U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



(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, 2008
|- |  | -----------------------------------------------------------------------------------------------------------------------------------



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



For the transition period from ____________ to ______________



For the Period Ended September 30, 2008



Commission file number 000-27727



SaviCorp

(Name of Small Business Issuer in Its Charter)



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



2530 S. Birch Street

Santa Ana, CA 92707



(Address of Principal Executive Offices)



(877) 611-7284



Issuer's Telephone Number



Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes x   
No o



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



Yes o
   No x



As of October 21, 2013, the Company had 5,970,827,673
shares of its par value $0.001 common stock issued and outstanding.



Transitional Small Business Disclosure Format (check one):



Yes o   
No x
















SAVICORP

(A Corporation in the Development Stage)

Quarterly Report on Form 10-QSB for the

Quarterly Period Ending September 30,
2008





Table of Contents





|PART I. FINANCIAL INFORMATION                                                                                                                                                       |   
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --
|                                                                                                                                                                                    |   
|Item 1. Unaudited Condensed Financial Statements                                                                                                                                    | 2 
|                                                                                                                                                                                    |   
|Balance Sheets:
        September 30, 2008 and December 31,
        2007                                                                                                            | 2 
|                                                                                                                                                                                    |   
|Statements of Operations:
        For the three and nine months ended September 30, 2008
        and 2007 and for the period from inception, August 13, 2002, to September 30, 2008 | 3 
|                                                                                                                                                                                    |   
|Statement of Stockholders’
        Deficit:
        For the period from inception,
        August 13, 2002, to September 30, 2008                                                   | 4 
|                                                                                                                                                                                    |   
|Statements of Cash Flows:
        For the nine months ended September 30, 2008 and 2007
        and for the period from inception, August 13, 2002, to September 30, 2008           | 7 
|                                                                                                                                                                                    |   
|Notes to Unaudited Financial Statements                                                                                                                                             | 8 
|                                                                                                                                                                                    |   
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                       | 24
|                                                                                                                                                                                    |   
|Item 3. Controls and Procedures                                                                                                                                                     | 29
|                                                                                                                                                                                    |   
|PART II. OTHER INFORMATION                                                                                                                                                          |   
|                                                                                                                                                                                    |   
|Item 1. Legal Proceedings                                                                                                                                                           | 29
|                                                                                                                                                                                    |   
|Item 2. Changes in Securities                                                                                                                                                       | 30
|                                                                                                                                                                                    |   
|Item 3. Defaults Upon Senior Securities                                                                                                                                             | 31
|                                                                                                                                                                                    |   
|Item 4. Submission of Matters to a Vote of Security Holders                                                                                                                         | 32
|                                                                                                                                                                                    |   
|Item 5. Other Information                                                                                                                                                           | 32
|                                                                                                                                                                                    |   
|Item 6. Exhibits                                                                                                                                                                    | 32
|                                                                                                                                                                                    |   
|SIGNATURES                                                                                                                                                                          | 33











1







PART I. FINANCIAL
INFORMATION



Item
1. Unaudited Condensed Financial Statements





SaviCorp

A Corporation in the Development Stage

BALANCE SHEETS

September 30, 2008 and December 31, 2007



|                                                                                                                                                                                               |  | September 30, |              |   | December 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------------ | - | ------------ | -
|                                                                                                                                                                                               |  | 2008          |              |   | 2007         |  
|ASSETS                                                                                                                                                                                         |  |               | (unaudited)  |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Current assets:                                                                                                                                                                                |  |               |              |   |              |  
|Cash and cash equivalents                                                                                                                                                                      |  | $             | –            |   |              | $
|                                                                                                                                                                                               |  |               |              |   |              |  
|Total current assets                                                                                                                                                                           |  |               | –            |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Deferred financing costs                                                                                                                                                                       |  |               | –            |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Total assets                                                                                                                                                                                   |  | $             | –            |   |              | $
|                                                                                                                                                                                               |  |               |              |   |              |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                          |  |               |              |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Current liabilities:                                                                                                                                                                           |  |               |              |   |              |  
|Convertible debt, net of unamortized discount of $0 and $920,033, as of 9/30/08 and 12/31/07 respectively, in default as of 9/30/08                                                            |  |               | 2,470,000    |   |              |  
|Accounts payable and accrued liabilities                                                                                                                                                       |  |               | 3,552,349    |   |              |  
|Related party accounts payable                                                                                                                                                                 |  |               | 372,786      |   |              |  
|Accounts payable assumed in recapitalization                                                                                                                                                   |  |               | 159,295      |   |              |  
|Derivative liabilities - embedded derivatives                                                                                                                                                  |  |               | 600,931      |   |              |  
|Derivative liabilities - warrants                                                                                                                                                              |  |               | 1,120,151    |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Total current liabilities                                                                                                                                                                      |  |               | 8,275,512    |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Commitments and contingencies                                                                                                                                                                  |  |               | –            |   |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Stockholders' deficit:                                                                                                                                                                         |  |               |              |   |              |  
|Series A convertible preferred stock; $0.001 par value,10,000,000 shares authorized, 5,347,500 and 10,000,000 issued and outstanding at September 30, 2008 and December 31, 2007, respectively |  |               | 5,348        |   |              |  
|Series 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, 3,415,000 and 4,915,000 issued and outstanding at September 30, 2008 and December 31, 2007, respectively  |  |               | 3,415        |   |              |  
|Common stock: $0.001 par value, 6,000,000,000 shares authorized, 1,403,604,264 and 1,045,456,564 shares issued and at September 30, 2008 and December 31, 2007, respectively                   |  |               | 1,403,605    |   |              |  
|Change in accounting principle                                                                                                                                                                 |  |               | 658,128      |   |              |  
|Additional paid-in capital                                                                                                                                                                     |  |               | 250,535,468  |   |              |  
|Losses accumulated during the development stage                                                                                                                                                |  |               | (260,881,476 | ) |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Total stockholders' deficit                                                                                                                                                                    |  |               | (8,275,512   | ) |              |  
|                                                                                                                                                                                               |  |               |              |   |              |  
|Total liabilities and stockholders' deficit                                                                                                                                                    |  | $             | –            |   |              | $





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





2









SaviCorp

A Corporation in the Development Stage

STATEMENTS OF OPERATIONS

For the 3 and 9 months ended September
30, 2008 and 2007 and for the Period

From Inception, August 13, 2002, to September
30, 2008

(unaudited)



|                                                    |  | For the three months ended: |               |   | For the nine months ended: |   |               |               | 
|--------------------------------------------------- |  | --------------------------- | ------------- | - | -------------------------- | - | ------------- | ------------- | 
|                                                    |  | September 30,               |               |   | September 30,              |   |               | September 30, | 
|                                                    |  | 2008                        |               |   | 2007                       |   |               | 2008          | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Operating costs and expenses:                       |  |                             |               |   |                            |   |               |               | 
|General and administrative expenses                 |  | $                           | 313,533       |   |                            | $ | 263,841       |               | 
|Research and development                            |  |                             | –             |   |                            | $ | 2,809         |               | 
|Loss from operations                                |  |                             | (313,533      | ) |                            |   | (266,650      | )             | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Other income and (expenses)                         |  |                             |               |   |                            |   |               |               | 
|Interest income                                     |  |                             | –             |   |                            |   | –             |               | 
|Gain on settlement                                  |  |                             | –             |   |                            |   | –             |               | 
|Cost of rescission                                  |  |                             | –             |   |                            |   | –             |               | 
|Cost of recapitalization                            |  |                             | –             |   |                            |   | –             |               | 
|Goodwill impairment                                 |  |                             | –             |   |                            |   | –             |               | 
|Impairment of property and equipment                |  |                             | –             |   |                            |   | –             |               | 
|Impairment of patent rights                         |  |                             | –             |   |                            |   | –             |               | 
|Change in fair value of financial instruments       |  |                             | 468,889       |   |                            |   | 2,758,583     |               | 
|Loss on debt extinguishment                         |  |                             | –             |   |                            |   | –             |               | 
|Interest expense                                    |  |                             | (611,366      | ) |                            |   | (306,808      | )             | 
|Registration rights expense                         |  |                             | (463,824      | ) |                            |   | (31,985       | )             | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Total other income and (expenses), net              |  |                             | (606,301      | ) |                            |   | 2,419,790     |               | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Net profit (loss) before cumulative effect of       |  |                             |               |   |                            |   |               |               | 
|change in accounting principle                      |  |                             | (919,834      | ) |                            |   | 2,153,140     |               | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Cumulative effect of change in accounting principle |  |                             | –             |   |                            |   | –             |               | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Net profit (loss)                                   |  | $                           | (919,834      | ) |                            | $ | 2,153,140     |               | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Weighted average shares outstanding                 |  |                             | 1,403,504,264 |   |                            |   | 1,015,565,260 |               | 
|Fully diluted weighted average shares outstanding   |  |                             | 1,403,504,264 |   |                            |   | 2,607,092,760 |               | 
|                                                    |  |                             |               |   |                            |   |               |               | 
|Net profit/(loss) per common share - basic          |  | $                           | (0.00         | ) |                            | $ | 0.00          |               | 
|Net profit/(loss) per common share - diluted        |  | $                           | (0.00         | ) |                            | $ | 0.00          |               | 









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









3







SaviCorp

A Corporation in the Development Stage

STATEMENT OF STOCKHOLDERS' DEFICIT

For the Period From Inception, August
13, 2002, to September 30, 2008

(unaudited)





|                                                                                      |  | Preferred Stock A |   |  | Preferred Stock B |   |   | Preferred Stock C |  |  | Common
    Stock |  |  |        |   |  | Change in
    Accounting |  |   | AdditionalPaid-In |  |   | Deferred |  |  | Losses Accumulated During
the Development |        |  |         |  
|------------------------------------------------------------------------------------- |  | ----------------- | - |  | ----------------- | - | - | ----------------- |  |  | ---------------- |  |  | ------ | - |  | ------------------------ |  | - | ----------------- |  | - | -------- |  |  | ----------------------------------------- | ------ |  | ------- | -
|                                                                                      |  | Shares            |   |  | Amount            |   |   | Shares            |  |  | Amount           |  |  | Shares |   |  | Amount                   |  |   | Shares            |  |   | Amount   |  |  | Principle                                 |        |  | Capital |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Balance at inception, August
    13, 2002                                             |  |                   | – |  |                   | $ | – |                   |  |  | –                |  |  | $      | – |  |                          |  | – |                   |  | $ | –        |  |  |                                           | –      |  |         | $
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Initial contribution
    to establish Energy Resource Management, Inc.                |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | –      |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Recapitalization on August 26, 2002                                                   |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 5,335  |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Common stock issued in exchange
    for consulting services                           |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 1,086  |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Net
    Loss                                                                          |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | –      |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Balance at December 31,
    2002                                                      |  |                   | – |  |                   | $ | – |                   |  |  | –                |  |  | $      | – |  |                          |  | – |                   |  | $ | –        |  |  |                                           | 6,421  |  |         | $
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Recognition of deferred
    compensation under consulting agreements                  |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | –      |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Common stock issued for
    cash under  Regulation D offering                         |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 4,180  |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Common stock issued in exchange
    for consulting services and employee compensation |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 1,200  |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Common stock issued in exchange
    for extension of acquisition agreement            |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 110    |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Common stock issued as a
    contribution to a related charitable organization        |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 2,280  |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Common stock issued to escrow
    for acquisition of DreamCity                        |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | 8,000  |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Interest recognition on
    loan from stockholder                                     |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | –      |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Net
    loss                                                                          |  |                   | – |  |                   |   | – |                   |  |  | –                |  |  |        | – |  |                          |  | – |                   |  |   | –        |  |  |                                           | –      |  |         |  
|                                                                                      |  |                   |   |  |                   |   |   |                   |  |  |                  |  |  |        |   |  |                          |  |   |                   |  |   |          |  |  |                                           |        |  |         |  
|Balance at December 31,
    2003                                                      |  |                   | – |  |                   | $ | – |                   |  |  | –                |  |  | $      | – |  |                          |  | – |                   |  | $ | –        |  |  |                                           | 22,191 |  |         | $



