U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-KSB
                                   (Mark One)


 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

                   For the fiscal year ended December 31, 2004


 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                    OF 1934

                 For the transition period from ______ to ______


                        Commission File Number 000-30587


                        NEWPORT INTERNATIONAL GROUP, INC.
                 (Name of small business issuer in its charter)


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


 73061 El Paseo, Suite 202, Palm Desert, California                     92260
 ------------------------------------------------------------------------------
         (Address of principal executive offices)                    (Zip Code)


                     Issuer's telephone number: 760-779-0251


         Securities registered under Section 12(b) of the Exchange Act:

                                                  Name of each exchange
         Title of each class                       on which registered
        -------------------                        -------------------

               None                                  Not Applicable


         Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
                                (Title of class)
<PAGE>

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 [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year. $10,583 for the 12
months ended December 31, 2004.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. The aggregate market value of the voting
stock held by non-affiliates computed at the closing price of Newport's common
stock on March 20, 2005 is approximately $ 17,221,000.

State the number of shares outstanding of each of the issuer's class of common
equity, as of the latest practicable date. As of March 20, 2005, 26,493,846
shares of common stock are issued and outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) of the Securities Act of 1933 ("Securities Act"). Not Applicable.
Transitional Small Business Disclosure Form (check one): Yes ___ No _X_

When used in this annual report,  the terms  "Newport," "we," and "us" refers to
Newport International Group, Inc., a Delaware corporation, and its subsidiaries,
Grass Roots Communications, Inc., a Delaware corporation ("Grass Roots") and
Spare Back-Up Inc., a Delaware corporation ("Spare").

All per share information contained in this annual report gives pro forma effect
to the one for 20 reverse stock split of our common stock effected on effected
on December 10, 2003.

                                       ii
<PAGE>

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION CERTAIN STATEMENTS
IN THIS ANNUAL REPORT ON FORM 10-KSB 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.


                                       iii
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

                                  OUR BUSINESS

Overview

         We sell productivity tools and services to small and medium sized
businesses. Our products are web-based and broadband-enabled and focus on
improving remote communications and automating data archiving and storage for
the non-technical owners and managers of small and medium sized businesses. Our
real-time communications product offers the ability to communicate with others
remotely, using text, audio, video, and Voice over Internet Protocol (VoIP)
calling, as well as collaborative features such as document and application
sharing, whiteboard and annotation in a virtual workspace.

         The growing adoption of broadband services, together with technology
advances in web-cameras, audio codecs and operating systems has helped clear the
path for real-time, rich media conferencing and collaboration across great
distances. We believe that we provide an affordable approach to real-time audio
and video communication via the Internet.

         Videoconferencing in its most basic form is the transmission of
synchronized image (video) and speech (audio) back and forth between two or more
participants in physically separate locations, simulating an exchange as if the
two (or more) participants were in the same physical conversation. This is
accomplished through the use of cameras (to capture and send video from your
local endpoint), video displays (to display video received from remote
endpoints), microphones (to capture and send audio from your local endpoint),
and speakers (to play audio received from remote endpoints).

         We have developed services directed to the web-based communications,
collaboration and conferencing markets. The real time communications and
conferencing tools market is relatively new and growing very rapidly, as
evidenced by companies such as WebEx Communications, Genesys Conferencing,
Microsoft and Groove Networks. We believe that our software is unique in that it
enables low cost, easy to scale document sharing and collaborative tool sets and
is designed for use by small and medium sized businesses. By providing new
technology in this area, paired with affordability, accessibility and ease of
overall use, we believe we can be a competitive factor in this specialized
business marketplace.

         There is a growing need for better ways of archiving data for legal,
regulatory and compliance reasons and for occasional reference in support of
ongoing business operations. Historically, businesses have relied on backup
tapes for storing archived data, but this process is rare in a small or medium
sized business environment. In addition, many industries, such as healthcare and
financial services, are facing increased governmental regulation mandating the
way in which electronic records are stored and managed. To help customers meet
these growing storage challenges, we presently plan to introduce digital
archiving services during the first half of fiscal 2005 as part of our new Spare
Back-up product line.

Our Target Customers

         We focus on owners and executives of small to mid-size businesses that
use technology to support their businesses and who also use technology to
compete with larger and often more powerful businesses. Since our products and
services allow non-technical users to quickly, easily and thoroughly access
real-time communications, rich media conferencing and collaboration or data
archiving and storage, we believe that our business is uniquely relevant to
enabling small companies to succeed using technology. Our products and services
also support individual business professionals working in companies of all
sizes. Other unique characteristics are additional coding that enables easy to
scale infrastructure and support elements. We believe that this characteristic
provides a competitive advantage over other providers whose products require
large investments in hardware, as well as professional installation, training
and support.

                                        1
<PAGE>

Our Products and Services

         Our Conga family of communication and collaboration software services
is designed to better meet the needs of small business users. Communication
tools within Conga include:

     o   Advanced VoIP phone calling and features;
     o   Simultaneous, integrated multi-network instant messaging;
     o   Private rich media communications;
     o   Group rich media communications;
     o   Contact lists with presence detection;
     o   Audio messaging;
     o   Integrated message center, and
     o   Ability to save and store communications.

         Collaboration tools within Conga include:

     o   One-click entry to shared workspace;
     o   Whiteboard;
     o   Edit, annotate, save a shared document;
     o   On-line presentations;
     o   Application-sharing;
     o   File-sharing and storage;
     o   Printing from a remote location;
     o   Rich media conferencing, and
     o   Advanced encryption and security.

Management and integration tools within Conga include:

     o   Communication storage and retrieval;
     o   Phone book;
     o   Security controls;
     o   Calendar synchronization with Microsoft Outlook;
     o   Integration with Microsoft Office;
     o   Contacts prioritization and grouping;
     o   Rich media device detection;
     o   Remote desktop; and
     o   Instant Invite.

         The monthly fees we charge our customers for Conga are $10.00 to $30.00
per two users.

                                        2
<PAGE>

         Prior to Conga, we sold our software applications under the GRC family
of products, which had similar features and functionalities and for which we
generated monthly subscriptions ranging from $80 to $180. Our revenues from the
GRC family of products generated revenues of approximately $10,000 during 2004.

         We have recently launched our Spare Back-up product line in the first
half of 2005. Spare automatically and efficiently backs up all data on selected
laptop or desktop computers. As a result, we believe small companies can ensure
file safety in PCs and laptops for backup and retrieval. An overview of customer
benefits includes:

      o  Ease-of-use - Spare provides fast, easy and fully automated data
         protection. Users benefit from automated data file selection, which
         distinguishes user data files from operating system and application
         files. As a result, users do not have to remember where all of their
         data files are stored. Spare also ensures that open files are
         protected, and allows users to retrieve multiple past versions of a
         file, not just the most recently backed-up version.

      o  Impenetrable Security and Protection of Corporate Data - Spare ensures
         that all data is encrypted with advanced 448-bit encryption on the
         user's machine using a user provided "key" or password. The data is
         encrypted a second time using SSL, or secure sockets layer, while it is
         being transmitted and a third time before it is stored on the RAID, or
         redundant array of independent disc, servers using a strong private
         key.

      o  SSL Support - SSL based protocol enhancements to address security
         parameters during: registration, upgrade, backup and retrieve.

     The monthly subscription fee we anticipate that we will charge for Spare
will start at $15.97 for two gigabytes of space.

How we market our products and services

         Our products are sold direct to the customer via online distribution.
Users may try our products and services at no cost for a limited trial period by
downloading our software. In addition, we will seek to establish a network of
affiliates that will also distribute our products online, as well as a
partnership network that will promote and/or resell our products. The primary
focus of our partnership efforts will be with key original equipment
manufacturers (OEM) and telecommunications service providers.

         Our marketing supports our sales efforts. In addition, we believe that
attracting users to our Spare Back-up product line will allow us to cross-sell
Conga to this potential customer base. During the second quarter of fiscal 2005
we anticipate that we will test market Spare in a direct response television
campaign promoting both its features and the branding of our company as a
precursor to the launch of a national advertising campaign. Based upon the
results of the direct marketing campaign, our marketing plan presently provides
that we will then advertise Spare nationally, as well as to specific vertical
business types within the small and medium sized sectors. We cannot presently
anticipate the exact cost of this national campaign if we decide to launch the
advertising, but our present estimate is between $100,000 and $1.0 million.

                                        3
<PAGE>

Customer Support

         We provide our tier 1 and tier 2 support for our services. Our tier 1
customer support provides initial call resolution and direct linking
capabilities to our tier 2 customer support. Tier 2 customer support is managed
by an internal group of specialists who are co-located within our Network
Operation Center and software development headquarters in Phoenix. Co-location
with the software development group allows for the resolution of highly specific
technical issues as well as identification of potential application flaws.

Technology

         Our products use a sophisticated combination of software and networking
to deliver rich content from one person's desktop to other users across the
Internet. Our networking components currently support:

      o  real-time audio at an average of twice the quality of a typical cell
         phone call;
      o  high resolution video;
      o  application sharing;
      o  remote desktop access;
      o  remote printing;
      o  scheduling; and
      o  a collaborative whiteboard.

         The networking systems used by us were designed to use outbound
Internet connections for all communications, thus allowing many users who are
behind a firewall access to collaboration services not available from peer to
peer software. We can expand our network capacity quickly and with highly
predicable costs.

         We outsource our hosting services and utilize high-end RedHat Linux
severs, hosted worldwide, as well as proprietary networking protocols. This
provides a highly available network that can scale rapidly using off the shelf
hardware. These systems are fully redundant and we anticipate our reliability at
99.5%.

         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. If for some reason
we should not have redundancy in our facilities, any damage or destruction to
our systems 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 which are beyond our control. This could lead to slower response
times or system failures.

         Our computer and communications infrastructure is located at a single
leased facility in Arizona. The infrastructure here is not fully redundant 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.

                                       4
<PAGE>

Competition

         The market for online backup, as well as real time communications and
rich media conferencing and collaboration products and services is extremely
competitive. Competitive factors include pricing, the number and range of tools,
ease of integration, and ease of use. Conga competes with providers of
teleconferencing and videoconferencing services, such as WebEx, Microsoft
(NetMeeting), Intercall, First Virtual Communications, and Raindance
Communications, and collaboration tools and services, including Groove from
Groove Networks. Additionally, 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. There are
also a number of providers of products such as ours at the enterprise level of
"broadcast" capability. There are also a number of providers that offer basic
peer to peer communications/conferencing for small office/home office and
business professionals. As we move up the scale of product capability to higher
integration and increased number of collaboration features, there are fewer
providers who support the small office/home office and small and medium business
community. Our Spare Back-up product line will compete with a number of
companies offering competitive remote back-up services, included Connected.com,
an Iron Mountain subsidiary, NovaStor and First Backup, as well as local back-up
devices such as external drives and media.

         Other than major companies which support large enterprises in the
conferencing market, most of our current competitors distribute their products
online with an e-commerce option from their sites; and these companies also
offer several basic ways to contact their sales or customer service departments.
Most of our competitors use small direct forces and affiliate and reseller
programs to market their products, and a few of our competitors also offer
strategic partnerships arrangements. Based upon our review, none of our
competitors actively market to small and medium sized businesses exclusively. We
believe, however, that the utilization of this type of marketing approach may
become a distinguishing factor for the success of future providers such as our
company.

         Because the barriers to entry in the market are relatively low and the
potential market is large, however, we expect continued growth in existing
competitors and the entrance of new competitors in the future. Many of our
current and potential competitors have significantly longer operating histories
and significantly greater managerial, financial, marketing, technical and other
competitive resources, as well as greater name recognition, than we do. As a
result, these companies may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements and may be able to devote
greater resources to the promotion and sale of their competing products and
services.

Intellectual Property

         Our intellectual property is critical to our business, and we may 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, although we do not execute such agreements in every case. Our
protection efforts may prove to be unsuccessful, and unauthorized parties may
copy or infringe upon aspects of our technology, services or other intellectual
property rights. In addition, these parties may develop similar technology
independently. Existing trade secret, copyright and trademark laws offer only
limited protection and may not be available in every country in which we will
offer our services.

                                        5
<PAGE>

         We are currently preparing the documentation to file patents for our
network architecture. We are also exploring our abilities to file for patents to
include living document functions. The applications we plan to file may fail to
result in any patents being issued. Even if one or more of these patents are
issued, any patent claims allowed may not be sufficiently broad to protect our
technology. In addition, any patents may be challenged, invalidated or
circumvented and any right granted thereunder may not provide meaningful
protection to us. The failure of any patents may not provide meaningful
protection to us. The failure of any patent to provide protection for our
technology would make it easier for other companies or individuals to develop
and market similar systems and services without infringing any of our
intellectual property rights.

Government Regulation

         Although there are currently relatively few laws and regulations
directly applicable to the Internet, it is likely that new laws and regulations
will be adopted in the United States and elsewhere covering issues such as
limitations on the use of mass-delivered e-mails, broadcast license fees,
copyrights, privacy, pricing, sales taxes and the characteristics and quality of
Internet services. The adoption of restrictive laws or regulations could slow
Internet growth. The application of existing laws and regulations governing
Internet issues such as property ownership, libel and personal privacy is also
subject to substantial uncertainty. There can be no assurance that current or
new government laws and regulations, or the application of existing laws and
regulations (including laws and regulations governing issues such as property
ownership, taxation, defamation and personal injury), will not expose us to
significant liabilities, slow Internet growth or otherwise hurt us financially.

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

         The Investment Company Act of 1940 restricts the operations of
companies that are deemed to be "investment companies." As a result of the
transaction with Langley Park which is described elsewhere in this annual
report, at December 31, 2004 a significant portion of our assets were classified
as "restricted investment in equity securities." Prior to entering into the
transaction with Langley Park our board of directors passed a resolution
affirmatively stating that we do not intend to become an investment company and
thereby be subject to the Investment Company Act of 1940. Because these
securities are subject to escrow agreements which prohibit us from disposing of
them, notwithstanding the requirement under generally accepted accounting
principles that the value of the securities be represented as an asset on our
balance sheet, this asset is presently illiquid and we do not consider it a
marketable security. As a result, we do not believe that we will be deemed to be
an "investment company" by virtue of this transaction. If, however, we should
inadvertently become subject to the Investment Company Act of 1940 and if we
should fail to comply with the requirements of that act, we would be prohibited
from engaging in business or selling our securities, and could be subject to
civil and criminal actions for doing so. Any failure to comply with the
Investment Company Act would therefore seriously harm our business.

                                        6
<PAGE>

Employees

         As of December 31, 2004, we had 19 full-time employees, including all
of our executive officers. None of our employees are covered by collective
bargaining agreements, and we believe our relationships with our employees to be
good.

Our History

         We were incorporated in Delaware on December 27, 1999 under the name
First Philadelphia Capital Corp. to serve as a vehicle to effect a merger,
exchange of common stock, asset acquisition or other business combination with
domestic or foreign private business. On October 30, 2000, we completed a
business combination with Conservation Anglers Manufacturing, Inc., a real
estate holding and development company that was originally organized in Florida
on February 7, 2000. The combination was a stock-for-stock merger that was
accounted for as a "pooling-of-interests". In connection with the merger, we
issued 235,000 shares of our common stock in exchange for all the outstanding
stock of Conservation Anglers Manufacturing, Inc. In January 2001 we changed our
name to Newport International Group, Inc. to better reflect and describe our
then current strategic direction.

         As a result of the transaction with Conservation Anglers Manufacturing,
Inc. we became a real estate holding company that intended to specialize in
large-scale commercial, industrial and residential mixed-use property
development. At the time of the transaction with Conservation Anglers
Manufacturing, Inc. we did not own any real estate and our activities were
limited to securing acquisition financing for a projects that we proposed to
acquire and develop.

         In November 2000, Mr. Soloman Lam, our then president and CEO, executed
certain land contracts to purchase approximately 3,300 acres of land for a total
of $11,389,600 which we intended to develop in the future. These contracts were
due to close on September 1, 2001, but were extended to March 1, 2002 at the
sellers' request. Mr. Lam personally deposited $180,000 into escrow pending
closing and we had agreed to reimburse him when he assigned the contracts to us.
On February 12, 2002, the land contracts were cancelled and the $180,000 deposit
was returned to Mr. Lam. Simultaneously, on February 12, 2002, Mr. Lam executed
a new land contract to purchase approximately 2,300 acres of land for
$15,000,000. We deposited $10,000 in escrow pending closing on April 30, 2002.
The closing on this contract was subsequently extended until July 29, 2002 and
as consideration we released the $10,000 to the seller that was in escrow.
Subsequently, the closing was again extended to September 30, 2002, in
consideration for a $25,000 non-refundable deposit. The closing was again
extended to December 30, 2002, then to March 31, 2003, then to July 31, 2003,
then to October 30, 2003, and subsequently to January 30, 2004, with no
additional deposit required. The check representing the $25,000 deposit was
never negotiated and in December 2003 it was voided. We do not intend to proceed
with this project. We have forfeited the $10,000 deposit and all rights and
obligations of this project have been assigned by us to Newport International
Group, Inc., a Florida corporation formerly known as Clinda Development
Corporation, a company affiliated with Mr. Clint Beckwith, a former officer and
director of our company.

