SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934

                   For the fiscal quarter ended June 30, 2008


[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _________________ to __________________

                        Commission File Number 333-42036


                                SOYO GROUP, INC.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as specified in its Charter)

                 Nevada                                  95-4502724
----------------------------------------    ------------------------------------
      (State or other Jurisdiction                    (I.R.S. Employer
    of Incorporation or Organization)              Identification Number)


           1420 South Vintage Avenue, Ontario, California 91761-3646
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (909) 292-2500
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  None


     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required  to be filed by  Section  13 or 15(d) of the  Exchange  Act  during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]


     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

  Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] Yes [X] No

     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of Common Stock as of the latest practicable date.

     As of August 14, 2008 there were 55,813,656 shares Outstanding.

     Documents Incorporated by Reference: None



<PAGE>



SOYO GROUP, INC. AND SUBSIDIARY

                                      INDEX


PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements

           Condensed  Consolidated  Balance  Sheets  -  June 30, 2008
           (Unaudited) and December 31, 2007...................................3

           Condensed  Consolidated  Statements of  Operations  (Unaudited) -
           Three and Six Months Ended -  June 30, 2008 and 2007................4


           Condensed  Consolidated  Statements  of Cash Flows  (Unaudited) -
           Six Months Ended -  June 30, 2008 and 2007..........................6

           Notes to Condensed  Consolidated Financial Statements (Unaudited)
           - Three and Six Months Ended -  June 30, 2008 and 2007..............7



   Item 2. Management's  Discussion and Analysis of Financial  Condition and
           Results of Operations..............................................19

   Item 3. Quantitative and Qualitative Disclosures about Market Risk.........32

   Item 4. Controls and Procedures............................................32


PART II. OTHER INFORMATION

   Item 1. Legal Proceedings..................................................33

   Item 1A.  Risk Factors.....................................................34

   Item 2. Changes in  Securities,  Use of Proceeds and Issuer  Purchases of
           Equity Securities..................................................34

   Item 3. Defaults upon Senior Securities....................................34

   Item 4. Submission of Matters to a Vote of Security Holders................34

   Item 5. Other Information..................................................34

   Item 6. Exhibits and Reports on Form 8-K...................................35


SIGNATURES....................................................................35




<PAGE>

                         SOYO Group, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheets

Consolidated Balance Sheets

                                                    June 30,      December 31,
                                                      2008            2007
                                                  ------------    ------------
                                                  (Unaudited)      (Restated)
ASSETS
Current Assets
Cash and cash equivalents                              571,855       1,848,249
Accounts receivable, net of allowance
  for doubtful accounts of $ 1,134,900 and
  $783,573 at June 30, 2008 and December 31,
2 007 respectively                                  30,261,898      27,123,985
Inventories, net of allowance for inventory
obsolescence of $222,044 and $88,114 at
June 30, 2008and December 31, 2007 respectively     14,960,525      12,221,265
Prepaid expenses                                       700,160         187,749
Deferred income tax assets                             575,000         544,688
Deposits                                             4,151,958       8,808,408
                                                  ------------    ------------
   Total Current Assets                             51,221,396      50,734,344
                                                  ------------    ------------

Investment in 247 MGI                                  400,000         400,000

Property and equipment                                 326,009         316,287
Less accumulated depreciation
   and amortization                                   (166,777)       (141,613)
                                                  ------------    ------------
                                                       159,232         174,674

Deferred income tax - noncurrent                       677,000         658,312
    Total noncurrent assets                          1,236,232       1,232,986

Total Assets                                      $ 52,457,628    $ 51,967,330
                                                  ============    ============


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable                                  $  8,327,606    $ 14,336,196
Accrued liabilities                                    742,202         789,526
Commercial Loans due to UCB                         23,907,492      27,824,490
Gateway Trade Finance                                3,198,539

Income Tax Payable                                   1,088,697         889,518

                                                  ------------    ------------
   Total current liabilities                        37,264,536      43,839,730
                                                  ------------    ------------

Long term payable                                            0
                                                  ------------    ------------
Total liabilities                                   37,264,536      43,839,730
                                                  ------------    ------------

