REVENUE INTEREST

On October 5, 2005,  the  Company  entered  into an  agreement  (the  "Ascendant
Agreement")  with Ascendant to acquire an interest in the revenues  generated by
Ascendant.  Pursuant  to the  Ascendant  Agreement,  the  Company  is  currently
entitled to a 50% interest,  subject to certain adjustments,  in the revenues of
Ascendant,  which interest  declines if the assets under management of Ascendant
reach certain  levels.  Revenues  generated by Ascendant  include  revenues from
assets under  management or any other sources or investments,  net of any agreed
commissions.  The Company also agreed to provide various  marketing  services to
Ascendant.  Steven J. Pully, CEO of the Company, was appointed to the Investment
Advisory  Committee of Ascendant.  The total potential  purchase price under the
terms of the Ascendant


                                       32


Agreement is $1,550,000,  payable in four equal  installments  of $387,500.  The
first installment was paid at the closing and the second installment was paid on
January  5,  2006.  Subject  to the  provisions  of  the  Agreement,  the  third
installment is payable on April 5, 2006 and the fourth installment is payable on
July 5, 2006.

      If the Company does not make an  installment  payment and Ascendant is not
in breach of the Ascendant  Agreement,  Ascendant will have the right to acquire
the  Company's  revenue  interest at a price which would yield a 10%  annualized
return to the Company.  If Ascendant were to materially  breach its  obligations
under the  Agreement,  Ascendant  could be  obligated  to refund the Company the
amount of its  investment.  Such refund  would not reduce the  revenue  interest
acquired by the Company.

      Ascendant had assets under  management of  approximately  $17,800,000  and
$13,577,000 as of December 31, 2005 and 2004,  respectively.  During the quarter
ended December 31, 2005,  Ascendant generated revenues of approximately  $66,000
of which the Company was entitled to approximately  $33,000. The revenues earned
by the Company from the Ascendant revenue interest are payable in cash within 30
days after the end of each quarter.

      After the  second  anniversary  of the  Ascendant  Agreement  and upon the
occurrence of certain  events,  Ascendant has the option to repurchase a portion
of the Company's  interest at a price which would yield a 25% annualized  return
to the Company.  In connection  with the Ascendant  Agreement,  the Company also
entered  into the  Principals  Agreement  with  Ascendant  and  certain  limited
partners and key employees of Ascendant (the "Principals Agreement") pursuant to
which the Company has the option to purchase  limited  partnership  interests of
Ascendant under certain circumstances (see Note 19).

NOTE 4. ACQUISITIONS AND INVESTMENTS

PRINCETON

      The Company made its initial  investment  in Princeton in September  1998.
Princeton is a privately  held company  located in Princeton,  New Jersey,  that
specializes in electronic bill presentment and payment  solutions  utilizing the
Internet and telephone.  Beginning in 1998 and through 2003 the Company invested
a total of  approximately  $77,300,000  in Princeton.  In June 2004, the Company
sold all its interest in Princeton for $10,000,000. The sale generated a capital
loss for federal  income tax purposes of  approximately  $67,000,000  and a book
gain of approximately $5,800,000.

FIDATA/MICROBILT

      In November 1999, the Company  completed the  acquisition of FIData,  Inc.
("FIData"),  a company that  provided  Internet-based  automated  loan  approval
products  to the  financial  services  industry.  In October  2001,  the Company
exchanged  100% of its stock of FIData  for a 9% equity  interest  in  Microbilt
Corporation  ("Microbilt").  In April  2003,  the Company  received  notice that
Bristol  Investments,  Ltd.  ("Bristol")  and  Microbilt  filed suit against the
Company   and  one  of  its   officers   alleging   breach   of   contract   and
misrepresentation  in  conjunction  with the October  2001 merger of FIData into
Microbilt.  In October 2003, the Company  settled the suit by  surrendering  its
ownership of the common  stock of  Microbilt  to Bristol.  During the year ended
December  31,  2003,  net other  expense  includes a  litigation  settlement  of
$354,000,  representing the transfer of the Company's investment in Microbilt to
Bristol.  This settlement resolves all claims brought by and against the Company
and the officer.


                                       33


SHARPS

      In October 2001, the Company participated in a private placement financing
with publicly traded Sharps.  Sharps, a Houston,  Texas-based company,  provides
medical-related  waste  services  to the  healthcare,  retail,  residential  and
hospitality  markets.  The Company  purchased  700,000  shares of Sharps' common
stock for $770,000. In January 2003, the Company purchased an additional 200,000
shares of Sharps' common stock for $200,000.  During the year ended December 31,
2003, the Company recorded an approximate $306,000 impairment write-down related
to its investment in Sharps (see Note 10).

      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  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.

NOTE 5. ACCRUED LIABILITIES

      Accrued liabilities is comprised of the following:

                                                             December 31,
      (in thousands)                                      2005         2004
                                                         ------       ------
      Accrued public company cost ..............         $  129       $   98
      Accrued preferred stock dividend .........            107          107
      Accrued legal ............................            223           64
      Accrued settlement .......................             85           --
      Other ....................................              6           14
                                                         ------       ------

        Total accrued liabilities ..............         $  550       $  283
                                                         ======       ======

      During  February 2006, the Company entered into an agreement with a former
employee to settle a dispute over a severance agreement the employee had entered
into with the  Company.  The  severance  agreement  which was executed by former
management  provided for a payment of approximately  $98,000 upon the occurrence
of certain events. The Company paid  approximately  $85,000 to settle all claims
associated with the severance agreement.

NOTE 6. COMMITMENTS AND CONTINGENCIES

      In October 2000, the Company completed the Platinum Transaction. Under the
terms of the  Platinum  Transaction,  all leases and  corresponding  obligations
associated with the Transaction Processing and Software Business were assumed by
Platinum.  Prior  to  the  Platinum  Transaction,  the  Company  guaranteed  two
operating leases for office space of the divested companies.  The first lease is
related to office  space  located in San  Antonio,  Texas,  and expires in 2006.
Under the original terms of the first lease, the remaining minimum  undiscounted
rent payments  total  approximately  $1,519,000 at December 31, 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   $5,674,000  at  December  31,  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.


                                       34


      On August 11, 2004,  Craig Davis,  allegedly a stockholder of the Company,
filed the Complaint in the Chancery  Court of New Castle County,  Delaware.  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. Mr. Davis alleges in the Complaint that different director defendants
breached their fiduciary duties to the Company. The allegations  involve,  among
other things, transactions with, and payments to, Mr. Holmes, a former executive
officer  and  director,  and whether  the  Company  operated as an  unregistered
investment  company.  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.

      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  of the
defendants filed a supplemental response in opposition to plaintiff's motion for
appointment of receiver.  The Company has had extensive  meetings with the other
parties to the litigation in an attempt to settle the  litigation.  There can be
no assurance that the Company will be able to effect a settlement.

      The  Company  is  currently  funding  legal and  professional  fees of the
defendants  pursuant to  indemnification  arrangements that were in place during
the respective terms of each of the defendants. The Company has met the $500,000
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 December 31,  2005,  the Company has recorded a receivable
from the insurance  carrier of  approximately  $1,522,000 for  reimbursement  of
legal and  professional  fees  incurred in excess of the policy  deductible,  in
accordance  with the  provisions  of the insurance  policy.  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. Nonpayment of the claim for reimbursement of legal and
professional  fees  could  have a  material  adverse  effect  on  the  financial
condition  and results of  operations  of the  Company.  The Company  intends to
vigorously seek enforcement of its rights under the policy.

      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 16) 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.


                                       35


      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 16) 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.

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

      On December 12, 2005, the Company received a letter from the SEC, based on
a review of the Company's  Form 10-K filed for the year ended December 31, 2004,
requesting  that the  Company  provide a written  explanation  as to whether the
Company is an  "investment  company" (as such term is defined in the  Investment
Company Act of 1940).  The Company provided a written response to the SEC, dated
January 12, 2005,  stating the reasons why it believes it is not an  "investment
company".  The Company  continues to provide  certain  confirmatory  information
requested by the SEC. See Item 1A. of Form 10-K for the year ended  December 31,
2005 - "Risk  Factors--OUR  BUSINESS COULD BE HARMED IF THERE IS A NON-FAVORABLE
RESOLUTION TO THE DERIVATIVE  ACTION  COMMENCED  AGAINST US BY CRAIG DAVIS OR IN
OTHER LITIGATION OR REGULATORY PROCEEDINGS AGAINST THE COMPANY."

      During  February 2006, the Company entered into an agreement with a former
employee to settle a dispute over a severance agreement the employee had entered
into with the  Company.  The  severance  agreement  which was executed by former
management  provided for a payment of approximately  $98,000 upon the occurrence
of certain events. The Company paid  approximately  $85,000 to settle all claims
associated with the severance agreement.

NOTE 7. SHARE CAPITAL

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

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


                                       36


      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 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.

In conjunction with the Newcastle Transaction, (1) Parris H. Holmes,
Jr., Gary D. Becker,  and Stephen M. Wagner resigned from the board of directors
and (2) Mr.  Holmes  resigned as the Chief  Executive  Officer and David P. Tusa
resigned as the Chief Financial Officer,  Executive Vice President and Corporate
Secretary.  Pursuant to employment  agreements  executed  prior to the Newcastle
Transaction,  upon  their  resignation,  the  Company  paid  severance,  accrued
vacation and other  amounts to Mr.  Holmes and Mr. Tusa  totaling  approximately
$2.1 million and $0.5 million,  respectively.  In addition,  the Company entered
into consulting agreements with Mr. Holmes and Mr. Tusa through October 31, 2004
and  September  30,  2004,  respectively.  Mr.  Holmes  and Mr.  Tusa  were paid
pro-rated  consulting  payments for the month of June 2004 in  conjunction  with
their severance.  Thereafter, the Company engaged the consulting services of Mr.
Tusa for the month of July 2004 only (see Note 6 to the  Consolidated  Financial
Statements).

            Mark E. Schwarz,  currently the Chief Executive Officer and Chairman
of Newcastle Capital  Management,  L.P.  ("Newcastle Capital  Management"),  and
Steven J. Pully,  currently the President of Newcastle Capital Management,  were
appointed to fill the director positions vacated by Messrs.  Holmes,  Becker and
Wagner. Messrs. Schwarz and Pully were appointed as directors of the class whose
terms of  office  expire  at the 2006  annual  meeting  of  stockholders  of the
Company.  Mr. Schwarz,  Mr. Pully and John P. Murray, Chief Financial Officer of
Newcastle Capital Management,  assumed positions as Chairman of the Board, Chief
Executive Officer and Chief Financial Officer, respectively, of the Company.

            Pursuant  to the  Newcastle  Transaction,  the  Company  was to have
caused the number of directors serving on the board of directors to be increased
and fixed at five (5) directors and an  additional  representative  of Newcastle
was to have been  appointed  as a  director  of the class  whose  term of office
expires at the 2004 annual  meeting of  stockholders  of the Company to fill the
vacancy created by such expansion.  Newcastle has waived the requirement that an
additional  representative  of Newcastle was to have been appointed by August 1,
2004.  On October 27,  2004,  the Company  announced  that James Risher had been
appointed to the Company's  board of  directors.  Mr. Risher was also named as a
member of the Company's audit committee.

            On August 11, 2004,  Craig  Davis,  allegedly a  stockholder  of the
Company, filed a complaint in the Chancery Court of New Castle County,  Delaware
against  various former  directors and current  directors of the Company and the
Company  as  a  nominal  defendant.  See  "Item  3.  Legal  Proceedings"  for  a
description of this matter.

                                       5





RISK FACTORS

            The following paragraphs discuss certain factors that may affect the
Company's business,  financial condition and operating results. For the purposes
of the following  paragraphs,  unless the context otherwise requires,  the terms
"we", "us" and "our" refer to NCEH. You should consider  carefully the risks and
uncertainties  described  below and the other  information  in this report.  The
risks  set  forth  below  are not the only  ones we face.  Additional  risks and
uncertainties that we are not aware of or that we currently deem immaterial also
may become  important  or impair our  business.  If any of the  following  risks
actually occur, our business, financial condition and operating results could be
materially  adversely  affected,  the  trading  price of our Common  Stock could
decline and the likelihood of there being any potential  return to  stockholders
would diminish.

WE MAY BE UNABLE TO REDEPLOY OUR ASSETS SUCCESSFULLY.

            As part of our  strategy  to limit  operating  losses and enable the
Company to redeploy its assets and use its cash and short-term investment assets
to enhance stockholder value, we are pursuing a strategy of identifying suitable
acquisition  candidates,  merger  partners or otherwise  developing new business
operations.  We may  not be  successful  in  acquiring  such  a  business  or in
operating  any  business  that we  acquire,  merge with or  develop.  Failure to
redeploy  our assets  successfully  will  prevent us from  becoming  profitable.
Future cash expenditures are expected to consist of funding corporate  expenses,
the costs  associated with  maintaining a public company,  expenses  incurred in
pursuing and operating new business activities and litigation  expenses,  during
which time operating losses are likely to be generated.

ANY ACQUISITIONS  THAT WE ATTEMPT OR COMPLETE COULD PROVE DIFFICULT TO INTEGRATE
OR REQUIRE A SUBSTANTIAL COMMITMENT OF MANAGEMENT TIME AND OTHER RESOURCES.

            Acquisitions  involve  a  number  of  unique  risks  including:  (i)
completing due diligence  successfully;  (ii) exposure to unforeseen liabilities
of acquired  companies;  and (iii)  increased risk of costly and  time-consuming
litigation,  including  stockholder  lawsuits. We may be unable to address these
problems  successfully.  Moreover, our future operating results will depend to a
significant   degree  on  our  ability  to  integrate   acquisitions   (if  any)
successfully and manage  operations while also controlling our expenses.  We may
be unable to  select,  manage or absorb or  integrate  any  future  acquisitions
successfully,  particularly  acquisitions of large  companies.  Any acquisition,
even if effectively integrated, may not benefit our stockholders.

WE MAY BE UNABLE TO REALIZE THE BENEFITS OF OUR NET  OPERATING  LOSS ("NOL") AND
CAPITAL LOSS CARRYFORWARDS.

            NOLs and capital losses may be carried forward to offset federal and
state  taxable  income and  capital  gains,  respectively,  in future  years and
eliminate  income taxes  otherwise  payable on such  taxable  income and capital
gains, subject to certain adjustments. Based on current federal corporate income
tax rates,  our NOL and capital loss  carryforwards,  if fully  utilized,  could
provide a benefit to us of future tax savings. However, our ability to use these
tax  benefits  in future  years will  depend  upon the  amount of our  otherwise
taxable income and capital gains.  If we do not have  sufficient  taxable income
and capital gains in future years to use the tax benefits before they expire, we
will lose the benefit of these NOL and capital loss carryforwards,  permanently.
Consequently,  our ability to use the tax benefits  associated  with our NOL and
capital loss will depend largely on our success in identifying  suitable  merger
partners and/or  acquisition  candidates,  and once  identified,  consummating a
merger with and/or acquisition of these candidates.

