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, 2005

                                       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 |_|

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

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

The total number of shares of the issuer's common stock, $.001 par value,
outstanding at November 8, 2005 was 35,659,208.

<PAGE>

When used in this quarterly report, the terms "Newport,", the Company", "we,"
and "us" refers to Newport International Group, Inc., a Delaware corporation,
and its subsidiaries, Spare Backup, Inc., a Delaware Corporation ("Spare") and
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>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL INFORMATION

                        NEWPORT INTERNATIONAL GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                               September 30, 2005
                                   (Unaudited)

                                     ASSETS
Current Assets:
  Cash ..........................................................  $  1,016,931
                                                                   ------------
     Total current assets .......................................     1,016,931

  Restricted investment in marketable securities ................       440,119
  Property and equipment, net of accumulated depreciation
   of $85,947 ...................................................       145,424
  Deferred financing costs, net of accumulated amortization
   of $327,809 ..................................................       106,801
  Other assets ..................................................        37,301
                                                                   ------------

     Total assets ...............................................  $  1,746,576
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts payable and accrued expenses .........................  $    517,546
  Current portion of capitalized lease obligations ..............         9,663
  8% Convertible promissory notes, net of debt discount
   of $412,174 ..................................................       494,612
  Accrued interest on convertible promissory notes ..............        38,959
  Due to stockholder ............................................        15,000
                                                                   ------------

     Total current liabilities ..................................     1,075,780

  12.5% Convertible promissory notes, net of debt discount
   of $454,217 ..................................................       180,783
  Other liabilities .............................................         6,426
                                                                   ------------

     Total liabilities ..........................................     1,262,989

  Common stock subject to put ...................................     5,000,000

Stockholders' Deficit:
  Preferred stock; $.0001 par value, 5,000,000 shares authorized,
    none issued and outstanding .................................             -
  Common stock; $.001 par value, 150,000,000 shares authorized,
    35,263,584 issued and outstanding ...........................        35,263
  Additional paid-in capital ....................................    38,985,632
  Accumulated deficit ...........................................   (37,544,990)
  Deferred compensation .........................................    (1,298,516)
  Accumulated comprehensive income ..............................       306,198
  Common stock subject to put ...................................    (5,000,000)
                                                                   ------------

     Total stockholders' deficit ................................    (4,516,413)
                                                                   ------------

     Total liabilities and stockholders' deficit ................  $  1,746,576
                                                                   ============

            See Notes to Unaudited Consolidated Financial Statements.
                                       -3-
<PAGE>
<TABLE>
                                     NEWPORT INTERNATIONAL GROUP, INC.
                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (Unaudited)
<CAPTION>
                                                    For the three-month           For the nine-month
                                                       periods ended                 periods ended
                                                       September 30,                 September 30,
                                                    2005           2004           2005           2004
                                                ------------   ------------   ------------   ------------
<S>                                             <C>            <C>            <C>            <C>
Revenues .....................................  $      2,035   $      5,339   $     15,463   $      8,729
                                                ------------   ------------   ------------   ------------

Operating expenses:
  Research and development ...................       138,574        168,029        469,722        534,257
  Sales, general and administrative ..........     1,775,234      2,742,896      4,006,173      4,579,778
                                                ------------   ------------   ------------   ------------

     Total operating expenses ................     1,913,808      2,910,925      4,475,895      5,114,035
                                                ------------   ------------   ------------   ------------

     Operating loss ..........................    (1,911,773)    (2,905,586)    (4,460,432)    (5,105,306)
                                                ------------   ------------   ------------   ------------

Other expenses ...............................             -              -       (172,929)             -
Unrealized loss-transfer of available-for-sale
 securities to trading securities ............             -              -     (4,999,263)             -
Unrealized loss on trading securities ........             -       (686,337)             -       (686,337)
Realized loss-trading securities .............             -              -       (270,384)             -
Realized loss-restricted investment ..........             -              -     (5,777,843)             -
Interest expense .............................    (1,099,105)      (271,653)    (2,164,744)    (4,213,945)
                                                ------------   ------------   ------------   ------------
  Total other expenses, net ..................    (1,099,105)      (957,990)   (13,385,163)    (4,900,282)

Net loss .....................................  $ (3,010,878)  $ (3,863,576)  $(17,845,595)  $(10,005,588)
                                                ============   ============   ============   ============

Transfer of previous unrealized loss on
 restricted investment .......................             -              -      4,999,263              -
Transfer of available-for-sale securities to
 trading securities ..........................             -              -      4,999,263              -
Unrealized loss- available-for-sale securities             -     (4,160,857)             -     (4,160,857)
Unrealized gain (loss)-restricted investment .       306,198     (3,474,520)       306,198     (3,474,520)
                                                ------------   ------------   ------------   ------------

Comprehensive loss ...........................  $ (2,704,680)  $(11,498,953)  $ (7,540,871)  $(17,640,965)
                                                ============   ============   ============   ============

Basic and diluted net loss per common share ..  $      (0.10)  $      (0.20)  $      (0.63)  $      (0.71)
                                                ============   ============   ============   ============

Basic and diluted weighted average common
 shares outstanding ..........................    30,605,811     19,335,609     28,184,029     14,141,907
                                                ============   ============   ============   ============

