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          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




[
      ]
      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 September 30, 2005**




*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 [ ]




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




Yes
      [ ]
      No [x]




As
      of
      November 16, 2005, the Company had 201,257,756 shares of its par value $0.001
      common stock issued and outstanding.




**Transitional
      Small Business Disclosure Format (check one):**




Yes
      [ ]
      No [X]





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**SAVI
      MEDIA GROUP, INC.**


(A
      Development Stage Company)




Quarterly
      Report on Form 10-QSB for the Quarterly Period Ending September 30,
      2005





Table
      of Contents





PART
                I. FINANCIAL INFORMATIONItem
                1. Unaudited Condensed Financial StatementsConsolidated
                Balance Sheets:September
                30, 2005 and December 31, 2004
            3Consolidated
                Statements of Operations:For
                the three and nine months ended September 30, 2005 and
                2004 and for the period from inception, August 13, 2002, to September
                30,
                2005
            5Consolidated
                Statement of Stockholders'
                DeficitFor
                the nine months ended September 30,
                2005
            6Consolidated
                Statements of Cash Flows:For
                the nine months ended September 30, 2005 and 2004 and for
                the period from inception, August 13, 2002 to September 30,
                2005
            9Notes
                to Unaudited Consolidated Financial
                Statements
            10Item
                2. Plan of Operation
            18Item
                3. Controls and Procedures
            22PART
                II. OTHER INFORMATIONItem
                1. Legal Proceedings
            22Item
                2. Changes in Securities
            22Item
                3. Defaults Upon Senior Securities
            22Item
                4. Submission of Matters to a Vote of Security
                Holders
            22Item
                5. Other Information
            22Item
                6. Exhibits
            23SIGNATURES
            24




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**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.





Based
      on
      the above determination, as of September 30, 2005, the Company expensed an
      additional $913,427 of non-cash interest expense, booked a loss on the net
      change in fair value of derivative liabilities of $88,811, and reclassed
      $211,086 of general and administrative expense to research and development.
      In
      addition, 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
      September 30, 2005, the derivative liabilities were $1,013,699, 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 September
      30, 2005, initially filed with the Securities and Exchange Commission ( the
      “SEC”) on November 18, 2005, is being filed to reflect restatements of the
      Company’s Consolidated Balance Sheet as of September 30, 2005, and the related
      Consolidated Statements of Operations, Shareholders’ Equity and Cash Flows for
      the quarter ended September 30, 2005. For a more detailed description of these
      restatements, see Note 4, “Restatement for Convertible Debt”.





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 Notes 1 and 4 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 Sarbanes-Oxley Act of 2002.


-2-
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**PART
      I. FINANCIAL INFORMATION**




**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****CONSOLIDATED
                CONDENSED BALANCE
                SHEET*****September
                30, 2005 (Unaudited) and December 31,
                2004***




**September
                30,**
            
            **December
                31,****2005**
            
            **2004****(Restated)****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            3,448
            
            $
            3,835Total
                current assets
            
            
            3,448
            
            
            3,835Property
                and equipment, net
            
            
            5,729
            
            
            —Intangible
                assets - patents
            
            
            38,500
            
            
            38,500Total
                assets
            
            $
            47,677
            
            $
            42,335





The
        accompanying notes are an integral part of the unaudited consolidated financial
        statements
 -3-
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**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED BALANCE SHEET*****September
                30, 2005 and December 31,
                2004***




**September
                30,**
            
            **December
                31,****2005**
            
            **2004****(Restated)****LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Short
                term advance
            
            $
            85,454
            
            $
            —Short
                term advance from stockholder/officer
            
            
            2,600
            
            
            —Derivative
                liability - compound embedded derivatives
            
            
            1,012,604
            
            
            —Derivative
                liability - warrants
            
            
            1,095
            
            
            —Accounts
                payable and accrued liabilities
            
            
            16,216
            
            
            10,000Accounts
                payable assumed in recapitalization
            
            
            159,295
            
            
            159,295Total
                current liabilities
            
            
            1,277,264
            
            
            169,295Convertible
                debenture
            
            
            3,591
            
            
            —Long-term
                debt
            
            
            144,127
            
            
            —Total
                liabilities
            
            
            1,424,982
            
            
            169,295Commitments
                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, 5,040,000 shares issuedand
                outstanding at September30, 2005
            
            
            6,060
            
            
            —Common
                stock: $0.001 par value, 990,000,000 sharesauthorized,
                144,980,852 and 86,947,767 shares issued andoutstanding
                at September 30, 2005 and December 31, 2004,respectively
            
            
            144,981
            
            
            86,947Additional
                paid-in capital
            
            
            247,159,406
            
            
            109,749,828Subscription
                receivable
            
            
            (5,500
            )
            