                                       6





            Additionally, if we underwent an ownership change within the meaning
of Sections 382 and 383 of the Internal  Revenue Code,  the NOL and capital loss
carryforward  limitations  would  impose  an annual  limit on the  amount of the
taxable  income and capital  gain that may be offset by our NOL and capital loss
generated prior to the ownership  change.  If an ownership change were to occur,
we would be unable to use a  significant  portion  of our NOL and  capital  loss
carryforwards  to offset  taxable  income and  capital  gains.  In  general,  an
ownership  change  occurs when,  as of any testing  date,  the  aggregate of the
increase in percentage points of the total amount of a corporation's stock owned
by "5-percent  shareholders"  (within the meaning of Sections 382 and 383 of the
Internal Revenue Code) whose percentage  ownership of the stock has increased as
of such  date  over the  lowest  percentage  of the  stock  owned  by each  such
"5-percent  shareholder" at any time during the three-year period preceding such
date, is more than 50 percentage points. In general,  persons who own 5% or more
of a corporation's stock are "5-percent shareholders," and all other persons who
own less than 5% of a  corporation's  stock are  treated,  together as a single,
public  group  "5-percent  shareholder,"  regardless  of  whether  they  own  an
aggregate of 5% of a corporation's stock.

            The  amount  of NOL  and  capital  loss  carryforwards  that we have
claimed  have not been  audited  or  otherwise  validated  by the U.S.  Internal
Revenue  Service.  The IRS could  challenge our calculation of the amount of our
NOL  and  capital  loss or our  determinations  as to  when a  prior  change  in
ownership  occurred and other  provisions of the Internal Revenue Code may limit
our ability to carry forward our NOL and capital loss to offset  taxable  income
and capital gains in future years. If the IRS was successful with respect to any
such  challenge,  the  potential  tax  benefit  of  the  NOL  and  capital  loss
carryforwards to us could be substantially reduced.

ANY TRANSFER RESTRICTIONS IMPLEMENTED BY THE COMPANY TO PRESERVE OUR NOL MAY NOT
BE EFFECTIVE OR MAY HAVE SOME UNINTENDED NEGATIVE EFFECTS.

            The Company may seek to preserve its NOL and capital loss through an
amendment of its certificate of incorporation  and/or bylaws, which would impose
restrictions  on the  transfer of the  Company's  capital  stock.  Any  transfer
restrictions  on the  Company's  capital stock will be designed to restrict only
those transfers that could result in an impermissible  ownership change limiting
our  ability  to  utilize  our NOL  and  capital  loss.  Although  any  transfer
restriction imposed on our capital stock is intended to reduce the likelihood of
an impermissible  ownership change,  there is no guarantee that such restriction
would  prevent all  transfers  that would result in an  impermissible  ownership
change.

            The  board  of  directors  adopted  an  amendment  to the  Company's
Shareholders  Rights Plan ("Rights  Plan") which  reduces the  triggering of the
Rights Plan from 15% of the Common  Stock to five  percent of the Common  Stock.
There is no  guarantee  that the  amendment  of the Rights  Plan will  prevent a
stockholder from acquiring more than five percent of the Common Stock.

            Any  transfer  restrictions  will require any person  attempting  to
acquire a significant  interest in the Company to seek the approval of our board
of  directors.  This may have an  "anti-takeover"  effect  because  our board of
directors may be able to prevent any future takeover.  Similarly,  any limits on
the amount of capital stock that a stockholder  may own could have the effect of
making  it more  difficult  for  stockholders  to  replace  current  management.
Additionally,  because transfer restrictions will have the effect of restricting
a stockholder's ability to dispose of or acquire our Common Stock, the liquidity
and market value of our Common Stock might suffer.

OUR STOCK IS ILLIQUID.

            Our stock is currently  quoted on the OTC Bulletin Board  ("OTCBB"),
and has traded as low as $0.20 per share during 2004. Since our Common Stock was
delisted  from a national  exchange  and is trading at a price  below  $5.00 per
share,  it is subject to certain other rules of the  Securities  Exchange Act of
1934, as amended.

                                       7





            Such  rules  require  additional  disclosure  by  broker-dealers  in
connection with any trades involving a stock defined as a "penny stock".  "Penny
stock" is defined as any non-Nasdaq  equity  security that has a market price of
less than $5.00 per share, subject to certain exceptions. Such rules require the
delivery of a  disclosure  schedule  explaining  the penny stock  market and the
risks  associated  with  that  market  before  entering  into  any  penny  stock
transaction.  Disclosure is also required to be made about compensation  payable
to  both  the  broker-dealer  and  the  registered  representative  and  current
quotations  for the  securities.  The rules also impose  various sales  practice
requirements  on  broker-dealers  who sell penny  stocks to  persons  other than
established customers and accredited investors. For these types of transactions,
the  broker-dealer  must  make  a  special  suitability  determination  for  the
purchaser and must receive the  purchaser's  written  consent to the transaction
prior  to  the  sale.  Finally,  monthly  statements  are  required  to be  sent
disclosing recent price information for the penny stocks. The additional burdens
imposed upon broker-dealers by such requirements could discourage broker-dealers
from effecting  transactions in our Common Stock.  This could severely limit the
market  liquidity of our Common Stock and the ability of a  stockholder  to sell
the Common Stock.

DEPENDENCE ON KEY PERSONNEL; POTENTIAL NEED FOR ADDITIONAL PERSONNEL.

            The Company's performance is substantially dependent on the services
and on the performance of its officers and directors.  The Company's performance
also depends on its ability to attract,  hire, retain, and motivate its officers
and key employees.  The loss of the services of any of the executive officers or
other key  employees  could  have a  material  adverse  effect on the  Company's
business, prospects, financial condition, and results of operations. The Company
has not entered into  employment  agreements  with any of its key  personnel and
currently has no "Key Man" life insurance policies. The Company's future success
may also depend on its ability to identify,  attract,  hire, train,  retain, and
motivate  other highly  skilled  technical,  managerial,  marketing and customer
service personnel.  Competition for such personnel is intense,  and there can be
no assurance that the Company will be able to successfully  attract,  assimilate
or retain sufficiently  qualified  personnel.  The failure to attract and retain
the necessary  technical,  managerial,  marketing and customer service personnel
could have a material adverse effect on the Company's business.

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

            As  discussed  in  "Item  3.  Legal  Proceedings",  certain  of  the
Company's  former and existing  directors are defendants in a derivative  action
filed by Craig Davis, who allegedly is a stockholder of the Company. The Company
is a nominal  defendant.  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.  Among the claims filed by Mr.
Davis is a claim that the Company operated as an illegal  investment  company in
violation of the Investment Company Act of 1940 (the "Investment  Company Act").
The Company  may have  violated  the  Investment  Company  Act in the past,  and
although  the  Company  does not  believe  that it is  currently  violating  the
Investment  Company  Act,  there can be no  assurance  that the  Company  is not
currently  in  violation  of, or in the future will not be in  violation  of the
Investment  Company Act. In the event the SEC or a court took the position  that
we were an investment company,  our failure to register as an investment company
would not only raise the  possibility of an enforcement or other legal action by
the SEC and potential fines and penalties,  but also could threaten the validity
of corporate  actions and contracts entered into by us during the period we were
deemed to be an  unregistered  investment  company,  among  other  remedies.  An
adverse outcome in the lawsuit filed by Mr. Davis or any other claim,  which may
arise in the ordinary course of our business, may result in significant monetary
damages,  a liquidation of the Company's assets or injunctive relief against us,
among other remedies.  While  management  currently  believes that resolving the
lawsuit  filed by Mr.  Davis  will not have a  material  adverse  impact  on our


                                       8





financial  position or results of operations,  litigation is subject to inherent
uncertainties  and management's  view of these matters may change in the future.
There  exists the  possibility  of a material  adverse  impact on our  financial
position and the results of operations  for the period in which the effect of an
unfavorable final outcome becomes probable and reasonably estimable.

EMPLOYEES

            As of December 31, 2004, the Company had two employees.  None of the
Company's  employees are represented by a union.  The Company  believes that its
employee relations are good.

ITEM 2.  PROPERTIES

            In February 2004, the Company leased approximately 1,700 square feet
of space at 10101 Reunion Place, Suite 970, San Antonio,  Texas, which served as
the corporate  headquarters  from April 2004 until September 2004. On October 8,
2004, the Company  entered into a sublease  agreement to sublet the office space
located at 10101 Reunion Place,  Suite 970, San Antonio,  Texas. Under the terms
of the  original  lease,  the  Company  is  obligated  to  make  monthly  rental
installments of approximately $3,000 through January 31, 2007, the expiration of
the lease.  The sublease  agreement  provides for the  subtenant to make monthly
rental installments of approximately  $2,500 per month through January 31, 2007.
The  Company's  corporate  headquarters  are  currently  located at 300 Crescent
Court, Suite 1110, Dallas, Texas 75201, which are also the offices of Newcastle.
Pursuant to an oral  agreement,  the Company  subleases a portion of Newcastle's
space on a month-to-month basis at no charge.

ITEM 3.  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").  That 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  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 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.

            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 February 23, 2005, Mr. Davis filed a motion for
the  appointment  of a receiver.  The Company plans to  vigorously  contest this
motion.

            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 16 to the
Consolidated  Financial  Statements) 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.

                                       9




            The Company has been notified by counsel to both Messrs.  Holmes and
Tusa 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 16 to the  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 December 31, 2004.

            Pursuant  to  the  Newcastle  Transaction,  the  Company  agreed  to
indemnify  Newcastle as the purchaser of the Series A Preferred Stock,  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

            During the fourth quarter of fiscal 2004, no matter was submitted by
the Company to a vote of its stockholders through the solicitation of proxies or
otherwise.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S  COMMON EQUITY, AND RELATED STOCKHOLDER MATTERS
         AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

            The Company's  Common Stock, par value $0.01 per share, is currently
quoted on the OTCBB under the symbol "NCEH.OB". From June 21, 2002 to October 9,
2003, the Common Stock was quoted on the Nasdaq SmallCap Market under the symbol
"NCEH".  From February 8, 2001 to June 20, 2002,  the Common Stock was quoted on
the Nasdaq National  Market under the symbol "NCEH".  The table below sets forth
the high and low bid prices for the Common  Stock from  January 1, 2003  through
December 31, 2004. These price quotations reflect inter-dealer  prices,  without
retail  mark-up,  mark-down or  commission,  and may not  necessarily  represent
actual transactions:

                                                       High             Low
                                                       ----             ---
            Year Ended December 31, 2003:
               1st Quarter                             $0.45           $0.27
               2nd Quarter                             $0.59           $0.19
               3rd Quarter                             $0.75           $0.20
               4th Quarter                             $0.52           $0.27

            Year Ended December 31, 2004:
               1st Quarter                             $0.39           $0.20
               2nd Quarter                             $0.35           $0.22
               3rd Quarter                             $0.34           $0.24
               4th Quarter                             $0.34           $0.23

                                       10





STOCKHOLDERS

            As of March 30, 2005,  there were 34,653,104  shares of Common Stock
outstanding, held by 517 holders of record. The last reported sales price of the
Common Stock on March 30, 2005 was $.24 per share.

DIVIDEND POLICY

            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  Preferred  Dividends have been paid. In addition,  whenever
the Company shall  declare or pay any dividend on its Common Stock,  the holders
of Series A Preferred  Stock are entitled to receive such Common Stock dividends
on a ratably as-converted basis.

RECENT SALE OF UNREGISTERED SECURITIES

            On June 18, 2004, the Company sold  approximately  4.8 million newly
issued shares of its Series A 4%  Convertible  Preferred  Stock to Newcastle for
$5.0 million.  The offer, sale and issuance of the Series A Preferred Stock were
exempt from the registration  requirements of Section 5 of the Securities Act of
1933,  as amended.  Reference  is made to the Form 8-K filed by the Company with
the SEC on June 30, 2004.

                                       11




ITEM 6.  SELECTED FINANCIAL DATA

            The following table presents  selected  financial and other data for
the Company.  The statement of operations  data for the years ended December 31,
2004, 2003,  2002, 2001, the transition  quarter ended December 31, 2000 and the
year ended  September  30, 2000,  and the balance  sheet data as of December 31,
2004,  2003,  2002,  2001 and 2000 presented  below are derived from the audited
Consolidated  Financial  Statements of the Company. The data presented below for
the years ended  December 31, 2004,  2003 and 2002 should be read in conjunction
with the Consolidated  Financial Statements and the notes thereto,  Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
other financial information included in this report.

                                                                                                        Quarter(1)     Year
                                                                              Year Ended                  Ended        Ended
                                                             ----------------------------------------     -----      ---------
                                                                              December 31,                           Sept. 30,
                                                          -----------------------------------------------------      ---------
(in thousands, except per share data)                        2004         2003        2002      2001       2000         2000
                                                             ----         ----        ----      ----       ----         ----
Consolidated Statement of Operations Data:
Operating revenues ..................................     $   --        $   --     $     --   $    502   $   163      $    410
Gross (loss) profit .................................         --            --           --        (62)       10            61
Operating loss from continuing operations ...........       (4,854)       (3,174)    (3,560)   (14,590)   (2,316)      (16,303)
Net loss from continuing operations .................       (1,903)       (6,486)   (18,538)   (38,328)   (5,086)      (26,579)
Net loss from discontinued
  operations, net of income taxes ...................         --            --         (962)       (98)       --        (6,565)
Net (loss) income from disposal of
  discontinued operations, net of income
  taxes .............................................         --             (30)     2,254      2,385        --        (9,277)
Net loss ............................................       (1,903)       (6,516)   (17,246)   (36,041)  (36,041)      (42,421)
Preferred stock dividend ............................         (107)         --           --         --        --            --
Net loss applicable to common stockholders ..........       (2,010)       (6,516)   (17,246)   (36,041)  (36,041)      (42,421)

Basic and diluted net (loss) income per common share:
  Net loss from continuing operations ...............     $   (.06)     $  (0.19)   $ (0.54)  $  (1.10)  $ (0.13)     $  (0.67)
  Net loss from discontinued
   operations, net of income taxes ..................         --            --        (0.03)        --        --         (0.16)
  Net (loss) income from disposal of
   discontinued operations, net of
   income taxes .....................................         --            --         0.07       0.07        --         (0.23)
  Net loss ..........................................     $   (.06)     $  (0.19)   $ (0.50)  $  (1.03)  $ (0.13)     $  (1.06)

Dividends per common share ..........................     $   --        $   --      $    --   $     --   $    --      $     --

Weighted average common shares
  outstanding .......................................       34,653        34,379     34,217     34,910    38,737        39,909

                                                                                   December 31,
                                                           -------------------------------------------------------------------
(in thousands)                                                2004        2003        2002       2001      2000
                                                              ----        ----        ----       ----      ----
Consolidated Balance Sheet Data:
Working capital.....................................      $  14,428     $  4,357    $  8,454  $  9,532   $32,454
Total assets........................................         15,095       13,036      20,124    39,577    81,176
Long-term obligations and redeemable
   preferred stock..................................              2           --          --        --        --
Additional paid-in capital..........................         75,428       70,476      70,346    70,342    90,403
(Accumulated deficit) Retained earnings.............      $ (61,107)    $(59,097)   $(52,581) $(35,335)  $   706

(1)  The quarter ended December 31, 2000 represents the  three-month  transition
     period between fiscal years 2001 and 2000.

