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 JUNE 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 July 31, 2004 was 14,390,045

<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........20

     Item 3. Controls and Procedures..........................................36



PART II - OTHER INFORMATION

     Item 1. Legal Proceedings................................................37

     Item 2. Changes in Securities and Small Business Issuer Purchase of
             Equity Securities................................................37

     Item 3. Defaults Upon Senior Securities..................................38

     Item 4. Submission of Matters to a Vote of Security Holders..............38

     Item 5. Other Information................................................38

     Item 6. Exhibits and Reports on Form 8-K.................................39

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


                                      - 3 -
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL INFORMATION

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

                                     ASSETS
Current Assets:
  Cash ..........................................................  $     20,807
                                                                   ------------

     Total current assets .......................................        20,807

  Website development costs, net of accumulated
   amortization of $17,500 ......................................        17,500
  Property and equipment, net of accumulated
   depreciation of $13,194 ......................................        76,267
  Deferred financing costs, net of accumulated
   amortization of $75,944 ......................................       244,832
  Other assets ..................................................         2,228
                                                                   ------------

     Total assets ...............................................  $    361,634
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Accounts payable and accrued expenses .........................  $    529,649
  Current portion of capitalized lease obligations ..............        10,103
  Due to stockholders ...........................................       240,000
                                                                   ------------

     Total current liabilities ..................................       779,752

  Convertible notes and related accrued interest,
   net of discount of $968,380 ..................................     1,222,821
  Capitalized lease obligations, net of current portion .........        12,333
  Other liabilities .............................................         6,426
                                                                   ------------

     Total liabilities ..........................................     2,021,332

Stockholders' Deficit:
  Preferred stock; $.0001 par value, 5,000,000 shares authorized,
   none issued and outstanding ..................................             -
  Common stock; $.00001 par value, 150,000,000 shares authorized,
   14,370,669 issued and outstanding ............................           144
  Additional paid-in capital ....................................     9,923,117
  Accumulated deficit ...........................................   (11,582,959)
                                                                   ------------

     Total stockholders' deficit ................................    (1,659,698)
                                                                   ------------

     Total liabilities and stockholders' deficit ................  $    361,634
                                                                   ============

                 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           Six Months Ended          For the Period
                                             June 30,                   June 30,            From June 12, 2002
                                    -------------------------   -------------------------   (Date of Inception)
                                       2004           2003         2004          2003         to June 30,2004
                                    -----------   -----------   -----------   -----------   -------------------
<S>                                 <C>           <C>           <C>           <C>              <C>
Revenues .......................... $     3,390   $         -   $     3,390   $         -      $      3,390

Operating expenses:
  Sales, general and administrative   1,095,553     2,134,984     2,203,110     2,663,212         7,605,658
                                    -----------   -----------   -----------   -----------      ------------

     Total operating expenses .....   1,095,553     2,134,984     2,203,110     2,663,212         7,605,658
                                    -----------   -----------   -----------   -----------      ------------

     Operating loss ...............  (1,092,163)   (2,134,984)   (2,199,720)   (2,663,212)       (7,602,268)
                                    -----------   -----------   -----------   -----------      ------------

  Interest expense ................     387,533             -     3,942,292             -         3,980,691
                                    -----------   -----------   -----------   -----------      ------------

Net loss .......................... $(1,479,696)  $(2,134,984)  $(6,142,012)  $(2,663,212)     $(11,582,959)
                                    ===========   ===========   ===========   ===========      ============

Basic net loss per common share ... $     (0.10)  $     (4.92)  $     (0.54)  $     (6.14)
                                    ===========   ===========   ===========   ===========

Basic weighted average common
shares outstanding ................  14,302,494       434,099    11,356,923       434,099
                                    ===========   ===========   ===========   ===========

                                 See Notes to Consolidated Financial Statements.

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

<CAPTION>
                                                                    Six Months Ended          For the Period
                                                                        June 30,            From June 12, 2002
                                                                -------------------------   (Date of Inception)
                                                                    2004          2003        to June 30,2004
                                                                -----------   -----------   -------------------
<S>                                                             <C>           <C>              <C>
Cash flows from operating activities:
Net loss .....................................................  $(6,142,012)  $(2,663,212)     $(11,582,959)
Adjustments to reconcile net loss to net cash
 used in operating activities:
  Amortization of debt discount ..............................       81,967             -            83,860
  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 isued in payment of
   interest on promissory notes ..............................       34,561             -            34,561
  Loss on sale of property and equipment .....................            -             -            29,906
  Depreciation and amortization ..............................       27,558         3,622            61,255
  Write-off of deposit on Focus Focus.com ....................            -       100,000           100,000
  Amortization of deferred financing costs ...................       40,097             -            43,509
  Fair value of stock options issued to employees and
   consultants for services rendered .........................      497,938     1,207,194         2,908,326
  Common stock issued to consultants for services rendered ...      134,000       153,000           409,750
Common stock issued in connection with note payable ..........      194,000             -           194,000
Changes in operating assets and liabilities:
  Due from related party .....................................       23,400       (35,700)                -
  Prepaid expenses and other current assets ..................        4,000        45,633                 -
  Accounts payable and accrued expenses ......................      291,731        60,104           497,041
  Other long-term liability ..................................            -             -             6,426
  Accrued interest on convertible promissory notes ...........       76,421             -            76,421
                                                                -----------   -----------      ------------