         In December 2001, Mr. Lam entered into purchase contracts to acquire 45
acres of vacant land, representing nine lots, in Wellington, Florida for a total
purchase price of $470,000. In April 2002, Mr. Lam closed on two of the nine
lots and in May 2002, closed on a third lot. The remaining six lots were to be
purchased when and if financing becomes available. Mr. Lam agreed to transfer
the vacant land to us in exchange for a purchase price equal to cost. Deposits
totaling $15,000 were paid by us in 2002 in conjunction with this land. The lots
were never transferred to us, the $15,000 became a receivable from Mr. Lam and
in December 2003 was expensed as an addition to our additional paid-in capital.

                                        7
<PAGE>

         On February 6, 2004, we closed an Agreement and Plan of Merger with
Grass Roots Communications Inc., a Delaware corporation. Grass Roots was a
development stage company incorporated in Delaware in June 2002 initially to
create, produce, deliver and track targeted multimedia communications over the
Internet. Under the terms of this agreement, Grass Roots became our wholly-owned
subsidiary. At the effective time of the merger, the stockholders of Grass Roots
exchanged their securities for approximately 12,300,000 shares of our common
stock, representing approximately 93% of our common stock. Contemporaneous with
this transaction, Grass Roots' President and Chief Executive Officer, Mr. Cery
B. Perle, was elected as a member of our Board of Directors and appointed CEO,
and Mr. Lam resigned his positions with our company. Mr. Richard Galterio, the
other member of our Board of Directors before the transaction remained as a
director, and Mr. Edward L. Hagan, Secretary of Grass Roots, was appointed our
secretary. Mr. Perle, the principal stockholder of Grass Roots, and members of
his family/household received an aggregate of 46% of our shares of common stock
as a result of the exchange upon the merger.

         Prior to our acquisition of Grass Roots, on January 6, 2003, Grass
Roots entered into a stock purchase agreement, with Ms. Esther Jill Pinsker and
Mr. Jan Johannes Dekkers, as amended on January 24, 2003, to purchase all of the
issued and outstanding capital stock of FocusFocus.com, Inc. for a purchase
price of $1,710,000. Under the terms of the agreement, $150,000 of the purchase
price was to be paid by the closing date and the remaining $1,560,000 was to be
paid in monthly installments of $30,000 plus accrued interest with the remaining
balance due on the 13th month after the closing date. FocusFocus provided
private, web page-based video and audio communications services, e-conferencing,
collaborative document preparation and revisions and chat services in a real
time, web-based environment. After Grass Roots' acquisition of FocusFocus, it
restructured its product and service offerings and combined its operations with
FocusFocus' web-based conference and collaboration tools.

         Under the terms of this agreement, Grass Roots has paid the sellers
$250,000. By letter dated May 2, 2003 counsel for the sellers advised Grass
Roots that it was in breach of the agreement and promissory notes for failing to
make scheduled monthly payments. By letter dated May 16, 2003, counsel for the
sellers gave notice that they would sell the assets of FocusFocus.com Inc. to
the highest bidder at a public auction on May 30, 2003. By letter dated May
22,2003, counsel for Grass Roots notified counsel for the sellers that Grass
Roots was prepared to return all of the assets of FocusFocus.com, Inc. to the
sellers. Grass Roots subsequently returned those assets, which included patent
applications, software applications, programs, code and related materials. The
promissory notes from Grass Roots to sellers provide that notwithstanding the
acceleration clause, upon an event of default (as defined in the agreement) that
is not cured within the prescribed time, that the shares of FocusFocus.com, Inc.
and the assets of it acquired by Grass Roots will revert back to the sellers,
the promissory notes would be terminated and be of no further force and effect
and all remaining sums due thereunder would be cancelled.

         In addition to the stock purchase agreement, at the time of the
transaction Grass Roots entered into three-month consulting agreements with each
of the sellers obligating them to perform certain consulting services to Grass
Roots in exchange for Grass Roots granting each of them options to purchase
500,000 shares of Grass Roots' common stock at an exercise price of $.01 per
share. These options were exchanged for like options in our company.

         In December 2004, we received a letter from counsel for the former
owners of FocusFocus requesting that we ceased to state in our public filings
that they did not perform under the aforementioned consulting agreements and
have also requested to receive the initial 500,000 stock options.

                                        8
<PAGE>

         To date, while no litigation has been filed, the parties have attempted
unsuccessfully to resolve their differences. In the event the parties are unable
to resolve their differences, litigation may result. In that event, Grass Roots
will take the position that it has returned all of the FocusFocus.com, Inc.
assets to the sellers and owes nothing under the stock purchase and related
agreements, and it is likely that the sellers will take the position that they
are owed the remaining balance under the promissory notes and the right to
purchase 1,000,000 shares of Grass Roots' common stock for $.01 per share.

         In September 2004, we executed a non-binding letter of intent to
purchase the assets and assume certain liabilities of MM Internet, Inc., an
Internet service provider located in the Los Angeles metropolitan area. Under
the contemplated terms of the transaction, we were to acquire all tangible and
intangible assets of the company and assume certain liabilities, including the
liability of one vendor, up to $100,000. The anticipated purchase price for the
assets was $250,000 and 405,405 shares of our common stock. In January 2005, we
announced that we had terminated negotiations on this proposed transaction as we
were unable to reach acceptable terms.

         In November 2004, we executed a non-binding letter of intent to
purchase the intangible assets of an Internet provider located in the South
Florida area. Under the contemplated terms of the transaction, the purchase
price for such assets amounts to $350,000 and approximately 175,000 shares of
our common stock. We terminated negotiations on this proposed transaction as we
were unable to reach acceptable terms.

                                        9
<PAGE>

RISK FACTORS

         An investment in our common stock involves a significant degree of
risk. You should not invest in our common stock unless you can afford to lose
your entire investment. You should consider carefully the following risk factors
and other information in this annual report before deciding to invest in our
common stock.

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT. WE ANTICIPATE CONTINUING
LOSSES MAY RESULT IN SIGNIFICANT LIQUIDITY AND CASH FLOW PROBLEMS.

         Our net loss for fiscal 2004 was $14,258,448 as compared to a net loss
of $5,073,252 for fiscal 2003, and we reported an accumulated other
comprehensive loss of $24,256,974 for fiscal 2004 and $5,073,252 for fiscal
2003, respectively. At December 31, 2004, we had approximately $1,670,000 cash
on hand. At December 31, 2004 we an accumulated deficit of $19,699,395, and the
report of our independent registered public accounting firm on our financial
statements for the year ended December 31, 2004 contains an explanatory
paragraph as to our ability to continue as a going concern.

         We have never generated sufficient revenues to fund our ongoing
operations. We are constantly evaluating our cash needs and existing burn rate,
in order to make appropriate adjustments in operating expenses. Depending on our
ongoing evaluation of cash needs, we may need to raise additional debt or equity
capital within the next 12 months to provide funding for ongoing future
operations, or to refinance existing indebtedness. No assurances can be given
that we will be successful in obtaining additional capital, or that such capital
will be available on terms acceptable to us. Our continued existence is
dependent upon, among other things, our ability to raise capital and to market
and sell our services successfully. The financial statements do not include any
adjustments to reflect future adverse effects on the recoverability and
classification of assets or amounts and classification of liabilities that may
result if we are not successful.

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

         We have recently launched our products and services in 2004. We have
generated minimal revenues since inception. We therefore still have a very
limited operating history upon which you may evaluate our operations and future
prospects, as well as limited insights into emerging trends that may affect our
business. Additionally, the income potential of our business and from our
markets is unproven. Because of the emerging nature of the industry, our
executives have limited experience in it. As a young company operating in an
emerging market, we face risks and uncertainties relating to our ability to
implement our business plan successfully. You must consider these risks,
uncertainties and difficulties in evaluating our potential for future
profitability.

WE CANNOT PREDICT OUR FUTURE REVENUES OR WHETHER OUR PRODUCTS WILL BE ACCEPTED.
IF THE MARKETS FOR OUR PRODUCTS AND SERVICES DO NOT DEVELOP, OUR FUTURE RESULTS
OF OPERATIONS WILL BE ADVERSELY AFFECTED.

         We reported revenues of $10,583 and $0 for the fiscal years ended
December 31, 2004 and 2003, respectively. The markets for our products and
services have only recently begun to develop, are rapidly evolving and are
increasingly competitive. Our competitors generally have greater brand
recognition and more resources and operating history that we do. It is difficult
to predict whether, or how fast, these markets will grow. We cannot guarantee
either that the demand for our products and services will continue to develop,
that such demand will be sustainable or that we will ever effectively compete in
our market segment. If we are unable to generate any significant revenues from
our products and services our business, operating results, and financial
condition in future periods will be materially and adversely affected and we may
not be able to continue our business as presently operated.

                                       10
<PAGE>

WE WILL NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON
ACCEPTABLE TERMS. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL AS NEEDED, OUR
CONTINUED OPERATIONS WILL BE ADVERSELY AFFECTED, AND THE FUTURE GROWTH OF OUR
BUSINESS AND OPERATIONS WILL BE SEVERELY LIMITED.

         Historically, our operations have been financed primarily through the
issuance of equity and debt. Because we have a history of losses and have never
generated sufficient revenue to fund our ongoing operations, we are dependent on
our continued ability to raise working capital through the issuance of equity or
debt to fund our present operations. Because we do not know if our revenues will
grow at a pace sufficient to fund our current operations, the continuation of
our operations and any future growth will depend upon our ability to raise
additional capital, possibly through the issuance of long-term or short-term
indebtedness or the issuance of our equity securities in private or public
transactions. The actual amount of our future capital requirements, however,
depends on a number of factors, including our ability to grow our revenues and
manage our business.

         If we raise additional capital through the issuance of debt, this will
result in increased interest expense. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of
our company held by existing stockholders will be reduced, and those
stockholders may experience significant dilution. In addition, new securities
may contain certain rights, preferences or privileges that are senior to those
of our common stock. There can be no assurance that acceptable financing can be
obtained on suitable terms, if at all. If we are unable to raise additional
working capital as needed, our ability to continue our current business will be
adversely affected and may be forced to curtail some or all of our operations.

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

         We hold 6,484,840 shares of Langley Park Investments, PLC, which were
received pursuant to a stock exchange agreement with that company. These shares
are listed on the London Stock Exchange. At the date of the stock exchange
agreement, the Langley investment shares were valued at $11.8 million. Based on
the subsequent decline in the market price of these shares, we are reflecting as
of December 31, 2004 that the investment has lost approximately $10 million in
value. Under the terms of our agreement, we have no guarantees as to the price
of the Langley Investment shares and no right to receive additional shares based
on the decline in the value of the investment. It is possible that the value of
these shares may decline further in the future, in which event the value of our
restricted investment will be reduced further, and the benefit to our financial
position may be substantially reduced or eliminated.

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.

                                       11
<PAGE>

WE GRANTED THE PURCHASERS OF SHARES OF OUR COMMON STOCK A PUT. IF THIS PUT IS
EXERCISED, OUR RESULTS OF OPERATIONS IN FUTURE PERIODS WILL BE ADVERSELY
AFFECTED.

         In August 2004, in connection with the sale of 4,500,000 shares of our
common stock to Robinson Reed, Inc. and First Capital Holdings International,
Inc., we granted the purchasers an option to put the shares of our common stock
they acquired in this transaction back to us at a weighted average exercise
price of $1.11 per share in the event the average price of our common stock is
less than $1.00 and $1.25 for a period of 10 consecutive trading days during an
option period beginning eight months after the effective date of the
registration statement registering the shares and extending 12 months
thereafter. If exercised and not honored by us within 10 days from the receipt
of the put notice, we are required to issue the purchasers a convertible
promissory note with a conversion price equal to 85% of the average of the
closing bid prices of our common stock for the 10 trading days prior to
conversion. While we have deposited 3,242,420 ordinary shares of Langley Park
owned by us which are not subject to the escrow agreement with Langley Park in a
brokerage account as collateral for the put option, if the put option is
exercised in full, we could be required to either pay the holders $4,500,000 in
cash or issue them a convertible promissory note with a conversion price less
than the then market value of our common stock. If we satisfy the put option in
cash, our working capital would be proportionality reduced at a time when we
might need the funds to pay our ongoing obligations and we could have difficulty
in raising additional capital. If we issue the convertible note, and the note
was converted, we would be required to issue a presently undeterminable number
of shares of our common stock at an effective price below the then current
market value of our common stock. This would result in not only an expense to
us, but would be dilutive to our stockholders and could adversely affect our
ability to fund our ongoing operations.

         In March 2004, a representative of Robinson Reed, Inc. and First
Capital Holdings, Inc. informed the Company that the put option related to
2,500,000 shares had been amended in December 2004 to allow the investors to
exercise their put option commencing on the effective date of the Company's
registration statement and not eight months after the registration statement
became effective. The Company maintains that it has not agreed to the alleged
amendment. The Company intends to vigorously defend its position in the event
the investors insist that the put option commences immediately upon the
effective date of the registration statement.

THE EXERCISE OF OUTSTANDING WARRANTS AND THE CONVERSION OF OUTSTANDING NOTES
WILL BE DILUTIVE TO OUR EXISTING STOCKHOLDERS.

         As of March 30, 2005, we had the following securities which are
convertible or exercisable into shares of our common stock were outstanding:

         o  common stock purchase warrants to purchase a total of 3,911,876
            shares of our common stock at prices ranging between $0.75 to $1.60
            per share; and

         o  2,312,220 shares of our common stock issuable upon the possible
            conversion of the outstanding $1,734,093 principal amount 8%
            promissory notes due March 1, 2006, and

         The exercise of these warrants and the conversion of the notes may
materially adversely affect the market price of our common stock and will have a
dilutive effect on our existing stockholders.

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:

                                       12
<PAGE>

         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.

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

         We have incurred net losses quarterly from inception through December
31, 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.

                                       13
<PAGE>

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

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

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

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

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

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

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

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

WE MAY BE EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROLS OVER
FINANCIAL REPORTING AND OUR ABILITY TO HAVE THOSE CONTROLS ATTESTED TO BY OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

         As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the
Securities and Exchange Commission adopted rules requiring public companies to
include a report of management on the Company's internal controls over financial
reporting in their annual reports, including Form 10-KSB. In addition, the
independent registered public accounting firm auditing a company's financial
statements must also attest to and report on management's assessment of the
effectiveness of the Company's internal controls over financial reporting as
well as the operating effectiveness of the company's internal controls. We were
not subject to these requirements for the fiscal year ended December 31, 2004.
We have not yet begun evaluating our internal control systems in order to allow
our management to report on, and our independent registered public accounting
firm attest to, our internal controls as a required part of our Annual Report on
Form 10-KSB beginning with our report for the fiscal year ending December 31,
2006.

                                       14
<PAGE>

         While we expect to expend significant resources in developing the
necessary documentation and testing procedures required by Section 404 of
Sarbanes-Oxley Act of 2002, there is a risk that we will not comply with all of
the requirements imposed by this rule. At present, there is no precedent
available with which to measure compliance adequacy. In the event we identify
significant deficiencies or material weaknesses in our internal controls that we
cannot remediate in a timely manner or we are unable to receive a positive
attestation from our independent registered public accounting firm with respect
to our internal controls, investors and others may lose confidence in the
reliability of our financial statements and our stock price and ability to
obtain equity or debt financing as needed could suffer.

         In addition, in the event that our independent registered public
accounting firm is unable to rely on our internal controls in connection with
their audit of our financial statements, and in the further event that they are
unable to devise alternative procedures in order to satisfy themselves as to the
material accuracy of our financial statements and related disclosures, it is
possible that we would receive a qualified or adverse audit opinion on those
financial statements which could also adversely affect the market price of our
common stock and our ability to secure additional financing as needed.

WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN
THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST
INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.

         Recent Federal legislation, including the Sarbanes-Oxley Act of 2002,
has resulted in the adoption of various corporate governance measures designed
to promote the integrity of the corporate management and the securities markets.
Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of
national securities exchanges, such as the NYSE or The Nasdaq Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges and Nasdaq are
those that address board of directors' independence, audit committee oversight,
and the adoption of a code of ethics. Although we recently adopted a Code of
Ethics, we have not yet adopted any of these other corporate governance measures
and, since our securities are not yet listed on a national securities exchange
or Nasdaq, we are not required to do so. We have not adopted corporate
governance measures such as an audit or other independent committees of our
board of directors as we presently only have one independent director. If we
expand our board membership in future periods to include additional independent
directors, we may seek to establish an audit and other committees of our board
of directors. It is possible that if we were to adopt some or all of these
corporate governance measures, stockholders would benefit from somewhat greater
assurances that internal corporate decisions were being made by disinterested
directors and that policies had been implemented to define responsible conduct.
For example, in the absence of audit, nominating and compensation committees
comprised of at least a majority of independent directors, decisions concerning
matters such as compensation packages to our senior officers and recommendations
for director nominees may be made by a majority of directors who have an
interest in the outcome of the matters being decided. Prospective investors
should bear in mind our current lack of corporate governance measures in
formulating their investment decisions.

