UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                     ______________________________________

                                   FORM 10-QSB
                     ______________________________________


          |X|    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004

                                       OR

          |_|    TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


                        Commission file number 000-30451


                        NEWPORT INTERNATIONAL GROUP, INC.
        (Exact name of small business issuer as specified in its charter)


                  DELAWARE                               23-3030650
        (State or other jurisdiction                   (IRS Employer
             of incorporation)                       Identification No.)


            73061 EL PASEO, SUITE 202 PALM DESERT         92260
           (Address of principal executive offices)    (Zip Code)


                                 (760) 779-0251
                 Issuer's telephone number, including area code


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.  Yes |X|   No |_|

Transitional Small Business Disclosure Format:  Yes |_|   No |X|

The total number of shares of the issuer's common stock, $.001 par value,
outstanding at October 31, 2004 was 22,322,397

<PAGE>

When used in this quarterly report, the terms "Newport," "we," and "us" refers
to Newport International Group, Inc., a Delaware corporation, and its
subsidiary, Grass Roots Communications, Inc., a Delaware corporation ("Grass
Roots").

           CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-QSB CONTAIN OR MAY
CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED
UTILIZING NUMEROUS ASSUMPTIONS AND OTHER FACTORS THAT COULD CAUSE OUR ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. THESE
FACTORS INCLUDE, BUT ARE NOT LIMITED TO, ECONOMIC, POLITICAL AND MARKET
CONDITIONS AND FLUCTUATIONS, GOVERNMENT AND INDUSTRY REGULATION, INTEREST RATE
RISK, U.S. AND GLOBAL COMPETITION, AND OTHER FACTORS. MOST OF THESE FACTORS ARE
DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. YOU SHOULD
CONSIDER THE AREAS OF RISK DESCRIBED IN CONNECTION WITH ANY FORWARD-LOOKING
STATEMENTS THAT MAY BE MADE HEREIN. READERS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF
THIS REPORT. READERS SHOULD CAREFULLY REVIEW THIS ANNUAL REPORT IN ITS ENTIRETY,
INCLUDING BUT NOT LIMITED TO OUR FINANCIAL STATEMENTS AND THE NOTES THERETO AND
THE RISKS DESCRIBED IN "ITEM 1. DESCRIPTION OF BUSINESS--RISK FACTORS." EXCEPT
FOR OUR ONGOING OBLIGATIONS TO DISCLOSE MATERIAL INFORMATION UNDER THE FEDERAL
SECURITIES LAWS, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO
ANY FORWARD-LOOKING STATEMENTS, TO REPORT EVENTS OR TO REPORT THE OCCURRENCE OF
UNANTICIPATED EVENTS.



                                      - 2 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.

                              INDEX TO FORM 10-QSB


PART I - FINANCIAL INFORMATION

     Item 1. Financial Statements (Unaudited)

       Historical Financial Statements (Unaudited)

         Consolidated Balance Sheet (Unaudited)................................4

         Consolidated Statements of Operations (Unaudited).....................5

         Consolidated Statements of Cash Flows (Unaudited).....................6

         Notes to Consolidated Financial Statements (Unaudited)................7

     Item 2. Management's Discussion and Analysis or Plan of Operation........22

     Item 3. Controls and Procedures..........................................37


PART II - OTHER INFORMATION

     Item 1. Legal Proceedings................................................38

     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds......38

     Item 3. Defaults Upon Senior Securities..................................39

     Item 4. Submission of Matters to a Vote of Security Holders..............39

     Item 5. Other Information................................................39

     Item 6. Exhibits ........................................................39

     Signatures...............................................................40


                                      - 3 -
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL INFORMATION

                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEET
                               September 30, 2004
                                   (Unaudited)

                                     ASSETS

Current Assets:
  Cash ..........................................................  $  1,228,761
                                                                   ------------

     Total current assets .......................................     1,228,761

  Restricted investment in equity securities ....................     3,231,814
  Website development costs, net of accumulated amortization
   of $26,250 ...................................................         8,750
  Property and equipment, net of accumulated depreciation
   of $20,649 ...................................................        68,812
  Deferred financing costs, net of accumulated amortization
   of $134,016 ..................................................       245,010
  Other assets ..................................................         2,228
                                                                   ------------

     Total assets ...............................................  $  4,785,375
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses .........................  $  1,406,539
  Current portion of capitalized lease obligations ..............        10,332
  Convertible promissory notes, net of debt discount of $318,507        206,493
  Accrued interest on convertible promissory notes ..............        38,467
  Due to stockholders ...........................................        15,000
                                                                   ------------

     Total current liabilities ..................................     1,676,831

  Convertible promissory notes, net of discount of $737,747 .....     1,071,346
  Capitalized lease obligations, net of current portion .........         9,663
  Other liabilities .............................................         6,426
                                                                   ------------

     Total liabilities ..........................................     2,764,266

Stockholders' Equity:
  Preferred stock; $.0001 par value, 5,000,000 shares authorized,
   none issued and outstanding ..................................             -
  Common stock; $.001 par value, 150,000,000 shares authorized,
   22,322,397 issued and outstanding ............................        22,322
  Additional paid-in capital ....................................    25,350,699
  Accumulated other comprehensive loss ..........................    (7,681,714)
  Accumulated deficit ...........................................   (15,670,198)
                                                                   ------------

     Total stockholders' equity .................................     2,021,109
                                                                   ------------

     Total liabilities and stockholders' equity .................  $  4,785,375
                                                                   ============

                 See Notes to Consolidated Financial Statements.

                                      - 4 -
<PAGE>
<TABLE>
                                       NEWPORT INTERNATIONAL GROUP, INC.
                                         (A Development Stage Company)
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (Unaudited)
<CAPTION>


                                     Three Months Ended           Nine Months Ended           For the Period
                                        September 30,                September 30,          From June 12, 2002
                                 --------------------------   --------------------------   (Date of Inception)
                                     2004           2003          2004           2003      to September 30,2004
                                 ------------   -----------   ------------   -----------   --------------------
<S>                              <C>            <C>           <C>            <C>               <C>
Revenues ......................  $      5,339   $         -   $      8,729   $         -       $      8,729

Operating expenses:
  Sales, general and
   administrative                   3,820,925     1,192,815      6,024,035     3,856,027         11,428,183
                                 ------------   -----------   ------------   -----------       ------------

     Total operating expenses .     3,820,925     1,192,815      6,024,035     3,856,027         11,428,183
                                 ------------   -----------   ------------   -----------       ------------

     Operating loss ...........    (3,815,586)   (1,192,815)    (6,015,306)   (3,856,027)       (11,419,454)
                                 ------------   -----------   ------------   -----------       ------------

  Interest expense ............       271,653             -      4,213,945             -          4,250,744
                                 ------------   -----------   ------------   -----------       ------------

  Total other expenses ........       271,653             -      4,213,945             -          4,250,744
                                 ------------   -----------   ------------   -----------       ------------

Net loss ......................    (4,087,239)   (1,192,815)   (10,229,251)   (3,856,027)       (15,670,198)


Other comprehensive loss
  Unrealized loss on restricted
  investment ..................    (7,681,714)            -     (7,681,714)            -         (7,681,714)
                                 ------------   -----------   ------------   -----------       ------------

Comprehensive loss ............  $(11,768,953)  $(1,192,815)  $(17,910,965)  $(3,856,027)      $(23,351,912)
                                 ============   ===========   ============   ===========       ============

Basic net loss per common share  $      (0.21)  $     (2.75)  $      (0.48)  $     (8.88)
                                 ============   ===========   ============   ===========

Basic weighted average common
shares outstanding ............    19,335,609       434,099     21,289,661       434,099
                                 ============   ===========   ============   ===========

                                See Notes to Consolidated Financial Statements.

                                                      -5-
</TABLE>
<PAGE>
<TABLE>
                                       NEWPORT INTERNATIONAL GROUP, INC.
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (Unaudited)

<CAPTION>
                                                                   Nine Months Ended         For the Period
                                                                      September 30,        From June 12, 2002
                                                               --------------------------  (Date of Inception)
                                                                   2004           2003     to September 30,2004
                                                               ------------   -----------   -------------------
<S>                                                            <C>            <C>              <C>
Cash flows from operating activities:
Net loss ..................................................... $(10,229,251)  $(3,856,027)     $(15,670,198)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Fair value of restricted investment transferred for
   consulting services rendered ..............................      910,000             -           910,000
  Amortization of debt discount ..............................      215,425             -           217,318
  Fair value of common shares issued in connection
   with debt settlement, in excess of pre-merger obligations .    3,482,382             -         3,482,382
  Fair value of shares of common stock issued in
   payment of interest on promissory notes ...................       69,148             -            69,148
  Loss on sale of property and equipment .....................            -        29,906            29,906
  Depreciation and amortization ..............................       43,763        26,791            77,460
  Write-off of deposit on Focus Focus.com ....................            -       100,000           100,000
  Amortization of deferred financing costs ...................      130,604             -           134,016
  Fair value of stock options issued to employees
   and consultants for services rendered .....................      950,661     1,850,790         3,365,049
  Common stock issued to consultants for services rendered ...      134,125       153,000           409,875
  Fair value of common stock issued in connection with
   note payable ..............................................      194,000             -           194,000
Changes in operating assets and liabilities
  Due from related party .....................................       23,400       (37,900)                -
  Prepaid expenses and other current assets ..................        4,000        45,633                 -
  Accounts payable and accrued expenses ......................    1,168,615       159,174         1,373,925
  Other long-term liability ..................................            -             -             6,426
  Accrued interest on convertible promissory notes ...........       45,243             -            45,243
                                                               ------------   -----------      ------------

Net cash used in operating activities ........................   (2,857,885)   (1,528,633)       (5,255,450)
                                                               ------------   -----------      ------------

Cash flows from investing activities:
  Proceeds from sale of property and equipment ...............            -        60,073            60,073
  Changes in other assets ....................................            -             -            (2,228)
  Cash acquired from merger ..................................       16,196             -            16,196
  Deposit on acquisition of Focus Focus.com ..................            -             -          (100,000)
  Website development costs ..................................            -             -           (35,000)
  Purchases of property and equipment ........................      (45,041)     (146,949)         (178,098)
                                                               ------------   -----------      ------------

Net cash used in investing activities ........................      (28,845)      (86,876)         (239,057)
                                                               ------------   -----------      ------------

Cash flows from financing activities:
  Principal repayments on lease obligations ..................       (7,233)            -           (11,908)
  Proceeds from issuance of convertible promissory notes .....    1,726,026             -         2,434,093
  Proceeds from exercise of stock options ....................          750       325,000           325,750
  Advances from stockholders .................................      215,000             -           230,000
  Collection of stock subscription receivable ................            -        81,000            81,000
  Proceeds from issuance of common stock .....................    2,830,000     1,199,007         4,447,925
  Payments of convertible promissory notes ...................     (140,000)            -          (140,000)
  Payments of costs-issuance of common stock .................     (104,000)            -          (104,000)
  Payments of deferred financing costs .......................     (235,754)            -          (289,592)
  Payments of pre-merger notes payable........................     (250,000)            -          (250,000)
                                                               ------------   -----------      ------------

Net cash provided by financing activities ....................    4,034,789     1,605,007         6,723,268
                                                               ------------   -----------      ------------

Increase in cash .............................................    1,148,059       (10,502)        1,228,761

Cash, beginning of year ......................................       80,702         5,866                 -
                                                               ------------   -----------      ------------

Cash, end of period .......................................... $  1,228,761   $    (4,636)     $  1,228,761
                                                               ============   ===========      ============
                                                                                                (continued)
                                See Notes to Consolidated Financial Statements.

