**Back
            to Table of Contents**





**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10QSB/A**


(Amendment
      #1 to Form 10QSB)





(Mark
      One)





x Quarterly
      report under Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended September 30,
      2005





o Transition
      report under Section 13 or 15(d) of the Securities
      Exchange Act of 1934





For
      the
      transition period from ____________ to ______________





For
      the
      Period Ended March 31, 2006





Commission
      file number 000-27727


**SAVI
      MEDIA GROUP, INC.**


(Name
      of
      Small Business Issuer in Its Charter)





Nevada
            91-1766174(State
                of Incorporation)
            (IRS
                Employer Identification No.)





9852
      West
      Katella Ave., #363


Anaheim,
      CA 92804


(Address
      of Principal Executive Offices)





(714)
      740-0601


Issuer's
      Telephone Number





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 o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes o No x





As
      of May
      19, 2006, the Company had 507,106,564 shares of its par value $0.001 common
      stock issued and outstanding.





Transitional
      Small Business Disclosure Format (check one):





Yes o No x





**Back
        to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**(A
      Development Stage Company)**





**Quarterly
      Report on Form 10-QSB for the**


**Quarterly
      Period Ending March 31, 2006**




Table
      of Contents





PART
                I. FINANCIAL INFORMATIONItem
                1. Unaudited Condensed Financial
                StatementsConsolidated
                Balance Sheets:March
                31, 2006 and December 31, 2005
            3Consolidated
                Statements of Operations:For
                the three months ended March 31, 2006 and 2005
                andfor
                the period from inception, August 13, 2002, to March 31,
                2006
            5Consolidated
                Statement of Stockholders’
                DeficitFor
                the three months ended March 31, 2006
            6Consolidated
                Statements of Cash Flows:For
                the three months ended March 31, 2006 and 2005
                andfor
                the period from inception, August 13, 2002, to March 31,
                2006
            9Notes
                to Unaudited Consolidated Financial
                Statements
            10Item
                2. Management's Discussion and Analysis of Financial
                Condition and Results of Operations
            17Item
                3. Controls and Procedures
            20PART
                II. OTHER INFORMATIONItem
                1. Legal Proceedings
            21Item
                2. Changes in Securities
            21Item
                3. Defaults Upon Senior Securities
            21Item
                4. Submission of Matters to a Vote of Security
                Holders
            21Item
                5. Other Information
            21Item
                6. Exhibits
            21SIGNATURES
            22




**Back
          to Table of Contents**





**Explanatory
      Note**




Savi
      Media Group, Inc. (the “Company”) has restated its consolidated financial
      statements for the fiscal year ended December 31, 2005 on Form 10-KSB/A, and
      the
      interim periods ended June 30, 2005, September 30, 2005 and March 31, 2006,
      on
      Forms 10-QSB/A.





As
      previously disclosed, on May 5, 2005, the Company entered into a Securities
      Purchase Agreement with an accredited investor for the sale of (i) $500,000
      in
      convertible debentures and (ii) warrants to buy 5,000,000 shares of our common
      stock. The Convertible Notes issued to Golden Gate Investors in May 2005 must
      be
      accounted for in accordance with SFAS 133, “Accounting for Derivative
      Instruments and Hedging Activities”, and EITF No. 00-19, "Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company's Own Stock."





The
      Company has identified that the Golden Gate debenture has embedded derivatives.
      These embedded derivatives have been bifurcated from the host debt contract
      and
      accounted for as derivative liabilities in accordance with EITF 00-19. When
      multiple derivatives exist within the Convertible Notes, they have been bundled
      together as a single hybrid compound instrument in accordance with SFAS No.
      133
      Derivatives Implementation Group Implementation Issue No. B-15, "Embedded
      Derivatives: Separate Accounting for Multiple Derivative Features Embedded
      in a
      Single Hybrid Instrument."





The
      embedded derivatives within the Convertible Notes have been recorded at fair
      value at the date of issuance; and are marked-to-market each reporting period
      with changes in fair value recorded to the Company's income statement as "Net
      change in fair value of derivative instruments." The Company has utilized a
      third party valuation firm to fair value the embedded derivatives using a
      lattice model with layered discounted probability-weighted cash flow
      methods.





Additionally,
      in accordance with EITF 00-19 and the terms of the warrants, the fair value
      of
      the warrants should be recorded as a liability. The warrant liability is
      initially measured at fair value using the Black-Scholes option pricing model,
      and is then re-valued at each reporting date, with changes in the fair value
      reported as non-cash charges or credits to earnings.





Originally,
      the Company classified the convertible debt as conventional convertible debt
      with a beneficial conversion feature and the warrants as stockholders equity
      when exercised. After further review in accordance with the SEC’s
      interpretations of EITF 00-19 as it relates to the convertible debt and
      warrants, the Company has concluded that its financial statements for the year
      ended December 31, 2005, and interim periods ended June 30, 2005, September
      30,
      2005 and March 31, 2006, will be restated. The restatement includes the
      valuation of the derivative liabilities and the incurrance of additional
      interest expense due ot the amortization of the debt discount and by the amount
      that the value of the derivative liabilities exceeded the notional amount of
      the
      debt.





The
      Company measured the initial fair value of the derivative liabilities on the
      closing date at $956,596. At the end of each reporting period, the value of
      the
      derivative liabilities is re-measured, and changes to the liability and related
      “gain or loss in fair value of derivative instruments” is recorded  as a
      non-cash charge or credit to earnings.




At
      March
      31, 2006, the derivative liabilities were $456,615, due to changes in the fair
      value.





This
      Amendment No. 1 on Form 10-QSB/A ( the “Form 10-QSB/A”) to the
      Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31,
      2006, initially filed with the Securities and Exchange Commission ( the “SEC”)
      on May 22, 2006, is being filed to reflect restatements of the Company’s
      Consolidated Balance Sheet as of March 31, 2006, and the related Consolidated
      Statements of Operations, Shareholders’ Equity and Cash Flows for the quarter
      ended March 31, 2006. For a more detailed description of these restatements,
      see
      Note 3, “Derivative Financial Instruments and Restatement”.





