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

**Washington,      D.C. 20549**

**FORM      10QSB**

**SAVI      MEDIA GROUP, INC.**

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

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**SAVI      MEDIA GROUP, INC.**

**(A      Development Stage Company)**

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

**Quarterly      Period Ending June 30, 2006**

Table      of Contents

| PART                I. FINANCIAL INFORMATION                                                                                |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                        |   |
| Item                1. Condensed Financial Statements                                                                       |   |
|                                                                                                                        |   |
| Unaudited                Consolidated Balance Sheets:                                                                       |   |
| June                30, 2006 and December 31, 2005                                                                          | 2      |
|                                                                                                                        |   |
| Unaudited                Consolidated Statements of                Operations:                                              |   |
| For                the three and six months ended June 30, 2006 and 2005                and                                 |   |
| for                the period from inception, August 13, 2002, to June 30,                2006                              | 4      |
|                                                                                                                        |   |
| Unaudited                Consolidated Statement of Stockholders’                Deficit                               |   |
| For                the six months ended June 30, 2006                                                                       | 5      |
|                                                                                                                        |   |
| Unaudited                Consolidated Statements of Cash                Flows:                                              |   |
| For                the six months ended June 30, 2006 and 2005                and                                           |   |
| for                the period from inception, August 13, 2002, to June 30,                2006                              | 8      |
|                                                                                                                        |   |
| Notes                to Unaudited Consolidated Financial                Statements                                          | 9      |
|                                                                                                                        |   |
| Item                2. Management's Discussion and Analysis of Financial                Condition and Results of Operations | 15     |
|                                                                                                                        |   |
| Item                3. Controls and Procedures                                                                              | 20     |
|                                                                                                                        |   |
| PART                II. OTHER INFORMATION                                                                                   |   |
|                                                                                                                        |   |
| Item                1. Legal Proceedings                                                                                    | 21     |
|                                                                                                                        |   |
| Item                2. Changes in Securities                                                                                | 21     |
|                                                                                                                        |   |
| Item                3. Defaults Upon Senior Securities                                                                      | 21     |
|                                                                                                                        |   |
| Item                4. Submission of Matters to a Vote of Security                Holders                                   | 21     |
|                                                                                                                        |   |
| Item                5. Other Information                                                                                    | 21     |
|                                                                                                                        |   |
| Item                6. Exhibits                                                                                             | 21     |
|                                                                                                                        |   |
| SIGNATURES                                                                                                                  | 22     |

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PART      I. FINANCIAL INFORMATION

| **SAVI                MEDIA GROUP, INC.**                                        |
|----------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                        |
| **UNAUDITED                CONSOLIDATED CONDENSED BALANCE                SHEET** |
| ***June                30, 2006 and December 31, 2005***                         |
|                                               |
|                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                       |   | **June                30,** |    | **December                31,** |   |
|--------------------------------------------|--------|-----------------------------|---------|---------------------------------|--------|
|                                       |   | **2006**                    |    | **2005**                        |   |
|                                       |   |                        |    | **(Restated)**                  |   |
| **ASSETS**                                 |   |                   |    |                       |   |
|                                       |   |                   |    |                       |   |
| Current                assets:             |   |                   |    |                       |   |
| Cash                and cash equivalents   |   | $                           | 29,415  |                            | $      | 336 |   |
|                                       |   |                        |    |                            |   |   |   |
| Total                current assets        |   |                        | 29,415  |                            |   | 336 |   |
|                                       |   |                        |    |                            |   |   |   |
| Property                and equipment, net |   |                        | 237,208 |                            |   | 5,208 |   |
| Intangible                assets - patents |   |                        | 38,500  |                            |   | 38,500 |   |
|                                       |   |                        |    |                            |   |   |   |
| Total                assets                |   | $                           | 305,123 |                            | $      | 44,044 |   |