            —Losses
                accumulated during the development stage
            
            
            (248,692,252
            )
            
            (109,973,735
            )Total
                stockholders' deficit
            
            
            (1,377,305
            )
            
            (126,960
            )Total
                liabilities and stockholders' deficit
            
            $
            47,677
            
            $
            42,335


The
        accompanying notes are an integral part of the unaudited consolidated financial
        statements
 -4-
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**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENTS OF
                OPERATIONS*****For
                the Three Months and Nine Months Ended September 30, 2005 and 2004
                and for
                the Period******From
                Inception, August 13, 2002, to September 30,
                2005***




**Three
                Months Ended**
            
            **Nine
                Months Ended**
            
            **Inception
                to****September
                30,**
            
            **September
                30,**
            
            **September
                30,**
            
            **September
                30,**
            
            **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**
            
            **2005****(Restated)**
            
            
            
            **(Restated)**
            
            
            
            **(Restated)**Operating
                costs and expenses:General
                and administrativeexpenses,
                except stockbased
                compensation
            
            $
            140,978
            
            $
            134,381
            
            $
            425,475
            
            $
            292,555
            
            $
            1,059,793Stock-based
                compensation
            
            
            3,148,000
            
            
            —
            
            
            137,077,475
            
            
            —
            
            
            245,713,707Research
                and development
            
            
            72,790
            
            
            —
            
            
            211,086
            
            
            
            
            
            211,086Loss
                from operations
            
            
            (3,361,768
            )
            
            (134,381
            )
            
            (137,714,036
            )
            
            (292,555
            )
            
            (246,984,586
            )Other
                income and (expenses)Interest
                Income
            
            
            —
            
            
            —
            
            
            1
            
            
            285
            
            
            298Gain
                on settlement
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            197,033Cost
                of recission
            
            
            —
            
            
            —
            
            
            —
            
            
            (43,074
            )
            
            (43,074
            )Cost
                of recapitalization
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (273,987
            )Goodwill
                impairment
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (541,101
            )Change
                in value of derivativefinancial
                instruments
            
            
            291,542
            
            
            —
            
            
            (88,811
            )
            
            —
            
            
            (88,811
            )Interest
                expense
            
            
            (5,683
            )
            
            (6,135
            )
            
            (915,671
            )
            
            (27,903
            )
            
            (958,526
            )Total
                other incomeand
                expenses, net
            
            
            (4,388
            )
            
            (6,135
            )
            
            (1,004,481
            )
            
            (70,692
            )
            
            (1,708,168
            )Net
                loss
            
            $
            (3,075,909
            )
            $
            (140,516
            )
            $
            (138,718,517
            )
            $
            (363,247
            )
            $
            (248,692,754
            )Weighted
                average sharesoutstanding
            
            
            121,114,740
            
            
            1,013,147
            
            
            105,229,366
            
            
            769,143Net
                loss per common share -basic
                and diluted
            
            $
            (0.03
            )
            $
            (0.14
            )
            $
            (1.32
            )
            $
            (0.47
            )


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


-5-
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**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLERS’
                DEFICIT*****For
                the Nine Months Ended September 30,
                2005***




**Series
                A Preferred Stock**
            
            **Series
                B Preferred Stock****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**Balance
                at December 31, 2004
            
            
            10,000,000
            
            $
            10,000
            
            
            —
            
            $
            —Common
                stock issued for cash
            
            
            —
            
            
            —
            
            
            —
            
            
            —Exercise
                of warrants
            
            
            —
            
            
            —
            
            
            —
            
            
            —Conversion
                of debt to equity, as restated
            
            
            —
            
            
            —
            
            
            —
            
            
            —Common
                and Preferred stock issued inexchange
                for consulting services, as restated
            
            
            —
            
            
            —
            
            
            —
            
            
            —Options
                issued to an officer
            
            
            —
            
            
            —
            
            
            —
            
            
            —Cancellation
                of shares
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                loss, as restated
            
            
            —
            
            
            —
            
            
            —
            
            
            —Balance
                at September 30, 2005, as restated
            
            
            10,000,000
            
            $
            10,000
            
            
            -
            
            $
            — The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements  -6-
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**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLERS'
                DEFICIT*****For
                the Nine Months Ended September 30,
                2005***




**Series
                  C Preferred Stock**
              
              **Common
                  Stock****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**Balance
                  at December 31, 2004
              
              
              —
              
              $
              —
              
              
              86,947,767
              
              $
              86,947Common
                  stock issued for cash
              
              
              —
              
              
              —
              
              
              5,288,946
              
              
              5,289Exercise
                  of warrants
              
              
              —
              
              
              —
              
              
              111,602
              
              
              112Conversion
                  of debt to equity, as restated
              
              
              —
              
              
              —
              
              
              12,333,900
              
              
              12,334Common
                  and Preferred stock issued inexchange
                  for consulting services, as restated
              