For
      the
      convenience of the reader, this Form 10-QSB/A sets forth the original Form
      10-QSB in its entirety. However, this Form 10-QSB/A only amends and restates
      the
      financial statements and Note 3 therein, in each case as a result of, and to
      reflect, the restatement. No other information in the original Form 10-QSB
      is
      amended hereby. In addition, pursuant to the rules of the SEC, the original
      Form
      10-QSB has been amended to contain currently dated certifications from the
      Company’s Chief Executive Officer and Chief Financial Officer, as required by
      Sections 302 and 906 of the SarbanesOxley Act of 2002.


-2-
 **Back
          to Table of Contents**




PART
      I. FINANCIAL INFORMATION




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED BALANCE
                SHEET*****March
                31, 2006 and December 31,
                2005***




**March
                31,**
            
            **December
                31,****2006**
            
            **2005****(Restated)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            145,118
            
            $
            336Total
                current assets
            
            
            145,118
            
            
            336Property
                and equipment, net
            
            
            4,687
            
            
            5,208Intangible
                assets - patents
            
            
            38,500
            
            
            38,500Total
                assets
            
            $
            188,305
            
            $
            44,044


The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements  -3-
 **Back
            to Table of Contents**




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED BALANCE SHEET*****March
                31, 2006 and December 31,
                2005***




**March
                31,**
            
            **December
                31,****2006**
            
            **2005****(Restated)****LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Note
                payable
            
            $
            147,000
            
            $
            142,500Convertible
                debt
            
            
            10,048
            
            
            6,519Accounts
                payable and accrued liabilities
            
            
            25,000
            
            
            31,448Deposit
                for warrant exercise
            
            
            —
            
            
            23,805Accounts
                payable assumed in re-capitalization
            
            
            159,295
            
            
            159,295Derivative
                financial instrument liabilities
            
            
            456,615
            
            
            707,499Total
                current liabilities
            
            
            797,958
            
            
            1,071,066Commitments
                and contingenciesStockholders'
                deficit:Series
                A convertible preferred stock; $0.001 par value,10,000,000
                shares authorized, issued and outstanding
            
            
            10,000
            
            
            10,000Series
                B convertible preferred stock; $0.001 par value,10,000,000
                shares authorized, none issued and outstanding
            
            
            —
            
            
            —Series
                C convertible preferred stock; $0.001 par value,10,000,000
                shares authorized, 6,455,275 and 6,060,000shares
                issued and outstanding at March 31, 2006 andDecember
                31, 2005, respectively
            
            
            6,455
            
            
            6,060Common
                stock: $0.001 par value, 990,000,000 sharesauthorized,
                268,306,564 and 209,109,976 shares issued andoutstanding
                at March 31, 2006 and December 31, 2005,Respectively
            
            
            268,306
            
            
            209,110Additional
                paid-in capital
            
            
            248,212,015
            
            
            247,147,631Losses
                accumulated during the development stage
            
            
            (249,106,429
            )
            
            (248,399,823
            )Total
                stockholders' deficit
            
            
            (609,653
            )
            
            (1,027,022
            )Total
                liabilities and stockholders' deficit
            
            $
            188,305
            
            $
            44,044 The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements  -4-
 **Back
            to Table of Contents**




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENTS OF CASH
                FLOWS*****For
                the Three Months Ended March 31, 2006 and 2005, and for the
                Period******>From
                Inception, August 13, 2002, to March 31,
                2006***




**March
                31,**
            
            **March
                31,**
            
            **Inception
                to****2006**
            
            **2005**
            
            **March
                31, 2006**Operating
                costs and expenses:General
                and administrative expenses,except
                stock based compensation
            
            $
            307,277
            
            $
            91,954
            
            $
            1,535,279Research
                & Development
            
            
            119,720
            
            
            
            
            
            419,663Stock-based
                compensation
            
            
            498,138
            
            
            2,154,941
            
            
            245,937,577Loss
                from operations
            
            
            (925,135
            )
            
            (2,246,895
            )
            
            (247,892,519
            )Other
                income and (expenses)Interest
                Income
            
            
            —
            
            
            1
            
            
            18Gain
                on settlement
            
            
            —
            
            
            —
            
            
            197,033Cost
                of rescission
            
            
            —
            
            
            —
            
            
            (43,074
            )Cost
                of re-capitalization
            
            
            —
            
            
            —
            
            
            (273,987
            )Goodwill
                impairment
            
            
            —
            
            
            —
            
            
            (541,101
            )Interest
                expense
            
            
            (8,179
            )
            
            —
            
            
            (969,046
            )Change
                in value of derivative financial instruments
            
            
            226,708
            
            
            —
            
            
            416,247Total
                other income and (expenses), net
            
            
            218,529
            
            
            1
            
            
            (1,213,910
            )Net
                loss
            
            
            (706,606
            )
            
            (2,246,894
            )
            
            (249,106,429
            )Weighted
                average shares outstanding - basic and diluted
            
            
            224,790,772
            
            
            83,852,510Net
                loss per common share - basic and diluted
            
            $
            (0.00
            )
            $
            (0.03
            ) The
      accompanying notes are an integral part of the consolidated financial
      statements  -5-
 **Back
            to Table of Contents**




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLERS’
                DEFICIT*****For
                the Three Months Ended March 31,
                2006***




**Series
                A Preferred Stock**
            
            **Series
                B Preferred Stock****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**Balance
                at December 31, 2005, as previously restated
            
            
            10,000,000
            
            $
            10,000
            
            
            —
            
            $
            —Common
                stock issued for cashExercise
                of warrants
            
            
            —
            
            
            —
            
            
            —
            
            
            —Conversion
                of debt to equity
            
            
            —
            
            
            —
            
            
            —
            
            
            —Common
                and Preferred stock issued inexchange
                for consulting services
            
            
            —
            
            
            —
            
            
            —
            
            
            —Reduction
                of shares in escrow
            
            
            —
            
            
            —
            
            
            —
            
            
            —Cancellation
                of shares
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                Loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —Balance
                at March 31, 2006
            