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| **SAVI                MEDIA GROUP, INC.**                         |
|-------------------------------------------------------------------|
| **A                Corporation in the Development Stage**         |
| **UNAUDITED                CONSOLIDATED CONDENSED BALANCE SHEET** |
| ***June                30, 2006 and December 31, 2005***          |
|                           |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                     |   | **June                30,** |         | **December                31,** |   |
|--------------------------------------------------------------------------|--------|-----------------------------|--------------|---------------------------------|--------|
|                                                                     |   | **2006**                    |         | **2005**                        |   |
|                                                                     |   |                        |         | **(Restated)**                  |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIT**                 |   |                   |         |                       |   |
|                                                                     |   |                   |         |                       |   |
| Current                liabilities:                                      |   |                   |         |                       |   |
| Note                payable                                              |   | $                           | 142,500      |                            | $      | 142,500 |   |
| Convertible                debt                                          |   |                        | 14,446       |                            |   | 6,519 |   |
| Accounts                payable and accrued liabilities                  |   |                        | 46,419       |                            |   | 31,448 |   |
| Deposit                for warrant exercise                              |   |                        | —      |                            |   | 23,805 |   |
| Advances                from investor                                    |   |                        | 1,048,370    |                            |   | — |   |
| Accounts                payable assumed in re-capitalization             |   |                        | 159,295      |                            |   | 159,295 |   |
| Derivative                financial instrument liabilities               |   |                        | 271,747      |                            |   | 707,499 |   |
| Total                current liabilities                                 |   |                        | 1,682,777    |                            |   | 1,071,066 |   |
|                                                                     |   |                        |         |                            |   |   |   |
| Commitments                and contingencies                             |   |                        |         |                            |   |   |   |
|                                                                     |   |                        |         |                            |   |   |   |
| Stockholders'                deficit:                                    |   |                        |         |                            |   |   |   |
| Series                A convertible preferred stock; $0.001 par value,   |   |                        |         |                            |   |   |   |
| 10,000,000                shares authorized, issued and outstanding      |   |                        | 10,000       |                            |   | 10,000 |   |
| 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, 6,455,275 and 6,060,000     |   |                        |         |                            |   |   |   |
| shares                issued and outstanding at June 30, 2006 and        |   |                        |         |                            |   |   |   |
| December                31, 2005, respectively                           |   |                        | 6,455        |                            |   | 6,060 |   |
| Common                stock: $0.001 par value, 990,000,000 shares        |   |                        |         |                            |   |   |   |
| authorized,                387,606,564 and 209,109,976 shares issued and |   |                        |         |                            |   |   |   |
| outstanding                at June 30, 2006 and December 31, 2005,       |   |                        |         |                            |   |   |   |
| Respectively                                                             |   |                        | 387,607      |                            |   | 209,110 |   |
| Additional                paid-in capital                                |   |                        | 248,795,838  |                            |   | 247,147,631 |   |
| Losses                accumulated during the development stage           |   |                        | (250,577,554 | )                               |   | (248,399,823 | ) |
|                                                                     |   |                        |         |                            |   |   |   |
| Total                stockholders' deficit                               |   |                        | (1,377,654   | )                               |   | (1,027,022 | ) |
|                                                                     |   |                        |         |                            |   |   |   |
| Total                liabilities and stockholders' deficit               |   | $                           | 305,123      |                            | $      | 44,044 |   |

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| **SAVI                MEDIA GROUP, INC.**                                                                                              |
|----------------------------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                                              |
| **UNAUDITED                CONSOLIDATED CONDENSED STATEMENTS OF                OPERATIONS**                                            |
| ***For                the Three Months and Six Months Ended June 30, 2006 and 2005 and                for the                Period*** |
| ***From                Inception, August 13, 2002, to June 30,                2006***                                                  |
|                                                                                                     |

