**UNITED      STATES**
**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-KSB**

| x | **ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

**For      the Fiscal Year Ended December 31, 2006**

|  ̈ | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the Transition Period From _____ to _____**

**SAVI      MEDIA GROUP, INC.**

| **Nevada**                                                                                   |   | **91-1766174**                                   |
|----------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization)                |   | (IRS                Employer Identification No.) |
|                                                                                         |   |                                             |   |
| **12707                High Bluff Drive, Suite 200****San                Diego, California** |   | **92130**                                        | **(858)                350-4207** |
| (Address                of principal executive office)                                       |   | (Postal                Code)                     | (Issuer's                telephone number) |

----

**SAVI      MEDIA GROUP, INC.**

**FORM      10-KSB**

**For      the Fiscal Year Ended December 31, 2006**

|                                                                                                                                                   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Part                I**                                                                                                                              | Page   |
|                                                                                                                                                   |   |
| Item                1. Description of Business.                                                                                                        | 3      |
|                                                                                                                                                   |   |
| Item                2. Description of Property.                                                                                                        | 16     |
|                                                                                                                                                   |   |
| Item                3. Legal Proceedings.                                                                                                              | 17     |
|                                                                                                                                                   |   |
| Item                4. Submission of Matters to a Vote of Security Holders.                                                                            | 17     |
|                                                                                                                                                   |   |
|                                                                                                                                                   |   |
| **Part                II**                                                                                                                             |   |
|                                                                                                                                                   |   |
| Item                5. Market for Common Equity and Related Stockholder                Matters.                                                        | 18     |
|                                                                                                                                                   |   |
| Item                6. Management's Discussion and Analysis or Plan of                Operation.                                                       | 19     |
|                                                                                                                                                   |   |
| Item                7. Financial Statements                                                                                                            | F-1    |
|                                                                                                                                                   |   |
| Item                8. Changes In and Disagreements With Accountants on Accounting and                Financial Disclosure.                            | 24     |
|                                                                                                                                                   |   |
| Item                8A. Controls and Procedures.                                                                                                       | 24     |
|                                                                                                                                                   |   |
| Item                8B. Other Information.                                                                                                             | 24     |
|                                                                                                                                                   |   |
|                                                                                                                                                   |   |
| **Part                III**                                                                                                                            |   |
|                                                                                                                                                   |   |
| Item                9. Directors, Executive Officers, Promoters and Control Persons;                Compliance with Section 16(a) of the Exchange Act. | 25     |
|                                                                                                                                                   |   |
| Item                10. Executive Compensation.                                                                                                        | 27     |
|                                                                                                                                                   |   |
| Item                11. Security Ownership of Certain Beneficial Owners and Management                and                Related Stockholder Matters   | 28     |
|                                                                                                                                                   |   |
| Item                12. Certain Relationships and Related Transactions.                                                                                | 29     |
|                                                                                                                                                   |   |
| Item                13. Exhibits.                                                                                                                      | 30     |
|                                                                                                                                                   |   |
| Item                14. Principal Accountant Fees and Services.                                                                                        | 30     |
|                                                                                                                                                   |   |
|                                                                                                                                                   |   |
| Signatures.                                                                                                                                            | 31     |

----

**PART      I**

**FORWARD-LOOKING      INFORMATION**

**ITEM      1. DESCRIPTION OF BUSINESS.**

**Overview**

**History**

**Automotive      Ventilation Systems**

**Our      Product**

** **

**Benefits      of the**
**Crankcase      Ventilation System**
**Technology**

|   | 1. | The                Crankcase Ventilation System can be applied to older cars,                  eliminating the need to wait for improved features or standards to                be                applied to new vehicles only. While the Crankcase Ventilation System                technology can be installed at the original equipment manufacturer                level,                on new vehicles, the Crankcase Ventilation System technology’s immediate                application will be in the retrofit market on vehicles already on the                road |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 2. | New                technologies and upgrades can be applied at each scheduled service                replacement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | 3. | Supplementary                technologies enable the collection and organized disposal of toxics,                as                supplementary technologies do not exclude periodic replacement or                service.                                                                                                                                                                                                                                                                                                                                                                     |
|   | 4. | The                Crankcase Ventilation System separates the formulation of emission                control                standards from the limitations of the make, year or purpose of the                device.                                                                                                                                                                                                                                                                                                                                                                            |
|   | 5. | The                Crankcase Ventilation System can be applied not only to cars but                also to                all types of vehicles that use gasoline or diesel internal combustion                engines - industrial, commercial, electrical generation equipment,                marine                engines, to name but a few examples.                                                                                                                                                                                                                                      |
|   | 6. | The                Crankcase Ventilation System can reduce emissions, even on new engines,                even those utilizing the most modern technologies.                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 7. | The                Crankcase Ventilation System technology generally will increase the                miles                per gallon and increase horsepower.                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 8. | The                Crankcase Ventilation System is a patented technology for the U.S.,                Canada                and selected overseas markets.                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**Independent      Testing**

**Specific      Product Descriptions**

* *

**Internal      Combustion Engine Crankcase Ventilation System**

**Pricing**

**Marketing      Strategy**

|   | 1. | We                will continue to enhance our Crankcase Ventilation System                  prototypes and products and enhance expected capabilities and confirm                commercialization steps in three phases. These phases are outlined                below: |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       Phase                I: | Focus                on the continued development of the Crankcase Ventilation System                 and all related technologies so as to have a solution to be able                to                sell/market in all vertical markets before the end of                2007.                                                                                                                                                                                                                                               |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                     Phase II:           | To                have products ready for shipment by the end of the third quarter                of 2007                so as to be able to offer all strategic partners, customers, original                equipment manufacturers and end-users products in the first three                months                of year 2008.                                                                                                                                                                                                    |
|                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                    Phase                III:                 | Thereafter,                continue the development of the vehicle emission reduction and engine                improvement technology by incorporating the use of additional                light-weight, powerful, state-of- the-art materials as well as enhanced                units that are based on designs currently in development to refine                products which will work with as many known existing gasoline and                diesel                engine systems as economically                practical. |

 

|   | 2. | We                will continue to demonstrate how the Crankcase Ventilation System                 technology can be retrofitted into various standard and commercial                vehicles. Starting in 1996, field-testing began on our Crankcase                Ventilation System technology and we continue to seek additional                parties                to do next generation pilots. We will continue the task of seeking                early-stage adopters of our Crankcase Ventilation System technology                in                applications and vehicles before the end of the third quarter of                year                2007. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | The                Company intends to adopt a pull-through market strategy. Our strategy                evolves around developing and commercializing our Crankcase Ventilation                System technology and sub-components tailored to the specific application                needs of industry original equipment manufacturers and partners (e.g..,                fleet, transportation, automotive, trucks, etc.), while focusing                solely on                licensing the entire Crankcase Ventilation System   technology                eventually to an established party for full-scale market commercialization                (i.e.., automotive and/or truck manufacturer, automobile maker, automobile                retrofit supplier, etc.). We will work directly with end-users (who                could                pull-through our products to manufacturers) as well as original equipment                manufacturers and partners to establish emission reduction products                that                are based on specific requirements and on the manufacturing and internal                partners’ capabilities. Conversely, with respect to the entire Crankcase                Ventilation System, we will seek to form one or several manufacturing                joint ventures or licensee agreements. In this situation, we will                continue                to play a leading role in the development area, up to and including                the                production and testing of prototypes for technical and commercial                evaluations. In the long-term, we will continue to provide technical                support and research & development to the manufacturing and marketing                activities of our joint venture partners regarding the Crankcase                Ventilation System   technology. Accordingly, the strategy includes                three main components: |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a. | Development                and licensing activities regarding the Crankcase Ventilation System                 technology; |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------|
|   | b. | Direct                sales and manufacturing activities; and                                                                   |
|   | c. | Various                system manufacturing and/or sale                activities.                                              |

|   | 4. | Ultimately,                we will seek to expand our range of strategic partners and other                pilot                projects. As part of our business model to creating a joint venture                and/or                securing a licensing agreement with an established partner, our management                has undertaken preliminary discussions regarding partnering agreements                but                intends to pursue these continuously with the goal that pilot projects,                targeted at vehicle fleets, may begin in calendar year 2007. We are                able                to serve as the development arm of any original equipment manufacturers                and/or partners while also actively pursuing in contract development                and                pre production work. As part of our development role, we will continue                to                produce and test prototypes, for external customers and for joint                venture                partners. Fine tuning adjustments usually needed during the early                stages                of production will best be resolved by having the original equipment                manufacturers and joint venture partners available on site. Once                larger                production volumes are needed, production will be moved to original                equipment manufacturers and/or partners’ mass manufacturing plants, whose                design will benefit from the experience acquired during the ramp-up                phase.                We intend to contract with OEMs and client partners for the production                and                test of the samples we will need to implement our development                strategy. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 5. | On                a longer term basis, we will focus on contract opportunities most                likely                to lead to licensing transactions. We desire that such opportunities                will                involve research areas in which we maintain a strong potential patent                position and customers, which have the necessary industrial resources                and                market presence to successfully commercialize the licensed                technologies. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Suppliers**

**Intellectual      Property**

**Competition**

**Government      Regulations**

**Employees**

**RISKS      RELATED TO BUSINESS**

**Risks      Relating to Our Business****:**

**We      Have a Limited Operating History Upon Which You Can Base An Investment      Decision.**

**We      Have a History Of Losses Which May Continue, Which May Negatively Impact Our      Ability to Achieve Our Business Objectives.**