            
            10,000,000
            
            $
            10,000
            
            
            —
            
            $
            —


The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements  -6-
 **Back
            to Table of Contents**




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLERS'
                DEFICIT*****For
                the Three Months Ended March 31,
                2006***




**Series
                  C Preferred Stock**
              
              **Common
                  Stock****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**Balance
                  at December 31, 2005, as previously restated
              
              
              6,060,000
              
              $
              6,060
              
              
              209,109,976
              
              $
              209,110Common
                  and Preferred stock issued for cash
              
              
              395,275
              
              
              395
              
              
              100,000
              
              
              100Exercise
                  of warrants
              
              
              —
              
              
              —
              
              
              174,540
              
              
              175Conversion
                  of debt to equity
              
              
              —
              
              
              —
              
              
              67,264,548
              
              
              67,264Common
                  and Preferred stock issued inexchange
                  for consulting services
              
              
              1,000,000
              
              
              1,000
              
              
              1,625,000
              
              
              1,625Reduction
                  of shares in escrow
              
              
              —
              
              
              —
              
              
              (9,967,500
              )
              
              (9,968
              )Cancellation
                  of shares
              
              
              (1,000,000
              )
              
              (1,000
              )
              
              —
              
              
              —Net
                  Loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance
                  at September 30, 2005
              
              
              6,455,275
              
              $
              6,455
              
              
              268,306,564
              
              $
              268,306
 The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements  -7-
 **Back
            to Table of Contents**




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLERS'
                DEFICIT*****For
                the Three Months Ended March 31,
                2006***




**Losses****Accumulated****Additional**
            
            
            
            **During
                the****Paid-In**
            
            **Subscription**
            
            **Development****Capital**
            
            **Receivable**
            
            **Stage**
            
            **Total**Balance
                at December 31, 2005, as previously restated
            
            $
            247,147,631
            
            $
            —
            
            $
            (248,399,823
            )
            $
            (1,027,022
            )Common
                and Preferred stock issued for cash
            
            
            382,235
            
            
            —
            
            
            —
            
            
            382,730Exercise
                of warrants
            
            
            190,074
            
            
            —
            
            
            —
            
            
            190,249Conversion
                of debt to equity
            
            
            (14,406
            )
            
            —
            
            
            —
            
            
            52,858Common
                and Preferred stock issued inExchange
                for consulting services
            
            
            495,513
            
            
            —
            
            
            —
            
            
            498,138Reduction
                of shares in escrow
            
            
            9,968
            
            
            —
            
            
            —
            
            
            —Cancellation
                of shares
            
            
            1,000
            
            
            —
            
            
            —
            
            
            —Net
                Loss
            
            
            —
            
            
            —
            
            
            (706,606
            )
            
            (706,606
            )Balance
                at March 31, 2006
            
            $
            248,212,015
            
            $
            —
            
            $
            (249,106,429
            )
            $
            (609,653
            )


The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements


-8-
 **Back
          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENTS OF CASH
                FLOWS*****For
                the Three Months Ended March 31, 2006 and 2005, and for the
                Period******>From
                Inception, August 13, 2002, to March 31,
                2006***




**March
                31,**
            
            **March
                31,**
            
            **Inception
                to****2006**
            
            **2005**
            
            **March
                31, 2006**Cash
                flows from operating activities:Net
                loss
            
            $
            (706,606
            )
            $
            (2,246,894
            )
            $
            (249,106,429
            )Adjustments
                to reconcile net income to netcash
                used by operating activities:Depreciation
                expense
            
            
            521
            
            
            —
            
            
            1,563Gain
                on settlement
            
            
            —
            
            
            
            
            
            (197,053
            )Impairment
                of goodwill
            
            
            —
            
            
            —
            
            
            541,101Cost
                of recapitalization
            
            
            —
            
            
            —
            
            
            273,987Amortization
                of deferred compensation
            
            
            —
            
            
            —
            
            
            2,233,150Compensatory
                common and preferred stock issuances
            
            
            498,138
            
            
            2,154,541
            
            
            212,441,927Compensatory
                option issuances
            
            
            —
            
            
            —
            
            
            31,250,000Interest
                imputed on note from a stockholder
            
            
            —
            
            
            —
            
            
            7,254Interest
                expense recognized through issuance andaccretion
                of discount on long-term debt
            
            
            7,713
            
            
            —
            
            
            953,758Common
                stock issued for rescission agreement
            
            
            —
            
            
            —
            
            
            43,074Common
                stock issued to pay accountspayable
                and accrued liabilities
            
            
            —
            
            
            —
            
            
            50,000Other
                items to reconcile cash to accrual
            
            
            27,264
            
            
            
            
            
            27,304Change
                in value of derivative financial instruments
            
            
            (226,708
            )
            
            —
            
            
            (416,247
            )Changes
                in accounts payable and accrued liabilities
            
            
            (6,448
            )
            
            2,495
            
            
            70,697Net
                cash used by operating activities
            
            
            (406,126
            )
            
            (89,858
            )
            
            (1,825,914
            )Cash
                flows from investing activities:Purchase
                of equipment
            
            
            —
            
            
            —
            
            
            (6,250
            )Acquisition
                of patent rights
            
            
            —
            
            
            —
            
            
            (38,500
            )Net
                cash used by investing activities
            
            
            —
            
            
            —
            
            
            (44,750
            )Cash
                flows from financing activities:Proceeds
                from stockholder advances
            
            
            —
            
            
            2,000
            
            
            49,672Proceeds
                from convertible debentures
            
            
            —
            
            
            —
            
            
            50,000Proceeds
                from note payable
            
            
            —
            
            
            —
            
            
            142,500Payments
                on notes payable
            
            
            —
            
            
            —
            
            
            (63,000
            )Proceeds
                from warrant exercise
            
            
            168,178
            
            
            —
            
            
            458,775Proceeds
                from sale of preferred stock
            
            
            381,730
            
            
            —
            
            
            381,730Proceeds
                from sale of common stock
            
            
            1,000
            
            
            149,530
            
            
            996,105Net
                cash provided by financing activities
            
            
            550,908
            
            
            151,530
            
            
            2,015,782Net
                increase in cash and cash equivalents
            
            
            144,782
            
            
            61,672
            
            
            145,118Cash
                and cash equivalents at beginning of period
            
            
            336
            
            
            3,835
            
            
            —Cash
                and cash equivalents at end of period
            
            $
            145,118
            
            $
            65,507
            
            $
            145,118


The
      accompanying notes are an integral part of the consolidated financial
      statements