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





4









SaviCorp

A Corporation in the Development Stage

STATEMENT OF STOCKHOLDERS' DEFICIT

For the Period From Inception, August
13, 2002, to September 30, 2008

(unaudited)







|                                                                                                    |  | Preferred Stock A |            |  | Preferred Stock B |   |        | Preferred Stock C |  |  | Common
    Stock |  |  |        |   |  | Change in
    Accounting |  |            | AdditionalPaid-In |  |   | Deferred |   |  | Losses Accumulated During
the Development |             |   |         |  
|--------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- |  | ----------------- | - | ------ | ----------------- |  |  | ---------------- |  |  | ------ | - |  | ------------------------ |  | ---------- | ----------------- |  | - | -------- | - |  | ----------------------------------------- | ----------- | - | ------- | -
|                                                                                                    |  | Shares            |            |  | Amount            |   |        | Shares            |  |  | Amount           |  |  | Shares |   |  | Amount                   |  |            | Shares            |  |   | Amount   |   |  | Principle                                 |             |   | Capital |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common Stock issued for
    acquisition of patent rights                                            |  |                   | 5,000,000  |  |                   |   | 5,000  |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 5,100,000   |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued for
    cash under Regulation D offering                                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 39,600,000  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued in payment
    of legal fees                                                    |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 252,000     |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Special dividend to certain
    major stockholders in Gene-Cell, Inc.                               |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 5,000,000   |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued in exchange
    for consulting services and employee compensation               |  |                   | 5,000,000  |  |                   |   | 5,000  |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 31,926,240  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued to repay
    debt                                                               |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 5,002,000   |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued to round
    stock splits                                                       |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 45,336      |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Net
    loss                                                                                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | –           |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Balance at December 31,
    2004                                                                    |  |                   | 10,000,000 |  |                   | $ | 10,000 |                   |  |  | –                |  |  | $      | – |  |                          |  | –          |                   |  | $ | –        |   |  |                                           | 86,947,767  |   |         | $
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued for
    cash under Regulation D offering                                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 22,150,950  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common and preferred stock
    issued in exchange for consulting services and employee compensation |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | 6,060,000  |                   |  |   | 6,060    |   |  |                                           | 42,828,835  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued upon
    exercise of stock warrants                                             |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 244,763     |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued for
    conversion of notes payable                                             |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 42,215,361  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Return and cancellation of shares                                                                   |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | (6,466,700  | ) |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued to escrow
    for debt conversions and warrant exercises                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 21,190,000  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Issuance of compensatory
    stock options to Chief Executive Officer                               |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | –           |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Net
    Loss                                                                                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | –           |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Balance at December 31,
    2005                                                                    |  |                   | 10,000,000 |  |                   | $ | 10,000 |                   |  |  | –                |  |  | $      | – |  |                          |  | 6,060,000  |                   |  | $ | 6,060    |   |  |                                           | 209,109,976 |   |         | $
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued for
    cash under Regulation D offering                                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | 395,275    |                   |  |   | 395      |   |  |                                           | 600,000     |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common and preferred stock
    issued in exchange for consulting services and employee compensation |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | 1,000,000  |                   |  |   | 1,000    |   |  |                                           | 7,125,000   |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued upon
    exercise of stock options/warrants                                     |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 389,540     |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued for
    conversion of notes payable                                             |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 162,049,548 |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Return and cancellation of shares                                                                   |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | (1,000,000 | )                 |  |   | (1,000   | ) |  |                                           | –           |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Common stock issued/(returned)
    to/(from) escrow for debt conversions and warrant exercises      |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | (21,167,500 | ) |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Shares Issued for Debt Extinguishment                                                               |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 60,000,000  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Shares issued for Debt Commitment                                                                   |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | 30,000,000  |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Conversion of Preferred
    C for Common                                                            |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | (1,540,000 | )                 |  |   | (1,540   | ) |  |                                           | 154,000,000 |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Net
    Loss                                                                                        |  |                   | –          |  |                   |   | –      |                   |  |  | –                |  |  |        | – |  |                          |  | –          |                   |  |   | –        |   |  |                                           | –           |   |         |  
|                                                                                                    |  |                   |            |  |                   |   |        |                   |  |  |                  |  |  |        |   |  |                          |  |            |                   |  |   |          |   |  |                                           |             |   |         |  
|Balance at December 31,
    2006                                                                    |  |                   | 10,000,000 |  |                   | $ | 10,000 |                   |  |  | –                |  |  | $      | – |  |                          |  | 4,915,275  |                   |  | $ | 4,915    |   |  |                                           | 602,106,564 |   |         | $



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





5









SaviCorp

A
Corporation in the Development Stage

STATEMENT
OF STOCKHOLDERS' DEFICIT

For
the Period From Inception, August 13, 2002, to September 30, 2008

(unaudited)



|                                                                                                    |  | Preferred Stock A |            |   | Preferred Stock B |   |           | Preferred Stock C |  |  | Common Stock |  |  |        |   |  |        | Change in Accounting |            |        | Additional Paid-In |   |        | Deferred |  |           | Losses Accumulated During the Development |   |         |   |          
|--------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | - | --------- | ----------------- |  |  | ------------ |  |  | ------ | - |  | ------ | -------------------- | ---------- | ------ | ------------------ | - | ------ | -------- |  | --------- | ----------------------------------------- | - | ------- | - | ---------
|                                                                                                    |  | Shares            |            |   | Amount            |   |           | Shares            |  |  | Amount       |  |  | Shares |   |  | Amount |                      |            | Shares |                    |   | Amount |          |  | Principle |                                           |   | Capital |   |          
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Change
    in Accounting Principle                                                                  |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Common
    and preferred stock issued in exchange for consulting services and employee compensation |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | 393,350,000                               |   |         |   | 393,350  
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Common
    stock issued upon exercise of stock options/warrants                                     |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | 50,000,000                                |   |         |   | 50,000   
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Imputed
    interest on related party debt                                                          |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Net
    Profit                                                                                      |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Balance
    at December 31, 2007                                                                    |  |                   | 10,000,000 |   |                   | $ | 10,000    |                   |  |  | –            |  |  | $      | – |  |        |                      | 4,915,275  |        |                    | $ | 4,915  |          |  |           | 1,045,456,564                             |   |         | $ | 1,045,457
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Common
    and preferred stock forfeited in settlement agreement                                    |  |                   | (1,000,000 | ) |                   |   | (1,000.00 | )                 |  |  | –            |  |  |        | – |  |        |                      | (1,500,000 | )      |                    |   | (1,500 | )        |  |           | (7,102,300                                | ) |         |   | (7,102   
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Conversion
    of Preferred A for Common                                                            |  |                   | (3,652,500 | ) |                   |   | (3,652    | )                 |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | 365,250,000                               |   |         |   | 365,250  
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Imputed
    interest on related party debt                                                          |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Wages
    Payable forfeited from related party                                                      |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Expenses
    incurred by related party for no consideration                                         |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Net
    Loss                                                                                        |  |                   | –          |   |                   |   | –         |                   |  |  | –            |  |  |        | – |  |        |                      | –          |        |                    |   | –      |          |  |           | –                                         |   |         |   | –        
|                                                                                                    |  |                   |            |   |                   |   |           |                   |  |  |              |  |  |        |   |  |        |                      |            |        |                    |   |        |          |  |           |                                           |   |         |   |          
|Balance
    atSeptember 30, 2008                                                                    |  |                   | 5,347,500  |   |                   | $ | 5,348     |                   |  |  | -            |  |  | $      | - |  |        |                      | 3,415,275  |        |                    | $ | 3,415, |          |  |           | 1,403,604,264                             |   |         | $ | 1,403,605















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







6









SaviCorp

A Corporation in the Development Stage

STATEMENTS OF CASH FLOWS

For the 9 Months Ended September 30,
2008 and 2007 and for the Period

From Inception, August 13, 2002, to September
30, 2008

(unaudited)



|                                                                                                       |  | For the nine months ended: |            |   | Inception (August 13, 2002) to |  
|------------------------------------------------------------------------------------------------------ |  | -------------------------- | ---------- | - | ------------------------------ | -
|                                                                                                       |  | September 30,              |            |   | September 30,                  |  
|                                                                                                       |  | 2008                       |            |   | 2007                           |  
|Cash flows from operating activities:                                                                  |  |                            |            |   |                                |  
|Net profit/(loss)                                                                                      |  | $                          | (1,650,298 | ) |                                | $
|Adjustments to reconcile net profit (loss) to net cash
    provided by (used in) operating activities: |  |                            |            |   |                                |  
|Gain on settlement                                                                                     |  |                            | –          |   |                                |  
|Impairment of property and equipment                                                                   |  |                            | –          |   |                                |  
|Impairment of goodwill                                                                                 |  |                            | –          |   |                                |  
|Cost of recapitalization                                                                               |  |                            | –          |   |                                |  
|Amortization of deferred compensation                                                                  |  |                            | –          |   |                                |  
|Compensatory common and preferred stock issuances                                                      |  |                            | –          |   |                                |  
|Compensatory option issuances                                                                          |  |                            | –          |   |                                |  
|Interest imputed on non-interest bearing note from a stockholder                                       |  |                            | 23,423     |   |                                |  
|Interest expense recognized on issuance and through accretion of discount on long-term debt            |  |                            | 950,151    |   |                                |  
|Change in fair value of derivatives                                                                    |  |                            | (609,185   | ) |                                |  
|Loss on extinguishment of debt                                                                         |  |                            | –          |   |                                |  
|Impairment of patent rights                                                                            |  |                            | –          |   |                                |  
|Common stock issued for rescission agreement                                                           |  |                            | –          |   |                                |  
|Common stock issued to pay of accounts payable                                                         |  |                            | –          |   |                                |  
|Contributed capital                                                                                    |  |                            | 113,948    |   |                                |  
|Depreciation expense                                                                                   |  |                            | –          |   |                                |  
|Changes in operating assets and liabilities                                                            |  |                            |            |   |                                |  
|Accrued registration rights expense                                                                    |  |                            | 613,322    |   |                                |  
|Changes in prepaid assets                                                                              |  |                            | –          |   |                                |  
|Changes in related party accounts payable                                                              |  |                            | 40,000     |   |                                |  
|Changes in accounts payable and accrued liabilities                                                    |  |                            | 518,640    |   |                                |  
|Net cash provided by (used in) operating activities                                                    |  |                            | –          |   |                                |  
|                                                                                                       |  |                            |            |   |                                |  
|Cash flows from investing activities:                                                                  |  |                            |            |   |                                |  
|Acquisition of equipment                                                                               |  |                            | –          |   |                                |  
|Acquisition of patents                                                                                 |  |                            | –          |   |                                |  
|Net cash used in investing activities                                                                  |  |                            | –          |   |                                |  
|                                                                                                       |  |                            |            |   |                                |  
|Cash flows from financing activities:                                                                  |  |                            |            |   |                                |  
|Bank overdraft/payoff overdraft                                                                        |  |                            | –          |   |                                |  
|Proceeds from stockholder advances                                                                     |  |                            | –          |   |                                |  
|Net proceeds from convertible debt                                                                     |  |                            | –          |   |                                |  
|Proceeds from note payable                                                                             |  |                            | –          |   |                                |  
|Proceeds from warrant exercise and deposit for warrant exercise                                        |  |                            | –          |   |                                |  
|Payments on notes payable                                                                              |  |                            | –          |   |                                |  
|Proceeds from sale of common stock                                                                     |  |                            | –          |   |                                |  
|Net cash provided by (used in) financing activities                                                    |  |                            | –          |   |                                |  
|                                                                                                       |  |                            |            |   |                                |  
|Net increase (decrease) in cash and equivalents                                                        |  |                            | –          |   |                                |  
|                                                                                                       |  |                            |            |   |                                |  
|Cash and cash equivalents at beginning of year                                                         |  |                            | –          |   |                                |  
|                                                                                                       |  |                            |            |   |                                |  
|Cash and cash equivalents at end of period                                                             |  |                            | –          |   |                                |  













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









7











SAVICORP

A Corporation in the Development Stage

NOTES TO FINANCIAL STATEMENTS

For the Three and Nine Month Periods Ended September 30,
2008 and September 30, 2007 and for the Period

From Inception, August 13, 2002 to September 30, 2008

(unaudited)





|1. | Organization and Significant Accounting Policies
|-- | ------------------------------------------------



SaviCorp (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., SaVi Media Group, Inc., and finally its current
name SaviCorp.



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 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.



Cash and Cash Equivalents



The Company considers all highly
liquid short-term investments with an original maturity of three months or less when purchased, to be cash equivalents. The Company
had no cash equivalents as of September 30, 2008 and as of December 31, 2007.



Concentration of Credit
Risk



Cash and cash equivalents are the
primary financial instruments that subject the Company to concentrations of credit risk. The Company maintains its cash deposits
with major financial institutions selected based upon management’s assessment of the financial stability. Balances periodically
exceed the $100,000 federal depository insurance limit; however, the Company has not experienced any losses on deposits.



Furniture and Equipment



Furniture and equipment is recorded
at cost. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective
accounts, and any resulting gains or losses are included in the results of operations. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets. Repairs and maintenance costs are expensed as incurred.



Impairment Of Long-Lived Assets



The Company evaluates the recoverability
of long-lived assets when events and circumstances indicate that such assets might be impaired and determines impairment by comparing
the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Impairments
are charged to operations in the period to which events and circumstances indicate that such assets might be impaired.





8







Intangible Assets



Intangible assets are amortized
using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically
and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.



Income Taxes



The Company uses 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. The Company
provides a valuation allowance to reduce deferred tax assets to their net realizable value.



Stock-Based Compensation



Effective January 1, 2006, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R), and
began expensing at fair value on a straight-line basis the costs resulting from share-based payment transactions.



Prior to 2006, the Company elected
to follow Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees(APB 25) and related
interpretations in accounting for stock options granted to employees as permitted by SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS 123), as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure.
Under APB 25, the Company did not recognize share-based payment expense in its financial statements because the stock option awards
qualified as fixed awards and the exercise price of the Company’s employee stock options equaled the market price of the
underlying stock on the date of grant.



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 and to Cornell Partners
in 2006 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 a lattice model with a probability
weighted exercise price, the fair value of the derivative was computed at inception and at each reporting period 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.



Profit/Loss Per Share



Basic and diluted net profit or
loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during each period.