|                                         |   | **Three                Months Ended** |        | **Six                Months Ended** |   | **Inception                to** |   |
|----------------------------------------------|--------|---------------------------------------|-------------|-------------------------------------|--------|---------------------------------|--------|
|                                         |   | **June                30,**           |        | **June                30,**         |   | **June                30,**     |   | **June                30,** |   | **June                30,** |   |
|                                         |   | **2006**                              |        | **2005**                            |   | **2006**                        |   | **2006** |   | **2006** |   |
|                                         |   |                             |        |                           |   |                       |   |    |   |    |   |
| Operating                costs and expenses: |   |                             |        |                           |   |                       |   |    |   |    |   |
| General                and administrative    |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| expenses,                except stock        |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| based                compensation            |   |                                  | 670,166     |                                |   | 193,064                         |   |   | 977,442 |   |   | 285,018 |   |   | 2,205,444 |   |
| Stock-based                compensation      |   |                                  | 89,500      |                                |   | 131,774,534                     |   |   | 587,638 |   |   | 133,929,475 |   |   | 246,027,077 |   |
| Research                and development      |   |                                  | 505,155     |                                |   | 138,296                         |   |   | 624,875 |   |   | 138,296 |   |   | 924,818 |   |
|                                         |   |                                  |             |                                |   |                                 |   |   |  |   |   |  |   |   |  |   |
| Loss                from operations          |   |                                  | (1,264,821  | )                                   |   | (132,105,894                    | )      |   | (2,189,955 | ) |   | (134,352,789 | ) |   | (249,157,339 | ) |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Other                income and (expenses)   |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Interest                Income               |   |                                  | 11          |                                |   | 1                               |   |   | 11 |   |   | 1 |   |   | 29 |   |
| Gain                on settlement            |   |                                  | —     |                                |   | —                         |   |   | — |   |   | — |   |   | 197,033 |   |
| Cost                of recission             |   |                                  | —     |                                |   | —                         |   |   | — |   |   | — |   |   | (43,074 | ) |
| Cost                of recapitalization      |   |                                  | —     |                                |   | —                         |   |   | — |   |   | — |   |   | (273,987 | ) |
| Change                in value of            |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| derivative                financial          |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| instruments                                  |   |                                  | 163,027     |                                |   | (380,353                        | )      |   | 389,735 |   |   | (380,353 | ) |   | 579,274 |   |
| Goodwill                impairment           |   |                                  | —     |                                |   | —                         |   |   | — |   |   | — |   |   | (541,101 | ) |
| Loss                on debt                  |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| extinguishment                               |   |                                  | (360,000    | )                                   |   |                            |   |   | (360,000 | ) |   |   |   |   | (360,000 | ) |
| Interest                expense              |   |                                  | (9,343      | )                                   |   | (909,988                        | )      |   | (17,522 | ) |   | (909,988 | ) |   | (978,389 | ) |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Total                other income            |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| and                expenses, net             |   |                                  | (206,305    | )                                   |   | (1,290,340                      | )      |   | 12,224 |   |   | (1,290,340 | ) |   | (1,420,215 | ) |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Net                loss                      |   | $                                     | (1,471,126  | )                                   | $      | (133,396,234                    | )      | $ | (2,177,731 | ) | $ | (135,643,129 | ) | $ | (250,577,554 | ) |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Weighted                average shares       |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| outstanding                                  |   |                                  | 332,278,786 |                                |   | 108,993,913                     |   |   | 331,619,924 |   |   | 98,644,556 |   |   |   |   |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Net                loss per common share     |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| basic                and dilutive            |   | $                                     | (0.00       | )                                   | $      | (1.22                           | )      | $ | (0.01 | ) | $ | (1.38 | ) |   |   |   |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |
|                                         |   |                                  |        |                                |   |                            |   |   |   |   |   |   |   |   |   |   |