-9-
 **Back
            to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**1.**  **Organization
      and Significant Accounting Policies**





SaVi
      Media Group, Inc. (the “Company”) is a Nevada Corporation that has acquired
      rights to “blow-by gas and crankcase engine emission reduction technology” which
      it intends to develop and market on a commercial basis. The technology is a
      relatively simple gasoline and diesel engine emission reduction device that
      the
      Company intends to sell to its customers for effective and efficient emission
      reduction and engine efficiency for implementation in both new and presently
      operating automobiles. The Company is considered a development stage enterprise
      because it currently has no significant operations, has not yet generated
      revenue from new business activities and is devoting substantially all of its
      efforts to business planning and the search for sources of capital to fund
      its
      efforts.





The
      Company was originally incorporated as Energy Resource Management, Inc. on
      August 13, 2002 and subsequently adopted name changes to Redwood Energy Group,
      Inc. and SaVi Media Group, Inc., upon completion of a recapitalization on August
      26, 2002. The re-capitalization occurred when the Company acquired the
      non-operating public shell of Gene-Cell, Inc. Gene-Cell Inc. had no significant
      assets or operations at the date of acquisition and the Company assumed all
      liabilities that remained from its prior discontinued operation as a
      biopharmaceutical research company. The historical financial statements
      presented herein are those of SaVi Media Group, Inc. and its predecessors,
      Redwood Energy Group, Inc. and Energy Resource Management, Inc.





The
      non-operating public shell used to recapitalize the Company was originally
      incorporated as Becniel and subsequently adopted name changes to Tzaar
      Corporation, Gene-Cell, Inc., Redwood Energy Group, Inc., Redwood Entertainment
      Group, Inc. and finally its current name, SaVi Media Group, Inc.





**Significant
      Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America 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 dates
      of
      the consolidated condensed financial statements and the reported amounts of
      revenues and expenses during the periods. Actual results could differ from
      estimates making it reasonably possible that a change in the estimates could
      occur in the near term.





**Principles
      of Consolidation**





The
      unaudited consolidated condensed financial statements include the accounts
      of
      the Company and its wholly owned subsidiaries after elimination of all
      significant intercompany accounts and transactions.





**Interim
      Financial Statements**





The
      accompanying unaudited consolidated condensed financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and with the
      instructions to Form 10-QSB and Article 10 of Regulation S-B. Accordingly,
      they
      do not include all of the information and footnotes required by accounting
      principles generally accepted in the United States of America for complete
      financial statements. In the opinion of management, all adjustments (consisting
      of normal recurring accruals) considered necessary for a fair presentation
      have
      been included. Operating results for the three-month periods ended March
      31, 2006 and 2005 are not necessarily indicative of the results that may be
      expected for the respective full years.


-10-
 **Back
          to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**1.**  **Organization
      and Significant Accounting Policies, continued**





**Derivative
      Financial Instruments**





The
      Company does not use derivative instruments to hedge exposures to cash flow,
      market, or foreign currency risks.





We
      review
      the terms of convertible debt and equity instruments issued to determine whether
      there are embedded derivative instruments, including embedded conversion
      options, that are required to be bifurcated and accounted for separately as
      a
      derivative financial instrument. In circumstances where the convertible
      instrument contains more than one embedded derivative instrument, including
      the
      conversion option, that is required to be bifurcated, the bifurcated derivative
      instruments are accounted for as a single, compound derivative instrument.
      Also,
      in connection with the sale of convertible debt and equity instruments, the
      Company may issue freestanding options or warrants that may, depending on their
      terms, be accounted for as derivative instrument liabilities, rather than as
      equity. The Company may also issue options or warrants to non-employees in
      connection with consulting or other services they provide.





Certain
      instruments, including convertible debt and equity instruments and the
      freestanding options and warrants issued in connection with those convertible
      instruments, may be subject to registration rights agreements, which impose
      penalties for failure to register the underlying common stock by a defined
      date.
      These potential cash penalties may require the Company to account for the debt
      or equity instruments or the freestanding options and warrants as derivative
      financial instrument liabilities, rather than as equity. In addition, when
      the
      ability to physical or net-share settle the conversion option or the exercise
      of
      the freestanding options or warrants is deemed to be not within the control
      of
      the company, the embedded conversion option or freestanding options or warrants
      may be required to be accounted for as a derivative financial instrument
      liability.


-11-
 **Back
          to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**1.** **Organization
      and Significant Accounting Policies, continued**  ****





**Derivative
      Financial Instruments, continued**





Certain
      instruments, including convertible debt and equity instruments and the
      freestanding options and warrants issued in connection with those convertible
      instruments, may be subject to registration rights agreements, which impose
      penalties for failure to register the underlying common stock by a defined
      date.
      These potential cash penalties may require the Company to account for the debt
      or equity instruments or the freestanding options and warrants as derivative
      financial instrument liabilities, rather than as equity. In addition, when
      the
      ability to physical or net-share settle the conversion option or the exercise
      of
      the freestanding options or warrants is deemed to be not within the control
      of
      the company, the embedded conversion option or freestanding options or warrants
      may be required to be accounted for as a derivative financial instrument
      liability.





Derivative
      financial instruments are initially measured at their fair value. For derivative
      financial instruments that are accounted for as liabilities, the derivative
      instrument is initially recorded at its fair value and is then re-valued at
      each
      reporting date, with changes in the fair value reported as charges or credits
      to
      income. For option-based derivative financial instruments, the Company uses
      the
      Black-Scholes option pricing model to value the derivative instruments. To
      the
      extent that the initial fair values of the freestanding and/or bifurcated
      derivative instrument liabilities exceed the total proceeds received, an
      immediate charge to income is recognized, in order to initially record the
      derivative instrument liabilities at their fair value.