                         See Notes to Unaudited Consolidated Financial Statements.
                                                    -4-
</TABLE>
<PAGE>
<TABLE>
                                     NEWPORT INTERNATIONAL GROUP, INC.
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the nine-month periods ended September 30,
                                                (Unaudited)

<CAPTION>
                                                                                  2005           2004
                                                                              ------------   ------------
<S>                                                                           <C>            <C>
Cash flows from operating activities:
Net loss ...................................................................  $(17,845,595)  $(10,005,588)
Adjustments to reconcile net loss to net cash used in operating activities:
  Unrealized loss-transfer of available-for-sale securities to trading
   securities ..............................................................     4,999,263              -
  Unrealized loss on trading securities ....................................             -        686,337
  Realized loss-trading securities .........................................       270,384              -
  Realized loss- restricted investment .....................................     5,777,843              -
  Amortization of debt discount ............................................     1,670,650        215,425
  Amortization of deferred compensation ....................................       287,734              -
  Fair value of shares issued in connection with the settlement of
   pre-merger obligations ..................................................             -      3,482,382
  Fair value of shares of common stock isued in payment of interest on
   promissory notes ........................................................       122,026         69,148
  Excess of fair value of shares issued in satisfaction of accounts payable        181,607              -
  Fair value of shares issued in connection with the failure to timely file
   the registration statement ..............................................       132,851              -
  Fair value of shares issued in connection with services rendered .........        13,440        134,125
  Depreciation .............................................................        57,823         43,763
  Amortization of deferred financing costs .................................       188,384        130,604
  Fair value of stock options issued to employees and consultants for
   services rendered .......................................................       618,018        950,661
  Common stock issued in connection with note payable ......................             -        194,000
Changes in operating assets and liabilities:
  Other assets .............................................................        24,000          4,000
  Due from related party ...................................................             -         23,400
  Accounts payable and accrued expenses ....................................       295,328      1,168,615
  Accrued interest on note receivable ......................................         1,200              -
  Accrued interest on convertible promissory notes .........................         1,284         45,243
                                                                              ------------   ------------

Net cash used in operating activities ......................................    (3,203,760)    (2,857,885)
                                                                              ------------   ------------

Cash flows from investing activities:
  Cash acquired from merger ................................................             -         16,196
  Proceeds from disposition of trading securities ..........................       642,117              -
  Proceeds from disposition of marketable securities .......................        68,925              -
  Proceeds from note receivable ............................................        85,000              -
  Purchases of property and equipment ......................................       (92,593)       (45,041)
                                                                              ------------   ------------

Net cash (used in) provided by investing activities ........................       703,449        (28,845)
                                                                              ------------   ------------

Cash flows from financing activities:
  Principal repayments on lease obligations ................................        (7,835)        (7,233)
  Payment of finder's fees in connection with issuance of shares ...........       (35,375)      (104,000)
  Proceeds from issuance of convertible promissory notes ...................       635,000      1,726,026
  Proceeds from issuance of shares .........................................     1,328,750      2,830,000
  Advances from stockholder ................................................             -        215,000
  Proceeds from exercise of warrants .......................................       189,375              -
  Proceeds from exercise of stock options ..................................           554            750
  Payments of convertible promissory notes .................................      (265,000)      (140,000)
  Payments of deferred financing costs .....................................             -       (235,754)
  Payments of notes payable ................................................             -       (250,000)
                                                                              ------------   ------------

Net cash provided by financing activities ..................................     1,845,469      4,034,789
                                                                              ------------   ------------

Decrease in cash ...........................................................      (654,842)     1,148,059

Cash, beginning of period ..................................................     1,671,773         80,702
                                                                              ------------   ------------

Cash, end of period ........................................................  $  1,016,931   $  1,228,761
                                                                              ============   ============
                                                                                              (continued)
                         See Notes to Unaudited Consolidated Financial Statements.
                                                    -5-
</TABLE>
<PAGE>
<TABLE>
                                     NEWPORT INTERNATIONAL GROUP, INC.
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the nine-month periods ended September 30,
                                                (Unaudited)
                                                (continued)
<CAPTION>
                                                                                  2005           2004
                                                                              ------------   ------------
<S>                                                                           <C>            <C>
Supplemental disclosures of cash flow information:
  Cash paid during the year for interest ...................................  $      3,909   $          -
                                                                              ============   ============

  Cash paid during the year for taxes ......................................  $          -   $          -
                                                                              ============   ============

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 .........................  $    182,263   $    506,036
                                                                              ============   ============

Fair value of warrants issued to placement agent in connection with the
 issuance of the convertible notes and corresponding increase in deferred
 financing costs ...........................................................  $          -   $     51,101
                                                                              ============   ============

Fair value of repricing of warrants issued to placement agent in connection
 with the issuance of the 8% convertible notes and corresponding increase in
 deferred financing costs ..................................................  $    140,149   $          -
                                                                              ============   ============

Fair value of repricing of warrants and beneficial conversion feature issued
 in connection with the issuance of the 8% convertible notes and
 corresponding debt discount ...............................................  $  1,154,635   $          -
                                                                              ============   ============

Beneficial feature resulting from issuance of convertible promissory notes
 and corresponding debt discount ...........................................  $    423,956   $    520,687
                                                                              ============   ============

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

Conversion of convertible promissory notes in shares of common stock .......  $    827,307   $          -
                                                                              ============   ============

Fair value of shares issued for services rendered and corresponding increase
 to deferred compensation ..................................................  $  1,586,250   $          -
                                                                              ============   ============

                         See Notes to Unaudited Consolidated Financial Statements.
                                                    -6-
</TABLE>
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Newport International Group, Inc. (the "Company") was a development stage
company incorporated in Delaware in December 1999. During February 2004, the
Company acquired GrassRoots Communications, Inc. ("GrassRoots"). The Company,
through one of its subsidiaries, Spare Backup, Inc., sells on-line backup
solutions software and services to individuals, business professionals, small
office and home office companies, and small to medium sized businesses. The
Company has substantially discontinued its marketing and development efforts
under GrassRoots.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 2005 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2005. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2004.