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| **SAVI                MEDIA GROUP, INC.**                                                                   |
|-------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                   |
| **UNAUDITED                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’                DEFICIT** |
| ***For                the Six Months Ended June 30, 2006***                                                 |
|                                                                          |

|                                                                |   | **Series                A Preferred Stock** |       | **Series                B Preferred Stock** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------|------------|---------------------------------------------|--------|
|                                                                |   | **Shares**                                  |       | **Amount**                                  |   | **Shares** |   | **Amount** |   |
|                                                                |   |                                   |       |                                   |   |    |   |    |   |
| Balance                at December 31, 2005, as previously restated |   |                                        | 10,000,000 |                                        | $      | 10,000 |   |   | — |   | $ | — |   |
|                                                                |   |                                        |            |                                        |   |  |   |   |  |   |   |  |   |
| Common                stock issued for cash                         |   |                                        |            |                                        |   |  |   |   |  |   |   |  |   |
| Exercise                of warrants                                 |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
| Conversion                of debt to equity                         |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
| Common                and Preferred stock issued in                 |   |                                        |            |                                        |   |  |   |   |  |   |   |  |   |
| exchange                for consulting services                     |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
| Reduction                of shares in escrow                        |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
| Cancellation                of shares                               |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
|  Shares                issued for Debt Extinguishment          |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
| Net                Loss                                             |   |                                        | —    |                                        |   | — |   |   | — |   |   | — |   |
| Balance                at June 30, 2006                             |   |                                        | 10,000,000 |                                        | $      | 10,000 |   |   | — |   | $ | — |   |

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| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **UNAUDITED                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS'                DEFICIT** |
| ***For                the Six Months Ended June 30, 2006***                                           |
|                                                                              |

|                                                                |   | **Series                C Preferred Stock** |       | **Common                Stock** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------|------------|---------------------------------|--------|
|                                                                |   | **Shares**                                  |       | **Amount**                      |   | **Shares** |   | **Amount** |   |
|                                                                |   |                                   |       |                       |   |    |   |    |   |
| Balance                at December 31, 2005, as previously restated |   |                                        | 6,060,000  |                            | $      | 6,060 |   |   | 209,109,976 |   | $ | 209,110 |   |
|                                                                |   |                                        |            |                            |   |  |   |   |  |   |   |  |   |
| Common                and Preferred stock issued for cash           |   |                                        | 395,275    |                            |   | 395 |   |   | 100,000 |   |   | 100 |   |
| Exercise                of warrants                                 |   |                                        | —    |                            |   | — |   |   | 389,540 |   |   | 389 |   |
| Conversion                of debt to equity                         |   |                                        | —    |                            |   | — |   |   | 162,049,548 |   |   | 162,050 |   |
| Common                and Preferred stock issued in                 |   |                                        |            |                            |   |  |   |   |  |   |   |  |   |
| exchange                for consulting services                     |   |                                        | 1,000,000  |                            |   | 1,000 |   |   | 7,125,000 |   |   | 7,125 |   |
| Reduction                of shares in escrow                        |   |                                        | —    |                            |   | — |   |   | (21,167,500 | ) |   | (21,167 | ) |
| Cancellation                of shares                               |   |                                        | (1,000,000 | )                               |   | (1,000 | ) |   | — |   |   | — |   |
|  Shares                issued for Debt Extinguishment          |   |                                        | —    |                            |   | — |   |   | 30,000,000 |   |   | 30,000 |   |
| Net                Loss                                             |   |                                        | —    |                            |   | — |   |   | — |   |   | — |   |
| Balance                at June 30, 2006                             |   |                                        | 6,455,275  |                            | $      | 6,455 |   |   | 387,606,564 |   | $ | 387,607 |   |

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| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **UNAUDITED                CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS'                DEFICIT** |
| ***For                the Six Months Ended June 30, 2006***                                           |
|                                                               |