              
              6,060,000
              
              
              6,060
              
              
              45,689,237
              
              
              45,689Options
                  issued to an officer
              
              
              —
              
              
              —
              
              
              —
              
              
              —Cancellation
                  of shares
              
              
              —
              
              
              —
              
              
              (5,390,600
              )
              
              (5,390
              )Net
                  loss, as restated
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance
                  at September 30, 2005, as restated
              
              
              6,060,000
              
              $
              6,060
              
              
              144,980,852
              
              $
              144,981
 The
      accompanying notes are an integral part of the unaudited consolidated financial
      statements  -7-
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**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLERS'
                DEFICIT*****For
                the Nine Months Ended September 30,
                2005***




**Losses****Accumulated****Additional**
            
            
            
            **During
                the****Paid-In**
            
            **Subscription**
            
            **Development****Capital**
            
            **Receivable**
            
            **Stage**
            
            **Total**Balance
                at December 31, 2004
            
            $
            109,749,828
            
            $
            —
            
            $
            (109,973,735
            )
            $
            (126,960
            )Common
                stock issued for cash
            
            
            235,941
            
            
            (5,500
            )
            
            —
            
            
            235,730Exercise
                of warrants
            
            
            123,641
            
            
            —
            
            
            —
            
            
            123,753Conversion
                of debt to equity, as restated
            
            
            18,880
            
            
            —
            
            
            —
            
            
            31,214Common
                stock issued in exchangefor
                consulting services, as restated
            
            
            105,775,726
            
            
            —
            
            
            —
            
            
            105,827,475Options
                issued to an officer
            
            
            31,250,000
            
            
            —
            
            
            —
            
            
            31,250,000Cancellation
                of shares
            
            
            5,390
            
            
            —
            
            
            —
            
            
            —Net
                loss, as restated
            
            
            —
            
            
            —
            
            
            (138,718,517
            )
            
            (138,718,517
            )Balance
                at September 30, 2005, as restated
            
            $
            247,159,406
            
            $
            (5,500
            )
            $
            (248,692,252
            )
            $
            (1,377,305
            )


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


-8-
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**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****UNAUDITED
                CONSOLIDATED CONDENSED STATEMENTS OF CASH
                FLOWS*****For
                the Nine Months Ended September 30, 2005 and 2004 and for the
                Period******From
                Inception, August 13, 2002, to September 30,
                2005***




**September
                30,**
            
            **September
                30,**
            
            **Inception
                to****2005**
            
            **2004**
            
            **September
                30, 2005****(Restated)**
            
            
            
            **(Restated)**Cash
                flows from operating activities:Net
                loss
            
            $
            (163,426,061
            )
            $
            (363,247
            )
            $
            (273,399,796
            )Adjustments
                to reconcile net income to netcash
                used by operating activities:Depreciation
                expense
            
            
            521
            
            
            —
            
            
            521Gain
                on settlement
            
            
            —
            
            
            —
            
            
            (197,033
            )Impairment
                of goodwill
            
            
            —
            
            
            —
            
            
            541,101Cost
                of recapitalization
            
            
            —
            
            
            —
            
            
            273,987Compensatory
                common and preferred stock issuances
            
            
            162,783,558
            
            
            —
            
            
            271,419,790Interest
                imputed on note from a stockholder
            
            
            —
            
            
            —
            
            
            7,254Interest
                expense recognized throughaccretion
                of discount on long-term debt
            
            
            3,699
            
            
            —
            
            
            24,031Common
                stock issued for rescission agreement
            
            
            —
            
            
            —
            
            
            43,074Common
                stock issued to pay accountspayable
                and accrued liabilities
            
            
            —
            
            
            —
            
            
            50,000Changes
                in accounts payable and accrued liabilities
            
            
            6,216
            
            
            16,752
            
            
            61,922Net
                cash used by operating activities
            
            
            (632,067
            )
            
            (346,495
            )
            
            (1,175,149
            )Cash
                flows from investing activities:Purchase
                of equipment
            
            
            (6,250
            )
            
            —
            
            
            (6,250
            )Acquisition
                of patent rights
            
            
            —
            
            
            (38,500
            )
            
            (38,500
            )Net
                cash used by investing activities
            
            
            (6,250
            )
            
            (38,500
            )
            
            (44,750
            )Cash
                flows from financing activities:Proceeds
                from stockholder advances
            
            
            7,600
            
            
            —
            
            
            57,272Repayment
                of stockholder advances
            
            
            (5,000
            )
            