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. The Company has generated minimal revenue since its inception on June 12,
2002, has incurred net losses of approximately $37.5 million. 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
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.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 valuation of stock-based instruments granted to noteholders and
consultants. Actual results will differ from these estimates.

                                       -7-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 amounting to 5,174,169
and 11,328,823, respectively, as of September 30, 2005, and the outstanding
warrants and stock options as of September 30, 2004 are excluded from the loss
per share computation due to their antidilutive effect.

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 2005, 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 and due to stockholder approximate their estimated
fair values due to the short-term maturities of those financial instruments. The
carrying amount of the convertible notes approximates the estimated fair value
for these financial instruments as management believes that such convertible
notes constitute substantially all of the Company's debt and the interest
payable on the convertible notes approximates the Company's incremental
borrowing rate.

INVESTMENT IN EQUITY SECURITIES

During 2004, the Company received 6,484,840 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 $11.8
million.

The Company holds 3,242,420 shares of the Investee in an escrow account which
may not be released without the Investee's permission until 2006. Until these
shares are released from escrow, the Company accounts for the value attributable
to such shares as restricted investment in marketable securities. The Company
adjusted the carrying value of the restricted investment to $133,921 at June 30,
2005 to reflect an other-than temporary impairment amounting to approximately
$5.8 million and has been recognized as realized loss in earnings. Any of the
restricted investment's future unrealized gain or loss, except for
other-than-temporary impairment, will be recognized as an element of
comprehensive income.

During July 2005, the Company sold 3,242,420 shares of the Investee used as
collateral for the Company's possible obligation to repurchase 2,500,000 shares
it has issued in a private placement during November 2004 ("Put Option"),
generating proceeds of approximately $640,000. The decrease in the carrying and
the fair value of this investment of approximately $5.3 million as of June 30,
2005 has been recorded as unrealized loss in the statement of operations of
approximately $5.0 million and as a realized loss of approximately $270,000.

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 are the following:

                                       -8-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      o  Transfer of the unrealized of available for-sale securities to trading
         securities resulting from the change of classification of the Investee
         shares used as collateral for the Put Option amounting to approximately
         $5.0 million during the nine-month period ended September 30, 2005

      o  Transfer of previously recognized unrealized loss on the Company's
         restricted investment in marketable securities amounting to
         approximately $5.0 million during the nine-month ended September 30,
         2005.

      o  Unrealized gain of approximately $300,000 resulting from an increase in
         the fair value of the restricted investment in marketable securities
         from June 30, 2005 to September 30, 2005.

      o  Unrealized loss on restricted investment in marketable securities and
         Investee shares used as collateral for the Put Option both amounting to
         approximately $3.5 million for the nine-month ended September 30, 2004,
         which represent the difference between the fair value of such
         investments at September 30, 2004 and their initial carrying value

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, 2005.

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.

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, which range between one
to two years.

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.

                                       -9-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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
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 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 for the respective nine-month period
ended September 30 would have been adjusted to the proforma amounts indicated
below:

                                                        2005           2004
                                                    ------------   ------------

Net loss as reported .............................  $(17,845,595)  $(10,005,588)
Add:
  Stock-based compensation expense included in
   reported net loss, net of related tax effects .       618,018        642,661
Deduct:
  Total stock-based compensation expense
   under fair value based method for all awards,
   net of related tax effects ....................      (720,523)      (653,489)
                                                    ------------   ------------

Pro forma net loss ...............................  $(17,948,100)  $(10,016,416)
                                                    ============   ============

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.

The fair value of the options granted during the six-month period ended
September 30, 2005 and 2004 was determined using the Black-Scholes
option-pricing model with the following assumptions: risk-free interest of
3.32%-3.95% and 3.0%, respectively; stock volatility of 36%-86% and 42%,
respectively; no dividends; and estimated life of 36 months.

                                      -10-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment".
This Statement requires that the cost resulting from all share-based
transactions be recorded in the financial statements. The Statement establishes
fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement
in accounting for share-based payment transactions with employees. The Statement
also establishes fair value as the measurement objective for transactions in
which an entity acquires goods or services from non-employees in share-based
payment transactions. The Statement replaces SFAS 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". The provisions of this Statement will be effective
for the Company beginning with its fiscal year ending 2006. The Company is
currently evaluating the impact this new Standard will have on its financial
position, results of operations or cash flows.