EQUITY
Class B Preferred stock, $0.001 par value,
  authorized - 10,000,000 shares, Issued
   and outstanding - 2,750,000 shares in 2008
   and 2,797,738 shares in 2007                      2,344,400       2,187,165
Preferred stock backup withholding                    (277,572)       (230,402)
Common stock, $0.001 par value.
   Authorized - 75,000,000 shares, Issued and
   outstanding - 52,179,656 shares in 2008
    and 52,004,656 shares in 2007                       58,964          52,005
Additional paid-in capital                          27,666,380      20,233,500
Accumulated deficit                                (13,879,080)    (14,114,668)
Subscriptions Receivable                              (720,000)              0
                                                  ------------    ------------
   Total shareholders' Equity                       15,193,092       8,127,600
                                                  ------------    ------------

Total liabilities and shareholders' equity        $ 52,457,628    $ 51,967,330
                                                  ============    ============
                                                             0               0


               See accompanying notes to the unaudited condensed
                       consolidated financial statements



                                       3
<PAGE>


                         SOYO Group, Inc. and Subsidiary
                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

                                             Three months ended -  June 30,
                                                 2008            2007
                                             ------------    ------------

Net revenues                                 $ 32,194,960    $ 24,202,395
Cost of revenues                               27,208,878      20,399,303
                                             ------------    ------------
Gross margin                                    4,986,082       3,803,092
                                             ------------    ------------
Costs and expenses:
Sales and marketing                             1,140,379       1,124,882
General and administrative                      2,086,432       2,168,198

Provision for doubtful accounts                   729,037         125,063
Depreciation and amortization:
   Property and equipment                          12,529          22,409
                                             ------------    ------------
Total costs and expenses                        3,968,377       3,440,552
                                             ------------    ------------
Income from operations                          1,017,705         362,540
Other income (expense):
   Interest income                                    363          17,409
   Interest expense                              (739,790)       (322,166)
   Other income (expense)                        (312,983)        (16,876)
                                             ------------    ------------
   Other income (expense), net                 (1,052,410)       (321,633)
Income before provision for income                (34,705)         40,907
taxes
Provision for income taxes                         24,820         129,775
Deferred income tax benefit                         8,000        (439,802)
Net income (loss)                                 (67,525)        350,934

Less: dividends on convertible                    (97,403)         65,160
preferred stock
Net income (loss) attributable to                  29,878         285,174
common shareholders
Net income (loss) per common share -                  .00             .01
Basic and diluted                                     .00             .01

Weighted average number of shares of           52,324,723      49,039,156
common stock outstanding - Basic and           57,357,723      56,541,914
diluted


                  See accompanying notes to unaudited condensed
                       consolidated financial statements.


                                       4
<PAGE>


                                             Six months ended -  June 30,
                                                 2008            2007
                                             ------------    ------------

Net revenues                                 $ 56,990,275    $ 38,893,505
Cost of revenues                               48,898,089      32,482,217
                                             ------------    ------------
Gross margin                                    8,092,186       6,411,288
                                             ------------    ------------
Costs and expenses:
Sales and marketing                             1,568,014       1,715,738
General and administrative                      3,490,609       3,746,372
Provision for doubtful accounts                 1,181,127         126,501
Depreciation and amortization:
   Property and equipment                          25,164          45,700
Total costs and expenses                        6,264,914       5,634,311
                                             ------------    ------------
Income from operations                          1,827,272         776,977
                                             ------------    ------------
Other income (expense):
   Interest income                                 12,470          48,794
   Interest expense                            (1,124,937)       (381,881)
   Other income (expense)                          87,017        (104,566)
   Other income (expense), net                 (1,025,450)       (437,653)
Income before provision for                       801,822         339,324
income taxes
Provision for income taxes                        458,000         192,860
Deferred income tax benefit                       (49,000)       (726,660)
Net income (loss)                                 392,822         873,124

Less: dividends on convertible                    157,235         126,923
preferred stock
Net income (loss) attributable to                 235,587         746,201
common shareholders
Net income (loss) per common share -                   01              02
Basic and diluted                                      01              02

Weighted average number of shares of           52,192,584      49,039,156
common stock outstanding - Basic and           57,225,584      56,541,914
diluted


                  See accompanying notes to unaudited condensed
                       consolidated financial statements.