                                                     - 6A -
</TABLE>
<PAGE>
<TABLE>
                                       NEWPORT INTERNATIONAL GROUP, INC.
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (Unaudited)
                                                  (continued)
<CAPTION>
                                                                   Nine Months Ended         For the Period
                                                                      September 30,        From June 12, 2002
                                                               --------------------------  (Date of Inception)
                                                                   2004           2003     to September 30,2004
                                                               ------------   -----------   -------------------
<S>                                                            <C>            <C>              <C>
Supplemental disclosures of cash flow information:
 Cash paid during the nine month period for interest and taxes $      7,768   $         -
                                                               ============   ===========

Supplemental schedule of non-cash financing and investing
 activities:

Fair value of warrants issued in connection with the issuance
of the convertible notes and corresponding debt discount ..... $    727,334   $         -
                                                               ============   ===========

Advance from a shareholder converted into an exercise
of stock options ............................................. $    187,500   $         -
                                                               ============   ===========

Advances from a shareholder converted into convertible
promissory notes ............................................. $     40,000   $         -
                                                               ============   ===========

Beneficial feature resulting from issuance of
convertible promissory notes and corresponding
debt discount ................................................ $    520,687   $         -
                                                               ============   ===========

Fair value of issuance of common stock in connection with the
 settlement of pre-merger obligations ........................ $    544,368   $         -
                                                               ============   ===========

Exchange of shares for restricted investment ................. $ 11,823,528   $         -
                                                               ============   ===========

Decline in fair value of restricted investment                 $  7,681,814   $         -
                                                               ============   ===========

                                See Notes to Consolidated Financial Statements.

                                                     - 6B -
</TABLE>
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Newport International Group, Inc. (the "Company") is a development stage company
incorporated in Delaware in December 1999. During February 2004, the Company
acquired GrassRoots Communications, Inc. ("GrassRoots"). The Company will sell
web-based conferencing services to business professionals, small office and home
office companies, and small to medium sized businesses. The Company's product
centers on web-based collaborative tools for small-business professionals and
features document and application sharing in a collaborative environment.
Included in the web-conferencing is the ability to communicate with participants
using voice over Internet and video viewing. The product also includes the
ability to collaborate via a whiteboard application to annotate drawings and
pictures.

The primary means of sales of the product will be through a direct sales force,
application download from websites and direct marketing activities. The Company
is currently developing partnerships with value-added resellers who exist in
both audio/video and networking technologies, as well as manufacturers of
networking and audio/video products specific to PC-based web conferencing. The
Company has also established sales relationships with office product superstores
and computer superstores.

The acquisition of GrassRoots was treated as a reverse acquisition for financial
reporting purposes. As such, our financial statements have been prepared as
GrassRoots as the acquiror. The results of operations discussed below represent
the operations of GrassRoots through February 9, 2004. The results of operations
subsequent to that date reflect the consolidated operations of GrassRoots and
the Company. We have retroactively restated our net loss per share and the
stockholders' deficit section of our balance sheet to reflect the reverse
acquisition.

The accompanying financial statements have been prepared on a going concern
basis. However, the Company has generated minimal revenue since its inception on
June 12, 2002, has incurred net losses of approximately $15.7 million and has
negative cash flows from operations of approximately $5.3 million since its
inception through September 30, 2004. The Company's ability to continue as a
going concern is dependent upon its ability to obtain the necessary financing to
meet its obligations and repay its liabilities arising from normal business
operations when they come to fund possible future acquisitions due and to
generate profitable operations in the future. Management plans to continue to
provide for its capital requirements by issuing additional equity securities and
debt. The outcome of these matters cannot be predicted at this time and there
are no assurances that if achieved, the Company will have sufficient funds to
execute its business plan or generate positive operating results.

These matters, among others, raise substantial doubt about the ability of the
Company to continue as a going concern. These financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.

                                      - 7 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DEVELOPMENT STAGE ENTERPRISE

The Company's planned principal operations have not yet commenced. Accordingly,
the Company's activities have been accounted for as those of a development stage
enterprise as defined in Statement of Financial Accounting Standards ("SFAS")
No. 7, ACCOUNTING AND REPORTING BY DEVELOPMENT STAGE ENTERPRISES. All losses
since inception have been considered as part of the Company's development stage
activities.

USE OF ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States 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 periods. Significant estimates made by management include, but are not
limited to, the realization of receivables and the recoverability of long-lived
assets. Actual results will differ from these estimates.

UNAUDITED INTERIM FINANCIAL DATA

These interim consolidated financial statements are unaudited and have been
prepared by the Company in accordance with the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in accordance with
such rules and regulations. These consolidated financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB, as filed with the
Securities and Exchange Commission on April 14, 2004. The financial information
included herein reflects all adjustments (consisting only of normal recurring
adjustments) that are, in the opinion of management, necessary for a fair
presentation of the results for interim periods. The results of operations for
the quarterly periods ended September 30, 2004 and 2003 are not necessarily
indicative of the results to be expected for the full years.

                                      - 8 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LOSS PER SHARE

Loss per share is based on the weighted average number of common shares
outstanding. The outstanding warrants and stock options are excluded from the
loss per share computation due to their antidilutive effect. The weighted
average number of common shares used in the computation of net loss per share
for the nine-month and three-month periods ended September 30, 2003 has been
retroactively adjusted to reflect a 20 for 1 reverse stock-split which occurred
in October 2003.

RISKS AND UNCERTAINTIES

The Company maintains its cash and cash equivalent accounts in financial
institutions. Accounts at these institutions are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to $100,000. During the nine-month period
ended September 30, 2004, the Company has reached bank balances exceeding the
FDIC insurance limit. To reduce its risk associated with the failure of such
financial institutions, the Company evaluates at least annually the rating of
the financial institutions in which it holds deposits.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's cash and cash equivalents, accounts
payable and accrued expenses approximate their estimated fair values due to the
short-term maturities of those financial instruments. The estimated fair value
of its due to shareholder is not determinable as the transaction is with a
related party. The carrying amount of the convertible notes approximates
estimated fair value of for these financial instruments as management believes
the notes bear interest at rates approximating the current rates at which loans
with similar terms would be made.

RESTRICTED INVESTMENT IN EQUITY SECURITIES

The Company holds 5,984,840 shares of a United Kingdom Corporation (the
"Investee") pursuant to a stock-exchange agreement whereby the Company issued
5,882,352 of its shares of common stock in exchange for the Investee's stock. At
the time of issuance, the Company recorded the cost of the investment at the
market value of the shares exchanged of approximately $10.9 million. Subsequent
to September 30, 2004, the market value of the Company's investment
significantly declined to approximately $3.2 million. The Company has given
retroactive adjustment to this significant decline as of September 30, 2004.

The Company intends to hold 2,700,000 shares of the Investee as collateral for
the Company's possible obligation if it has to repurchase 2,500,000 shares it
has issued in a private placement during November 2004. The Company also holds
3,250,000 shares of the Investee, which are held in escrow and cannot be sold by
the Company without the Investee's permission for up to two years. During
October 2004, the Investee's shares became publicly-traded.

The decrease in the carrying and the fair value of this investment of
approximately $7.7 million as of September 30, 2004 has been included as
accumulated other comprehensive loss in stockholders' equity.

                                      - 9 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

COMPREHENSIVE LOSS

Comprehensive loss is defined as a change in equity during the period from
transactions and other events and circumstances from non-owner resources.
Included in this category is the change resulting from the difference between
the carrying value and the market value of the restricted investment in equity
securities amounting to approximately $7.7 million as of September 30, 2004.

SOFTWARE DEVELOPMENT COSTS

Costs incurred in the research and development of software products are expensed
as incurred until technological feasibility has been established. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO
BE SOLD, LEASED OR OTHERWISE MARKETED. The Company believes that the current
process for developing software is essentially completed concurrently with the
establishment of technological feasibility; accordingly, no software development
costs have been capitalized as of September 30, 2004.

WEBSITE DEVELOPMENT COSTS

The Company capitalizes website development costs in accordance with Emerging
Issues Task Force ("EITF") Issue No. 00-02, ACCOUNTING FOR WEBSITE DEVELOPMENT
COSTS. Website development costs are amortized on a straight-line basis over one
year.

PROPERTY AND EQUIPMENT

Property and equipment, which primarily consists of office equipment and
computer software, are recorded at cost and are depreciated on a straight-line
basis over their estimated useful lives of three to five years. Maintenance and
repairs are charged to expense as incurred. Significant renewals and betterments
are capitalized. At the retirement or other disposition of property and
equipment, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in other income (expense) in the
accompanying statements of operations.

                                     - 10 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

LONG-LIVED ASSETS

The Company's management assesses the recoverability of its long-lived assets by
determining whether the depreciation and amortization of long-lived assets over
their remaining lives can be recovered through projected undiscounted future
cash flows. The amount of long-lived asset impairment, if any, is measured based
on fair value and is charged to operations in the period in which long-lived
asset impairment is determined by management. At September 30, 2004, the
Company's management believes there is no impairment of its long-lived assets.
There can be no assurance, however, that market conditions will not change or
demand for the Company's products or services will continue, which could result
in future impairment of long-lived assets.

DEFERRED FINANCING COSTS

Deferred financing costs represent costs incurred in connection with the
issuance of the convertible promissory notes. Deferred financing costs are being
amortized over the terms of the related debt agreements.

STOCK-BASED COMPENSATION

Stock-based awards to non-employees are accounted for using the fair value
method in accordance with SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
and EITF Issue No. 96-18, ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO
OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING GOODS OR
SERVICES. All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
used to determine the fair value of the equity instrument issued is the earlier
of the date on which the third-party performance is complete or the date on
which it is probable that performance will occur.

In December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 148, ACCOUNTING FOR STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE,
effective for fiscal years ending after December 15, 2002. SFAS No. 148 amends
SFAS No. 123 to provide alternative methods of transition to the fair value
method of accounting for stock-based employee compensation. SFAS No. 148 also
amends the disclosure provisions of SFAS No. 123 to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
SFAS No. 148 does not amend SFAS No. 123 to require companies to account for
their employee stock-based awards using the fair value method. The disclosure
provisions are required for all companies with stock-based employee
compensation, regardless of whether they utilize the fair value method of

                                     - 11 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

accounting described in SFAS No. 123 or the intrinsic value method described in
Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES.

The Company has adopted the disclosure requirements of SFAS No. 148 effective
January 1, 2003. The adoption of this standard did not have a significant impact
on the Company's financial condition or operating results.

