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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

         For the quarterly period ended June 30, 2003


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

         For the transition period from              to

Commission File Number 0-28536

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


Delaware   74-2781950
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)
     
10101 Reunion Place, Suite 450, San Antonio, Texas   78216
(Address of principal executive offices)   (Zip code)

(210) 302-0444
(Registrant’s telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No

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

        Indicated below is the number of shares outstanding of the registrant’s only class of common stock at August 13, 2003:


Title of Class Number of Shares
Outstanding
Common Stock, $0.01 par value 34,217,620



NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES

INDEX


PAGE
     
 
     
PART I FINANCIAL INFORMATION    
     
Item 1. Interim Condensed Consolidated Financial Statements    
     
        Condensed Consolidated Balance Sheets – June 30, 2003 (Unaudited)    
                      and December 31, 2002       3  
     
        Unaudited Condensed Consolidated Statements of Operations – For the Three    
                      and Six Months ended June 30, 2003 and 2002       4  
     
        Unaudited Condensed Consolidated Statements of Cash Flows – For the Six    
                      Months ended June 30, 2003 and 2002       5  
           
        Notes to Unaudited Interim Condensed Consolidated Financial Statements       6  
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results    
                      of Operations       11  
           
Item 3. Quantitative and Qualitative Disclosure about Market Risk       13  
           
Item 4. Controls and Procedures       13  
     
PART II OTHER INFORMATION    
           
Item 1. Legal Proceedings       14  
           
Item 4. Submission of Matters to a Vote of Security Holders       14  
           
Item 6. Exhibits and Reports on Form 8-K       14  
           
SIGNATURE       15  


2


PART I FINANCIAL INFORMATION

Item 1. Interim Condensed Consolidated Financial Statements

NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)


June 30,
2003 		December 31,
2002
     
   
 
    (Unaudited)    
                                                              ASSETS    
     
Current assets:    
  Cash and cash equivalents     $ 7,620   $ 8,704  
  Accounts receivable       40     9  
  Prepaid and other assets       286     330  
  Net current assets from discontinued operations       —     1,427  
   Total current assets       7,946     10,470  
Property and equipment, net       170     248  
Other non-current assets       53     53  
Investments in affiliates       8,003     9,353  
  Total assets     $ 16,172   $ 20,124  
                            LIABILITIES AND STOCKHOLDERS’ EQUITY    
     
Current liabilities:    
  Accounts payable     $ 13   $ 30  
  Accrued liabilities       521     551  
  Net current liabilities from discontinued operations       38     1,435  
   Total current liabilities       572     2,016  
Other non-current liabilities       —     1  
   Total liabilities       572     2,017  
Commitments and contingencies       —     —  
Stockholders’ equity:    
  Preferred stock, $0.01 par value, 10,000,000 shares authorized;    
   no shares issued or outstanding       —     —  
  Common stock, $0.01 par value, 75,000,000 shares authorized;    
   34,217,620 shares issued and outstanding       342     342  
  Additional paid-in capital       70,346     70,346  
  Accumulated deficit       (55,088 )   (52,581 )
   Total stockholders’ equity       15,600     18,107  
    Total liabilities and stockholders’ equity     $ 16,172   $ 20,124  

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

3


NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)


Three Months Ended
June 30, 		Six Months Ended
June 30,
2003 2002 2003 2002
     
 
 
 
 
Operating revenues     $ —   $ —   $ —   $ —  
Operating expenses:    
   Selling, general and administrative expenses       541     914     1,221     1,880  
   Depreciation and amortization expenses       40     43     80     86  
Operating loss from continuing operations       (581 )   (957 )   (1,301 )   (1,966 )
Other income (expense):    
   Interest income, net       22     28     49     88  
   Equity in net loss of affiliate       (766 )   (2,287 )   (1,413 )   (16,556 )
   Consulting income       —     938     —     1,876  
   Other (expense) income, net       (1 )   313     11     608  
Total other expense, net       (745 )   (1,008 )   (1,353 )   (13,984 )
Net loss from continuing operations       (1,326 )   (1,965 )   (2,654 )   (15,950 )
Discontinued operations:    
   Net loss from discontinued operations       —     (325 )   —     (543 )
   Net income from disposal of discontinued    
     operations       —     2,176     147     2,176  
Net loss     $ (1,326 ) $ (114 ) $ (2,507 ) $ (14,317 )
Basic and diluted net (loss) income per common share:    
   Net loss from continuing operations     $ (0.04 ) $ (0.05 ) $ (0.08 ) $ (0.46 )
   Net loss from discontinued operations       —     (0.01 )   —     (0.02 )
   Net income from disposal of discontinued    
     operations       —     0.06     0.01     0.06  
   Net loss     $ (0.04 ) $ —   $ (0.07 ) $ (0.42 )
Weighted average common shares outstanding       34,218     34,218     34,218     34,216  