**If      We Are Unable to Obtain Additional Funding Our Business Operations Will be      Harmed.**

**If      We Do Obtain Additional Financing Our Then Existing Shareholders May Suffer      Substantial Dilution.**

**Our      Independent Auditors Have Expressed Substantial Doubt About Our Ability to      Continue As a Going Concern, Which May Hinder Our Ability to Obtain Future      Financing.**

**Many      of Our Competitors are Larger and Have Greater Financial and Other Resources      than We do and Those Advantages Could Make it Difficult for Us to Compete With      Them**

**Competition      in the US market is fierce, with significant technical developments occurring      within the past several years.**

**We      Acquired Rights to Our Technology from One of the Founding Investors Without      a      Valuation Opinion or Arm’s Length Negotiations**

**A      Manufacturer's Inability to Produce Our Goods on Time and to Our Specifications      Could Result in Lost Revenue and Net Losses**

**As      a Result of Our Industry, We Need to Maintain Substantial Insurance Coverage,      Which Could Become Very Expensive or Have Limited      Availability.**

**Any      Inability to Adequately Protect Our Proprietary Technology Could Harm Our      Ability to Compete.**

**Our      Products may Infringe Upon the Intellectual Property Rights of Others and      Resulting Claims Against Us Could be Costly and Require Us to Enter Into      Disadvantageous License or Royalty Arrangements**

**If      We Are Unable to Retain the Services of Messrs. Sweeney, Scott or Monros or      If      We Are Unable to Successfully Recruit Qualified Personnel, We May Not Be Able      to      Continue Our Operations.**

**Risks      Relating to Our Current Financing Arrangement**
**:      **

**There      Are a Large Number of Shares Underlying Our Convertible Debentures and Warrants      That May be Available for Future Sale and the Sale of These Shares May Depress      the Market Price of Our Common Stock.**

**The      Issuance of Shares Upon Conversion of the Secured Convertible Debentures and      Exercise of Outstanding Warrants May Cause Immediate and Substantial Dilution      to      Our Existing Stockholders.**

**If      Our Stock Prices Falls Below $.003 Per Share We Will Be Required To Make Monthly      Payments In Cash And If We Are Required for Any Other any Other Reason to Repay      Our Outstanding Secured Convertible Debentures, We Would Be Required to Deplete      Our Working Capital, If Available, Or Raise Additional Funds. Our Failure to      Repay the Secured Convertible Debentures, If Required, Could Result in Legal      Action Against Us, Which Could Require the Sale of Substantial      Assets.**

**If      an Event of Default Occurs under the Securities Purchase Agreement dated July      10, 2006, as Amended, Secured Convertible Debentures or Security Agreement,      the      Investors Could Take Possession of all Our Goods, Inventory, Contractual Rights      and General Intangibles, Receivables, Documents, Instruments, Chattel Paper,      and      Intellectual Property.**

**Risks      Relating to Our Common Stock**
**:      **

**There      Are a Large Number of Shares Underlying Our Series A and C Convertible Preferred      Stock and the Issuance of Shares Upon Conversion of the Series A and C      Convertible Preferred Stock Would Cause Immediate and Substantial Dilution      to      Our Existing Stockholders.**

**Our      Officers And Directors Own a Controlling Interest in Our Voting Stock And      Investors Will Not Have Any Voice in Our Management.**

**If      We Fail to Remain Current in Our Reporting Requirements, We Could be Removed      From the OTC Bulletin Board Which Would Limit the Ability of Broker-Dealers      to      Sell Our Securities and the Ability of Stockholders to Sell Their Securities      in      the Secondary Market.**

**Our      Common Stock is Subject to the "Penny Stock" Rules of the SEC and the Trading      Market in Our Securities is Limited, Which Makes Transactions in Our Stock      Cumbersome and May Reduce the Value of an Investment in Our Stock.**

| ·   | that                a broker or dealer approve a person's account for transactions in                penny                stocks; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the                broker or dealer receive from the investor a written agreement to                the                transaction, setting forth the identity and quantity of the penny                stock to                be purchased. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | obtain                financial information and investment experience objectives of the                person;                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | make                a reasonable determination that the transactions in penny stocks                are                suitable for that person and the person has sufficient knowledge                and                experience in financial matters to be capable of evaluating the risks                of                transactions in penny stocks. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | sets                forth the basis on which the broker or dealer made the suitability                determination; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | that                the broker or dealer received a signed, written agreement from the                investor prior to the transaction. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      2. DESCRIPTION OF PROPERTY.**

**ITEM      3. LEGAL PROCEEDINGS.**
** **

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

|   | (b) | increase                the number of authorized shares of preferred stock, par value $.001                per                share (the “Preferred Stock”), of the Company from 30,000,000 shares to                40,000,000 shares; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**PART      II**

**ITEM      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER      MATTERS.**

**MARKET      INFORMATION**
 

|                          | **Fiscal                Year 2005** |
|-------------------------------|-------------------------------------|
|                          | **High**                            | **Low** |
| First                Quarter  | $0.40                               | $0.12 |
| Second                Quarter | $0.38                               | $0.03 |
| Third                Quarter  | $0.06                               | $0.01 |
| Fourth                Quarter | $0.06                               | $0.01 |

|                          | **Fiscal                Year 2006** |
|-------------------------------|-------------------------------------|
|                          | **High**                            | **Low** |
| First                Quarter  | $0.04                               | $0.01 |
| Second                Quarter | $0.03                               | $0.01 |
| Third                Quarter  | $0.02                               | $0.01 |
| Fourth                Quarter | $0.0096                             | $0.005 |

**HOLDERS**

**DIVIDENDS**

**RECENT      SALE OF UNREGISTERED SECURITIES**

**ITEM      6 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

**Business      History**

**Business      Summary**

**Critical      Accounting Policies and Estimates**

*Share-Based      Payment*

*Accounting      for Stock Issued to Employees *
*Accounting      for Stock-Based Compensation*
*Accounting      for Stock-Based Compensation—Transition and Disclosure*

**Plan      of Operations**

|   | 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:*

*Projects:      *

*An      R & D Lab and adjacent offices*

*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. *

**Results      of Operations**

**Plan      of Operation**

**$**

**Liquidity      and Capital Resources**

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

| 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 |

** **

**Off-Balance      Sheet Arrangements**

----

**ITEM      7. FINANCIAL STATEMENTS.**

| **SAVI                MEDIA GROUP, INC.**                                                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                                               |
| **TABLE                OF CONTENTS**                                                                                                    |
|                                                                                                                                    |
|                                                                                                                                    |
|                                                                                                                                    |   |
|                                                                                                                                    | **Page(s)** |
|                                                                                                                                    |   |
| Report                of Registered Independent Public Accounting Firm                                                                  | F-2 |
|                                                                                                                                    |   |
| Consolidated                Balance Sheets at December 31, 2006 and 2005                                                                | F-3 |
|                                                                                                                                    |   |
| Consolidated                Statements of Operations for the years ended December 31, 2006 and                2005,                     |   |
| and                for the period from inception, August 13, 2002, to December 31,                2006                                  | F-4 |
|                                                                                                                                    |   |
| Consolidated                Statements of Stockholders' Deficit for the years ended December                31, 2006                and |   |
| 2005,                and for the period from inception, August 13, 2002, to December 31,                2006                            | F-5                to F-19 |
|                                                                                                                                    |   |
| Consolidated                Statements of Cash Flows for the years ended December 31, 2006 and                2005,                and  |   |
| for                the period from inception, August 13, 2002, to December 31,                2006                                      | F-20 |
|                                                                                                                                    |   |
| Notes                to Consolidated Financial Statements                                                                               | F-21-F-41 |
|                                                                                                                                    |   |