The Company accounts for stock-based awards to employees using the intrinsic
value method in accordance with APB Opinion No. 25. As permitted by SFAS No.
123, as amended by SFAS No. 148, the Company has chosen to continue to account
for its employee stock-based compensation plans under APB Opinion No. 25 and
provide the expanded disclosures specified in SFAS No. 123, as amended by SFAS
No. 148. Had employee stock based compensation cost been determined using the
fair value method the Company's net loss would have been adjusted to the pro
forma amounts indicated below:

                                                   SEPTEMBER 30,   SEPTEMBER 30,
                                                       2004            2003
                                                   -------------   -------------

Net loss as reported ............................. $(10,229,251)   $ (3,856,027)
Add:
  Stock-based compensation expense included in
   reported net loss, net of related tax effects..      642,661         559,219
Deduct:
  Total stock-based employee compensation expense
   under fair value based method for all awards,
   net of related tax effects ....................     (653,489)       (560,282)
                                                   ------------    ------------

Pro forma net loss ............................... $(10,222,423)   $ (3,857,090)
                                                   ============    ============

The pro forma amounts reflected above may not be representative of future
disclosures since the estimated fair value of stock options is amortized to
expense as the options vest and additional options may be granted in future
years.

INCOME TAXES

Income taxes are accounted for in accordance with SFAS No. 109, ACCOUNTING FOR
INCOME TAXES. SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Measurement of
the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of

                                     - 12 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

INCOME TAXES

Company's assets and liabilities result in a deferred tax asset, SFAS No. 109
requires an evaluation of the probability of being able to realize the future
benefits indicated by such assets. A valuation allowance related to a deferred
tax asset is recorded when it is more likely than not that some or all of the
deferred tax asset will not be realized.

RECENT ACCOUNTING PRONOUNCEMENTS

Management does not believe that recently issued, but not yet effective
accounting pronouncements when adopted would have a material effect on the
accompanying financial statements.

NOTE 3 - CONVERTIBLE DEBT

In December 2003, the Company commenced a private placement offering of 8%
convertible promissory notes (the "Follow-on Financing"). The promissory notes
bear interest at 8% per annum. The promissory notes are convertible into shares
of the Company's common stock, at anytime, at the option of the holder at a
conversion price of $0.75 per share, subject to antidilution provisions, as
defined in the promissory note agreements. During the nine-month period ending
September 30, 2004, in connection with the Follow-on Financing, holders of the
convertible promissory notes were issued an aggregate of 1,366,875 warrants to
purchase common stock of the Company at an exercise price of $1.25 per share.
The warrants are exercisable for a period of five years. The fair value of the
warrants at the date of issuance of approximately $334,000 has been recorded as
a debt discount. The debt discount is amortized over the terms of the Follow-on
Financing.

The Company used the following assumption to value the warrants issued during
the nine-month period ended September 30, 2004: risk-free interest rate: 3.0%;
volatility of .42; estimated life of 5 years; and no dividend expected during
the term.

The Follow-on Financing closed in March 2004. The principal balance and unpaid
accrued interest on the promissory notes is due 24 months from the final closing
of the Follow-on Financing. The interest is payable beginning March 31, 2004 and
every three months thereafter, until maturity. Interest is payable in cash or in
shares of common stock. Interest paid in common stock is convertible using the
ten-day average closing bid price of the stock prior to the end of the quarter.

                                     - 13 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - CONVERTIBLE DEBT (continued)

The convertible rates for the interest accrued at September 30, 2004 amounted to
$2.305. Each occurrence of interest not paid within 30 days following the end of
each quarter causes a reduction of 10% in the conversion price of the promissory
notes and the exercise price of the related warrants. During the nine-month
period ended September 30, 2004, the Company received gross proceeds of
$1,025,089 in connection with the Follow-on Financing.

In May 2004, the Company commenced a private placement offering 10% convertible
promissory notes amounting to $665,000. The promissory notes bear interest at
10% and the principal and unpaid accrued interest are due one year from
issuance. Interest is payable in quarterly installment beginning September 1,
2004. The promissory notes are convertible into 332,500 shares of the Company's
common stock, at anytime, at the option of the holder at a conversion price of
$2.00 per share, subject to antidilution provisions, as defined in the
promissory note agreements. In connection with this private placement offering,
holders of such convertible promissory notes were issued 332,500 warrants to
purchase common stock of the Company at an exercise price of $1.25. The warrants
are exercisable for a period of five years. The fair value of the warrants
issued amounting to approximately $334,000 has been recorded as debt discount.
The debt discount is amortized over the terms of the 10% convertible promissory
notes. In September 2004, the Company repaid $140,000 of the outstanding 10%
convertible promissory notes.

In the event the Company issues any shares of its common stock or issues any
options, warrants, convertible preferred stock or convertible debt issuable or
convertible into common stock of the Company at an exercise price or conversion
price per share less than $0.75 per share within two years following the closing
of the Follow-on Financing , then the exercise price of the warrants issued
pursuant to the Follow-on Financing will reset to such lower price.

The Company has the right to call all of the Follow-on Financing and 10%
convertible promissory notes warrants, if the stock underlying the warrants has
been registered (and that registration statement is still effective), the
lock-up restriction, as defined, on the common stock has been lifted, and after
the lock-up restriction has been lifted the stock maintains a closing bid price
above $3.00 for 15 business days. The Company may redeem the warrants for $0.01
if not exercised within 30 days of the call notification.

In connection with the financings which took place during 2003 and 2004, the
Company paid approximately $236,000 to the placement agent. The Company has
recorded the placement agent fee in deferred financing costs at September 30,
2004, and will amortize these costs over the terms of the respective convertible
promissory notes.

                                     - 14 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - CONVERTIBLE DEBT (continued)

Amortization of the debt discount amounted to approximately $215,000 during the
nine-month period ended September 30, 2004 and is included in interest expense
in the accompanying consolidated statements of operations.

Accrued interest on the convertible promissory notes amounted to approximately
$38,000 at September 30, 2004.

In accordance with EITF Issue No.00-27,"Application of Issue No. 98-5,
Accounting for convertible securities with beneficial conversion features of
contingently adjustable conversion ratios, to certain convertible instruments",
the Company recorded a beneficial conversion feature related to these notes.
Under the terms of these notes, the intrinsic value of the beneficial conversion
feature was calculated assuming that the conversion date was the same as the
issue date. As of the issue date, the beneficial conversion feature amounted to
approximately $521,000 for the nine-month period ended September 30, 2004. This
beneficial conversion feature is reflected in the accompanying consolidated
financial statements as additional paid-in capital and corresponding debt
discount.

NOTE 4 - STOCKHOLDERS' EQUITY

ISSUANCE OF COMMON STOCK PURSUANT TO THE MERGER BETWEEN THE COMPANY AND
GRASSROOTS

During February 2004, the Company merged with GrassRoots. At the effective time
of the merger, the stockholders of the Company exchanged their securities for
approximately 12,300,000 shares of Newport's restricted common stock,
representing approximately 93% of the common stock of Newport at that time.

ISSUANCE OF COMMON STOCK PURSUANT TO A SETTLEMENT OF DEBT

During February 2004, pursuant to a notification of default by the holder, the
Company settled its outstanding notes to a stockholder, its affiliated entity
and other participants. In connection with the settlement of all debt (the
$370,000 convertible debenture and the $10,000 loan along with the related
accrued loan premium of $100,000 and accrued interest of $158,368 due to a
stockholder, and the loan of $100,000 along with the accrued loan premium of
$50,000 and accrued interest of $6,000 to an affiliated entity), the Company
disbursed $250,000 in cash and 1,365,000 shares of common stock, and 530,000
shares of common stock were returned to the Company for cancellation.

                                     - 15 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 - STOCKHOLDERS' EQUITY-CONTINUED

ISSUANCE OF COMMON STOCK PURSUANT TO SERVICES PERFORMED

During May 2004, the Company issued 72,500 shares of common stock to vendors for
services performed. The fair value of such shares amounted to approximately
$134,000 and has been recorded as selling general and administrative expenses
for the nine-month period ended September 30, 2004.

ISSUANCE OF COMMON STOCK PURSUANT TO THE PAYMENT OF INTEREST ON THE CONVERTIBLE
DEBT

During April 2004, the Company issued 12,203 shares of its common stock to
holders of the notes payable issued in connection with the Follow-on Financing
in consideration of interest payment for the period ended March 31, 2004. The
fair value of such shares amounted to approximately $35,000.

During July 2004, the Company issued 19,376 shares of its common stock to
holders of the notes payable issued in connection with the Follow-on Financing
in consideration of interest payment for the three-month period ended June 30,
2004. The fair value of such shares amounted to approximately $35,000.

During October 2004, the Company issued 15,170 shares of its common stock to
holders of the notes payable issued in connection with the Follow-on Financing
in consideration of interest payment for the three-month period ended September
30, 2004. The fair value of such shares amounted to approximately $35,000.

ISSUANCE OF COMMON STOCK PURSUANT TO FINANCING PROVIDED BY A RESELLER

During May 2004, the Company entered in a distribution agreement with a
reseller. The agreement, provided for, among other things a minimum advance of
$250,000 from the reseller to the Company. The advance bears interest at 8% a
year and matures in May 2005. The agreement also provided with the issuance of
100,000 shares of common stock to the reseller. The fair value of the shares
issued in connection with this agreement amounted to approximately $194,000. The
Company has received $125,000 to date and has cancelled this agreement during
July 2004. The Company will reimburse the amount received to date and has
cancelled the shares issued to the reseller. The fair value of the shares issued
has been recorded as interest expense in the accompanying consolidated financial
statements.


                                     - 16 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 - STOCKHOLDERS' EQUITY (continued)

ISSUANCE OF COMMON STOCK PURSUANT TO A STOCK-EXCHANGE AGREEMENT

In July 2004, the Company issued 5,882,352 shares of its common stock in
exchange for 6,484,840 shares of the Investee's common stock. Approximately
3,250,000 shares of the Investee will remain in an escrow account for up to two
years, during which time the Company may not dispose of the Investee's shares
without the Investee's authorization. The investment has been recorded by the
Company at the fair value of its stock at the date of issuance. The agreement
provides for, among other things, price protection provisions in the event the
average of the ten closing bid prices per share (the "Average Bid Price") of the
Company's common stock, as quoted on a stock exchange, the over-the-counter
market or as appraised, during the ten trading days immediately preceding July
30, 2006 is below $2.01. If the Average Bid Price is below $2.01 at that time, a
proportion of the shares of the Investee held in escrow will be returned to the
Investee in the same ratio as the Average Bid Price is to $2.01.

The Company's Board of Directors has authorized resolutions indicating that the
Company has no intention and will not conduct its operations as an investment
company within the meaning of the Investment Company Act of 1940.