The
      discount from the face value of the convertible debt or equity instruments
      resulting from allocating some or all of the proceeds to the derivative
      instruments, together with the stated interest on the instrument, is amortized
      over the life of the instrument through periodic charges to income, usually
      using the effective interest method. When the instrument is convertible
      preferred stock, the dividends payable are recognized as they accrue and,
      together with the periodic amortization of the discount, are charged directly
      to
      retained earnings.





The
      classification of derivative instruments, including whether such instruments
      should be recorded as liabilities or as equity, is re-assessed periodically,
      including at the end of each reporting period. If re-classification is required,
      the fair value of the derivative instrument, as of the determination date,
      is
      re-classified. Any previous charges or credits to income for changes in the
      fair
      value of the derivative instrument are not reversed. Derivative instrument
      liabilities are classified in the balance sheet as current or non-current based
      on whether or not net-cash settlement of the derivative instrument could be
      required within 12 months of the balance sheet date.





**2.** **Going
      Concern Considerations** ****





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company is presently a shell company
      and
      has limited operations and resources. The Company has accumulated net losses
      in
      the development stage of $249,106,429 for the period from inception, August
      13,
      2002, to March 31, 2006. Additionally, at March 31, 2006, the Company is in
      a negative working capital position of $652,840 and has a stockholders’ deficit
      of $609,653. Such matters raise substantial doubt about the Company’s ability to
      continue as a going concern. These financial statements do not include any
      adjustment that might result from the outcome of this uncertainty.





The
      goals
      of the Company will require a significant amount of capital and there can be
      no
      assurances that the Company will be able to raise adequate short-term capital
      to
      sustain its current operations in the development stage, or that the Company
      can
      raise adequate long-term capital from private placement of its common stock
      or
      private debt to emerge from the development stage. There can also be no
      assurances that the Company will ever attain profitability. The Company’s
      long-term viability as a going concern is dependent upon certain key factors,
      including:




·
            The
                Company’s ability to obtain adequate sources of funding to sustain it
                during the development stage.





·
            The
                ability of the Company to successfully produce and market its gasoline
                and
                diesel engine emission reduction device in a manner that will allow
                it to
                ultimately achieve adequate profitability and positive cash flows
                to
                sustain its operations.





In
      order
      to address its ability to continue as a going concern, implement its business
      plan and fulfill commitments made in connection with its agreement for
      acquisition of patent rights the Company intends to raise additional capital
      from sale of its common stock.


Sources
      of funding may not be available on terms that are acceptable to the Company
      and
      its stockholders, or may include terms that will result in substantial dilution
      to existing stockholders.


-12-
 **Back
          to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**3.**  **Derivative
      Financial Instruments and Restatement**





During
      the year ended December 31, 2005 the Company issued $50,000 of convertible
      notes
      to a third party. As part of the several financing transaction, the Company
      also
      issued warrants to purchase shares of stock at various exercise prices. The
      convertible debentures bear interest at 5 1/4%, mature two years from the date
      of issuance, and are convertible into shares of the Company’s common stock, at
      the Investor’s option. The convertible debentures are convertible into shares of
      the Company’s based on the following formula: The Company will issue the number
      of shares of common stock equal to the principal amount of the debentures being
      converted multiplied by 110, less the product of the conversion price multiplied
      by 100 times the dollar amount of the debenture; and the product thereof shall
      be divided by the conversion price. The conversion price for the convertible
      debentures is the lesser of (i) $0.75; (ii) eighty percent of the of the average
      of the three lowest volume weighted average prices during the twenty (20)
      trading days prior to the conversion or (iii) eighty percent of the of the
      volume weighted average on the trading day prior to conversion. ****





If
      the
      volume weighted average price is below $0.20 on a conversion date, the Company
      has the right to pre-pay the amount of the debenture the Investor elects to
      convert, plus accrued and unpaid interest, at 150% of such amount; however,
      if
      the Company elects to pre-pay in this situation, the Investor holder has the
      right to withdraw the notice of conversion. Also, if the volume weighted average
      price is below $0.20 at any point during a month, the Investor is not obligated
      to convert any portion of the debenture during that month. In addition, the
      selling stockholder is obligated to exercise the warrant concurrently with
      the
      submission of a conversion notice by the selling stockholder. The warrant is
      exercisable into 5,000,000 shares of common stock at an exercise price of $1.09
      per share.





The
      conversion provisions of the convertible debentures and the exercise provisions
      of the warrant are correlated so that the convertible debentures will be
      converted and the warrant exercised in like proportions. The result is that
      in
      any month in which the Investor converts the 5% minimum it will also exercise
      the 5% minimum under the warrant, which will result in it purchasing common
      stock for $275,000 ($272,500 paid in cash and $2,500 of the convertible
      debentures principal converted). In total, the conversion of the convertible
      debentures and exercise of the warrant could result in the Investor purchasing
      up to $5,500,000 of the Company’s common stock ($5,450,000 paid in cash and
      $50,000 of the convertible debentures principal converted) under the
      Agreement.





It
      is
      currently unlikely that the $5,500,000 available under the Agreement will ever
      be received because the Company’s stock price has fallen substantially below
      $0.20 and the Agreement contains a provision that if at the time of a
      conversion/exercise, the conversion price would be less than $.20, then the
      Investor is not obligated to convert any portion of the convertible debenture
      or
      exercise any portion of the warrant for that month or the Company may opt to
      redeem the amount of principal that the Investor presents for conversion at
      150%
      of face value. These provisions will, in all likelihood, reduce the aggregate
      purchases under the convertible debentures and warrants.





The
      holder shall have the right, but not the obligation, to convert all or any
      portion of the then aggregate outstanding principal amount of this note into
      shares of common stock.





The
      proceeds from the financing transactions were allocated to the debt features
      and
      to the warrants based upon their fair values. After the latter allocations,
      the
      remaining value, if any, is allocated to the Note on the financial
      statements.