----

**Report      of Independent Registered Public Accounting Firm**

*/s/      Ham, Langston & Brezina, L.L.P.*

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| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                BALANCE SHEETS**                                                                     |
| ***December                31, 2006 and 2005***                                                                    |
|                                                                                                               |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **ASSETS**                                                                                                         |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                assets:                                                                                     |   |   |   |   |   |   |
|                                                                                                               | Cash                and cash equivalents |   | $ | 1,088 |   | $ | 336 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Total                current assets |   |   | 1,088 |   |   | 336 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Furniture                and equipment, net                                                                        |   |   | 202,401 |   |   | 5,208 |
| Deferred                financing costs                                                                            |   |   | 86,371 |   |   | - |
| Intangible                assets - patent rights                                                                   |   |   | - |   |   | 38,500 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   | Total                assets |   | $ | 289,860 |   | $ | 44,044 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIT**                                                           |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                liabilities:                                                                                |   |   |   |   |   |   |
|                                                                                                               | Bank                overdraft |   | $ | 3,631 |   | $ | - |
|                                                                                                               | Note                payable |   |   | - |   |   | 142,500 |
|                                                                                                               | Convertible                debt |   |   | 705,864 |   |   | 6,519 |
|                                                                                                               | Accounts                payable and accrued liabilities |   |   | 822,282 |   |   | 31,448 |
|                                                                                                               | Accounts                payable and accrued liabilities - related party |   |   | 59,935 |   |   | - |
|                                                                                                               | Deposit                for warrant exercise |   |   | - |   |   | 23,805 |
|                                                                                                               | Accounts                payable assumed in recapitalization |   |   | 159,295 |   |   | 159,295 |
|                                                                                                               | Derivative                liabilities - embedded derivatives |   |   | 3,459,980 |   |   | 707,024 |
|                                                                                                               | Derivative                liabilities - warrants |   |   | 16,101,795 |   |   | 475 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Total                current liabilities |   |   | 21,312,782 |   |   | 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, 6,060,000 and 4,915,275 |   |   |   |   |   |   |
|                                                                                                               |   | shares                issued and outstanding at December 31, 2006 and |   |   |   |   |   |   |
|                                                                                                               |   | 2005,                respectively |   |   | 4,915 |   |   | 6,060 |
|                                                                                                               | Common                stock: $0.001 par value, 6,000,000,000 shares |   |   |   |   |   |   |
|                                                                                                               |   | authorized,                602,106,564 and 209,110,976 shares issued |   |   |   |   |   |   |
|                                                                                                               |   | and                outstanding at December 31, 2006 and 2005, respectively |   |   | 602,107 |   |   | 209,110 |
|                                                                                                               | Additional                paid-in capital |   |   | 249,630,380 |   |   | 247,147,631 |
|                                                                                                               | Losses                accumulated during the development stage |   |   | (271,270,324) |   |   | (248,399,823) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Total                stockholders' deficit |   |   | (21,022,922) |   |   | (1,027,022) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   | Total                liabilities and stockholders' deficit |   | $ | 289,860 |   | $ | 44,044 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENTS OF OPERATIONS**                                                           |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Inception                to** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |   | **December                31, 2006** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                costs and expenses:                                                                       |   |   |   |   |   |   |   |   |   |
|                                                                                                               | General                and administrative expenses, |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | except                items listed separately below |   | $ | 2,050,241 |   | $ | 605,923 |   | $ | 3,289,701 |
|                                                                                                               | Depreciation                expense |   |   | 49,152 |   |   | 1,042 |   |   | 50,194 |
|                                                                                                               | Research                and development |   |   | 1,153,820 |   |   | 299,943 |   |   | 1,453,763 |
|                                                                                                               | Stock-based                compensation |   |   | 587,638 |   |   | 136,790,718 |   |   | 246,014,577 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   | Loss                from operations |   |   | (3,840,851) |   |   | (137,697,626) |   |   | (250,808,235) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                income and (expenses)                                                                         |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Interest                Income |   |   | 157 |   |   | 1 |   |   | 175 |
|                                                                                                               | Gain                on settlement |   |   | - |   |   | - |   |   | 197,033 |
|                                                                                                               | Cost                of rescission |   |   | - |   |   | - |   |   | (43,074) |
|                                                                                                               | Cost                of recapitalization |   |   | - |   |   | - |   |   | (273,987) |
|                                                                                                               | Goodwill                impairment |   |   | - |   |   | - |   |   | (541,101) |
|                                                                                                               | Impairment                of property and equipment |   |   | (235,299) |   |   | - |   |   | (235,299) |
|                                                                                                               | Impairment                of patent rights |   |   | (38,500) |   |   | - |   |   | (38,500) |
|                                                                                                               | Loss                on extinguishment of debt |   |   | (492,464) |   |   | - |   |   | (492,464) |
|                                                                                                               | Change                in fair value of derivative financial instruments |   |   | 27,579,380 |   |   | 189,539 |   |   | 27,768,919 |
|                                                                                                               | Interest                expense |   |   | (45,842,924) |   |   | (918,002) |   |   | (46,803,791) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   | Total                other income and expenses, net |   |   | (19,029,650) |   |   | (728,462) |   |   | (20,462,089) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   | Net                loss |   | $ | (22,870,501) |   | $ | (138,426,088) |   | $ | (271,270,324) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                average shares outstanding                                                                 |   |   | 403,200,197 |   |   | 121,294,340 |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss per common share - basic and dilutive                                                      |   | $ | (0.06) |   | $ | (1.14) |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                A Preferred Stock** |   | **Series                B Preferred Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at inception, August 13, 2002                                                               |   |   | - |   | $ | - |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Initial                contribution to establish Energy |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Resource                Management, Inc. |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Recapitalization                on August 26, 2002 |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2002                                                                        |   |   | - |   | $ | - |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Preferred                Stock** |   | **Common                Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at inception, August 13, 2002                                                               |   |   | - |   | $ | - |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Initial                contribution to establish Energy |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Resource                Management, Inc. |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Recapitalization                on August 26, 2002 |   |   | - |   |   | - |   |   | 5,335 |   |   | 5 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services |   |   | - |   |   | - |   |   | 1,086 |   |   | 1 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2002                                                                        |   |   | - |   | $ | - |   |   | 6,421 |   | $ | 6 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006 ***                    |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Losses** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulated** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Additional** |   |   |   |   | **During                the** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Paid-In** |   | **Deferred** |   | **Development** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Capital** |   | **Compensation** |   | **Stage** |   | **Total** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at inception, August 13, 2002                                                               |   | $ | - |   | $ | - |   | $ | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Initial                contribution to establish Energy |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Resource                Management, Inc. |   |   | 1,020 |   |   | - |   |   | - |   |   | 1,020 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Recapitalization                on August 26, 2002 |   |   | (5) |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services |   |   | 2,233,149 |   |   | (1,030,917) |   |   |   |   |   | 1,202,233 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | (1,555,838) |   |   | (1,555,838) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2002                                                                        |   | $ | 2,234,164 |   | $ | (1,030,917) |   | $ | (1,555,838) |   | $ | (352,585) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                A Preferred Stock** |   | **Series                B Preferred Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2002                                                                        |   |   | - |   | $ | - |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Recognition                of deferred compensation |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | under                consulting agreements |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                extension of acquisition |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | agreement |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued as a contribution |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | to                a related charitable organization |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to escrow for |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | acquisition                of DreamCity |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Interest                recognition on loan from |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stockholder |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2003                                                                        |   |   | - |   | $ | - |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                C Preferred Stock** |   | **Common                Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2002                                                                        |   |   | - |   | $ | - |   |   | 6,421 |   | $ | 6 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Recognition                of deferred compensation |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | under                consulting agreements |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | - |   |   | - |   |   | 4,180 |   |   | 4 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | - |   |   | - |   |   | 1,200 |   |   | 1 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                extension of acquisition |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | agreement |   |   | - |   |   | - |   |   | 110 |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued as a contribution |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | to                a related charitable organization |   |   | - |   |   | - |   |   | 2,280 |   |   | 3 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to escrow for |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | acquisition                of DreamCity |   |   | - |   |   | - |   |   | 8,000 |   |   | 8 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Interest                recognition on loan from |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stockholder |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2003                                                                        |   |   | - |   | $ | - |   |   | 22,191 |   | $ | 22 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Losses** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulated** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Additional** |   |   |   |   | **During                the** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Paid-In** |   | **Deferred** |   | **Development** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Capital** |   | **Compensation** |   | **Stage** |   | **Total** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2002                                                                        |   | $ | 2,234,164 |   | $ | (1,030,917) |   | $ | (1,555,838) |   | $ | (352,585) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Recognition                of deferred compensation |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | under                consulting agreements |   |   | - |   |   | 1,030,917 |   |   | - |   |   | 1,030,917 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | 154,996 |   |   | - |   |   | - |   |   | 155,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 170,055 |   |   | - |   |   | - |   |   | 170,056 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                extension of acquisition |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | agreement |   |   | 4,400 |   |   | - |   |   | - |   |   | 4,400 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued as a contribution |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | to                a related charitable organization |   |   | 91,197 |   |   | - |   |   | - |   |   | 91,200 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to escrow for |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | acquisition                of DreamCity |   |   | 359,992 |   |   | - |   |   | - |   |   | 360,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Interest                recognition on loan from |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stockholder |   |   | 6,209 |   |   | - |   |   | - |   |   | 6,209 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   | - |   |   | - |   |   | (1,999,913) |   |   | (1,999,913) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2003                                                                        |   | $ | 3,021,013 |   | $ | - |   | $ | (3,555,751) |   | $ | (534,716) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                A Preferred Stock** |   | **Series                B Preferred Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2003                                                                        |   |   | - |   | $ | - |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                Stock issued for acquisition of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | patent                rights |   |   | 5,000,000 |   |   | 5,000 |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in payment of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | legal                fees |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Special                dividend to certain major |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stockholders                in Gene-Cell, Inc. |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 5,000,000 |   |   | 5,000 |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to repay |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | debt |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to round stock splits |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                        |   |   |                   10,000,000 |   | $ | 10,000 |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                C Preferred Stock** |   | **Common                Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2003                                                                        |   |   | - |   | $ | - |   |   | 22,191 |   | $ | 22 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                Stock issued for acquisition of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | patent                rights |   |   | - |   |   | - |   |   | 5,100,000 |   |   | 5,100 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | - |   |   | - |   |   | 39,600,000 |   |   | 39,600 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in payment of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | legal                fees |   |   | - |   |   | - |   |   | 252,000 |   |   | 252 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Special                dividend to certain major |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stockholders                in Gene-Cell, Inc. |   |   | - |   |   | - |   |   | 5,000,000 |   |   | 5,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | - |   |   | - |   |   | 31,926,240 |   |   | 31,926 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to repay |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | debt |   |   | - |   |   | - |   |   | 5,002,000 |   |   | 5,002 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to round stock splits |   |   | - |   |   | - |   |   | 45,336 |   |   | 45 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                        |   |   | - |   | $ | - |   |   | 86,947,767 |   | $ | 86,947 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLDERS' DEFICIT**                                                 |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Losses** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulated** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Additional** |   |   |   |   | **During                the** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Paid-In** |   | **Deferred** |   | **Development** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Capital** |   | **Compensation** |   | **Stage** |   | **Total** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2003                                                                        |   | $ | 3,021,013 |   | $ | - |   | $ | (3,555,751) |   | $ | (534,716) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                Stock issued for acquisition of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | patent                rights |   |   | (10,100) |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | 403,125 |   |   | - |   |   | - |   |   | 442,725 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in payment of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | legal                fees |   |   | 49,748 |   |   | - |   |   | - |   |   | 50,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Special                dividend to certain major |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stockholders                in Gene-Cell, Inc. |   |   | (5,000) |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued in exchange |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | for                consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 106,196,089 |   |   | - |   |   | - |   |   | 106,233,015 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to repay |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | debt |   |   | 94,998 |   |   | - |   |   | - |   |   | 100,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to round stock splits |   |   | (45) |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   | - |   |   | - |   |   | (106,417,984) |   |   | (106,417,984) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                        |   | $ | 109,749,828 |   | $ | - |   | $ | (109,973,735) |   | $ | (126,960) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLERS' DEFICIT**                                                  |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                A Preferred Stock** |   | **Series                B Preferred Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                        |   |   | 10,000,000 |   | $ | 10,000 |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued in |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | exchange                for consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued upon exercise of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stock                warrants |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | notes                payable |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Return                and cancellation of shares |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to escrow for debt |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | conversions                and warrant exercises |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Issuance                of compensatory stock options to |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Chief                Executive Officer |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                        |   |   | 10,000,000 |   | $ | 10,000 |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLERS' DEFICIT**                                                  |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                C Preferred Stock** |   | **Common                Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                        |   |   | - |   | $ | - |   |   | 86,947,767 |   | $ | 86,947 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | - |   |   | - |   |   | 22,150,950 |   |   | 22,151 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued in |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | exchange                for consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 6,060,000 |   |   | 6,060 |   |   | 42,828,835 |   |   | 42,829 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued upon exercise of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stock                warrants |   |   | - |   |   | - |   |   | 244,763 |   |   | 245 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | notes                payable |   |   | - |   |   | - |   |   | 42,215,361 |   |   | 42,215 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Return                and cancellation of shares |   |   | - |   |   | - |   |   | (6,466,700) |   |   | (6,467) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to escrow for debt |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | conversions                and warrant exercises |   |   | - |   |   | - |   |   | 21,190,000 |   |   | 21,190 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Issuance                of compensatory stock options to |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Chief                Executive Officer |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                        |   |   | 6,060,000 |   | $ | 6,060 |   |   | 209,110,976 |   | $ | 209,110 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLERS' DEFICIT**                                                  |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Losses** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulated** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Additional** |   |   |   |   | **During                the** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Paid-In** |   | **Deferred** |   | **Development** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Capital** |   | **Compensation** |   | **Stage** |   | **Total** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2004                                                                        |   | $ | 109,749,828 |   | $ | - |   | $ | (109,973,735) |   | $ | (126,960) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for cash under |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Regulation                D offering |   |   | 374,409 |   |   | - |   |   | - |   |   | 396,360 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued in |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | exchange                for consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 105,491,829 |   |   | - |   |   | - |   |   | 105,540,718 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued upon exercise of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stock                warrants |   |   | 268,935 |   |   | - |   |   | - |   |   | 269,180 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | notes                payable |   |   | 27,353 |   |   | - |   |   | - |   |   | 69,568 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Return                and cancellation of shares |   |   | 6,467 |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued to escrow for debt |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | conversions                and warrant exercises |   |   | (21,190) |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Issuance                of compensatory stock options to |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | Chief                Executive Officer |   |   | 31,250,000 |   |   | - |   |   | - |   |   | 31,250,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | (138,426,088) |   |   | (138,426,088) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                        |   | $ | 247,147,631 |   | $ | - |   | $ | (248,399,823) |   | $ | (1,027,022) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLERS' DEFICIT**                                                  |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                A Preferred Stock** |   | **Series                B Preferred Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                        |   |   | 10,000,000 |   | $ | 10,000 |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued for cash and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | debt                conversion under Regulation D offering |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued in |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | exchange                for consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued upon exercise of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stock                warrants |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | notes                payable |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Return                and cancellation of shares |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock returned to escrow for debt |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | conversions                and warrant exercises |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | upon                debt extinguishment |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for debt extinguishment |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for debt commitment |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of Series |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | C                preferred stock |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                        |   |   | 10,000,000 |   | $ | 10,000 |   |   | - |   | $ | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLERS' DEFICIT**                                                  |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Series                C Preferred Stock** |   | **Common                Stock** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Shares** |   | **Amount** |   | **Shares** |   | **Amount** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                        |   |   | 6,060,000 |   | $ | 6,060 |   |   | 209,110,976 |   | $ | 209,110 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued for cash and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | debt                conversion under Regulation D offering |   |   | 395,275 |   |   | 395 |   |   | 600,000 |   |   | 600 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued in |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | exchange                for consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 1,000,000 |   |   | 1,000 |   |   | 7,125,000 |   |   | 7,125 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued upon exercise of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stock                warrants |   |   | - |   |   | - |   |   | 389,540 |   |   | 389 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | of                notes payable |   |   | - |   |   | - |   |   | 162,049,548 |   |   | 162,050 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Return                and cancellation of shares |   |   | (1,000,000) |   |   | (1,000) |   |   |  |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock returned to escrow for debt |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | conversions                and warrant exercises |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | upon                debt extinguishment |   |   | - |   |   | - |   |   | (21,168,500) |   |   | (21,167) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for debt extinguishment |   |   | - |   |   | - |   |   | 60,000,000 |   |   | 60,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for debt commitment |   |   | - |   |   | - |   |   | 30,000,000 |   |   | 30,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of Series |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | C                preferred stock |   |   | (1,540,000) |   |   | (1,540) |   |   | 154,000,000 |   |   | 154,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                        |   |   | 4,915,275 |   | $ | 4,915 |   |   | 602,106,564 |   | $ | 602,107 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENT OF STOCKHOLERS' DEFICIT**                                                  |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Losses** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Accumulated** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Additional** |   |   |   |   | **During                the** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Paid-In** |   | **Deferred** |   | **Development** |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **Capital** |   | **Compensation** |   | **Stage** |   | **Total** |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                        |   | $ | 247,147,631 |   | $ | - |   | $ |                              (248,399,823) |   | $ | (1,027,022) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued for cash and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | debt                conversion under Regulation D offering |   |   | 529,237 |   |   | - |   |   | - |   |   | 530,232 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                and preferred stock issued in |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | exchange                for consulting services and |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | employee                compensation |   |   | 603,643 |   |   | - |   |   | - |   |   | 611,768 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued upon exercise of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | stock                warrants |   |   | 425,577 |   |   | - |   |   | - |   |   | 425,966 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | notes                payable |   |   | (115,415) |   |   | - |   |   | - |   |   | 46,635 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Return                and cancellation of shares |   |   | 1,000 |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock returned to escrow for debt |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | conversions                and warrant exercises |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | upon                debt extinguishment |   |   | 21,167 |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for debt extinguishment |   |   | 750,000 |   |   | - |   |   | - |   |   | 810,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for debt commitment |   |   | 420,000 |   |   | - |   |   | - |   |   | 450,000 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Common                stock issued for conversion of Series |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | C                preferred stock |   |   | (152,460) |   |   | - |   |   | - |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                Loss |   |   | - |   |   | - |   |   | (22,870,501) |   |   | (22,870,501) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2006                                                                        |   | $ | 249,630,380 |   | $ | - |   | $ | (271,270,324) |   | $ | (21,022,922) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