            —
            
            
            (5,000
            )Proceeds
                from convertible debentures
            
            
            50,000
            
            
            —
            
            
            50,000Proceeds
                from short term advance
            
            
            196,200
            
            
            —
            
            
            196,200Proceeds
                from note payable
            
            
            142,500
            
            
            —
            
            
            142,500Payments
                on notes payable
            
            
            —
            
            
            (60,000
            )
            
            (63,000
            )Proceeds
                from warrant exercise
            
            
            10,900
            
            
            —
            
            
            10,900Proceeds
                from sale of common stock
            
            
            235,730
            
            
            465,000
            
            
            834,475Net
                cash provided by financing activities
            
            
            637,930
            
            
            405,000
            
            
            1,223,347Net
                increase in cash and cash equivalents
            
            
            (387
            )
            
            20,005
            
            
            3,448Cash
                and cash equivalents at beginning of year
            
            
            3,835
            
            
            6,973
            
            
            —Cash
                and cash equivalents at end of year
            
            $
            3,448
            
            $
            26,978
            
            $
            3,448


The
        accompanying notes are an integral part of the consolidated financial
        statements  -9-
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              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 and nine-month periods
      ended September 30, 2005 and 2004 are not necessarily indicative of the results
      that may be expected for the respective full years.


-10-
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          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**





**Stock-Based
      Compensation**





The
      Company has elected to use the intrinsic value method under Accounting
      Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
      (APB
      25), as permitted by Statement of Financial Accounting Standard No. 123,
      "Accounting for Stock-Based Compensation" (SFAS 123), subsequently amended
      by
      SFAS 148, "Accounting for Stock- Based Compensation Transition and Disclosure"
      to account for stock options issued to its employees and amortizes deferred
      compensation, if any, ratably over the vesting period of the options.
      Compensation expense resulting from the issuance of fixed term stock option
      awards is measured as the difference between the exercise price of the option
      and the fair market value of the underlying share of common stock subject to
      the
      option on the award's grant date. The Company also makes pro forma fair value
      disclosures required by SFAS 123 which reflect the impact on net income (loss)
      and net income (loss) per share had the Company applied the fair value method
      of
      accounting for its stock-based awards to employees. The Company estimates the
      fair value of its stock- based awards to employees using a Black-Scholes
      option-pricing model. During the three months ended September 30, 2005, the
      Company issued 125,000,000 stock options to its Chief Executive officer (See
      Note 3) and the compensation expense associated with those options was
      essentially the same under APB No. 25 and SFAS 123 due to the extremely low
      exercise price associated with the options. Accordingly, no pro forma
      information is presented.





**Valuation
      of Derivatives**





Financial
      Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging
      Activities” (“SFAS 133”) established financial accounting and reporting
      standards for derivative instruments, including certain derivative instruments
      embedded in other contracts, and for hedging activities. The convertible
      debentures issued to Golden Gate Investors on May 5, 2005 are subject to
      derivative accounting under SFAS 133 and EITF No. 00-19, "Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company's Own Stock.". A model was developed that values the compound embedded
      derivatives within the convertible notes and associated freestanding warrants.
      The embedded derivatives are valued using a lattice model which incorporates
      a
      probability weighted discounted cash flow methodology. This model is based
      on
      future projections of the various potential outcomes. The model analyzed the
      underlying economic factors that influenced which likely events would occur,
      when they were likely to occur, and the specific terms that would be in effect
      at the time (i.e. interest rates, stock price, conversion price, etc.). The
      primary factors driving the economic value of the embedded derivatives are
      stock
      price, stock volatility, whether the company has obtained a timely registration,
      an event of default, and the likelihood of obtaining alternative financing.
      The
      warrants issued with the convertible debt are a freestanding derivative
      financial instrument. Using the Black-Scholes Method with a probability weighted
      exercise price, the fair value of the derivative was computed for the May issued
      warrants at inception and are recorded as a derivative liability.





The
      derivative liabilities result in a reduction of the initial carrying amount
      (as
      unamortized discount) of the Convertible Note. This derivative liability is
      marked-to-market each quarter with the change in fair value recorded in the
      income statement. Unamortized discount is amortized to interest expense using
      the effective interest method over the life of the Convertible Note. If the
      Note
      is converted or the warrants are exercised, the derivative liability is released
      and recorded as additional paid in capital.


-11-
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          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****NOTES
                TO UNAUDITED FINANCIAL
                STATEMENTS**




**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 $248,692,754 for the period from inception, August
      13,
      2002, to September 30, 2005. Additionally, at September 30, 2005, the Company
      is
      in a negative working capital position of $1,273,816 and has a stockholders'
      deficit of $1,377,305. 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 (See Note 3), 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.