NOTE 3 - CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following as of September 30, 2005:

8% Convertible promissory notes, bearing interest at 8% per annum,
maturing on March 1, 2006. Interest payable March 31, 2004 and every
quarter thereafter either in cash or common stock. Interest paid in
common stock is convertible using the 10-day average closing bid of
the stock prior to the end of the quarter. 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. The promissory
notes are convertible at any time at the option of the holder, into
shares of common stock at a rate of $0.375 .........................  $ 906,786

Less:  unamortized discount ........................................   (412,174)
                                                                      ---------
Convertible promissory notes-long-term .............................  $ 494,612
                                                                      =========

12.5% Convertible promissory notes, bearing interest at 12.5% per
annum, maturing between March and June 2007. Interest payable June
30, 2005 and every quarter thereafter either in cash or common
stock. Interest paid in common stock is convertible using the 5-day
average closing price of the stock prior to the end of the quarter.
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. The promissory notes are convertible into shares of common
stock at a rate of $0.375 ..........................................  $ 635,000

Less: unamortized discount .........................................   (454,217)
                                                                      ---------
Convertible promissory notes-short term ............................  $ 180,783
                                                                      =========

In connection with the issuance of the 8% convertible promissory notes, the
Company issued 1,501,875 warrants to purchase common stock of the Company at an
exercise price of $1.25 per share during 2004. The warrants are exercisable for
a period of five years. The fair value of the warrants at the date of issuance
of approximately $366,000 has been recorded as a debt discount. The debt
discount is amortized over two years using the imputed interest rate method.

                                      -11-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - CONVERTIBLE PROMISSORY NOTES (CONTINUED)

The convertible rates for the 8% convertible promissory notes interest accrued
as of September 30, 2005 amounted to $1.03 per share. The Company issued 196,155
and 104,115 shares in connection with the payment of interest on the 8%
convertible promissory notes during the nine-month period ended September 30,
2005 and 2004, respectively. The fair value of such shares issued during the
nine-month period ended September 30, 2005 and 2004 amounted to approximately
$122,000 and $69,000, respectively. Furthermore, the Company issued 31,988
shares in October 2005 in connection with the payment of accrued interest of
approximately $32,000 as of September 30, 2005.

During the nine-month ended September 30, 2005, the Company satisfied the
remaining 10% Convertible Promissory Notes amounting to $325,000 by paying
$265,000 and issuing 75,000 shares of common stock. The fair value of the shares
of common stock amounted to $48,750.

During the nine-month ended September 30, 2005, certain noteholders of 8%
convertible promissory notes converted their promissory notes and accrued
interest amounting to approximately $827,000 in 2,251,152 shares of common
stock.

During the nine-month period ended September 30, 2005 and 2004, the Company
received $635,000 and $1,726,026, respectively, in consideration for the
issuance of the 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 8% Convertible Promissory Notes, then the exercise price of the warrants
issued pursuant to the Follow-on Financing will reset to such lower price. As of
September 30, 2005, the exercise price of such warrants are $0.375.

The Company has the right to call all of the 8% Convertible promissory notes and
12.5% 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.

Amortization of the debt discount and amortization of the deferred financing
costs amounted to approximately $1.7 million and $190,000 and $215,000 and
$130,000 during the nine-month period ended September 30, 2005 and 2004,
respectively, and are included in interest expense in the accompanying
consolidated statements of operations.

Accrued interest on the Convertible Promissory Notes amounted to approximately
$40,000 as of September 30, 2005.

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 the Convertible
promissory 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. During the nine-month period September 30, 2005
and 2004, the beneficial conversion feature amounted to approximately $424,000
and $521,000. This beneficial conversion feature is reflected in the
accompanying consolidated financial statements as additional paid-in capital and
corresponding debt discount.

                                      -12-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - COMMON STOCK SUBJECT TO PUT

Pursuant to a private placement of shares of common stock finalized in November
2004, the investors have the right to have the Company reacquire all or a
portion of 2,000,000 and 2,500,000 shares purchased at a price of $1.25 and
$1.00 per share, respectively, in the event the average price per share is less
than $1.25 and $1.00, respectively, 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 thirty-six months
thereafter. Such puts, valued at $5,000,000 as of September 30, 2005, are
accounted as temporary equity in the accompanying balance sheet. Such investors
have threatened to commence litigation and certain principals (See Note 7).

NOTE 5 - STOCKHOLDERS' DEFICIT

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, which
generated an interest expense of approximately $3.5 million during the
nine-month period ended September 30, 2004.

ISSUANCE OF COMMON STOCK PURSUANT TO SERVICES PERFORMED

During the nine-month period ended September 30, 2005 and 2004, the Company
issued 2,553,000 and 72,500 shares of common stock to consultants for services
performed. The fair value of such shares amounted to approximately $1.6 million
and $134,000, of which $280,000 and $134,000 has been recorded as selling
general and administrative expenses. The nature of the services rendered in
connection with the issuance of these shares were for marketing and strategic
planning purposes.

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

The Company issued 196,155 and 104,115 shares in connection with the payment of
interest on the 8% convertible promissory notes during the nine-month period
ended September 30, 2005 and 2004, respectively. The fair value of such shares
issued during the nine-month period ended September 30, 2005 and 2004 amounted
to approximately $122,000 and $69,000, respectively.

ISSUANCE OF COMMON STOCK PURSUANT TO FAILURE TO TIMELY FILE REGISTRATION
STATEMENT

During the nine-month period ended September 30, 2005, the Company issued 92,903
shares of common stock pursuant to its failure to timely file its registration
statement. The fair value of such shares amounted to approximately $133,000 and
is included in other expenses in the accompanying statement of operations.