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.

                                       15
<PAGE>

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.

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.

                                       16
<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.

                                       17
<PAGE>

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

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

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

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

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

                                       18
<PAGE>

         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 communications management, any
interruptions could:

         o  Damage our reputation;

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

         o  Increase our product development resources;

         o  Cause us to lose revenues; and

         o  Delay market acceptance of our services and applications.

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

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

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

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

                                       19
<PAGE>

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 develope and are interpreted
by the judicial system, they could have the effect of:

         o  Limiting the growth of the Internet;

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

         o  Increasing our cost of doing business;

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

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

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

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

                                       20
<PAGE>

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

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

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A
TAKEOVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS.

         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 Delaware 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 authorizes the issuance
of up to 5,000,000 shares of preferred stock with such rights and preferences as
may be determined by our board of directors. Our board of directors may, without
stockholder approval, issue preferred stock with dividends, liquidation,
conversion or voting rights that could adversely affect the voting power or
other rights of our common stockholders.

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTCBB, BUT TRADING IN OUR STOCK IS
LIMITED. BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED
ON THE OTC BULLETIN BOARD, OUR STOCK IS CONSIDERED A "PENNY STOCK" WHICH CAN
ADVERSELY EFFECT ITS LIQUIDITY.

         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. In addition, the trading price of our common stock is currently
below $5.00 per share, and we do not anticipate that it will be above $5.00 per
share in the foreseeable future. Because 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. 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 our
securities in the secondary market because few broker or dealers are likely to
undertake these compliance activities.

                                       21
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY.

         Our executive offices are located at 73-061 El Paseo, Suites 202 and
205, Palm Desert, California 92211. We lease approximately 4,000 square feet,
which houses all of our executive and administrative personnel for approximately
$62,000 annually, plus our pro-rata share of common area expenses. Our lease for
this space expires on March 31, 2009. We believe this facility will meet our
operational needs for the foreseeable future. If we need additional space for
our hosting and data center operations, we believe we will be able to obtain it
on commercially reasonable terms.

         We lease an office in an office building at 2501 West Behrend Drive,
Phoenix, Arizona 85027. This space is approximately 4,150 square feet and houses
our servers for our hosting and data center operations and our technical
personnel. Our lease for this space provides for annual rental of approximately
$31,000 and expires on June 2007. We believe this facility will meet our
operational needs for the foreseeable future. If we need additional space for
our hosting and data center operations, we believe we will be able to obtain it
on commercially reasonable terms.

         We also lease an office in an office building at 1150 Main Street,
Suite C, Irvine, California 92614, which previously served as our data operation
center. Our lease for this space provides for annual base rental of $37,800
through December 2004, escalating to $39,313 in January 2005. The lease expires
on December 31, 2005. In August 2003, we sub-leased this space to an
unaffiliated third party under a sub-lease which provides for annual rental of $
37,800 and expires in December 2005.

ITEM 3.  LEGAL PROCEEDINGS.

We are not a party to any pending litigation.

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

None

PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
         BUSINESS ISSUER'S PURCHASE OF EQUITY SECURITIES.

         Our common stock is quoted on the OTCBB under the symbol NWPO. The
reported high and low sales prices for the common stock as reported on the OTCBB
are shown below for the periods indicated. The quotations reflect inter-dealer
prices, without retail mark-up, markdown or commission, and may not represent
actual transactions. All information contained in the following table gives
proforma effect to the 1:20 reverse stock split of our common stock effective
December 10, 2003.
                                                                High       Low
                                                                ----       ---
FISCAL 2003

January 1, 2003 through March 31, 2003.........................$4.00       $1.00
April 1, 2003 through June 30, 2003............................$9.00       $0.80
July 1, 2003 through September 30, 2003........................$3.00       $0.20
October 1, 2003 through December 31, 2003......................$1.25       $0.35

                                       22
<PAGE>

FISCAL 2004

January 1, 2004 through March 31, 2004.........................$2.45       $1.75
April 1, 2004 through June 30, 2004............................$2.45       $1.20
July 1, 2004 through September 30, 2004........................$2.95       $1.20
October 1, 2004 through December 31, 2004......................$3.25       $0.40

         On March 20, 2005, the last sale price of our common stock as reported
on the OTCBB was $0.62. As of March 20, 2005, there were approximately 329
record owners of our common stock. Dividend Policy

         We have never paid cash dividends on our common stock. We intend to
keep future earnings, if any, to finance the expansion of our business. We do
not anticipate that any cash dividends will be paid in the foreseeable future.

Securities Authorized For Issuance Under Equity Compensation Plans

         The following table sets forth securities authorized for issuance under
equity compensation plans, including individual compensation arrangements, by us
under our 2002 Stock Option and Stock Award Plan and any compensation plans not
previously approved by our stockholders as of December 31, 2004.

                    Number of                            Number of securities
                    securities to     Weighted           remaining available for
                    be issued         average            future issuance under
                    upon exercise     exercise price     equity compensation
                    of outstanding    of outstanding     plans (excluding
                    options, warrants options, warrants  securities reflected
Plan category       and rights (a)    and rights (b)     in column (a) (c)
-------------       ----------------- ------------------ ------------------

2002 Stock Option
and Stock Award
Plan                   6,574,333            $1.51              5,425,667

Equity compensation
plans Not approved
by stockholders          none               none                  none

RECENT SALES OF UNREGISTERED SECURITIES

None

                                       23
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

Overview

         We were originally formed in December 1999 to serve as a vehicle to
effect a merger, exchange of common stock, asset acquisition or other business
combination with domestic or foreign private business. In October 2000, we
completed a business combination with Conservation Anglers Manufacturing, Inc.,
a real estate holding and development company. As a result of the transaction
with Conservation Anglers Manufacturing, Inc., we became a real estate holding
company that intended to specialize in large-scale commercial, industrial and
residential mixed-use property development. At the time of the transaction with
Conservation Anglers Manufacturing, Inc., we did not own any real estate, and
our activities were limited to securing acquisition financing for a projects
that we proposed to acquire and develop. Unable to conclude our business
strategy to be a real estate holding and development company, in February 2004,
we closed a merger with Grass Roots Communications Inc., a development stage
company. As a result of the transaction with Grass Roots, which resulted in a
change of control of our company, our business is the sale of web-based
conferencing services to business professionals, small office and home office
companies, and small to medium sized businesses. The acquisition of Grass Roots
was treated as a reverse acquisition for financial reporting purposes. As such,
our financial statements have been prepared as Grass Roots as the acquiror.

Critical Accounting Policies

         A summary of significant accounting policies is included in Note 2 to
the audited consolidated financial statements included elsewhere in this annual
report. We believe that the application of these policies on a consistent basis
enables us to provide useful and reliable financial information about our
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 Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" and SFAS
148, "Accounting for Stock-Based Compensation -Transition and Disclosure", which
permits entities to provide pro forma net income (loss) and pro forma earnings
(loss) per share disclosures for employee stock option grants as if the
fair-valued based method defined in SFAS No. 123 had been applied. We account
for stock options and stock issued to non-employees for goods or services in
accordance with the fair value method of SFAS 123.

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

                                       24
<PAGE>

Plan of Operation

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

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

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

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

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

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

         We intend to spend approximately $1.0 million during the first half of
2005 in advertising to support the launch of our new product, Spare Back-up.

         We believe that our revenues will increase in 2005 following the launch
of Spare.

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

Going Concern

         We have generated minimal revenue since our inception on June 12, 2002,
and have incurred net losses of approximately $19.7 million and had negative
cash flows from operations of approximately $5.0 million since its inception
through December 31, 2004. Our ability to continue as a going concern is
dependent upon our ability to obtain the necessary financing to meet our
obligations and repay our liabilities arising from normal business operations
when they come due and to generate profitable operations in the future. We plan
to continue to provide for our 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, we will have sufficient funds
to execute our business plan or generate positive operating results.

                                       25
<PAGE>

Results of Operations
<TABLE>
<CAPTION>
                                                                     Increase/         Increase/
                                                                    (Decrease)        (Decrease)
                                      2004             2003       $ 2004 vs 2003    % 2004 vs 2003
                                 ------------     ------------    --------------    --------------
<S>                              <C>              <C>              <C>                   <C>
Revenues                         $     10,583     $         --     $     10,583           NM

Operating expenses:
  Research and development            722,113          440,770          281,343           64%
  Sales, general and
   administrative                   6,085,908        4,595,683        1,490,225           32%
                                 ------------     ------------     ------------         ------

     Total operating expenses       6,808,021        5,036,453        1,771,568           35%

     Operating loss                (6,797,438)      (5,036,453)       1,760,985           35%


  Other expenses                       37,963           27,030           10,933           NM
  Settlement with
stockholders                        2,775,000               --        2,775,000           NM

  Other income                         (6,375)          (1,940)           4,435          229%

  Interest expense                  4,654,422           11,709        4,642,713           NM
                                 ------------     ------------     ------------         ------
  Total other expenses, net         7,461,010           36,799        7,424,211           NM

Net loss                         $(14,258,448)    $ (5,073,252)    $  9,185,196          181%
                                 ============     ============     ============         ======
</TABLE>
*NM:  Not meaningful

Revenues

         We have generated minimal revenues since inception. Revenues recognized
during 2004 consists of monthly licensing fees generated from our GRC Live
product offerings launched during 2004.

Research and development expenses

         Research and development expenses consists primarily of compensation
expenses paid to our software engineers employees and consultants. The increase
in research and development expenses of approximately $280,000 during 2004 is
primarily due a larger number of software engineers hired in 2004 to develop and
enhance our product offerings.

Sales, general  and administrative expenses

         Sales, general, and administrative expenses consist primarily of
salaries and related expenses paid to our sales and administrative employees and
contractors. Our sales, general and administrative expenses during 2004
increased by approximately $1.5 million when compared 2003. The increase in
sales, general, and administrative expenses during 2004 is primarily due to
consulting services rendered in connection with a share-exchange agreement for a
total consideration of $1.6 million.

Settlement with stockholders

         Settlement expense with stockholders consists of the fair value of the
shares issued pursuant to a settlement agreement with existing stockholders. The
increase in other expenses during 2004 consists primarily of the fair value of
the shares issued in November 2004 pursuant to a settlement agreement with
existing stockholders. There was no such settlement in 2003.

                                       26
<PAGE>

Other expenses

         Other expenses consist primarily of the fair value of shares issued
pursuant to penalties associated with the failure to timely file the
registration statement and loss on disposition of property and equipment. The
increase in other expenses during 2004 consists primarily of the fair value of
the shares issued in December 2004 offset by a loss on disposition of property
and equipment which occurred in 2003. There were no such shares issued in 2003.
There were no disposition of property and equipment in 2004.

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.

         During 2004 we have received gross proceeds of approximately $6.1
million, $1.8 million, and $215,000 from the issuances of shares of common
stock, convertible promissory notes, and advances from stockholder,
respectively. Such proceeds were used to fund our operating expenses, as well as
the payment of deferred financing costs and financing costs, of approximately
$248,000 and $229,000, respectively, the repayment of convertible promissory
notes amounting to approximately $380,000, and the repayment of $250,000 of
pre-merger obligations. We have also satisfied the remaining pre-merger
obligations by issuing 1,365,000 shares of our common stock to a creditor.

         During 2003, we have received gross proceeds of approximately $1.2
million and $700,000 from the issuance of shares of common stock and convertible
promissory notes as well as $325,000 from the issuance of stock options which
were used to fund our operating activities.

         During January 2005 we have satisfied three 10% secured notes amounting
to $75,000 by issuing 15,000 shares of our common stock and paying $52,500 to
the note holders.

         During February 2005 we have satisfied one 10% secured notes amounting
to $150,000 by paying $150,000 to the note holder.

         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.

Capital Raising Transactions

         We undertook the following transactions to provide working capital for
our company:

8% promissory notes

         Between October 2003 and March 2004 we sold an aggregate of $1,835,343
principal amount 8% promissory notes resulting in gross proceeds to us of
$1,835,343. We issued the holders of the convertible promissory notes five-year
common stock purchase warrants to purchase aggregate of 1,501,875 shares of our
common stock at an exercise price of $1.25 per share. The notes are convertible
into shares of our common stock, at anytime, at the option of the holder at a
conversion price of $0.75 per share, subject to anti-dilution provisions in the
case of stock splits, dividends or if we issue shares of our common stock or
other securities convertible into shares of our common stock at an effective
price less than $0.75 per share.

                                       27
<PAGE>

         The principal balance and unpaid accrued interest on the promissory
notes is due March 1, 2006. 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 at our option. Interest paid in common stock is
convertible using the 10-day average closing bid price of the stock prior to the
end of the quarter. Each occurrence of interest not paid within 30 days
following the end of each quarter causes a reduction of 10% in the conversion
price of the promissory notes and the exercise price of the related warrants.

         vFinance Investments, Inc. acted as placement agent in the transaction
and we paid a commission of 10%, an expense allowance equal to 4% of the amount
raised and issued vFinance warrants to purchase 350,000 shares of our common
stock with an exercise price of $0.75 per share as compensation.

10% secured notes

         Between May and August 2004, we sold $665,000 principal amount 10%
secured notes and issued these purchasers five year common stock purchase
warrant to purchase an aggregate of 332,500 shares of our common stock at an
exercise price of $1.25 per share. We received gross proceeds of $665,000 in
this transaction. The notes bear interest on unpaid principal at the rate of 10%
per year, payable quarterly commencing on September 1, 2004, and all principal
and accrued and unpaid interest under the notes was due and payable one year
after the date of issuance. The 10% secured notes were secured by a blanket
security interest in all of our assets. We were required to establish a sinking
fund from which payments of the principal and interest under these notes are to
be made, and to fund this sinking fund with 15% of our revenues during the
period it is maintained.

         We agreed not to issue any additional debt securities so long as the
10% secured notes were outstanding without the prior consent of vFinance
Investments, Inc., the placement agent in the transaction. The secured notes
were convertible into shares of our common stock, at anytime, at the option of
the holder at a conversion price of $2.00 per share.

         During January 2005 we satisfied $75,000 principal amount of the 10%
secured notes through the issuance of 15,000 shares of our common stock and the
payment of $52,500 to the note holders. During February 2005 we satisfied an
additional $150,000 principal amount 10% secured notes through the payment of
$150,000 to the note holder. As of February 28, 2005, all 10% secured notes have
been satisfied. We granted the note holders piggyback registration rights
covering the common shares underlying both the 10% secured notes and common
stock purchase warrants, and the purchasers agreed to be subject to any lock-up
restriction imposed by vFinance Investments, Inc.

         vFinance Investments, Inc. acted as placement agent in this transaction
and received a commission of 10%, an expense allowance equal to 4% of the amount
raised and issued vFinance warrants to purchase 75,000 shares of our common
stock with an exercise price of $1.25 per share as compensation.

         Langley Park Transaction

         In July 2004, we issued 5,882,352 shares of our common stock to Langley
Park Investments PLC in exchange for 6,484,840 ordinary shares of Langely Park.
Langley Park's ordinary shares are quoted on the London Stock Exchange and the
shares we acquired in the transaction are freely saleable by us, subject to the
escrow provisions described below. Langley Park has agreed not to sell or
otherwise dispose of our shares of common stock it acquired for a period of two
years from the date of the transaction. At the time of issuance, we recorded the
cost of the investment at the market value of our shares of common stock
exchanged which was approximately $11.8 million. The decrease in the carrying
and the fair value of this investment of approximately $10.0 million as of
December 31, 2004 has been included as accumulated other comprehensive loss in
stockholders' equity in our financial statements appearing elsewhere in this
annual report.

                                       28
<PAGE>

         We have placed 3,242,420 of the Langley Park ordinary shares we
acquired in an escrow account as a downside price protection for Langley Park.
These shares will remain in an escrow account for up to two years, subject to
early termination upon the consent of the parties. If at the end of this two
year period the average of the 10 closing bid prices per share of our common
stock during the 10 trading days immediately preceding July 30, 2006 is below
$2.01, a proportion of the Langley Park ordinary shares held in escrow will be
returned to Langely Park in the same ratio as the average bid price is to $2.01.

         In August 2004 we entered into an agreement with E-Holdings, Inc. in
connection with this transaction. Pursuant to this agreement, as a finder's fee
we agreed to:

         o  transfer 877,500 shares of Langley Park to E-Holdings, Inc., and

         o  grant a put option to E-Holdings, Inc. whereby we agreed to
            repurchase the 877,500 Langley Park ordinary shares transferred to
            E-Holdings, Inc. for (pound)1.00 per share for a period of one year
            from the date of the agreement.

         During fiscal 2004, we paid approximately $1,600,000 in lieu of
transferring the agreed 877,500 shares of Langley Park to E-Holdings, Inc.

         We entered into this transaction in order to provide capital to finance
our operations, meet our working capital requirements, our short and long-term
debt requirements as well as for strategic purposes. Our board of directors has
authorized resolutions indicating that we have no intention and will not conduct
our operations as an investment company within the meaning of the Investment
Company Act of 1940.