Fair Value of Financial Instruments



The Company includes fair value
information in the notes to financial statements when the fair value of its financial instruments is different from the book value.
When the book value approximates fair value, no additional disclosure is made.



New Accounting Pronouncements



On January 1, 2007, we adopted the
provisions of FSP EITF 00-19-2 to account for the registration payment arrangement associated with our July 2006 financing (the
“July 2006 Registration Payment Arrangement”). As of January 1, 2007 and December 31, 2007, management determined that
it was probable that we would have payment obligation under the July 2006 Registration Payment Arrangement; therefore, the Company
accrued a contingent obligation of $340,860 as required under the provisions of FSP EITF 00-19-2. In addition, the compound embedded
derivative liability associated with the July 2006 Financing was adjusted to eliminate the registration payment arrangement and
the comparative financial statements of prior periods and as of December 31, 2006 have been adjusted to apply the new method retrospectively.
The cumulative effect of this change in accounting principle adjusted retained earnings as of December 31, 2006 by $658,129. The
following financial statement line items for the twelve months ended December 31, 2006 were affected by the change in accounting
principle. In addition, under EITF 00-19, the Company would not book the contingent registration rights payment payable.





9







|                         |  | As of              |          
|------------------------ |  | ------------------ | ---------
|                         |  | December 31,  2006 |          
|Under EITF 00-19         |  |                    |          
|Income Statement Impacts |  |                    |          
|Change in value of CED   |  |                    | 2,871,934
|Amortization of Discount |  |                    | 117,504  
|Balance Sheet Impacts    |  |                    |          
|Discount on Note         |  |                    | 1,764,136
|Derivative Liability     |  |                    | 3,459,979
|                         |  |                    |          
|Under EITF 00-19-02      |  |                    |          
|Income Statement Impacts |  |                    |          
|Change in value of CED   |  |                    | 2,302,219
|Amortization of Discount |  |                    | 112,211  
|Balance Sheet Impacts    |  |                    |          
|Discount on Note         |  |                    | 1,730,720
|Derivative Liability     |  |                    | 2,768,435



In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statements
No. 115 (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement,
which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS 159 also
establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities.



SFAS 159 does not affect any existing
accounting literature that requires certain assets and liabilities to be carried at fair value. In addition, SFAS 159 does not
establish requirements for recognizing and measuring dividend income, interest income or interest expense, nor does it eliminate
disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements
included in SFAS No. 157, Fair Value Measurements (SFAS 157), and SFAS No. 107, Disclosures about Fair Value of Financial
Instruments. SFAS 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15,
2007. The Company currently is evaluating the impact of adopting SFAS 159.



|2. | Going Concern Considerations
|-- | ----------------------------



The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. In 2008, the Company had limited operations and
resources. The Company has accumulated net losses in the development stage of $260,881,476 for the period from inception, August
13, 2002, to September 30, 2008. At September 30, 2008, the Company is in a negative working capital position of $8,275,512 and
has a stockholders' deficit of $8,275,512. Additionally, as of September 30, 2008 the Company faced substantial challenges to future
success as follows:



| | · | The Company is delinquent on critical liabilities such as payments to key consultants.
| | - | --------------------------------------------------------------------------------------



| | · | The Company was in default of its registration rights agreement with the investor in its long-term debt. Such default and the Company’s inability to fund its ongoing operations increase the likelihood that the investor could seize its assets to partially satisfy the debt or find another operator of those assets.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





10







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 hopes 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 Divine Vehicle, Inc. (“HDVI”). Further discussions between the Company
and Serge Monros led to a September 1, 2004 agreement (the "Agreement") under which the Company acquired 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.



The Company does not have the records
of the amounts spent in the development of the Patents and is unaware of the amounts expended.



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 during that 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 will be recognized as compensation expense of $31,250,000 in the second quarter of 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. In 2006, The Company recorded a $38,500 impairment allowance that reduced the patents
to a zero carrying value since it is clear the Company will not meet the requirements of the Agreement, and will likely lose any
rights it has to such patents.



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





11







|4. | Accounts Payable and Accrued Liabilities – Related Party
|-- | --------------------------------------------------------



Accounts payable and accrued
liabilities to a related party of $372,786, at September 30, 2008 represents amounts due to His Divine Vehicle, Inc, ("HDV",
a company owned by the Company’s chief technology officer who is also a major stockholder). The amounts due HDV are primarily
related to actual and estimated operations and research and development activities that were paid by HDV on behalf of the Company.



|5. | Accounts Payable Assumed in Recapitalization
|-- | --------------------------------------------



Accounts payable assumed in recapitalization,
represents the liabilities of the public shell, at the time, Gene-Cell, Inc. that the Company assumed as part of the recapitalization.
This balance is comprised of liabilities for legal fees and trade payables incurred by Gene-Cell, Inc. (See Note 1).



|6. | Debt
|-- | ----



On July 10, 2006, we entered
into a Securities Purchase Agreement with Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10% secured
convertible debentures in the aggregate principal amount of $2,970,000 of which $1,670,000 was advanced immediately. We entered
into an amended and restated securities purchase agreement with Cornell on August 17, 2006. The second installment of $200,000
was advanced on August 17, 2006. The third installment of $600,000 was advanced on September 1, 2006. The last installment of $500,000
would be advanced two business days prior to a registration statement being declared effective by the SEC. In addition, Cornell
issued a note payable of $15,000 on April 2, 2007 that on default became convertible. The Company was in default on all debt to
Cornell as of September 30, 2008. A portion of the funds advanced were used to pay off the existing convertible debenture and other
advances made by Golden Gate Investors totaling $1,016,942. Following is an analysis of the proceed received and related fees and
expenses paid with such proceeds.



|Gross amount received – contractual balance |  | $ | 2,470,000 |  
|------------------------------------------- |  | - | --------- | -
|Less commissions paid                       |  |   | (247,000  | )
|Less legal fees                             |  |   | (108,960  | )
|Less structuring fee                        |  |   | (10,000   | )
|                                            |  |   |           |  
|Net proceeds                                |  | $ | 2,104,040 |  





Following is an analysis of
long-term debt at September 30, 2008:





|Contractual balance, in default |  | $ | 2,470,000 | 
|------------------------------- |  | - | --------- | 
|Less unamortized discount       |  |   | -         | 
|                                |  |   |           | 
|Convertible debt                |  | $ | 2,470,000 | 





The secured convertible debentures
bear interest at 10% and mature two years from the date of issuance. Holders may convert, at any time, any amount outstanding under
the secured convertible debentures into shares of the Company’s common stock at a conversion price per share equal to $0.013
beginning the earlier of (i) the first business day of the month immediately following the month in which a registration statement
is first declared effective or (ii) November 1, 2006, and continuing on the first business day of each calendar month thereafter,
we are required to make a mandatory redemption payment of $225,000 and accrued and unpaid interest, which payment can be made in
cash or in restricted shares of our common stock.



The Company has the option, at its
sole discretion, to settle the monthly mandatory redemption amount by (i) paying the investor cash in an amount equal to 115% of
the monthly mandatory redemption amount, or (ii) issuing to the investor the number of shares of the Company’s common stock
equal to the monthly mandatory redemption amount divided by $0.007, which is known as the redemption conversion price, provided,
however, that in order the Company to issue shares upon payment of the monthly mandatory redemption amount (A) this registration
statement is effective, (B) no event of default shall have occurred, and (C) the closing bid price for our common stock shall be
greater than the redemption conversion price as of the trading day immediately prior to the redemption date. However, in the event
that (A) this registration statement is effective, (B) no event of default shall have occurred, and (C) the closing bid price for
our common stock is less than the redemption conversion price but is greater than $0.003, which is known as the default conversion
price, we shall have the option to settle the monthly mandatory redemption amount by issuing to the investor the number of shares
of common stock equal to the monthly mandatory redemption amount divided by the default conversion price.



In the event that certain events
of default, such as failure to pay principal or interest when due, failure to issue common stock upon conversion or the delisting
or lack of quotation of our common stock, the redemption conversion price will be reduced to the default conversion price. The
investor has contractually agreed to restrict its ability to convert the debentures and receive shares of the Company’s common
stock such that the number of shares of common stock held by it and its affiliates after such conversion does not exceed 4.9% of
the then issued and outstanding shares of common stock.





12







The Company has the right, at its
option, with three business days advance written notice, to redeem a portion or all amounts outstanding under the secured convertible
debentures prior to the maturity date provided that the closing bid price of the Company’s common stock, is less than $0.013
at the time of the redemption. In the event of a redemption, the Company is obligated to pay an amount equal to the principal amount
being redeemed plus a 15% redemption premium, and accrued interest.



In connection with the securities
purchase agreement dated July 10, 2006, as amended, the Company granted the investor registration rights. Under the terms of the
registration rights the Company was obligated to use its best efforts to cause the registration statement to be declared effective
no later than December 7, 2006 and to insure that the registration statement remains in effect until the earlier of (i) all of
the shares of common stock issuable upon conversion of the Debentures have been sold or (ii) July 10, 2008.



The Company defaulted on its
obligations under the registration rights agreement because the Registration Statement was not declared effective by December
7, 2006. Accordingly, we are required to pay to Cornell, as liquidated damages, for each month that the registration statement
has not been filed or declared effective, as the case may be, either a cash amount or shares of our common stock equal to 2% of
the liquidated value of the secured convertible debentures. Under FASB EITF 00-19-02, the registration rights liability is separated
from the derivative liability and shown on the balance sheet at December 31, 2007 and September 30, 2008 at $933,660 and $1,546,982
respectively.



In connection with the securities purchase agreement dated July 10, 2006, the Company executed a security agreement
in favor of the investor granting them a first priority security interest in all of the Company’s goods, inventory, contractual
rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. The security agreement
states that if an event of default occurs under the secured convertible debentures or security agreement, the investors have the
right to take possession of the collateral, to operate our business using the collateral, and have the right to assign, sell,
lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy
our obligations under these agreements. Based on the Company’s current default of the registration rights agreement, the
investor could take possession of substantially all assets of the Company.



|7. | Commitments and Contingencies
|-- | -----------------------------



Legal Proceedings



From time to time, we may become
party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.



On January 16, 2007, Serge Monros,
the Company’s then chief technology officer, filed a derivative suit on behalf of the Company naming the Company, Mario Procopio,
and Kathy Procopio as defendants in the Superior Court of the State of California for the County of San Diego. Mr. Monros’
derivative suit alleged the following causes of action: (i) breach of fiduciary duty of loyalty; (ii) breach of fiduciary duty
of care; (iii) unjust enrichment; (iv) conversion; (v) waste of corporate assets; and (vi) trade libel.



On January 25, 2007, Mario Procopio
filed a derivative suit on behalf of the Company naming the Company and Serge Monros in the Superior Court of the State of California
for the County of Orange. Mr. Procopio’s derivative suit alleged the following causes of action: (i) breach of contract;
(ii) promise without intent to perform; (iii) breach of fiduciary duty; (iv) rescission; (v) intentional misrepresentation; (vi)
negligent misrepresentation; and (vii) conversion.



These two suits were settled on
February 25, 2008. In reaching the settlement, no parties have made any admission of liability or wrongdoing. As part of the settlement,
Mario Procopio, Kathy Procopio, and certain private corporations controlled by the Procopios have voluntarily waived accrued unpaid
compensation in the amount of $114,000 and returned the following securities to the Company: 1,000,000 Preferred A shares, 1,500,000
Preferred C shares, 7,102,300 common shares, and 125,000,000 options. As consideration, the Company has agreed to a limited indemnification
of the Procopios for certain transactions agreed-upon by the Procopios and the Company. The Procopios also waive any rights to
the 4,000,000 Preferred A shares they previously pledged to Cornell Capital and the parties understand that Cornell Capital retains
control of this stock. The gain on settlement was booked to additional paid in capital.



In January 2007, Herrera Partners
filed an arbitration claim against the Company in Harris County, Texas. Herrera Partners claim was for $63,700 for non-payment
for services rendered. The suit was settled in November, 2008 and a payment schedule was agreed upon and paid. The Company booked
a $9,014 gain on settlement.



On March 14, 2007, United Rentals
filed a suit against the Company, Greg Sweeney, and Mario Procopio in Orange County Superior Court. United Rentals claim is for
non-payment for services rendered. A judgment was entered in favor of United Rentals Northwest, Inc. and subsequently paid.





13







On or about July 28, 2011, SaviCorp,
a Nevada corporation, formerly known as Savi Media Group, Inc. (the “Company”) entered into a Repayment Agreement (the
“Repayment Agreement”) with YA Global Investments, L.P., a Cayman Islands exempt limited partnership formerly known
as Cornell Capital Partners, L.P. (“YA Global”).



On or about July 10, 2006, the Company
and YA Global, then known as Cornell Capital Partners, L.P., entered into a Securities Purchase Agreement which was subsequently
amended and restated on August 17, 2006 (collectively the “SPA”) wherein the Company issued and sold to YA Global secured
convertible debentures in the aggregate amount of approximately US$2,485,000 (collectively, the “Debentures”) and certain
warrants (collectively the “Prior Warrants” and with the Debentures, the “Securities”) to purchase an aggregate
of 2,900,000,000 shares of the Company’s common stock, par value $0.001 (the “Common Stock”).