The Company has entered into a consulting agreement with a third-party in
connection with this transaction. Pursuant to this agreement, the Company
committed to the following compensation for services rendered by the consultant:

      1) to transfer 877,500 shares of the Investee,

      2) to issue warrants convertible into 646,000 shares of the Company's
         stock at an exercise price of $1.70 per share or 500,000 shares of the
         Investee,

      3) to provide an option to the consultant whereby the Company agrees to
         repurchase all Investee's shares held by the consultant at $1.82 per
         share ("Option Price") by August 2005.

During the nine-months ended September 30, 2004, the Company has paid
approximately $750,000 in lieu of transferring 409,000 shares (of the agreed
total 877,500 shares) of the Investee to the consultant. During November 2004,
the Company paid approximately $850,000 in lieu of transferring the remaining
468,500 shares (of the agreed total 877,500 shares) of the Investee to the
Consultant. Also, during November 2004, the consultant has indicated that it
opted to received the 500,000 shares of the Investee in lieu of the 646,000
warrants, which are valued at $910,000 based on the Option Price. In aggregate,
the consideration for the consultant's services amounted to approximately
$2,510,000, which is included in the sales, general, and administrative expenses
in the accompanying financial statements. The Company owes approximately
$850,000 in consulting services at September 30, 2004, which is included in the
accounts payable and accrued expenses in the accompanying balance sheet.

                                     - 17 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 - STOCKHOLDERS' EQUITY (continued)

ISSUANCE OF COMMON STOCK PURSUANT TO A PRIVATE PLACEMENT

During August and September 2004, the Company issued 2,000,000 shares of its
common stock to a foreign investor generating proceeds of $2,830,000. The
Company paid finders' fees of $104,000 to a third-party in connection with this
transaction. The Company has also issued 250,000 and 150,000 warrants to the
investor and a third-party, respectively, in connection with this transaction.
The warrants are convertible at an exercise price of $1.55 per share and expire
five years from the date of issuance. The investor has the right to have the
Company reacquire all or a portion of the shares purchased at a price of $1.25
per share in the event the average price per share is less than $1.25 for a
period of ten consecutive trading days during an option period commencing eight
months after the effective date of the Company's registration statement and
extending for a period of twelve months thereafter.

INCREASE IN AUTHORIZED SHARES AND SHARES REGISTERED PURSUANT TO THE 2002 STOCK
PLAN

In June 2004, the Company's Board of Directors approved, and a majority of the
stockholders ratified, an amendment to the Certificate of Incorporation of
Newport to increase the authorized common stock from 20,000,000 shares to
150,000,000 shares of common stock. Additionally, the Company's Board of
Directors approved, and a majority of the stockholders ratified, the amendment
to the Company's 2002 Stock Option and Stock Award Plan ("the 2002 Stock Plan")
to increase the number of shares that can be issued pursuant to the 2002 Stock
Plan from 1,000,0000 shares to 12,000,000 shares of common stock.

NOTE 5 - STOCK OPTIONS

In 2002, the Company adopted the 2002 Stock Plan under which stock awards or
options to acquire shares of the Company's common stock may be granted to
employees and non-employees of the Company. The Company has authorized
12,000,000 shares of the Company's common stock for grant under the 2002 Plan.
The 2002 Plan is administered by the Board of Directors and permits the issuance
of options for the purchase of up to the number of available shares outstanding.
Options granted under the 2002 Plan vest in accordance with the terms
established by the Company's stock option committee and generally terminate five
years after the date of issuance.

During the nine-month period ended September 30, 2004 and 2003, respectively,
the Company granted 400,000 and 2,300,000 options, respectively, to purchase
common stock to non-employees for services performed. The exercise prices of
such options ranged from $1.25 to $2.40 and ranged from $0.02 to $1.70 for the
nine-month period ended June 30, 2004 and 2003, respectively. As a result, the
Company recorded consulting expense of approximately $308,000 and $1,251,000 for
the nine-month period ended June 30, 2004 and 2003, respectively, under SFAS No.
123, which is included in selling, general, and administrative expenses in the
accompanying statement of operations.

The fair value of the options granted during the nine-month period ended
September 30, 2004 was determined using the Black-Scholes option-pricing model
with the following assumptions: risk-free interest of 3.0%; stock volatility of
..42; estimated life of 36 months; and no dividend expected during the term.

                                     - 18 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 - STOCK OPTIONS (continued)

During the nine-month period ended September 30, 2004 and 2003, the Company
issued options to employees to purchase an aggregate of 250,000 shares and
1,525,000 shares, respectively, with a weighted-average exercise price of $0.98
and $0.02 per share, respectively, were granted with below market exercise
prices. Included in the accompanying statement of operations is approximately
$643,000 and $559,000 of compensation expense recorded under APB Opinion No. 25
during the nine-month period ended September 30, 2004 and 2003, respectively,
associated with such option grants. The expense equals the difference between
the fair market value of our common stock on the grant date and the exercise
price of the stock options and is recognized ratably over the vesting period of
the stock options, currently ranging up to 24 months.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

LITIGATION

On January 6, 2003, the Company entered into a stock purchase agreement (the
"Agreement") with Focus Focus.com, Inc. ("Focus Focus") to purchase all of the
issued and outstanding capital stock of Focus Focus for cash of $150,000 and
promissory notes payable for $1,560,000. In May 2003, the Company received a
letter from counsel for the former owners of Focus Focus advising the Company
that it was in breach of the Agreement and promissory notes for failing to make
scheduled monthly payments. Shortly thereafter, the Company returned the
acquired assets and the Focus Focus stock to the former owners of Focus Focus.

In connection with the Agreement, the Company entered into three-month
consulting agreements with the former owners of Focus Focus to perform certain
consulting services for the Company. As consideration for the services rendered,
the Company granted options to purchase 500,000 shares of the Company's common
stock, which had an exercise price of $0.02 per share, and vested immediately.
The Company contends that the former owners of Focus Focus did not perform under
these consulting agreements, and accordingly, cancelled the options and recorded
no consulting expense in the accompanying financial statements for the six-month
ended June 30, 2004 and 2003, respectively.

No litigation has been filed by either party. However, there is no guarantee
that litigation will not arise in this matter.

The Company may become involved in certain legal proceedings and claims which
arise in the normal course of business. Management does not believe that the
outcome of any such matter will have a material effect on the Company's
financial position or results of operations.

                                     - 19 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 - COMMITMENTS AND CONTINGENCIES (continued)

NEW LEASES

On February 16, 2004, the Company entered into a 39-month non-cancelable lease
for a 4,150 square foot office facility in Phoenix, Arizona, which commences
March 1, 2004. Under the terms of the lease, the Company is required to pay
initial monthly base rent of $2,615, plus common area, insurance and property
tax expenses. The base rent will be adjusted annually based on the Consumer
Price Index ("CPI").

On March 12, 2004, the Company entered into a 5-year non-cancelable lease for a
4,160 square foot office facility in Palm Desert, California to replace its
existing corporate facility. The lease requires the Company to pay initial
monthly base rent of $5,154, plus common area, insurance and property tax
expenses. The base rent will be adjusted annually based on CPI. The lease is set
to commence on April 1, 2004.

POTENTIAL REGISTRATION PENALTIES

In connection with its recently completed private placement, the Company may
have to issue additional shares if it fails to meet certain deadlines, such as
not filing a registration statement or if its registration is not effective
within 45 days and 135 days of the final closing date, respectively. The final
closing date was November 2, 2004. The additional shares of common stock to be
issued amount to approximately 45,000 per month after the failure of meeting
such deadlines, until the registration statement is filed or effective.

NOTE 7 - RELATED PARTY TRANSACTIONS

At December 31, 2003, the Company had advanced $23,400 to a majority stockholder
and an officer of the Company. During the six-month period ended June 30, 2004,
the Company paid $113,054 of personal expenses on behalf of the majority
stockholder and officer. The majority stockholder and officer repaid $136,454 to
the Company during the six-month period ended June 30, 2004. There is no
remaining amount due from such advances as of September 30, 2004.

In September 2003, a stockholder advanced $15,000 to the Company. The advance
does not bear interest and is payable on demand.

In May 2004, a stockholder advanced $175,000 to the Company. In August 2004, the
stockholder converted the advance into the exercise of 150,000 stock options at
a price of $1.25. The Company also paid $12,500 of interest in connection with
the advance. There is no outstanding amount due to the stockholder at September
30, 2004.

                                     - 20 -
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                          (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7 - RELATED PARTY TRANSACTIONS (continued)

In May 2004, a stockholder advanced $40,000 to the Company. In August 2004, the
stockholder converted the advance into 10% convertible promissory notes. The
advance did not bear interest. There is no outstanding amount due to the
stockholder at September 30, 2004.

NOTE 8 - SUBSEQUENT EVENTS

During November 2004, the Company issued 2,500,000 shares of its common stock to
two investors generating proceeds of $3.1 million, net of commission' fees and
legal costs of $125,000 and $11,000, respectively. The Company also issued
312,500 warrants to such investors in connection with the transaction. The
Company has also issued 187,500 warrants to a third-party as a financing fee.
The warrants are convertible at an exercise price of $1.60 per share and expire
five years from the date of issuance. The investors have the right to have the
Company reacquire all or a portion of the shares purchased at a price of $1.00
per share in the event the average price per share is less than $1.00 for a
period of ten consecutive trading days during an option period commencing eight
months after the effective date of the Company's registration statement and
extending for a period of twelve months thereafter. The investors' right is
collateralized by 2,357,340 shares of the Company's investment in equity
securities

The Company entered into a non-binding letter of intent to purchase the assets
and assume certain liabilities of an Internet provider located in the Los
Angeles metropolitan area. Under the contemplated terms of the transaction, the
Company would acquire all tangible and intangible assets of the Internet service
provider and would assume certain liability, including the liability of one
vendor, up to $100,000. The purchase price for such assets amounts to $250,000
and 405,405 shares of the Company's common stock. There are no assurances that
the contemplated transaction will be consumated.

The Company entered into a non-binding letter of intent to purchase the
intangible assets of an Internet provider located in the South Florida area.
Under the contemplated terms of the transaction, the purchase price for such
assets amounts to $350,000 and approximately 175,000 shares of the Company's
common stock. There are no assurances that the contemplated transaction will be
consumated.

                                     - 21 -
<PAGE>

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

      OVERVIEW

The acquisition of Grassroots was treated as a reverse acquisition for financial
reporting purposes. As such, our financial statements have been prepared as
Grassroots as the acquiror. The results of operations discussed below represent
the operations of Grassroots through February 9, 2004. The results of operations
subsequent to that date reflect the consolidated operations of Grassroots and
Newport. The equity section of the balance sheet and our net loss per share have
been retroactively restated to reflect the reverse acquisition.

      PLAN OF OPERATION

Over the course of the next twelve months, we intend to raise additional
operating capital, execute our business plan and focus our business development
efforts in the following four key areas:

      o  By enabling our customers to communicate more effectively with their
         employees, customers, vendors, and investors through the use of
         web-conferencing services, collaborative tools and application sharing
         sevices;

      o  By diversifying our product and service offerings to enhance the
         usefullness of our solutions for customers who will have already
         adopted one or more products;

      o  By acquiring internet service providers allowing us to sell our product
         offerings to their existing customer base, and;

      o  By developing partnering relationships with wide-ranging sales and
         distribution channel leaders already serving our vertical market space
         in a way that assists them in developing new revenue streams and
         opportunities for additional sales and that also reduces their
         dependency on low margin products that may already be in the final
         stages of their product lifecycle.