The
      debt
      discount is being accreted using the effective interest method over the term
      of
      the note.





The
      value
      of the discount on the converted notes on the books is being accreted over
      the
      term of the note. For the year ended December 31, 2005 and the three months
      ended March 31, 2006 the Company accreted $6,616 and $3,679, respectively,
      of
      debt discount. The accretion of debt discount amount is adjusted in direct
      proportion to the conversions of debt to stock during the period.


-13-
 **Back
          to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**3.**  **Derivative
      Financial Instruments and Restatement, continued**





**Warrants
      Issued**





The
      estimated fair value of the warrants was $84,234 at the date of issue. These
      amounts have been classified as a derivative instrument and recorded as a
      liability on the Company's balance sheet in accordance with current
      authoritative guidance. The estimated fair value of the warrants was determined
      using the Black-Scholes option-pricing model.The model uses several assumptions
      including: historical stock price volatility, risk-free interest rate, remaining
      time till maturity, and the closing price of the Company's common stock to
      determine estimated fair value of the derivative liability.





In
      accordance with the provisions of SFAS No. 133, Accounting for Derivative
      Instruments, the Company is required to adjust the carrying value of the
      instrument to its fair value at each balance sheet date and recognize any change
      since the prior balance sheet date as a component of Other Income (Expense).
      The
      recorded value of such warrants can fluctuate significantly based on
      fluctuations in the market value of the underlying securities of the issuer
      of
      the warrants, as well as in the volatility of the stock price during the term
      used for observation and the term remaining for the warrants.





**Debt
      Features**





In
      accordance with Statement of Financial Accounting Standards No. 133, "Accounting
      for Derivative Instruments and Hedging Activities," as amended ("SFAS 133"),
      the
      debt features provision (collectively, the features) contained in the terms
      governing the Notes are not clearly and closely related to the characteristics
      of the Notes. Accordingly, the features qualified as embedded derivative
      instruments at issuance and, because they do not qualify for any scope exception
      within SFAS 133, they were required by SFAS 133 to be accounted for separately
      from the debt instrument and recorded as derivative financial
      instruments.




Pursuant
      to the terms of the Notes, these notes are convertible at the option of the
      holder, at anytime on or prior to maturity. The debt features represents an
      embedded derivative that is required to be accounted for apart from the
      underlying Notes. At issuance of the Notes, the debt features had an estimated
      initial fair value of 872,362.





In
      subsequent periods, if the price of the security changes, the embedded
      derivative financial instrument related to the debt features will be adjusted
      to
      the fair value with the corresponding charge or credit to other expense or
      income. The estimated fair value of the debt features was determined using
      the
      probability weighted average expected cash flows / Lattice Model with the
      closing price on original date of issuance, a conversion price based on the
      terms of the respective contract, a period based on the terms of the notes,
      and
      a volatility factor on the date of issuance. At December 31, 2005, the estimated
      fair value of the debt features was approximately $707,023. For the three months
      ended March 31, 2006, due in part to a decrease in the market value of the
      Company's common stock, the Company recorded an "other income" on the
      consolidated statement of operations for the change in fair value of the debt
      features of approximately $226,708. At March 31, 2006, the estimated fair value
      of the debt features was approximately $456,615.





The
      recorded value of the debt features related to the Notes can fluctuate
      significantly based on fluctuations in the fair value of the Company's common
      stock, as well as in the volatility of the stock price during the term used
      for
      observation and the term remaining for the warrants.





The
      significant fluctuations can create significant income and expense items on
      the
      financial statements of the company.


-14-
 **Back
          to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**3.**  **Derivative
      Financial Instruments and Restatement, continued**





Because
      the terms of the convertible notes (“notes”) require such classification, the
      accounting rules required additional convertible notes and non-employee warrants
      to also be classified as liabilities, regardless of the terms of the new notes
      and / or warrants. This presumption has been made due to the company no longer
      having the control to physical or net share settle subsequent convertible
      instruments because it is tainted by the terms of the notes. Were the notes
      to
      not have contained those terms or even if the transactions were not entered
      into, it could have altered the treatment of the other notes and the conversion
      features of the latter agreement may have resulted in a different accounting
      treatment from the liability classification. The notes and warrants, as well
      as
      any subsequent convertible notes or warrants, will be treated as derivative
      liabilities until all such provisions are settled.





At
      the
      date of origination, the embedded derivatives and the warrants associated with
      the convertible notes were improperly accounted as equity transactions and
      accordingly the Company’s’ financial statements for the quarters ended June 30,
      2005, September 30, 2005 and December 31, 2005 and have also been
      restated.


-15-
 **Back
          to Table of Contents**




**SAVI
      MEDIA GROUP, INC.**


**A
      Corporation in the Development Stage**


**NOTES
      TO UNAUDITED FINANCIAL STATEMENTS**




**4.**  **Stockholders’
      Equity**





Following
      is a description of transactions affecting stockholders equity in the three
      months ended March 31, 2006:





-
            The
                Company issued 1,625,000 shares of common stock and 1,000,000 shares
                of
                Series C Preferred Stock to various individuals that provided consulting
                and other services to the Company and recognized compensation expense
                of
                $498,138 related to those
                issuances.





-
            The
                Company issued 100,000 shares of common stock under private placement
                and
                received cash proceeds of $1,000.





-
            The
                Company issued 395,275 shares of Series C Preferred Stock
                for cash of $381,730.





-
            The
                Company cancelled 1,000,000 shares of Series C Preferred Stock previously
                issued to officers/major stockholders of the
                Company.





-
            The
                Company issued 174,540 shares of common stock to the holder of its
                convertible debt upon exercise of stock warrants and received proceeds
                of
                $190,249. The proceeds were received as cash of $167,164 and offsets
                of
                short-term advances of $23,085.





-
            The
                Company issued 67,264,548 shares of common stock to the holder of
                its
                convertible debt upon conversion of $1,744 of convertible
                debt.