ISSUANCE OF COMMON STOCK PURSUANT TO A STOCK-EXCHANGE AGREEMENT

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

                                      -13-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - STOCKHOLDERS' DEFICIT-CONTINUED

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

      2) 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. In aggregate, the consideration for the consultant's services
amounted to approximately $1,600,000, which is included in the sales, general,
and administrative expenses in the accompanying financial statements.

ISSUANCE OF COMMON STOCK PURSUANT TO A PRIVATE PLACEMENT

During September 2005, the Company issued 2,415,907 shares pursuant to a private
placement which generated net proceeds of approximately $1.3 million. In
connection with this private placement, the Company issued 664,375 warrants
exercisable at a price of $1.30 per share. The warrants expire in September
2010.

EXERCISE OF WARRANTS

During the nine-month period ended September 30, 2005, The Company issued
505,000 shares of common stock pursuant to the exercise of warrants which
generated proceeds of approximately $190,000.

NOTE 6 - STOCK OPTIONS AND WARRANTS

WARRANTS

During the nine-month period ended September 30, 2005, the Company issued
576,668 warrants in connection with the issuance of the 12.5% Convertible
Promissory Notes. The exercise price of the warrants is $0.375 per underlying
share of common stock. The warrants expire in December 2009. The fair value of
the warrants amounted to approximately $179,000 and has been recorded as an
increase in debt discount and a corresponding increase in additional-paid-in
capital.

The issuance of the 12.5% Convertible Promissory Notes triggered an adjustment
in the exercise price of the following warrants:

      o  2,621,875 warrants issued to the holders of the 8% Convertible
         Promissory Notes. The exercise price of such warrants has been
         decreased from a range of $0.75- $1.25 to $0.375. The fair value of the
         decrease of the exercise price of the warrants and the beneficial
         conversion feature of approximately $452,000 and $702,000, respectively
         was recorded as an increase in debt discount and as an increase in
         additional paid-in capital;

      o  425,000 warrants issued to the placement agent of the 8% Convertible
         Promissory Notes. The exercise price of such warrants has been
         decreased from a range of $0.75- $1.25 to $0.375. The fair value of the
         decrease of the exercise price of the warrants of approximately
         $140,000 was recorded as an increase in deferred financing costs and as
         an increase in additional paid-in capital;

                                      -14-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - STOCK OPTIONS AND WARRANTS (CONTINUED)

      o  562,500 warrants issued to shareholders in connection with the private
         placement closed in November 2004. The exercise price of such warrants
         has been decreased from a range of $1.55-1.60 to $1.49.

During the nine-month period ended September 30, 2004, the Company issued
1,366,875 warrants in connection with the issuance of the 8% Convertible
Promissory Notes. The fair value of the warrants amounted to approximately
$506,000 and has been recorded as an increase in debt discount and a
corresponding increase in additional-paid-in capital.

The Company used the following assumption to value the warrants issued in
connection with debt financing during the nine-month period ended September 30,
2005 and 2004: risk-free interest rate: 3.32%-3.95% and 3.0%, respectively;
volatility of 86% and 42%, respectively; estimated life of 4 years; and no
dividend expected during the term.

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 terminates ten
years after the date of issuance.

The Company granted 700,000 and 400,000 options during the nine-month period
ended September 30, 2005 and 2004, respectively, to purchase common stock to
non-employees for services performed. The exercise prices of such options ranged
from $0.001 to $1.62 during the nine-months ended September 30, 2005 and ranged
from $1.25 to $2.40 for options granted during the nine-month period ended
September 30, 2004, respectively. As a result, the Company recorded consulting
expense of approximately $208,000 and $310,000 during the nine-month period
ended September 30, 2005 and 2004, respectively, in accordance with SFAS No.123.

Such consulting expenses are 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, 2005 and 2004 was determined using the Black-Scholes
option-pricing model with the following assumptions: risk-free interest of
3.32-3.95% and 3.0%, respectively; stock volatility of 36%-86% and 42%,
respectively; no dividends; and estimated life of 36 months;

The Company issued 2,291,535 and 250,000 options with below market exercise
prices during the nine-month period ended September 30, 2005 and 2004,
respectively. The issuance of such options to employees resulted in compensation
expense pursuant to APB Opinion No. 25 amounting to approximately $410,000 and
$643,000 during the nine-month period ended September 30, 2005 and 2004,
respectively.

                                      -15-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - COMMITMENTS AND CONTINGENCIES

LITIGATION

FOCUS FOCUS
-----------

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 2004 and 2003 accompanying financial statements,
respectively.

No litigation has been filed by either party. However, in December 2004, the
Company has received notice from the counsel of the former owners of Focus Focus
that they are entitled to the options initially granted by the Company. The
Company believes that this claim is without merit.

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.

ROBINSON REED, INC. AND FIRST CAPITAL HOLDINGS INTERNATIONAL, INC.
------------------------------------------------------------------

Robinson Reed, Inc. and First Capital Holdings International, Inc. ("Robinson
Reed and First Capital") have recently threatened to bring litigation against
the Company, the Company's directors and/or the Company's management, and to
issue a press release in which they will disclose how $6.5 million of their
investment in the Company was obtained through misrepresentation, fraud and
failure to disclose material facts, and asserting that the Company acted in bad
faith in connection with the issuance of a promissory note pursuant to the
exercise of their put. Robinson Reed and First Capital have not specified the
amount of their purported damages and have not indicated exactly whom they would
sue or on what basis.