As the demand for our products and services increases, we intend to add
personnel who will primarily focus in the following areas: customer service and
quality monitoring as well general and administrative to support growing
operations.

Once we raise sufficient capital, we also intend to invest in core technology
research and product development as well as sales and marketing personnel.

      GOING CONCERN

The Company has generated minimal revenue since its inception on June 12, 2002,
and has incurred net losses of approximately $15.7 million and had negative cash
flows from operations of approximately $5.3 million since its inception through
September 30, 2004. The Company's ability to continue as a going concern is
dependent upon its ability to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations
when they come due to fund possible future acquisitions and to generate
profitable operations in the future. Management plans to continue to provide for
its capital requirements by issuing additional equity securities and debt. The
outcome of these matters cannot be

                                     - 22 -
<PAGE>

predicted at this time and there are no assurances that if achieved, the Company
will have sufficient funds to execute its business plan or generate positive
operating results.

We are a development stage company and have not started to market our various
products. We have not generated revenues from operations since our inception and
have no assurance of any future revenues. All losses accumulated since inception
have been considered as part of our development stage activities. We will
require substantial additional financing for continuing research and development
of our products and for the commercialization of our products. There can be no
assurances that our operations will become profitable or that we will be able to
obtain sufficient additional financings when they are needed, or that such
financings will be obtainable on terms satisfactory to us.

CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 1 to the
audited consolidated financial statements included in our filing on Form 10-KSB
as filed with the Securities and Exchange Commission for the year ended December
31, 2003. Management believes that the application of these policies on a
consistent basis enables the Company to provide useful and reliable financial
information about the company's operating results and financial condition.

The preparation of financial statements in conformity with generally accepted
accounting principles 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 may differ from those estimates.

We account for stock options issued to employees in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation cost is measured on the date of grant as the excess of the current
market price of the underlying stock over the exercise price. Such compensation
amounts, if any, are amortized over the respective vesting periods of the option
grant. We adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based Compensation
-Transition and Disclosure", which permits entities to provide pro forma net
income (loss) and pro forma earnings (loss) per share disclosures for employee
stock option grants as if the fair-valued based method defined in SFAS No. 123
had been applied. We account for stock options and stock issued to non-employees
for goods or services in accordance with the fair value method of SFAS 123.

We account for our restricted investment in equity securities pursuant to
Statement of Financial Accounting Standards ("SFAS") No.115. This standard
requires such investments in equity securities that have readily determinable
fair values be measured at fair value in the balance sheet and that unrealized
holding gains and losses for these investments be recorded as a component of
stockholders' equity.

                                     - 23 -
<PAGE>

RESULTS OF OPERATIONS

      THREE- AND NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2004 COMPARED TO
      SEPTEMBER 30,2003

REVENUES

We have generated minimal revenues since inception. Revenues recognized during
the three and nine-month period ended September 30, 2004 consists of monthly
licensing fees generated from our GRC Live product offerings launched during
2004.

SALES, GENERAL AND ADMINISTRATIVE EXPENSES

Sales, general, and administrative expenses consists primarily of salaries and
related expenses paid to our employees and contractors. Our sales, general and
administrative expenses for the three- and nine-month period ended September 30,
2004 increased by approximately $2.6 million and approximately $2.2 million,
respectively, when compared to the same periods in 2003. The increase in sales,
general, and administrative expenses during the three-month and nine-month
period ended September 30, 2004 is primarily due to consulting services rendered
in connection with a share-exchange agreement for a total consideration of $2.5
million. Additionally, the increase in sales and general and administrative
expenses during the nine-month period ended September 30, 2004, when compared to
the comparable period in 2003 was also due to an increase salaries and related
benefits associated with additional personnel hired in 2004 to develop and
market the Company's product offerings. This increase in consulting services and
salaries and related benefits during the nine-month period ended was partially
offset by a higher number of options granted below fair value during the first
half of 2003 than in 2004. The fair value of such options amounted to
approximately $950,000 and $1.9 million during the nine-month period ended
September 30, 2004 and 2003, respectively. The stock options were granted to
employees and consultants to develop and market the company's product offerings.

INTEREST EXPENSE

Interest expense consists primarily of interest recognized in connection with
the settlement of pre-merger obligations as well as amortization of debt
discount and interest on our convertible promissory notes. Our interest expense
for the three-month and nine-month period ended June 30, 2004 increased by
approximately $270,000 and $4.2 million when compared to the same periods in
2003. The increase in interest expense during the three-month period ended
September 30, 2004 is primarily due to accrued interest and debt amortization of
the Follow-on Notes issued in March 2004 and the 10% convertible promissory
notes issued between May and August 2004. The increase in interest expenses
during the nine-month period ended September 30, 2004 is primarily due to the
recognition of interest expenses of $3.4 million in connection with the
settlement of pre-merger obligations in February 2004. The interest expense
associated with the settlement of pre-merger obligations result from the
issuance of shares of our common stock valued at approximately $4.0 million in
consideration for the payment of $600,000 of pre-merger obligations. No such
convertible promissory notes were issued, nor any debt were settled during the
same periods in 2003.

                                     - 24 -
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LIQUIDITY AND CAPITAL RESOURCES

We have generated minimal revenues since inception. As a result, our current
operations are not an adequate source of cash to fund future operations. To fund
our cash requirements, we have relied on private placement issuances of equity
and debt financing instruments.

For the nine-month period ended September 30, 2004, we have received gross
proceeds of approximately $2.8 million, $1.8 million, and $215,000 from the
issuances of shares of common stock, convertible promissory notes, and advances
from shareholder, respectively. Such proceeds, together with an increase of
approximately $1.1 million in accounts payable and accrued expenses, were used
to fund our operating expenses, as well as the payment of deferred financing
costs of approximately $235,000, the repayment of convertible promissory notes
amounting to $140,000, and the repayment of $250,000 of pre-merger obligations.
We have also satisfied the remaining pre-merger obligations by issuing 1,365,000
shares of our common stock to a creditor. For the nine-month period ended June
30, 2003, we have received gross proceeds of approximately $1.2 million from the
issuance of shares of common stock as well as $325,000 from the issuance of
stock options which were used to fund our operating expenses.

During November 2004, the Company has received gross proceeds of approximately
$3.2 million. The Company intends to use such proceeds for working capital and
general and strategic corporate purposes..

We will need to raise a substantial amount of either debt or equity financing
over the course of the next twelve months to fund our current level of
operations and possible future acquisitions. There can be no assurance, however,
that such financing will be available to us or, if it is available, that we will
be able to structure such financing on terms acceptable to us and that it will
be sufficient to fund our cash requirements until we can reach a level of
profitable operations and positive cash flows. If we are unable to obtain the
financing necessary to support our operations, we may be unable to continue as a
going concern. We currently have no commitments for any additional capital.

CERTAIN FACTORS WHICH MAY IMPACT FUTURE RESULTS

In addition to the other information in this report, the following factors
should be considered in evaluating our financial condition and prospects. These
factors may have a significant impact on our business and future operating
results.

WE HAVE INCURRED LOSSES AND NEGATIVE CASH FLOW SINCE INCEPTION, RAISING
SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN

The accompanying consolidated financial statements have been prepared under the
assumption that we will continue to operate as a going concern. We have incurred
losses from inception, have an accumulated deficit and have experienced negative
cash flows from operations since inception. These matters raise substantial
doubt about our ability to continue as a going concern. We will require
additional capital to fund our operations and possible future acquisitions. We
intend to secure substantial additional financing in the near future to
adequately fund our operations for the foreseeable future. However, there can be
no assurance that capital, if any, will be available to us on acceptable terms.

The accompanying consolidated financial statements do not include any
adjustments that may result from the outcome of this uncertainty.

                                     - 25 -
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WE HAVE A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT FOR YOU TO EVALUATE OUR
BUSINESS AND YOUR INVESTMENT

We have not yet fully launched our products and services. We have generated
minimal revenues since inception. We therefore still have a very limited
operating history upon which you may evaluate our operations and future
prospects, as well as limited insights into emerging trends that may affect our
business. Additionally, the income potential of our business and from our
markets is unproven. Because of the emerging nature of the industry, our
executives have limited experience in it. As a young company operating in an
emerging market, we face risks and uncertainties relating to our ability to
implement our business plan successfully. You must consider these risks,
uncertainties and difficulties in evaluating our potential for future
profitability.

POSSIBLE DECLINE IN VALUE OF SHARES OF LANGLEY PARK INVESTMENTS, PLC

The Company holds 5,984,840 shares of Langley Park Investments, PLC, which were
received pursuant to a stock exchange agreement with that Company. These shares
are listed on the London Stock Exchange. At the date of the stock exchange
agreement, the Langley investment shares were valued at $11.8 million, less the
value of the shares transferred to a consultant for services rendered in
connection with this transaction. Based on the subsequent decline in the market
price of these shares, we are reflecting as of September 30, 2004 that the
investment is valued at approximately $3.2 million. Under the terms of our
agreement, we have no guarantees as to the price of the Langley Investment
shares and no right to receive additional shares based on the decline in the
value of the investment. It is possible that the value of these shares may
decline further in the future, in which event the value of our restricted
investment will be reduced further, and the benefit to the financial position of
the Company may be substantially reduced or eliminated.

OUR QUARTERLY FINANCIAL RESULTS WILL CONTINUE TO FLUCTUATE MAKING IT DIFFICULT
TO FORECAST OUR OPERATING RESULTS

Our quarterly operating results have fluctuated in the past and we expect our
revenues and operating results may vary significantly from quarter to quarter
due to a number of factors, many of which are beyond our control, including:

      o  Variability in demand and usage for our product and services;

      o  Market acceptance of new and existing services offered by us, our
         competitors and potential competitors; and

      o  Governmental regulations affecting the use of the Internet, including
         regulations concerning intellectual property rights and security
         features.

Our limited operating history and unproven business model further contribute to
the difficulty of making meaningful quarterly comparisons. Our current and
future levels of expenditures are based primarily on our growth plans and
estimates of expected future revenues. Such expenditures are primarily fixed in
the short term and our sales cycle can be lengthy. Accordingly, we may not be
able to adjust spending or generate new revenue sources timely to compensate for
any shortfall in revenues. If our operating results fall below the expectation
of investors, our stock price will likely decline significantly.

WE NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, AND IF WE ARE UNABLE TO
SECURE ADEQUATE FUNDS ON TERMS ACCEPTABLE TO US, WE WILL BE UNABLE TO EXECUTE
OUR BUSINESS PLAN AND CURRENT STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION.

                                     - 26 -
<PAGE>

As of September 30, 2004, we had approximately $1.2 million in cash. Our
existing cash is insufficient to fund our operations and meet our working
capital and capital expenditure requirements for 2004. Accordingly, we are
unable to fund operating and other expenses, working capital and capital
expenditures from our operations and we find it necessary to secure additional
financing. There can be no assurance that we will be able to obtain such
financing on acceptable terms, or at all. If adequate funds are not available or
are not available on acceptable terms, we may not be able to pursue our business
objectives. This inability could seriously harm our business, results of
operations and financial condition.