-16-
 **Back
            to Table of Contents**




ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS





*The
      following discussion should be read in conjunction with the unaudited condensed
      consolidated financial statements and notes thereto set forth in Item 1 of
      this
      Quarterly Report. In addition to historical information, this discussion and
      analysis contains forward-looking statements that involve risks, uncertainties
      and assumptions, which could cause actual results to differ materially from
      Management’s expectations. Factors that could cause differences include, but are
      not limited to, expected market demand for the Company’s services, fluctuations
      in pricing for products distributed by the Company and services offered by
      competitors, as well as general conditions of the entertainment
      marketplace.*





**Overview**





**Business
      History**





We
      were
      originally incorporated as Energy Resource Management, Inc. on August 13, 2002
      and subsequently adopted name changes to Redwood Energy Group, Inc. and Redwood
      Entertainment Group, Inc., upon completion of a recapitalization on August
      26,
      2002. The re-capitalization occurred when we acquired the non-operating entity
      of Gene-Cell, Inc. Gene-Cell had no significant assets or operations at the
      date
      of acquisition and we assumed all liabilities that remained from its prior
      discontinued operation as a biopharmaceutical research company. The historical
      financial statements presented herein are those of SaVi Media Group, Inc. and
      its predecessors, Redwood Entertainment Group, Inc., Redwood Energy Group,
      Inc.
      and Energy Resource Management, Inc.





The
      non-operating public shell we used to recapitalize was originally incorporated
      as Becniel and subsequently adopted name changes to Tzaar Corporation,
      Gene-Cell, Inc., Redwood Energy Group, Inc., Redwood Entertainment Group, Inc.,
      and finally its current name, SaVi Media Group, Inc.





**Business
      Summary**





We
      are
      considered a development stage enterprise because we currently have no
      significant operations, have not yet generated revenue from new business
      activities and are devoting substantially all of our efforts to business
      planning and the search for sources of capital to fund our efforts. We have
      acquired all rights to "blow-by gas and crankcase engine emission reduction
      technology" which we intend to develop and market on a commercial basis. The
      technology is a gasoline and diesel engine emission reduction device which
      will
      allow us to sell to our customers a low-cost and relatively more effective
      and
      efficient emission reduction and engine efficiency for implementation in both
      new and presently operating automobiles. The technology is designed and we
      believe that it will offer better mileage and longer engine lifespan. The
      technology is also believed to provide for dramatic reductions in harmful
      emissions in engines and vehicles, a reduction in costs to do so as well as
      reducing all related emission costs. The goal of the technology is to sell
      a
      commercially-viable product which delivers superior emission reduction
      technology and operating performance.





We
      currently have the right to develop, produce, market and distribute a new
      product which provides for increased fuel economy and reduced emissions in
      automotive applications for both new and existing vehicles and may be used
      in
      other non-automotive applications. The technology may be sold internationally,
      but Los Angeles is our base of operations and the United States will be our
      initial market. We plan to seek the rights to develop and sell additional
      products and will seek strategic partnerships with manufacturers and
      distributors in the various industries where our products may be sold and to
      develop markets in other areas. Once established domestically, we intend to
      formulate a plan to expand into international markets.





**Critical
      Accounting Policies and Estimates**





Our
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenue and expenses, and related disclosure of contingent assets and
      liabilities. On an ongoing basis, we evaluate our estimates and our estimates
      are based on historical experience and on various other assumptions that are
      believed to be reasonable under the circumstances. These estimates and
      assumptions provide a basis for our judgments about the carrying values of
      assets and liabilities that are not readily apparent from other sources. Actual
      results may differ from our estimates under different assumptions or conditions,
      and these differences may be material.


-17-
 **Back
            to Table of Contents**




We
      believe that the following critical accounting policies affect our more
      significant judgments and estimates used in the preparation of our consolidated
      financial statements:





Income
      Taxes





We
      use
      the liability method of accounting for income taxes. Under this method, deferred
      income taxes are recorded to reflect the tax consequences on future years of
      temporary differences between the tax basis of assets and liabilities and their
      financial amounts at year-end. We provide a valuation allowance to reduce
      deferred tax assets to their net realizable value.





**Results
      of Operations**





During
      the period from inception, August 13, 2002, to March 31, 2006, we have not
      generated any revenue from operations. As of March 31, 2006, we have accumulated
      net losses in the development stage of $250,340,256 for the period from
      inception, August 13, 2002, to March 31, 2006. Additionally, at March 31, 2006,
      we are in a negative working capital position of $2,007,489 and a stockholders'
      deficit position $1,964,302. Our auditors have opined that such matters raise
      substantial doubt about our ability to continue as a going concern. We financed
      our operations mainly through the sale of common stock and have been entirely
      dependent on outside sources of financing for continuation of operations. For
      the remainder of fiscal 2006, we will continue to pursue funding for our
      business. There is no assurance that we will continue to be successful in
      obtaining additional funding on attractive terms or at all, nor that the
      projects towards which additional paid-in capital is assigned will generate
      revenues at all.





**Plan
      of Operation**





During
      the quarter ended March 31, 2006, we had limited operations and we expect to
      require additional cash of approximately $5,000,000 over the next twelve months.
      Those funds will be used for continued operation in the development
      stage.





Our
      plan
      of operations will require sources of funding that may not be available on
      terms
      that are acceptable to management and existing stockholders, or may include
      terms that will result in substantial dilution to existing
      stockholders.





**Liquidity
      and Capital Resources**





As
      of
      March 31, 2006, total current assets were $145,118 consisting of cash and cash
      equivalents.





Total
      current liabilities were $797,958 as of March 31, 2006, consisting of notes
      payable of $147,000, convertible debt of $10,048, accounts payable and accrued
      liabilities of $25,000, accounts payable assumed in recapitalization of $159,295
      and derivitive financial instrument liabilities of $456,615.





We
      had a
      negative working capital of $652,840 as of March 31, 2006.


-18-
 **Back
            to Table of Contents**




We
      incurred net losses of $249,106,429 during the period from inception, August
      13,
      2002, to March 31, 2006. In addition, at March 31, 2006, we were in a negative
      working capital deficit of $652,840 and had a stockholders' deficit of $609,653.
      As a result, our independent registered public accounting firm, in its report
      dated April 13, 2006, has expressed substantial doubt about our ability to
      continue as a going concern.