**3.
      Agreement for Acquisition of Patent Rights**





On
      March
      31, 2003, the Company entered into a letter of intent to acquire 20% of SaVi
      Group, the name under which Serge Monros was conducting business in the
      ownership of numerous patents he had developed. The acquisition of 20% of SaVi
      Group was completed in the second quarter of 2004 upon the Company's payment
      of
      $38,500 in cash and the issuance of 4,000 shares of the Company's common stock
      to Serge Monros.





Subsequent
      to the acquisition, the Company changed its name from Redwood Entertainment
      Group, Inc. to SaVi Media Group, Inc. Serge Monros changed the name of the
      entity in which he holds the patents to His Devine Vehicle, Inc. Further
      discussions between the Company and Serge Monros led to a September 1, 2004
      agreement (the "Agreement") under which the Company acquire 100% of the rights
      to various patents (the "Patents") owned by Serge Monros. The Agreement was
      amended and modified on December 30, 2004 and again on April 6,
      2005.





The
      most
      important patented technology, for which the Company acquired rights, was
      technology to produce a relatively simple gasoline and diesel engine emission
      reduction device that the Company intends to sell to manufacturers of new
      vehicles and owners of presently operating automobiles.


-12-
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          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****NOTES
                TO UNAUDITED FINANCIAL
                STATEMENTS**




**3.
      Agreement for Acquisition of Patent Rights, continued**





Under
      the
      terms of the Agreement as amended, the Company acquired the Patents rights
      for
      the following consideration:





·
            5,000,000
                shares of Series A preferred stock to both Serge Monros, who owned
                the
                patents, and Mario Procopio, the Company's founder and Chief Executive
                Officer. The Series A preferred stock is convertible to and holds
                voting
                rights of 100 to 1 of those attributable to common stock. These shares
                are
                to remain in escrow for three years, and, accordingly, they will
                not be
                converted to common stock prior to the end of the escrow
                period.





·
            5,000,000
                shares of common stock to both Serge Monros and Mario
                Procopio.





·
            Three-year
                stock options to acquire 125,000,000 shares of the Company's common
                stock
                at $0.00025 per share to both Serge Monros and Mario Procopio. This
                provision of the agreement was reached in April 2005. The options
                to Serge
                Monros are considered part of the cost of the patent rights under
                the
                Agreement. The Options to Mario Procopio have been recognized as
                compensation expense of $31,250,000 in the quarter ended June 30,
                2005.





The
      Agreement represents a three year relationship that may be renegotiated or
      rescinded at the end of that term if the use of the Patents does not produce
      revenue equal to costs associated with the Agreement or modified annual cost,
      whichever is less. The Agreement does not define the terms "Costs associated
      with the Agreement " or "Modified Annual Costs". Regardless of performance,
      the
      Agreement is eligible for renewal and/or modification on September 1,
      2007.





In
      the
      event the Agreement is rescinded, the Patents and related technology will be
      returned to Serge Monros. Further, under the terms of the Agreement, the Company
      is required to build a $5,000,000 research and development lab and a
      manufacturing plant and Serge Monros will also own those assets, free and clear,
      in the event the Agreement is rescinded or the Company dissolved.





The
      Agreement contains two commitments by the Company as follows:





·
            Serge
                Monros and Mario Procopio each are to receive monthly compensation
                of
                $10,000 per month, depending on revenues and the raising of capital,
                but
                not less than $3,000 per month.





·
            Contingent
                consideration to Serge Monros of $75,000,000 in cash or in the form
                of
                stock options the exercise of which will provide net proceeds to
                Serge
                Monros of $75,000,000 over the next ten years. If options are issued,
                they
                will bear an exercise price of $0.00025 per share. This provision
                of the
                agreement is specifically tied to the performance of the Company
                and its
                ability to pay either in cash or stock
                options.





The
      Company recorded Patents at cost to Serge Monros because the Agreement resulted
      in the control of the Company by Serge Monros and Mario Procopio. Further,
      due
      to the fact that most costs incurred by Serge Monros in developing the patents
      represented research and development costs that were immediately expensed,
      the
      basis of the Patents has been limited to $38,500, the actual cash paid to Serge
      Monros under the initial agreement to acquire 20% of SaVi Group.





The
      Series A convertible preferred stock and the stock options issued under the
      Agreement could have a very significant future dilutive effect on
      stockholders.


-13-
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          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****NOTES
                TO UNAUDITED FINANCIAL
                STATEMENTS**




**4.
      Restatement of Convertible Debt and Short-Term
      Advances**





To
      obtain
      funding for its ongoing operations, the Company entered into a securities
      purchase agreement (the "Agreement") with an accredited investor (the
      "Investor") on May 5, 2005, for the sale of (i) $50,000 of convertible
      debentures and (ii) warrants to buy 5,000,000 shares of our common stock at
      $1.09 per share. The Investor is obligated to provide the Company with an
      aggregate of at least $200,000 as follows:





·
            On
                May 5, 2005, the Company received $50,000 from the investor for purchases
                of the convertible debentures and
                warrants.