In connection with the SPA, the
Company and YA Global entered into ancillary agreements, including a Security Agreement, an Insider Pledge and Escrow Agreement,
a Registration Rights Agreement, and other related documents (the SPA and such ancillary agreements are collectively referred to
hereinafter as “Financing Documents”). Copies of the Financing Documents have been attached to the Company’s
prior filings with the United States Securities and Exchange Commission (the “SEC”) and are hereby incorporated in
their entirety by reference.



Pursuant to the terms of the Repayment
Agreement, all of the Company’s obligations under the Financing Documents have been terminated in full. Without limitation,
all amounts otherwise due under the Debentures are deemed satisfied in full, the Prior Warrants are deemed cancelled, and any and
all security interests granted by the Company in favor of YA Global pursuant to the Financing Documents have been extinguished,
including the release of 4,000,000 shares of Series A Preferred Stock held in escrow. In exchange for the foregoing, the Company
delivered to YA Global: (i) a one-time cash payment of US$550,000; and (ii) new warrants to purchase up to 25,000,000 shares of
Common Stock at an exercise price of $0.0119 (the “Current Warrants”). The Current Warrants expire on or about July
28, 2014. A copy of the Repayment Agreement and Current Warrants have been attached as exhibits to the Form 8-K filed August 2,
2011 and are hereby incorporated in their entirety by reference.



The Company received a letter from
the Securities and Exchange Commission, Los Angeles Regional Office, dated May 9, 2011. The letter informed us that the SEC had
entered into a “formal order of investigation” into “Savi Media Group, Inc.” The letter included a “Subpoena
DucesTecum,” meaning the Company was given a prescribed period of time to produce all requested documents and information
contained in the subpoena. An index of the source of all such produced information and an authentication declaration were also
to be supplied. The stated purpose of the investigation is a fact-finding inquiry to assist the SEC staff in determining if the
Company has violated federal securities laws. The SEC states there is no implication of negativity or guilt at this stage of the
investigation.



The Company initially hired the
Los Angeles law firm of Troy Gould to represent us in the matter of this investigation. As of the date of this filing, the Company
believes it has provided all requested material to the SEC. Updates on the investigation will be supplied by supplemental filings
hereto.



Status of prior private investment;
$530,232 was raised privately in 2006 (cash for shares), $0 in 2007 (although HDV sold $13,000 of its shares), $1,000 in 2008
(although HDV sold $453,750 of its shares), $442,000 in 2009, $879,550 in 2010, $1,930,828 in 2011, $342,000 in the first calendar
quarter of 2012 and $100,000 in the 2nd quarter of 2012. There is concern that these private placement securities sales were not
made in compliance with applicable law (lack of material disclosure and/or failure to file securities sales notices as required
by federal law). The Company is planning to offer rescission to many private placement investors shortly after the posting of
this Annual Report on OTC Markets.



In 2006, the Company issued shares
for services valued at $611,768. There were issued shares for services valued at $1,416,060 in 2007; shares for services valued
at $7,875 in 2008 and shares for services valued at $74,400 in 2009. We have no plans to offer rescission for these share issuances.



The Company offered rescission to
many of the 2011 investors in late 2011 (“2011 rescission offer”). The legal sustainability of these rescission offers
is also being looked at by Counsel. The results of our 2011 rescission offer, in terms of rescission offers accepted by shareholders,
were very encouraging. The Company had one rescission offer acceptance and refunded $1,000.



Generally, the Company believes
it has good relationships with their shareholders. Our plan is to offer rescission to most shareholders obtaining privately offered
shares from us since January 1, 2006 through 2011. The Company has pledged to use our best efforts, in good faith, to honor any
accepted rescission offer. However, there is no assurance that rescission offer acceptances will not have a material effect on
our finances or that we will be able to re-pay those electing to rescind in a complete and timely manner.



The Company received a letter dated
June 7, 2013 with a Civil Complaint titled Arnold LamarrWeese, et al v. SaviCorp filed in the Northern District of West Virginia.
In addition to SaviCorp, Serge Monros and Craig Waldrop are being sued individually. Settlement discussions failed and Plaintiff's
counsel began service of Process. The Company and Mr. Monros have hired Shustak and Partners to defend the claim. The defendants
have sued for breach of contract, fraud, vicarious liability, and unlawful sale by an unregistered broker. The lawsuit attempts
to hold the Company and Mr. Monros responsible for alleged improprieties of Waldrop. The Company has filed for dismissal and intends
on vigorously defending its rights or reaching a settlement to release the Company and Mr. Monros of any liability.





14







Lease Commitments



The Company is currently leasing
office space and adjacent research and development space on an annual basis from CEE, LLC, for $110,000 per year.



|8. | Stockholders' Equity
|-- | --------------------



Common
Stock



Following is a description of transactions
affecting common stock.



Inception to December 31, 2002



On August 26, 2002 the Company entered
into the recapitalization transaction under which the Company agreed to acquire all of the issued and outstanding common stock
of Energy Resource Management, Inc. ("ERM") in exchange for 4,000,000 shares of the Company's common stock.



On August 26, 2002 and September
30, 2002 the Company entered into consulting agreements with five consultants for services related to business strategy and business
development. The consulting agreements had a term of two to three months and required the Company to issue 905,000 shares of common
stock valued at $2,232,150 based on the quoted market price on the dates of the transactions. The transactions resulted in a charge
to consulting expense of $1,202,233 for the period from inception, August 13, 2002, to December 31, 2002 and deferred compensation,
presented as an increase in stockholders' deficit of $1,030,917, at December 31, 2002.



Year ended December 31, 2003



Effective March 3, 2003 the Company
adopted a 3 to 1 forward stock split. This stock split has been reflected in the accompanying financial statements on a retroactive
basis and all references to shares outstanding, weighted average shares and earnings per share have been restated to reflect the
split as if it had occurred at inception.



In April 2003, the Company demanded
return of 1,050,000 shares of common stock, issued under the consulting agreements in 2002, as a result of nonperformance of services
and failure by specific members of the Company's business development consulting team to fulfill specific contractual obligations
to the Company.



In June 2003, the Company negotiated
an extension to its DreamCity acquisition agreement in exchange for 275,000 shares of restricted common stock. This acquisition
was completed in October 2003, upon issuance of an additional 20,000,000 shares.



In September 2003 the Company issued
5,700,000 shares of common stock to New Creation Outreach, Inc., as a donation to support its ministries. New Creation Outreach
is a related party because at the time, certain members of Company management and the board of directors are also officers in New
Creation Outreach, Inc.



At various dates in 2003, the Company
sold 10,450,000 shares of its common stock at prices ranging from $0.01 to $0.02 per share and received total proceeds of $155,000.
These shares were sold under private placements exempt from registration.



Year Ended December 31, 2004



Effective September 2, 2004 and
November 19, 2004, the Company's board of directors declared a 1 for 25 reverse stock split and a 1 for 100 reverse stock split,
respectively. The reverse stock splits, with a total impact of 1 for 2500, have been reflected in the accompanying financial statements
and all references to common stock outstanding, additional paid in capital, weighted average shares outstanding and per share amounts
prior to the record dates of the reverse stock splits have been restated to reflect the stock splits on a retroactive basis. Subsequently
to the stock splits, the Company awarded a total of 5,000,000 post-split shares to certain early investors and key stockholders
in Gene-Cell, Inc. This stock issuance has been shown as a special dividend in the accompanying statement of stockholders' deficit.During
2004, the Company amended its Articles of Incorporation to increase its authorized shares of common stock from 100,000,000 to 1,000,000,000
shares.



The Company issued 5,002,000 shares
of common stock to the owner of Energy Resource Management, Inc. to rescind a re-capitalization transaction that occurred in 2002.



The Company issued 4,000 shares
of common stock in payment of the acquisition price of 20% of SaVi Group (See Note 3). The Company subsequently issued 5,000,000
shares of common stock, 5,000,000 shares of Series A preferred stock and 125,000,000 three-year stock options (to acquire shares
of the Company's common stock at $0.00025 per share) to complete the acquisition of the rights to the patents. The patents came
over at Serge Monros's basis, which was zero, because the development of the patents was a research and development effort. Serge
Monros also received 100,000 shares of common stock, valued at $20,000, as compensation for his role of chief technology officer
of the Company.





15







The Company issued 17,560,000 shares
of common stock to associates of Serge Monros that were involved in the initial development of the patents that he owns, or are
now assisting the Company. These issuances were considered compensation and a cost of the transaction and valued at $3,160,800.



The Company subsequently issued
5,100,000 shares of common stock, 5,000,000 shares of Series A preferred stock and 125,000,000 three-year stock options to acquire
shares of the Company's common stock at $0.00025 per share to Mario Procopio, the Company's Chief Executive Officer, for compensation
and for his efforts in arranging the acquisition of the rights to the patents owned by Serge Monros. The stock issuances to Mario
Procopio were valued at $101,020,000.



The Company issued 252,000 shares
of common stock to its former legal counsel for approximately $50,000 of services provided.



The Company issued 2,000,000 shares
of common stock to Kathleen Procopio for services she provided as chief financial officer of the Company. These services were valued
at $460,000, based on the quoted market price of the common stock. Kathleen Procopio is the spouse of the Company's chief executive
officer, Mario Procopio.



The Company issued 7,166,240 shares
of common stock as compensation to various individuals that provided services to the Company. These shares were valued at $1,572,215.



The company sold 39,600,000 shares
of common stock to qualified investors and received cash proceeds of $442,725



Year Ended December 31, 2005



During 2005, the Company amended
its Articles of Incorporation to increase its authorized shares of common stock from 1,000,000,000 to 6,000,000,000 shares.



The Company issued 42,828,835 shares
of common stock to various individual that provided consulting and other services to the Company and recognized compensation expense
of $5,337,218 related to those issuances.



The Company issued 22,150,950 shares
of common stock to under private placements of its common stock and received cash proceeds of $396,360.



The Company cancelled 6,466,700
shares previously issued to consultants.



The Company issued 244,763 shares
of common stock to the Investor upon exercise of stock warrants.



The company issued 42,215,361 shares
of common stock to the Investor upon conversion of $2,448 of convertible debt.



The Company issued 42,828,835 shares
of common stock to various individual that provided consulting and other services to the Company and recognized compensation expense
of $5,337,218 related to those issuances.



The Company issued 22,150,950 shares
of common stock to under private placements of its common stock and received cash proceeds of $396,360.



The Company cancelled 6,466,700
shares previously issued to consultants.



The Company issued 244,763 shares
of common stock to the Investor upon exercise of stock warrants.



The company issued 42,215,361 shares
of common stock to the Investor upon conversion of $2,448 of convertible debt.



Year Ended December 31, 2006



The Company issued 7,125,000 shares
of common stock to various individual that provided consulting and other services to the Company and recognized compensation expense
of $121,768 related to those issuances.



The Company issued 600,000 shares
of common stock to under private placements of its common stock and received cash proceeds of $6,000.



The Company issued 389,540 shares
of common stock to the holder of its convertible debt upon exercise of stock warrants and received proceeds of $425,966.



The Company issued 162,048,548 shares
of common stock to the holder of its convertible debt upon conversion of $3,903 of debt.



The Company issued 60,000,000 shares
of common stock to Golden Gate Investors in connection with an agreement to retire the outstanding debt owed to Golden Gate Investors.





16







The Company issued 30,000,000 shares
of common stock to Cornell Capital in connection with the agreement to issue Cornell Capital a Senior Secured Convertible Debt
instrument.



The Company exchanged 1,540,000
Preferred C shares for 154,000,000 shares of common stock.



Year Ended December 31, 2007



The Company issued 393,350,000
shares of common stock to twenty-two individuals that provided consulting and other services to the Company and recognized compensation
expense of $1,416,060 related to those issuances based on the market value of the shares on the date of grant.



Period Ended September 30, 2008



In February 2008, as part of
the settlement, Mario Procopio, Kathy Procopio, and certain private corporations controlled by the Procopios have returned to the
Company 7,102,300 common shares.



In March 2008, 1,500,000 Preferred
A shares were converted to 150,000,000 common shares. In May 2008, 2,152,000 Preferred A shares were converted to 215,200,000 common
shares.



Stock Options



Gene-Cell, Inc., the company, used
in the recapitalization (See Note 1) periodically issued incentive stock options to key employees, officers, and directors to provide
additional incentives to promote the success of the Company's business and to enhance the ability to attract and retain the services
of qualified persons. The Board of Directors approved the issuance of all stock options. The exercise price of an option granted
was determined by the fair market value of the stock on the date of grant. Reverse stock splits by the Company resulted in the
reduction of outstanding options to less than 150 shares with exercise prices that are so high that the exercise of the options
will never be practical. Expiration dates range from March, 2008 through July, 2012.



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). These
options represent all outstanding options of the Company at December 31, 2006 and 2005. The options to Serge Monros were considered
as part of the acquisition of patent rights. The options issued to Mario Procopio were valued at estimated market value of $31,250,000
and charged to compensation expense. On August 24, 2007, Serge Monros exercised 50,000,000 options for total consideration of $12,500.
No proceeds were actually received as the consideration received was a credit to amounts owed to Serge Monros. In February 2008,
as part of the settlement, Mario Procopio returned 125,000,000 options. The remaining 75,000,000 options held by Serge Monros expired
unexercised.