|                                                                |   |      |        |        |   | **Losses**                    |   |    |         |
|---------------------------------------------------------------------|--------|----------------|-------------|------------------|--------|-------------------------------|--------|--------------|--------------|
|                                                                |   |      |        |        |   | **Accumulated**               |   |    |         |
|                                                                |   | **Additional** |        |        |   | **During                the** |   |    |         |
|                                                                |   | **Paid-In**    |        | **Subscription** |   | **Development**               |   |    |         |
|                                                                |   | **Capital**    |        | **Receivable**   |   | **Stage**                     |   | **Total**    |         |
|                                                                |   |      |        |        |   |                     |   |    |         |
| Balance                at December 31, 2005, as previously restated |   | $              | 247,147,631 |             | $      | —                       |   | $            | (248,399,823 | ) | $ | (1,027,022 | ) |
|                                                                |   |           |             |             |   |                               |   |         |              |   |   |  |   |
| Common                and Preferred stock issued for cash           |   |           | 382,235     |             |   | —                       |   |         | —      |   |   | 382,730 |   |
| Exercise                of warrants                                 |   |           | 425,577     |             |   | —                       |   |         | —      |   |   | 425,966 |   |
| Conversion                of debt to equity                         |   |           | (115,415    | )                |   | —                       |   |         | —      |   |   | 46,635 |   |
| Common                and Preferred stock issued in                 |   |           |             |             |   |                               |   |         |              |   |   |  |   |
| Exchange                for consulting services                     |   |           | 603,643     |             |   | —                       |   |         | —      |   |   | 611,768 |   |
| Reduction                of shares in escrow                        |   |           | 21,167      |             |   | —                       |   |         | —      |   |   | — |   |
| Cancellation                of shares                               |   |           | 1,000       |             |   | —                       |   |         | —      |   |   | — |   |
|  Shares                issued for Debt Extinguishment          |   |           | 330,000     |             |   | —                       |   |         | —      |   |   | 360,000 |   |
| Net                Loss                                             |   |           | —     |             |   | —                       |   |         | (2,177,731   | ) |   | (2,177,731 | ) |
| Balance                at June 30, 2006                             |   | $              | 248,795,838 |             | $      | —                       |   | $            | (250,577,554 | ) | $ | (1,377,654 | ) |

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**Back            to Table of            Contents**

| **SAVI                MEDIA GROUP, INC.**                                                              |
|--------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                              |
| **UNAUDITED                CONSOLIDATED CONDENSED STATEMENTS OF CASH                FLOWS**            |
| ***For                the Six Months Ended June 30, 2006 and 2005 and for the                Period*** |   |   |   |   |
| ***From                Inception, August 13, 2002, to June 30, 2006***                                 |   |   |   |   |   |   |
|                                                                                    |