Robinson Reed - First Capital Holdings International transaction

         On August 27, 2004, we entered into a Common Stock and Warrant Purchase
Agreement with Robinson Reed, Inc. pursuant to which we agreed to sell up to
5,000,000 shares of our common stock at a price per share equal to 85% of the
average of the reported bid prices of our common shares for the 10 trading days
prior to the separate closings contemplated by the agreement, but not greater
than $1.60 per share. Under the terms of this agreement, as amended, we sold
Robinson Reed, Inc. 1,000,000 shares at a purchase price of $1.39 per share,
1,000,000 shares at a purchase price of $1.44 per share, and 250,000 shares at
an effective purchase price of $1.30 per share. We also sold First Capital
Holdings International, Inc. 2,250,000 shares of our common stock at an
effective purchase price of $1.30 per share. We issued the purchasers five-year
common stock purchase warrants to purchase an aggregate of 562,500 shares of our
common stock at an exercise price of $1.55 per share. We received net proceeds
of $6,068,982 in these transactions, net of transaction costs.

         We paid finders' fees of $229,000 to Edge, LLC in connection with this
transaction, and initially issued Continental Blue Limited, a placement agent,
five-year common stock purchase warrants to purchase an aggregate of 339,000
shares of our common stock at an exercise price of $1.55 per share as
compensation for their services. As described below, these warrants have been
cancelled.

                                       29
<PAGE>

         Under the terms of the agreement, as amended, we have granted the
purchasers an option to put the 2,500,000 and 2,000,000 shares of our common
stock they acquired back to us at a price of $1.00 and $1.25, respectively, per
share in the event the average price of our common stock is less than $1.00 and
$1.25, respectively, for a period of 10 consecutive trading days during an
option period commencing eight months after the effective date of the
registration statement registering such shares and extending for a period of 12
months thereafter. If exercised and not honored by us within 10 days from the
receipt of the put notice, we are required to issue the purchasers a convertible
promissory note with a conversion price equal to 85% of the average of the
closing bid prices of our common stock for the 10 trading days prior to
conversion. We initially deposited 3,242,420 ordinary shares of Langley Park
owned by us which are not subject to the escrow agreement with Langley Park in a
brokerage account as collateral for the put option.

         In December 2004, we entered into a Settlement Agreement with Robinson
Reed Inc., First Capital Holdings International Inc., Continental Blue Limited
and E-Holdings, Inc. resolving certain issues and disputes that had arisen among
the parties. Under the terms of the Settlement Agreement, we issued 750,000
shares of our common stock to each of Robinson Reed and First Capital; at the
request of the recipients the shares were issued in the name of Preston & Price,
S.A. These shares are subject to all the obligations and rights under the
Registration Rights Agreement dated August 27, 2004, as amended on November 2,
2004, except that they will not be subject to any put option. We also deposited
as additional collateral provided for by the aforementioned agreements an
additional 500,000 ordinary shares of Langley Park Investments owned by us to
honor any put options pursuant to the above agreement. In connection with the
Settlement Agreement, Continental Blue Limited agreed to rescind warrants to
purchase up to 339,000 shares of our common stock previously issued to it in
connection with the prior Langley Park financing. Continental Blue also agreed
to forego any first refusal rights or restrictions on subsequent financings by
us that Continental Blue held as a result of the common stock purchase
agreement. E-Holdings will be entitled to receive a commission equal to 10% on
any future financings between our company and Robinson Reed and First Capital.
Finally, Robinson Reed and First Capital granted our Chief Executive Officer,
Mr. Cery Perle, all voting rights with respect to the additional shares issued
to Robinson Reed and First Capital. Finally, the put option was modified to
provide that we cannot remove any of the shares serving as collateral from the
brokerage account into which they are presently deposited without the consent of
Robinson Reed and First Capital until we maintain a cash or cash equivalent
balance equal to the amount necessary to satisfy the put option then
outstanding.

         Under the terms of the Registration Rights Agreement we agreed to
include the shares of common stock sold in this transaction, including the
shares underlying the warrants, in order to provide for the public resale
thereof. If we fail to meet certain deadlines, such as not filing a registration
statement or if its registration is not effective within 45 days and 135 days of
the final closing date, respectively, we are required to issue certain
additional shares of our common stock as a penalty. The additional shares of
common stock to be issued amount to approximately 45,000 per month after the
failure of meeting such deadlines, until the registration statement is filed or
declared effective. We filed the registration statement on March 2, 2005.

         In March 2004, a representative of Robinson Reed, Inc. and First
Capital Holdings, Inc. informed the Company that the put option related to
2,500,000 shares had been amended in December 2004 to allow the investors to
exercise their put option commencing on the effective date of the Company's
registration statement and not eight months after the registration statement
became effective. The Company maintains that it has not agreed to the alleged
amendment. The Company intends to vigorously defend its position in the event
the investors insist that the put option commences immediately upon the
effective date of the registration statement.

ITEM 7. FINANCIAL STATEMENTS

         The financial statements required by this report are included,
commencing on page F-1.

                                       30
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Berkovits, Lago & Company, LLP ("Berkovits Lago"), by letter dated
December 10, 2004, was dismissed as our independent registered public accounting
firm). Berkovits Lago had been our independent registered public accounting firm
for, and audited our financial statements as of December 31, 2003 and for the
year then ended.

         The report of Berkovits Lago on our financial statements for the fiscal
2003 contained no adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting principles,
but did include an explanatory paragraph relating to our ability to continue as
a "going concern."

         The decision to change accountants was approved unanimously by the
Board of Directors.

         In connection with the audit for the most recent fiscal year and in
connection with Berkovits Lago's review of the subsequent interim periods
preceding dismissal on December 10, 2004, there have been no disagreements
between our company and Berkovits Lago on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Berkovits Lago, would have caused
Berkovits Lago to make reference thereto in their report on our financial
statements for the 2004 fiscal year. During the most recent fiscal year and
prior to the date hereof, we had no reportable events (as defined in Item
304(a)(1) of Regulation S-B).

         Sherb & Co. LLP ("Sherb"), by letter dated December 10, 2004, was
engaged as the independent registered public accounting firm for Newport

         We had not consulted with Sherb regarding the application of accounting
principles to any contemplated or completed transactions nor the type of audit
opinion that might be rendered on our financial statements, and neither written
nor oral advice was provided that would be an important factor considered by us
in reaching a decision as to an accounting, auditing or financial reporting
issues.

         There have been no disagreements between our company and the former
certifying accountant, Berkovits Lago, for which Sherb was consulted

ITEM 8A. CONTROLS AND PROCEDURES

         As required by Rule 13a-15 under the Securities Exchange Act of 1934,
as of the end of the period covered by the annual report, being December 31,
2004, we have carried out an evaluation of the effectiveness of the design and
operation of our company's disclosure controls and procedures. This evaluation
was carried out under the supervision and with the participation of our
company's management, including our company's President. Based upon that
evaluation, our company's President concluded that our company's disclosure
controls and procedures are effective. There have been no significant changes in
our company's internal controls or in other factors, which could significantly
affect internal control subsequent to the date we carried out our evaluation.

         Disclosure controls and procedures and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time period specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to management
including our President as appropriate, to allow timely decisions regarding
required disclosure.

ITEM 8B. OTHER INFORMATION

         None.

                                       31
<PAGE>
                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

                                   MANAGEMENT

Directors and Executive Officers

         Name                   Age      Positions

         Cery B. Perle          43       President, CEO, CFO and Chairman
         Edward L. Hagan        33       Secretary and director
         Richard Galterio       41       Director

         Cery B. Perle. Mr. Perle has served as our President, CEO and Chairman
since February 2004. Mr. Perle co-founded Grass Roots in June of 2002. Mr. Perle
has experience in numerous start-up ventures. A primary focus of Mr. Perle's
experience has been on the sales and marketing of innovative ideas and products.
Prior to Grass Roots, from 2001 to 2002, he was director of Crystal Consulting
Group, a business-consulting firm. From 2000 to 2001, he was engaged as a
consultant to Rxalternative.com, an alternative healthcare web site. From 1994
to 1998, he was President and Chief Executive Officer of Waldron & Co., a
California-based registered broker-dealer, where he established four branch
offices in addition to the West Coast based corporate office of the investment
firm.

         In September 1998, the Securities and Exchange Commission commenced a
civil action against Mr. Perle and Waldron & Co., a broker-dealer registered
with the Commission. The civil action alleged that Mr. Perle and Waldron
artificially raised the market price of Shopping.com, an Internet retailer whose
initial public offering was underwritten by Waldron & Co. In February 1999, the
United States District Court for the Central District of California, acting upon
the Commission's allegations, entered a permanent injunction against Mr. Perle,
enjoining him from violating Section 17(a) of the Securities Act of 1933 and
Sections 10(b) and 15(c)(1) of the Securities Exchange Act of 1934 and Rules
10b-5 and 15cl-2 thereunder, and required Mr. Perle to pay a $110,000 civil
penalty. As a result of the February 1999 injunction, in October 1999, Mr. Perle
was barred from association with any broker-dealer. In June 2001, Mr. Perle was
barred by the National Association of Securities Dealers, Inc. from any
association with any NASD member in any capacity. The sanction was based upon
findings that Mr. Perle received $30,000 of checks from customers for the
purchase of Shopping.com IPO stock prior to the IPO registration statement being
declared effective by the Commission. In April 1998, a class action lawsuit was
filed against Shopping.com, Mr. Perle and Waldron in the United States District
Court for the Central District of California. Mr. Perle filed for personal
bankruptcy in 2001 for which a final decree was granted in March 2002. In
January 2001 the U.S. Department of Labor brought an action against Waldron &
Co. and Mr. Perle in the U.S. District Court for the Central District of
California for violations of the Employee Retirement Income Security Act of 1974
(ERISA) alleging that violations of ERISA occurred when Waldron & Co. and Mr.
Perle failed to forward contributions of approximately $50,000 withheld from
employee paychecks to Waldron & Co.'s 401(k) Plan. Among other relief's, the
suit sought to permanently bar Mr. Perle from serving as a fiduciary of or
service provider to any plan covered by ERISA. Although Mr. Perle was never
formally notified of the outcome of the action, he has assumed that such an
order was issued.

         Edward L. Hagan. Mr. Hagan has been a member of our Board of Directors
and our Secretary since February 2004. Mr. Hagan co-founded Grass Roots in June
2002 and has been a director and secretary of that company since inception, and
served as Chief Financial Officer from inception through September 2, 2002.
Since 1990, he has owned and managed Hagan Farms Partnership, a commercial
agricultural company.

                                       32
<PAGE>

         Richard Galterio. Mr. Galterio has been a member of our Board of
Directors since July 2003. Since October 1998 he has been Managing Director of
Private Equity for vFinance, Inc., an investment banking firm which is a member
of the NASD, a position he had held since the acquisition in September 1998 by
vFinance, Inc. of First Level Capital, a NASD member firm which he co-founded in
1998. Mr. Galterio is also a member of the Board of Directors of ResQnet. During
his tenure at First Level Capital, Mr. Galterio served as Compliance and
Operations Director. Mr. Galterio was employed by Commonwealth Associates, an
NASD member firm, from 1991 to 1998, initially in the capacity as a registered
representative (1991 to 1993) and then as Managing Director (1994 to 1998) where
his responsibilities included branch management and compliance. From 1986 to
1991 Mr. Galterio was Director of Research for Barry Leeds and Associates, a
firm specializing in sales tracking research for the banking industry. Mr.
Galterio received a B.S. in Business Management with honors from Villanova
University. Mr. Galterio holds Series 27, 7 and 55 licenses from the NASD.

Director independence, Audit Committee of the Board of Directors and Audit
Committee financial expert

         None of the member of our Board of Directors are "independent" within
the meaning of definitions established by the Securities and Exchange
Commission. As a result of our limited operating history and minimal resources,
small companies such as ours generally have difficulty in attracting independent
directors. As we grow, in the future our Board of Directors intends to seek
additional members who are independent, have a variety of experiences and
backgrounds, who will represent the balanced, best interests of all of our
stockholders and at least one of which who is an "audit committee financial
expert" described below.

         Our Board of Directors has also not yet established an Audit Committee,
and the functions of the Audit Committee are currently performed by the entire
Board of Directors. At such time as we expand our Board of Directors to include
independent directors, we intend to establish an Audit Committee of our Board of
Directors. We are not currently subject to any law, rule or regulation, however,
requiring that all or any portion of our Board of Directors include
"independent" directors, nor are we required to establish or maintain an Audit
Committee of our Board of Directors.

         None of our directors is an "audit committee financial expert" within
the meaning of Item 401(e) of Regulation S-B. In general, an "audit committee
financial expert" is an individual member of the audit committee or Board of
Directors who:

         o  understands generally accepted accounting principles and financial
            statements,
         o  is able to assess the general application of such principles in
            connection with accounting for estimates, accruals and reserves,
         o  has experience preparing, auditing, analyzing or evaluating
            financial statements comparable to the breadth and complexity to our
            financial statements,
         o  understands internal controls over financial reporting, and
         o  understands audit committee functions.

         Our Board of Directors are presently comprised of individuals who were
integral in the start-up of our company, as in the case of Messrs. Perle and
Haglund, or were initially elected to our Board as a designee of our then
investment banking firm, as in the case of Mr. Galterio. As discussed earlier in
this section, at such time as we are able to expand our Board of Directors to
include independent directors those additional directors will include at least
one "audit committee financial expert."

                                       33
<PAGE>

Code of Business Conduct and Ethics

         We have adopted a Code of Business Conduct and Ethics to provide
guiding principles to all of our employees. Our Code of Business Conduct and
Ethics does not cover every issue that may arise, but it sets out basic
principles to guide our employees and provides that all of our employees must
conduct themselves accordingly and seek to avoid even the appearance of improper
behavior. Any employee which violates our Code of Business Conduct and Ethics
will be subject to disciplinary action, up to an including termination of his or
her employment. Generally, our Code of Business Conduct and Ethics provides
guidelines regarding:

         o  compliance with laws, rules and regulations,
         o  conflicts of interest,
         o  insider trading,
         o  corporate opportunities,
         o  competition and fair dealing,
         o  discrimination and harassment,
         o  health and safety,
         o  record keeping,
         o  confidentiality,
         o  protection and proper use of company assets,
         o  payments to government personnel,
         o  waivers of the Code of Business Conduct and Ethics,
         o  reporting any illegal or unethical behavior, and
         o  compliance procedures.

         In addition, we have also adopted a Code of Ethics for our Chief
Executive Officer and Senior Financial Officers. In addition to our Code of
Business Conduct and Ethics, our CEO and senior financial officers are also
subject to specific policies regarding:

         o  disclosures made in our filings with the SEC,
         o  deficiencies in internal controls or fraud involving
            management or other employees who have a significant role in
            our financial reporting, disclosure or internal controls,
         o  conflicts of interests, and
         o  knowledge of material violations of securities or other laws, rules
            or regulations to which we are subject.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to us under Rule 16a-3(d) of the Securities Exchange Act of 1934
("Exchange Act") during the fiscal year ended December 31, 2004, we are not
aware of any person that failed to file on a timely basis, as disclosed in the
aforementioned Forms, reports required by Section 16(a) of the Exchange Act
during the fiscal year ended December 31, 2004 with the exception of the
following:

Cery Perle, our Chief Executive Officer has not timely filed a Form 4 related to
the issuance of 1,500,000 shares of common stock to Preston Price, S.A., of
which he holds voting rights, in December 2004.

                                       34
<PAGE>

Langley Park Investments PLC has failed to file an initial statement of
beneficial ownership on Form 3 although it has filed a Schedule 13-D relevant to
its stock ownership.

ITEM 10. EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE
Executive Compensation

                                Cash Compensation

         The following table summarizes all compensation recorded by us in each
of the last three fiscal years for our Chief Executive Officer and each other
executive officers serving as such (the "Named Executive Officers") whose annual
compensation exceeded $100,000.
<TABLE>
<CAPTION>
                       Annual Compensation                     Long-Term Compensation
                       ------------------------------------    ----------------------------------------------
                                                               Awards                   Payouts
                                               Other Annual    Restricted  Securities            All Other
 Name and Principal    Fiscal Salary    Bonus  Compensation    Stock       Underlying   LTIP     Compensation
 Position              Year   ($)       ($)    ($)             Awards ($)  Options (#)  Payouts  ($)
 ------------------    ----   --------  -----  ------------    ----------  -----------  -------  ------------
 <S>                   <C>    <C>       <C>    <C>             <C>          <C>         <C>      <C>
 Cery B. Perle,        2004   $221,500  $-0-   $-0-            $-0-        -0-          $-0-     $-0-
 President, CEO,       2003   $-0-      $-0-   $-0-            $-0-        -0-          $-0-     $-0-
 Director (1)          2002   $-0-      $-0-   $-0-            $-0-        -0-          $-0-     $-0-

 Solomon Lam (2)       2004   $-0-      $-0-   $-0-            $-0-        -0-          $-0-     $-0-
                       2003   $-0-      $-0-   $-0-            $-0-        -0-          $-0-     $-0-
                       2002   $125,000  $-0-   $-0-            $-0-        -0-          $-0-     $-0-

 Clint Beckwith        2004   $-0-      $-0-   $-0-            $-0-        -0-          $-0-     $-0-
                       2003   (3)       $-0-   $-0-            $-0-        -0-          $-0-     $-0-
                       2002   $-0-      $-0-   $-0-            $-0-        -0-          $-0-     $-0-
</TABLE>

(1) Mr. Perle has served as our president and CEO since February 2004.