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

4


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


Six Months Ended
June 30,
2003 2002
Cash flows from operating activities:                
Net loss from continuing operations     $ (2,654 ) $ (15,950 )
Adjustments to reconcile net loss from continuing operations to net cash    
  (used in) provided by operating activities:    
  Depreciation and amortization expenses       80     86  
  Equity in net loss of affiliate       1,413     16,556  
  Changes in operating assets and liabilities:    
   (Increase) decrease in accounts receivable       (31 )   653  
   Decrease in prepaid and other assets       44     650  
   (Decrease) increase in accounts payable       (17 )   7  
   Decrease in accrued liabilities       (30 )   (733 )
   Increase in other liabilities and other noncash items       136     352  
                 
Net cash (used in) provided by continuing operating activities       (1,059 )   1,621  
Net cash provided by (used in) discontinued operating activities       178     (125 )
Net cash (used in) provided by operating activities       (881 )   1,496  
     
Cash flows from investing activities:    
  Purchases of property and equipment       (3 )   —  
  Investments in affiliates       (200 )   (3,849 )
  Redemption of affiliate       —     1,471  
  Other investing activities       —     (9 )
Net cash used in investing activities       (203 )   (2,387 )
     
Cash flows from financing activities:    
  Proceeds from issuance of common stock       —     4  
Net cash provided by financing activities       —     4  
                 
Net decrease in cash and cash equivalents       (1,084 )   (887 )
Cash and cash equivalents, beginning of period       8,704     7,279  
Cash and cash equivalents, end of period     $ 7,620   $ 6,392  
     
Supplemental disclosure of financial information:    
  Cash paid for interest     $ —   $ 3  
  Cash paid for income taxes     $ —   $ —  

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

5


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

Note 1. Basis of Presentation

        The interim condensed consolidated financial statements included herein have been prepared by New Century Equity Holdings Corp. and subsidiaries (collectively, the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying interim condensed consolidated financial statements reflect all adjustments, of a normal recurring nature, that are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for such periods. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. Results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year.

        In October 2000, the Company completed the sale of its Transaction Processing and Software divisions to Platinum Holdings (“Platinum”) of Los Angeles, California (the “Transaction”), for initial consideration of $49.7 million. The Company may be entitled to receive additional consideration consisting of potential royalty payments, assuming the achievement of certain post-closing revenue targets ($5.0 million related to the Aptis division and $5.0 million related to the OSC division). The post-closing revenue targets apply to the three-year period subsequent to the Transaction. Management continues to monitor the revenue achievements of the Aptis and OSC divisions, but does not believe it is likely that either division will achieve the post-closing revenue targets necessary to generate a potential royalty payment to the Company.

Note 2. Stock Based Compensation

        The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation”, but elected to apply Accounting Principles Board (“APB”) Opinion No. 25 “Accounting for Stock Issued to Employees” and related interpretations in accounting for its stock option plans. 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 Employee Stock Purchase Plan (“ESPP”) purchases been determined based on the fair value at the grant dates consistent with the methodology of SFAS No. 123. 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.


Three Months Ended
June 30, 		Six Months Ended
June 30,
(in thousands, except per share data) 2003 2002 2003 2002
 
Net loss, as reported     $ (1,326 ) $ (114 ) $ (2,507 ) $ (14,317 )
Less: Total stock based employee compensation    
   expense determined under fair value based method    
   for all awards, net of related tax effects       (45 )   (40 )   (56 )   (56 )
Net loss, pro forma     $ (1,371 ) $ (154 ) $ (2,563 ) $ (14,373 )
     
Basic and diluted net loss per common share:    
   Net loss, as reported     $ (0.04 ) $ —   $ (0.07 ) $ (0.42 )
   Net loss, pro forma