|                                                               |   | **June                30,** |       | **June                30,** |   | **Inception                to**  |   |
|--------------------------------------------------------------------|--------|-----------------------------|------------|-----------------------------|--------|----------------------------------|--------|
|                                                               |   | **2006**                    |       | **2005**                    |   | **June                30, 2006** |   |
| Cash                flows from operating activities:               |   |                   |       |                   |   |                        |   |
| Net                loss                                            |   | $                           | (2,177,731 | )                           | $      | (135,643,129                     | )      | $ | (250,577,554 | ) |
| Adjustments                to reconcile net income to net          |   |                        |       |                        |   |                             |   |   |   |   |
| cash                used by operating activities:                  |   |                        |       |                        |   |                             |   |   |   |   |
|  Depreciation                Expense                          |   |                        | 26,357     |                        |   | —                          |   |   | 27,399 |   |
|  Gain                on settlement                            |   |                        | —    |                        |   | —                          |   |   | (197,033 | ) |
|  Impairment                of goodwill                        |   |                        | —    |                        |   | —                          |   |   | 541,101 |   |
|  Cost                of recapitalization                      |   |                        | —    |                        |   | —                          |   |   | 273,987 |   |
|  Amortization                of deferred compensation         |   |                        |       |                        |   |                             |   |   | 2,233,150 |   |
|  Compensatory                common and preferred             |   |                        |       |                        |   |                             |   |   | — |   |
|  stock                issuances                               |   |                        | 611,768    |                        |   | 133,929,475                      |   |   | 212,555,557 |   |
|  Compensatory                option issuances                 |   |                        | —    |                        |   |                             |   |   | 31,250,000 |   |
|  Interest                imputed on non-interest bearing note |   |                        |       |                        |   |                             |   |   | — |   |
|  from                a stockholder                            |   |                        | —    |                        |   | —                          |   |   | 7,254 |   |
|  Interest                expense recognized on issuance and   |   |                        |       |                        |   |                             |   |   | — |   |
|  through                accretion of discount on              |   |                        |       |                        |   |                             |   |   |   |   |
|  long-term                debt                                |   |                        | 8,545      |                        |   | 908,548                          |   |   | 28,877 |   |
|  Change                in fair value of derivatives           |   |                        | (389,735   | )                           |   | 380,353                          |   |   | 296,359 |   |
|  Common                stock issued for rescission agreement  |   |                        | —    |                        |   | —                          |   |   | 43,074 |   |
|  Common                stock issued to pay accounts           |   |                        |       |                        |   |                             |   |   | — |   |
|  payable                and accrued liabilities               |   |                        | —    |                        |   | —                          |   |   | 50,000 |   |
|  Common                stock issuances for extinguishment     |   |                        |       |                        |   |                             |   |   |   |   |
|  of                debt                                       |   |                        | 360,000    |                        |   | —                          |   |   | 360,000 |   |
|  Changes                in accounts payable and accrued       |   |                        |       |                        |   |                             |   |   |   |   |
|  liabilities                                                  |   |                        | 14,971     |                        |   | 17,830                           |   |   | 92,116 |   |
| Net                cash used by operating activities               |   |                        | (1,545,825 | )                           |   | (406,923                         | )      |   | (3,015,713 | ) |
|                                                               |   |                        |       |                        |   |                             |   |   |   |   |
| Cash                flows from investing activities:               |   |                        |       |                        |   |                             |   |   |   |   |
| Purchase                of equipment                               |   |                        | (258,357   | )                           |   | (6,250                           | )      |   | (264,607 | ) |
| Acquisition                of patent rights                        |   |                        | —    |                        |   | —                          |   |   | (38,500 | ) |
| Net                cash used in investing activities               |   |                        | (258,357   | )                           |   | (6,250                           | )      |   | (303,107 | ) |
|                                                               |   |                        |       |                        |   |                             |   |   |   |   |
| Cash                flows from financing activities:               |   |                        |       |                        |   |                             |   |   |   |   |
| Proceeds                from stockholder advances                  |   |                        | 1,048,370  |                        |   | —                          |   |   | 1,098,042 |   |
| Proceeds                from convertible debentures                |   |                        | —    |                        |   | 50,000                           |   |   | 50,000 |   |
| Proceeds                from short term advance                    |   |                        | —    |                        |   | 50,000                           |   |   | 50,000 |   |
| Proceeds                from note payable                          |   |                        | —    |                        |   | 142,500                          |   |   | 142,500 |   |
| Payments                on notes payable                           |   |                        | —    |                        |   | —                          |   |   | (63,000 | ) |
| Proceeds                from warrant exercise                      |   |                        | 402,161    |                        |   | —                          |   |   | 692,758 |   |
| Proceeds                from sale of preferred stock               |   |                        | 381,730    |                        |   | —                          |   |   | 381,730 |   |
| Proceeds                from sale of common stock                  |   |                        | 1,000      |                        |   | 218,230                          |   |   | 996,205 |   |
| Net                cash provided by financing activities           |   |                        | 1,833,261  |                        |   | 460,730                          |   |   | 3,348,235 |   |
|                                                               |   |                        |       |                        |   |                             |   |   |   |   |
| Net                increase in cash and cash equivalents           |   |                        | 29,079     |                        |   | 47,557                           |   |   | 29,415 |   |
|                                                               |   |                        |       |                        |   |                             |   |   |   |   |
| Cash                and cash equivalents at beginning of period    |   |                        | 336        |                        |   | 3,835                            |   |   | - |   |
| Cash                and cash equivalents at end of period          |   | $                           | 29,415     |                        | $      | 51,392                           |   | $ | 29,415 |   |

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**SAVI      MEDIA GROUP, INC.**