                                       5
<PAGE>
<TABLE>
<CAPTION>
                         SOYO Group, Inc. and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                             Six months ended June 30,
                                                                 2008           2007
                                                             -----------    -----------
<S>                                                          <C>            <C>
OPERATING ACTIVITIES
Net Income (loss)                                                392,822        873,124
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and Amortization                                     25,164         45,700
 Unrealized gain (loss) on investment in 247MGI
Non cash payments for director's compensation
Non cash payments for public relations                                            6,825
Stock based compensation                                         366,761        959,230
Provision for doubtful accounts                                1,069,877        126,501
Provision for Inventory Obsolescence                              53,444
Payment of long term debt                                                    (3,735,198)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts Receivable                                           (4,207,790)    (5,587,034)
Inventories                                                   (2,792,704)    (3,269,060)
Prepaid expenses                                                (512,411)         6,972
Deposits                                                       4,656,450     (4,794,294)
Deferred income tax asset - current                              (30,312)      (726,660)
Deferred income tax asset - non current                          (18,688)
Increase (Decrease) in:
Accounts payable                                                  (4,562)      (241,251)
Accrued liabilities                                              (47,324)        92,582
Income tax payable                                               199,179
                                                             -----------    -----------
Net cash used in operating activities                           (850,094)   (16,242,562)
                                                             -----------    -----------
INVESTING ACTIVITIES
Purchase of property and equipment                                (9,722)       (18,839)
Proceeds from sale of equipment
                                                             -----------    -----------
Net cash used in investing activities                                           (18,839)
                                                             -----------    -----------

FINANCING ACTIVITIES

Proceeds from business loan - net                               (718,458)    15,983,324
Payment of backup withholding tax on accreted
dividends on preferred stock                                     (47,170)       (38,077)
Proceeds from Issuance of Common Stock                           349,050
Payment of Short term loan                                                     (100,000)
                                                             -----------    -----------
Net cash provided by (used in) financing activities             (416,578)    15,845,247
                                                             -----------    -----------

CASH AND CASH EQUIVALENTS
Net Increase (Decrease)                                       (1,276,394)      (416,154)
At beginning of Period                                         1,848,249      1,501,040
                                                             -----------    -----------
At End of Period                                                 571,855      1,084,886
                                                             ===========    ===========

Non cash investing and financing activities
Accretion of discount on Class B preferred stock                 157,235        126,923

Stock Option Compensation                                        357,425        959,230
Non Cash- conversion of accounts payable to                    6,004,028
common stock


Supplemental Disclolsure of
Cash Flow Information
  Cash paid for interest                                         258,821        381,881
  Cash paid for income taxes                                     458,000           --
</TABLE>

                  See accompanying notes to unaudited condensed
                       consolidated financial statements.


                                       6
<PAGE>

                         SOYO Group, Inc. and Subsidiary
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

                     Six Months Ended June 30, 2008 and 2007


1.   Organization and Basis of Presentation

Organization - Effective October 24, 2002, Vermont Witch Hazel Company,  Inc., a
Nevada  corporation  ("VWHC"),  acquired SOYO, Inc., a Nevada corporation ("SOYO
Nevada"),  from SOYO Computer,  Inc., a Taiwan  corporation  ("SOYO Taiwan),  in
exchange for the issuance of 1,000,000 shares of convertible preferred stock and
28,182,750  shares of common  stock,  and changed  its name to SOYO Group,  Inc.
("SOYO"). The 1,000,000 shares of preferred stock were issued to SOYO Taiwan and
the  28,182,750  shares of common  stock were issued to certain  members of SOYO
Nevada management.