Our
      ability to continue as a going concern is dependent upon several factors. These
      factors include our ability to:





· further implement our business plan;


· obtain additional financing or refinancing as may be required; and


·   generate
      revenues.





We
      believe it is imperative that we raise an additional $5,000,000 of capital
      in
      order to implement our business plan. We are attempting to raise additional
      funds through debt and/or equity offerings. We intend to use any funds raised
      to
      pay down debt and to provide us with working capital. There can be no assurance
      that any new capital would be available to us or that adequate funds for our
      operations, whether from our revenues, financial markets, or other arrangements
      will be available when needed or on terms satisfactory to us. Any additional
      financing may involve dilution to our then-existing shareholders. At this time,
      no additional financing has been secured or identified. We have no commitments
      from officers, directors or affiliates to provide funding. If we are unable
      to
      obtain debt and/or equity financing upon terms that we deem sufficiently
      favorable, or at all, it would have a materially adverse impact upon our ability
      to pursue our business strategy and maintain our current operations. As a
      result, it may require us to delay, curtail or scale back some or all of our
      operations. We do not currently have commitments for capital at this
      time.





**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition or results of
      operations.





There
      were no recent accounting pronouncements that have had or are likely to have
      a
      material effect on our financial position or results of
      operations.


-19-
 **Back
            to Table of Contents**




ITEM
      3 - CONTROLS AND PROCEDURES





a)
            Evaluation
                of Disclosure Controls and Procedures.
                As of March 31, 2006, as required by SEC rule 13a-15(b) we conducted
                an
                evaluation, under the supervision and with the participation of our
                management, including our Chief Executive Officer and Chief Financial
                Officer, the effectiveness of the design and operation of our disclosure
                controls and procedures. Based upon that evaluation, the Chief Executive
                Officer, President and Vice President of Finance concluded that our
                disclosure controls and procedures are effective in timely alerting
                them
                to material information relating to us (including our subsidiaries)
                required to be included in our periodic SEC filings.
              
              Our
                new independent accountants, Ham Langston & Brezina LLP conducted an
                audit of our financial statements for 2005. In connection with the
                issuance of its report to the Board of Directors, Ham Langston &
                Brezina LLP reported two material weaknesses under standards established
                by the Public Company Accounting Oversight Board regarding some elements
                of our system of internal controls. They noted the following specific
                material deficiencies.
              
              (i)The
                Company lacked the required expertise needed to properly account
                for
                non-routine transactions (such as the acquisition of other businesses
                and
                preparation of its required financial statement disclosure in accordance
                with U.S.G.A.A.P. and SEC rules and regulations.
              (ii)The
                Company has restated its consolidated financial statements for the
                year-ended December 31, 2005 to reflect the accounting for derivatives.
                The restatement is considered a material weakness over financial
                reporting
                as defined by the PCAOB.
              
              Other
                than the foregoing initiatives, there were no significant changes
                in our
                internal controls or to our knowledge, in other factors that could
                significantly affect such internal controls subsequent to the date
                of
                their evaluation.
              
              While
                we have taken or are in the process of taking the foregoing steps
                in order
                to address the adequacy of our disclosure controls and procedures,
                and, in
                addition, to develop and implement a formal set of internal controls
                and
                procedures for financial reporting in accordance with SEC’s proposed rules
                to adopt the internal control report requirements included in Section
                404
                of the Sarbanes-Oxley Act of 2002, the efficiency of the steps we
                have
                taken to date and the steps we are still in the process of completing
                is
                subject to continued management review supported by confirmation
                and
                testing by our internal and external auditors. As a result, it is
                likely
                that additional changes will be made to our internal
                controls.





b)
            Changes
                in internal controls.
                There were no changes in internal controls over financial reporting
                that
                occurred during the period covered by this report that have materially
                affected, or are reasonably likely to materially effect, our internal
                control over financial reporting.




-20-
 **Back
            to Table of Contents**




**PART
      II - OTHER INFORMATION**




**ITEM
      1 - LEGAL PROCEEDINGS**





>From
      time to time, we may become involved in various lawsuits and legal proceedings
      which arise in the ordinary course of business. However, litigation is subject
      to inherent uncertainties, and an adverse result in these or other matters
      may
      arise from time to time that may harm our business. We are currently not aware
      of any such legal proceedings or claims that we believe will have, individually
      or in the aggregate, a material adverse affect on our business, financial
      condition or operating results.




**ITEM
      2 - UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





During
      the quarter ended March 31, 2006, we issued 1,625,000 shares of common stock
      and
      1,000,000 shares of Series C Preferred Stock to various individual for
      consulting services provided to us. We recognized compensation expense of
      $498,138 related to those issuances.





We
      sold
      100,000 shares of common stock to one accredited investor for
      $1,000.




We
      sold
      395,275 shares of Series C Preferred Stock for cash of
      $381,730.





We
      issued
      174,540 shares of common stock to the holder of its convertible debt upon
      exercise of stock warrants and received proceeds of $190,249.





We
      issued
      67,264,548 shares of common stock upon conversion of $1,744 of convertible
      debt.




**ITEM
      3 - DEFAULTS UPON SENIOR SECURITIES**





None.




**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS**





None.




**ITEM
      5 - OTHER INFORMATION**




None.




**ITEM
      6 - EXHIBITS**




31.1 -
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended




31.2 -
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended





32.1 -
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer)





32.2 -
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer)




-21-
 **Back
          to Table of Contents**




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**SAVI
                MEDIA GROUP, INC.**Date:
                August 21, 2006
            By:*/s/
                MARIO PROCOPIO*Mario
                Procopio*President,
                Chief Executive Officer (Principal Executive Officer) and Chairman
                of the
                Board of Directors*Date:
                August 21, 2006
            By:*/s/
                GEORGE HUKRIEDE*George
                Hukriede*Chief
                Financial Officer (Principal Financial Officer and Principal Accounting
                Officer)*




-22-