----

| **SAVI                MEDIA GROUP, INC.**                                                                          |
|--------------------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                                          |
| **CONSOLIDATED                STATEMENTS OF CASH FLOWS**                                                           |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period***              |
| ***From                Inception, August 13, 2002, to December 31,                2006***                          |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **Inception                to** |
|                                                                                                               |   |   |   |   |   |   |   |   |   | **2006** |   | **2005** |   | **December                31, 2006** |
| Cash                flows from operating activities:                                                               |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Net                loss |   |   |   |   |   | $ | (22,870,501) |   | $ | (138,426,088) |   | $ | (271,270,324) |
|                                                                                                               | Adjustments                to reconcile net income to net |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   | cash                used by operating activities: |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   | Depreciation                expense |   |   | 49,152 |   |   | 1,042 |   |   | 50,194 |
|                                                                                                               |   |   | Gain                on settlement |   |   | - |   |   | - |   |   | (197,033) |
|                                                                                                               |   |   | Impairment                of property and equipment |   |   | 235,299 |   |   | - |   |   | 235,299 |
|                                                                                                               |   |   | Impairment                of patent rights |   |   | 38,500 |   |   | - |   |   | 38,500 |
|                                                                                                               |   |   | Impairment                of goodwill |   |   | - |   |   | - |   |   | 541.101 |
|                                                                                                               |   |   | Loss                on extinguishment of debt |   |   | 492,464 |   |   | - |   |   | 492,464 |
|                                                                                                               |   |   | Cost                of recapitalization |   |   | - |   |   | - |   |   | 273,987 |
|                                                                                                               |   |   | Amortization                of deferred compensation |   |   | - |   |   | - |   |   | 2,233,150 |
|                                                                                                               |   |   | Compensatory                common and preferred |   |   |   |   |   |   |   |   |   |
|                                                                                                               |   |   |   | stock                issuances |   |   | 611,768 |   |   | 105,540,718 |   |   | 212,555,557 |
|                                                                                                               |   |   | Compensatory                option issuances |   |   | - |   |   | 31,250,000 |   |   | 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 |   |   | 45,756,761 |   |   | 925,713 |   |   | 46,702,806 |
|                                                                                                               |   |   | Change                in fair value of derivative financial instruments |   |   | (27,579,380) |   |   | (189,539) |   |   | (27,768,919) |
|                                                                                                               |   |   | Common                stock issued for rescission agreement |   |   | - |   |   | - |   |   | 43,074 |
|                                                                                                               |   |   | Common                stock issued to pay accounts payable |   |   | - |   |   | - |   |   | 50,000 |
|                                                                                                               |   |   | Changes                in accounts payable and accrued liabilities |   |   | 850,769 |   |   | 21,448 |   |   | 928,034 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                cash used by operating activities                                                               |   |   | (2,415,168) |   |   | (876,706) |   |   | (3,834,856) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                               |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Acquisition                of equipment |   |   | (481,644) |   |   | (6,250) |   |   | (487,894) |
|                                                                                                               | Acquisition                of patents |   |   | - |   |   | - |   |   | (38,500) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                cash used by investing activities                                                               |   |   | (481,644) |   |   | (6,250) |   |   | (526,394) |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                               |   |   |   |   |   |   |   |   |   |
|                                                                                                               | Bank                overdraft |   |   | 3,631 |   |   | - |   |   | 3,631 |
|                                                                                                               | Proceeds                from stockholder advances |   |   | - |   |   | - |   |   | 49,672 |
|                                                                                                               | Net                proceeds from convertible debt |   |   | 2,104,040 |   |   | 50,000 |   |   | 2,154,040 |
|                                                                                                               | Proceeds                from note payable |   |   | - |   |   | 142,500 |   |   | 142,500 |
|                                                                                                               | Proceeds                from warrant exercise and deposit for |   |   |   |   |   |   |   |   |   |
|                                                                                                               | warrant                exercise |   |   | 402,161 |   |   | 290,397 |   |   | 692,558 |
|                                                                                                               | Payments                on notes payable |   |   | - |   |   | - |   |   | (63,000) |
|                                                                                                               | Proceeds                from sale of common and preferred stock |   |   | 387,732 |   |   | 396,560 |   |   | 1,382,937 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                cash provided by financing activities                                                           |   |   | 2,897,564 |   |   | 879,457 |   |   | 4,362,338 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                                                |   |   | 752 |   |   | (3,499) |   |   | 1,088 |
| Cash                and cash equivalents at beginning of year                                                      |   |   | 336 |   |   | 3,835 |   |   | - |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of year                                                            |   | $ | 1,088 |   | $ | 336 |   | $ | 1,088 |
|                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of the consolidated financial                statements |

F-20

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**Significant      Estimates**

**Principles      of Consolidation**

**Cash      and Cash Equivalents**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**Concentration      of Credit Risk**

**Furniture      and Equipment**

**Impairment      Of Long-Lived Assets **

**Intangible      Assets **

**Income      Taxes**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**Stock-Based      Compensation**

*Share-Based      Payment*

*Accounting      for Stock Issued to Employees *
*Accounting      for Stock-Based Compensation*
*Accounting      for Stock-Based Compensation—Transition and Disclosure*

**Valuation      of Derivatives**

**Loss      Per Share**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**Fair      Value of Financial Instruments**

**New      Accounting Pronouncements**

*The      Fair Value Option for Financial Assets and Financial Liabilities, Including      an      amendment of FASB Statements No. 115*

*Fair      Value Measurements*
*Disclosures      about Fair Value of Financial Instruments*

*Employers’      Accounting for Defined Benefit Pension and Other Postretirement Plans—an      amendment of FASB Statements No. 87, 88, 106, and 132(R)*

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**New      Accounting Pronouncements, continued**

*Accounting      for Uncertainty in Income Taxes, an Interpretation of FASB Statement      No. 109, Accounting for Income Taxes *
*Accounting      for Income Taxes. *

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**New      Accounting Pronouncements, continued**

*Accounting      for Certain Hybrid Financial Instruments*
*Accounting      for Derivative Instruments and Hedging Activities*
*Application      of Statement 133 to Beneficial Interests in Securitized Financial      Assets*

*Accounting      Changes and Error Corrections *
*Accounting      Changes*
*Reporting      Accounting Changes in Interim Financial Statements*

*Statement      of Cash Flows*

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

**New      Accounting Pronouncements, continued**

*Technical      Corrections of FASB Statement No. 123R *

*An      Amendment of FSP FAS 123R-1 *
*Classification      and Measurement of Freestanding Financial Instruments Originally Issued in      Exchange for Employee Services under FASB Statement      No. 123R.*

*Transition      Election Related to Accounting for the Tax Effects of Share-Based Payment      Awards*

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

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**2.**
**Going      Concern Considerations, continued**

| ·   | The                Company is delinquent on critical liabilities such as lease payments                for                its facilities and payments to key                consultants |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company will, in all likelihood, fail to comply with the terms of                the                agreement under which it obtained the rights to certain technology                that                was expected to become the basis for the Company’s future success and is                subject to losing rights to such                technology |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

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

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

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

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

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

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

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

**4.**
**Property      and Equipment**

|   |   |   |                                         |   |                     | **Life** |   | **2006** |    | **2005** |    |
|--------|--------|--------|----------------------------------------------|--------|--------------------------|----------|--------|----------|---------|----------|---------|
|   |   |   |                                         |   |                     |     |   |     |    |     |    |   |   |
|   |   |   | Furniture                and fixtures        |   | 3-5                years |     | $      | 17,503   |    | $        | -       |   |
|   |   |   | Machinery                and equipment       |   | 5                years   |     |   | 235,092  |    |     | 6,250   |   |
|   |   |   |                                         |   |                     |     |   |     |    |     |    |   |   |
|   |   |   |                                         |   |                     |     |   |     | 252,595 |     |    | 6,250 |   |
|   |   |   | Less                accumulated depreciation |   |                     |     |   | (50,194) |    |     | (1,042) |   |
|   |   |   |                                         |   |                     |     |   |     |    |     |    |   |   |
|   |   |   |                                         |   |                     |     |   | $        | 202,401 |     | $       | 5,208 |   |

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

| **5.** | **Accounts                Payable and Accrued                Liabilities** |
|--------|----------------------------------------------------------------------------|

|   |   |   |                                     |   |   | **2006** |    | **2005** |   |
|--------|--------|--------|------------------------------------------|--------|--------|----------|---------|----------|--------|
|   |   |   |                                     |   |   |     |    |     |   |   |   |
|   |   |   | Trade                accounts payable    |   | $      | 390,892  |    | $        | 5,000  |   |
|   |   |   | Accrued                professional fees |   |   | 50,000   |    |     | -      |   |
|   |   |   | Accrued                wages payable     |   |   | 232,350  |    |     | -      |   |
|   |   |   | Accrued                interest expense  |   |   | 149,040  |    |     | 26,448 |   |
|   |   |   |                                     |   |   |     |    |     |   |   |
|   |   |   |                                     |   |   | $        | 822,282 |     | $      | 31,448 |   |

| **6.** | **Accounts                Payable and Accrued Liabilities - Related                Party** |
|--------|--------------------------------------------------------------------------------------------|

|   | Accounts                payable and accrued liabilities to a related party of $59,935, at                December                31, 2006 represents amounts due to His Devine Vehicle, Inc, (a company                owned by the Company’s chief technology officer who is also a major                stockholder). The amounts due HDVI are primarily related to actual                and                estimated research and development activities that were paid by HDVI                on                behalf of the Company. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**7.**
**Accounts      Payable Assumed in Recapitalization**

**8.**
**Convertible      Debt**

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

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**8.**
**Convertible      Debt, continued**

|   |   |   | Contractual                balance       |                            | $      | 2,470,000   |    |
|--------|--------|--------|------------------------------------------|---------------------------------|--------|-------------|---------|
|   |   |   | Less                unamortized discount |                            |   | (1,764,136) |    |
|   |   |   |                                     |                            |   |        |    |   |
|   |   |   |                                     | Convertible                debt |   | $           | 705,864 |   |

** **

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**8.**
**Convertible      Debt, continued**

**9.**
**Note      Payable**

|   |   |   | Contractual                balance  |                        | $      | 150,000 |    |
|--------|--------|--------|-------------------------------------|-----------------------------|--------|---------|---------|
|   |   |   | Less                origination fee |                        |   | (7,500) |    |
|   |   |   |                                |                        |   |    |    |
|   |   |   |                                | Net                proceeds |   | $       | 142,500 |   |

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**10.**
**Income      Taxes**