Subsequent to this  transaction,  SOYO Taiwan  maintained an equity  interest in
SOYO, continued to be the primary supplier of inventory to SOYO, and was a major
creditor. In addition,  there was no change in the management of SOYO and no new
capital invested, and there was a continuing family relationship between certain
members of the management of SOYO and SOYO Taiwan. As a result, this transaction
was accounted for as a  recapitalization  of SOYO Nevada,  pursuant to which the
accounting  basis  of  SOYO  Nevada  continued   unchanged   subsequent  to  the
transaction date. Accordingly,  the pre-transaction financial statements of SOYO
Nevada are now the historical financial statements of the Company.

On December 9, 2002,  SOYO's Board of Directors  elected to change SOYO's fiscal
year end from July 31 to  December  31 to conform to SOYO  Nevada's  fiscal year
end.

On October 24, 2002,  the primary  members of SOYO Nevada  management  were Ming
Tung Chok, the Company's  President,  Chief Executive Officer and Director,  and
Nancy Chu, the Company's Chief Financial  Officer.  Ming Tung Chok and Nancy Chu
are husband and wife.  Andy Chu, the  President  and major  shareholder  of SOYO
Taiwan, is the brother of Nancy Chu.

Unless the context indicates  otherwise,  SOYO and its wholly-owned  subsidiary,
SOYO Nevada, are referred to herein as the "Company".

Basis  of  Presentation  - The  accompanying  unaudited  condensed  consolidated
financial  statements  include  the  accounts  of  SOYO  and  SOYO  Nevada.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.  The unaudited condensed  consolidated  financial statements have
been prepared in accordance  with United States  generally  accepted  accounting
principles,  and with the  instructions to Form 10-Q and Rule 10-1 of Regulation
S-X.



                                       7
<PAGE>

Interim  Financial  Statements - The accompanying  interim  unaudited  condensed
consolidated  financial  statements  are  unaudited,   but  in  the  opinion  of
management  of the  Company,  contain  all  adjustments,  which  include  normal
recurring  adjustments,  necessary to present  fairly the financial  position at
June 30, 2008, the results of operations for the three and six months ended June
30,  2008 and 2007,  and cash flows for the six months  ended June 30,  2008 and
2007.  The  condensed  consolidated  balance  sheet as of  December  31, 2007 is
derived from the Company's audited consolidated financial statements.

Certain  information  and footnote  disclosures  normally  included in financial
statements  that have been prepared in  accordance  with  accounting  principles
generally  accepted in the United States have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission, although
management  of the Company  believes  that the  disclosures  contained  in these
condensed consolidated financial statements are adequate to make the information
presented  therein  not  misleading.  For  further  information,  refer  to  the
consolidated  financial  statements  and  the  notes  thereto  included  in  the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2007, as filed with the Securities and Exchange Commission.

The results of  operations  for the three and six months ended June 30, 2008 are
not  necessarily  indicative of the results of operations to be expected for the
full fiscal year ending  December  31, 2008.  The largest part of the  Company's
business,  the  importing  and  resale of  consumer  electronic  products,  is a
seasonal  business.  The busiest time of the year is the holiday  season,  which
occurs at the end of the year. Accordingly, sales for the year should improve as
the year  passes,  culminating  in  strongest  sales  in the  third  and  fourth
quarters.

Business - Through 2007, The Company sold products under four different  product
lines:  1)  Computer  products  ;  2)  Consumer  Electronics;  3)  Furniture  4)
Communcations (VoIP).

The Company  began  selling  furniture  under the Levello  brand name during the
second  quarter  of 2007.  A series of wood and glass  tables  and  stands,  the
Levello  products are meant to enhance the physical  appearance of the Company's
consumer electronics products.  The Levello furniture is a series of pieces that
can be sold independently,  or bundled with large screen televisions. During the
initial  product roll out during the second  quarter,  the Company began selling
the Levello series to Costco.com, as well as furniture distributors in the
United  States and  Mexico.  In the last  year,  the line has  matured,  and the
products are now  available to customers at various  brick and mortar  stores as
well as online  retailers.  After one year, the furniture  line still  comprises
less than one half of one percent of the Company's revenues.

On December  31, 2007,  the Company  sold all of the assets  related to the VoIP
business to 247MGI of Fort Lauderdale, Florida for 40,000,000 shares of 247MGI's



                                       8
<PAGE>

common  stock.  The stock is traded on the OTC pink  sheets.  The Company has no
plans to dispose of the 247MGI  stock,  and intends to hold it  long-term  as an
investment.