Incentive Stock Plan



During the year ended December 31,
2005 the 2005 Incentive Stock Plan was adopted by the Company’s Board of Directors and approved by the stockholders in August
2005. The 2005 Plan provides for the issuance of up to 25,000,000 shares and/or options. The primary purpose of the 2005 Incentive
Stock Plan is to attract and retain the best available personnel for us in order to promote the success of our business and to
facilitate the ownership of our stock by employees. The 2005 Incentive Stock Plan is administered by our Board of Directors. Under
the 2005 Incentive Stock Plan, key employees, officers, directors and consultants are entitled to receive awards. The 2005 Incentive
Stock Plan permits the granting of incentive stock options, non-qualified stock options and shares of common stock with the purchase
price, vesting and expiration terms set by the Board of Directors. No options have been issued under the Plan at September 30, 2008.



Stock Warrants



In connection with the securities
purchase agreement (See Note 6), we agreed to issue Cornell warrants to purchase an aggregate 2,900,000,000 shares of common stock,
exercisable for a period of five years as follows:



|          |               |  |          |   |        | Remaining
|--------- | ------------- |  | -------- | - | ------ | ---------
|Number of |               |  | Exercise |   |        | Life     
|Warrants  |               |  | Price    |   |        | Years    
|          | 1,000,000,000 |  |          | $ | 0.0030 |          
|          | 1,000,000,000 |  |          |   | 0.0060 |          
|          | 300,000,000   |  |          |   | 0.0100 |          
|          | 200,000,000   |  |          |   | 0.0150 |          
|          | 150,000,000   |  |          |   | 0.0200 |          
|          | 100,000,000   |  |          |   | 0.0300 |          
|          | 60,000,000    |  |          |   | 0.0500 |          
|          | 40,000,000    |  |          |   | 0.0750 |          
|          | 30,000,000    |  |          |   | 0.1000 |          
|          | 20,000,000    |  |          |   | 0.1500 |          
|          |               |  |          |   |        |          
|          | 2,900,000,000 |  |          | $ | 0.0114 |          





17







Gene Cell, Inc. and Redwood Entertainment
Group, Inc. periodically issued incentive stock options to key employees, officers, and directors to provide additional incentives
to promote the success of the Company's business and to enhance the ability to attract and retain the services of qualified persons.
The Board of Directors approved the issuance of all stock options. The exercise price of an option granted was determined by the
fair market value of the stock on the date of grant. Reverse stock splits by the Company resulted in the reduction of outstanding
options to less than 150 shares with exercise prices that are so high that the exercise of the options will never be practical.
The options expire from March 2008 to July 2012.



Preferred Stock



During the year ended December 31,
2005, the Company set preferences for its Series A, B and C preferred stock. The Company is authorized to issue 40,000,000 shares
of preferred stock, $0.01 par value per share. At December 31, 2006 the Company had 10,000,000 shares of series A preferred stock
issued and outstanding and 4,915,275 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 participates 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 participates on distribution and liquidation on an equal
basis with the holders of common stock.



Following is a description of transactions
affecting preferred stock.



Inception to December 31, 2002



None



Year Ended December 31, 2003



None



Year Ended December 31, 2004



The Company issued 5,000,000 shares
of Series A Preferred Stock for the acquisition of patent rights as described in Note x.



The Company issued 5,000,000 shares
of Series A Preferred Stock for compensation to Mario Procopio, the then current CEO. The Company incurred in compensation expense
based on the market value of the equivalent common shares that the preferred shares could convert into.



Year Ended December 31, 2005



The Company issued 6,060,000 shares
of Series C Preferred Stock to various individuals for consulting services and employee compensation. The Company expensed $105,540,718
in compensation expense based on the market value of the equivalent common shares that the preferred shares could convert into.



Year Ended December 31, 2006



The Company issued 395,275 shares
of Series C Preferred Stock for cash of $381,730 and extinguishment of debt of $142,500.



The Company issued 1,000,000 shares
of Series C Preferred Stock to a vendor for lease facilities and services provided valued at $490,000.



1,000,000 shares of Series C Preferred
Stock was returned to the Company by two officers/primary stockholders of the Company.





18







Year Ended December 31, 2007



None.



Period Ended September 30, 2008



In February 2008, as part of
the settlement, Mario Procopio, Kathy Procopio, and certain private corporations controlled by the Procopios have returned to the
Company: 1,000,000 Preferred A shares, 1,500,000 Preferred C shares.



In March 2008, 1,500,000 Preferred
A shares were converted to 150,000,000 common shares. In May 2008, 2,152,000 Preferred A shares were converted to 215,200,000 common
shares.



Potentially Dilutive Equity
Instruments





An analysis of potentially
dilutive equity instruments at September 30, 2008



|Warrants issued in connection with Cornell financing                      |  |  | 2,900,000,000 | 
|------------------------------------------------------------------------- |  |  | ------------- | 
|Stock options issued at for patent rights and Compensation                |  |  | –             | 
|Series A Preferred Stock convertible to common stock on a 100 for 1 basis |  |  | 534,750,000   | 
|Series C Preferred Stock convertible to common stock on a 100 for 1 basis |  |  | 341,500,000   | 
|                                                                          |  |  |               | 
|Total                                                                     |  |  | 3,776,250,000 | 



Other Equity Transactions



Year Ended December 31, 2007



Interest was imputed on non-interest
bearing related party debt in the amount of $20,503 and credited to additional paid in capital.



Period Ended September 30, 2008





Interest was imputed on non-interest
bearing related party debt in the amount of $23,423 and credited to additional paid in capital.





His Divine Vehicle, a related
party contributed $68,948 in capital by incurring expenses on behalf of the Company.



Greg Sweeney, the former CEO,
waived $45,000 in wages which was credited to additional paid in capital.



|9. | Related Party Transactions
|-- | --------------------------





The Company engaged in various
related party transactions involving the issuance of shares of the Company's common stock during the year ended December 31, 2007
and the period ended June 30, 2008. Those transactions included the exercise of options by Serge Monros and are described in Note
8.



As discussed in Note 7, Serge
Monros, the Company’s current chief technology officer, filed a derivative suit on behalf of the Company naming the Company,
Mario Procopio, and Kathy Procopio as defendants in the Superior Court of the State of California for the County of San Diego.



As also discussed in Note 7,
Mario Procopio filed a derivative suit on behalf of the Company naming the Company and Serge Monros in the Superior Court of the
State of California for the County of Orange.





During 2007 and 2008 His Divine
Vehicle, Inc. incurred costs on behalf of the Company. At September 30, 2008, the Company owes His Divine Vehicle, Inc. $372,786
and Serge Monros $294,000 in accrued wages.



In the first nine months of
2008, HDV incurred $68,948 in expenses on behalf of the company and received no compensation. This amount was booked to additional
paid in capital.



Greg Sweeney, the former CEO
waived $45,000 of accrued wages as part of his settlement agreement with the company.









19







|10. | Change in Accounting Principle for Registration Payment Arrangements.
|--- | ---------------------------------------------------------------------



In December 2006, the Financial
Accounting Standards Board (“FASB”) issued FASB Staff Position on No. EITF 00-19-2, Accounting for Registration Payment
Arrangements (“FSP EITF 00-19-2”). FSP EITF 00-19-2 provides that the contingent obligation to make future payments
or otherwise transfer consideration under a registration payment arrangement should be separately recognized and measured in accordance
with Statement of Financial Accounting Standards (“FAS”) No. 5, Accounting for Contingencies , which provides that
loss contingencies should be recognized as liabilities if they are probable and reasonably estimable. Subsequent to the adoption
of FSP EITF 00-19-2, any changes in the carrying amount of the contingent liability will result in a gain or loss that will be
recognized in the statement of operations in the period the changes occur. The guidance in FSP EITF 00-19-2 is effective immediately
for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified
subsequent to the date of issuance of FSP EITF 00-19-2. For registration payment arrangements and financial instruments subject
to those arrangements that were entered into prior to the issuance of FSP EITF 00-19-2, this guidance is effective for our financial
statements issued for the year beginning January 1, 2007, and interim periods within that year.



On January 1, 2007, we adopted the
provisions of FSP EITF 00-19-2 to account for the registration payment arrangement associated with our July 2006 financing (the
“July 2006 Registration Payment Arrangement”). As of January 1, 2007 and December 31, 2007, management determined that
it was probable that we would have payment obligation under the July 2006 Registration Payment Arrangement; therefore, the Company
accrued a contingent obligation of $340,860 as required under the provisions of FSP EITF 00-19-2. In addition, the compound embedded
derivative liability associated with the July 2006 Financing was adjusted to eliminate the registration payment arrangement and
the comparative financial statements of prior periods and as of December 31, 2006 have been adjusted to apply the new method retrospectively.
The cumulative effect of this change in accounting principle adjusted retained earnings as of December 31, 2006 by $658,129. The
following financial statement line items for the twelve months ended December 31, 2006 were affected by the change in accounting
principle. In addition, under EITF 00-19, the Company would not book the contingent registration rights payment payable.



|                         |  | As of              |          
|------------------------ |  | ------------------ | ---------
|                         |  | December 31,  2006 |          
|Under EITF 00-19         |  |                    |          
|Income Statement Impacts |  |                    |          
|Change in value of CED   |  |                    | 2,871,934
|Amortization of Discount |  |                    | 117,504  
|Balance Sheet Impacts    |  |                    |          
|Discount on Note         |  |                    | 1,764,136
|Derivative Liability     |  |                    | 3,459,979
|                         |  |                    |          
|Under EITF 00-19-02      |  |                    |          
|Income Statement Impacts |  |                    |          
|Change in value of CED   |  |                    | 2,302,219
|Amortization of Discount |  |                    | 112,211  
|Balance Sheet Impacts    |  |                    |          
|Discount on Note         |  |                    | 1,730,720
|Derivative Liability     |  |                    | 2,768,435



The net impact to the balance sheet
is $658,128 and shows in the equity section of the balance sheets.



|11. | Fair Value of Financial Instruments.
|--- | ------------------------------------



The Company’s financial instruments
consist of cash and cash equivalents, accounts payable, accrued liabilities and convertible debt. The estimated fair value of cash,
accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.



The Company utilizes various types
of financing to fund its business needs, including convertible debt with warrants attached. The Company reviews its warrants and
conversion features of securities issued as to whether they are freestanding or contain an embedded derivative and, if so, whether
they are classified as a liability at each reporting period until the amount is settled and reclassified into equity with changes
in fair value recognized in current earnings. At December 31, 2007, the Company had convertible debt and warrants to purchase common
stock, the fair values of which are classified as a liability. Some of these units have embedded conversion features that are treated
as a discount on the notes. Such financial instruments are initially recorded at fair value and amortized to interest expense over
the life of the debt using the effective interest method.



Inputs used in the valuation to
derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions based on market data (observable
inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:



Level one — Quoted market
prices in active markets for identical assets or liabilities;



Level two — Inputs other than
level one inputs that are either directly or indirectly observable; and



Level three — Unobservable
inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that
a market participant would use.





20







Determining which category an asset
or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.
The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated
with the convertible debt and warrants to purchase common stock (discussed above). The Company classifies the fair value of these
convertible notes and warrants under level three.



Based on the guidance in FASB No.
133 and related guidance, the Company concluded the convertible notes and common stock purchase warrants are required to be accounted
for as derivatives as of the issue date due to a reset feature on the conversion/exercise price. At the date of issuance the convertible
subordinated financing, warrant derivative liabilities were measured at fair value using either quoted market prices of financial
instruments with similar characteristics or other valuation techniques. The Company records the fair value of these derivatives
on its balance sheet at fair value with changes in the values of these derivatives reflected in the consolidated statements of
operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging instruments
under ASC 815-10 and are disclosed on the balance sheet under Derivative Liabilities.



The following table summarizes the
convertible debt and warrant liabilities activity for the period December 31, 2007 to September 30, 2008:





|Description                      |  | Convertible Notes |         |  | Warrant Liabilities |   |            | Total | 
|-------------------------------- |  | ----------------- | ------- |  | ------------------- | - | ---------- | ----- | 
|Fair value at December 31, 2007  |  | $                 | 83,371  |  |                     | $ | 2,246,896  |       | 
|Change in Fair Value             |  | $                 | 517,560 |  |                     | $ | (1,126,745 | )     | 
|Fair value at September 30, 2008 |  | $                 | 600,931 |  |                     | $ | 1,120,151  |       | 





For the nine month period ended
September 30, 2008, net derivative income was $609,185.