The      composition of deferred tax assets and the related tax effects at December      31,      2006 and 2005 are as follows:

|   |   |   |                                  |                                     |   | **2006**  |        | **2005** |      |
|--------|--------|--------|---------------------------------------|------------------------------------------|--------|-----------|-------------|----------|-----------|
|   |   |   |                                  |                                     |   |      |        |     |      |   |   |
|   |   |   | Net                operating losses   |                                     | $      | 2,597,827 |        | $        | 1,470,727 |   |
|   |   |   | Property                and equipment |                                     |   | 80,002    |        |     | -         |   |
|   |   |   | Patents                               |                                     |   | 13,090    |        |     | -         |   |
|   |   |   |                                  |                                     |   |      |        |     |      |   |   |
|   |   |   |                                  | Total                deferred tax assets |   |      | 2,690,919   |     |      | 1,470,727 |   |
|   |   |   |                                  | Valuation                allowance       |   |      | (2,690,919) |     |      | (1,470,727) |   |
|   |   |   |                                  |                                     |   |      |        |     |      |   |   |
|   |   |   |                                  | Net                deferred tax asset    |   | $         | -           |     | $         | - |   |

|   |   |   |                                             |                          |   | **2006**    |      |   | **2005** |   |
|--------|--------|--------|--------------------------------------------------|-------------------------------|--------|-------------|-----------|--------|----------|--------|
|   |   |   |                                             |                          |   | **Amount**  |      |   | **%**    |   |   | **Amount** |   |   | **%** |   |
|   |   |   |                                             |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |   |
|   |   |   |                                             |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |   |
|   |   |   | Benefit                for income tax at federal |                          |   |        |      |   |     |   |   |   |   |   |   |   |
|   |   |   |                                             | statutory                rate |   | $           | 7,775,970 |   |     | 34.0   | % |   | $ | 47,064,870 |   |   | 34.0 | % |
|   |   |   | Non-deductible                interest expense   |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |
|   |   |   | and                change in value of            |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |
|   |   |   | derivative                financial              |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |
|   |   |   | instruments                                      |                          |   | (6,180,309) |      |   | (27.0)   |   |   |   | (250,299) |   |   | (0.2) |   |
|   |   |   | Non-deductible                stock-based        |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |
|   |   |   |                                             | compensation                  |   |        | (208,001) |   |     | (0.9)  |   |   |   | (46,508,844) |   |   | (33.6) |   |
|   |   |   | Non-deductible                loss on debt       |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |
|   |   |   | extinguishment                                   |                          |   | (167,468)   |      |   | (0.7)    |   |   |   | - |   |   | - |   |
|   |   |   | Change                in valuation allowance     |                          |   | (1,220,192) |      |   | (5.4)    |   |   |   | (305,727 | ) |   | (0.2) |   |
|   |   |   |                                             |                          |   |        |      |   |     |   |   |   |   |   |   |   |   |   |
|   |   |   |                                             |                          | $      | -           |      |   | -        | %      | $ | - |   |   | - | % |

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**11.**
**Commitments      and Contingencies**

**Legal      Proceedings**

**Lease      Commitments**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**12.**
**Stockholders'      Equity**

**Common      Stock**

**Year      Ended December 31, 2006**

**Year      Ended December 31, 2005**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**12.**
**Stockholders'      Equity, continued**

**Stock      Options**

**Incentive      Stock Plan**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**12.**
**Stockholders'      Equity, continued**

**Stock      Warrants**

|                                  |   |   |         |   | **Remaining** |
|---------------------------------------|--------|--------|--------------|--------|---------------|
|                                  |   |   | **Exercise** |   | **Life**      |
| **Number                of Warrants** |   |   | **Price**    |   | **Years**     |
| 1,000,000,000                         |   | $      | 0.0030       |   | 4.5           |
| 1,000,000,000                         |   |   | 0.0060       |   | 4.5           |
| 300,000,000                           |   |   | 0.0100       |   | 4.5           |
| 200,000,000                           |   |   | 0.0150       |   | 4.5           |
| 150,000,000                           |   |   | 0.0200       |   | 4.5           |
| 100,000,000                           |   |   | 0.0300       |   | 4.5           |
| 60,000,000                            |   |   | 0.0500       |   | 4.5           |
| 40,000,000                            |   |   | 0.0750       |   | 4.5           |
| 30,000,000                            |   |   | 0.1000       |   | 4.5           |
| 20,000,000                            |   |   | 0.1500       |   | 4.5           |
|                                  |   |   |         |   |          |
| 2,900,000,000                         |   | $      | 0.0114       |   |          |

**Preferred      Stock**

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**12.**
**Stockholders'      Equity, continued**

**Preferred      Stock, continued**

**Year      Ended December 31, 2006**

**Year      Ended December 31, 2005**

**Potentially      Dilutive Equity Instruments**

|   |   |   | Warrants                issued in connection with Cornell financing |                                |   | 2,900,000,000 |          |
|--------|--------|--------|---------------------------------------------------------------------|-------------------------------------|--------|---------------|---------------|
|   |   |   | Stock                options issued at for patent rights and        |                                |   |          |          |
|   |   |   | compensation                                                        |                                |   | 250,000,000   |          |
|   |   |   | Series                A Preferred Stock convertible to common stock |                                |   |          |          |
|   |   |   |                                                                | on                a 100 for 1 basis |   |          | 1,000,000,000 |   |
|   |   |   | Series                C Preferred Stock convertible to common stock |                                |   |          |          |
|   |   |   |                                                                | on                a 100 for 1 basis |   |          | 491,527,500   |   |
|   |   |   |                                                                |                                |   |          |          |   |
|   |   |   |                                                                | Total                               |   |          | 4,641,527,500 |   |

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**13.**
**Related      Party Transactions**

**14.**
**Non-Cash      Investing and Financing Transactions and Supplemental Disclosure of Cash Flow      Information**

|   |   |   |                                                                 |   |   | **2006** |   | **2005** |   |
|--------|--------|--------|----------------------------------------------------------------------|--------|--------|----------|--------|----------|--------|
|   |   |   |                                                                 |   |   |     |   |     |   |   |   |
|   |   |   | Common                stock issued in conversion of convertible debt |   |   |     |   |     |   |   |
|   |   |   | and                debt extinguishment                               |   | $      | 364,171  |   | $        | 2,448  |   |
|   |   |   |                                                                 |   |   |     |   |     |   |   |
|   |   |   | Common                stock issued to convert note payable           |   |   | 142,500  |   |     | -      |   |
|   |   |   |                                                                 |   |   |     |   |     |   |   |
|   |   |   | Common                stock issued for financing costs               |   |   | 450,000  |   |     | -      |   |
|   |   |   |                                                                 |   |   |     |   |     |   |   |
|   |   |   | Common                stock issued for debt extinguishment           |   |   | 364,171  |   |     | -      |   |
|   |   |   |                                                                 |   |   |     |   |     |   |   |

----

| **SAVI                MEDIA GROUP, INC.**                                                             |
|-------------------------------------------------------------------------------------------------------|
| **A                Corporation in the Development Stage**                                             |
| **NOTES                TO CONSOLIDATED FINANCIAL STATEMENTS**                                         |
| ***For                the Years Ended December 31, 2006 and 2005 and for the                Period*** |
| ***From                Inception, August 13, 2002, to December 31,                2006***             |

**14.**
**Non-Cash      Investing and Financing Transactions and Supplemental Disclosure of Cash Flow      Information, continued**

----

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

**ITEM      8A - CONTROLS AND PROCEDURES**

| **a)  ** | **Evaluation                of Disclosure Controls and Procedures**                .                As of December 31, 2006, the Company’s management carried out an                evaluation, under the supervision of the Company’s Chief Executive Officer                and Chief Financial Officer of the effectiveness of the design and                operation of the Company’s system of disclosure controls and procedures                pursuant to the Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e)                under the Exchange Act).  Based upon that evaluation, the Chief                Executive Officer and Chief Financial Officer concluded that the                Company’s                disclosure controls and procedures were ineffective, as of the date                of                their evaluation, for the purposes of recording, processing, summarizing                and timely reporting material information required to be disclosed                in                reports filed by the Company under the Securities Exchange Act of                1934.                 This                assessment was made based on the need to amend prior filings due                to                embedded derivatives within various convertible securities and the                lack of                sufficient personnel to process transactions. We have hired an outside                expert to evaluate and value derivative financial instruments in                any and                all convertible securities and when we obtain additional financing                will                hire additional personnel and implement procedures to properly account                for                and disclose all transactions. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **b)  ** | **Changes                in internal controls**.                There were no changes in internal controls over financial reporting                that                occurred during the period covered by this report that has materially                affected, or is likely to materially effect, the Company’s internal                control over financial reporting. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      8B - OTHER INFORMATION**

** **

**ITEM      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL      PERSONS.**

| **Names:**                    | **Ages** | **Titles:**                                                             | **Board                of Directors** |
|-------------------------------|----------|-------------------------------------------------------------------------|---------------------------------------|
| Greg                Sweeney   | 54       | Chief                Executive Officer and President                    | Director                              |
| Phil                Scott     | 44       | Chief                Financial Officer and Principal Accounting Officer |                                  |
| Serge                Monros   | 55       | Chief                Technology Officer                                 | Director                              |
| Phil                Pisanelli | 57       | Vice                President for Marketing                             | Director                              |
| Rudy                Rodriguez | 55       | Chief                Operating Officer                                  | Director                              |
| Steve                Botkin   |  48 | Chief                Information Officer                                | Director                              |