(2) Mr. Lam served as our president from 2000 until February 2004. During fiscal
2002, we accrued approximately $97,000 of compensation to Mr. Lam. In December
2003, he relinquished all rights to any amounts due him. We reversed this
accrued but unpaid compensation to additional paid-in capital.

                                       35
<PAGE>

(3) In February 2003, we issued Mr. Beckwith, our Vice President of Public
Relations and a member of our Board of Directors, 90,000 shares of our common
stock as compensation for his services for the period of April 2000 through
December 2003 and as repayment to a loan to us in the amount of$60,000. We
valued these shares at $360,000, of which $216,400 was applicable to
compensation. Of the amount accrued for fiscal 2002, approximately $47,600 was
reversed to additional paid-in capital during fiscal 2003.

Employment Agreements

         On January 1, 2003, we entered into a two-year employment agreement
with Mr. Cery B. Perle to serve as our president. The agreement automatically
renews for an additional two year term upon its expiration, with an 10% increase
in his base salary. Under the terms of this agreement, we pay Mr. Perle an
annual base salary of $218,000. We granted him an option to purchase 2,000,000
shares of our common stock at an exercise price of $0.01 per share as additional
compensation. This option vests ratably over the two-year term of the agreement.
The agreement also provides for an automobile allowance of $1,200 per month,
paid vacation, fringe benefits commensurate with his duties and responsibilities
and benefits in the event of disability as well as containing certain
non-disclosure and non-competition provisions. Under the terms of the agreement,
we may terminate Mr. Perle's employment either with or without cause. If the
agreement is terminated by us without good cause, or by Mr. Perle with cause, we
would be obligated to pay him his base salary though the end of the term of the
agreement, continue his benefits through the end of the term and all options
would continue to vest during the remaining period of the term. To the extent
that Mr. Perle is terminated for cause, or he voluntarily resigns, no severance
benefits will be paid.

Director Compensation

         Members of our Board of Directors do not receive cash compensation for
their services as directors but are reimbursed for their reasonable expenses for
attending board and board committee meetings.

                      Option/SAR Grants in Last Fiscal Year

         The following table sets forth information concerning individual grants
of options made during fiscal 2004 to the Named Executive Officers.

                                    % OF TOTAL
                NUMBER OF SHARES    OPTIONS  GRANTED  EXERCISE OR
                UNDERLYING OPTIONS  TO EMPLOYEES IN   BASE PRICE   EXPRIRATION
 NAME           GRANTED (#)         FISCAL YEAR       ($/SH)       DATE
 -------------  ------------------  ----------------  -----------  -----------

 Cery B. Perle          0                  n/a            n/a          n/a

                                       36
<PAGE>
               Aggregated Option/SAR Exercises in Last Fiscal Year
                          and FY-End Option/SAR Values
<TABLE>
<CAPTION>
                                              No. of Securities                Value of Unexercised
                                            Unexercised Options at            In-the-Money Options at
                 Shares                       December 31, 2004                  December 31, 2004
                Acquired                      -----------------               -----------------------
                   On        Value
 Name           Exercise    Realized      Exercisable    Unexercisable        Exercisable   Unexercisable
 --------------------------------------------------------------------------------------------------------
 <S>               <C>      <C>              <C>               <C>              <C>               <C>
 Cery B. Perle     0        n/a              0                 0                0                 0

</TABLE>

2002 Stock Plan

         On August 9, 2002, our board of directors authorized, and holders of a
majority of our outstanding common stock approved and adopted, our 2002 Stock
Plan covering 1,000,000 shares of common stock. On April 20, 2004, the plan was
amended to increase the number of shares covered by the plan to 12,000,000
shares to accommodate grants previously provided under the Grass Roots
Communications, Inc. compensation program.

         The purpose of the plan is to encourage stock ownership by our
officers, directors, key employees and consultants, and to give such persons a
greater personal interest in the success of our business and an added incentive
to continue to advance and contribute to us. Our board of directors, or a
committee of the board, will administer the Plan including, without limitation,
the selection of the persons who will be awarded stock grants and granted
options, the type of options to be granted, the number of shares subject to each
option and the exercise price.

         Plan options may either be options qualifying as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended, or
non-qualified options. In addition, the plan allows for the inclusion of a
reload option provision, which permits an eligible person to pay the exercise
price of the option with shares of common stock owned by the eligible person and
receive a new option to purchase shares of common stock equal in number to the
tendered shares. Furthermore, compensatory stock amounts may also be issued. Any
incentive option granted under the plan must provide for an exercise price of
not less than 100% of the fair market value of the underlying shares on the date
of grant, but the exercise price of any incentive option granted to an eligible
employee owning more than 10% of our outstanding common stock must not be less
than 110% of fair market value on the date of the grant. The term of each plan
option and the manner in which it may be exercised is determined by the board of
directors or the committee, provided that no option may be exercisable more than
10 years after the date of its grant and, in the case of an incentive option
granted to an eligible employee owning more than 10% of the common stock, no
more than five years after the date of the grant.

Eligibility

         Our officers, directors, key employees and consultants are eligible to
receive stock grants and non-qualified options under the plan. Only our
employees are eligible to receive incentive options.

Administration

         The plan will be administered by our board of directors or an
underlying committee. The board of directors or the committee determines from
time to time those of our officers, directors, key employees and consultants to
whom stock grants or plan options are to be granted, the terms and provisions of
the respective option agreements, the time or times at which such options shall
be granted, the type of options to be granted, the dates such plan options
become exercisable, the number of shares subject to each option, the purchase
price of such shares and the form of payment of such purchase price. All other
questions relating to the administration of the plan, and the interpretation of
the provisions thereof and of the related option agreements, are resolved by the
board of directors or committee.

                                       37
<PAGE>

Shares Subject to Awards

         We have currently reserved 12,000,000 of our authorized but unissued
shares of common stock for issuance under the plan, and a maximum of 12,000,000
shares may be issued, unless the plan is subsequently amended, subject to
adjustment in the event of certain changes in our capitalization, without
further action by our board of directors and stockholders, as required. Subject
to the limitation on the aggregate number of shares issuable under the plan,
there is no maximum or minimum number of shares as to which a stock grant or
plan option may be granted to any person. Shares used for stock grants and plan
options may be authorized and unissued shares or shares reacquired by us,
including shares purchased in the open market. Shares covered by plan options
which terminate unexercised will again become available for grant as additional
options, without decreasing the maximum number of shares issuable under the
plan, although such shares may also be used by us for other purposes.

         The plan provides that, if our outstanding shares are increased,
decreased, exchanged or otherwise adjusted due to a share dividend, forward or
reverse share split, recapitalization, reorganization, merger, consolidation,
combination or exchange of shares, an appropriate and proportionate adjustment
shall be made in the number or kind of shares subject to the plan or subject to
unexercised options and in the purchase price per share under such options. Any
adjustment, however, does not change the total purchase price payable for the
shares subject to outstanding options. In the event of our proposed dissolution
or liquidation, a proposed sale of all or substantially all of our assets, a
merger or tender offer for our shares of common stock, the board of directors
may declare that each option granted under the Plan shall terminate as of a date
to be fixed by the board of directors; provided that not less than 30 days
written notice of the date so fixed shall be given to each participant holding
an option, and each such participant shall have the right, during the period of
30 days preceding such termination, to exercise the participant's option, in
whole or in part, including as to options not otherwise exercisable.

Terms of Exercise

         The plan provides that the options granted thereunder shall be
exercisable from time to time in whole or in part, unless otherwise specified by
the committee or by the board of directors.

         The plan provides that, with respect to incentive stock options, the
aggregate fair market value (determined as of the time the option is granted) of
the shares of common stock, with respect to which incentive stock options are
first exercisable by any option holder during any calendar year shall not exceed
$100,000.

Exercise Price

         The purchase price for shares subject to incentive stock options must
be at least 100% of the fair market value of our common stock on the date the
option is granted, except that the purchase price must be at least 110% of the
fair market value in the case of an incentive option granted to a person who is
a "10% stockholder." A "10% stockholder" is a person who owns, within the
meaning of Section 422(b)(6) of the Internal Revenue Code of 1986, at the time
the incentive option is granted, shares possessing more than 10% of the total
combined voting power of all classes of our outstanding shares. The plan
provides that fair market value shall be determined by the board of directors or
the committee in accordance with procedures which it may from time to time
establish. If the purchase price is paid with consideration other than cash, the
Board or the Committee shall determine the fair value of such consideration to
us in monetary terms.

                                       38
<PAGE>

         The exercise price of non-qualified options shall be determined by the
board of directors or the committee, but shall not be less than the par value of
our common stock on the date the option is granted.

         The per share purchase price of shares issuable upon exercise of a plan
option may be adjusted in the event of certain changes in our capitalization,
but no such adjustment shall change the total purchase price payable upon the
exercise in full of options granted under the plan.

Manner of Exercise

         Plan options are exercisable by delivery of written notice to us
stating the number of shares with respect to which the option is being
exercised, together with full payment of the purchase price therefor. Payment
shall be in cash, checks, certified or bank cashier's checks, promissory notes
secured by the shares issued through exercise of the related options, shares of
common stock or in such other form or combination of forms which shall be
acceptable to the board of directors or the committee, provided that any loan or
guarantee by us of the purchase price may only be made upon resolution of the
board of directors or committee that such loan or guarantee is reasonably
expected to benefit us.

Option Period

         All incentive stock options shall expire on or before the tenth
anniversary of the date the option is granted except as limited above. However,
in the case of incentive stock options granted to an eligible employee owning
more than 10% of the common stock, these options will expire no later than five
years after the date of the grant. Non-qualified options shall expire 10 years
and one day from the date of grant unless otherwise provided under the terms of
the option grant.

Termination

         All plan options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee shall die while
our employee or within three months after termination of employment by us
because of disability, or retirement or otherwise, such options may be
exercised, to the extent that the optionee shall have been entitled to do so on
the date of death or termination of employment, by the person or persons to whom
the optionee's right under the option pass by will or applicable law, or if no
such person has such right, by his executors or administrators.

         In the event of termination of employment because of death while an
employee or because of disability, the optionee's options may be exercised not
later than the expiration date specified in the option or one year after the
optionee's death, whichever date is earlier, or in the event of termination of
employment because of retirement or otherwise, not later than the expiration
date specified in the option or one year after the optionee's death, whichever
date is earlier.

         If an optionee's employment by us terminates because of disability and
such optionee has not died within the following three months, the options may be
exercised, to the extent that the optionee shall have been entitled to do so at
the date of the termination of employment, at any time, or from time to time,
but not later than the expiration date specified in the option or one year after
termination of employment, whichever date is earlier.

                                       39
<PAGE>

         If an optionee's employment shall terminate for any reason other than
death or disability, optionee may exercise the options to the same extent that
the options were exercisable on the date of termination, for up to three months
following such termination, or on or before the expiration date of the options,
whichever occurs first. In the event that the optionee was not entitled to
exercise the options at the date of termination or if the optionee does not
exercise such options (which were then exercisable) within the time specified
herein, the options shall terminate.

         If an optionee's employment shall terminate for any reason other than
death, disability or retirement, all right to exercise the option shall
terminate not later than 90 days following the date of such termination of
employment.

         If an optionee's employment with us is terminated for any reason
whatsoever, and within three months after the date thereof optionee either (i)
accepts employment with any competitor of, or otherwise engages in competition
with us, or (ii) discloses to anyone outside our company or uses any
confidential information or material of our company in violation of our policies
or any agreement between the optionee and our company, the committee, in its
sole discretion, may terminate any outstanding stock option and may require
optionee to return to us the economic value of any award that was realized or
obtained by optionee at any time during the period beginning on that date that
is six months prior to the date optionee's employment with us is terminated.

         The committee may, if an optionee's employment with us is terminated
for cause, annul any award granted under this plan to such employee and, in such
event, the committee, in its sole discretion, may require optionee to return to
us the economic value any award that was realized or obtained by optionee at any
time during the period beginning on that date that is six months prior to the
date optionee's employment with us is terminated.

Modification and Termination of Plan

         The board of directors or committee may amend, suspend or terminate the
plan at any time. However, no such action may prejudice the rights of any holder
of a stock grant or optionee who has prior thereto been granted options under
the plan. Further, no amendment to this plan which has the effect of (a)
increasing the aggregate number of shares subject to this plan (except for
adjustments due to changes in our capitalization), or (b) changing the
definition of "Eligible Person" under the plan, may be effective unless and
until approved by our stockholders in the same manner as approval of this plan
is required. Any such termination of the plan shall not affect the validity of
any stock grants or options previously granted thereunder. Unless the plan shall
theretofore have been suspended or terminated by the board of directors, the
plan will terminate on August 9, 2012.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         At March 20, 2005, we had 26,493,846 shares of our common stock issued
and outstanding. The following table sets forth information regarding the
beneficial ownership of our common stock as of March 20, 2005 by:

         o  each person known by us to be the beneficial owner of more than 5%
            of our common stock;
         o  each of our directors;
         o  each of our executive officers; and
         o  our executive officers, directors and director nominees as a group.

                                       40
<PAGE>

         Unless otherwise indicated, the business address of each person listed
is in care of 73061 El Paso, Suite 202, Palm Desert, California 92260. The
percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock outstanding
on that date and all shares of our common stock issuable to that holder in the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by that person at that date which are exercisable within 60
days of that date. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all shares of our common stock
owned by them, except to the extent that power may be shared with a spouse.

Name and Address                        Number of Shares              Percentage
Of Beneficial Owner                    Beneficially Owned            Outstanding

Cery B. Perle (1)                           8,166,500                   29.2%

Edward L. Hagan (2)                         1,725,000                    6.5%

Richard Galterio (3)                          210,000                     *

All officers and directors as a
group (three persons) (1)(2)(3)            10,101,500                   35.7%

First Capital Holdings
International, Inc. (4)                     2,588,304                    9.7%

Langley Park
Investment Trust PLC (5)                    5,882,352                   22.2%

Robinson Reed, Inc. (6)                     2,588,304                    9.7%

Preston & Price, S.A. (7)                   1,500,000                    5.7%

* represents less than 1%

(1) The number of shares beneficially owned by Mr. Perle includes:

      o  1,000,000 shares of common stock and options to purchase an additional
         500,000 shares of common stock at an exercise price of $0.02 per share
         held by his fiancee, Jenell Del Rio (Fontes),

      o  1,500,000 shares of common stock held by Preston & Price, S.A., over
         which Mr. Perle can exercise voting rights. See footnote 7 below, and

      o  options to purchase 1,000,000 shares of common stock with an exercise
         price of $0.02 per share held by Mr. Perle.

(2) The number of shares beneficially owned by Mr. Hagan includes:

                                       41
<PAGE>

      o  375,000 shares of our common stock held by his wife Stephanie and
         250,000 shares of our common stock held by his daughter, Makena Hagan,
         but excludes 125,000 shares of common stock held by the Sandra L. Hagan
         Irrevocable Trust over which he disclaims beneficial ownership, and

      o  options to purchase 100,000 shares of our common stock exercisable at
         $1.75 per share.

(3) The number of shares beneficially owned by Mr. Galterio includes options to
purchase 100,000 shares of our common stock exercisable at $1.75 per share and
warrants to purchase 110,000 shares of our common stock exercisable at $0.75 per
share. Mr. Galterio, an employee of vFinance Investments, Inc., disclaims
beneficial ownership of any of our securities which may be owned by that firm.

(4) The number of shares beneficially owned by First Capital Holdings
International, Inc. includes warrants to purchase 281,250 shares of our common
stock exercisable at $1.55 per share. Mr. Andri Athanasiou is the control person
of First Capital Holdings International, Inc.

(5) Messrs. Alstair Rae and Harry Pearl are the control persons of Langley Park
Investments, PLC.

(6) The number of shares beneficially owned by Robinson Reed Inc. includes
warrants to purchase 281,250 shares of our common stock exercisable at $1.55 per
share. Mr. Geoffrey Magistrate is the control person of Robinson Reed Inc.
Robinson Reed Inc. has contractually agreed to limit the exercise of the
warrants so that upon the exercise the holder's beneficial ownership would not
exceed 4.99% of our common stock outstanding at the time of exercise, subject to
a waiver of this limitation by the holder upon 61 days notice to us, as well as
limiting the holder's beneficial ownership upon exercise to less than 9.9% of
our then issued and outstanding common stock, including shares issuable upon the
exercise of the warrant, also subject to waiver by the holder upon 61 days
notice to us.