·
            On
                June 27, 2005 the Investor advanced the Company $50,000 for services
                provided to the Company by various professionals in connection with
                the
                agreement. The Company disbursed these funds on the effective date
                of the
                registration statement required under the
                Agreement.





·
            On
                July 29, 2005 the Investor advanced the Company $50,000 in connection
                with
                the Investors' commitment to advance the funds within five business
                days
                after the Company responds to its first round of SEC comments on
                it's
                registration statement. On August 25, 2005 the Investor advanced
                the
                Company $50,000 upon effectiveness of the registration
                statement.





The
      advances made to the Company, other than the $50,000 initially received for
      purchase of the convertible debentures and warrants, will be applied to the
      exercise price of warrants at the future discretion of the Investor. At
      September 30, 2005, the first $50,000 advance is presented as short-term advance
      in the consolidated balance sheet.





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.





Accordingly,
      there is in fact no limit on the number of shares into which the debenture
      may
      be converted. 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.
      (See Note 5)


-14-
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          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****NOTES
                TO UNAUDITED FINANCIAL
                STATEMENTS**




**4.
      Restatement of Convertible Debt and Short-Term Advances,
      continued**





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.





These
      financials are being restated to properly account for this convertible note
      in
      accordance with SFAS 133 and EITF 00-19. At the time of issue, the derivative
      liabilities associated with the note and the freestanding warrants were valued
      as follows:


Contractual
                balance
            
            $
            50,000Less
                compound embedded derivatives
            
            
            (872,362
            )Less
                warrant liability
            
            
            (84,234
            )Plus
                interest expense
            
            
            906,596Net
                convertible debt
            
            $
            —


Because
      the value of the derivative liabilities exceeded the notional amount, the excess
      amount of $906,596 was expensed as non-cash interest expense upon issuance
      of
      the convertible note. The discount is amortized to interest expense using the
      effective interest method over the term of the note. For the period ending
      September 30, 2005, $4,702 of the discount was amortized to interest expense.





The
      derivative liabilities were valued as of September 30, 2005 at $1,012,604 for
      the Compound Embedded Derivative and $1,095 for the Warrant Liability. In
      addition, 111,602 warrants were exercised and $1,111 of the convertible note
      was
      converted by September 30, 2005. The derivative liability associated with these
      conversions and exercises was released and included in additional
      paid-in-capital. These changes result in a gain on the change in fair value
      of
      derivative instruments of $291,542 for the quarter ended September 30, 2005.




Following
      is an summary analysis of convertible debentures at September 30,
      2005:





Contractual
                balance
            
            $
            50,000Less
                conversions
            
            
            (1,111
            )Gross
                amount of convertible debt
            
            
            48,889Less
                un-amortized discount
            
            
            (45,298
            )Net
                convertible debt
            
            $
            3,591


**5.
      Long-Term Debt**




On
      April
      15, 2005, the Company entered into a $150,000 long-term debt agreement, bearing
      interest at 4% per year and due in April 2007. A total of 4,000,000 shares
      of
      the Company's common stock collateralized this long-term debt and the Company
      can fully discharge its obligation under the agreement by issuing the shares.
      The Company paid origination fees of $7,500 in connection with the long-term
      debt and those fees are being amortized to interest expense over the term of
      the
      debt using the effective yield method.




Following
      is an analysis of long-term debt at September30, 2005:


-15-
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          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****NOTES
                TO UNAUDITED FINANCIAL
                STATEMENTS**




**5.
      Long-Term Debt, continued**


Contractual
                balance
            
            $
            150,000Less
                un-amortized portion of beneficial conversion feature
            
            
            (5,873
            )Long-term
                debt
            
            $
            144,127


**6.
      Stockholders' Equity**





**Preferred
      Stock**





During
      the nine months ended September 30, 2005, the Company set preferences for its
      Series A, B and C preferred stock. The Company is authorized to issue 30,000,000
      shares of preferred stock, $0.01 par value per share. At September 30, 2005,
      the
      Company had 10,000,000 shares of series A preferred stock issued and outstanding
      and 6,060,000 shares of series C preferred stock issued and outstanding. The
      Company's preferred stock may be issued in series, and shall have such voting
      powers, full or limited, or no voting powers, and such designations, preferences
      and relative participating, optional or other special rights, and
      qualifications, limitations or restrictions thereof, as shall be stated and
      expressed in the resolution or
      resolutions providing for the issuance of such stock adopted from time to time
      by the board of directors.