Since November 2004, the Company believes that Robinson Reed and First Capital
have engaged in a relentless campaign to exploit its position as a start-up and
to gain more stock and more benefits than was part of the original agreements
with them. Since November 2004:

      1) Robinson Reed and First Capital received an additional 1,500,000 shares
         of our common stock as part of a settlement agreement that provided for
         a general release of all parties involved;

      2) Robinson Reed and First Capital threatened to sue Cery Perle and
         Richard Galterio, two of the Company's directors, by asserting claims
         that were either completely unsubstantiated or fully released by the
         settlement agreement;

                                      -16-
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                               SEPTEMBER 30, 2005
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

      3) Robinson Reed and First Capital threatened to initiate regulatory
         investigations if the Company did not pay them $6.5 million dollars
         plus interest accruing at 7% per annum;

      4) Either Robinson Reed or First Capital breached a mutual non-disclosure
         agreement and contacted a retail outlet with which the Company was
         engaged in confidential negotiations;

      5) Robinson Reed and First Capital issued a put option notice to the
         Company in the middle of negotiations at a time when the parties were
         seeking to agree when the put options would become effective; and

      6) Robinson Reed and First Capital repeatedly refused to accept a
         convertible promissory note delivered to them in conformity with the
         agreements, and unreasonably demanded that a registration statement to
         register the Company's shares of common stock issuable upon conversion
         of the promissory note be filed with the SEC just one day after they
         gave the Company a demand for registration. No such requirements
         relating to timing of the registration statement are set forth in our
         agreements with Robinson Reed or First Capital.

We further understand that Robinson Reed and First Capital may have breached
their stock purchase agreement with the Company, by transferring restricted
securities to "individual investors" shortly after our original issuance, at a
substantial mark-up from the original purchase price. Our stock purchase
agreement with Robinson Reed and First Capital contained representations that
they were purchasing the stock for their own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
neither Robinson Reed or First Capital had any present intention of selling,
granting any participation in or otherwise distributing the same. The common
stock the Company issued to Robinson Reed and First Capital contained an
appropriate legend that the shares were not registered and could not be sold or
transferred without compliance with the Securities Act of 1933, as amended.
Given the timing of the transfer, which the Company's management understands to
have taken place very shortly after our original issuance, the Company is not
certain if Robinson Reed and First Capital had valid exemptions when they
transferred its stock to these "individual investors".

The Company believes that the demands and requests from Robinson Reed and First
Capital are unreasonable and unwarranted. Management intends to vigorously
defend any and all claims brought against the Company, its directors and its
management by Robinson Reed and or First Capital, and, if a lawsuit is filed,
management will assert various counterclaims against them. We have retained
counsel to represent us in the event of such litigation. Management is unable to
determine the outcome of this matter at this time.

SPENCE MCLAUGHLIN CONSULTING GROUP
----------------------------------

During the quarter ended June 30, 2005, an arbitrator awarded a consultant
certain compensation amounting to $81,250 payable by Grassroots, one of the
Company's subsidiaries. The Company has recorded a corresponding liability in
the accompanying financial statements.

NOTE 8 - SUBSEQUENT EVENTS

During October 2005, the Company issued 363,636 shares of common stock pursuant
to its private placement generating $200,000. In connection with the issuance of
shares, it also issued 100,000 warrants exercisable at a price of $1.30 per
share. The warrants expire in October 2010.

During October 2005, the Company issued 31,988 shares in connection with the
payment of interest on the 8% and 12.5% convertible promissory notes.

                                      -17-
<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.

Over the course of the next 12 months, we intend to raise additional operating
capital, execute our business plan and focus our business development efforts in
the following three key areas:

      o  By enabling our customers to secure their files and documents more
         effectively through the use of web-based backup services,

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

      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.

      o  By raising sufficient funds to cover our ongoing operations and satisy
         our obligations when they become due

We have substantially ceased all our marketing and development efforts for our
Conga line of products operated by Grassroots. During March 2005 we launched
Spare Backup, our fully automated online backup service. During the nine-month
period ended September 30, 2005, we have established a reseller network and
entered into reseller agreements with six companies, including Hewlett-Packard
and CompUSA. In July 2005 we received our first purchase order from CompUSA. In
August 2005 we launched our Spare Switch software. We are now focusing all our
marketing and development efforts on our Spare software line which we believe
will constitute a substantial portion of our revenues and operating expenses in
the future. Our focus on Spare is the result of what we believe to be the best
use of our available resources and limited personnel and of our belief that this
area will provide a greater opportunity for earlier returns on this technology
as compared to video conferencing. We may refocus certain of our marketing and
development efforts back to our Conga line of products in future periods at such
time as we have sufficient available resources to devote to these products and
if we determine we can effectively compete in this product area.

Our pricing model for Spare Backup and Spare Switch product offerings are
subscription-based. Additionally, certain of our marketing programs provide for
end-user trial periods not to exceed three months. While we are shipping these
products to retailers and Original Equipment Manufacturers ("OEM") for wide
distribution and availability, we recognize revenues on these product offerings
once the end-users subscribed and pay for our web-based back-up services.
Accordingly, we do not expect a significant increase in our revenues until the
first half of 2006.