The Company requires substantial additional financing for the development and
marketing of its existing and future products and services. There are no
assurances that the Company will obtain sufficient additional financing, that
such financing terms will be satisfactory to the Company and that the Company's
operations will be profitable in the foreseeable future. If the Company does not
secure substantial additional funding to meet its liabilities it may have to
issue additional shares of its common stock.

If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our current stockholders will be
reduced and these securities may have rights and preferences superior to that of
our current stockholders. If we raise capital through debt financing, we may be
forced to accept restrictions affecting our liquidity, including restrictions on
our ability to incur additional indebtedness or pay dividends.

BECAUSE WE EXPECT TO CONTINUE TO INCUR NET LOSSES, WE MAY NOT BE ABLE TO
IMPLEMENT OUR BUSINESS STRATEGY AND THE PRICE OF OUR STOCK MAY DECLINE.

We have incurred net losses quarterly from inception through September 30 2004,
and we expect to continue to incur net losses for the foreseeable future.

Accordingly, our ability to operate our business and implement our business
strategy may be hampered by negative cash flows in the future, and the value of
our stock may decline as a result. Our capital requirements may vary materially
from those currently planned if, for example, we incur unforeseen capital
expenditures, unforeseen operating expenses or make investments to maintain our
competitive position. If this is the case, we may have to delay or abandon some
or all of our development plans or otherwise forego market opportunities. We
will need to generate significant additional revenues to be profitable in the
future and we may not generate sufficient revenues to be profitable on either a
quarterly or annual basis in the future. To address the risks and uncertainties
facing our business strategy, we must, among other things:

      o  Achieve broad customer adoption and acceptance of our products and
         services;
      o  Successfully raise additional capital in the future;
      o  Successfully integrate, leverage and expand our sales force;
      o  Successfully scale our current operations;
      o  Implement and execute our business and marketing strategies;
      o  Address intellectual property rights issues that effect our business;
      o  Develop and maintain strategic relationships to enhance the development
         and marketing of our existing and new products and services; and
      o  Respond to competitive developments in the web conferencing and
         collaboration solutions industry.

We might not be successful in achieving any or all of these business objectives
in a cost-effective manner, if at all, and the failure to achieve these could
have a serious adverse impact on our business, results of operations and
financial position. Each of these objectives may require significant additional
expenditures on our part. Even if we ultimately do achieve profitability, we

                                     - 27 -
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may not be able to sustain or increase profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis.

OUR SUCCESS IS DEPENDENT ON THE PERFORMANCE AND RETENTION OF OUR CHIEF EXECUTIVE
OFFICER AND KEY EMPLOYEES

Our business and operations are substantially dependent on the performance of
our executive officers and key employees, including Cery B. Perle, all of whom
are employed on an at-will basis and have worked together for only a relatively
short period of time. The loss of one or several executives could seriously harm
our business. Any reorganization or reduction in the size of our employee base
could harm our ability to attract and retain other valuable employees critical
to the success of our business.

WE ARE DEPENDENT ON THE DEVELOPMENT AND THE RATE OF ADOPTION OF MULTIMEDIA
BROADCASTS AND THE DELAY OR FAILURE OF THIS DEVELOPMENT WOULD SERIOUSLY HARM OUR
BUSINESS.

We are dependent on the development and the rate of adoption of web conferencing
and collaboration solutions services and applications and the delay or failure
of this development would seriously harm our business. The development of
commercial services and applications for web conferencing and collaboration
solutions is in its relatively early stages. If the Internet does not develop as
an effective medium for the distribution of web conferencing and collaboration
solutions to consumers or if businesses predicated on the distribution of web
conferencing and collaboration solutions are not profitable or are unable to
raise necessary operating capital, then we may not succeed in executing our
business plan. Many factors could inhibit the growth of the distribution of
multimedia content, including concerns about the profitability of
Internet-related businesses, uncertainty about intellectual property rights
associated with content shared on our software, multimedia, bandwidth
constraints, piracy and privacy.

Our success depends on users having access to the necessary hardware, software
and bandwidth, or data transmission capability, to receive and broadcast high
quality digital media over the Internet. Congestion over the Internet and data
loss may interrupt audio and video streams, resulting in unsatisfying user
experiences. The success of multimedia distribution over the Internet depends on
the continued rollout of broadband access to consumers on an affordable basis.
Widespread adoption of multimedia technology depends on overcoming obstacles to
the deployment and use of digital media software, identifying additional viable
revenue models for digital media-based businesses, improving audio and video
quality and educating customers and users in the use of digital media
technology. If digital media technology fails to overcome these obstacles, our
business could be seriously harmed. Because digital recorded music formats, such
as MP3, do not always contain mechanisms for tracking the source of ownership of
digital recordings, users are able to download and distribute unauthorized or
"pirated" copies of copyrighted recorded music over the Internet. This piracy is
a significant concern to record companies and artists are reluctant to digitally
deliver their recorded music over the Internet. As long as pirated recordings
are available, many consumers will choose free pirated recordings rather than
paying for legitimate recordings. Accordingly, if this issue is not addressed,
our business might be harmed.

                                     - 28 -
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OUR PRICING MODEL FOR OUR PRODUCTS AND SERVICES IS UNPROVEN AND MAY BE LESS THAN
ANTICIPATED, WHICH MAY HARM OUR GROSS MARGINS

The pricing model of our products and services may be lower than expected as a
result of competitive pricing pressures, promotional programs and customers who
negotiate price reductions in exchange for longer term purchase commitments or
otherwise. Our pricing model depends on the duration of the agreement, the
specific requirements of the order, purchase volumes, the sales and service
support and other contractual agreements. We expect to experience pricing
pressure and anticipate that the average selling prices and gross margins for
our products may decrease over product life cycles. We may not be successful in
developing and introducing on a timely basis new products with enhanced features
and services that can be sold at higher gross margins.

WE MAY BE LIABLE OR ALLEGED TO BE LIABLE TO THIRD PARTIES FOR SOFTWARE AND OTHER
CONTENT THAT WE DISTRIBUTE OR MAKE AVAILABLE TO OUR CUSTOMERS

We may be liable or alleged to be liable to third parties software and other
content that we distribute or make available to our customers:

      o  If the content or the performance of our services violates third party
         copyright, trademark, or other intellectual property rights;

      o  If our customers violate the intellectual property rights of others by
         providing content trough our services; or

      o  If content shared or distributed through our software and services is
         deemed obscene, indecent, or defamatory.

Any alleged liability could harm our business by damaging our reputation,
requiring us to incur legal costs in defense, exposing us to awards of damages
and costs and diverting management's attention which could have an adverse
effect on our business, results of operations and financial condition. We
anticipate require our customers to hold us harmless from claims arising from
their failure to have the right to distribute software and other content through
our software and services for that purpose. However, customers may contest this
responsibility or not have sufficient resources to defend claims and we have
limited insurance coverage for claims of this nature.

We could be exposed to liability with respect to the unauthorized duplication of
content or unauthorized use of other parties' proprietary technology. Any
imposition of liability that is not covered by insurance or is in excess of
insurance coverage or any alleged liability could harm our business.

We cannot assure you that third parties will not claim infringement by us with
respect to past, current, or future technologies. We expect that participants in
our markets will be increasingly subject to infringement claims as the number of
services and competitors in our industry segment grows. In addition, these risks
are difficult to quantify in light of the continuously evolving nature of laws
and regulations governing the Internet. Any claim relating to proprietary
rights, whether meritorious or not, could be time-consuming, result in costly
litigation, cause service upgrade delays or require us to enter into royalty or
licensing agreements, and we can not assure you that we will have adequate
insurance coverage or that royalty or licensing agreements will be available on
terms acceptable to us or at all.

                                     - 29 -
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WE CANNOT BE CERTAIN THAT WE WILL BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY,
AND WE MAY BE FOUND TO INFRINGE ON PROPRIETARY RIGHTS OF OTHERS, WHICH COULD
HARM OUR BUSINESS

Our intellectual property is critical to our business, and we seek to protect
our intellectual property through copyrights, trademarks, patents, trade
secrets, confidentiality provisions in our customer, supplier, potential
investors, and strategic relationship agreements, nondisclosure agreements with
third parties, and invention assignment agreements with our employees and
contractors. We cannot assure you that measures we take to protect our
intellectual property will be successful or that third parties will not develop
alternative solutions that do not infringe upon our intellectual property.

In addition, we could be subject to intellectual property infringement claims by
others. Potential customers may be deterred from distributing content over the
Internet for fear of infringement claims. If, as a result, potential customers
forego sharing content over the Internet, demand for our services and
applications could be reduced which would harm our business. Claims against us,
and any resultant litigation, should it occur in regard to any of our services
and applications, could subject us to significant liability for damages
including treble damages for willful infringement. In addition, even if we
prevail, litigation could be time-consuming and expensive to defend and could
result in the diversion of our time and attention. Any claims from third parties
may also result in limitations on our ability to use the intellectual property
subject to these claims. Further, we plan to offer our services and applications
to customers worldwide including customers in foreign countries that may offer
less protection for our intellectual property than the United States. Our
failure to protect against misappropriation of our intellectual property, or
claims that we are infringing the intellectual property of third parties could
have a negative effect on our business, revenues, financial condition and
results of operations.

WE WILL RELY ON STRATEGIC RELATIONSHIPS TO PROMOTE OUR SERVICES AND FOR ACCESS
TO LICENSED TECHNOLOGY; IF WE FAIL TO DEVELOP, MAINTAIN OR ENHANCE THESE
RELATIONSHIPS, OUR ABILITY TO SERVE OUR CUSTOMERS AND DEVELOP NEW SERVICES AND
APPLICATIONS COULD BE HARMED

Due to the evolving nature of our industry, we will need to develop additional
relationships to adapt to changing technologies and standards and to work with
newly emerging companies with whom we do not have pre-existing relationships. We
cannot be certain that we will be successful in developing new relationships or
that our partners will view these relationships as significant to their own
business or that they will continue their commitment to us in the future. If we
are unable to maintain or enhance these relationships, we may have difficulty
strengthening our technology development and increasing the adoption of our
brand and services.

COMPETITION MAY DECREASE OUR MARKET SHARE, REVENUES, AND GROSS MARGINS

We face intense and increasing competition in the web conferencing and
collaboration solutions market. If we do not compete effectively or if we
experience reduced market share from increased competition, our business will be
harmed. In addition, the more successful we are in the emerging market for web
conferencing and collaboration solutions , the more competitors are likely to
emerge. We believe that the principal competitive factors in our market include:

                                     - 30 -
<PAGE>

      o  Service functionality, quality and performance;
      o  Ease of use, reliability and security of services;
      o  Establishing a significant base of customers and distribution partners;
      o  Ability to introduce new services to the market in a timely manner;
      o  Customer service and support; and
      o  Pricing.