**A      Corporation in the Development Stage**

**NOTES      TO UNAUDITED FINANCIAL STATEMENTS**

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

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

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

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

**Significant      Estimates**

|   | The                preparation of financial statements in conformity with accounting                principles generally accepted in the United States of America requires                management to make estimates and assumptions that affect the reported                amounts of assets and liabilities and disclosure of contingent assets                and                liabilities at the dates of the consolidated condensed financial                statements and the reported amounts of revenues and expenses during                the                periods. Actual results could differ from estimates making it reasonably                possible that a change in the estimates could occur in the near                term. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Principles      of Consolidation**

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

**Interim      Financial Statements**

|   | The                accompanying unaudited consolidated condensed financial statements                have                been prepared in accordance with accounting principles generally                accepted                in the United States of America for interim financial information                and with                the instructions to Form 10-QSB and Article 10 of Regulation S-B.                Accordingly, they do not include all of the information and footnotes                required by accounting principles generally accepted in the United                States                of America for complete financial statements. In the opinion of                management, all adjustments (consisting of normal recurring accruals)                considered necessary for a fair presentation have been included.                Operating                results for the three and six-month periods ended June 30, 2006 and                2005 are not necessarily indicative of the results that may be expected                for the respective full years. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Derivative      Financial Instruments**

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**SAVI          MEDIA GROUP, INC.**

**A          Corporation in the Development Stage**

**NOTES          TO UNAUDITED FINANCIAL STATEMENTS**

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

**Derivative      Financial Instruments, continued**

**Going      Concern Considerations**
** **

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**SAVI          MEDIA GROUP, INC.**

**A          Corporation in the Development Stage**

**NOTES          TO UNAUDITED FINANCIAL STATEMENTS**

**Going      Concern Considerations, continued**
** **

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

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

|   | In                order to address its ability to continue as a going concern, implement                its                business plan and fulfill commitments made in connection with its                agreement for acquisition of patent rights the Company intends to                raise                additional capital from sale of its common stock. Sources of funding                may                not be available on terms that are acceptable to the Company and                its                stockholders, or may include terms that will result in substantial                dilution to existing stockholders. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.        **  | **Derivative                Financial Instruments** |
|--------------------------------------------------------------|-----------------------------------------------------|

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

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

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

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

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

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

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

|   | The                value of the discount on the converted notes on the books is being                accreted over the term of the note. For the year ended December 31,                2005                and the six months ended June 30, 2006 the Company accreted $6,616                and                $8,545, respectively, of debt discount. The accretion of debt discount                amount is adjusted in direct proportion to the conversions of debt                to                stock during the period. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**SAVI            MEDIA GROUP, INC.**

**A            Corporation in the Development Stage**

**NOTES            TO UNAUDITED FINANCIAL STATEMENTS**

| **3.        **  | **Derivative                Financial Instruments,                continued** |
|--------------------------------------------------------------|-------------------------------------------------------------------------------|

|   | **Warrants                Issued** |
|--------|------------------------------------|

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

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

|   | **Debt                Features** |
|--------|----------------------------------|

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

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

|   | In                subsequent periods, if the price of the security changes, the embedded                derivative financial instrument related to the debt features will                be                adjusted to the fair value with the corresponding charge or credit                to                other expense or income. The estimated fair value of the debt features                was                determined using the probability weighted average expected cash flows                /                Lattice Model with the closing price on original date of issuance,                a                conversion price based on the terms of the respective contract, a                period                based on the terms of the notes, and a volatility factor on the date                of                issuance. At December 31, 2005, the estimated fair value of the debt                features was approximately $707,023. For the three months ended June                30,                2006, due in part to a decrease in the market value of the Company's                common stock, the Company recorded an "other income" on the consolidated                statement of operations for the change in fair value of the debt                features                of approximately $163,027. For the six months ended June 30, 2006,                due in                part to a decrease in the market value of the Company's common stock,                the                Company recorded an "other income" on the consolidated statement                of                operations for the change in fair value of the debt features of                approximately $389,735. At June 30, 2006, the estimated fair value                of the                debt features was approximately                $271,662. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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**SAVI            MEDIA GROUP, INC.**