The lattice methodology was
used to value the convertible notes and warrants issued, with the following assumptions.





|Assumptions             |  | September 30, 2008 |                 |  | December 31, 2007 | 
|----------------------- |  | ------------------ | --------------- |  | ----------------- | 
|Dividend yield          |  |                    | 0.00%           |  |                   | 
|Risk-free rate for term |  |                    | 1.02%-2.28%     |  |                   | 
|Volatility              |  |                    | 335%            |  |                   | 
|Maturity dates          |  |                    | 0.0-3.272 years |  |                   | 
|Stock Price             |  |                    | 0.0015          |  |                   | 





The Golden Gate warrants (102,125)
expired on 05/05/07. The Cornell 7/10/06 convertible note ($2,470,000 balance) matured on 7/10/08. The Cornell 4/02/07 promissory
note ($15,000 balance) became convertible upon default and is due and payable.



|12. | Non-Cash Investing and Financing Transactions and Supplemental Disclosure of Cash Flow Information
|--- | --------------------------------------------------------------------------------------------------



During the period ended September 30,
2008 and the year ended December 31, 2007, the Company engaged in various non-cash investing and financing activities as follows:



|                                                                             |  | 2008 |         |  | 2007 |  
|---------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | -
|Common stock issued for exercise of stock options for debt due option holder |  | $    | –       |  |      | $
|Change in accounting principle                                               |  | $    | –       |  |      | $
|Settlement of AP with fixtures & furniture                                   |  | $    | –       |  |      | $
|Conversion of Preferred Stock into Common Stock                              |  | $    | 361,598 |  |      | $
|Procopio Settlement                                                          |  | $    | 123,602 |  |      | $



During the period ended September 30,
2008 and the year ended December 31, 2007, the Company made no cash interest payments or income tax payments.



|13. | Subsequent Events.
|--- | ------------------



Stock Issuances:



Since 2008, the Board of Directors
authorized the issuance of an aggregate of 1,885,018,272 shares of its common stock, 1,525,000 shares of its Preferred A shares
and 10,355,500 of its Preferred C shares to accredited and non-accredited investors for total proceeds of $4,772,843. In addition,
the Board of Directors has authorized the issuance of an aggregate of 1,549,418,387 shares of its common stock, 2,406,667 shares
of its Preferred A shares and 456,000 of its Preferred C shares to accredited and non-accredited investors for services rendered
valued at an aggregate of $6,245,339. No sales commissions were paid in connection with these issuances and all investors reviewed
or had access to all of the Company’s filing pursuant to the Securities Exchange Act of 1934, as amended.





21







Legal Proceedings:



On January 16, 2007, Serge Monros,
the Company’s then chief technology officer, filed a derivative suit on behalf of the Company naming the Company, Mario Procopio,
and Kathy Procopio as defendants in the Superior Court of the State of California for the County of San Diego. Mr. Monros’
derivative suit alleged the following causes of action: (i) breach of fiduciary duty of loyalty; (ii) breach of fiduciary duty
of care; (iii) unjust enrichment; (iv) conversion; (v) waste of corporate assets; and (vi) trade libel. This case was settled on
02/25/2008.



On January 25, 2007, Mario Procopio
filed a derivative suit on behalf of the Company against the Company and Serge Monros in the Superior Court of the State of California
for the County of Orange. Mr. Procopio’s derivative suit alleged the following causes of action: (i) breach of contract;
(ii) promise without intent to perform; (iii) breach of fiduciary duty; (iv)rescission; (v) intentional misrepresentation; (vi)
negligent misrepresentation; and (vii) conversion.



These two suits were settled on
February 25, 2008. In reaching the settlement, no parties have made any admission of liability or wrongdoing. As part of the settlement,
Mario Procopio, Kathy Procopio, and certain private corporations controlled by theProcopios have voluntarily waived accrued unpaid
compensation and returned the following securities to the Company: 1,000,000 Preferred A shares, 1,500,000 Preferred C shares,
7,102,300 common shares, and 125,000,000 options. As consideration, the Company has agreed to a limited indemnification of the
Procopios for certain transactions agreed-upon by the Procopios and the Company. The Procopios also waive any rights to the 4,000,000
Preferred A shares they previously pledged to Cornell Capital and the parties understand that Cornell Capital retains control of
this stock.



On or about July 10, 2006, the Company
and YA Global, then known as Cornell Capital Partners, L.P., entered into a Securities Purchase Agreement which was subsequently
amended and restated on August 17, 2006 (collectively the “SPA”) wherein the Company issued and sold to YA Global secured
convertible debentures in the aggregate amount of approximately US$2,485,000 (collectively, the “Debentures”) and certain
warrants (collectively the “Prior Warrants” and with the Debentures, the “Securities”) to purchase an aggregate
of 2,900,000,000 shares of the Company’s common stock, par value $0.001 (the “Common Stock”).



In connection with the SPA, the
Company and YA Global entered into ancillary agreements, including a Security Agreement, an Insider Pledge and Escrow Agreement,
a Registration Rights Agreement, and other related documents (the SPA and such ancillary agreements are collectively referred to
hereinafter as “Financing Documents”). Copies of the Financing Documents have been attached to the Company’s
prior filings with the United States Securities and Exchange Commission (the “SEC”) and are hereby incorporated in
their entirety by reference.



On July 28, 2011, the Company and
Cornell reached a settlement for this debt under the terms of a Repayment Agreement. Pursuant to the terms of the Repayment Agreement,
all of the Company’s obligations under the Financing Documents have been terminated in full. Without limitation, all amounts
otherwise due under the Debentures are deemed satisfied in full, the Prior Warrants are deemed cancelled, and any and all security
interests granted by the Company in favor of YA Global pursuant to the Financing Documents have been extinguished, including the
release of 4,000,000 shares of Series A Preferred Stock held in escrow. In exchange for the foregoing, the Company delivered to
YA Global: (i) a one-time cash payment of US$550,000; and (ii) new warrants to purchase up to 25,000,000 shares of Common Stock
at an exercise price of $0.0119 (the “Current Warrants”). The Current Warrants expire on or about July 28, 2014. A
copy of the Repayment Agreement and Current Warrants have been attached as exhibits to the Form 8-K filed August 2, 2011 and are
hereby incorporated in their entirety by reference.



The Company received a letter from
the Securities and Exchange Commission, Los Angeles Regional Office, dated May 9, 2011. The letter informed us that the SEC had
entered into a “formal order of investigation” into “Savi Media Group, Inc.” The letter included a “Subpoena
DucesTecum,” meaning the Company was given a prescribed period of time to produce all requested documents and information
contained in the subpoena. An index of the source of all such produced information and an authentication declaration were also
to be supplied. The stated purpose of the investigation is a fact-finding inquiry to assist the SEC staff in determining if the
Company has violated federal securities laws. The SEC states there is no implication of negativity or guilt at this stage of the
investigation.



We initially hired the Los Angeles
law firm of Troy Gould to represent us in the matter of this investigation. As of the date of this filing, we believe we have provided
all requested material to the SEC.



Status of prior private investment;
$0 in 2007 (although HDV sold $13,000 of its shares), $1,000 in 2008 (although HDV sold $453,750 of its shares), $442,000 in 2009,
$879,550 in 2010, $1,930,828 in 2011, $342,000 in the first calendar quarter of 2012 and $100,000 in the 2nd quarter of 2012. There
is concern that these private placement securities sales were not made in compliance with applicable law (lack of material disclosure
and/or failure to file securities sales notices as required by federal law).



In 2006, the Company issued shares
for services valued at $611,768. There were issued shares for services valued at $1,416,060 in 2007; shares for services valued
at $7,875 in 2008 and shares for services valued at $74,400 in 2009. We have no plans to offer rescission for these share issuances.





22







We offered rescission to many of
the 2011 investors in late 2011 (“2011 rescission offer”). The legal sustainability of these rescission offers is also
being looked at by Counsel. The results of our 2011 rescission offer, in terms of rescission offers accepted by shareholders, were
very encouraging. We had one rescission offer acceptance and refunded $1,000.



Licensing Events:



HDV, an affiliate of Mr.
Monros, manufactures the “DynoValve” and “DynoValve Pro” products based on these patent applications
and then sells them to the Company for resale pursuant to the Product Licensing Agreement dated December 15, 2008, as amended
on December 16, 2009. Under the Product Licensing Agreement, the price at which HDV sells the products to the Company is
subject to change at any time upon written notice. The Company may determine the prices that it charges to its customers. The
Product Licensing Agreement is non-exclusive and automatically renews on an annual basis provided certain sales volumes are
achieved and the Company is otherwise not in breach. HDV may, after an applicable cure period, terminate the Product
Licensing Agreement earlier if it believes that the Company is deficient in meeting its responsibilities. HDV may amend
the Product Licensing Agreement at any time by giving notice to the Company, unless the Company objects within ten days
of such notice.



As consideration for HDV entering into
the Product Licensing Agreement, the Company agreed to issue to Mr. Monros and HDV, if and when available, an aggregate of
500 Million shares of Common Stock, 5 Million shares of Series A Preferred Stock and 5 Million shares of Series C Preferred
Stock. In July, 2011, HDV and Mr. Monros entered into a revised licensing agreement which modified the prior consideration
paid to an aggregate of 600 Million shares of Common Stock, 6.5 Million shares of Series A Preferred Stock and 2.5 Million
shares of Series C Preferred Stock. In connection with this transaction, Mr. Monros waived $350,000 in accrued salary owed
to him by the Company, and HDV waived $372,000 owed to it by the Company.



Mr. Monros has continued the process
of preparing patent applications for the other versions of the DynoValve products & related IP. In March, 2013, the Company
entered into a five (5) year Master Distribution Agreement with His Divine Vehicle to sell the DynoValve and DynoValve Pro in various
international territories. The consideration for the agreement was guaranteeing a minimum annual volume, payment for the DynoValves
acquired and a three percent (3%) royalty payment.



Major Contracts:



In 2013, the Company has entered
into a 5 year licensing agreement with Dyno Green Tech, LLC ("DGT") to sell the DynoValve products in the licensed territories
(UAE, Dubai, Malaysia, India, and Africa). DGT has ordered 3,000 DynoValves as of 9/30/13. The DynoValves were shipped in the third
quarter of 2013. In order for them to fulfill and maintain this 5 year licensing agreement, they are required to purchase 500 additional
DynoValves per quarter for a total of $3,000,000 over a 5 year span.





23







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 that may be distributed by the Company and services offered by competitors, as well as general conditions
of the marketplace.



Overview



We are considered a development stage enterprise
because as of September 30, 2008 we 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 certain technology for the production of a gasoline and diesel engine emission reduction device which
we believe delivers superior emission reduction technology and operating performance. This technology is an emission reduction
device believed to reduce, harmful exhaust emissions in gasoline and diesel engines, and increase fuel efficiency. As of June 30,
2008 we do not have any products available for sale and we will acquire additional funding before we will be able to begin production
of our products and there is no guarantee that we will be able to obtain such additional funding.



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
public shell of Gene-Cell, Inc., a public company. 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 Redwood Entertainment Group, Inc. and its predecessors, Redwood
Energy Group, Inc. and Energy Resource Management, Inc.



The public entity 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. In 2012, Savi Media
Group, Inc. changed its name to SaviCorp.



Business History



Until 2011, we were considered a development
stage enterprise because we had no significant operations, had not yet generated revenue from new business activities and were
devoting substantially all of our efforts to business planning and the search for sources of capital to fund our efforts. We had
acquired all rights to "blow-by gas and crankcase engine emission reduction technology" which we intended to develop
and market on a commercial basis.



This technology is an emission reduction device
believed to reduce harmful exhaust emissions in gasoline and diesel engines, and increase fuel efficiency. Phase one testing at
California Environmental Engineering indicated notable reduction in tailpipe emissions and Particulate Matter (PM) while improving
fuel economy. The reductions were 5.1% in hydrocarbons, 5.1% in carbon monoxide, 5.5% in nitrogen oxides, while increasing fuel
economy by 0.3%.



We currently have the right to market and distribute
the DynoValve and DynoValve Pro products, 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. Personal watercraft, small engine powered
lawn equipment, and stand alone power generation engines are additional markets that we intend to develop. The technology may be
sold internationally and we are pursuing opportunities simultaneously domestically and internationally. We have no immediate plans
to develop additional products at this time.



Critical Accounting Policies and Estimates



Our discussion and analysis of our financial
condition and results of operations are based upon our 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.





24







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



Effective January 1, 2006, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R),
and began expensing at fair value on a straight-line basis the costs resulting from share-based payment transactions.



Prior to 2006, the Company elected to follow
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees(APB 25) and related interpretations
in accounting for stock options granted to employees as permitted by SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS 123), as amended by SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure. Under
APB 25, the Company did not recognize share-based payment expense in its financial statements because the stock option awards qualified
as fixed awards and the exercise price of the Company’s employee stock options equaled the market price of the underlying
stock on the date of grant.



Convertible Notes - Derivative Financial Instruments



The convertible notes issued to Cornell Capital
in 2006 and to Golden Gate Investors in 2005 have been accounted for in accordance with SFAS No. 133 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 both the Golden
Gate debenture and the Cornell Capital debenture have 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 liabilities." 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.



The fair value of the derivative liabilities
are subject to the changes in the trading value of the Company's common stock, as well as other factors. As a result, the Company's
financial statements may fluctuate from quarter-to-quarter based on factors, such as the price of the Company's stock at the balance
sheet date and the amount of shares converted by note holders. Consequently, our financial position and results of operations may
vary from quarter-to-quarter based on conditions other than our operating revenues and expenses.