**Mr.      Greg Sweeney **

**Mr.      Phil Scott, CFA **

**Mr.      Serge Monros**

**Mr.      Rudy Rodriguez**

**Mr.      Phil Pisanelli**

**Mr.      Steve Botkin**

**Audit      Committee**

**Code      of Ethics**

**COMPLIANCE      WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934**

**ITEM      10. EXECUTIVE COMPENSATION.**

| **SUMMARY                COMPENSATION TABLE** |   |                      |                     |                      |       |        |
|-----------------------------------------------|--------|---------------------------|--------------------------|---------------------------|------------|-------------|
| **ANNUAL                COMPENSATION**        |   |                      |                     |                      |       |        |   |
|                                          |   |                      |                     |                      |       |        |   |   |
|                                          |   |                      |                     | Annual                    | Restricted | Options     | Other |   |
| Name                & Principal           |   |                      |                     | Compen-                   | Stock      | SARs        | LTIP | All                Other |
| Position                                      | Year   | Salary                ($) | Bonus                ($) | sation                ($) | Awards($)  | (#)         | Payouts($) | Compensation |
| Mario                Procopio                 | 2006   | 98,500                    | 75,000                   | 173,500                   | -          | -           | - | 10,357 |
| Former                CEO                     | 2005   | 32,000                    | -                        | 32,000                    | 69,770,000 | 125,000,000 | - | - |
|                                          | 2004   | 38,840                    | -                        | 38,840                    | -          | -           | - | - |
|                                          |   |                      |                     |                      |       |        |   |   |
| Kathy                Procopio                 | 2006   | 54,000                    | -                        | 54,000                    | -          | -           | - | - |
| Former                CFO                     | 2005   | -                         | -                        | -                         | 40,000     | -           | - | - |
|                                          | 2004   | -                         | -                        | -                         | 460,000    | -           | - | - |
|                                          |   |                      |                     |                      |       |        |   |   |
| Greg                Sweeney                   | 2006   | 50,000                    | -                        | 50,000                    | 250        | -           | - | 10,357 |
| CEO                                           | 2005   | -                         | -                        | -                         | -          | -           | - | - |
|                                          | 2004   | -                         | -                        | -                         | -          | -           | - | - |
|                                          |   |                      |                     |                      |       |        |   |   |
| Serge                Monros                   | 2006   | 144,000                   | 75,000                   | 219,000                   | -          | -           | - | 10,357 |
| CTO                                           | 2005   | -                         | -                        | -                         | -          | -           | - | - |
|                                          | 2004   | -                         | -                        | -                         | 20,000     | -           | - | - |

**Employment/Consultant      Agreements**

*Greg      Sweeney*

*Phil      Scott*

**Remuneration      of Directors**

**Stock      Option Plans**

*2005      Incentive Stock Plan*

**Option/Stock      Appreciation Right Grants in 2006**

**Aggregate      Option/SAR Exercises in 2006 and December 31, 2006 Option      Values**

----

**Equity      Compensation Plan Information**

|                                                       |                               |                              | Number                  of            |
|------------------------------------------------------------|------------------------------------|-----------------------------------|---------------------------------------|
|                                                       |                               |                              | securities                            |
|                                                       |                               |                              | remaining                             |
|                                                       | Number                  of         | Weighted-                         | available                  for future |
|                                                       | securities                  to be  | average                  exercise | issuance                  under       |
|                                                       | issued                  upon       | price                  of         | equity                                |
|                                                       | exercise                  of       | outstanding                       | compensation                          |
|                                                       | outstanding                        | options,                          | plans                  (excluding     |
|                                                       | options,                  warrants | warrants                  and     | securities                  reflected |
|                                                       | and                  rights        | rights                            | in                  column (a))       |
|                                                       | (a)                                | (b)                               | (c)                                   |
| Equity                  compensation plans approved by     |                               |                              |                                  |
| security                  holders                          | 25,000,000                         | -                                 | 25,000,000                            |
| Equity                  compensation plans not approved by |                               |                              |                                  |
| security                  holders                          | -                                  | -                                 | -                                     |
| Total                                                      | 25,000,000                         | -                                 | 25,000,000                            |

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

| ·   | by                each person who is known by us to beneficially own more than 5% of                our                common stock; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | by                each of our officers and directors; and |
|--------------------|-----------------------------------------------------------|

| ·   | by                all of our officers and directors as a group. |
|--------------------|-----------------------------------------------------------------|

| **Savi                  Media Group, Inc.**        |                          |             |                            |                                                 |
|----------------------------------------------------|-------------------------------|------------------|---------------------------------|------------------------------------------------------|
| **Related                  Parties**               |                          |             |                            |                                                 |
| **December                  31, 2006**             |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
|                                               |                          | **Beneficially** | **Percent                  of** |                                                 |
| **Name**                                           | **Class**                     | **Owned(1)**     | **Class(2)**                    | **Title                  or Nature of Relationship** |
|                                               |                          |             |                            |                                                 |
| Greg                  Sweeney                      | Common                  Stock | 50,000           | *                               | CEO/Director                                         |
| 12707                  High Bluff Drive, Suite 200 |                          |             |                            |                                                 |
| San                  Diego, CA 92130               |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Phillip                  C. Scott                  | Common                  Stock | 0                | *                               | CFO                                                  |
| 12707                  High Bluff Drive, Suite 200 |                          |             |                            |                                                 |
| San                  Diego, CA 92130               |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Serge                  Monros (3)                  | Common                  Stock | 782,102,300      | 69.70%                          | CTO/Director                                         |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Phil                  Pisanell                     | Common                  Stock | 1,000,000        | *                               | Vice                  President/Director             |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Steve                  Botkin                      | Common                  Stock | 56,100,000       | 9.32%                           | CIO/Director                                         |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Rudy                  Rodriguez (4)                | Common                  Stock | 52,000,000       | 7.97%                           | COO/Director                                         |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| All                  Officers and Directors        | Common                  Stock | 891,252,300      | 62.45%                          |                                                 |
| As                  a Group (6 persons)            |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Mario                  Procopio (5)                | Common                  Stock | 125,100,000      | 17.21%                          | Former                  CEO/Former Director          |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Kathy                  Procopio (6)                | Common                  Stock | 657,002,300      | 52.64%                          | Wife                  of CEO/Former CFO              |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Alexander                  M. Haig Jr. (7)         | Common                  Stock | 50,500,000       | 7.74%                           | Advisory                  Board Member               |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Alexander                  P. Haig (7)             | Common                  Stock | 50,500,000       | 7.74%                           | Advisory                  Board Member               |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Cyrus                  Project Incorporated (8)    | Common                  Stock | 48,630,280       | 7.58%                           |                                                 |
| P.O.                  Box 1969                     |                          |             |                            |                                                 |
| Huntington                  Beach, CA 92647        |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| G                  & K Automotive              | Common                  Stock | 100,000,000      | 16.61%                          |                                                 |
| 2530                  S. Birch Street              |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| His                  Devine Vehicle (9)            | Common                  Stock | 656,548,300      | 52.44%                          | Entity                  Related to Serge Monros      |
| 11001                  E. Valley Mall,             |                          |             |                            |                                                 |
| Suite                  301C                        |                          |             |                            |                                                 |
| El                  Monte, California 91731        |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| New                  Creation Outreach, Inc. (9)   | Common                  Stock | 655,002,300      | 52.31%                          | Entity                  Related to Kathy Procopio    |
| 2530                  S. Birch Street, #A          |                          |             |                            |                                                 |
| Santa                  Ana, California 92707       |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| Cornell                  Capital (10)              | Common                  Stock | 1,889,538,000    | 76.76%                          |                                                 |
| 101                  Hudson Street, Suite 3700     |                          |             |                            |                                                 |
| Jersey                  City, NJ 07302             |                          |             |                            |                                                 |
|                                               |                          |             |                            |                                                 |
| His                  Devine Vehicle                | Preferred                  A  | 5,000,000        | 50.00%                          | Entity                  Related to Serge Monros      |
|                                               |                          |             |                            |                                                 |
| New                  Creation Outreach, Inc.       | Preferred                  A  | 5,000,000        | 50.00%                          | Entity                  Related to Mario Procopio    |
|                                               |                          |             |                            |                                                 |
| His                  Devine Vehicle                | Preferred                  C  | 1,500,000        | 30.52%                          | Entity                  Related to Serge Monros      |
|                                               |                          |             |                            |                                                 |
| New                  Creation Outreach, Inc.       | Preferred                  C  | 1,500,000        | 30.52%                          | Entity                  Related to Kathy Procopio    |
|                                               |                          |             |                            |                                                 |
| Alexander                  M. Haig Jr.             | Preferred                  C  | 500,000          | 10.17%                          | Advisory                  Board Member               |
|                                               |                          |             |                            |                                                 |
| Alexander                  P. Haig                 | Preferred                  C  | 500,000          | 10.17%                          | Advisory                  Board Member               |
|                                               |                          |             |                            |                                                 |
| Cyrus                  Incorporated                | Preferred                  C  | 395,275          | 8.04%                           | CIO/Director                                         |
|                                               |                          |             |                            |                                                 |
| Rudy                  Rodriguez                    | Preferred                  C  | 500,000          | 10.17%                          | COO/Director                                         |

| (1) | Beneficial                Ownership is determined in accordance with the rules of the Securities                and                Exchange Commission and generally includes voting or investment power                with                respect to securities. Shares of common stock subject to options                or                warrants currently exercisable or convertible, or exercisable or                convertible within 60 days of December 31, 2006 are deemed outstanding                for                computing the percentage of the person holding such option or warrant                but                are not deemed outstanding for computing the percentage of any other                person. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | For                purposes of calculating the percentage beneficially owned, the number                of                shares of each class of stock deemed outstanding includes 602,106,564                common shares; 10,000,000 Preferred "A" Shares and 4,915,275 Preferred                "C"                Shares outstanding as of December 31,                2006. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes                125,000,000 shares of common stock underlying                options. |
|-----|-----------------------------------------------------------------------------------------------|

| (6) | Includes                5,002,300 shares of common stock, 500,000,000 shares of common stock                underlying series A convertible preferred stock and 150,000,000 shares                of                common stock underlying series C convertible preferred stock owned                by New                Creation Outreach, Inc., of which Mrs. Procopio is the Chief Executive                Officer. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Includes                50,000,000 shares of common stock underlying series C convertible                preferred stock |
|-----|--------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes                39,527,500 shares of common stock underlying series C convertible                preferred stock |
|-----|--------------------------------------------------------------------------------------------------------------------------|

| (9) | Includes                500,000,000 shares of common stock underlying series A convertible                preferred stock and 150,000,000 shares of common stock underlying                series C                convertible preferred stock. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Includes                the conversion of the principal amount of $2,470,000 plus accrued                interest                through 12/31/06 of $108,614 converting into common shares at the                default                conversion rate of $0.003 and the exercise of 1,000,000,000 warrants                that                are in the money as of 12/31/06. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Series      A and C Voting Rights**