**A            Corporation in the Development Stage**

**NOTES            TO UNAUDITED FINANCIAL STATEMENTS**

| **4.       **  | **Stockholders’                Equity** |
|--------------------------------------------------------|-----------------------------------------------|

|   | Following                is a description of transactions affecting stockholders equity in                the                three months ended June 30, 2006: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The                Company issued 5,500,000 shares of common stock to various individuals                that provided consulting and other services to the Company and recognized                compensation expense of $89,500 related to those                issuances. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The                Company issued 215,910 shares of common stock to the holder of its                convertible debt upon exercise of stock warrants and received proceeds                of                $235,342. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The                Company issued 94,784,090 shares of common stock to the holder of                its                convertible debt upon conversion of $2,159 of convertible                debt. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | The                Company issued 30,000,000 shares of common stock to the holder of                its                convertible debt as a payment related to the extinguishment of the                Golden                Gate Investors debt upon the Cornell Capital financing discussed                below                under Liquidity and Capital Resources. The Company recognized a loss                on                debt extinguishment in the amount of $360,000 related to this                issuance. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **5.** | **Subsequent                Events** |
|--------|--------------------------------------|

| Number                of Warrants |   | Exercise                Price |   |
|-----------------------------------|--------|-------------------------------|--------|
|                              |   |                          |   |
| 1,000,000,000                     |   | $                             | 0.003  |   |
| 1,000,000,000                     |   | $                             | 0.006  |   |
| 300,000,000                       |   | $                             | 0.01   |   |
| 200,000,000                       |   | $                             | 0.015  |   |
| 150,000,000                       |   | $                             | 0.02   |   |
| 100,000,000                       |   | $                             | 0.03   |   |
| 60,000,000                        |   | $                             | 0.05   |   |
| 40,000,000                        |   | $                             | 0.075  |   |
| 30,000,000                        |   | $                             | 0.10   |   |
| 20,000,000                        |   | $                             | 0.15   |   |

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**SAVI          MEDIA GROUP, INC.**

**A          Corporation in the Development Stage**

**NOTES          TO UNAUDITED FINANCIAL STATEMENTS**

| **5.** | **Subsequent                Events, continued** |
|--------|-------------------------------------------------|

** **

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

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

**OVERVIEW**

**Business      History**

**Business      Summary**

**Critical      Accounting Policies and Estimates**

**Income      Taxes**

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**Results      of Operations**

**Plan      of Operation**

|   | 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, debburing & 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;                                                                                                                                                                                                                                                                                |
|   | 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:**

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**Projects:      **

*A      fully functional R & D Lab and office with limited manufacturing      capabilities and state of the art diagnostic equipment. *

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

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

**Liquidity      and Capital Resources**

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| Number                of Warrants |   |   | Exercise                Price |   |
|-----------------------------------|--------|--------|-------------------------------|--------|
| 1,000,000,000                     |   | $      | 0.003                         |   |
| 1,000,000,000                     |   | $      | 0.006                         |   |
| 300,000,000                       |   | $      | 0.01                          |   |
| 200,000,000                       |   | $      | 0.015                         |   |
| 150,000,000                       |   | $      | 0.02                          |   |
| 100,000,000                       |   | $      | 0.03                          |   |
| 60,000,000                        |   | $      | 0.05                          |   |
| 40,000,000                        |   | $      | 0.075                         |   |
| 30,000,000                        |   | $      | 0.10                          |   |
| 20,000,000                        |   | $      | 0.15                          |   |

** **

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**Off-Balance      Sheet Arrangements**

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ITEM      3 - CONTROLS AND PROCEDURES

*(a)      Evaluation of disclosure controls and procedures. *

*(b)      Changes in internal control over financial reporting. *

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**PART      II - OTHER INFORMATION**

**ITEM      1 - LEGAL PROCEEDINGS**

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

**ITEM      3 - DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM      5 - OTHER INFORMATION**

**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) |
|--|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**SIGNATURES**

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

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