The
      series A and series C preferred stock provides for conversion on the basis
      of
      100 shares of common stock for each share of preferred stock converted, with
      conversion at the option of the holder or mandatory conversion upon restructure
      of the common stock and holders of the series A preferred stock vote their
      shares on an as-converted basis. Holders of the series A preferred stock
      participate on distribution and liquidation on an equal basis with the holders
      of common stock.





The
      series B preferred stock provides for conversion on the basis of 10 shares
      of
      common stock for each share of preferred stock converted, with conversion at
      the
      option of the holder or mandatory conversion upon restructure of the common
      stock and holders of the series A preferred stock vote their shares on an
      as-converted basis. Holders of the series B preferred stock participate on
      distribution and liquidation on an equal basis with the holders of common
      stock.





**Warrants**





In
      connection with the Agreement, the Investor was issued 5,000,000 warrants to
      purchase shares of the Company's common stock. The warrants are exercisable
      until two years from the date of issuance at a purchase price of $1.09 per
      share. Warrants for 111,602 shares of common stock were issued in the quarter
      ended September 30, 2005





**Options**





During
      April 2005, the Company granted a total of 250,000,000 options to Mario Procopio
      and Serge Monros as additional consideration for the assignment of the patent
      and services provided to us. The options were granted on April 6, 2005, are
      exercisable starting July 6, 2005, and expire on April 6, 2008. The options
      are
      exercisable at the rate of $250 for every one million shares of common stock
      ($0.00025 per share).





**Common
      Stock**





Following
      is a description of transactions affecting stockholders equity in the nine
      months ended September 30, 2005:


-16-
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          to Table of Contents**


**SAVI
                MEDIA GROUP, INC.****A
                Corporation in the Development Stage****NOTES
                TO UNAUDITED FINANCIAL
                STATEMENTS**




**6.
      Stockholders' Equity, continued**




**Common
      Stock, continued**





·
            The
                Company issued 45,689,237 shares of common stock and 6,060,000 shares
                of
                Series C Preferred Stock to various individual that provided consulting
                and other services to the Company and recognized compensation expense
                of
                $105,827,475 related to those
                issuances.





·
            The
                Company issued 5,288,946 shares of common stock to under private
                placements of its common stock and received cash proceeds of
                $235,730.





·
            The
                Company cancelled 5,390,600 shares previously issued to
                consultants





·
            The
                Company issued 111,602 shares of common stock to the Investor upon
                exercise of stock warrants and received proceeds of $123,865. The
                proceeds
                were received as cash of $10,900 and offsets of short-term advances
                of
                $110,746. (See Note 4)





·
            The
                Company issued 12,333,900 shares of common stock to the Investor
                upon
                conversion of $1,111 of convertible debt. (See Note
                4)




-17-
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          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.  -18-
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            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.




**Stock-Based
      Compensation**




We
      follow
      the disclosure and reporting requirements of Financial Accounting Standard
      No.
      123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") for stock-based
      employee compensation plans. SFAS No. 123 defined a fair value based method of
      accounting for an employee stock option or similar equity instrument and
      encouraged all entities to adopt that method of accounting for all of their
      employee stock compensation plans and include the cost in the income statement
      as compensation expense. However, it also allowed entities to continue to
      measure compensation cost for those plans using the intrinsic value based method
      of accounting prescribed by Accounting Principles Board ("APB") Opinion No.
      25,
      "Accounting for Stock Issued to Employees". We account for compensation cost
      for
      stock option plans in accordance with APB Opinion No. 25.




**RESULTS
      OF OPERATIONS**




During
      the period from inception, August 13, 2002, to September 30, 2005, we have
      not
      generated any revenue from operations. As of September 30, 2005, we have
      accumulated net losses in the development stage of $248,692,754 for the period
      from inception, August 13, 2002, to September 30, 2005. Additionally, at
      September 30, 2005, we are in a negative working capital position of $1,273,816
      and a stockholders' deficit position $1,377,305. 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 2005, 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 September 30, 2005, 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 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
      September 30, 2005, total current assets were $3,448 consisting of cash and
      cash
      equivalents.





Total
      current liabilities were $1,277,264 as of June 30, 2005, consisting of short
      term advances of $88,054, derivative liability of $1,013,699, accounts payable
      and accrued liabilities of $16,216 and accounts payable assumed in
      recapitalization of $159,295.





We
      had a
      negative working capital of $1,273,816 as of September 30, 2005.





We
      incurred net losses of $248,692,754 during the period from inception, August
      13,
      2002, to September 30, 2005. In addition, at September 30, 2005, we were in
      a
      negative working capital deficit of $1,273,816 and had a stockholders' deficit
      of $1,377,305. As a result, our independent registered public accounting firm,
      in its report dated April 11, 2005, 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




-19-
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          to Table of Contents**




·
            generate
                revenues.