                                       12





ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

            The  following  discussion  should be read in  conjunction  with the
Business section discussion, the Consolidated Financial Statements and the Notes
thereto and the other financial information included elsewhere in this Report.

            In June 2004, the Company sold all its interest in Princeton for $10
million,  which  comprised  the  largest  asset of the  Company.  As part of the
Company's  strategy to  redeploy  the assets of the Company and use its cash and
short-term  investments to enhance  stockholder  value,  the Company is seeking,
analyzing and evaluating potential acquisition and merger candidates. Therefore,
the  information  appearing  below,  which  relates  to  prior  periods,  is not
indicative  of the results  which may be expected  for any  subsequent  periods.
Until  the  Company  completes  the  transition  of its  business,  the  Company
currently  expects  future periods to consist  principally of funding  corporate
expenses,  the costs  associated  with  maintaining a public  company,  expenses
incurred in pursuing new business activities and litigation expenses.

CONTINUING OPERATIONS

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

            Selling,  general and administrative ("SG&A") expenses are comprised
of all selling, marketing and administrative costs incurred in direct support of
the business operations of the Company. During the year ended December 31, 2004,
SG&A  expenses  totaled $4.8 million,  compared to $3.0 million  during the year
ended  December  31, 2003 and $3.4  million  during the year ended  December 31,
2002.  SG&A  expenses for year ended  December 31, 2004 included a total of $2.6
million of  severance  paid to Parris H.  Holmes,  Jr.  and David P.  Tusa,  the
Company's   former  Chief  Executive   Officer  and  Chief  Financial   Officer,
respectively.   SG&A   expenses   also  included  $0.7  million  for  legal  and
professional  expenses,  of which $0.2 million relates to the derivative  action
filed by Craig Davis (see "Part I - Item 3. Legal Proceedings") and $0.5 million
relates to completing the proposed proxy statement seeking stockholder  approval
to liquidate the Company (which was  subsequently  withdrawn) and completing the
Newcastle Transaction.  See "Part I-Item 1. Business" for a detailed description
of the Newcastle Transaction.

            In November 2001,  the Company  entered into an Amended and Restated
Employment  Agreement  ("Employment  Agreement") with Parris H. Holmes, Jr., the
Company's then Chairman and Chief Executive  Officer.  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  $172,000.  The
underlying  life insurance  policy had a face value of $4.5 million and required
remaining  annual premium payments  through March 2012 totaling  $1,548,000.  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  $699,391  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
$0.7 million is included in SG&A during the year ended  December  31,  2003.  In
December  2003,  $0.2 million of the total $0.7 million was paid.  The remaining
$0.5 million was accrued at December 31, 2003 and paid in January 2004.

                                       13





DEPRECIATION AND AMORTIZATION

            Depreciation  and  amortization  expense is incurred with respect to
certain  assets,  including  computer  hardware,   software,  office  equipment,
furniture,  goodwill and other  intangibles.  During the year ended December 31,
2004,  depreciation  and  amortization  expense  totaled  $28,000,  compared  to
$153,000  during the year ended  December 31, 2003 and $157,000  during the year
ended  December 31, 2002. The decrease in  depreciation  and  amortization  from
prior periods is principally the result of fixed asset sales.

INTEREST INCOME

            Interest income totaled  $121,000 during the year ended December 31,
2004,  compared to $77,000 and $158,000 during the years ended December 31, 2003
and 2002, respectively. The increase in interest income in 2004 was attributable
to higher cash  balances  available for  short-term  investment as the Company's
cash  resources  were  increased by the  Newcastle  Transaction  and the sale of
Princeton (see Notes 1 and 3 to the Consolidated Financial Statements).

EQUITY IN NET LOSS OF AFFILIATES

            Equity in net loss of  affiliates  totaled $3.0  million  during the
year ended December 31, 2004,  compared to $2.7 million and $18.9 million during
the years ended  December  31, 2003 and 2002,  respectively.  In June 2004,  the
Company sold all of its holdings in  Princeton,  which  offers  electronic  bill
presentment and payment  services via the Internet and telephone.  See PRINCETON
caption below for Princeton's summarized results of operations.

GAIN ON SALE OF EQUITY AFFILIATE

            The sale of Princeton  generated a capital  loss for federal  income
tax purposes of approximately $67 million and a book gain of approximately  $5.8
million.

IMPAIRMENT OF INVESTMENTS

            During the year ended December 31, 2003,  the Company  evaluated the
realizability  of its  investment  in Sharps in  accordance  with  Statement  of
Financial  Accounting  Standards  ("SFAS")  No.  115,  "Accounting  for  Certain
Investments in Debt and Equity Securities". The Company compared the fair market
value of its  investment  in Sharps to the carrying  value of the  investment to
determine the impairment.  Based upon the current fair market value, the Company
determined  that its  investment  in Sharps  was  permanently  impaired  by $0.3
million and, accordingly,  recorded an impairment write-down,  which is included
in other income (expense) as impairment of investments in affiliates.

LITIGATION SETTLEMENT

            During the year ended December 31, 2003, net other expense  includes
a  litigation  settlement  of $0.3  million,  representing  the  transfer of the
Company's investment in Microbilt to Bristol Investments,  Ltd. ("Bristol").  In
April 2003, the Company  received  notice that Bristol and Microbilt  filed suit
against the  Company and one of its  officers  alleging  breach of contract  and
misrepresentation  in  conjunction  with the October  2001 merger of FIData into
Microbilt.  In October 2003, the Company  settled the suit by  surrendering  its
ownership of the common stock of Microbilt to Bristol.  This settlement resolves
all claims brought by and against the Company and the officer.

                                       14





CONSULTING INCOME

            In October 2000, the Company completed the Platinum Transaction.  In
conjunction with the Platinum  Transaction,  the Company also received  payments
totaling $3.1 million for consulting  services  provided to Platinum  during the
year ended December 31, 2002.

INCOME TAXES

            As a result of the operating  losses  incurred in recent  years,  no
provision or benefit for income taxes was recorded for the years ended  December
31, 2004, 2003 and 2002.

PRINCETON

Princeton's  statements of  operations  for the eight months ended May 31, 2004,
and the twelve  months  ended  September  30,  2003 and 2002,  have been used to
calculate  the  equity  in net loss  recorded  in the  Company's  statements  of
operations for the years ended December 31, 2004,  2003 and 2002,  respectively.
In June 2004,  the Company sold all its  interest in Princeton  for $10 million.
The  sale   generated  a  capital  loss  for  federal  income  tax  purposes  of
approximately $67 million and book gain of approximately $5.8 million.

            Princeton's summarized statements of operations are as follows:

                                      Eight
                                   Months Ended           Year Ended
                                      May 31,            September 30,
            (in thousands)             2004           2003          2002
                                     --------      ---------     ---------
            Revenues ...........     $ 16,695      $ 35,309      $ 28,559
            Gross profit .......        7,258        16,026        11,300
            Loss from operations       (9,188)       (7,965)      (30,234)
            Net loss ...........       (9,214)       (7,674)      (32,462)

DISCONTINUED OPERATIONS

NET LOSS FROM DISCONTINUED OPERATIONS

            Tanisys'  statement of operations  for the year ended  September 30,
2002,  including  adjustments made under the purchase method of accounting,  was
consolidated  in the  Company's  statement  of  operations  for the  year  ended
December  31,  2002.  Tanisys'  statement  of  operations   consolidated  herein
(presented as net loss from discontinued operations) is as follows:

                                                       Year ended
                                                      September 30,
                                                          2002
                                                          ----
      (in thousands)
      Operating revenues ..........................     $ 2,619
      Operating expenses:
       Cost of revenues ...........................       1,999
       Selling, general and administrative expenses       1,511
       Research and development expenses ..........       1,506
       Depreciation and amortization expense ......         139
                                                        -------
        Operating loss from discontinued operations      (2,536)
      Other income (expense):
       Interest income ............................           5
       Interest expense ...........................        (816)
       Other income (expense), net ................          83
       Minority interest in consolidated affiliate        2,302
                                                        -------
        Total other income, net ...................       1,574
                                                        -------
      Net loss from discontinued operations........     $  (962)
                                                        =======

            Operating  revenues  were  comprised  of sales  of  production-level
equipment along with related hardware and software, less returns and discounts.

                                       15





            Costs of revenues were  comprised of the costs of all components and
materials  purchased for the  manufacture of products,  direct labor and related
overhead costs.  Cost of revenues for the year ended September 30, 2002 included
a $0.5  million  inventory  write-down  for excess and obsolete  inventories  of
Tanisys due to the decline in the semiconductor  industry and the uncertainty of
future sales volumes.

            Selling,  general and administrative  expenses were comprised of all
selling,  marketing and  administrative  costs incurred in direct support of the
business operations of Tanisys.

            Research and development  expenses consisted of all costs associated
with the engineering design and testing of new technologies and products.

            Depreciation and amortization expenses were incurred with respect to
certain  assets,  including  computer  hardware,   software,  office  equipment,
furniture and other intangibles.

            Net other income consisted  primarily of interest  income,  interest
expense and  minority  interest,  plus other  miscellaneous  income and expenses
including  interest  expense  resulting from the  amortization  of debt discount
related to the note payable to the minority stockholders.

NET (LOSS) INCOME FROM DISPOSAL OF DISCONTINUED OPERATIONS

            During the year ended  December 31, 2003,  net loss from disposal of
discontinued  operations is comprised of income of $0.2 million from the sale of
Tanisys and $0.2 million from the reduction of accruals  related to discontinued
operations,  offset by expense of $0.4 million to settle  claims  related to the
April 2000  acquisition of Operator  Service  Company  ("OSC").  In exchange for
approximately  $0.2 million,  the Company sold its preferred stock in Tanisys to
ATE Worldwide LLC, whose majority  stockholder is a leader in the  semiconductor
testing equipment market.  Based upon estimates of future liabilities related to
the divested entities classified as discontinued operations, the Company reduced
its related accruals to $0 and accordingly,  recorded $0.2 million as income. In
January 2004,  the Company  entered into an agreement  with the former  majority
stockholders  of 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  stockholders  525,000  shares of the common stock of
Sharps  owned by the  Company,  which  resulted in a non-cash  charge in 2003 of
approximately $0.4 million in conjunction with the settlement agreement.

            During the year ended December 31, 2002, net income from disposal of
discontinued  operations  is comprised  of income of $2.2 million  related to an
income tax refund and $0.1 million from the reduction of accruals related to the
divested entities classified as discontinued operations (based upon estimates of
future  liabilities  at that time).  During 2002,  the Company filed its federal
income tax return  with the  Internal  Revenue  Service  for the tax fiscal year
ended September 30, 2001 (which includes the Platinum  Transaction  completed in
October 2000) and received a refund claim totaling $2.2 million.  The income tax
refund is included in net income from disposal of discontinued operations as the
refund relates to those companies sold in the Platinum Transaction.

LIQUIDITY AND CAPITAL RESOURCES

            The Company's cash balance and short-term  investments  increased to
$14.6 million at December 31, 2004,  from $5.3 million at December 31, 2003. The
increase  relates to the receipt of $10.0  million in proceeds  from the sale of
the Company's  holdings in Princeton and $5.0 million from the sale of preferred
stock to Newcastle,  offset by severance  payments totaling $2.6 million made to
Mr. Holmes and Mr. Tusa, a $0.6 million payment made to Mr. Holmes in connection
with a restricted stock grant, a $0.5 million payment related to the termination
of the split dollar life insurance  agreement with Mr. Holmes,  $0.5 million for
legal and professional  expenses related to completing the proposed  liquidation
proxy (which was  subsequently  withdrawn)  and completing the sale of preferred

                                       16





stock to Newcastle,  $0.2 million for legal and professional fees related to the
lawsuit filed by Craig Davis and the cash portion of corporate  expenses of $1.3
million.  Capital expenditures totaled $3,000 during the year ended December 31,
2004.

            During 2005, the Company's  operating cash  requirements is expected
to consist principally of funding corporate expenses,  the costs associated with
maintaining a public  company,  expenses  incurred in pursuing and operating new
business  activities  and  litigation  expenses.  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 $3.3 million at December 31, 2004. 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  $7.1  million  at  December  31,  2004.  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.

OFF-BALANCE-SHEET ARRANGEMENTS

            The Company  guaranteed  two  operating  leases for office space for
certain of its wholly-owned  subsidiaries prior to the Platinum Transaction (see
Liquidity and Capital Resources-Lease Guarantees above).

CONTRACTUAL OBLIGATIONS

            The Company's contractual obligations are as follows (in thousands):

                                                           Payments due by period
                                 --------------------------------------------------------------------
                                                Less than                                 More than
    Contractual Obligations          Total        1 year      1-3 years   3-5 years        5 years
- --------------------------------  -----------   -----------   ---------   ---------      -----------

Long-term debt obligations ..      $     2       $    --       $    2     $     --       $     --
Capital lease obligations ...           --            --           --           --             --
Operating lease obligations .           75            36           39           --             --
Purchase obligations ........           --            --           --           --             --
Other long-term liabilities
   reflected on balance sheet
   under GAAP ...............           --            --           --           --             --
                                   -------       -------       ------     ----------     ---------
Total .......................      $    77       $   $36       $   41     $     --       $     --
                                   =======       =======       ======     ==========     =========

            The  operating  lease  obligations  reflected  in  the  table  above
represent the Company's lease for office space, which is discussed further under
Item 2 of this annual report.

                                       17





SEASONALITY

            The Company's current  operations are not significantly  affected by
seasonality.

EFFECT OF INFLATION

            Inflation  has not been a material  factor  affecting  the Company's
business.  General  operating  expenses,  such as salaries,  employee  benefits,
insurance and occupancy costs, are subject to normal inflationary pressures.