(7) Mr. Cery B. Perle holds voting control over the shares owned beneficially by
Preston & Price, S.A. See footnote 1 above. Mr. Peter Grut is the control person
of Preston & Price, S.A.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         From time to time we made advances to and received advances from Mr.
Soloman Lam, our former CEO and member of our board of directors. Advances made
to us generally were due on demand, did not pay any interest, and were used by
us for working capital. At December 31, 2003, we transferred certain assets to
Mr. Lam related to real estate interests and he assumed certain related
liabilities. As a result, we held an advance due from Mr. Lam of $100,500. In
December 2003, we wrote off this amount as an addition to our additional paid-in
capital.

         In 2001, Mr. Lam was given a $25,830 advance against salary due in 2002
and in 2002 additional salary to him of $97,000 was accrued. In December 2003,
Mr. Lam agreed to relinquish all rights to this accrued but unpaid salary. In
December 2003, we reversed these liabilities on our financial statements as an
addition to our additional paid-in capital.

         In fiscal 2003, Mr. Clint Beckwith, our then Vice President of Public
Relations and a member of our Board of Directors, advanced us $60,000 which we
used for working capital. In fiscal 2003, we issued Mr. Beckwith 90,000 shares
of our common stock, valued at $360,000, as compensation for his services and as
repayment of such advance. Of the $360,000, approximately $216,400 was
applicable to compensation. Additionally, in December 2003, we assigned a
corporation which is an affiliate of Mr. Beckwith all rights and obligations we
held for certain land contracts. In connection with this assignment, we
forfeited a $10,000 deposit we had paid on these contracts in 2002, and we
issued him an additional 10,000 shares of our common stock in settlement of any
disputes with our company.

                                       42
<PAGE>

         In December 2001, Mr. Lam entered into purchase contracts to acquire 45
acres of vacant land, for a total purchase price of $470,000. In April 2002, Mr.
Lam closed on two of the nine lots and in May 2002, closed on a third lot. The
remaining six lots were to be purchased when and if financing became available.
Mr. Lam had agreed to transfer the vacant land to us in exchange for a purchase
price equal to cost. Deposits totaling $15,000 were paid by us in 2002 in
conjunction with this land. The lots were never transferred to us and the
$15,000 became a receivable to us from Mr. Lam. In December 2003 this receivable
was expensed as an addition to our additional paid-in capital.

         During fiscal 2003, we advanced $23,400 to Mr. Cery B. Perle, our
president, and during fiscal 2004, we paid $113,054 of personal expenses on his
behalf. These amounts, which were advanced to Mr. Perle or paid on his behalf
when Grass Roots was a privately held company, were repaid in full by Mr. Perle
prior to December 31, 2004.

         Mr. Rich Galterio, a member of our Board of Directors, is employed by
vFinance, Inc., an affiliate of vFinance Investments, Inc. vFinance Investments,
Inc. has acted as placement agent for us in two private placements as described
earlier in this annual report under "Management's Discussion and Analysis or
Plan of Operation."

ITEM 13. EXHIBITS

Exhibits

2.1      Acquisition Agreement and Plan of Merger (3)
2.2      Agreement and Plan of Merger (4)
3.1      Certificate of Incorporation (1)
3.2      By-Laws (1)
3.3      Certificate of Incorporation, as amended (2)
3.4      Certificate of Amendment to the Certificate of Incorporation (5)
3.5      Certificate of Amendment to the Certificate of Incorporation (9)
4.1      Form of 8% promissory note (11)
4.2      Form of 10% secured note (9)
4.3      Form of Investor Warrant to Purchase Common Stock issued with 8%
         promissory note (11)
4.4      Form of Common Stock Purchase Warrant issued with 10% secured note (11)
4.5      Form of Common Stock Purchase Warrant issued to Robinson Reed Inc. and
         First Capital Holdings International, Inc. (11)
4.6      Form of $0.75 Investor Warrant (11)
10.1     2002 Stock Option and Stock Award Plan (7)
10.2     Lease for principal executive offices (11)
10.3     Stock Purchase Agreement with Langley Park Investments PLC (10)
10.4     Escrow Agreement with Langley Park (11)
10.5     Employment Agreement with Cery B. Perle (11)
10.6     Common Stock and Warrant Purchase Agreement dated as of August 27, 2004
         (10)
10.7     Registration Rights Agreement dated as of August 27, 2004 (10)
10.8     Amendment No. 1 to Common Stock and Warrant Purchase Agreement dated as
         of November 2, 2004 (10)
10.9     Settlement  Agreement and Release between Newport  International
         Group,  Inc.,  Robinson Reed,  Inc., First Capital Holdings
         International, Inc., Continental Blue Limited and E-Holdings, Inc. (11)
10.10    Finder's Fee Agreement with E-Holdings, Inc. (11)
14.1     Code of  Business  Conduct  and Ethics  and Code of Ethics  for the
         Chief  Executive  Officer  and Senior  Financial Officers (11)
16.1     Letter from Berkovitz, Lago & Company, LLP (8)
23.1     Consent of Sherb & Co., LLP*
31.1     Section 302 Certificate of Chief Executive Officer *
31.2     Section 302 Certificate of principal accounting officer *
32.1     Section 906 Certificate of Chief Executive Officer *

*        filed herewith

                                       43
<PAGE>

(1)  Incorporated by reference to the Form 10-SB as filed with the SEC on May
     10, 2000.

(2)  Incorporated by reference to the Report on Form 8-K as filed with the SEC
     on February 5, 2001.

(3)  Incorporated by reference to the Report on Form 8-K filed with the SEC on
     November 6, 2000.

(4)  Incorporated by reference to the Report on Form 8-K filed with the SEC on
     February 13, 2004.

(5)  Incorporated by reference to the definitive Information Statement on
     Schedule 14C as filed with the SEC on November 14, 2003.

(6)  Incorporated by reference to the Report on Form 8-K as filed with the SEC
     on June 3, 2003.

(7)  Incorporated by reference to the registration statement on Form S-8 as
     filed with the SEC on August 8, 2004.

(8)  Incorporated by reference to the Report on Form 8-K as filed with the SEC
     on December 16, 2004.

(9)  Incorporated by reference to the quarterly report on Form 10-QSB for the
     three and six months ended June 30, 2004.

(10) Incorporated by reference to the quarterly report on Form 10-QSB for the
     three and nine months ended September 30, 2004.

(11) Incorporated by reference to the registration statement on Form SB-2, file
     number 333-123096, as filed with the SEC on March 2, 2005.

                                       44
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         The following table shows the fees that we paid or accrued for the
audit and other services provided by Sherb & Co., LLP for fiscal 2004 and
Berkovits, Lago & Company, LLP for fiscal 2004 and 2003.

                             Fiscal 2004        Fiscal 2003
                             -----------        -----------

Audit Fees                       $66,950           $  9,000
Audit-Related Fees                     0                  0
Tax Fees                               0                  0
All Other Fees                         0                  0
                                 -------          ---------
         Total                   $66,950           $  9,000
                                 =======          =========

         Audit Fees -- This category includes the audit of our annual financial
statements, review of financial statements included in our Form 10-QSB Quarterly
Reports and services that are normally provided by the independent auditors in
connection with engagements for those fiscal years. This category also includes
advice on audit and accounting matters that arose during, or as a result of, the
audit or the review of interim financial statements.

         Audit-Related Fees -- This category consists of assurance and related
services by the independent auditors that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported above under "Audit Fees." The services for the fees disclosed under
this category include consultation regarding our correspondence with the SEC and
other accounting consulting.

         Tax Fees -- This category consists of professional services rendered by
our independent auditors for tax compliance and tax advice. The services for the
fees disclosed under this category include tax return preparation and technical
tax advice.

         All Other Fees -- This category consists of fees for other
miscellaneous items.

         Our Board of Directors has adopted a procedure for pre-approval of all
fees charged by our independent auditors. Under the procedure, the Board
approves the engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Board, or, in the period between
meetings, by a designated member of Board. Any such approval by the designated
member is disclosed to the entire Board at the next meeting. The audit and tax
fees paid to the auditors with respect to fiscal year 2004 were pre-approved by
the entire Board of Directors.

                                       45
<PAGE>
                                   SIGNATURES

         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.

Dated: March 31, 2005               NEWPORT INTERNATIONAL GROUP, INC.



                                    By: /s/ Cery B. Perle
                                        ----------------------------------------
                                        Cery B. Perle
                                        President, CEO, CFO, principal executive
                                        and principal accounting officer


         In accordance with the Exchange Act, this report has been signed by the
following persons in the capacities and on the dates indicated.

 SIGNATURE                             TITLE                         DATE

                            President, CEO, CFO,Chairman,
                            principal executive officer,
 /s/ Cery B. Perle          principal accounting officer        March 31, 2005
 ------------------
 Cery B. Perle



 /s/ Edwin L. Hagan         Secretary and Director              March 31, 2005
 ------------------
 Edwin L. Hagan



 /s/ Richard Galterio       Director                            March 31, 2005
 ------------------------
 Richard Galterio

<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC

                          INDEX TO FINANCIAL STATEMENTS

                                                                         Page

REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS..........................F-2

FINANCIAL STATEMENTS

         Balance Sheet.......................................................F-3

         Statements of Operations and Comprehensive Loss.....................F-4

         Statements of Changes in Stockholders' Deficiency...................F-5

         Statements of Cash Flows............................................F-6

         Notes of Financial Statements................................F-7 - F-29






                                       F-1
<PAGE>

                                                                805 Third Avenue
                                                              New York, NY 10022
                                                               Tel. 212-838-5100
                                                                Fax.212-838-2676
                                                        e-mail:info@sherbcpa.com

                                                 Offices in New York and Florida
________________________________________________________________________________
CERTIFIED PUBLIC ACCOUNTANTS

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Newport International Group, Inc.

We have audited the accompanying consolidated balance sheet of Newport
International Group, Inc. and its Subsidiary as of December 31, 2004, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 2004 and 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amount and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Newport
International Group, Inc. and Subsidiaries as of December 31, 2004, and the
results of their operations and their cash flows for the years ended December
31, 2004 and 2003, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company had net losses and cash used in
operations of $14,258,448 and $5,059,918 respectively, for the year ended
December 31, 2004. This raises substantial doubt about its ability to continue
as a going concern. Management's plans in regards to these matters are also
described in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                       /s/ Sherb & Co., LLP
                                       Certified Public Accountants
New York, New York
February 16, 2005

                                       F-2
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2004


                                     ASSETS

Current Assets:
  Cash ..........................................................  $  1,671,773
  Deposit .......................................................        25,000
  Marketable security held for sale .............................        68,925
  Note receivable ...............................................        86,200
                                                                   ------------
     Total current assets .......................................     1,851,898

  Investment in equity securities ...............................       912,501
  Property and equipment, net of accumulated
    depreciation of $28,124 .....................................       110,654
  Deferred financing costs, net of accumulated
    amortization of $197,675 ....................................       155,036
  Other assets ..................................................        36,301
                                                                   ------------

     Total assets ...............................................  $  3,066,390
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses .........................  $    347,218
  Current portion of capitalized lease obligations ..............         6,932
  Convertible promissory notes, net of debt discount of $106,477        218,523
  Accrued interest on convertible promissory notes ..............        37,675
  Due to stockholder ............................................        15,000
                                                                   ------------

     Total current liabilities ..................................       625,348

  Convertible promissory notes, net of debt
  discount of $681,660 ..........................................     1,052,433
  Capitalized lease obligations, net of current portion .........        10,566
  Other liabilities .............................................         6,426
                                                                   ------------
     Total liabilities ..........................................     1,694,773

  Common stock subject to put ...................................     5,000,000
Stockholders' Deficit:
  Preferred stock; $.0001 par value, 5,000,000
    shares authorized, none issued and outstanding ..............            --
  Common stock; $.001 par value, 150,000,000
    shares authorized, 26,400,061 issued and outstanding ........        26,400
  Additional paid-in capital ....................................    31,955,639
  Restricted investment in marketable securities ................      (912,501)
  Accumulated other comprehensive loss ..........................    (9,998,526)
  Accumulated deficit ...........................................   (19,699,395)
  Common stock subject to put ...................................    (5,000,000)
                                                                   ------------

     Total stockholders' deficit ................................    (3,628,383)
                                                                   ------------

     Total liabilities and stockholders' deficit ................  $  3,066,390
                                                                   ============

                  See Notes to Consolidated Financial Statements.
                                       F-3
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,


                                                       2004            2003
                                                   ------------    ------------

Revenues .......................................   $     10,583             $ -
                                                   ------------    ------------
Operating expenses:
  Research and development .....................        722,113         440,770
  Sales, general and administrative ............      6,085,908       4,595,683
                                                   ------------    ------------

     Total operating expenses ..................      6,808,021       5,036,453
                                                   ------------    ------------

     Operating loss ............................     (6,797,438)     (5,036,453)
                                                   ------------    ------------

  Other expenses ...............................         37,963          27,030
  Settlement with stockholders .................      2,775,000               -
  Other income .................................         (6,375)         (1,940)
  Interest expense .............................      4,654,422          11,709
                                                   ------------    ------------
  Total other expenses, net ....................      7,461,010          36,799

Net loss .......................................    (14,258,448)     (5,073,252)
                                                   ------------    ------------

Unrealized loss on restricted investment .......     (9,998,526)              -
                                                   ------------    ------------

 Comprehensive loss ............................   $(24,256,974)   $ (5,073,252)
                                                   ============    ============

Basic and diluted net loss per common share ....   $      (0.81)   $      (0.45)
                                                   ============    ============

Basic and diluted weighted average common
shares outstanding .............................     17,608,577      11,169,343
                                                   ============    ============

                 See Notes to Consolidated Financial Statements.
                                       F-4
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
            FOR THE PERIOD FROM JANUARY 1, 2003 TO DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                                                                                        Restricted
                                                                                 Common Stock            Additional     Investment
                                                                          ---------------------------     Paid-in       Marketable
                                                                             Shares         Amount        Capital       Securities
                                                                          ------------   ------------   ------------   -------------
<S>                                                                       <C>            <C>            <C>            <C>
Balance at January 1, 2003 .............................................    10,034,333   $     10,034   $    578,766   $         --

Cancellation of common stock from founders .............................      (300,000)          (300)           300             --
Issuance of common stock for cash ......................................     1,703,353          1,703      1,231,172             --
Issuance of common stock for services rendered .........................       300,000            300        152,700             --
Issuance of common stock pursuant to exercise of stock options .........       566,667            567        324,433             --
Fair value warrants issued in connection with the Convertible
 promissory notes ......................................................            --             --         76,652             --
Compensation expense for options granted to employees ..................            --             --        745,625             --
Compensation expense for options granted to outside consultants ........            --             --      1,668,763             --
Net loss ...............................................................            --             --             --             --
                                                                          ------------   ------------   ------------   ------------
                                                                            12,304,353         12,304      4,778,411             --

Issuance of common stock pursuant to the merger with GrassRoots ........     1,009,112          1,009       (779,181)            --
Cancellation of common stockissued pursuant to extinghushment of debt ..      (530,000)          (530)            --             --
Issuance of common stock pursuant to the settlement of pre-merger
 obligations ...........................................................     1,365,000          1,365      4,025,385             --
Issuance of common stock pursuant to exercise of stock options .........       187,500            188        188,063             --
Issuance of common stock for cash, net of financing costs ..............     4,500,000          4,500      5,835,482             --
Issuance of common stock in connection with settlement with stockholders     1,500,000          1,500      2,773,500             --
Issuance of common stock pursuant to a share- exchange agreement .......     5,882,352          5,882     11,817,646     (5,911,764)
Issuance of common stock to pay interest on convertible promissory notes        48,921             49        108,504             --
Issuance of common stock to partially repay convertible promissory notes        40,000             40         59,960             --
Issuance of common stock to consultants and a reseller for services
 rendered ..............................................................       172,500            173        327,952             --
Issuance of common stock for failure to timely file registration
 statement .............................................................        20,323             20         37,943             --
Cancellation of shares issued to a reseller ............................      (100,000)          (100)            --             --
Fair value of warrants issued in connection with the convertible
 promissory notes ......................................................            --             --        760,290             --
Compensation expense for options granted to employees and consultants ..            --             --      1,432,701             --
Beneficial feature resulting from the issuance of convertible
 promissory notes ......................................................            --             --        588,983             --
Unrealized loss on investment in marketable securities .................            --             --             --      4,999,263
Net loss ...............................................................            --             --             --             --
                                                                          ------------   ------------   ------------   ------------
                                                                            26,400,061   $     26,400   $ 31,955,639   $   (912,501)
                                                                          ============   ============   ============   ============
                                                                                                 (CONTINUED)
</TABLE>
                 See Notes to Consolidated Financial Statements.
                                      F-5A
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
            FOR THE PERIOD FROM JANUARY 1, 2003 TO DECEMBER 31, 2004
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                                                            Other
                                                                          Accumulated   Comprehensive   Common Stock
                                                                            Deficit         Loss       Subject to Put      Total
                                                                          ------------  -------------  --------------  ------------
<S>                                                                       <C>            <C>            <C>            <C>
Balance at January 1, 2003 .............................................  $   (367,695)  $         --   $         --   $    221,105