The Company's products are sold to distributors and retailers primarily in North
and South America.

SOYO Group Inc.  has signed a license  agreement  with  Honeywell  International
Inc., effective January 1, 2007, under which SOYO will create and market certain
consumer electronics products under the Honeywell Brand.

The agreement is for a minimum  period of 6.5 years and calls for the payment of
MINIMUM royalties by SOYO to Honeywell totaling $3,840,000 (Three Million, Eight
Hundred and Forty  Thousand  Dollars  U.S.).  Sales  levels in excess of minimum
agreed targets will result in associated  increases in the royalty payments due.
Minimum royalty payments due under the agreement were $353,000 through December
31, 2007, and $469,000  through December 31, 2008. The Company made the required
payments in 2007, and through June 30, had paid $255,000 in royalties in 2008.

Through  this  agreement,  SOYO is  planning  to  develop  and  market  consumer
electronics  products under the Honeywell brand.  Over the life of the contract,
SOYO has the right to create and bring to market LCD monitors  and  televisions,
front and rear projectors,  home audio and video DVD (receivers,  AMPS,  tuners,
VHS  recorders,  DVD players and  recorders,  clock  radio,  bookshelf  systems,
speakers and audio  intercom),  portable  audio/video DVD (boom boxes,  portable
CD/DVD players, MP3, MPEG, camcorders/ digital recorders) and accessories for TV
monitors and audio visual products such as cables, surge protectors,  Bluetooth,
antennas,  headphones (wireless and wired) remote controls, multimedia speakers,
IPOD and PC accessories  including  portable hard drives and flash drives,  wall
mounts, set top boxes and PC embedded boxes. Since there are many market factors
at play in the  consumer  electronics  world,  including  consumer  preferences,
pricing and other  market  conditions,  SOYO plans to spend the  majority of its
time and money on the most profitable  products.  There can be no assurance that
SOYO will bring all of these products to market in a timely fashion, or at all.


Accounting  Estimates - The  preparation  of financial  statements in conformity
with United States generally accepted accounting  principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities,  disclosure of contingent assets and liabilities at the date of the
financial  statements,  and the reported amounts of revenues and expenses during
the reporting period.  Significant  estimates primarily relate to the realizable
value of accounts  receivable,  vendor programs and inventories.  Actual results
could differ from those estimates.



                                       9
<PAGE>


2. Earnings  Per Share

Statement of  Financial  Accounting  Standards  No. 128,  "Earnings  Per Share",
requires  presentation  of basic  earnings per share  ("Basic  EPS") and diluted
earnings per share ("Diluted EPS"). Basic income (loss) per share is computed by
dividing  net income  (loss)  available to common  shareholders  by the weighted
average number of common shares  outstanding  during the period.  Diluted income
per share gives  effect to all  dilutive  potential  common  shares  outstanding
during the period.  Potentially  dilutive  securities consist of the outstanding
shares of preferred  stock,  and stock options  granted to employees in 2005 and
2007. The calculation of fully diluted shares is as follows:

      Weighted average Shares outstanding
          at 6/30/2008                                    52,192,584
      Add: Conversion of Preferred Stock
         2,750,000 shares (see footnote 7b)                2,750,000
           Vested in the money options                     2,283,000


      Total fully diluted shares at 6/30/2008             57,225,584

On August 7, 2008,  the Company  reached an agreement with the  independent  3rd
party that owned the Class B preferred  stock to fix the conversion of the Class
B preferred stock to common stock at 2,750,000 common shares. With the mandatory
conversion  date less than six months away,  recent  volatility of the Company's
share price, weakness in the stock market and perceived market uncertainty,  the
Company  believed it was prudent to fix the  conversion  at this time.  Based on
these factors, the Company believes that it made a very favorable deal.