NEW ACCOUNTING STANDARDS

            During  December  2004,  the Financial  Accounting  Standards  Board
("FASB")  issued  Statement  of Financial  Accounting  Standard No. 123 (revised
2004)   "Share-Based   Payment"  (SFAS  123R).  SFAS  123R  replaces  SFAS  123,
"Accounting  for  Stock-Based  Compensation",  and  supercedes  APB  Opinion 25,
"Accounting  for Stock Issued to Employees  ("APB 25").  SFAS 123R requires that
the cost of share-based payment transactions with employees be recognized in the
financial  statements as compensation  cost. That cost will be measured based on
the fair value of equity or liability  instrument issued. SFAS 123R is effective
for the Company beginning  September 1, 2005. The Company currently accounts for
stock options issued to employees under APB 25.

            In December 2004, the FASB issued Statement of Financial  Accounting
Standard No. 153  "Exchanges of Nonmonetary  Assets-An  Amendment of APB Opinion
No. 29 ("SFAS 153").  The amendments made by SFAS 153 are based on the principle
that exchanges on nonmonetary  assets should be measured based on the fair value
of  the  assets  exchanged.  The  provisions  in  SFAS  153  are  effective  for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005.  Early  application  is permitted  and  companies  must apply the standard
prospectively. The Company has determined that SFAS 153 will not have a material
impact on the  consolidated  results of operations,  financial  position or cash
flows.

CRITICAL ACCOUNTING POLICIES

IMPAIRMENT OF INVESTMENTS

            The Company  evaluates its  investments in affiliates when events or
changes in circumstances, such as a significant economic slowdown, indicate that
the  carrying  value of the  investments  may not be  recoverable.  Reviews  are
performed  to  determine  whether  the  carrying  value is  impaired  and if the
comparison  indicates that impairment  exists, the investment is written down to
fair value.  Significant  management  judgment based on estimates is required to
determine whether and how much an investment is impaired.

                                       18





CONSOLIDATION OF SUBSIDIARIES

            In  general,  the  accounting  rules  and  regulations  require  the
consolidation  of entities in which the company  holds an interest  greater than
50% and the use of the equity  method of  accounting  for  entities in which the
company holds an interest between 20% and 50%. Exceptions to these rules are (i)
when a company does not exercise  control over the decision  making of an entity
although  the  company  does own over 50% of the  entity and (ii) when a company
does exercise control over the decision making of an entity but the company owns
between 20% and 50% of the entity.

            The first exception existed with respect to the Company's  ownership
interest in Princeton.  As of December 31, 2001,  the Company owned 57.4% of the
outstanding  shares of Princeton but the voting  control was only  temporary and
the  Company  did not have the ability to  exercise  control  over the  decision
making of Princeton.  Therefore,  the Company did not  consolidate the financial
statements  of  Princeton  into the  consolidated  financial  statements  of the
Company.  Accordingly,  the Company recorded its interest in Princeton under the
equity method of accounting. As of December 31, 2003, the Company owned 34.0% of
the  outstanding  shares of  Princeton.  In June 2004,  the Company sold all its
interest in Princeton for $10 million.

            The second exception existed with respect to the Company's ownership
interest in Tanisys.  As of December 31, 2002, the Company's  ownership interest
was only 36.2%.  However, the Company exercised control over the decision making
of Tanisys. Therefore, Tanisys was consolidated into the financial statements of
the Company. The Company sold its interest in Tanisys in February 2003.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            The Company is exposed to interest rate risk  primarily  through its
portfolio of cash equivalents and short-term  investments.  The Company does not
believe  that it has  significant  exposure  to  market  risks  associated  with
changing interest rates as of December 31, 2004, because the Company's intention
is to maintain a liquid portfolio. The Company does not use derivative financial
instruments in its operations.

                                       19


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            The  Consolidated  Financial  Statements  of the  Company,  and  the
related reports of the Company's  independent  public accountants  thereon,  are
included in this report at the page indicated.

                                                                                              Page
                                                                                              ----
Report of Management .....................................................................     21
Reports of Independent Public Accountants ................................................     22
Consolidated Balance Sheets as of December 31, 2004 and 2003 .............................     23
Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003 and 2002     24
Consolidated Statements of Stockholders' Equity for the Years Ended
   December 31, 2004, 2003 and 2002 ......................................................     25
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002     26
Notes to Consolidated Financial Statements ...............................................     27

                                       20





                              REPORT OF MANAGEMENT

            The  financial  statements  included  herein  have been  prepared in
conformity with accounting principles generally accepted in the United States of
America.  Management is  responsible  for preparing the  consolidated  financial
statements  and  maintaining  and  monitoring  the Company's  system of internal
accounting  controls.  The Company believes that the existing system of internal
controls provides reasonable  assurance that errors or irregularities that could
be material to the financial  statements are prevented or would be detected in a
timely manner. Key elements of the Company's system of internal controls include
careful   selection  of  management   personnel,   appropriate   segregation  of
conflicting  responsibilities,  periodic  evaluations  of Company  financial and
business practices, communication practices that provide assurance that policies
and managerial  authorities are understood  throughout the Company, and periodic
meetings  between the Company's audit  committee,  senior  financial  management
personnel and independent public accountants.

            The consolidated  financial statements as of and for the years ended
December 31,  2004,  2003 and 2002,  were  audited by Burton  McCumber & Cortez,
L.L.P.,  independent  public  accountants,  who have also issued a report on the
consolidated financial statements.


/s/ STEVEN J. PULLY
- -------------------
Steven J. Pully
   CHIEF EXECUTIVE OFFICER


/s/ JOHN P. MURRAY
- ------------------
John P. Murray
  CHIEF FINANCIAL OFFICER

                                       21





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
New Century Equity Holdings Corp.

We have  audited the  accompanying  consolidated  balance  sheets of New Century
Equity Holdings Corp. (a Delaware  corporation)  and Subsidiaries as of December
31,  2004 and 2003,  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash flows for the years ended December 31, 2004, 2003
and 2002.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting  Oversight  Board (U.S.).  Those  standards  require that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of New
Century Equity Holdings Corp. and Subsidiaries as of December 31, 2004 and 2003,
and the  consolidated  results of their operations and their  consolidated  cash
flows for the years ended  December 31, 2004,  2003 and 2002 in conformity  with
accounting principles generally accepted in the United States of America.

                                        /s/ BURTON McCUMBER & CORTEZ, L.L.P.
                                        ----------------------------------------

Brownsville, Texas
March 16, 2005

                                       22





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

                                                                                 DECEMBER 31,
                                                                              2004           2003
                                                                           ---------      ---------

                                     ASSETS

Current assets:
  Cash and cash equivalents ..........................................     $  1,716      $  5,330
  Accounts receivable ................................................         --              28
  Prepaid and other assets ...........................................          145           309
  Short-term investments .............................................       12,895          --
                                                                           --------      --------

   Total current assets ..............................................       14,756         5,667
Property and equipment ...............................................          183           616
Accumulated depreciation .............................................         (176)         (533)
                                                                           --------      --------

  Net property and equipment .........................................            7            83
Other non-current assets .............................................            6            53
Investments ..........................................................          326         7,233
                                                                           --------      --------

  Total assets .......................................................     $ 15,095      $ 13,036
                                                                           ========      ========

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ...................................................     $     45      $     58
  Accrued liabilities ................................................          283         1,252
                                                                           --------      --------

   Total current liabilities .........................................          328         1,310
Other non-current liabilities ........................................            2          --
                                                                           --------      --------

   Total liabilities .................................................          330         1,310
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          --
  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        70,476
  Accumulated deficit ................................................      (61,107)      (59,097)
  Accumulated other comprehensive income .............................           49          --
                                                                           --------      --------

   Total stockholders' equity ........................................       14,765        11,726
                                                                           --------      --------

     Total liabilities and stockholders' equity ......................     $ 15,095      $ 13,036
                                                                           ========      ========

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

                                       23





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

                                                                        YEAR ENDED DECEMBER 31,
                                                                    2004         2003           2002
                                                                  ---------     --------      --------

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

Operating expenses:
  Selling, general and administrative expenses ..............        4,826         3,021         3,403
 Depreciation and amortization expense ......................           28           153           157
                                                                  --------      --------      --------

Operating loss from continuing operations ...................       (4,854)       (3,174)       (3,560)

Other income (expense):
 Interest income ............................................          121            77           158
 Interest expense ...........................................         --            --              (4)
 Equity in net loss of affiliates ...........................       (2,985)       (2,723)      (18,891)
 Gain on sale of equity affiliate ...........................        5,817          --            --
 Impairment of investments in affiliates ....................         --            (306)         --
 Litigation settlement ......................................         --            (354)         --
 Consulting income ..........................................         --            --           3,125
 Other (expense) income, net ................................           (2)           (6)          634
                                                                  --------      --------      --------

Total other (expense) income, net ...........................        2,951        (3,312)      (14,978)
                                                                  --------      --------      --------

Net loss from continuing operations .........................       (1,903)       (6,486)      (18,538)

Discontinued operations:
 Net loss from discontinued operations ......................         --            --            (962)
  Net (loss) income from disposal of discontinued operations,
   including income tax benefit of $0, $0 and $2,176,
   respectively .............................................         --             (30)        2,254
                                                                  --------      --------      --------

  Net (loss) income from discontinued operations ............         --             (30)        1,292
                                                                  --------      --------      --------

Net loss ....................................................       (1,903)       (6,516)      (17,246)

Preferred stock dividend ....................................         (107)         --            --
                                                                  --------      --------      --------
Net loss applicable to common stockholders ..................     $ (2,010)     $ (6,516)     $(17,246)
                                                                  ========      ========      ========

Basic and diluted net (loss) income per common share:
 Net loss from continuing operations ........................     $   (.06)     $  (0.19)     $  (0.54)
 Net loss from discontinued operations ......................         --            --           (0.03)
 Net income from disposal of discontinued operations ........         --            --            0.07
                                                                  --------      --------      --------

 Net loss ...................................................     $   (.06)     $  (0.19)     $  (0.50)
                                                                  ========      ========      ========

Weighted average common shares outstanding ..................       34,653        34,379        34,217
                                                                  ========      ========      ========

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

                                       24



               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (IN THOUSANDS)

                                                                                                            ACCUMULATED
                                                              ADDITIONAL                                       OTHER
                                           COMMON STOCK        PAID-IN    ACCUMULATED    PREFERRED STOCK    COMPREHENSIVE
                                         SHARES      AMOUNT     CAPITAL      DEFICIT    SHARES     AMOUNT      INCOME       TOTAL
                                         ------      ------     -------      -------    ------   --------- --------------  --------

Balances at December 31, 2001 .......    34,206     $    342    $ 70,342    $(35,335)      --    $   --     $   --       $ 35,349

  Issuance of common stock ..........        12         --             4        --         --        --         --              4
  Net loss ..........................      --           --          --       (17,246)      --        --         --        (17,246)
                                       --------     --------    --------    --------   --------  --------   --------     --------

Balances at December 31, 2002 .......    34,218          342      70,346     (52,581)      --        --         --         18,107

  Issuance of common stock ..........       435            5         130        --         --        --         --            135
  Net loss ..........................      --           --          --        (6,516)      --        --         --         (6,516)
                                       --------     --------    --------    --------   --------  --------   --------     --------

Balances at December 31, 2003 .......    34,653          347      70,476     (59,097)      --        --         --         11,726

  Issuance of preferred stock .......      --           --         4,952        --        4,808        48       --          5,000
  Comprehensive income (loss):
       Unrealized gain on investment       --           --          --          --         --        --           49           49
       Net loss .....................      --           --          --        (2,010)      --        --         --         (2,010)
                                                                            --------                        --------     --------
 Comprehensive loss .................      --           --          --        (2,010)      --        --           49       (1,961)
                                       --------     --------    --------    --------   --------  --------   --------     --------

Balances at December 31, 2004 .......    34,653     $    347    $ 75,428    $(61,107)     4,808  $     48   $     49     $ 14,765
                                       ========     ========    ========    ========   ========  ========   ========     ========

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

                                       25





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

                                                                                 YEAR ENDED DECEMBER 31,
                                                                            2004          2003         2002
                                                                         ----------     --------     --------

Cash flows from operating activities:
  Net loss from continuing operations ..............................     $ (1,903)     $ (6,486)     $(18,538)
  Adjustments to reconcile net loss from continuing operations to
   net cash provided by (used in) operating activities:
   Depreciation and amortization expense ...........................           27           153           157
   Equity in net loss of and impairment of investments in affiliates        2,985         3,029        18,891
   Gain on sale of equity affiliate ................................       (5,817)         --            --
    Litigation settlement ..........................................         --             354          --
    Loss on disposition of fixed assets ............................           30            17          --
    Accretion of discount on securities ............................          (36)         --            --
    Changes in operating assets and liabilities:
     (Increase) decrease in accounts receivable ....................           28           (19)          821
     Decrease in prepaid and other assets ..........................          171           156           156
     Increase (decrease) in accounts payable .......................          (13)           28            (1)
     Increase (decrease) in accrued liabilities ....................         (687)          486          (744)
     Increase in other liabilities and other noncash items .........         --             136           620
                                                                         --------      --------      --------

Net cash (used in) provided by continuing operating activities .....       (5,215)       (2,146)        1,826
Net cash provided by discontinued operating activities .............         --              78         2,002
                                                                         --------      --------      --------

  Net cash (used in) provided by operating activities ..............       (5,215)       (1,968)        3,828

Cash flows from investing activities:
  Purchases of property and equipment ..............................           (3)           (6)          (20)
  Investments in available-for-sale securities .....................      (12,858)         --            --
  Investments in affiliates ........................................         --          (1,400)       (3,849)
  Redemption of investments in affiliates ..........................         --            --           1,471
  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 activities .......................................           62          --              (9)
                                                                         --------      --------      --------

Net cash used in investing activities ..............................       (3,399)       (1,406)       (2,407)

Cash flows from financing activities:
  Proceeds from issuance of common stock ...........................         --            --               4
  Proceeds from sale of preferred stock ............................        5,000          --            --
                                                                         --------      --------      --------

Net cash provided by financing activities ..........................        5,000          --               4
                                                                         --------      --------      --------

Net (decrease) increase in cash and cash equivalents ...............       (3,614)       (3,374)        1,425
Cash and cash equivalents, beginning of period .....................        5,330         8,704         7,279
                                                                         --------      --------      --------

Cash and cash equivalents, end of period ...........................     $  1,716      $  5,330      $  8,704
                                                                         ========      ========      ========

Supplemental cash flow information:
 Cash payments for income taxes ....................................     $   --        $   --        $   --
 Cash payments for interest ........................................         --            --               4

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

                                       26






               NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2004, 2003 AND 2002

NOTE 1.  BUSINESS ACTIVITY

            New Century  Equity  Holdings  Corp.  ("NCEH" or the "Company") 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  $77.3 million  before
selling  all of  its  interest  for  $10  million  in  June  2004.  The  Company
subsequently made investments in other high growth companies.  In June 2004, the
Company  sold all its interest in Princeton  for $10 million.  Princeton  offers
electronic bill presentment and payment services via the Internet and telephone.
The Company  continues  to hold an equity  interest in  publicly  traded  Sharps
Compliance  Corp.  ("Sharps"),  which  provides  cost-effective  medical-related
disposal  solutions for the  healthcare,  retail,  residential  and  hospitality
industries.

