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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________

FORM 10-Q

(Mark One)

x
  		 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003

o
  		 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 oNo

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

        Indicated below is the number of shares outstanding of the registrant’s only class of common stock at November 11, 2003:


  Number of Shares
Title of Class Outstanding
Common Stock, $0.01 par value 34,653,104



NEW CENTURY EQUITY HOLDINGS CORP. AND SUBSIDIARIES

INDEX


        PAGE  
PART I FINANCIAL INFORMATION    
     
Item 1. Interim Condensed Consolidated Financial Statements    
     
             Condensed Consolidated Balance Sheets - September 30, 2003 (Unaudited)    
                 and December 31, 2002       3  
     
             Unaudited Condensed Consolidated Statements of Operations - For the Three    
                 and Nine Months ended September 30, 2003 and 2002       4  
     
             Unaudited Condensed Consolidated Statements of Cash Flows - For the Nine    
                 Months ended September 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       12  
           
Item 3. Quantitative and Qualitative Disclosure about Market Risk       15  
           
Item 4. Controls and Procedures       15  
     
PART II OTHER INFORMATION    
           
Item 1. Legal Proceedings       16  
           
Item 6. Exhibits and Reports on Form 8-K       16  
           
SIGNATURE       17  

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)


September 30,
2003
December 31,
2002
(Unaudited)
                                                          ASSETS                     
Current assets:    
  Cash and cash equivalents     $ 6,040   $ 8,704  
  Accounts receivable       88     9  
  Prepaid and other assets       261     330  
  Net current assets from discontinued operations       —     1,427  
   Total current assets       6,389     10,470  
Property and equipment, net       132     248  
Other non-current assets       53     53  
Investments in affiliates       8,093     9,353  
  Total assets     $ 14,667   $ 20,124  
     
                                                LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities:    
  Accounts payable     $ 36   $ 30  
  Accrued liabilities       322     551  
  Net current liabilities from discontinued operations       —     1,435  
   Total current liabilities       358     2,016  
Other non-current liabilities       —     1  
   Total liabilities       358     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;    
   34,653,104 and 34,217,620 shares issued and outstanding       347     342  
  Additional paid-in capital       70,476     70,346  
  Accumulated deficit       (56,514 )   (52,581 )
   Total stockholders' equity       14,309     18,107  
    Total liabilities and stockholders' equity     $ 14,667   $ 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
September 30, 		Nine Months Ended
September 30,
2003        2002      2003      2002
Operating revenues     $ —   $ —   $ —   $ —  
     
Operating expenses:    
   Selling, general and administrative expenses       502     688     1,723     2,568  
   Depreciation and amortization expenses       41     30     121     116  
Operating loss from continuing operations       (543 )   (718 )   (1,844 )   (2,684 )
     
Other income (expense):    
   Interest income, net       16     34     65     122  
   Equity in net loss of affiliate       (756 )   (1,189 )   (2,169 )   (17,745 )
   Consulting income       —     938     —     2,814  
   Litigation settlement       (354 )   —     (354 )   —  
   Other (expense) income, net       (1 )   13     10     621  
Total other expense, net       (1,095 )   (204 )   (2,448 )   (14,188 )
Net loss from continuing operations       (1,638 )   (922 )   (4,292 )   (16,872 )
     
Discontinued operations:    
   Net loss from discontinued operations       —     (420 )   —     (963 )
   Net income from disposal of discontinued    
     operations       212     —     359     2,176  
Net loss     $ (1,426 ) $ (1,342 ) $ (3,933 ) $ (15,659 )
Basic and diluted net (loss) income per common share:    
   Net loss from continuing operations     $ (0.05 ) $ (0.03 ) $ (0.12 ) $ (0.49 )
   Net loss from discontinued operations       —     (0.01 )   —     (0.03 )
   Net income from disposal of discontinued    
     operations       0.01     —     0.01     0.06  
   Net loss     $ (0.04 ) $ (0.04 ) $ (0.11 ) $ (0.46 )
Weighted average common shares outstanding       34,426     34,218     34,287     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)


Nine Months Ended
September 30,
2003 2002
 
Cash flows from operating activities:              
Net loss from continuing operations $ (4,292 )    $ (16,872 )
Adjustments to reconcile net loss from continuing operations to net cash
  (used in) provided by operating activities:
  Depreciation and amortization expenses   121       116  
  Equity in net loss of affiliate   2,169       17,745  
  Litigation settlement   354       —  
  Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivable   (79 )     818  
   Decrease in prepaid and other assets   204       760  
   Increase in accounts payable   6       3  
   Decrease in accrued liabilities   (55 )     (773 )
   Increase in other liabilities and other non-cash items   136       486  
 
Net cash (used in) provided by continuing operating activities   (1,436 )     2,283  
Net cash provided by discontinued operating activities   178       1,972  
 
Net cash (used in) provided by operating activities   (1,258 )     4,255  
 
Cash flows from investing activities:
  Purchases of property and equipment   (6 )     (6 )
  Investments in affiliates   (1,400 )     (3,849 )
  Redemption of affiliate   —       1,471  
  Other investing activities   —       (9 )
 
Net cash used in investing activities   (1,406 )     (2,393 )
 
Cash flows from financing activities:
  Proceeds from issuance of common stock   —       4  
 
Net cash provided by financing activities   —       4  
 
Net (decrease) increase in cash and cash equivalents   (2,664 )     1,866  
Cash and cash equivalents, beginning of period   8,704       7,279  
 
Cash and cash equivalents, end of period $ 6,040     $ 9,145  
 
Supplemental disclosure of financial information:
  Cash paid for interest $ —     $ 4  
  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.

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
September 30,
  Nine Months Ended
September 30,
 
   
 
   2003        2002        2003        2002  
 (in thousands, except per share data)
 
 
 
Net loss, as reported $ (1,426 )   $ (1,342 )   $ (3,933 )   $ (15,659 )
Less: Total stock based employee compensation
   expense determined under fair value based method
   for all awards, net of related tax effects   (71 )       (337 )       (127 )       (393 )
 
 
 
 
Net loss, pro forma $ (1,497 )   $ (1,679 )   $ (4,060 )   $ (16,052 )
 
 
 
 
Basic and diluted net loss per common share:
   Net loss, as reported $ (0.04 )   $ (0.04 )   $ (0.11 )   $ (0.46 )
   Net loss, pro forma $ (0.04 )   $ (0.05 )   $ (0.12 )   $ (0.47 )

        The fair value for these options was estimated at the respective grant date using the Black-Scholes option-pricing model with the following weighted average assumptions for the nine months ended September 30, 2003: expected volatility of 96.3%, no dividend yield, expected life of 2.5 years and risk-free interest rate of 1.8%.


6


Note 3. Investments in Affiliates

        Investments in affiliates is comprised of the following:


          September 30,        December 31,   
        2003        2002  
  (in thousands)