Net cash used in operating activities ........................   (1,257,957)   (1,129,359)       (3,655,522)
                                                                -----------   -----------      ------------

Cash flows from investing activities:
  Proceeds from sale of property and equipment ...............            -             -            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 ........................      (45,046)      (84,883)         (178,103)
                                                                -----------   -----------      ------------

Net cash used in investing activities ........................      (28,850)      (84,883)         (239,062)
                                                                -----------   -----------      ------------

Cash flows from financing activities:
  Principal repayments on lease obligations ..................       (4,792)            -            (9,467)
  Proceeds from issuance of convertible promissory notes .....    1,401,023             -         2,109,090
  Proceeds from exercise of stock options ....................          750        29,750           325,750
  Advances from stockholders .................................      225,000             -           240,000
  Collection of stock subscription receivable ................            -        81,000            81,000
  Proceeds from issuance of common stock .....................            -     1,106,090         1,617,925
  Payments of deferred financing costs .......................     (145,069)            -          (198,907)
  Payments of notes payable ..................................     (250,000)            -          (250,000)
                                                                                               ------------

Net cash provided by financing activities ....................    1,226,912     1,216,840         3,915,391
                                                                -----------   -----------      ------------

Change in cash ...............................................      (59,895)        2,598            20,807

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

Cash, end of period ..........................................  $    20,807   $     8,464      $     20,807
                                                                ===========   ===========      ============

                                 See Notes to Consolidated Financial Statements.

                                                     - 6A -
</TABLE>
<PAGE>
<TABLE>
                                        NEWPORT INTERNATIONAL GROUP, INC.
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (Unaudited)
                                                   (continued)
<CAPTION>
                                                                    Six Months Ended          For the Period
                                                                        June 30,            From June 12, 2002
                                                                -------------------------   (Date of Inception)
                                                                    2004          2003        to June 30,2004
                                                                -----------   -----------   -------------------
<S>                                                             <C>           <C>              <C>
Supplemental disclosures of cash flow information:

  Cash paid during the six month period for interest and 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 ................................................  $   506,036

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 setllement of pre-merger obligations ................  $   544,368


                                 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 revenues since its inception
on June 12, 2002, has incurred net losses of approximately $11.6 million and has
negative cash flows from operations of approximately $3.7 million since its
inception through June 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 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.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN (CONTINUED)

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

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

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

UNAUDITED INTERIM FINANCIAL DATA-CONTINUED

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 June 30, 2004 and 2003 are not necessarily
indicative of the results to be expected for the full years.

BASIC AND DILUTED LOSS PER SHARE

Basic and diluted loss per share is based on the weighted average number of
common shares and common share equivalents 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 three-month and six-month periods
ended June 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 six-month period ended
June 30, 2004, the Company had occasionally reached bank balances which exceeded
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, receivables,
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 related-party advances payable 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.

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,

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

SOFTWARE DEVELOPMENT COSTS-CONTINUED

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 June 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.

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 June 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.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

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
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.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

STOCK-BASED COMPENSATION-CONTINUED

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:
                                                           SIX-MONTH ENDED
                                                      -------------------------
                                                        JUNE 30,      JUNE 30,
                                                          2004         2003
                                                      -----------   -----------

Net loss as reported ...............................  $(6,142,012)  $(2,663,212)
Add:
  Stock-based compensation expense included in
    reported net loss, net of related tax effects ..      493,813       372,813
Deduct:
  Total stock-based employee compensation expense
    under fair value based method for all awards,
    net of related tax effects .....................     (186,768)     (373,522)
                                                      -----------   -----------

Pro forma net loss .................................  $(6,022,391)  $(2,135,921)
                                                      ===========   ===========

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

the 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 six-month period ending
June 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 three-month period ended June 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

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - CONVERTIBLE DEBT-CONTINUED

end of the quarter. The convertible rates for the interest accrued through March
31, 2004 and June 30, 2004 amounted to $2.83 and $1.79, respectively. 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 six-month period ended
June 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 $375,000. 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 187,500 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 187,500 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 $172,000 has been recorded as debt discount.
The debt discount is amortized over the terms of the 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 $314,000 to the placement agent. The Company has
recorded the placement agent fee in deferred financing costs at June 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 $82,000 during the
six-month period ended June, 2004 and is included in interest expense in the
accompanying consolidated statements of operations.