Results of Operations



During the period from inception, August
13, 2002, to September 30, 2008, we have not generated any revenue from operations. As of September 30, 2008, we have accumulated
net losses in the development stage of $260,881,476 for the period from inception, August 13, 2002, to September 30, 2008. Additionally,
at September 30, 2008, we are in a negative working capital position of $8,275,512 and a stockholders' deficit position $8,275,512.
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 2008, 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 Operations



We believe that there are six critical elements
for the building of a successful research & development company that has the capacity to manufacture technology for the implementation
of immediate and long-term solutions to the global challenges of air, water, and land pollution.



| | 1. | People - this includes a qualified board of
        directors, advisory board members, management, employees, shop personnel, Q.C., project managers, journeymen, welders, machinists,
        CNC operators, cad cam, shop planners, senior engineers, tool & design, maintenance personnel, calibrators & inspectors,
        sheet metal fabricators, deburring& finishing personnel, purchasers, transporters, CNC trainers and consultants, etc.;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Projects - a credible portfolio of projects
        that have the appropriate risk-return ratio in order to generate potentially significant shareholder value;                                                                                                                                                                                                                                                                                       
| | 3. | Capital - based upon the reputation
of the people and the quality of the projects, there must be sufficient capital in order to launch the company and to provide
for additional fundings;                                                                                                                                                                                                                                                            





25







| | 4. | Technology - the most advanced interpretation
        methods, techniques and methods should be utilized in order to maximize the potential for finding and developing immediate and
        long term solutions to the global challenges of air, water, and land pollution;                                                                         
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | Favorable positioning - the international influence
        of the oil and gas companies along with the automotive & diesel industries requires a combination of secured relationships
        with their appointed leadership in these various industries as well as with all the various local and international governmental
        entities; and
| | 6. | Manufacturing capability and equipment- the competitive nature of the automotive &diesel industry requires a unique approach and a significant capital commitment in order to secure the latest in hi-tech equipment, technology, research, and the creation of numerous patents as well as to expedite mass production.                             



People:



In August 2004 Savi Media Group was founded
by Serge Monros and Mario Procopio. Serge Monros sold the Crankcase Ventilation technologies to Savi Media that he personally developed
over the last 17 years. Mario Procopio was hired as the President, Chief Executive Officer and director with a mandate to acquire
the initial funding for the planned projects and to assist in aggressively transforming us into an emerging research and development
company in the field of automotive and diesel retrofitting and pollution control. In August 2004, enough capital was obtained to
acquire a bulletin board company, pay off many of its existing debts, and begin to launch the varied projects of which the DynoValve
is one of several projects.



We have established a Strategic Advisory Board
and recruited qualified individuals to develop marketing strategies, feasibility studies, and update our business plan. Among those
are Retired U.S. General Alexander M. Haig, Jr., Alexander P. Haig, John Hewitt, Marketing Specialist, and John Dunlap, former
Executive Director of CalTrans.



Projects:



During 2006, we further refined our strategic
plan and have determined that the maximum value to all of our shareholders is best served by targeting three focused project areas
that provide for long-term growth from our invested capital. The three major project areas are as follows:



An R & D lab and adjacent offices



We have established an R & D lab with its
adjacent offices located at 2530 S. Birch St. Santa Ana, CA. 92707. We have also negotiated with G & K Auto in acquiring a
270,000 square foot R & D lab and office in Tian Jin, China in the Auto Trade - Free Trade Zone in order to test and retrofit
internal combustion engines both stationary and in automotive applications.



Implement the initial testing phases
in order to secure revenues, licensing agreements, and contracts.



We hope to continue to test our emission control
device on select diesel engines in order to obtain certification and validation of our technology. However, we currently lack the
financial resources to continue testing. We hope to obtain an Executive Order from the California Air Resource Board which allows
us to legally sell our product in California. This will assist in obtaining contracts and purchase orders. The monthly cost for
each product testing is approximately $60,000 and completion of testing should be accomplished in six to nine months assuming there
are no delays. Phase one testing on a new diesel engine at California Environmental Engineering indicated notable reduction in
tailpipe emissions and Particulate Matter (PM) while improving fuel economy. The reductions were 5.1% in hydrocarbons, 5.1% in
carbon monoxide, 5.5% in nitrogen oxides, while increasing fuel economy by 0.3%.



Become a technology partner to the various
entities that are focused on environmental solutions.



We are presently participating in a consortium
of companies with emission reduction technologies for the problem solving of both our local environmental challenges and to assist
in China’s pursuit of immediate solutions to the particular needs in their environment. At this time we have not engaged
in formal agreements with any company or initiated any actions or plans and have not committed any funds.



As of March 31, 2008, we had limited operations
and we expect to require additional cash of a minimum of approximately $3,000,000 over the next twelve months. Those funds, if
available, will be used for continued operation in the development stage. Additional financing will need to be obtained. Due to
our still being in the development stage, sources of funding 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.



As of September 30, 2008, we had limited operations
and we expect to require additional cash of approximately $2,000,000 over the next twelve months. Those funds will be used
to continue 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.





26







Liquidity and Capital Resources







As of September 30, 2008, the Company had
no cash or current assets.



Total current liabilities were $8,275,512
as of September 30, 2008, consisting of convertible debt, net, of $2,470,000, derivative liabilities of $1,721,082, accounts payable
and accrued liabilities of $3,925,135, and accounts payable assumed in recapitalization of $159,295.



We had a negative working capital of $8,275,512
as of September 30, 2008.



We incurred net losses of $260,881,476
during the period from inception, August 13, 2002, to September 30, 2008. In addition, at September 30, 2008, we were in a negative
working capital position and had a stockholders' deficit of $8,275,512. As a result, our independent registered public accounting
firm, in its report dated October 25, 2013, has expressed substantial doubt about our ability to continue as a going concern.



Our average monthly operational expenses have been $49,402
per month, for the period ended September 30, 2008.



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



| | · | further implement our business plan;                          
| | - | --------------------------------------------------------------
| |   |                                                               
| | · | obtain additional financing or refinancing as may be required;
| |   |                                                               
| | · | and generate revenues.                                        



We believe it is imperative that we raise an
additional $5,000,000 of capital in order to implement our business plan. We are attempting to raise additional funds through debt
and/or equity offerings. We intend to use any funds raised to pay down debt and to provide us with working capital. There can be
no assurance that any new capital would be available to us or that we would have 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.



On July 10, 2006, we entered into a Securities
Purchase Agreement with Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10% secured convertible debentures
in the aggregate principal amount of $2,970,000 of which $1,670,000 was advanced immediately. We entered into an amended and restated
securities purchase agreement with Cornell on August 17, 2006. The second installment of $200,000 was advanced on August 17, 2006.
The third installment of $600,000 was advanced on September 1, 2006. The last installment of $500,000 will be advanced two business
days prior to a registration statement being declared effective by the SEC. A portion of the funds advanced were used to pay off
the existing convertible debenture and other advances made by Golden Gate Investors.



In connection with the securities purchase
agreement, we agreed to issue Cornell warrants to purchase an aggregate 2,900,000,000 shares of common stock, exercisable for a
period of five years as follows:



|Number of Warrants |  | Exercise Price
|------------------ |  | --------------
|                   |  |               
|1,000,000,000      |  |               
|1,000,000,000      |  |               
|300,000,000        |  |               
|200,000,000        |  |               
|150,000,000        |  |               
|100,000,000        |  |               
|60,000,000         |  |               
|40,000,000         |  |               
|30,000,000         |  |               
|20,000,000         |  |               



All of the warrants were issued upon closing. 
We also issued to the investor 30 million shares of restricted common stock as a commitment fee.



The debentures mature on the second anniversary
of the date of issuance and bear interest at the annual rate of 10%. Holders may convert, at any time, any amount outstanding under
the debentures into shares of our common stock at a conversion price per share equal to $0.013. Beginning the earlier of (i) the
first business day of the month immediately following the month in which a registration statement is first declared effective or
(ii) November 1, 2006, and continuing on the first business day of each calendar month thereafter, we are required to make a mandatory
redemption payment of $225,000 and accrued and unpaid interest, which payment can be made in cash or in restricted common stock.



We have the option, in our sole discretion,
to settle the monthly mandatory redemption amount by (i) paying the investor cash in an amount equal to 115% of the monthly mandatory
redemption amount, or (ii) issuing to the investor the number of shares of common stock equal to the monthly mandatory redemption
amount divided by $0.007, provided, however, that in order for us to issue shares upon payment of the monthly mandatory redemption
amount (A) a registration statement is effective, (B) no event of default shall have occurred, and (C) the closing bid price for
our common stock shall be greater than the redemption conversion price (currently $0.007) as of the trading day immediately prior
to the redemption date.  However, in the event that (A) a registration statement is effective, (B) no event of default
shall have occurred, and (C) the closing bid price for our common stock is less than the redemption conversion price (currently
$0.007) but is greater than $0.003, we shall have the option to settle mandatory redemptions by issuing to the investor the number
of shares of common stock equal to the mandatory redemption amount divided by the default conversion price ($0.003).





27







In the event that certain events of default,
such as failure to pay principal or interest when due, failure to issue common stock upon conversion or the delisting or lack of
quotation of our common stock, the redemption conversion price will be reduced to the default conversion price.



Cornell has agreed to restrict its ability
to convert the debenture and exercise the warrants and receive shares of our common stock such that the number of shares of common
stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued
and outstanding shares of our common stock.



We, at our option, have the right with three
business days advance written notice, to redeem a portion or all amounts outstanding under this debenture prior to the maturity
date provided that the closing bid price of our common stock, is less than $0.013 at the time of the redemption. In the event of
a redemption, we are obligated to pay an amount equal to the principal amount being redeemed plus a 15% redemption premium, and
accrued interest.



In connection with the Purchase Agreement,
we also entered into a registration rights agreement, as amended, providing for the filing, within 60 days of closing, of a registration
statement with the Securities and Exchange Commission registering the common stock issuable upon conversion of the debentures.
We are obligated to use our best efforts to cause the registration statement to be declared effective no later than 90 days after
filing the registration statement and to insure that the registration statement remains in effect until the earlier of (i) all
of the shares of common stock issuable upon conversion of the debentures have been sold or (ii) July 10, 2008. In the event of
a default of our obligations under the registration rights agreement, including our agreement to file the Registration Statement
with the Securities and Exchange Commission no later than September 8, 2006, or if the registration statement is not declared effective
by November 22, 2006, we are required to pay to Cornell, as liquidated damages, for each month that the registration statement
has not been filed or declared effective, as the case may be, either a cash amount or shares of our common stock equal to 2% of
the liquidated value of the debentures.



In connection with the securities purchase
agreement, we executed a security agreement in favor of the investor granting them a first priority security interest in all of
our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual
property. The security agreement states that if an event of default occurs under the secured convertible debentures or security
agreements, the investor has the right to take possession of the collateral, to operate our business using the collateral, and
has the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private
sale or otherwise to satisfy our obligations under these agreements. As of June 30, 2008, the Company was in default on this debt.



We have no other 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.







28







ITEM   3. CONTROLS AND PROCEDURES



|a) | Evaluation of Disclosure
Controls and Procedures. As of September 30, 2008, the Company’s management carried out an evaluation, under the supervision
of the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of
the Company’s 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 upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company’s disclosure controls and procedures were ineffective, as of the date of their evaluation, for the purposes
of recording, processing, summarizing and timely reporting material information required to be disclosed in reports filed by the
Company under the Securities Exchange Act of 1934. This assessment was made based on the
need to amend prior filings due to embedded derivatives within various convertible securities and the lack of sufficient personnel
to process transactions. We have hired an outside expert to evaluate and value derivative financial instruments in any and all
convertible securities and when we obtain additional financing will hire additional personnel and implement procedures to properly
account for and disclose all transactions.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 has materially affected, or is likely to materially effect, the Company’s internal control over financial reporting.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



PART II - OTHER INFORMATION



ITEM   1. - LEGAL PROCEEDINGS



From time to time, we may become party to litigation
or other legal proceedings that we consider to be a part of the ordinary course of our business.



On January 16, 2007, Serge Monros, the Company’s
then chief technology officer, filed a derivative suit on behalf of the Company naming the Company, Mario Procopio, and Kathy Procopio
as defendants in the Superior Court of the State of California for the County of San Diego. Mr. Monros’ derivative suit alleged
the following causes of action: (i) breach of fiduciary duty of loyalty; (ii) breach of fiduciary duty of care; (iii) unjust enrichment;
(iv) conversion; (v) waste of corporate assets; and (vi) trade libel. This case was settled on 02/25/2008.



On January 25, 2007, Mario Procopio filed a
derivative suit on behalf of the Company against the Company and SergeMonros in the Superior Court of the State of California for
the County of Orange. Mr. Procopio’s derivative suit alleged the following causes of action: (i) breach of contract; (ii)
promise without intent to perform; (iii) breach of fiduciary duty; (iv) rescission; (v) intentional misrepresentation; (vi) negligent
misrepresentation; and (vii) conversion.



These two suits were settled on February 25,
2008. In reaching the settlement, no parties have made any admission of liability or wrongdoing. As part of the settlement, Mario
Procopio, Kathy Procopio, and certain private corporations controlled by the Procopios have voluntarily waived accrued unpaid compensation
and returned the following securities to the Company: 1,000,000 Preferred A shares, 1,500,000 Preferred C shares, 7,102,300 common
shares, and 125,000,000 options. As consideration, the Company has agreed to a limited indemnification of the Procopios for certain
transactions agreed-upon by the Procopios and the Company. The Procopios also waive any rights to the 4,000,000 Preferred A shares
they previously pledged to Cornell Capital and the parties understand that Cornell Capital retains control of this stock.