Although we do not currently compete against any one entity with respect to all
aspects of multimedia broadcast products and services, there are various
competitors that provide various products and services in the following
categories:

      o  Web conferencing, which provides online meeting functionalities
      o  Web casting, which provides one to many presentation functionalities
      o  Collaboration, which provides for document and application sharing as
         well as user interactivity o Live Video and streaming multimedia
      o  Hosted services
      o  Training, which provides e-learning applications
      o  On-premise software

Our primary competitors are Internet broadcasters, such as WebEx. This company
and each of the following companies provide services similar to ours and each
has a well-established market presence. We also compete with providers of
traditional communications technologies, such as teleconferencing and
videoconferencing, as well as applications software and tools companies, such as
Centra Software, Microsoft (NetMeeting and Placeware), ON24, Intercall, First
Virtual Communications, and Raindance Communications. There are also smaller
competitors that focus on certain of our individual market segments, such as
investor relations Webcasts.

There are a number of companies that provide outsourced digital media services.
As the multimedia broadcast market continues to develop, we expect to see
increased competition from traditional telecommunication service providers or
resellers of those services. We also face competition from the in-house encoding
services, streaming networks and content management systems and encoding
services.

All of our competitors have substantially more capital, longer operating
histories, greater brand recognition, larger customer bases and significantly
greater financial, technical and marketing resources than we do. These
competitors may also engage in more extensive development of their technologies,
adopt more aggressive pricing policies and establish more comprehensive
marketing and advertising campaigns than we can. Our competitors may develop
products and service offerings that we do not offer or that are more
sophisticated or more cost effective than our own. For these and other reasons,
our competitors' products and services may achieve greater acceptance in the
marketplace than our own, limiting our ability to gain market share and customer
loyalty and to generate sufficient revenues to achieve a profitable level of
operations. Our failure to adequately address any of the above factors could
harm our business and operating results.

OUR INDUSTRY IS EXPERIENCING CONSOLIDATION THAT MAY INTENSIFY COMPETITION

The web conferencing and collaboration solutions industry is undergoing
substantial change that has resulted in increasing consolidation and a
proliferation of strategic transactions. Many companies in these industries have

                                     - 31 -
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been going out of business or are being acquired by larger entities. As a
result, we are increasingly competing with larger competitors that have
substantially greater resources than we do. We expect this consolidation and
strategic partnering to continue. Acquisitions or strategic relationships could
harm us in a number of ways. For example:

      o  Competitors could acquire or enter into relationships with companies
         with which we have strategic relationships and discontinue our
         relationship, resulting in the loss of distribution opportunities for
         our products and services or the loss of certain enhancements or
         value-added features to our products and services;
      o  Competitors could obtain exclusive access to desirable multimedia
         content and prevent that content from being available in certain
         formats, thus decreasing the use of our products and services to
         distribute and experience the content that audiences most desire, and
         hurting our ability to attract customers;
      o  A competitor could be acquired by a party with significant resources
         and experience that could increase the ability of the competitor to
         compete with our products and services; and
      o  Other companies with related interests could combine to form new,
         formidable competition, which could preclude us from obtaining access
         to certain markets or content; or which could dramatically change the
         market for our products and services.

Any of these results could put us at a competitive disadvantage that could cause
us to lose customers, revenue and market share. They could also force us to
expend greater resources to meet the competitive threat, which could also harm
our operating results.

IF WE FAIL TO ENHANCE OUR EXISTING SERVICES AND APPLICATIONS PRODUCTS OR DEVELOP
AND INTRODUCE NEW WEB CONFERENCING AND COLLABORATION SOLUTIONS SERVICES,
APPLICATIONS AND FEATURES IN A TIMELY MANNER TO MEET CHANGING CUSTOMER
REQUIREMENTS AND EMERGING INDUSTRY TRENDS OR STANDARDS, OUR ABILITY TO GROW OUR
BUSINESS WILL SUFFER

The market for web conferencing and collaboration solutions is characterized by
rapidly changing technologies and short product life cycles. These market
characteristics are heightened by the emerging nature of the Internet and the
continuing trend of companies from many industries to offer Internet-based
applications and services. The widespread adoption of the new Internet,
networking, streaming media, or telecommunications technologies or other
technological changes could require us to incur substantial expenditures to
modify or adapt our operating practices or infrastructure. Our future success
will depend in large part upon our ability to:

      o  Identify and respond to emerging technological trends in the market;
      o  Enhance our products by adding innovative features that differentiate
         services and applications from those of our competitors;
      o  Acquire and license leading technologies;
      o  Bring new services and applications to market and scale our business on
         a timely basis at competitive prices; and
      o  Respond effectively to new technological changes or new product
         announcements by others.

We will not be competitive unless we continually introduce new services and
applications or enhancements to existing services and applications that meet
evolving industry standards and customer needs. In the future, we may not be
able to address effectively the compatibility and interoperability issues that

                                     - 32 -
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arise as a result of technological changes and evolving industry standards. The
technical innovations required for us to remain competitive are inherently
complex, require long development schedules and are dependent in some cases on
sole source suppliers. We will be required to continue to invest in research and
development in order to attempt to maintain and enhance our existing
technologies and products, but we may not have the funds available to do so.
Even if we have sufficient funds, these investments may not serve the needs of
customers or be compatible with changing technological requirements or
standards. Most development expenses must be incurred before the technical
feasibility or commercial viability of new or enhanced services and applications
can be ascertained. Revenue from future services and applications or
enhancements to services and applications may not be sufficient to recover the
associated development costs.

THE TECHNOLOGY UNDERLYING OUR SERVICES AND APPLICATIONS IS COMPLEX AND MAY
CONTAIN UNKNOWN DEFECTS THAT COULD HARM OUR REPUTATION, RESULT IN PRODUCT
LIABILITY OR DECREASE MARKET ACCEPTANCE OF OUR SERVICES AND APPLICATIONS

The technology underlying services and applications are complex and include
software that is internally developed and software licensed from third parties.
These software products may contain errors or defects, particularly when first
introduced or when new versions or enhancements are released. We may not
discover software defects that affect our current or new services and
applications or enhancements until after they are sold. Furthermore, because our
services and applications are designed to work in conjunction with various
platforms and applications, we are susceptible to errors or defects in
third-party applications that can result in a lower quality product for our
customers. Because our customers depend on us for digital media management, any
interruptions could:

      o  Damage our reputation;

      o  Cause our customers to initiate product liability suits against us;

      o  Increase our product development resources;

      o  Cause us to lose revenues; and

      o  Delay market acceptance of our services and applications.

WE DO NOT POSSESS PRODUCT LIABILITY INSURANCE, AND OUR ERRORS AND OMISSIONS
COVERAGE IS NOT LIKELY TO BE SUFFICIENT TO COVER OUR COMPLETE LIABILITY EXPOSURE

Our business will suffer if our systems fail or our third-party facilities
become unavailable A reduction in the performance, reliability and availability
of our systems and network infrastructure may harm our ability to distribute our
products and services to our customers and other users, as well as harm our
reputation and ability to attract and retain customers and content providers.
Our systems and operations are susceptible to, and could be damaged or
interrupted by, outages caused by fire, flood, power loss, telecommunications
failure, Internet breakdown, earthquake and similar events. We may not have any
redundancy in our facilities and therefore any damage or destruction to these
would significantly harm our business. Our systems are also subject to human
error, security breaches, power losses, computer viruses, break-ins, "denial of
service" attacks, sabotage, intentional acts of vandalism and tampering designed
to disrupt our computer systems, Web sites and network communications. This
could lead to slower response times or system failures.

                                     - 33 -
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Our operations also depend on receipt of timely feeds from our content
providers, and any failure or delay in the transmission or receipt of such feeds
could disrupt our operations. We also depend on Web browsers, ISPs and online
service providers to provide access over the Internet to our product and service
offerings. Many of these providers have experienced significant outages or
interruptions in the past, and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. These types of
interruptions could continue or increase in the future.

Our digital distribution activities are managed by sophisticated software and
computer systems. We must continually develop and update these systems over time
as our business and business needs grow and change, and these systems may not
adequately reflect the current needs of our business. We may encounter delays in
developing these systems, and the systems may contain undetected errors that
could cause system failures. Any system error or failure that causes
interruption in availability of products or content or an increase in response
time could result in a loss of potential or existing business services
customers, users, advertisers or content providers. If we suffer sustained or
repeated interruptions, our products, services and Web sites could be less
attractive to such entities or individuals and our business could be harmed.

Significant portions of our business are dependent on providing customers with
efficient and reliable services to enable customers to broadcast content to
large audiences on a live or on-demand basis. Our operations are dependent in
part upon transmission capacity provided by third-party telecommunications
network providers. Any failure of such network providers to provide the capacity
we require may result in a reduction in, or interruption of, service to our
customers. If we do not have access to third-party transmission capacity, we
could lose customers and, if we are unable to obtain such capacity on terms
commercially acceptable to us our business and operating results could suffer.

Our computer and communications infrastructure is located at a single leased
facility in California. We do not have fully redundant systems, and we may not
have adequate business interruption insurance to compensate us for losses that
may occur from a system outage. Despite our efforts, our network infrastructure
and systems could be subject to service interruptions or damage and any
resulting interruption of services could harm our business, operating results
and reputation.

BECAUSE OUR PRINCIPAL STOCKHOLDERS AND MANAGEMENT MAY HAVE THE ABILITY TO
CONTROL A SIGNIFICANT PERCENTAGE OF STOCKHOLDER VOTES, THE PREMIUM OVER MARKET
PRICE THAT AN ACQUIROR MIGHT OTHERWISE PAY MAY BE REDUCED AND ANY MERGER OR
TAKEOVER MAY BE PREVENTED OR DELAYED

Our officers and directors beneficially own or control the voting of
approximately [57]% of our outstanding common stock. As a result, these
stockholders, acting together, have the ability to substantially influence all
matters submitted to our stockholders for approval, including:

      o  Election or removal of our Board of Directors;

      o  Amendment of our certificate of incorporation or bylaws;

      o  Adoption of measures that could delay or prevent a change in control or
         impede a merger, takeover or other business combination involving us;
         and

      o  Adoption of stock-based compensation plans.

                                     - 34 -
<PAGE>

These stockholders have substantial influence over our management and our
affairs. Accordingly, this concentration of ownership may have the effect of
impeding a merger, consolidation, takeover or other business consolidation
involving us, or discouraging a potential acquirer from making a tender offer
for our shares. This concentration of ownership could also adversely affect our
stock's market price or lessen any premium over market price that an acquiror
might otherwise pay.

GOVERNMENT REGULATION COULD ADVERSELY AFFECT OUR BUSINESS PROSPECTS

We do not know with certainty how existing laws governing issues such as
property ownership, copyright and other intellectual property issues, taxation,
illegal or obscene content, retransmission of media, personal privacy and data
protection will apply to the Internet or to the distribution of multimedia and
other proprietary content over the Internet. Most of these laws were adopted
before the advent of the Internet and related technologies and therefore do not
address the unique issues associated with the Internet and related technologies.
Depending on how these laws developed and are interpreted by the judicial
system, they could have the effect of:

      o  Limiting the growth of the Internet;

      o  Creating uncertainty in the marketplace that could reduce demand for
         our products and services;

      o  Increasing our cost of doing business;

      o  Exposing us to significant liabilities associated with content
         distributed or accessed through our products or services; or

      o  Leading to increased product and applications development costs, or
         otherwise harm our business.