Accrued interest on the convertible promissory notes amounted to approximately
$82,000 at June 30, 2004, and is included in convertible promissory notes and
related accrued interest in the accompanying consolidated balance sheet.

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 six-month period ended June 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' DEFICIT

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.

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 us for cancellation.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 - STOCKHOLDERS' DEFICIT-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 six-month period ended June 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.

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 cancel 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.

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.

ISSUANCE OF COMMON STOCK PURSUANT TO EXERCISE OF STOCK OPTIONS

During April 2004, the Company issued 37,500 shares of common stock pursuant to
the exercise of stock options which generated proceeds of $750.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 six-month period ended June 30, 2004 and 2003, respectively, the
Company granted 200,000 and 2,300,000 options, respectively, to purchase common
stock to non-employees for services performed. The exercise prices of such
options amounted to $2.40 and ranged from $0.02 to $1.70 for the six-month
period ended June 30, 2004 and 2003, respectively. As a result, the Company
recorded consulting expense of approximately $80,000 and $834,000 for the
six-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 six-month period ended June 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.

During the three-month period ended June 30, 2004 and 2003, the Company issued
options to employees to purchase an aggregate of 29,000 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 $41,000
and $373,000 of compensation expense recorded under APB Opinion No. 25 during
the six-month period ended June 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.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

During July 2004, the Company received notice of a claim on behalf of a former
consultant alleging wrongful termination of his contract, thereby entitling him
to certain compensation and severance rights. The Company believes the claim is
without merit based upon the material breach of the contract by the consultant.

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

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 - COMMITMENTS AND CONTINGENCIES-CONTINUED

and property tax expenses. The base rent will be adjusted annually based on CPI.
The lease is set to commence on April 1, 2004.

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 June 30, 2004.

In September 2003, a stockholder advanced $15,000 to the Company. Additionally,
In May 2004, two shareholders advanced $225,000 to the Company. The advances do
not bear interest and are payable on demand. All original advances are
outstanding at June 30, 2004.

NOTE 8 - SUBSEQUENT EVENT

In July 2004, the Company has agreed to issue 5,882,352 shares of the Company's
common stock at a purchase price of $2.01 to a United Kingdom Corporation (the "
Corporation"). In exchange for such shares, the Corporation will issue
approximately up to 6,500,000 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
the Corporation's shares without the Corporation's 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 the Corporation held in escrow will be returned to
the Corporation in the same ratio as the Average Bid Price is to $2.01. This
transaction will be rescinded if the Corporation's shares of common stock are
not traded on the London Stock Exchange by September 30, 2004. The Company
intends to sell the shares of the Corporation to finance its operations, its
working capital requirements, its short and long-tem debt requirements as well
for strategic purposes.

                                     - 19 -
<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 three 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 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 $11.6 million and had negative cash
flows from operations of approximately $3.7 million since its inception through
June 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
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

                                     - 20 -
<PAGE>

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 generated minimal 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.

                                     - 21 -
<PAGE>

RESULTS OF OPERATIONS

      THREE- AND SIX-MONTH PERIOD ENDED JUNE 30, 2004 COMPARED TO JUNE 30,2003

REVENUES

We have generated minimal revenues since inception. Revenues recognized during
the three and six-month period ended June 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 six-month period ended June 30, 2004
decreased by approximately $1.0 million and $1.4 million, respectively, when
compared to the same periods in 2003. The decreases in sales, general, and
administrative expenses is primarily due to a large number of grants of stock
options below fair market value during 2003. The fair value of such options
amounted to approximately $600,000 and $1.2 million during the three- and
six-month period ended June 30, 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 six-month period ended June 30, 2004 increased by
approximately $400,000 and $3.9 million when compared to the same periods in
2003. The increase in interest expense during the three-month period ended June
30, 2004 is primarily due to the issuance of common stock pursuant to financing
provided by a reseller, and, to a lesser extent, to accrued interest and debt
amortization of the Follow-on Notes issued in March 2004. The increase in
interest expenses during the six-month period ended June 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.

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.

                                     - 22 -
<PAGE>

For the six-month period ended June 30, 2004, we have received gross proceeds of
approximately $1.4 million and $225,000 from the issuances of convertible
promissory notes and advances from stockholders, respectively. Such proceeds,
together with the funding of $300,000 provided by vendors, were used to fund our
operating expenses as well as 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 six-month
period ended June 30, 2003, we have received gross proceeds of approximately
$1.2 million from the issuance of shares of common stock which were used to fund
our operating expenses.