In January 2007, Herrera Partners filed an
arbitration claim against the Company in Harris County, Texas. Herrera Partners claim was for $63,700 for non-payment for services
rendered. The suit was settled in January, 2009 and a payment schedule was agreed upon and paid.



On March 14, 2007, United Rentals filed a suit
against the Company, Greg Sweeney, and Mario Procopio in Orange County Superior Court. United Rentals claim is for non-payment
for services rendered. A judgment was entered in favor of United Rentals Northwest, Inc. and has been subsequently paid.



On or about July 28, 2011, SaviCorp, a Nevada
corporation, formerly known as Savi Media Group, Inc. (the “Company”) entered into a Repayment Agreement (the “Repayment
Agreement”) with YA Global Investments, L.P., a Cayman Islands exempt limited partnership formerly known as Cornell Capital
Partners, L.P. (“YA Global”).



On or about July 10, 2006, the Company and
YA Global, then known as Cornell Capital Partners, L.P., entered into a Securities Purchase Agreement which was subsequently amended
and restated on August 17, 2006 (collectively the “SPA”) wherein the Company issued and sold to YA Global secured convertible
debentures in the aggregate amount of approximately US$2,485,000 (collectively, the “Debentures”) and certain warrants
(collectively the “Prior Warrants” and with the Debentures, the “Securities”) to purchase an aggregate
of 2,900,000,000 shares of the Company’s common stock, par value $0.001 (the “Common Stock”).



In connection with the SPA, the Company and
YA Global entered into ancillary agreements, including a Security Agreement, an Insider Pledge and Escrow Agreement, a Registration
Rights Agreement, and other related documents (the SPA and such ancillary agreements are collectively referred to hereinafter as
“Financing Documents”). Copies of the Financing Documents have been attached to the Company’s prior filings with
the United States Securities and Exchange Commission (the “SEC”) and are hereby incorporated in their entirety by reference.





29







Pursuant to the terms of the Repayment Agreement,
all of the Company’s obligations under the Financing Documents have been terminated in full.  Without limitation, all
amounts otherwise due under the Debentures are deemed satisfied in full, the Prior Warrants are deemed cancelled, and any and all
security interests granted by the Company in favor of YA Global pursuant to the Financing Documents have been extinguished, including
the release of 4,000,000 shares of Series A Preferred Stock held in escrow.  In exchange for the foregoing, the Company delivered
to YA Global: (i) a one-time cash payment of US$550,000; and (ii) new warrants to purchase up to 25,000,000 shares of Common Stock
at an exercise price of $0.0119 (the “Current Warrants”). The Current Warrants expire on or about July 28, 2014. A
copy of the Repayment Agreement and Current Warrants have been attached as exhibits to the Form 8-K filed August 2, 2011 and are
hereby incorporated in their entirety by reference.



The Company received a letter from the Securities
and Exchange Commission, Los Angeles Regional Office, dated May 9, 2011. The letter informed us that the SEC had entered into a
“formal order of investigation” into “Savi Media Group, Inc.” The letter included a “Subpoena DucesTecum,”
meaning the Company was given a prescribed period of time to produce all requested documents and information contained in the subpoena.
An index of the source of all such produced information and an authentication declaration were also to be supplied. The stated
purpose of the investigation is a fact-finding inquiry to assist the SEC staff in determining if the Company has violated federal
securities laws. The SEC states there is no implication of negativity or guilt at this stage of the investigation.



We initially hired the Los Angeles law
firm of Troy Gould to represent us in the matter of this investigation. As of the date of this filing, we believe we have provided
all requested material to the SEC. Updates on the investigation will be supplied by supplemental filings hereto.



Status of prior private investment; $0 in 2007
(although HDV sold $13,000 of its shares), $1,000 in 2008 (although HDV sold $453,750 of its shares), $442,000 in 2009, $879,550
in 2010, $1,930,828 in 2011, $342,000 in the first calendar quarter of 2012 and $100,000 in the 2nd quarter of 2012. There is concern
that these private placement securities sales were not made in compliance with applicable law (lack of material disclosure and/or
failure to file securities sales notices as required by federal law).



In 2006, the Company issued shares for services
valued at $611,768. There were issued shares for services valued at $1,416,060 in 2007; shares for services valued at $7,875 in
2008 and shares for services valued at $74,400 in 2009. We have no plans to offer rescission for these share issuances.



We offered rescission to many of the 2011 investors
in late 2011 (“2011 rescission offer”). The legal sustainability of these rescission offers is also being looked at
by Counsel. The results of our 2011 rescission offer, in terms of rescission offers accepted by shareholders, were very encouraging.
We had one rescission offer acceptance and refunded $1,000.



Generally, we believe we have good relationships
with our shareholders. Our plan is to offer rescission to most shareholders obtaining privately offered shares from us since January
1, 2007 through 2011. The Company has pledged to use our best efforts, in good faith, to honor any accepted rescission offer. However,
there is no assurance that rescission offer acceptances will not have a material effect on our finances or that we will be able
to re-pay those electing to rescind in a complete and timely manner.



The Company received a letter dated June 7,
2013 with a Civil Complaint titled Arnold LamarrWeese, et al v. SaviCorp filed in the Northern District of West Virginia. In addition
to SaviCorp, Serge Monros and Craig Waldrop are being sued individually. Settlement discussions failed and Plaintiff's counsel
began service of Process. The Company and Mr. Monros have hired Shustak and Partners to defend the claim. The defendants have sued
for breach of contract, fraud, vicarious liability, and unlawful sale by an unregistered broker. The lawsuit attempts to hold the
Company and Mr. Monros responsible for alleged improprieties of Waldrop. The Company has filed for dismissal and intends on vigorously
defending its rights or reaching a settlement to release the Company and Mr. Monros of any liability.



We may become involved in material legal proceedings
in the future.



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







For the nine months ended September 30,
2008, the Company issued/cancelled the following:



In February 2008, as part of the settlement,
Mario Procopio, Kathy Procopio, and certain private corporations controlled by the Procopios have returned the following securities
to the Company: 1,000,000 Preferred A shares, 1,500,000 Preferred C shares, 7,102,300 common shares, and 125,000,000 options.



In March 2008, 1,500,000 Preferred A shares
were converted to 150,000,000 common shares. In May 2008, 2,152,000 Preferred A shares were converted to 215,200,000 common shares.



For the remainder of 2008, the Board of
Directors authorized the issuance of 13,500,000 shares of its common stock and 112,500 shares of its Preferred C stock to 6 accredited
and unaccredited investors for services rendered valued at an aggregate of $14,625 based on the market value at the date awarded.
The Board of Directors authorized the issuance of an aggregate of 500,000,000 common shares, 5,000,000 Preferred A shares and
5,000,000 Preferred C shares in exchange for a licensing agreement with His Divine Vehicle. His Divine Vehicle subsequently loaned
back 1,000,000 Preferred A shares. No sales commissions were paid in connection with these issuances and all investors
reviewed or had access to all of the Company’s filing pursuant to the Securities Exchange Act of 1934, as amended.





30







Since 2008, the Board of Directors authorized
the issuance of an aggregate of 1,885,018,272 shares of its common stock, 1,525,000 shares of its Preferred A shares and 10,355,500
of its Preferred C shares to accredited and non-accredited investors for total proceeds of $4,772,843. In addition, the Board of
Directors has authorized the issuance of an aggregate of 1,549,418,387 shares of its common stock, 2,406,667 shares of its Preferred
A shares and 456,000 of its Preferred C shares to accredited and non-accredited investors for services rendered valued at an aggregate
of $6,245,339. No sales commissions were paid in connection with these issuances and all investors reviewed or had access to all
of the Company’s filing pursuant to the Securities Exchange Act of 1934, as amended.



ITEM   3. DEFAULTS UPON SENIOR
SECURITIES



On July 10, 2006, we entered into a Securities
Purchase Agreement with Cornell Capital Partners L.P. providing for the sale by us to Cornell of our 10% secured convertible debentures
in the aggregate principal amount of $2,970,000 of which $1,670,000 was advanced immediately. We entered into an amended and restated
securities purchase agreement with Cornell on August 17, 2006. The second installment of $200,000 was advanced on August 17, 2006.
The third installment of $600,000 was advanced on September 1, 2006. The last installment of $500,000 will be advanced two business
days prior to a registration statement being declared effective by the SEC. A portion of the funds advanced were used to pay off
the existing convertible debenture and other advances made by Golden Gate Investors.



In connection with the securities purchase
agreement, we agreed to issue Cornell warrants to purchase an aggregate 2,900,000,000 shares of common stock, exercisable for a
period of five years as follows:



|Number of Warrants |  | Exercise Price
|------------------ |  | --------------
|                   |  |               
|1,000,000,000      |  |               
|1,000,000,000      |  |               
|300,000,000        |  |               
|200,000,000        |  |               
|150,000,000        |  |               
|100,000,000        |  |               
|60,000,000         |  |               
|40,000,000         |  |               
|30,000,000         |  |               
|20,000,000         |  |               



All of the warrants were issued upon closing. 
We also issued to the investor 30 million shares of restricted common stock as a commitment fee.



The debentures mature on the second anniversary
of the date of issuance and bear interest at the annual rate of 10%. Holders may convert, at any time, any amount outstanding under
the debentures into shares of our common stock at a conversion price per share equal to $0.013. Beginning the earlier of (i) the
first business day of the month immediately following the month in which a registration statement is first declared effective or
(ii) November 1, 2006, and continuing on the first business day of each calendar month thereafter, we are required to make a mandatory
redemption payment of $225,000 and accrued and unpaid interest, which payment can be made in cash or in restricted common stock.



We have the option, in our sole discretion,
to settle the monthly mandatory redemption amount by (i) paying the investor cash in an amount equal to 115% of the monthly mandatory
redemption amount, or (ii) issuing to the investor the number of shares of common stock equal to the monthly mandatory redemption
amount divided by $0.007, provided, however, that in order for us to issue shares upon payment of the monthly mandatory redemption
amount (A) a registration statement is effective, (B) no event of default shall have occurred, and (C) the closing bid price for
our common stock shall be greater than the redemption conversion price (currently $0.007) as of the trading day immediately prior
to the redemption date.  However, in the event that (A) a registration statement is effective, (B) no event of default
shall have occurred, and (C) the closing bid price for our common stock is less than the redemption conversion price (currently
$0.007) but is greater than $0.003, we shall have the option to settle mandatory redemptions by issuing to the investor the number
of shares of common stock equal to the mandatory redemption amount divided by the default conversion price ($0.003).



In the event that certain events of default,
such as failure to pay principal or interest when due, failure to issue common stock upon conversion or the delisting or lack of
quotation of our common stock, the redemption conversion price will be reduced to the default conversion price.



Cornell has agreed to restrict its ability
to convert the debenture and exercise the warrants and receive shares of our common stock such that the number of shares of common
stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued
and outstanding shares of our common stock.





31







We, at our option, have the right with three
business days advance written notice, to redeem a portion or all amounts outstanding under this debenture prior to the maturity
date provided that the closing bid price of our common stock, is less than $0.013 at the time of the redemption. In the event of
a redemption, we are obligated to pay an amount equal to the principal amount being redeemed plus a 15% redemption premium, and
accrued interest.



In connection with the Purchase Agreement,
we also entered into a registration rights agreement, as amended, providing for the filing, within 60 days of closing, of a registration
statement with the Securities and Exchange Commission registering the common stock issuable upon conversion of the debentures.
We are obligated to use our best efforts to cause the registration statement to be declared effective no later than 90 days after
filing the registration statement and to insure that the registration statement remains in effect until the earlier of (i) all
of the shares of common stock issuable upon conversion of the debentures have been sold or (ii) July 10, 2008. In the event of
a default of our obligations under the registration rights agreement, including our agreement to file the Registration Statement
with the Securities and Exchange Commission no later than September 8, 2006, or if the registration statement is not declared effective
by November 22, 2006, we are required to pay to Cornell, as liquidated damages, for each month that the registration statement
has not been filed or declared effective, as the case may be, either a cash amount or shares of our common stock equal to 2% of
the liquidated value of the debentures.



In connection with the securities purchase
agreement, we executed a security agreement in favor of the investor granting them a first priority security interest in all of
our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual
property. The security agreement states that if an event of default occurs under the secured convertible debentures or security
agreements, the investor has the right to take possession of the collateral, to operate our business using the collateral, and
has the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private
sale or otherwise to satisfy our obligations under these agreements. As of June 30, 2008, the Company was in default on this debt
and the associated registration rights agreement.



The Company is in default of its registration
rights agreement with the investor and its long-term debt. Such default and the Company’s inability to fund its ongoing operations
increase the likelihood that the investor could seize its assets to partially satisfy the debt or find another operator of those
assets.



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)





32







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.





|                       | SaviCorp                                                                              
|---------------------- | --------------------------------------------------------------------------------------
|                       |                                                                                       
|Date: October 25, 2013 | By: /s/ SERGE MONROS                                                                  
|                       | Serge Monros                                                                          
|                       | President, Chief Executive Officer (Principal Executive Officer) and Director         
|                       |                                                                                       
|Date: October 25, 2013 | By: /s/ SERGE MONROS                                                                  
|                       | Serge Monros                                                                          
|                       | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)































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