**DESCRIPTION      OF SECURITIES **

**COMMON      STOCK **

**PREFERRED      STOCK **

**WARRANTS      **

| 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                         |

**OPTIONS**

**CONVERTIBLE      SECURITIES **

** **
** **

** **

**INDEMNIFICATION      FOR SECURITIES ACT LIABILITIES**

**ITEM      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

----

**ITEM      13. EXHIBITS.**

| Exhibit                No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.1                        |   | Amended                and Restated Articles of Incorporation, filed March 1, 2005, filed                as an                exhibit to the registration statement on Form SB-2 filed with the                Securities and Exchange Commission (the “Commission”) on June 27, 2005 and                incorporated herein by reference. ** **                                                                                           |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.2                        |   | Amendment                to the Articles of Incorporation, as amended and restated, filed                April 22,                2005, filed as an exhibit to the registration statement on Form SB-2                filed                with the Commission on June 27, 2005 and incorporated herein by                reference.                                                                                                                        |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.3                        |   | Certificate                of Designation of Series A Preferred Stock, filed as an exhibit to                the                registration statement on Form SB-2 filed with the Commission on                June 27,                2005 and incorporated herein by reference.                                                                                                                                                                          |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.4                        |   | Certificate                of Designation of Series B Preferred Stock, filed as an exhibit to                the                registration statement on Form SB-2 filed with the Commission on                June 27,                2005 and incorporated herein by reference.                                                                                                                                                                          |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.5                        |   | Certificate                of Designation of Series C Preferred Stock, filed as an exhibit to                the                registration statement on Form SB-2 filed with the Commission on                June 27,                2005 and incorporated herein by reference.                                                                                                                                                                          |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 3.6                        |   | By-laws,                filed as an exhibit to the registration statement on Form SB-2 filed                with                the Commission on June 27, 2005 and incorporated herein by                reference.                                                                                                                                                                                                                                        |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.1                        |   | Securities                Purchase Agreement, dated July 10, 2006, by and between Savi Media                Group,                Inc. and Cornell Capital Partners L.P., filed as an exhibit to the                current                report on Form 8-K filed with the Commission on July 14, 2006 and                incorporated herein by reference.                                                                                               |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.2                        |   | Secured                Convertible Debenture issued to Cornell Capital Partners, L.P., dated                July                10, 2006, filed as an exhibit to the current report on Form 8-K filed                with                the Commission on July 14, 2006 and incorporated herein by                reference.                                                                                                                               |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.3                        |   | Warrant                to purchase 1,000,000,000 shares of Common Stock, dated July 10,                2006,                issued to Cornell Capital Partners L.P., filed as an exhibit to the                current report on Form 8-K filed with the Commission on July 14,                2006 and                incorporated herein by reference.                                                                                                    |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.4                        |   | Warrant                to purchase 1,000,000,000 shares of Common Stock, dated July 10,                2006,                issued to Cornell Capital Partners L.P., filed as an exhibit to the                current report on Form 8-K filed with the Commission on July 14,                2006 and                incorporated herein by reference.                                                                                                    |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.5                        |   | Warrant                to purchase 300,000,000 shares of Common Stock, dated July 10, 2006,                issued to Cornell Capital Partners L.P., filed as an exhibit to the                current report on Form 8-K filed with the Commission on July 14,                2006 and                incorporated herein by reference.                                                                                                                     |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.6                        |   | Warrant                to purchase 200,000,000 shares of Common Stock, dated July 10, 2006,                issued to Cornell Capital Partners L.P., filed as an exhibit to the                current report on Form 8-K filed with the Commission on July 14,                2006 and                incorporated herein by reference.                                                                                                                     |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.7                        |   | Warrant                to purchase 150,000,000 shares of Common Stock, dated July 10, 2006,                issued to Cornell Capital Partners L.P., filed as an exhibit to the                current report on Form 8-K filed with the Commission on July 14,                2006 and                incorporated herein by reference.                                                                                                                     |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.8                        |   | Warrant                to purchase 100,000,000 shares of Common Stock, dated July 10, 2006,                issued to Cornell Capital Partners L.P., filed as an exhibit to the                current report on Form 8-K filed with the Commission on July 14,                2006 and                incorporated herein by reference.                                                                                                                     |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.9                        |   | Warrant                to purchase 60,000,000 shares of Common Stock, dated July 10, 2006,                issued                to Cornell Capital Partners L.P., filed as an exhibit to the current                report on Form 8-K filed with the Commission on July 14, 2006 and                incorporated herein by reference.                                                                                                                      |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.10                       |   | Warrant                to purchase 40,000,000 shares of Common Stock, dated July 10, 2006,                issued                to Cornell Capital Partners L.P., filed as an exhibit to the current                report on Form 8-K filed with the Commission on July 14, 2006 and                incorporated herein by reference.                                                                                                                      |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.11                       |   | Warrant                to purchase 30,000,000 shares of Common Stock, dated July 10, 2006,                issued                to Cornell Capital Partners L.P., filed as an exhibit to the current                report on Form 8-K filed with the Commission on July 14, 2006 and                incorporated herein by reference.                                                                                                                      |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.12                       |   | Warrant                to purchase 20,000,000 shares of Common Stock, dated July 10, 2006,                issued                to Cornell Capital Partners L.P., filed as an exhibit to the current                report on Form 8-K filed with the Commission on July 14, 2006 and                incorporated herein by reference.                                                                                                                      |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.13                       |   | Registration                Rights Agreement, dated July 10, 2006, by and between Savi Media                Group,                Inc. and Cornell Capital Partners L.P., filed as an exhibit to the                current                report on Form 8-K filed with the Commission on July 14, 2006 and                incorporated herein by reference.                                                                                               |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.14                       |   | Security                Agreement, dated July 10, 2006, by and between Savi Media Group,                Inc. and                Cornell Capital Partners L.P., filed as an exhibit to the current                report                on Form 8-K filed with the Commission on July 14, 2006 and incorporated                herein by reference..                                                                                                         |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.15                       |   | Pledge                and Escrow Agreement, dated July 10, 2006, by and among Savi Media                Group,                Inc., Cornell Capital Partners L.P., New Creation Outreach, Inc.                and David                Gonzalez, Esq. as escrow agent., filed as an exhibit to the current                report                on Form 8-K filed with the Commission on July 14, 2006 and incorporated                herein by reference. |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1                       |   | Agreement,                dated as of April 6, 2005, by and between the Company and His Devine                Vehicle, Inc., filed as an exhibit to the registration statement                on Form                SB-2 filed with the Commission on June 27, 2005 and incorporated                herein by                reference.                                                                                                                    |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.2                       |   | Agreement,                dated as of June 17, 2005, amending the April 6, 2005 agreement between                the Company and His Devine Vehicle, Inc., filed as an exhibit to                the                registration statement on Form SB-2 filed with the Commission on                June 27,                2005 and incorporated herein by reference.                                                                                      |
|                       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 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) |

----

**ITEM      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**

**Audit      Fees**

**Audit      Related**

**Tax      Fees**

**All      Other Fees**

----

**SIGNATURES**

**SAVI      MEDIA GROUP, INC.**

| Date:                April 16, 2007 | By:                * **/s/                GREG SWEENEY*                                                                                         |
|-------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                | Greg                Sweeney                                                                                                                          |
|                                | President,                Chief Executive Officer (Principal Executive Officer) and Chairman                of the                Board of Directors |
|                                |                                                                                                                                                 |
| Date:                April 16, 2007 | By:                * **/s/                PHILLIP C. SCOTT*                                                                                     |
|                                | Phillip                C. Scott                                                                                                                      |
|                                | Chief                Financial Officer (Principal Financial Officer and Principal Accounting                Officer)                                 |

| Name                                                             | Position                                                                                                             | Date                          |
|------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|-------------------------------|
|                                                             |                                                                                                                 |                          |
| /*s/                GREG SWEENEY*Greg                Sweeney     | Chief                Executive Officer (Principal Executive Officer) and President and                Director       | April                16, 2007 |
|                                                             |                                                                                                                 |                          |
| */s/                PHILLIP C. SCOTT*Phil                Scott   | Chief                Financial Officer (Principal Financial Officer and Principal Accounting                Officer) | April                16, 2007 |
|                                                             |                                                                                                                 |                          |
| */s/                SERGE MONROS*Serge                Monros     | Chief                Technology Officer and Director                                                                 | April                16, 2007 |
|                                                             |                                                                                                                 |                          |
| */s/                PHIL PISANELLI*Phil                Pisanelli | Director                                                                                                             | April                16, 2007 |
|                                                             |                                                                                                                 |                          |
| */s/                RUDY RODRIGUEZ*Rudy                Rodriguez | Chief                Operating Officer and Director                                                                  | April                16, 2007 |
|                                                             |                                                                                                                 |                          |
| */s/                STEVE BOTKIN*Steve                Botkin     | Chief                Information Office and Director                                                                 | April                16, 2007 |