            In March 2004, the Company filed  preliminary  proxy  materials with
the SEC seeking stockholder approval of a liquidation of the Company. On June 2,
2004,  the  Company  announced  that it had  been in  discussions  with  various
organizations that had expressed an interest in exploring strategic alternatives
to the Company's  previously  proposed  plan of  liquidation.  The  contemplated
transactions, proposed as alternatives to the previous plan of liquidation, were
focused  on the  use of the  Company's  cash  and  operating  and  capital  loss
carryforwards.  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.  The purpose of such  amendment was to help ensure the
preservation of the Company's net operating loss and capital loss carryforwards.
On June 18, 2004, the Company sold approximately 4.8 million newly issued shares
of its Series A 4% Convertible  Preferred Stock (the "Series A Preferred Stock")
to Newcastle  Partners,  L.P.  ("Newcastle")  for $5.0  million (the  "Newcastle
Transaction"). Newcastle was exempted from the five percent ownership limitation
in the Shareholder Rights Agreement.  In connection with the announcement of the
Newcastle  Transaction,  the  Company  announced  that the  board  of  directors
determined  that it was not in the best interests of the Company's  stockholders
to liquidate  the Company and withdrew  all proxy  materials  filed with the SEC
related to the proposed liquidation.  At the time of the aforementioned  events,
the Company's board of directors consisted of C. Lee Cooke, Jr., Gary D. Becker,
Justin L. Ferrero, Parris H. Holmes, Jr. and Stephen M. Wagner.

            In conjunction with the Newcastle Transaction, (1) Parris H. Holmes,
Jr., Gary D. Becker,  and Stephen M. Wagner resigned from the Company's board of
directors and (2) Mr. Holmes resigned as the Company's  Chief Executive  Officer
and David P. Tusa resigned as the Company's Chief Financial  Officer,  Executive
Vice  President  and  Corporate  Secretary.  Pursuant to  employment  agreements
executed prior to the Newcastle Transaction, upon their resignation, the Company
paid  severance,  accrued  vacation and other amounts to Mr. Holmes and Mr. Tusa
totaling approximately $2.1 million and $0.5 million, respectively. In addition,
the Company  entered into  consulting  agreements  with Mr.  Holmes and Mr. Tusa
through  October 31, 2004 and September 30, 2004,  respectively.  Mr. Holmes and
Mr. Tusa were paid pro-rated  consulting  payments for the month of June 2004 in
conjunction with their severance. Thereafter, the Company engaged the consulting
services of Mr. Tusa for the month of July 2004 only (see Note 6).

                                       27





            Mark E. Schwarz,  currently the Chief Executive Officer and Chairman
of Newcastle Capital  Management,  L.P.  ("Newcastle Capital  Management"),  and
Steven J. Pully,  currently the President of Newcastle Capital Management,  were
appointed to fill the director positions vacated by Messrs.  Holmes,  Becker and
Wagner. Messrs. Schwarz and Pully were appointed as directors of the class whose
terms of  office  expire  at the 2006  annual  meeting  of  stockholders  of the
Company.  Mr. Schwarz, Mr. Pully, and John P. Murray, Chief Financial Officer of
Newcastle Capital Management,  assumed positions as Chairman of the Board, Chief
Executive Officer and Chief Financial Officer, respectively, of the Company.

            Pursuant  to the  Newcastle  Transaction,  the  Company  was to have
caused the number of directors serving on the board of directors to be increased
and fixed at five (5) directors and an  additional  representative  of Newcastle
was to have been  appointed  as a  director  of the class  whose  term of office
expires at the 2004 annual  meeting of  stockholders  of the Company to fill the
vacancy created by such expansion.  Newcastle has waived the requirement that an
additional  representative  of Newcastle was to have been appointed by August 1,
2004.  On October 27,  2004,  the Company  announced  that James Risher had been
appointed to the Company's  board of  directors.  Mr. Risher was also named as a
member of the Company's audit committee.

            On August 11, 2004,  Craig  Davis,  allegedly a  stockholder  of the
Company, filed a complaint in the Chancery Court of New Castle County,  Delaware
against  various former  directors and current  directors of the Company and the
Company as a nominal defendant (see Note 6).

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

            The  accompanying  consolidated  financial  statements  include  the
accounts of the Company,  it's wholly owned  subsidiaries  and  subsidiaries  in
which the  Company  is deemed  to have  control  for  accounting  purposes.  The
Company's  investment  in Princeton was accounted for using the equity method of
accounting.  The  Company's  investment in Sharps is accounted for in accordance
with SFAS No.  115,  "Accounting  for  Certain  Investments  in Debt and  Equity
Securities". The Company's investment in Microbilt Corporation was accounted for
under the cost method of accounting.  All significant  intercompany accounts and
transactions have been eliminated in consolidation.

                                       28





ESTIMATES IN THE FINANCIAL STATEMENTS

            The   preparation  of  financial   statements  in  conformity   with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

CASH AND CASH EQUIVALENTS

            The Company  considers all highly liquid  investments  with original
maturities  of  three  months  or  less  to  be  classified  as  cash  and  cash
equivalents.

FINANCIAL INSTRUMENTS

            SFAS  No.   107,   "Disclosures   About  Fair  Value  of   Financial
Instruments",  requires the disclosure of fair value information about financial
instruments,  whether or not  recognized on the balance  sheet,  for which it is
practicable  to estimate  the value.  SFAS No. 107  excludes  certain  financial
instruments from its disclosure  requirements.  Accordingly,  the aggregate fair
market value amounts are not intended to represent the  underlying  value of the
Company. The carrying amounts of cash and cash equivalents,  current receivables
and payables and  long-term  liabilities  approximate  fair value because of the
nature of these instruments.

PROPERTY AND EQUIPMENT

            Property  and  equipment  are  stated  at  cost.   Depreciation  and
amortization  are computed on a  straight-line  basis over the estimated  useful
lives of the  related  assets,  which  range  from  three to seven  years.  Upon
disposition,  the cost and related accumulated  depreciation or amortization are
removed from the accounts and the  resulting  gain or loss is reflected in other
income  (expense) for that period.  Expenditures for maintenance and repairs are
charged to expense as incurred and major improvements are capitalized.

INVESTMENTS IN EQUITY SECURITIES

            The Company  follows the standards of SFAS No. 115,  "Accounting for
Certain  Investments in Debt and Equity  Securities,"  for those  investments in
which the securities  are publicly  traded.  For those  investments in which the
securities are privately  held,  the Company  follows the guidance of Accounting
Principles  Board ("APB")  Opinion No. 18, "The Equity Method of Accounting  for
Investments in Common Stock".  The Company accounts for its investment in Sharps
under SFAS No. 115, as Sharps'  common  stock is publicly  traded.  SFAS No. 115
establishes  standards for  accounting  and reporting for  investments in equity
securities that have readily determinable fair values and for all investments in
debt  securities.  Unrealized  holdings  gains  and  losses,  other  than  those
considered permanent, related to the Company's investment in Sharps are excluded
from  net loss and  reported  as a  separate  component  of other  comprehensive
income.

SHORT-TERM INVESTMENTS

            The Company invests its excess cash in money market  accounts,  U.S.
Treasury bills,  and short-term debt  securities.  Investments  with an original
maturity  at the time of  purchase  over  three  months but less than a year are
classified as short-term  investments.  Investments with an original maturity at
the time of  purchase  of  greater  than one year are  classified  as  long-term
investments. Management determines the appropriate classification of investments
at the time of purchase and  reevaluates  such  designations  at the end of each

                                       29





period.  At  December  31,  2004,  short-term   investments  are  classified  as
available-for-sale and consist principally of U.S. Treasury bills.

TREASURY STOCK

            In 2000, the Company's board of directors approved the adoption of a
common stock repurchase program. Under the terms of the program, the Company may
purchase an aggregate  $25.0 million of the  Company's  Common Stock in the open
market or in privately negotiated transactions.  The Company records repurchased
Common Stock at cost (see Note 8).

INCOME TAXES

            Deferred tax assets and  liabilities  are recorded  based on enacted
income  tax rates that are  expected  to be in effect in the period in which the
deferred tax asset or liability is expected to be settled or realized.  A change
in the tax laws or rates results in  adjustments  to the deferred tax assets and
liabilities.  The  effects of such  adjustments  are  required to be included in
income in the period in which the tax laws or rates are changed.

DISCONTINUED OPERATIONS

            Effective  for the  Company's  fiscal year ended  December 31, 2002,
SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-lived Assets",
establishes  standards for accounting and reporting for long-lived  assets to be
disposed of by sale. The Company  adopted SFAS No. 144 and  determined  that the
operations of Tanisys  Technology,  Inc.  ("Tanisys")  qualified as discontinued
operations and, accordingly, are reported separately from continuing operations.

NET LOSS PER COMMON SHARE

            SFAS No.  128,  "Earnings  Per  Share",  establishes  standards  for
computing  and  presenting  earnings per share for entities  with  publicly-held
common  stock or  potential  common  stock.  As the  Company had a net loss from
continuing  operations  for the years ended  December 31,  2004,  2003 and 2002,
diluted EPS equals basic EPS, as potentially  dilutive common stock  equivalents
are anti-dilutive in loss periods.

STOCK-BASED COMPENSATION

            The  Company  adopted  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation,"  but elected to apply APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees,"  and related  interpretations  in accounting for its stock
option  plans  (see  Note  9).  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.  In accordance with the provisions of APB Opinion No. 25, the Company did
not recognize  compensation  expense for employee stock purchased under the NCEH
Employee Stock Purchase Plan ("ESPP").

            The following table  illustrates the effect on net loss and net loss
per common share had compensation  expense for the Company's stock option grants
and ESPP  purchases 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.

                                       30






                                                                           Year Ended December 31,
   (in thousands, except per share data)                              2004          2003          2002
                                                                   ----------    ----------    ---------
   Net loss, as reported .....................................     $ (1,903)     $ (6,516)     $(17,246)
   Less:  Total stock based employee compensation expense
      determined under fair value based method for all awards,
      net of related tax effects .............................         (100)         (347)         (602)
                                                                   --------      --------      --------
   Net loss, pro forma .......................................     $ (2,003)     $ (6,863)     $(17,848)
                                                                   ========      ========      ========

   Basic and diluted net loss per common share:
     Net loss, as reported ...................................     $  (0.06)     $  (0.19)     $  (0.50)
                                                                   ========      ========      ========
     Net loss, pro forma .....................................     $  (0.06)     $  (0.20)     $  (0.52)
                                                                   ========      ========      ========

            The fair value for these  options was  estimated  at the  respective
grant  dates using the  Black-Scholes  option-pricing  model with the  following
weighted average assumptions:  expected volatility of 99.2%, 96.3% and 96.3% for
the years ended  December 31,  2004,  2003 and 2002,  respectively;  no dividend
yield;  expected  life of 2.5 years for all option  grants and 0.5 years for all
ESPP purchases;  and risk-free  interest rates of 4.75%,  1.8%, and 2.2% for the
years ended December 31, 2004, 2003 and 2002, respectively.

NOTE 3.  ACQUISITIONS AND INVESTMENTS

PRINCETON

            The Company  made its initial  investment  in Princeton in September
1998.  Princeton is a privately held company  located in Princeton,  New Jersey,
that specializes in electronic bill presentment and payment solutions  utilizing
the Internet and telephone. The Company accounts for the investment in Princeton
under the equity method of accounting.

            In September 1998, the Company  acquired 22% of the capital stock of
Princeton  for $10.0  million.  During the year ended  September  30, 1999,  the
Company acquired additional shares of Princeton stock,  increasing the Company's
ownership percentage to approximately 24%.

            In March 2000,  the Company  invested $33.5 million in the equity of
Princeton,  consisting of $27.0 million of convertible  preferred stock and $6.5
million  of  common  stock.  In June  2000,  under  the  terms of a  Convertible
Promissory Note, the Company advanced $5.0 million to Princeton, which converted
into shares of Princeton preferred stock, during the quarter ended September 30,
2000.  The Company's  ownership  percentage in Princeton,  based upon its voting
interest, as of September 30, 2000, was approximately 42.5%.

            In April 2001, the Company  invested $15.0 million,  of an aggregate
$22.5 million private convertible debt financing, in Princeton. In exchange, the
Company received $15.0 million of convertible  promissory  notes. In addition to
the convertible  debt, the Company also received  warrants to purchase shares of
Princeton's convertible preferred stock.

            In November 2001, the Company advanced $1.8 million, of an aggregate
$3.1 million,  to Princeton under the terms of a secured debt  financing.  Under
the  terms  of the  debt  financing  with  Princeton,  the  Company  received  a
convertible  promissory note secured by certain data center assets of Princeton.
The note  accrued  interest  at a rate per annum of 15% and the  principal  with
accrued  interest was payable in November  2002.  Notwithstanding  the terms set
forth above,  upon the occurrence of a qualifying change of control or an equity
financing of Princeton,  the rate of interest under the note increased to a rate
per annum equal to 50%, which would be prepaid upon such event.  If such payment
was made, no additional interest was payable.

                                       31






            In December  2001, in  conjunction  with a  recapitalization  of the
capital  structure  of  Princeton,  the Company  invested  $6.0  million,  of an
aggregate $8.5 million,  in the preferred  stock of Princeton  through a private
equity financing.  In addition, the convertible promissory notes issued in April
and November  2001,  plus accrued  interest,  were  converted  into equity.  The
Company's  ownership  percentage  of the  outstanding  shares (based upon voting
interest) and the fully-diluted shares of Princeton as of December 31, 2001, was
approximately  57.4%.  Although the Company's  ownership  percentage was greater
than 50%, the Company did not consolidate the financial  statements of Princeton
as the voting  control was only temporary and the Company was not deemed to have
control of Princeton.

            During the quarter ended March 31, 2002,  the Company  invested $1.5
million, of a total $2.5 million equity financing, in Princeton. In exchange for
its  investment,   the  Company  received  1.5  million  shares  of  Princeton's
mandatorily  redeemable  convertible preferred stock. In April 2002, the Company
committed to finance $3.75 million,  of a total $8.5 million equity  commitment,
to Princeton during the year ended December 31, 2002. During April and May 2002,
the  Company  funded  $2.4  million of its total  $3.75  million  commitment  in
exchange for shares of Princeton's  mandatorily redeemable convertible preferred
stock.