During the nine months ended September 30, 2005 we reduced our headcount. This
reduction in headcount will provide for reduced costs of operations in the
foreseeable future. As the demand for our products and services increases, we
intend to add personnel who will primarily focus in the areas of customer
service and quality monitoring, as well as administrative functions to support
growing operations. If we are able to raise sufficient capital, we also intend
to invest in core technology research and product development as well as sales
and marketing personnel.

                                      -18-
<PAGE>

GOING CONCERN

We have generated minimal revenue since our inception on June 12, 2002, and have
incurred net losses of approximately $38.0 million, of which approximately $28.2
million resulted from stock-based transactions, since inception through
September 30, 2005. As a result, our current operations are not an adequate
source of cash to fund future operations. The report of our independent
registered public accounting firm on our financial statements for the year ended
December 31, 2004 contains an explanatory paragraph regarding our ability to
continue as a going concern based upon our net losses and cash used in
operations. Our ability to continue as a going concern is dependent upon our
ability to obtain the necessary financing to meet our obligations and repay our
liabilities when they become due and to generate profitable operations in the
future. We plan to continue to provide for our capital requirements through the
sale of equity securities and debt, however, we have no firm commitments from
any third party to provide this financing and we cannot assure you we will be
successful in raising working capital as needed. There are no assurances that we
will have sufficient funds to execute our business plan, pay our obligations as
they become due or generate positive operating results.

CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 2 to the
audited consolidated financial statements included in our Form 10KSB for the
year ended December 31, 2004. We believe that the application of these policies
on a consistent basis enables our 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 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 investments in available-for-sale equity securities and
investments in trading equity securities be recorded as a component of
stockholders' equity and statement of operations, respectively. Furthermore, it
provides that if factors leads us to determine that the fair value of certain
financial instruments is impaired, that we should adjust the carrying value of
such investments to its fair value.

Robinson Reed, Inc. and First Capital Holdings International, Inc. are
continuing to threaten us with litigation, which has been recurring since
November 2004. Additionally, during the nine-month period ended September 30,
2005, an arbitrator entered an award in the amount of $81,250 against
GrassRoots.

                                      -19-
<PAGE>

To help fund its on-going operations and to help defray future legal
expenditures we will incur related to threatened litigation brought by Robinson
Reed and First Capital Holdings International, we have sold 50% of our
investment in Langley Park Investment Trust in July 2005. The proceeds generated
from such sale amounted to approximately $640,000. Based on historical data, we
believe that we will continue to incur between $100,000 and $200,000 per year on
legal fees on matters related to Robinson Reed and First Capital for the
foreseeable future.

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 as 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.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                               (Unaudited)     (Unaudited)     Increase/       Increase/
                                                 Nine-Month Period Ended       (Decrease)      (Decrease)
                                                      September 30,            $ 2005 vs       % 2005 vs
                                                  2005           2004            2004            2004
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>                 <C>
Revenues ..................................   $     15,463    $      8,729    $      6,734          77%
                                              ------------    ------------    ------------        ----
Operating expenses: .......................              -               -
  Research and development ................        469,722         534,257         (64,535)        -12%
  Sales, general and administrative .......      4,006,173       4,579,778        (573,605)        -13%
                                              ------------    ------------    ------------        ----

     Total operating expenses .............      4,475,895       5,114,035        (638,140)        -12%

     Operating loss .......................     (4,460,432)     (5,105,306)        644,874          13%

Other expenses ............................       (172,929)              -        (172,929)         NM
Unrealized loss-transfer of available-for-
 sale securities to trading securities ....     (4,999,263)              -       4,999,263          NM
Unrealized loss on trading securities .....              -        (686,337)       (686,337)         NM
Realized loss-trading securities ..........       (270,384)              -         270,384          NM
Realized loss-restricted investment .......     (5,777,843)              -       5,777,843
Interest expense ..........................     (2,164,744)     (4,213,945)     (2,049,201)        -49%
                                              ------------    ------------    ------------        ----
  Total other expenses, net ...............    (13,385,163)     (4,900,282)      8,484,881         173%

Net loss ..................................   $(17,845,595)   $(10,005,588)      7,840,007          78%
                                              ============    ============    ============        ====
NM:  Not meaningful
</TABLE>

      Nine-Month Period Ended September 30, 2005 and 2004

         REVENUES

We have generated minimal revenues since inception. Revenues recognized during
the nine-month period ended September 30, 2005 consists of monthly licensing
fees generated from our Conga product offerings launched during 2004. We believe
that our revenues from our Conga offerings will decrease in the future and that
our revenues from our Spare-Backup will constitute the majority of our revenues
in the future.

                                      -20-
<PAGE>

         RESEARCH AND DEVELOPMENT

Research and development expenses consist primarily of compensation expenses
paid to our software engineers employees and consultants. The decrease in our
research and development expenses during the nine-month period ended September
30, 2005 when compared to the prior year period is primarily due to a reduction
in software engineers during the nine-month ended September 30, 2005.

         SALES, GENERAL, AND ADMINISTRATIVE EXPENSES

Sales, general, and administrative expenses consist primarily of salaries and
related expenses paid to our employees and contractors as well as advertising
expenses. The decrease in sales, general, and administrative expenses during the
nine-month period ended September 30, 2005 is primarily due to a one-time
finders'fees of $1.6 million paid in connection with the Langley Park
transaction in September 2004, offset by advertising fees we have incurred in
connection with the launch of our new product Spare as well as legal fees
incurred in connection with our registration statement filed in 2005 and legal
fees incurred in connection with the Robinson Reed transaction. We have not
incurred such costs in 2004.