To
      obtain
      funding for our ongoing operations, we entered into a Securities Purchase
      Agreement with an accredited investor on May 5, 2005, and amended on May 5,
      2005, for the sale of (i) $50,000 in convertible debentures and (ii) warrants
      to
      buy 5,000,000 shares of our common stock.





The
      investor provided us with an aggregate of $200,000 as follows:





·
            $50,000
                was disbursed to us on May 5, 2005





·
            $50,000
                was advanced to us and retained for services provided to our company
                by
                various professionals, which was disbursed upon effectiveness of
                our
                registration statement





·
            $100,000
                was advanced to us upon effectiveness of our registration
                statement.





The
      debentures bear interest at 5 1/4%, mature two years from the date of issuance,
      and are convertible into our common stock, at the selling stockholder's option.
      The convertible debentures are convertible into the number of our 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, we have the right
      to
      pre-pay the amount of the debenture the holder elects to convert, plus accrued
      and unpaid interest, at 150% of such amount; however, if we elect to pre-pay
      in
      this situation, the debenture 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 holder is not obligated to convert any portion of
      the
      debenture during that month. Accordingly, there is in fact no limit on the
      number of shares into which the debenture may be converted. 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.




Golden
      Gate Investors has contractually committed to convert not less than 5% of the
      original face value of the debenture monthly beginning the month after the
      effective date of the Registration Statement. Golden Gate Investors is required
      to exercise warrants concurrently with the exercise of a conversion notice
      under
      the debenture and is committed to exercise at least 5% of the warrants per
      month
      after the effective date of the Registration Statement. In the event that Golden
      Gate Investors breaches the minimum restriction on the debenture and warrant,
      Golden Gate will not be entitled to collect interest on the debenture for that
      month. If Golden Gate submits a conversion notice and the volume weighted
      average price is less then $.20 per share, then we will be entitled to prepay
      the portion of the debenture that is being converted at 150% of such amount.
      If
      we elect to prepay, then Golden Gate may withdraw its conversion
      notice.




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 holder 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 will result in Golden Gate purchasing our common stock
      for up to $5,500,000 ($5,450,000 paid in cash and $50,000 of the convertible
      debentures principal converted) during the period between the effective date
      of
      the registration statement and May 5, 2007.




There
      are
      two conditions that may reduce the aggregate purchase price paid by Golden
      Gate
      below $5,500,000:




1.
      The
      conversion and exercise provisions of the securities provide that at no time
      may
      Golden Gate acquire ownership of more that 9.99% of our outstanding common
      stock; or




2.
      If at
      the time of a conversion/exercise, the conversion price would be less than
      $.20,
      then (a) Golden Gate is not obligated to convert any portion of the convertible
      debenture or exercise any portion of the warrant for that month or (b) we may
      opt to redeem the amount of principal that the holder presents for conversion
      at
      150% of face value, either of which events would reduce the aggregate purchases
      under the convertible debentures and warrants.




Golden
      Gate has further contractually agreed to restrict its ability to convert the
      debenture or exercise their warrants and receive shares of our common stock
      such
      that the number of shares held by the Holder and its affiliates after such
      conversion or exercise does not exceed 9.99% of the then issued and outstanding
      shares of our common stock.  -20-
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We
      believe that we can operate at our current level of liquidity for the next
      twelve months. In addition to the money raised pursuant to the Securities
      Purchase Agreement, we believe it is imperative that we raise an additional
      $5,500,000 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.  -21-
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            to Table of Contents**


**ITEM
      3 CONTROLS AND PROCEDURES**





a)
      Evaluation of Disclosure Controls and Procedures.





As
      of
      September 30, 2005, our management carried out an evaluation, under the
      supervision of our Chief Executive Officer and Chief Financial Officer of the
      effectiveness of the design and operation of our system of disclosure controls
      and procedures pursuant to the Securities and Exchange Act, Rule 13a-15(e)
      and
      15d-15(e) under the Exchange Act). Based on that evaluation, our chief executive
      officer and chief financial officer concluded that our disclosure controls
      and
      procedures are effective to provide reasonable assurance that information we
      are
      required to disclose in reports that we file or submit under the Exchange Act
      is
      recorded, processed, summarized and reported within the time periods specified
      in Securities and Exchange Commission rules and forms, and that such information
      is accumulated and communicated to our management, including our chief executive
      officer and chief financial officer, as appropriate, to allow timely decisions
      regarding required disclosure.




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.  -22-
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**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**




None.




**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)


-23-
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**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)*




-24-