            In conjunction  with the completion of Princeton's  equity financing
in June 2002, the Company  received $1.5 million in proceeds from the redemption
of mandatorily redeemable convertible preferred stock of Princeton. In addition,
the Company is no longer required to fund its remaining $1.4 million  commitment
to  Princeton.  As  of  December  31,  2002,  the  Company's  ownership  of  the
outstanding  and  fully-diluted  shares  (considering  all  issued  options  and
warrants) of Princeton was 38.0% and 32.9%, respectively.

            In September  2003,  the Company  invested $1.2 million,  of a total
$5.0 million equity financing, in Princeton. In exchange for its investment, the
Company  received  4.0  million  shares of  Princeton's  mandatorily  redeemable
convertible preferred stock. As of December 31, 2003, the Company's ownership of
the outstanding and  fully-diluted  shares  (considering  all issued options and
warrants)  of Princeton  was 36.2% and 31.7%,  respectively.  In June 2004,  the
Company sold all its interest in Princeton for $10 million. The sale generated a
capital loss for federal  income tax purposes of  approximately  $67 million and
book gain of approximately $5.8 million.


FIDATA/MICROBILT

            In November  1999, the Company  completed the  acquisition of FIData
Inc. ("FIData"), a company located in Austin, Texas that provided Internet-based
automated loan approval  products to the financial  services  industries.  Total
consideration  for the  acquisition was  approximately  $4.2 million in cash and
debt  assumption  and 1.1 million  shares of the Company's  common  stock.  This
acquisition  was  accounted  for as a  purchase.  In October  2001,  the Company
exchanged  100% of its stock of FIData  for a 9% equity  interest  in  Microbilt
Corporation ("Microbilt").

            In April 2003, the Company received notice that Bristol Investments,
Ltd.  ("Bristol")  and  Microbilt  filed suit against the Company and one of its
officers alleging breach of contract and  misrepresentation  in conjunction with
the merger of FIData into  Microbilt.  In October 2003, the Company  settled the
suit by surrendering  its ownership of the common stock of Microbilt to Bristol.
This  settlement  resolves all claims brought by and against the Company and the
officer.  During the year ended December 31, 2003, net other expense  includes a
litigation  settlement  of  $0.3  million,  representing  the  transfer  of  the
Company's investment in Microbilt to Bristol.

                                       32





SHARPS

            In October 2001,  the Company  participated  in a private  placement
financing with publicly traded Sharps.  Sharps, a Houston,  Texas-based company,
provides medical-related waste services to the healthcare,  retail,  residential
and hospitality  markets. The Company purchased 700,000 shares of Sharps' common
stock for $770,000. In January 2003, the Company purchased an additional 200,000
shares of Sharps'  common  stock for  $200,000.  As of December  31,  2003,  the
Company owned  approximately 8.5% of Sharps  outstanding stock.  During the year
ended  December  31,  2003,  the  Company  recorded  a $0.3  million  impairment
write-down  related  to its  investment  in  Sharps  (see  Note  10 for  further
discussion).

            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
stockholders  525,000 shares of the common stock of Sharps owned by the Company,
valued  at  approximately  $389,000.   Additionally,  the  former  OSC  majority
stockholders  agreed to a voting  rights  agreement  which allows the Company to
direct  the  vote of the  Company's  shares  owned by  them.  Subsequent  to the
transfer of the Sharps common stock shares,  the Company's interest in Sharps is
3.6% of the outstanding  shares.  The Company  recorded a non-cash charge to net
loss from disposal of discontinued operations in 2003 of $389,000 in conjunction
with the settlement agreement.

NOTE 4.  INVESTMENTS

            Investments consist of the following:
                                                                              December 31,   December 31,
            (in thousands)                                                       2004           2003
                                                                               ---------     ------------
            Investment in Princeton:
                 Cash investments ........................................     $ 77,276      $ 77,276
                 Proceeds from sale of all holdings in Princeton .........      (10,000)         --
                 Proceeds from sale of all holdings in Princeton allocated
                   to former chief executive officer .....................          600          --
                 Gain on sale of Princeton ...............................        5,817          --
                 Amortization and equity loss pick-up ....................      (65,971)      (62,986)
                 In-process research and development costs ...............       (4,465)       (4,465)
                 Impairment of investment ................................       (1,777)       (1,777)
                 Other ...................................................       (1,480)       (1,481)
                                                                               --------      --------
                    Net investment in Princeton ..........................         --           6,567

              Investment in Sharps:
                 Cash investments ........................................          970           970
                 Settlement ..............................................         (389)         --
                 Impairment of investment ................................         (306)         (306)
                 Unrealized holding gain .................................           49          --
                 Other ...................................................            2             2
                                                                               --------      --------
                    Net investment in Sharps .............................          326           666
                                                                               --------      --------
                 Total investments in affiliates .........................     $    326      $  7,233
                                                                               ========      ========

                                       33





NOTE 5.  ACCRUED LIABILITIES

            Accrued liabilities is comprised of the following:
                                                                     December 31,
            (in thousands)                                         2004         2003
                                                                ---------    ---------
            Accrued vacation ................................     $ --       $  136
            Accrued audit fees ..............................          8         62
            Accrued annual report fees ......................         70         53
            Accrued split dollar life insurance (see Note 16)       --          561
            Accrued settlement ..............................       --          389
            Accrued preferred stock dividend ................        107       --
            Accrued legal ...................................         64       --
            Other ...........................................         34         51
                                                                  ------     ------

               Total accrued liabilities ....................     $  283     $1,252
                                                                  ======     ======
NOTE 6.  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  $49.7  million  (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 $3.3 million at December 31,
2004. 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 $7.1 million at December 31, 2004. 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").  That 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  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 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.

            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

                                       34





Chancery  Court of New Castle  County,  Delaware on January 18, 2005.  The court
denied the motion to dismiss. On February 23, 2005, Mr. Davis filed a motion for
the  appointment  of a receiver.  The Company plans to  vigorously  contest this
motion.

            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 16) 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 Messrs.  Holmes and
Tusa 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 16) 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 December
31, 2004.

            Pursuant  to  the  Newcastle  Transaction,  the  Company  agreed  to
indemnify Newcastle,  as the purchaser of the Series A Preferred Stock, 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 7.  SHARE CAPITAL

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

                                       35






            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  Preferred  Dividends have been paid. In addition,  whenever
the Company shall declare or pay any dividends on its Common Stock,  the holders
of 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  Company's  Common  Stock,  par value $.01 per share
("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.

            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.

                                       36

NOTE 8. TREASURY STOCK

      In 2000,  the  Company's  board of  directors  approved  the adoption of a
common stock repurchase program. Under the terms of the program, the Company may
purchase an  aggregate  $25.0 million$25,000,000  of the  Company's  Common Stock in the open
market or in privately negotiated  transactions.  Through December 31, 2004,2005, the
Company had purchased an aggregate $20.1  million,$20,100,000, or 8.3 million8,300,000 shares, of treasury
stock under this program.  The Company made no treasury stock  purchases  during
the year ended December 31, 20042005,  and has no plans to make any future  treasury
stock purchases.


                                       37


NOTE 9. STOCK OPTIONS AND STOCK PURCHASE WARRANTS

      The Company has adopted the NCEH 1996  Employee  Comprehensive  Stock Plan
("Comprehensive  Plan") and the NCEH 1996 Non-Employee  Director Plan ("Director
Plan")  under  which  officers  and  employees,   and  non-employee   directors,
respectively,  of the Company and its  affiliates  are eligible to receive stock
option grants.  Employees of the Company are also eligible to receive restricted
stock grants under the Comprehensive  Plan. The Company has reserved  14.5  million14,500,000
and  1.3 million1,300,000  shares  of  its  Common  Stock  for  issuance  pursuant  to  the
Comprehensive Plan and the Director Plan, respectively. Under each plan, options
vest and expire pursuant to individual award agreements; however, the expiration
date of  unexercised  options  may not  exceed  ten years from the date of grant
under the  Comprehensive  Plan and seven  years from the date of grant under the
Director Plan.

      Option  activity for the years ended December 31, 2005,  2004 2003 and 2002,2003, is
summarized as follows:

                                                   Number      Weighted Average
                                                  of Shares     Exercise Price
                                                  ---------     --------------

   Outstanding, December 31, 2001 .....................................      8,662,136           $   6.42
               Granted .........................................................      1,040,000           $   0.36
               Canceled ........................................................     (2,988,704)          $   7.772002............     6,713,432          $4.88
     Granted.................................        90,000          $0.29
     Canceled................................    (1,025,245)         $9.53
                                                 ----------

   Outstanding, December 31, 2002 .....................................      6,713,432           $   4.88
               Granted .........................................................         90,000           $   0.29
               Canceled ........................................................     (1,025,245)          $   9.532003............     5,778,187          $3.98
     Granted.................................       300,000          $0.28
     Canceled................................    (3,308,583)         $4.54
                                                 ----------

   Outstanding, December 31, 2003 .....................................      5,778,187           $   3.98
               Granted .........................................................        300,000           $   0.28
               Canceled ........................................................     (3,308,583)          $   4.542004............     2,769,604          $2.90
     Granted.................................        90,000          $0.24
     Canceled................................      (643,406)         $2.68
                                                 ----------

   Outstanding, December 31, 2004 .....................................      2,769,604           $   2.902005............     2,216,198          $2.86
                                                 ==========

      At  December  31,  2005,  2004 2003 and 2002,2003,  stock  options  to  purchase  an
aggregate of 2,082,865, 2,500,854, 4,995,062 and 4,955,6854,995,062 shares were exercisable and had
weighted  average  exercise  prices  of  $3.02,  $3.13,  $4.53  and  $6.38$4.53  per  share,
respectively.


                                       3738


      Stock options  outstanding  and  exercisable at December 31, 2004,2005, were as
follows:

                                     Options Outstanding                         Options Exercisable
                           -------------------              -------------------------------------------------------------      -------------------------------
                                      Weighted Average
       Range of                           Remaining       Remaining         Weighted           Weighted
       Exercise              Number         Life           Average           Number             Average
        Prices             Outstanding     (years)     Exercise Price      Exercisable      Exercise Price
        --------------------------------             -----------     -------     --------------      -----------      ---------------     ------------     ------------------------------

  $   0.280.24 - $   1.98       1,355,451       4.11,135,451        3.1           $   0.39            1,095,4510.35            1,002,118      $   0.420.37
  $   2.03 - $   4.88         1,115,820       2.0876,414        1.0           $   3.20            1,107,0703.27              876,414      $   3.233.27
  $   5.69 - $  16.84         298,333       2.0204,333        1.6           $  12.68              298,33314.62              204,333      $  12.68
                                  ---------                                        ----------

                                  2,769,604       3.014.62
                          -----------                                        -----------

                            2,216,198        2.2           $   2.90            2,500,8542.86            2,082,865      $   3.13
                                  =========                                        ==========3.02
                          ===========                                        ===========

      The weighted  average fair value and weighted  average  exercise  price of
options  granted  where the exercise  price was equal to the market price of the
underlying  stock at the  grant  date were  $0.24  and $0.24 for the year  ended
December  31,  2005,  $0.25 and $0.28 for the year ended  December  31, 2004 and
$0.20 and $0.29 for the year ended December 31, 2003, and
$0.22 and $0.35 for the year ended December 31, 2002, respectively.

NOTE 10. IMPAIRMENT

      During the year  ended  December  31,  2003,  the  Company  evaluated  the
realizability  of its investment in Sharps in accordance  with SFAS No. 115. The
Company  compared  the fair  market  value of its  investment  in  Sharps to the
carrying  value of the  investment to determine the  impairment.  Based upon the
current fair market value, the Company  determined that its investment in Sharps
was permanently  impaired by $0.3  million$306,000 and,  accordingly,  recorded an impairment
write-down,  which is  included  in other  income  (expense)  as  impairment  of
investments in affiliates.

NOTE 11. INVESTMENT IN SECURITIES AVAILABLE-FOR-SALESHORT-TERM INVESTMENTS

      In October 2004,  the Company  purchased a 26 week U.S.  Treasury bill for
$12.9 million. The fair valueapproximately  $12,859,000 which matured on May 5, 2005 for $13,000,000.  In May
2005,  the Company  purchased  a 26 week U.S.  Treasury  bill for  approximately
$13,786,000 which was $12.9 million atsold on July 27, 2005 for approximately $13,863,000. As of
December 31, 2004.2005, the Company held all short-term investments in cash.

NOTE 12. LEASES

      The Company  leases  certain  office space and equipment  under  operating
leases. Rental expense was approximately  $36,000,  $58,000 $164,000 and $173,000$164,000 for the
years ended December 31, 2005, 2004 2003 and 2002,2003, respectively. Future minimum lease
payments  under  non-cancelable  operating  leases as of  December  31, 20042005 are
$36,000  for the year  ending  December  31, 2005,  $36,000 for the year ending
December 31, 2006 and $3,000 for the year ending
December  31, 2007 and $0 for all years  thereafter.  Sub-leaseFuture  minimum  sub-lease
receipts under  sub-lease  rentals for the year ending December 31, 2006 and the
year ending December 31, 2007, are $30,000, $30,000 and $2,500, during the
same periods.respectively.

      The Company's corporate headquarters are currently located at 300 Crescent
Court, Suite 1110, Dallas, Texas 75201, which are also the offices of Newcastle.
Pursuant to an oral  agreement,  the Company  subleasesoccupies a portion of  Newcastle's
space on a month-to-month basis at no charge.