         OTHER EXPENSES

Other expenses consist primarily of the fair value of shares issued pursuant to
penalties associated with the failure to timely file the registration statement
and loss on disposition of property and equipment. The increase in other
expenses during the six-month period ended September 30, 2005 consists primarily
of the fair value of the shares issued in January, February and March 2005.
There were no such shares issued in the six-month period ended September 30,
2004.

         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. The decrease in
interest expense during the nine-month period ended September 30, 2005 is
primarily due to the recognition of interest expense 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 one-time 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. This increase is offset by higher amortization of debt discount
resulting from the March 2005 repricing of the 8% convertible promissory notes
and related warrants.

UNREALIZED/REALIZED LOSS ON MARKETABLE SECURITIES.

The unrealized/realized loss on marketable securities consists of losses on our
investment in Langley Park recognized in earnings which aggregated approximately
$11.0 million and $690,000 during the nine-month ended September 30, 2005 and
2004. A significant portion of the unrealized/ realized loss resulted from a
decline in value of the Langley Park shares in 2004, which was previously
recorded as a separate element of comprehensive income.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2005, we had a working capital deficiency of approximately
$60,000.

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.

                                      -21-
<PAGE>

During the nine-month period ended September 30, 2005, we have received gross
proceeds of $1,328,750 and $635,000 from the issuance of shares of common stock
and convertible promissory notes, respectively. We have also received proceeds
from the sale of the Langley Park shares amounting to approximately $640,000.
Such proceeds were used to fund our operations. From funds available at January
1, 2005, we have also satisfied the remaining $325,000 10% convertible
promissory by paying $265,000 and fund our operating activities, amounting to
$3.2 million.

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.

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. 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.

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.

On November 9, 2005, the Company announced that it was restating its
consolidated balance sheet, statement of operations and statements of
stockholders' deficit as of and for the the interim period ended June 30, 2005
to correct the carrying value of its restricted investment in marketable
securities. Previously, the Company had presented its restricted investment in
marketable securities at a value of $795,311. As a result of a normal periodic
review of its financial statements by the staff of the Securities and Exchange
Commission, and after considering the length of time and the extent to which the
market value of the restricted investment has been less than its cost and other
factors, the Company has determined that the fair value of the restricted
investment amounted to $133,921 as of June 30, 2005. Consequently, on November
9, 2005 the Company filed an amendment to its June 30, 2005 Form 10-QSB
restating its interim financial statements as of June 30, 2005 and for the
interim period then ended. As a result of the restatement, the Company
determined that there was a material weakness in its internal control over
financial reporting as of September 30, 2005 related to the carrying value of
its restricted investment in marketable securities. The transaction leading to
the Company's acquisition of marketable securities was a one-time transaction
and management does not anticipate the Company will enter into similar
transactions in future periods. Because the Company corrected the carrying value
of its restricted investment in marketable securities and the related charge to
earnings, and as a result of the nonrecurring nature of the underlying
transaction, the Company believes that it corrected this material weakness.

                                      -22-
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

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

During September and October 2005 we sold 2,937,782 shares of our common stock
and common stock purchase warrants to purchase 807,891 shares of our common
stock at an exercise price of $1.30 per share to 17 accredited investors in a
private placement exempt from registration under the Securities Act of 1933 in
reliance on Section 4(2) of that act and Rule 506 of Regulation D. We received
gross proceeds of $1,615,781 in this offering and we paid commissions of $35,375
to Skye Banc LLC in connection with the sale of these securities.

During July 2005, we issued 1,500,000 shares of common stock to an individual
and to a corporation for services rendered. The fair value of the shares, at the
time of issuance, amounts to $660,000. The securities were issued in a
transactions exempt from registration under the Securities Act of 1933 in
reliance on an exemption provided by Section 4(2) of that act and the recipients
were accredited or sophisticated investors who had such knowledge and experience
in business matters that they were capable of evaluating the merits and risks of
the prospective investment in our securities. The recipients had access to
business and financial information concerning our company.

During August 2005, we issued 750,000 shares of common stock to a corporation
for services rendered. The fair value of the shares, at the time of issuance,
amounts to $652,500. The securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on an exemption
provided by Section 4(2) of that act and the recipient was a sophisticated
investor who had such knowledge and experience in business matters that it was
capable of evaluating the merits and risks of the prospective investment in our
securities. The recipient had access to business and financial information
concerning our company.

During September 2005, we issued 275,000 shares of common stock to a corporation
and to a limited liability company for services rendered. The fair value of the
shares, at the time of issuance, amounts to $273,750. The securities were issued
in transactions exempt from registration under the Securities Act of 1933 in
reliance on an exemption provided by Section 4(2) of that act and the recipients
were sophisticated investors who had such knowledge and experience in business
matters that they were capable of evaluating the merits and risks of the
prospective investment in our securities. The recipients had access to business
and financial information concerning our company.

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

      31.1     Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer

      31.2     Rule 13a-14(a)/15d-14(a) certification of Principal Accounting
               Officer.

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

                                      -23-
<PAGE>


                                   SIGNATURES

In accordance with requirements of the Exchange Act, 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 18, 2005
          -----------------------------------------------      -----------------
                          Cery B. Perle                              Date
          President, Chief Executive Officer and Director
                 (Principal executive officer and
                   principal financial officer)


                                      -24-