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.

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 AND HAVE AN
ACCUMULATED DEFICIT AT JUNE 30, 2004, 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. 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.

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

We have not yet formally 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

                                     - 23 -
<PAGE>

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.

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.

As of June 30, 2004, we had approximately $20,000 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. The Company intends
to secure substantial additional financing in the near future. 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

                                     - 24 -
<PAGE>

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.

As of June 30, 2004, we had an accumulated deficit of approximately $11.6
million. We have incurred net losses quarterly from inception through June 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 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.

                                     - 25 -
<PAGE>

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.

                                     - 26 -
<PAGE>

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 violates 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

                                     - 27 -
<PAGE>

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.

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.

                                     - 28 -
<PAGE>

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:

      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

                                     - 29 -
<PAGE>

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
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

                                     - 30 -
<PAGE>

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
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;

                                     - 31 -
<PAGE>

      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.

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

                                     - 32 -
<PAGE>

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.

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;

                                     - 33 -
<PAGE>

      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
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

                                     - 34 -
<PAGE>

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.

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

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.

                                     - 35 -
<PAGE>

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We provide Web conferencing and collaboration solutions product and services.
Our financial results could be affected by factors such as changes in interest
rates and fluctuations in the stock market. We do not use derivative instruments
to hedge our investing and financing risks. Due to the limited duration of our
short-term investments and their investment grade level, we anticipate no
material market risk exposure. Therefore, no quantitative tabular disclosures
are presented.

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.

                                     - 36 -
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         During July 2004, the Company received notice of a claim on behalf of a
former consultant alleging wrongful termination of his contract, thereby
entitling him to certain compensation and severance rights. We believe the claim
is without merit based upon the material breach of the contract by the
consultant.

ITEM 2.  CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY
         SECURITIES

         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. 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.

         Between May 2004 and June 2004, we issued to three accredited investors
our promissory notes in the aggregate principal amount of $375,000 and warrants
to purchase 187,500 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.

         During May 2004, Newport issued 100,000 shares of its common stock to a
reseller pursuant to a distribution agreement. The agreement was subsequently
cancelled by Newport. The issuance of the shares was made to an accredited and
sophisticated investor, who acquired the shares for investment and had access to
applicable information pertaining to the company. Accordingly the issuance of
the shares was exempt from registration under Section 4(2) of the Securities Act
of 1933. Subsequent to the issuance, the Company cancelled the agreement with
the reseller, and the shares are expected to be cancelled as well.

         In May 2004, the Company issued 72,500 shares of its common stock to
two independent contractors for services rendered, which were valued at
approximately $134,125. Inasmuch as the independent contractors were
sophisticated and knowledgeable investors acquired the shares for investment and
had access to applicable information pertaining to the Company and had a

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<PAGE>

preexisting relationship with the Company, the issuance of the shares was exempt
from registration under Section 4(2) of the Securities Act of 1933.

ITEM 3.  DEFAULTS ON SENIOR SECURITIES

         None

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

         In June 2004, the holders of a majority in interest of the voting
capital stock of our Company approved 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. In addition, pursuant to the same
consent, the holders of a majority in interest of the capital stock of our
Company ratified the amendment to the Company's 2002 Stock Option and Stock
Award Plan to increase the covered shares from 1,000,0000 shares to 12,000,000
shares of common stock.

ITEM 5.  OTHER INFORMATION

         In July 2004, the Company has agreed to issue 5,882,352 shares of the
Company's common stock at a purchase price of $2.01 to a United Kingdom
Corporation (the " Corporation"). In exchange for such shares, the Corporation
will issue approximately up to 6,500,000 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 the Corporation's shares without the Corporation's 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 the Corporation held in escrow will
be returned to the Corporation in the same ratio as the Average Bid Price is to
$2.01. This transaction will be rescinded if the Corporation's shares of common
stock are not traded on the London Stock Exchange by September 30, 2004. The
Company intends to sell the shares of the Corporation to finance its operations,
its working capital requirements, its short and long-tem debt requirements as
well for strategic purposes.

                                     - 38 -
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


         a. EXHIBITS

            3.4   Certificate of Amendment to the Certificate of Incorporation

            10.1  Form of Promissory Note

            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 8k/A was filed on April 16, 2004 reporting
                under Items 1 and 7.

            (2) A report on Form 8-K/A was filed on May 5, 2004 reporting under
                Items 1 and 7.

                                     - 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                                  August 13, 2004
          ---------------------------------------------      ---------------
                          Cery B. Perle                            Date
          President, Chief Executive Officer & Director
                    (CHIEF EXECUTIVE OFFICER)
                    (CHIEF FINANCIAL OFFICER)


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