Cancellation of common stock from founders .............................            --             --             --             --
Issuance of common stock for cash ......................................            --             --             --      1,232,875
Issuance of common stock for services rendered .........................            --             --             --        153,000
Issuance of common stock pursuant to exercise of stock options .........            --             --             --        325,000
Fair value warrants issued in connection with the Convertible
 promissory notes ......................................................            --             --             --         76,652
Compensation expense for options granted to employees ..................            --             --             --        745,625
Compensation expense for options granted to outside consultants ........            --             --             --      1,668,763
Net loss ...............................................................    (5,073,252)            --             --     (5,073,252)
                                                                          ------------   ------------   ------------   ------------
                                                                            (5,440,947)            --             --       (650,232)

Issuance of common stock pursuant to the merger with GrassRoots ........            --             --             --       (778,172)
Cancellation of common stockissued pursuant to extinghushment of debt ..            --             --             --           (530)
Issuance of common stock pursuant to the settlement of pre-merger
 obligations ...........................................................            --             --             --      4,026,750
Issuance of common stock pursuant to exercise of stock options .........            --             --             --        188,251
Issuance of common stock for cash, net of financing costs ..............            --             --     (5,000,000)       839,982
Issuance of common stock in connection with settlement with stockholders            --             --             --      2,775,000
Issuance of common stock pursuant to a share- exchange agreement .......            --             --             --      5,911,764
Issuance of common stock to pay interest on convertible promissory notes            --             --             --        108,553
Issuance of common stock to partially repay convertible promissory notes            --             --             --         60,000
Issuance of common stock to consultants and a reseller for services
 rendered ..............................................................            --             --             --        328,125
Issuance of common stock for failure to timely file registration
 statement .............................................................            --             --             --         37,963
Cancellation of shares issued to a reseller ............................            --             --             --           (100)
Fair value of warrants issued in connection with the convertible
 promissory notes ......................................................            --             --             --        760,290
Compensation expense for options granted to employees and consultants ..            --             --             --      1,432,701
Beneficial feature resulting from the issuance of convertible
 promissory notes ......................................................            --             --             --        588,983
Unrealized loss on investment in marketable securities .................            --     (9,998,526)            --     (4,999,263)
Net loss ...............................................................   (14,258,448)            --             --    (14,258,448)
                                                                          ------------   ------------   ------------   ------------
                                                                          $(19,699,395)  $ (9,998,526)  $ (5,000,000)  $ (3,628,383)
                                                                          ============   ============   ============   ============

</TABLE>
                 See Notes to Consolidated Financial Statements.
                                      F-5B
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the years ended December 31,
<TABLE>
<CAPTION>
                                                                  2004          2003
                                                              ------------   ------------
<S>                                                           <C>            <C>
Cash flows from operating activities:
Net loss ...................................................  $(14,258,448)  $ (5,073,252)
Adjustments to reconcile net loss to net cash
used in operating activities:
 Amortization of debt discount .............................       584,792          1,893
 Fair value of common shares issued in connection
  with debt settlement, in excess of pre-merger obligations      3,482,382              -
 Fair value of shares of common stock isued in payment of
  interest on promissory notes .............................       108,553              -
 Fair value of shares issued in connection with the failure
  to timely file the registration statement ................        37,963              -
 Loss on sale of property and equipment ....................             -         29,906
 Depreciation and amortization .............................        94,868         29,588
 Write-off of deposit on Focus Focus.com ...................             -        100,000
 Amortization of deferred financing costs ..................       197,675          3,412
 Fair value of stock options issued to employees and
  consultants for services rendered ........................     1,432,701      2,414,388
 Common stock issued to consultants for services rendered ..       134,125        153,000
 Fair value of common stock issued in connection with
  note payable .............................................       194,000              -
 Fair value of shares issued in connection with settlement
  with stockholders ........................................     2,775,000              -
Changes in operating assets and liabilities
 Due from related party ....................................        23,400        (23,400)
 Prepaid expenses and other current assets .................         4,000         41,633
 Deposit ...................................................       (25,000)             -
 Accounts payable and accrued expenses .....................       143,693        168,287
 Other assets ..............................................       (34,073)             -
 Other long-term liability .................................             -          6,426
 Accrued interest on convertible promissory notes ..........        44,451              -
                                                              ------------   ------------

Net cash used in operating activities ......................    (5,059,918)    (2,148,119)
                                                              ------------   ------------
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              -
 Purchase of marketable securities .........................       (70,125)             -
 Purchase of note receivable ...............................       (85,000)             -
 Website development costs .................................             -        (35,000)
 Purchases of property and equipment .......................      (129,338)       (96,369)
                                                              ------------   ------------

Net cash used in investing activities ......................      (268,267)       (73,524)
                                                              ------------   ------------
Cash flows from financing activities:
 Change in bank overdraft ..................................             -         (6,950)
 Principal repayments on lease obligations .................        (9,730)        (4,675)
 Proceeds from issuance of convertible promissory notes ....     1,752,276        708,067
 Proceeds from exercise of stock options ...................           750        325,000
 Advances from stockholders ................................       215,000         15,000
 Collection of stock subscription receivable ...............             -         81,000
 Proceeds from issuance of common stock ....................     6,068,982      1,232,875
 Payments of convertible promissory notes ..................      (381,250)             -
 Payments of financing costs-issuance of common stock ......      (229,000)             -
 Payments of deferred financing costs ......................      (247,772)       (53,838)
 Payments of notes payable .................................      (250,000)             -
                                                              ------------   ------------

Net cash provided by financing activities ..................     6,919,256      2,296,479
                                                              ------------   ------------

Increase in cash ...........................................     1,591,071         74,836

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

Cash, end of year ..........................................  $  1,671,773   $     80,702
                                                              ============   ============
                                                                      (CONTINUED)
</TABLE>
                 See Notes to Consolidated Financial Statements.
                                      F-6A
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the years ended December 31,
<TABLE>
<CAPTION>
                                                                  2004          2003
                                                              ------------   ------------
<S>                                                           <C>            <C>
Supplemental disclosures of cash flow information:
 Cash paid during the year for interest ....................  $     18,768   $          -
                                                              ============   ============

 Cash paid during the year for taxes .......................  $          -   $          -
                                                              ============   ============
Supplemental schedule of non-cash financing and
 investing activities:
Purchase of property and equipment
 financed by capitalized lease obligations .................  $          -   $     31,903
                                                              ============   ============
Fair value of warrants issued in connection with the
 issuance of the convertible notes and corresponding
 debt discount .............................................  $    760,290   $     25,551
                                                              ============   ============
Fair value of warrants issued to placement
 agent in connection with the issuance of the
 convertible notes and corresponding increase
 in deferred financing costs ...............................  $          -   $     51,101
                                                              ============   ============
Advance from a shareholder converted into an exercise
 of stock options ..........................................  $    187,500   $          -
                                                              ============   ============
Advances from a shareholder converted into convertible
 promissory notes ..........................................  $     40,000   $          -
                                                              ============   ============
Beneficial feature resulting from issuance of
 convertible promissory notes and corresponding
 debt discount .............................................  $    588,983   $          -
                                                              ============   ============
Fair value of issuance of common stock in
 connection with the setllement of pre-merger obligations ..  $    544,368   $          -
                                                              ============   ============
Fair value of shares issued to partially satisfy convertible
 promissory notes ..........................................  $     60,000   $          -
                                                              ============   ============
Exchange of shares for restricted investment ...............  $ 11,823,528   $          -
                                                              ============   ============
Fair value of puts granted upon issuance of common stock ...  $  5,000,000   $          -
                                                              ============   ============
</TABLE>
                 See Notes to Consolidated Financial Statements.
                                      F-6B
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Newport International Group, Inc. (the "Company") was a development stage
company incorporated in Delaware in December 1999. During February 2004, the
Company acquired GrassRoots Communications, Inc. ("GrassRoots"). The Company
sells 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 acquisition of GrassRoots was treated as a reverse acquisition for financial
reporting purposes. As such, our financial statements have been prepared as
GrassRoots as the acquiror. The results of operations discussed below represent
the operations of GrassRoots through February 9, 2004. The results of operations
subsequent to that date reflect the consolidated operations of GrassRoots and
the Company. We have retroactively restated our net loss per share and the
stockholders' deficit section of our balance sheet to reflect the reverse
acquisition.

The accompanying financial statements have been prepared on a going concern
basis. The Company has generated minimal revenue since its inception on
June 12, 2002, has incurred net losses of approximately $20 million. The
Company's ability to continue as a going concern is dependent upon its ability
to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due, to fund
possible future acquisitions, and to generate profitable operations in the
future. Management plans to continue to provide for its capital requirements by
issuing additional equity securities and debt. The outcome of these matters
cannot be predicted at this time and there are no assurances that if achieved,
the Company will have sufficient funds to execute its business plan or generate
positive operating results.

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

                                       F-7
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DEVELOPMENT STAGE ENTERPRISE

The Company's planned principal operations commenced during 2004 with the
launching of its GRC family of products. Accordingly, the Company's activities
are no longer 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.

USE OF ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not
limited to, the valuation of stock-based instruments granted to noteholders and
consultants. Actual results will differ from these estimates.

LOSS PER SHARE

Loss per share is based on the weighted average number of common shares
outstanding. The outstanding warrants and stock options amounting to 3,911,876
and 6,574,333, respectively, as of December 31, 2004, 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 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 2004, the Company has
reached bank balances exceeding the FDIC insurance limit. To reduce its risk
associated with the failure of such financial institutions, the Company
evaluates at least annually the rating of the financial institutions in which it
holds deposits.

                                       F-8
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

INVESTMENT IN EQUITY SECURITIES

The Company holds 6,484,840 shares of a United Kingdom Corporation (the
"Investee") pursuant to a stock-exchange agreement whereby the Company issued
5,882,352 of its shares of common stock in exchange for the Investee's stock. At
the time of issuance, the Company recorded the cost of the investment at the
market value of the shares exchanged of approximately $11.8 million.

The Company holds 3,242,420 shares of the Investee in an escrow account which
may not be released without the the Investee's permission until 2006. Until
these shares are released from escrow, the Company accounts for the value
attributable to such shares as restricted investment in marketable securities
and is included in the stockholders' deficit section of the balance sheet.

The Company holds 3,242,420 shares of the Investee as collateral for the
Company's possible obligation to repurchase 2,500,000 shares it has issued in a
private placement during November 2004.

The decrease in the carrying and the fair value of this investment of
approximately $10 million as of December 31, 2004 has been recorded as other
comprehensive loss in stockholders' deficit.

COMPREHENSIVE LOSS

Comprehensive loss is defined as a change in equity during the period from
transactions and other events and circumstances from non-owner resources.
Included in this category is the change resulting from the difference between
the carrying value and the market value of the restricted investment in equity
securities amounting to approximately $10.0 million as of December 31, 2004.

                                       F-9
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

SOFTWARE DEVELOPMENT COSTS

Costs incurred in the research and development of software products are expensed
as incurred until technological feasibility has been established. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO
BE SOLD, LEASED OR OTHERWISE MARKETED. The Company believes that the current
process for developing software is essentially completed concurrently with the
establishment of technological feasibility; accordingly, no software development
costs have been capitalized as of December 31, 2004.

PROPERTY AND EQUIPMENT

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

DEFERRED FINANCING COSTS

Deferred financing costs represent costs incurred in connection with the
issuance of the convertible promissory notes. Deferred financing costs are being
amortized over the terms of the related debt agreements, which range between one
to two years.

STOCK-BASED COMPENSATION

Stock-based  awards to  non-employees  are  accounted  for using the fair  value
method in accordance with SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
and EITF Issue No. 96-18,  ACCOUNTING FOR EQUITY  INSTRUMENTS THAT ARE ISSUED TO
OTHER THAN  EMPLOYEES FOR  ACQUIRING,  OR IN  CONJUNCTION  WITH SELLING GOODS OR
SERVICES.  All  transactions  in which goods or services  are the  consideration
received for the issuance of equity instruments are accounted for based on the

                                      F-10
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable.

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.

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:

                                      F-11
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

                                                        2004            2003
                                                    ------------   ------------

Net loss as reported .............................  $(14,258,448)  $ (5,073,252)
Add:
  Stock-based compensation expense included in
   reported net loss, net of related tax effects .       858,994        745,625
Deduct:
  Total stock-based compensation expense
   under fair value based method for all awards,
   net of related tax effects ....................    (2,801,417)      (747,043)
                                                    ------------   ------------

Pro forma net loss ...............................  $(16,200,871)  $ (5,074,670)
                                                    ============   ============

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

The fair value of the options granted during 2004 was determined using the
Black-Scholes option-pricing model with the following assumptions: risk-free
interest of 3.0-4.0%; stock volatility of .42 to 1.51; no dividends; estimated
life of 36-48 months; and no dividend expected during the term.

The fair value of the options granted during 2003 was determined using the
Black-Scholes option-pricing model with the following assumptions: risk-free
interest of 2.11%; no stock volatility; no dividends; estimated life of 36
months; and no dividend expected during the term.

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

                                      F-12
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment".
This Statement requires that the cost resulting from all share-based
transactions be recorded in the financial statements. The Statement establishes
fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement
in accounting for share-based payment transactions with employees. The Statement
also establishes fair value as the measurement objective for transactions in
which an entity acquires goods or services from non-employees in share-based
payment transactions. The Statement replaces SFAS 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". The provisions of this Statement will be effective
for the Company beginning with its fiscal year ending 2005. The Company is
currently evaluating the impact this new Standard will have on its financial
position, results of operations or cash flows.

NOTE 3 - DEPOSIT

During 2004, the Company made a refundable deposit of $25,000 to an Internet
service provider in contemplation of an acquisition. The acquisition did not
materialize. The Internet service provider has refused to refund the deposit to
date. The Company is actively pursuing the collection of this deposit and
believes it will be successful in its efforts. Accordingly, no allowance has
been provided in the accompanying financial statements.

NOTE 4 - MARKETABLE SECURITY HELD FOR SALE

During 2004, the Company has invested approximately $64,000 in equities of a
U.S. publicly-traded company. The fair value of the marketable security, based
on available quoted prices, amounted to approximately $69,000 at December 31,
2004. The increase in fair value during 2004 of approximately $5,000 has been
recorded as other income in the accompanying consolidated statement of
operations.

                                      F-13
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - NOTE RECEIVABLE

During 2004, the Company has invested $85,000 in a note issued by a U.S.
publicly-traded company. The note is secured by substantially all assets of the
issuer. The note bears interest at 7% and matures in January 2005. The Company
has received the principal and accrued interest in January 2005. Accrued
interest of $1,200 as of December 31, 2004 is included in the note receivable in
the accompanying balance sheet.

NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31, 2004:

Computer equipment and software ...........................           $  94,338
Furniture and fixtures ....................................              44,440
                                                                      ---------
                                                                        138,778
Less accumulated depreciation .............................             (28,124)
                                                                      ---------
                                                                      $ 110,654

Depreciation expense amounted to approximately $59,000 and $30,000 during 2004
and 2003, respectively.

NOTE 7 - CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following as of December 31, 2004:

                                                                    ------------
                                                                    December 31,
                                                                       2004
                                                                    ------------
8% Convertible promissory notes, bearing interest at 8% per
annum, maturing on March 1, 2006. Interest payable March 31,
2004 and every quarter thereafter either in cash or common
stock. Interest paid in common stock is convertible using
the 10-day average closing bid of the stock prior to the end
of the quarter. Each occurrence of interest not paid within
30 days following the end of each quarter causes a reduction
of 10% in the conversion price of the promissory notes and
the exercise price of the related warrants. The promissory
notes are convertible at any time at the option of the
holder, into shares of common stock at a rate of $0.75 ...........   $1,734,093

Less:  unamortized discount ......................................     (681,660)
                                                                     ----------
Convertible promissory notes-long-term ...........................   $1,052,433
                                                                     ==========

                                      F-14
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - CONVERTIBLE PROMISSORY NOTES (continued)

10% Convertible promissory notes, bearing interest at 10%
per annum, maturingbetween May and August 2005. Interest
payable in cash September 1, 2004 andevery quarter
thereafter. The promissory notes are convertible into shares
of common stock at a rate of $2.00. Secured by the
intangible assets of the Company .................................   $  325,000

Less: unamortized discount .......................................     (106,477)

Convertible promissory notes-short term ..........................   $  218,523
                                                                     ===========

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

In connection with the issuance of the 10% convertible promissory notes, the
Company issued 332,500 warrants to purchase common stock of the Company at an
exercise price of $1.25 per share during 2004. The warrants are exercisable for
a period of five years. The fair value of the warrants at the date of issuance
of approximately $394,000 has been recorded as a debt discount. The debt
discount is amortized over one year using the imputed interest rate method.

The Company used the following  assumptions to value the warrants  issued during
2004: risk-free interest rate:  3.0%-3.81%;  volatility of .42 -1.51;  estimated
life of 5 years; and no dividend expected during the term.