As of June 30,  2008,  potentially  dilutive  securities  consisted of 2,750,000
shares of Class B Convertible Preferred Stock with a stated liquidation value of
$1.00 per share that are convertible into common stock at fair market value, but
not less than $0.25 per share. As of June 30, 2007,  5,902,758  shares of common
stock were issuable upon  conversion of the Class B Convertible  Preferred Stock
based on the $0.55 per share conversion price.

The Company  applies the treasury stock method to each  individual  compensation
grant. If a grant is  out-of-the-money  based on the stated exercise price,  the
effects of including any component of the assumed proceeds  associated with that
grant in the treasury stock method  calculation would be antidilutive.  A holder
would not be expected to exercise out-of-the money awards. For the period ended
June 30,  2008,  the  stock  options  granted  in 2007 were "in the  money"  and
therefore are included in the computation of diluted EPS.

Comprehensive Income (Loss) - The Company reports comprehensive income or loss,
its  components  and  accumulated   balances  in  its   consolidated   financial
statements.  Comprehensive  income or loss includes all changes in equity except
those  resulting from  investments by owners and  distributions  to owners.  The



                                       10
<PAGE>

Company did not have any items of  comprehensive  income (loss) during the three
and six months ended June 30, 2008 and 2007.

Significant  Risks  and  Uncertainties  -  The  Company  operates  in  a  highly
competitive industry subject to aggressive pricing practices, pressures on gross
margins,  frequent introductions of new products,  rapid technological advances,
continuous  improvement  in  product  price/performance   characteristics,   and
changing consumer demand.

As a result of the  dynamic  nature of the  business,  it is  possible  that the
Company's  estimates  with  respect  to the  realizability  of  inventories  and
accounts  receivable  may be materially  different  from actual  amounts.  These
differences  could  result in higher than  expected  allowance  for bad debts or
inventory  reserve  costs,  which could have a materially  adverse effect on the
Company's financial position and results of operations.

Stock  Options and  Warrants - As of  December  31,  2007,  the Company had both
warrants and options outstanding.  The outstanding warrants were those issued to
Evergreen  Technology as part of the private placement  completed in March 2005.
The warrants expired unexercised on March 20, 2008.

On July 22, 2005, the Company issued  2,889,000  option grants to employees at a
strike price of $0.75.  One third of those options vested and were available for
purchase on July 22, 2006, one third vested on July 22, 2007, and one third will
vest on July 22, 2008.  The grants will expire if unused on July 22, 2010. As of
June 30, 2008, none of the options had been exercised,  none were "in the money"
and 1,200,000 options issued to Ming Chok and Nancy Chu had been returned to the
Company.  Seventeen employees who were issued stock options in 2005 had left the
Company,  and those 17 employees  forfeited  714,000  options.  Of the remaining
987,000  outstanding  options,  662,000  were  vested as of June 30,  2008.  The
remaining  325,000 will vest on July 22,  2008.  If not  exercised,  all 987,000
options will expire on July 22, 2010.

The Company did not grant any stock options to employees,  officers or directors
in 2006.  On February 2, 2007,  the Company  issued  4,805,000  option grants to
employees  at a  strike  price  of  $0.35.  One  third  of  those  options  were
immediately  vested and  available  for purchase on February 2, 2007,  one third
vested on February 2, 2008, and the remaining one third will vest on February 2,
2009. The grants will expire if unused on February 2, 2012.

During 2007,  674,500 of the options granted in 2007 were exercised.  During the
six months ended June 30, 2008, 283,000 stock options were exercised. As of June
30,  2008,  nine  individuals  who  were  granted  options  in 2007 had left the
Company.  Those individuals  exercised a total of 232,000 options, and forfeited
an additional 621,000 options.

 As of June 30, 2008, employees held 3,460,500 options of the options granted in
2007, of which 2,250,000 have vested. The Company also issued 100,000 options to
three new employees  later in 2007. One of those  employees left the Company and
surrendered 50,000 options. Of the 50,000 remaining options, 33,000 have vested.

For the three months ended June 30, 2008 and 2007, the Company recorded $144,594
and $649,295  respectively,  in  compensation  costs  relating to stock  options
granted to employees.  The amounts recorded represent equity-based  compensation



                                       11
<PAGE>

expense  related to options that were issued in 2005 and 2007. The  compensation
costs are based on the fair value at the grant date.