                                       3839


NOTE 13. INCOME TAXES

      The income tax benefit is comprised of the following:

                                                                        Year Ended December 31,
      (in thousands)                                               2005           2004           2003
                                                                 2002
                                   -------------    ------------     --------------------       --------       --------
      Current:
       Federal..........Federal ............................................      $     --       $     --       $     --
       State .........................................................            --             --             --
                                                                 ------------     ------------     ------------
              Total...........--------       --------       --------
        Total .............................................      $     --       $     --       $     --
                                                                 ============     ============     ====================       ========       ========

      The income tax benefit  differs  from the amount  computed by applying the
statutory  federal  income  tax rate of 35% to loss from  continuing  operations
before income tax benefit. The reasons for these differences were as follows:

                                                                        Year Ended December 31,
      (in thousands)                                               2005           2004           2003
                                                                 2002
                                                                ----------    --------       -----------------       --------

      Computed income tax benefit at statutory rate .......      $    190       $    666       $  2,270      $  6,488
      (Decrease) increase in taxes resulting from:
      Nondeductible losses in and impairments of affiliates            --         (1,045)        (1,060)       (6,790)
      Book gain on sale of equity affiliate ...............            --          2,036          --             --
      Tax capital loss on sale of equity affiliate ........            --         23,547          --             --
      Permanent and other deductions, net .................            20           (754)          (218)          (85)
      Valuation allowance .................................          (210)       (24,450)          (992)          387
                                                                 --------       --------       --------

      Income tax benefit ..................................      $     --       $     --       $     --
                                                                 ========       ========       ========

      The tax effect of significant  temporary  differences,  which comprise the
deferred tax liability, is as follows:

                                                                       December 31,
      (in thousands)                                                2005          2004
                                                                 2003
                                                   -----------------      --------
      Deferred tax asset:
        Net operating loss carryforwardcarryforward....................      $   3,541      $  3,331
        $  2,428
               Capital loss carryforward .....carryforward..........................         23,547        --23,547
        Valuation allowance ...........allowance................................        (27,088)      (26,878)       (2,428)
      Deferred tax liability:
        Estimated tax liability .......liability............................             --            --
                                                                 -----------------      --------
           Net deferred tax liability .liability......................      $      --      $     --
                                                                 =================      ========

      As of  December  31,  2004,2005,  the  Company  had a federal  income  tax loss
carryforward  of  $9.5 million,approximately  $10,000,000,  which begins expiring in 2019. In
addition,  the Company had a federal capital loss  carryforward of $67 millionapproximately
$67,000,000 which expires in 2009. Realization of the Company's carryforwards is
dependent on future taxable income and capital gains.  At this time, the Company
cannot assess whether or not the  carryforward  will be realized;  therefore,  a
valuation allowance has been recorded as shown above.

      Ownership  changes,  as defined in the  Internal  Revenue  Code,  may have
limited  the amount of net  operating  loss  carryforwards  that can be utilized
annually to offset future taxable  income.  Subsequent  ownership  changes could
further affect the limitation in future years.


                                       3940


NOTE 14. BENEFIT PLANS

      The Company  established  the NCEH 401(k) Plan (the  "Plan") for  eligible
employees of the  Company.  Generally,  all  employees of the Company who are at
least  twenty-one  years of age and who have completed  one-half year of service
are eligible to participate in the Plan. The Plan is a defined contribution plan
which   provides  that   participants   may  make  voluntary   salary   deferral
contributions,  on a pretax basis,  between 1% and 15% of their  compensation in
the form of voluntary payroll deductions,  up to a maximum amount as indexed for
cost-of-living  adjustments.  The  Company  will  match a  participant's  salary
deferral,  up  to 5% of a  participant's  compensation.  The  Company  may  make
additional discretionary contributions. No discretionary contributions were made
during the years ended December 31, 2005,  2004 2003 or 2002.2003. The Company's  matching
contributions to this plan totaled approximately $7,500, $22,000 $29,000  and $30,000$29,000 for
the years ended December 31, 2005, 2004 2003 and 2002,2003, respectively.

NOTE 15. SUMMARIZED FINANCIAL INFORMATION FOR UNCONSOLIDATED SUBSIDIARY

      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 selling its  interest in
Princeton in June 2004,  the Company  accountsaccounted for its  investment in Princeton
under the equity  method of  accounting  (as the  Company  does not exhibit  control  over
Princeton).  The  Companyand  recorded the equity in net loss of
Princeton  on a  three-month  lag forlag.  As a  result  of the  year  ended  December  31,  2003 and 2002.sale of the  Company's
holdings in Princeton,  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 beenwas used to calculate the equity in net
loss  recorded  in the  Company's  statementsstatement  of  operations  for the year ended
December 31, 2004.  The  Company's  ownership
percentage of the preferred stock, the outstanding  stock and the  fully-diluted
stock of Princeton was 34.0%, 36.2% and 31.7%, respectively,  as of December 31,
2003.  In June 2004,  the Company  sold all its  interest in  Princeton  for $10
million.

      Princeton's summarized balance sheet is as follows:

                                                              May 31,    September 30,
      (in thousands)                                            2004         2003
                                                                -------     ----------         ----
      Current assets .........................................................................................      $47,528      $34,750
      Non-current assets .................................................................................        9,464       12,681
      Current liabilities ...............................................................................       38,188       30,386
      Non-current liabilities .......................................................................        1,209          486
      Mandatorily redeemable convertible preferred stock ..................       49,845       39,587

      Princeton's summarized statements of operations are as follows:

                                                Eight
                                            Months Ended        Year Ended
                                               May 31,         September 30,
      (in thousands)                              2004              2003
                                                  2002
                                     --------      ---------     -------------              ----
      Revenues ................................          $ 16,695           $ 35,309
      $ 28,559
            Gross profit ........................             7,258             16,026        11,300
      Loss from operations .........            (9,188)            (7,965)
      (30,234)
            Net loss ................................            (9,214)            (7,674)


                                       (32,462)

            For the year ended September 30, 2002, loss from operations of $30.2
million  includes  special charges  totaling $12.5 million.  Approximately  $9.3
million of the  special  charges  relate to the  implementation  of a  strategic
restructuring  plan to streamline  Princeton's  operations by reducing operating
expenses primarily through workforce reductions ($5.8 million) and renegotiating
significant  contracts and leases ($3.5 million).  The additional charges relate
to the  write-down of a portion of the asset value of  Princeton's  property and

                                       4041




equipment.  The impairment was recognized as the future  undiscounted cash flows
for Princeton were estimated to be insufficient to recover the related  carrying
values of the property and equipment.

NOTE 16. RELATED PARTIES

      Mr.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. Mr.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.  According to public filings by Sharps, Mr. Holmes continues to
be a director of Sharps,  although he is not serving in such  capacity on behalf
of the Company.  Mr. Tusa was  appointed  Chief  Financial
Officer of Sharps in February  2003. In March 2003,  Sharps began  reimbursing the Company for certain
expenses incurred by Mr. Tusa. As of December 31, 2004, no amount was due to the
Company by Sharps for these expenses. A currentformer member of the  Company's  board of
directors, Lee Cooke, served on the board of directors of Sharps from March 1992
until November 2004.

            Mr.  Holmes  served as Chairman of the Board of Tanisys  Technology,
Inc.  ("Tanisys") from the time of the Company's investment in Tanisys until his
resignation in February 2002. Mr. Cooke also served as Tanisys'  Chairman of the
Board and Chief Executive  Officer from February 2002 until February 2003 and as
a member of Tanisys'  board of directors  from February 2002 to March 2003.  Mr.
Cooke was  entitled to receive  approximately  $15,000 per month from Tanisys as
compensation for services as Chairman of the Board and Chief Executive  Officer.
The Company also  appointed Mr. Tusa and another one of its Board  members,  Mr.
Ferrero,  to the board of directors of Tanisys.  Mr.  Ferrero  resigned from the
board of directors of Tanisys in February  2003 and Mr. Tusa  resigned  from the
board of directors of Tanisys in March 2003.

            In July 2001,  the  Company  retained  Habitek  International,  Inc.
("Habitek")  to provide  operational  consulting  services  for FiData,  Inc and
Tanisys.  Habitek  was paid  $137,500  for this  one-year  agreement.  Habitek's
majority owner is Mr. Cooke.

      In August 2003,  the Company  issued 435,484 shares of its 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
$200,000.$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
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. 41

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 quarter 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 at no cost by the Company at no cost.Company.  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.


                                       42


      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  recognized  $150,000
during the year ended December 31, 2003, as compensation  expense related to the
stock grant. 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.Mark Schwarz,
Chief  Executive  Officer and Chairman of  Newcastle  Capital  Management,  Mr.L.P.
("NCM"), Steve Pully, President of Newcastle  Capital  Management,NCM, and Mr.John Murray, Chief Financial Officer
of Newcastle Capital Management,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.  Newcastle  Capital  ManagementNCM 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 Newcastle.NCM.
Pursuant to an oral agreement,  the Company subleasesoccupies a portion of Newcastle'sNCM's space on
a month-to-month  basis at no charge.  The Company also receives  accounting and
administrative services from employees of Newcastle Capital ManagementNCM at no charge.


                                       4243


NOTE 17.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

                                                                                  Three Months Ended
                                                               -------------------------------------------------------------------------------------------------------------
                                                               December 31,    September 30,     June 30,        March 31,
      (in thousands, except per share data)                        2005             2005           2005            2005
                                                               ------------    -------------     --------        ---------
      Operating revenues ..................................      $    33         $    --         $    --         $    --
      Operating loss from continuing operations ...........         (121)           (287)           (246)           (355)
      Net (loss) income ...................................           13            (193)            (89)           (274)
      Preferred stock dividend ............................          (50)            (50)            (50)            (50)
      Net loss available to common stockholders ...........          (37)           (243)           (139)           (324)
      Basic and diluted net (loss) income per common share:
       Net (loss) income from continuing operations .......         0.00           (0.01)          (0.00)          (0.01)
       Net (loss) income ..................................         0.00           (0.01)          (0.00)          (0.01)

                                                                                    Three Months Ended
                                                               -----------------------------------------------------------
                                                               December 31,    September 30,     June 30,        March 31,
      (in thousands, except per share data)                        2004            2004            2004            2004
                                                               -----------  ------------    -------------     --------        ---------
      Operating revenues ..................................      $    --         $    --         $    --         $    --
      Operating loss from continuing operations ...........         (283)           (292)         (3,618)           (661)
      Net (loss) income from continuing operations ........        (217)        (262)         428       (1,852)
      Net (loss) income ...................................         (217)           (262)            428          (1,852)
      Preferred stock dividend ............................          (50)            (50)             (7)             --
      Net loss available to common stockholders ...........         (267)           (312)            421          (1,852)
      Basic and diluted net (loss) income per common share:
       Net (loss) income from continuing operations .............        (0.01)          (0.01)           0.01           (0.05)
       Net (loss) income ...................................................................        (0.01)          (0.01)           0.01           (0.05)

Three Months Ended
                                                               --------------------------------------------------
                                                               December 31, September 30,  June 30,     March 31,
      (in thousands, except per share data)                        2003         2003         2003         2003
                                                               ------------  -----------  ----------   ---------
      Operating revenues ..................................     $  --        $  --        $  --        $  --
      Operating loss from continuing operations ...........      (1,330)        (543)        (581)        (720)
      Net loss from continuing operations .................      (2,194)      (1,638)      (1,326)      (1,328)
      Net loss from discontinued operations ...............        --           --           --           --
      Net (loss) income from disposal of
         discontinued operations ..........................        (389)         212         --            147
      Net loss ............................................      (2,583)      (1,426)      (1,326)      (1,181)
      Basic and diluted net (loss) income per common share:
        Net loss from continuing operations ...............       (0.06)       (0.05)       (0.04)       (0.04)
        Net loss from discontinued operations .............        --           --           --           --
        Net (loss) income from disposal of
         discontinued operations ..........................       (0.01)        0.01         --           0.01
        Net loss ..........................................       (0.07)       (0.04)       (0.04)       (0.03)

NOTE 18. DISCONTINUED OPERATIONS

TANISYS

            In August 2001, the Company  entered into a Series A Preferred Stock
Purchase  Agreement  ("Purchase  Agreement") with Tanisys to purchase  1,060,000
shares of Tanisys'  Series A Preferred  Stock for  $1,060,000,  in an  aggregate
$2,575,000  financing.  Each  share of  Tanisys'  Series A  Preferred  Stock was
initially convertible into 33.334 shares of Tanisys' common stock. The Company's
ownership  percentage  of the  outstanding  shares of Tanisys was  approximately
36.2%, based upon its voting interest, as of December 31, 2002.

            For accounting  purposes,  the Company was deemed to have control of
Tanisys and, therefore,  consolidated the financial  statements of Tanisys.  The
Company  consolidated the financial  statements of Tanisys on a three-month lag,
as the Company had a different year-end than Tanisys.  Tanisys' balance sheet as
of September 30, 2002 was  consolidated  with the Company's  balance sheet as of
December 31, 2002.  The  statement of  operations  of Tanisys for the year ended
September 30, 2002, was consolidated with the Company's statements of operations
for the years ended December 31, 2002.

                                       43





            In February 2003, the Company sold its preferred stock in Tanisys to
ATE Worldwide LLC, whose majority  stockholder is a leader in the  semiconductor
testing  equipment  market.  Accordingly,  the  operations  of Tanisys have been
classified  as  discontinued   operations  in  the  consolidated  statements  of
operation  for  the  year  ended  December  31,  2002.   The  Company   received
approximately  $0.2  million  in  exchange  for its  preferred  stock,  which is
reported in net loss from disposal of  discontinued  operations  during the year
ended December 31, 2003.

            Tanisys'  statement of operations  for the year ended  September 30,
2002,  including  adjustments made under the purchase method of accounting,  was
consolidated  in the  Company's  statement  of  operations  for the  year  ended
December  31,  2002.  Tanisys'  statement  of  operations   consolidated  herein
(presented as net loss from discontinued operations) is as follows:

                                                                          Year ended
                                                                         September 30,
      (in thousands)                                                         2002
                                                                          ---------
      Operating revenues .............................................     $ 2,619
      Operating expenses:
        Cost of revenues .............................................       1,999
        Selling, general and administrative expenses .................       1,511
        Research and development expenses ............................       1,506
        Depreciation and amortization expense ........................         139
                                                                           -------
          Operating loss from discontinued operations ................      (2,536)
      Other income (expense):
       Interest income ...............................................           5
       Interest expense ..............................................        (816)
       Other income (expense), net ...................................          83
       Minority interest in consolidated affiliate ...................       2,302
                                                                           -------
        Total other income, net ......................................       1,574
                                                                           -------
      Net loss from discontinued operations ..........................     $  (962)
                                                                           =======

      Net loss from discontinued operations ..........................     $  (962)
      Preferred stock dividend and amortization of the value of the
         beneficial conversion feature on stock issued by consolidated
         affiliate ...................................................        (249)
      Minority interest in consolidated affiliate ....................         249
                                                                           -------
       Net loss from discontinued operations applicable to
         common stockholders .........................................     $  (962)
                                                                           =======

(LOSS) INCOMENET LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS

      During  the year  ended  December  31,  2003,  net loss from  disposal  of
discontinued  operations is comprised of income of  $0.2 millionapproximately  $147,000 from
the sale of Tanisys and  $0.2 millionapproximately  $212,000  from the reduction of accruals
related to discontinued operations, offset by expensea non-cash charge of $0.4  millionapproximately
$389,000 to settle claims related to a
priorthe OSC acquisition.