The convertible  rates for the 8% convertible  promissory notes interest accrued
during 2004 ranged between $1.79 and $2.83 per share.  The Company issued 48,921
shares  in  connection  with  the  payment  of  interest  on the 8%  convertible
promissory  notes  during  2004.  The fair  value  of such  shares  amounted  to
approximately $109,000. Furthermore, the Company issued 18,719 shares in January
2005 in  connection  with the  payment  of  accrued  interest  of  $34,967 as of
December 31, 2004.

The Company paid interest of approximately $19,000 in connection with the 10%
convertible promissory notes.

During 2004, the Company received $1,126,335 and $665,000 in consideration for
the issuance of the 8% convertible promissory notes and 10% convertible
promissory notes,

                                      F-15
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - CONVERTIBLE PROMISSORY NOTES (continued)

respectively. Additionally, the Company made principal repayments of $101,250
and $340,000 on the 8% Convertible promissory notes and 10% Convertible
promissory notes, respectively.

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 8% Convertible promissory notes 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 issuance of the Convertible Promissory Notes, the Company
paid approximately $248,000 and issued 425,000 warrants to the placement agent
during 2004. One of the Company's director is one of the Managing Directors of
the placement agent. The warrants issued to the placement agent were valued at
approximately $51,000. The Company has recorded the placement agent fee in
deferred financing costs as of December 31, 2004 and amortizes these costs over
one to two years, which corresponds to the respective terms of the Convertible
Promissory Notes.

Amortization of the debt discount and amortization of the deferred financing
costs amounted to approximately $585,000 and $198,000, respectively, during 2004
and are included in interest expense in the accompanying consolidated statements
of operations.

Accrued interest on the Convertible Promissory Notes amounted to approximately
$38,000 as of December 31, 2004.

In accordance with EITF Issue No.00-27,"Application of Issue No. 98-5,
Accounting for convertible securities with beneficial conversion features of
contingently adjustable conversion ratios, to certain convertible instruments",
the Company recorded a beneficial conversion feature related to the 8%
Convertible promissory notes. Under the terms of these notes, the intrinsic
value of the beneficial conversion feature was calculated assuming that the
conversion date was the same as the

                                      F-16
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - CONVERTIBLE PROMISSORY NOTES (continued)

issue date. During 2004, the beneficial conversion feature amounted to
approximately $589,000. This beneficial conversion feature is reflected in the
accompanying consolidated financial statements as additional paid-in capital and
corresponding debt discount.

NOTE 8 - CAPITALIZED LEASE OBLIGATIONS

The Company leases certain computer software under a capital lease that expires
in July 2006. The lease provides for monthly payments of $976 at an implicit
interest rate of 9% per annum. The assets and liabilities under the capital
lease are recorded at lease inception at the lower of the present value of the
minimum lease payments or the fair market value of the related assets. The asset
is depreciated over its estimated useful life.

The schedule of future minimum payments under capital lease is as follows:

         Years Ending
         December 31,

              2005 ..................................         $ 11,711
              2006 ..................................            6,832
                                                              --------
                                                                18,543
         Less: imputed interest .....................           (1,045)
                                                              --------
                                                                17,498
         Less: current portion ......................           (6,932)
                                                              --------
         Long-term portion ..........................         $ 10,566
                                                              ========

NOTE 9 - 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 GrassRoots exchanged their securities for
approximately 12,300,000 shares of Newport's restricted common stock,
representing approximately 93% of the common stock of Newport at that time. The
Company had 1,009,112 outstanding shares of common stock immediately preceding
the merger.

                                      F-17
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - STOCKHOLDERS' DEFICIT (continued)

ISSUANCE OF COMMON STOCK PURSUANT TO A SETTLEMENT OF DEBT

During February 2004, pursuant to a notification of default by the holder, the
Company settled its outstanding notes to a stockholder, its affiliated entity
and other participants. In connection with the settlement of all debt (the
$370,000 convertible debenture and the $10,000 loan along with the related
accrued loan premium of $100,000 and accrued interest of $158,368 due to a
stockholder, and the loan of $100,000 along with the accrued loan premium of
$50,000 and accrued interest of $6,000 to an affiliated entity), the Company
disbursed $250,000 in cash and 1,365,000 shares of common stock, and 530,000
shares of common stock were returned to the Company for cancellation, which
generated an interest expense of approximately $3.5 million during 2004.

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.

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

The Company issued 48,921 shares in connection with the payment of interest on
the 8% convertible promissory notes during 2004. The fair value of such shares
amounted to approximately $109,000. Furthermore, the Company issued 18,719
shares in January 2005 in connection with the payment of accrued interest of
$34,967 as of December 31, 2004.

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 for the issuance of
100,000 shares of common stock to the reseller. The fair value of the shares
issued in connection with this agreement amounted to approximately $194,000. The
Company has received $125,000 to date and has cancelled this agreement during
July 2004. The Company will reimburse the amount received to date and has

                                      F-18
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - STOCKHOLDERS' DEFICIT (continued)

cancelled the shares issued to the reseller. The amount received is recorded as
accrued expense in the accompanying balance sheet. The fair value of the shares
issued has been recorded as interest expense in the accompanying consolidated
financial statements.

ISSUANCE OF COMMON STOCK PURSUANT TO A STOCK-EXCHANGE AGREEMENT

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

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

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

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

During 2004, the Company has paid approximately $1,600,000 in lieu of
transferring 877,500 shares of the Investee to the consultant. The consideration
paid to the consultant is included in the sales, general, and administrative
expenses in the accompanying financial statements.

ISSUANCE OF COMMON STOCK PURSUANT TO A PRIVATE PLACEMENT

During 2004, the Company issued 4,500,000 shares of its common stock to two
foreign investors generating proceeds of $6.1 million. The Company paid finders'
fees of

                                      F-19
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - STOCKHOLDERS' DEFICIT (continued)

$229,000 to a third-party in connection with this transaction. The Company has
also issued 562,500 warrants to the investors in connection with this
transaction. The warrants are convertible at exercise prices ranging between
$1.55 and $1.60 per share and expire five years from the date of issuance. The
investor has the right to have the Company reacquire all or a portion of
2,000,000 and 2,500,000 shares purchased at a price of $1.25 and $1.00 per
share, respectively, in the event the average price per share is less than $1.25
and $1.00, respectively, for a period of ten consecutive trading days during an
option period commencing eight months after the effective date of the Company's
registration statement and extending for a period of thirty-six months
thereafter. Such puts, valued at $5,000,000 at December 31, 2004, are accounted
as temporary equity in the accompanying balance sheet.

Shortly after the closing of this private placement, the foreign investors and
the Company claimed that certain representations made by the both parties were
inaccurate. In December 2004, the Company settled this matter amicably by
issuing 1,500,000 shares to a third foreign investor. The value of the shares
issued in connection with this settlement amounted to $2,775,000 and is included
in other expenses.

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.

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

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

As of December 31, 2004, the Company issued 20,323 shares of common stock
pursuant to its failure to timely file its registration statement. The fair
value of such shares

                                      F-20
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - STOCKHOLDERS' DEFICIT (continued)

amounted to approximately $38,000 and is included in other expenses in the
accompanying statement of operations.

NOTE 10 - STOCK OPTIONS AND WARRANTS

Warrants

During 2003, the Company issued 400,000 warrants to certain stockholders for the
purchase of the Company's common stock at exercise prices ranging between $1.00
to $1.50 in connection with the offering of common stock. The warrants expired
in 2003 unexercised.

During 2003, the Company issued 280,001 warrants to certain stockholders in
connection with a private placement of common stock for the purchase of 280,001
shares of the Company's common stock, which are exercisable at $1.25 per share.
Such warrants expire in October 2006.

In connection with the issuance of the Convertible Promissory Notes, during 2004
and 2003, the Company issued warrants to purchase a total of 1,449,375 and
1,545,000 shares of common stock, respectively. The exercise prices of such
warrants range between $0.75 and $1.25 per share.

During 2004, the Company issued 562,500 warrants to certain stockholders in
connection with a private placement of common stock for the purchase of the
shares of the Company's common stock, which are exercisable at prices ranging
from $1.55 to $1.60 per share. Such warrants expire in November 2009.

                                      F-21
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCK OPTIONS AND WARRANTS (continued)

A summary of the activity of the Company's outstanding warrants during 2004 and
2003 is as follows:
                                                                     Weighted
                                                                      Average
                                                       Warrants   Exercise Price

Outstanding, January 1, 2003                                  --       $  --
Granted                                                2,225,001        1.13
Exercised                                                     --         --
Expired                                                 (400,000)       1.25
                                                      ----------        ----
Outstanding and exercisable at December 31, 2003       1,825,001        1.11

Granted                                                2,086,875        1.15
Exercised                                                     --          --
Expired                                                       --          --
                                                      ----------        ----
Outstanding and exercisable at December 31, 2004       3,911,876       $1.13
                                                      ==========        ====

                                            Weighted Average
 Range of exercise   Warrants outstanding   Remaining          Weighted Average
 prices              and exercisable        ContractualLife    Exercise Price
 -----------------   --------------------   ----------------   ----------------
      $0.75               1,295,000                4.75            $0.75
       1.25               2,054,376                3.77             1.25
    1.50-1.60               562,500                4.83             1.58

The weighted average remaining contractual life of the terms of the warrants is
4.2 years.

Stock Options

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

                                      F-22
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCK OPTIONS AND WARRANTS (continued)

A summary of the activity of the Company's stock option plan is presented below:

                                                                     Weighted
                                                                      Average
                                                   Options        Exercise Price

Outstanding, January 1, 2003                        287,500            $0.72
Granted                                           9,475,556             0.70
Exercised                                          (566,667)            0.57
Expired                                          (3,163,889)            0.34
                                                 ----------            -----
Outstanding at December 31, 2003                  6,032,500             0.91

Granted                                           2,132,000             1.97
Exercised                                          (187,500)            1.00
Expired                                          (1,402,667)            1.57
                                                 ----------            -----
Outstanding at December 31, 2004                  6,574,333            $1.51
                                                 ==========            =====

Exercisable at December 31, 2003                  4,227,709            $0.89
                                                 ==========            =====
Exercisable at December 31, 2004                  5,045,115            $1.65
                                                 ==========            =====

The weighted average remaining contractual life and weighted average exercise
price of options outstanding and options exercisable at December 31, 2004, for
selected exercise price ranges, is as follows:

Options outstanding:

                                            Weighted Average
 Range of exercise     Number of            Weighted Average
 prices                 options             ContractualLife    Exercise Price
 -----------------   --------------------   ----------------   ----------------
    $0.02              2,072,500                 8.06               $ 0.02
  0.50-0.75            1,187,500                 8.27                 0.51
  1.25-1.75            1,295,000                 9.46                 1.68
  1.85-2.9             2,019,333                 8.97                 2.11

                                      F-23
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCK OPTIONS AND WARRANTS (continued)

Options exercisable:

                                            Weighted Average
 Range of exercise     Number of            Weighted Average
 prices                 options             ContractualLife    Exercise Price
 -----------------   --------------------   ----------------   ----------------
    $0.02              2,010,000                 8.06               $ 0.02
  0.50-0.75            1,185,417                 8.27                 0.51
  1.25-1.75              731,392                 9.25                 1.63
  1.85-2.9             1,118,306                 8.68                 2.01

The Company granted 940,000 and 7,445,765 options during 2004 and 2003,
respectively, to purchase common stock to non-employees for services performed.
The exercise prices of such options ranged from $1.25 to $1.75 during 2004 and
ranged from $0.02 to $2.00 during 2003. As a result, the Company recorded
consulting expense of approximately $570,000 and $1.7 million during 2004 and
2003, respectively, in accordance with SFAS No.123. Such consulting expenses are
included in selling, general, and administrative expenses in the accompanying
statement of operations.

The fair value of the options granted during 2004 was determined using the
Black-Scholes option-pricing model with the following assumptions: risk-free
interest of 3.0-4.0%; stock volatility of .42 to 1.51; no dividends; estimated
life of 36-48 months; and no dividend expected during the term.

The fair value of the options granted during 2003 was determined using the
Black-Scholes option-pricing model with the following assumptions: risk-free
interest of 2.11%; no stock volatility; no dividends; estimated life of 36
months; and no dividend expected during the term.

The Company issued 290,000 and 1,525,000 options with below market exercise
prices during 2004 and 2003, respectively. The issuance of such options to
employees resulted in compensation expense pursuant to APB Opinion No. 25
amounting to approximately $860,000 and $750,000 during 2004 and 2003,
respectively.

                                      F-24
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - INCOME TAXES (continued)

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred taxes, at December 31, 2004 are as follows:

                                                                        2004
                                                                        ----
Deferred tax assets:
Net operating loss carryforward ..........................          $ 4,410,000
Less valuation allowance .................................           (4,410,000)
                                                                    -----------
Total net deferred tax assets: ...........................            $       -
                                                                    ===========

SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets
reported, if any, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Management has determined that a valuation allowance of $ 4,410,000 at December
31, 2004 is necessary to reduce the deferred tax assets to the amount that will
more likely than not be realized. The change in the valuation allowance during
2004 and 2003 was $2,330,000 and $1,810,000, respectively.

The Company has incurred net operating losses since inception. At December 31,
2004, the Company had a net operating loss carryforward amounting to
approximately $11.4 million for U.S. tax purposes that expire in various amounts
through 2024. The Company has had a change of ownership as defined by the
Internal Revenue Code Section 382. As a result, a substantial annual limitation
may be imposed upon the future utilization of its net operating loss
carryforwards. At this point, the Company has not completed a change in
ownership study and the exact impact of such limitations is unknown.

The federal statutory tax rate reconciled to the effective tax rate during 2004
and 2003, respectively, is as follows:
                                                              2004      2003
                                                              ----      ----
Tax at U.S. statutory rate: ...........................       35.0%     35.0%
State tax rate, net of federal benefits ...............        6.0       6.0
Change in valuation allowance .........................      (41.0)    (41.0)
                                                              ----      ----
Effective tax rate ....................................        0.0%      0.0%
                                                              ====      ====

                                      F-25
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - 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 2004 and 2003 accompanying financial statements,
respectively.

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

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

OPERATING LEASES

The Company leases its office facilities under noncancelable operating leases,
which require monthly payments ranging from $2,615 to $5,154 and expire at
various dates through 2009. Additionally, the Company subleases an office
facility in Irvine, Southern California to an unrelated entity. The sublease
agreement provides for monthly rent charges of approximately $3,200 through
December 2005. Base rent expense, net of sublease income of approximately
$38,400 and $16,000 in 2004 and 2003, respectively, amounted to approximately
$78,000 and $54,000 during 2004 and 2003, respectively.

                                      F-26
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - COMMITMENTS AND CONTINGENCIES (continued)

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

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

Future annual minimum payments, net of sublease income, required under operating
lease obligations at December 31, 2004 are as follows:

                               Future Minimum      Sublease        Net Minimum
                               Lease Payments       Income       Lease Payments
                               --------------      --------      --------------
   2005                        $  131,628           $38,400          $93,228
   2006                            93,228              -              93,228
   2007                            74,923              -              74,923
   2008                            61,848              -              61,848
   2009 and thereafter             15,462              -              15,462


POTENTIAL REGISTRATION PENALTIES

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

In January 2005, the Company issued 45,000 shares of its common stock pursuant
to its failure for filing a registration statement within the time prescribed by
its recently completed private placement.

                                      F-27
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - COMMITMENTS AND CONTINGENCIES (continued)

EMPLOYMENT CONTRACT

The Company has entered in an employment agreement with its chief executive
officer which expires in December 2005 and is renewable for additional 3-year
term. The employment agreement provides for an annual base salary of $218,000.
The Company has the obligation to pay the chief executive officer's compensation
through December 31, 2005 in the event 1)it terminates the employment without
cause, 2) of the death of the chief executive officer, and 3) of the
consummation of a merger or disposition of substantially all assets of the
Company.

NOTE 13 - RELATED PARTY TRANSACTIONS

At December 31, 2003, the Company had advanced $23,400 to a majority stockholder
and an officer of the Company. During 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 2004.
There is no remaining amount due from such advances as of December 31, 2004.

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

In May 2004, a stockholder advanced $175,000 to the Company. In August 2004, the
stockholder converted the advance into the exercise of 150,000 stock options at
a price of $1.25. The Company also paid $12,500 of interest in connection with
the advance. There is no outstanding amount due to the stockholder as of
December 31, 2004.

In May 2004, a stockholder  advanced $40,000 to the Company. In August 2004, the
stockholder  converted the advance into 10% convertible  promissory  notes.  The
advance  did not  bear  interest.  There  is no  outstanding  amount  due to the
stockholder under this advance as of December 31, 2004.

                                      F-28
<PAGE>
                        NEWPORT INTERNATIONAL GROUP, INC.
                                DECEMBER 31, 2004
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - SUBSEQUENT EVENTS

In January 2005, the Company has satisfied its obligations under three 10%
convertible promissory notes amounting to $75,000 by issuing 15,000 shares of
its common stock and paying in aggregate $52,500 to the note holders.

In January 2005, the Company issued 45,000 shares of its common stock pursuant
to its failure for filing a registration statement within the time prescribed by
its recently completed private placement.


                                      F-29