Specifically with respect to one aspect of copyright law, on October 28, 1998,
the Digital Millennium Copyright Act (or "DMCA") was enacted. The DMCA includes
statutory licenses for the performance of sound recordings and for the making of
recordings to facilitate transmissions. Under these statutory licenses,
depending on our future business activities, the Company and its customers may
be required to pay licensing fees in connection with digital sound recordings we
deliver or our customers provide on their Web site and through retransmissions
of radio broadcasts and/or other audio content. A Copyright Arbitration Royalty
Panel has determined that, for eligible non-subscription services, sound
recording performance rates should be $0.0014 per performance for the period
October 1998-2000, with a surcharge of 9% of the total performance fee for the
ephemeral copies used to facilitate such performances. However, that decision is
subject to review and revision by the U.S. Copyright Office, and several appeal
petitions have been filed. Furthermore, the Copyright Office's review is subject
to an appeal to a Federal Court of Appeals. The fees for the same types of
transmissions offered on a subscription basis have not been determined and will
be the subject of another Copyright Arbitration Royalty Panel proceeding, as
will fees for digital phono-record deliveries pursuant to the "mechanical
license" provisions of the U.S. Copyright Act. Depending on the rates and terms
adopted for the statutory licenses, our business could be harmed both by
increasing our own cost of doing business, and by increasing the cost of doing
business for our customers.

Because of this rapidly evolving and uncertain regulatory environment, both
domestically and internationally, we cannot predict how existing or proposed

                                     - 35 -
<PAGE>

laws and regulations might affect our business. In addition, these uncertainties
make it difficult to ensure compliance with the laws and regulations governing
digital music. These laws and regulations could harm us by subjecting us to
liability or forcing us to change our business.

OUR WEB CONFERENCING SERVICE MAY BECOME SUBJECT TO TRADITIONAL
TELECOMMUNICATIONS CARRIER REGULATION BY FEDERAL AND STATE AUTHORITIES, WHICH
WOULD INCREASE THE COST OF PROVIDING OUR SERVICES AND MAY SUBJECT US TO
PENALTIES

We believe our web conferencing service is not subject to regulation by the
Federal Communications Commission or any state public service commission because
the services integrate traditional voice teleconferencing and added value
Internet services. The FCC and state public service commissions, however, may
require us to submit to traditional telecommunications carrier regulations for
our web conferencing service under the Communications Act of 1934, as amended,
and various state laws or regulations as a provider of telecommunications
services. If the FCC or any state public service commission seeks to enforce any
of these laws or regulations against us, we could be prohibited from providing
the voice aspect of our web conferencing service until we have obtained various
federal and state licenses and filed tariffs. We believe we would be able to
obtain those licenses, although in some states, doing so could significantly
delay our ability to provide services. We also would be required to comply with
other aspects of federal and state laws and regulations. Subjecting our web
conferencing service to these laws and regulations would increase our operating
costs, could require restructuring of those services to charge separately for
the voice and Internet components, and would involve on-going reporting and
other compliance obligations. We also might be subject to fines or forfeitures
and civil or criminal penalties for non-compliance.

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTCBB, BUT TRADING IN OUR STOCK IS
LIMITED

The market for our common stock is extremely limited and there are no assurances
an active market for our common stock will ever develop. Accordingly, purchasers
of our common stock cannot be assured any liquidity in their investment.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A
TAKE-OVER WHICH MAY NOT BE IN THE INTEREST OF OUR

Provisions of our certificate of incorporation and bylaws may be deemed to have
anti-takeover effects, which include when and by whom special meetings of our
stockholders may be called, and may delay, defer or prevent a takeover attempt.
In addition, certain provisions of the Delaware General Corporation Law also may
be deemed to have certain anti-takeover effects which include that control of
shares acquired in excess of certain specified thresholds will not possess any
voting rights unless these voting rights are approved by a majority of a
corporation's disinterested stockholders.

In addition, our certificate of incorporation authorize the issuance of up to
5,000,000 shares of preferred stock with such rights and preferences as may be
determined from time to time by our Board of Directors, of which no shares are
currently. Our Board of Directors may, without stockholder approval, issue
preferred stock with dividends, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
our common stock.

                                     - 36 -
<PAGE>

BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5 PER SHARE AND IS QUOTED ON THE
OTCBB, OUR STOCK IS CONSIDERED A "PENNY STOCK", WHICH CAN ADVERSELY AFFECT ITS
MARKETABILITY

If the trading price of our common stock is less than $5.00 per share, our
common stock is considered a "penny stock," and trading in our common stock is
subject to the requirements of Rule 15g-9 under the Securities Exchange Act of
1934. Under this rule, broker/dealers who recommend low-priced securities to
persons other than established customers and accredited investors must satisfy
special sales practice requirements. The broker/dealer must make an
individualized written suitability determination for the purchaser and receive
the purchaser's written consent prior to the transaction.

SEC regulations also require additional disclosure in connection with any trades
involving a "penny stock," including the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and its
associated risks. These requirements severely limit the liquidity of securities
in the secondary market because few broker or dealers are likely to undertake
these compliance activities. In addition to the applicability of the penny stock
rules, other risks associated with trading in penny stocks could also be price
fluctuations and the lack of a liquid market.

ITEM 3.  CONTROLS AND PROCEDURES

Our principal executive officer and principal financial officer evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) as of the end of the period covered by this report. Based on this
evaluation, the Company's principal executive officer and principal financial
officer have concluded that the Company's controls and procedures are effective
in providing reasonable assurance that the information required to be disclosed
in this report has been recorded, processed, summarized and reported as of the
end of the period covered by this report.

During the period covered by this report, there have not been any significant
changes in our internal controls or, to our knowledge, in other factors that
could significantly affect our internal controls.

                                     - 37 -
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         None.

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

During July 2004, the Company issued 19,376 shares of its common stock to
holders of the notes payable issued in connection with the Follow-on Financing
in consideration of interest payment for the period ended June 30, 2004. The
fair value of such shares amounted to approximately $35,000. Inasmuch as each of
the investors had previously invested in prior financings of the Company or its
subsidiaries, were accredited and sophisticated investors, had acquired the
securities for investment and had access to applicable information pertaining to
Newport, the issuance of the securities was exempt from registration under
Section 3(89) of the Securities Act of 1933.

Between July and August 2004, we issued to six accredited investors our
promissory notes in the aggregate principal amount of $365,000 and warrants to
purchase 365,000 shares of our common stock exercisable at $1.25 per share and
expiring in June 2009. vFinance Investments, Inc. received a commission of 10%
and an expense allowance equal to 4% of the amount raised. Inasmuch as each of
the investors had previously invested in prior financings of the Company or its
subsidiaries, were accredited and sophisticated investors, had acquired the
securities for investment and had access to applicable information pertaining to
Newport, the issuance of the securities was exempt from registration under
Section 4(2) of the Securities Act of 1933.

In July 2004, the Company has issued 5,882,352 shares of the Company's common
stock at a purchase price of $2.01 to Langley Park Investments PLC (" Langley").
In exchange for such shares, Langley has issued 6,484,840 shares of its common
stock to the Company. Approximately 3,250,000 shares of the Corporation will
remain in an escrow account for up to two years, during which time the Company
may not dispose of Langley's shares without its authorization. The agreement
provides for, among other things, price protection provisions in the event the
average of the ten closing bid prices per share (the "Average Bid Price") of the
Company's common stock, as quoted on a stock exchange, the over-the-counter
market or as appraised, during the ten trading days immediately preceding July
30, 2006 is below $2.01. If the Average Bid Price is below $2.01 at that time, a
proportion of the shares of Langley held in escrow will be returned to Langley
in the same ratio as the Average Bid Price is to $2.01.

In connection with the transaction with Langley, the Company has entered into a
consulting agreement with E-Holdings, Inc ("E-Holdings, Inc."). Pursuant to this
agreement, for services rendered, the Company committed to:

      1) transfer 877,500 shares of Langley to E-Holdings,

      2) issue to E-Holdings warrants convertible into 646,000 shares of the
         Company's stock at an exercise price of $1.70 per share or 500,000
         shares of Langley,

      3) provide an option to E-Holdings to require the Company to repurchased
         the shares of Langley at $1.82 per share ("Option Price") by August
         2005.

                                     - 38 -
<PAGE>

During the nine-months ended September 30, 2004, the Company has paid
approximately $750,000 in lieu of transferring 409,000 shares of Langley to
E-Holdings. During November 2004, the Company paid approximately $850,000 in
lieu of transferring 468,500 shares of Langley to the E-Holdings. Also, during
November 2004, E-Holdings has indicated to the Company that it opted to received
the 500,000 shares of Langley in lieu of receiving the 646,000 warrants.

ITEM 3.  DEFAULTS ON SENIOR SECURITIES

         None

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

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      a. Exhibits

         10.1     Stock Purchase Agreement dated as of July 6, 2004, between
                  Newport International Group, Inc. and Langley Park Investments
                  PLC.

         10.2     Common Stock and Warrant Purchase Agreement dated as of August
                  27, 2004 by and among Newport International Group, Inc. and
                  Robinson Reed Inc.

         10.3     Registration Rights Agreement dated as of August 27, 2004, by
                  and among Newport International Group, Inc. and Robinson Reed
                  Inc.

         10.4     Escrow Agreement dated as of August 27, 2004, by and among
                  Newport International Group, Inc., Jenkens & Gilchrist Parker
                  Chapin LLP and Robinson Reed Inc.

         10.5     Amendment No. 1 to Common Stock Purchase Agreement,
                  Registration Rights Agreement and Escrow Agreement dated as of
                  November 2, 2004 by and among Newport International Group,
                  Inc., Robinson Reed Inc. and Jenkens & Gilchrist Parker Chapin
                  LLP.

         31.1     Certificate of Chief Executive Officer pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         31.2     Certificate of Chief Financial Officer pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         32.1     Certification of Chief Executive Officer and Chief Financial
                  Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.

      b. Reports on Form 8-K

         (1)      A report on Form 8-K was filed on September 2, 2004 reporting
                  under Items 1 and 3.

         (2)      A report on Form 8-K/A was filed on September 3, 2004
                  reporting under Items 1 and 3.

                                     - 39 -
<PAGE>

                                    SIGNATURE

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the registrant caused this report to be signed on its behalf by the
undersigned and duly authorized


                NEWPORT INTERNATIONAL GROUP, INC.



      By:               /s/ Cery B. Perle                    November 15, 2004
          ---------------------------------------------      -----------------
                          Cery B. Perle                            Date
          President, Chief Executive Officer & Director
                 (Principal executive officer and
                   principal financial officer)


                                     - 40 -