                                       Based upon estimates of future  liabilities  related to44


NOTE 19. SUBSEQUENT EVENTS (UNAUDITED)

      In connection with the divested entities classified as discontinued operations,Ascendant Agreement,  the Company reduced its
related  accrualsalso entered into
the Principals  Agreement with  Ascendant and certain  limited  partners and key
employees of Ascendant  pursuant to $0 and  accordingly,  recorded  $0.2 million as income.  In
January 2004,which the Company entered into an agreementhas the option to purchase
limited  partnership   interests  of  Ascendant  under  certain   circumstances.
Effective  March  14,  2006,  in  accordance  with the former  majority
stockholders  of OSC to settle all claims related to the April 2000  acquisition
of OSC by the Company. Under the  terms of the  agreement,Principals
Agreement, the Company transferred
to the former OSC majority  stockholders  525,000  sharesacquired a 7% limited partnership interest from a limited
partner of the common stock of
Sharps  owned  by  the  Company,   which  resulted  inAscendant for a non-cash   charge  of
approximately $0.4 million in 2003 in conjunction with the settlement agreement.

                                       44nominal amount.


                                       45




            During the year ended December 31, 2002, net income from disposal of
discontinued  operations  is comprised  of income of $2.2 million  related to an
income tax refund and $0.1 million from the reduction of accruals related to the
divested entities classified as discontinued operations (based upon estimates of
future  liabilities  at that time).  During 2002,  the Company filed its federal
income tax return  with the  Internal  Revenue  Service  for the tax fiscal year
ended September 30, 2001 (which includes the Platinum  Transaction  completed in
October 2000) and received a refund claim totaling $2.2 million.  The income tax
refund is included in net income from disposal of discontinued operations as the
refund relates to those companies sold in the Platinum Transaction.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

      None.

ITEM 9A. CONTROLS AND PROCEDURES

      Disclosure controls are procedures that are designed with the objective of
ensuring  that  information  required to be disclosed in the  Company's  reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such
as this  Form  10-K,  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 for 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.  There were no  significant
changes  in the  Company's  internal  controls  or in other  factors  that could
significantly  affect these  controls  subsequent  to the date of the  Company's
evaluation.

ITEM 9B. OTHER INFORMATION

      None.

                                       4546


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The information inrequired by Item 10 will be furnished on or prior to April
30, 2006 (and is hereby  incorporated  by reference)  by an amendment  hereto or
pursuant to a definitive proxy statement of the Proxy Statement set forth underCompany's 2006 Annual Meeting of
Stockholders for the caption  "Information
Regarding Directors and Executive Officers" is incorporated herein by reference.fiscal year ended December 31, 2005.

ITEM 11. EXECUTIVE COMPENSATION

      The information inrequired by Item 11 will be furnished on or prior to April
30, 2006 (and is hereby  incorporated  by reference)  by an amendment  hereto or
pursuant to a definitive proxy statement of the Proxy Statement set forth underCompany's 2006 Annual Meeting of
Stockholders for the captions "Information
Regarding  Executive Officer  Compensation" and "Information About the Board and
its Committees--Director Compensation" is incorporated herein by reference.fiscal year ended December 31, 2005.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

      The information inrequired by Item 12 will be furnished on or prior to April
30, 2006 (and is hereby  incorporated  by reference)  by an amendment  hereto or
pursuant to a definitive proxy statement of the Proxy  Statement  set forth underCompany's 2006 Annual Meeting of
Stockholders for the captions  "Equity
Compensation Plan Information" and "Information  Regarding  Beneficial Ownership
of Principal Stockholders,  Directors, and Management" is incorporated herein by
reference.fiscal year ended December 31, 2005.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information set forth under the caption "Certain  Relationships  and Related
Transactions"required by Item 13 will be furnished on or prior to April
30, 2006 (and is hereby  incorporated  by reference)  by an amendment  hereto or
pursuant to a definitive proxy statement of the Proxy Statement is incorporated herein by reference.Company's 2006 Annual Meeting of
Stockholders for the fiscal year ended December 31, 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Information  concerning  principal  accountant fees and services  appears inThe information required by Item 14 will be furnished on or prior to April
30, 2006 (and is hereby  incorporated  by reference)  by an amendment  hereto or
pursuant to a definitive proxy statement of the Proxy  Statement  underCompany's 2006 Annual Meeting of
Stockholders for the heading  "Fees Billed by Burton,  McCumber & Cortez,
L.L.P." and is incorporated herein by reference.fiscal year ended December 31, 2005.

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

      (a)(A)   DOCUMENTS FILED AS PART OF REPORT

            1.    Financial Statements:

                  The Consolidated  Financial  Statements of the Company and the
                  related report of the Company's independent public accountants
                  thereon have been filed under Item 8 hereof.

            2.    Financial Statement Schedules:

                  The information required by this item is not applicable.

                                       46



            3.    Exhibits:

                  The exhibits listed below are filed as part of or incorporated
                  by  reference  in this  report.  Where such  filing is made by
                  incorporation  by reference to a  previously  filed  document,
                  such document is identified in  parentheses.  See the Index of
                  Exhibits  included  with the exhibits  filed as a part of this
                  report.


                                       47


Exhibit
Number                          Description of Exhibits

2.1      Plan of Merger and Acquisition  Agreement  between BCC, CRM Acquisition
         Corp.,  Computer Resources  Management,  Inc. and Michael A. Harrelson,
         dated June 1, 1997  (incorporated by reference from Exhibit 2.1 to Form
         10-Q, dated June 30, 1997).

2.2      Stock Purchase Agreement between BCC and Princeton TeleCom Corporation,
         dated September 4, 1998  (incorporated by reference from Exhibit 2.2 to
         Form 10-K, dated September 30, 1998).

2.3      Stock Purchase  Agreement  between BCC and Princeton eCom  Corporation,
         dated February 21, 2000  (incorporated by reference from Exhibit 2.1 to
         Form 8-K, dated March 16, 2000).

2.4      Agreement  and Plan of Merger  between  BCC,  Billing  Concepts,  Inc.,
         Enhanced Services Billing,  Inc., BC Transaction  Processing  Services,
         Inc., Aptis, Inc.,  Operator Service Company, BC Holding I Corporation,
         BC Holding II Corporation, BC Holding III Corporation, BC Acquisition I
         Corporation,   BC  Acquisition  II  Corporation,   BC  Acquisition  III
         Corporation and BC Acquisition IV Corporation, dated September 15, 2000
         (incorporated  by  reference  from  Exhibit  2.1  to  Form  8-K,  dated
         September 15, 2000).

2.5      Stock  Purchase  Agreement  by and among New  Century  Equity  Holdings
         Corp., Mellon Ventures, L.P., Lazard Technology Partners II LP, Conning
         Capital Partners VI, L.P. and Princeton eCom  Corporation,  dated March
         25, 2004  (incorporated  by  reference  from  Exhibit 10.1 to Form 8-K,
         dated March 29, 2004).

2.6      Series A  Convertible  4%  Preferred  Stock  Purchase  Agreement by and
         between New Century Equity Holdings Corp. and Newcastle  Partners,  L.P.,LP,
         dated June 18, 2004 (incorporated by reference from Exhibit 2.1 to Form
         8-K, dated June 30, 2004).

3.1      Amended and Restated  Certificate of Incorporation of BCC (incorporated
         by reference from Exhibit 3.1 to Form 10/A, Amendment No. 1, dated July
         11, 1996);  as amended by  Certificate  of Amendment to  Certificate of
         Incorporation,  filed with the Delaware  Secretary  of State,  amending
         Article I to change the name of the Company to Billing  Concepts  Corp.
         and amending Article IV to increase the number of authorized  shares of
         common stock from  60,000,000 to  75,000,000,  dated  February 27, 1998
         (incorporated  by reference from Exhibit 3.4 to Form 10-Q,  dated March
         31, 1998).

                                       47



3.2      Amended and Restated  Bylaws of BCC  (incorporated  by  reference  from
         Exhibit 3.3 to Form 10-K, dated September 30, 1998).

4.1      Form of Stock  Certificate  of  Common  Stock of BCC  (incorporated  by
         reference from Exhibit 4.1 to Form 10-Q, dated March 31, 1998).

4.2      Rights Agreement, dated as of July 10, 1996, between BCC and U.S. Trust
         Company of Texas,  N.A.  (incorporated by reference from Exhibit 4.2 to
         the Registration Statement on Form 10-12G/A, dated July 11, 1996).

4.3      Certificate of Designation of Series A Junior  Participating  Preferred
         Stock (incorporated by reference from Form 10/A, Amendment No. 1, dated
         July 11, 1996).

4.4      Certificate  of  Designation  of Series A Convertible  Preferred  Stock
         (incorporated by reference from Exhibit 4.1 to Form 8-K, dated June 30,
         2004).

4.5      First  Amendment  to the Rights  Agreement  by and  between New Century
         Equity  Holdings,  Corp. and The Bank of New York Trust  Company,  N.A.
         dated as of June 10, 2004  (incorporated  by reference from Exhibit 4.3
         to Form 10-12G/A, dated July 9, 2004).

*10.1    BCC's 1996 Employee  Comprehensive  Stock Plan amended as of August 31,
         1999  (incorporated  by reference from Exhibit 10.8 to Form 10-K, dated
         September 30, 1999).

*10.2    Form of Option  Agreement  between BCC and its employees under the 1996
         Employee  Comprehensive  Stock Plan  (incorporated  by  reference  from
         Exhibit 10.9 to Form 10-K, dated September 30, 1999).

*10.3    Amended and Restated 1996 Non-Employee Director Plan of BCC, amended as
         of August 31, 1999  (incorporated  by reference  from Exhibit  10.10 to
         Form 10-K, dated September 30, 1999).

*10.4    Form  of  Option  Agreement  between  BCC  and  non-employee  directors
         (incorporated  by  reference  from  Exhibit  10.11 to Form 10-K,  dated
         September 30, 1998).


                                       48
*10.5    BCC's 1996 Employee Stock Purchase Plan, amended as of January 30, 1998
         (incorporated  by  reference  from  Exhibit  10.12 to Form 10-K,  dated
         September 30, 1998).

10.6     Office Building Lease  Agreement  between  Billing  Concepts,  Inc. and
         Medical Plaza Partners (incorporated by reference from Exhibit 10.21 to
         Form 10/A,  Amendment No. 1, dated July 11, 1996),  as amended by First
         Amendment to Lease Agreement, dated September 30, 1996 (incorporated by
         reference  from  Exhibit  10.31 to Form 10-Q,  dated  March 31,  1998),
         Second   Amendment  to  Lease   Agreement,   dated   November  8,  1996
         (incorporated by reference from Exhibit 10.32 to Form 10-Q, dated March
         31, 1998),  and Third Amendment to Lease  Agreement,  dated January 24,
         1997  (incorporated by reference from Exhibit 10.33 to Form 10-Q, dated
         March 31, 1998).

48

10.7     Put Option Agreement  between BCC and Michael A. Harrelson,  dated June
         1, 1997  (incorporated  by  reference  from  Exhibit 10.1 to Form 10-Q,
         dated June 30, 1997).

*10.8    Amended and Restated  Employment  Agreement  between New Century Equity
         Holdings  Corp.  andCorp.and  Parris H.  Holmes,  Jr.,  dated  January  11,  2002
         (incorporated  by  reference  from  Exhibit  10.11 to Form 10-K,  dated
         December 31, 2001).

*10.9    Employment  Agreement  between New Century  Equity  Holdings  Corp. and
         David P. Tusa,  dated November 1, 2001  (incorporated by reference from
         Exhibit 10.12 to Form 10-K, dated December 31, 2001).

10.10    Office Building Lease Agreement between Prentiss Properties Acquisition
         Partners,  L.P. and Aptis,  Inc., dated November 11, 1999 (incorporated
         by  reference  from Exhibit  10.33 to Form 10-K,  dated  September  30,
         1999).

*10.11   BCC's 401(k)  Retirement Plan  (incorporated  by reference from Exhibit
         10.14 to Form 10-K, dated September 30, 2000).

10.12    Office  Building  Lease  Agreement  between  BCC and  EOP-Union  Square
         Limited Partnership,  dated November 6, 2000 (incorporated by reference
         from Exhibit 10.16 to Form 10-K, dated December 31, 2001).

10.13    Office Building Sublease  Agreement between BCC and CCC Centers,  Inc.,
         dated February 11, 2002  (incorporated  by reference from Exhibit 10.17
         to Form 10-K, dated December 31, 2001).

10.14    Office Building Lease Agreement between SAOP Union Square, L.P. and New
         Century Equity Holdings Corp., dated February 11, 2004 (incorporated by
         reference from Exhibit 10.18 to Form 10-K, dated December 31, 2003).

10.15    Sublease  agreement  entered  into by and between  New  Century  Equity
         Holdings  Corp.  and  the  Law  Offices  of  Alfred  G.  Holcomb,  P.C.
         (incorporated  by  reference  from  Exhibit  10.1 to Form  10-Q,  dated
         September 30, 2004).

10.16    Revenue  Sharing  Agreement,  dated as of October 5, 2005,  between New
         Century Equity Holdings Corp. and ACP Investments LP  (incorporated  by
         reference from Exhibit 10.1 to Form 10-Q, dated September 30, 2005).

10.17    Principals  Agreement,  dated as of October  5, 2005,  by and among New
         Century Equity Holdings Corp. and ACP Investments LP  (incorporated  by
         reference from Exhibit 10.2 to Form 10-Q, dated September 30, 2005).

14.1     New Century  Equity  Holdings  Corp.  Code of Ethics  (incorporated  by
         reference from Exhibit 14.1 to Form 10-K, dated December 31, 2003).

21.1     List of Subsidiaries:

         New Century Equity Holdings of Texas, Inc. (incorporated in Delaware)
         New Century Equity Holdings, Inc. (incorporated in Texas)

23.1     Consent of Burton, McCumber & Cortez, L.L.P. (filed herewith).

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).

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

- --------------
*Indicates* Includes compensatory plan or arrangement.


                                       49


                                   SIGNATURESIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) 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: March 31, 200530, 2006                           By:     /s/ Steven J. Pully
                                                   -------------------------------------------------------------
                                                           Steven J. Pully
                                                      CHIEF EXECUTIVE OFFICERChief Executive Officer

      Pursuant to the  requirements  of the Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on the 31st30th day of March 2005.2006.

         SIGNATURE                                      TITLE
            ---------                                         -----


   /s/ Steven J. Pully                         - ----------------------------------                   Chief Executive Officer
- ----------------------------                (Principal Executive Officer)
     Steven J. Pully                          (Principal Executive Officer)


   /s/ John P. Murray                          - ----------------------------------                   Chief Financial Officer
John P. Murray- ----------------------------        (Principal Financial and Accounting Officer)
     John P. Murray


   /s/ Mark E. Schwarz                              - ----------------------------------                        Director and
Mark E. Schwarz- ----------------------------                    Chairman of the Board
     Mark E. Schwarz


    /s/ James Risher                                   Director
- --------------------------------------------------------------
      James Risher


    /s/ Jonathan Bren                                  Director
- ----------------------------
       Jonathan Bren


                                       50