The fair  value of the  options  issued  in July  2005 was  estimated  using the
Black-Scholes  option-pricing  model with the following  assumptions:  risk free
interest rate of 4.04 %, expected life of five (5) years and expected volatility
147%. The fair value of the options issued in February 2007 was estimated  using
the Black-Scholes option-pricing model with the following assumptions: risk free
interest rate of 4.82 %, expected life of five (5) years and expected volatility
129%.

Revenue Recognition

The Company  recognizes  revenue  when  persuasive  evidence  of an  arrangement
exists,  delivery has occurred,  the sales price is fixed or  determinable,  and
collectibility is probable.

The  Company  recognizes  product  sales  generally  at the time the  product is
shipped,  although under certain  circumstances the Company  recognizes  product
sales at the time the  product  reaches  its  destination.  Concurrent  with the
recognition of revenue,  the Company  provides for the estimated cost of product
warranties and reduces revenue for estimated  product returns.  Sales incentives
are  generally  classified  as a reduction of revenue and are  recognized at the
later of when revenue is recognized or when the incentive is offered. When other
significant  obligations  remain  after  products  are  delivered,   revenue  is
recognized  only after such  obligations  are  fulfilled.  Shipping and handling
costs are included in cost of goods sold.


3. Investment in 247MGI

On December 31, 2007,  the Company  completed the sale of all assets of the VoIP
division to 247MGI,  Inc., a Miami,  Florida based publicly  traded  corporation
just beginning operations.  The sales price of the assets was $1,000,000,  which
was paid by 40,000,000  shares of 247MGI's  restricted common stock. As of March
31, 2008, the shares had not been  registered  under the Securities Act of 1933,
and any future sale of the shares was  restricted  completely  for one year, and
subject  to volume  restrictions  after  that.  The  Company  has no  management
participation  in 247MGI's  business.  At  December  31,  2007,  247MGI had only
75,272,814  common  shares  outstanding,  so the Company owned a majority of the
outstanding shares. In February,  2008, 247MGI issued 335,000,000 common shares,
diluting our holding to approximately 10% of the outstanding  common shares. The
Company intends to hold the 247MGI shares as a long-term investment.

Since the Company's  shares are  unregistered  and illiquid,  the net realizable
value of the Company's  investment  is difficult to  calculate.  The Company has
initially  recorded the  investment for $400,000 and will mark the investment to
market each  quarter.  At June 30,  2008,  the share price was  identical to the



                                       12
<PAGE>

share  price on the date of the  transaction,  so the  Company  has  valued  the
investment at $400,000, resulting in no gain or loss on a YTD basis.


4. Accounts Payable

During the quarter,  the Company was able to reach an agreement  with a supplier
over unpaid debts.  To settle the debt, the Company issued  5,900,000  shares of
its  restricted  common  stock to the supplier in return for the  retirement  of
$6,004,028 of debt.  The Company took this step to improve its balance sheet and
financial  ratios as it  continues  to  negotiate a large  financing  line.  The
Company has negotiated a buy back provision,  at its sole  discretion,  with the
supplier,  and intends to buy back all of the shares issued within the next five
years.


5. Commercial Loans Due to UCB

At June 30, 2008, Commercial loans due to UCB consisted of:

----------------------------- --------------
Asset based financing         $ 23,907,492
----------------------------- --------------
Purchase Order financing                 0
----------------------------- --------------
      Total                   $ 23,907,492
----------------------------- --------------




In March 2007,  the Company  announced  that it had secured a $12 million  Asset
Based  Credit  Facility  from a  California  bank to provide  funding for future
growth.  The  agreement  stated  that UCB would  provide  SOYO with a  revolving
financing  facility of up to $12 million to finance working capital,  letters of
credit or other capital needs. The maximum amount of the facility to be extended
at any point in time based on the Company's  accounts  receivable and inventory,
which would serve as collateral for the loan.

In April 2007, by mutual agreement of the parties,  the maximum loan balance was
increased from $12 million to $14 million. The maximum loan balance was
increased in December  2007 to $17 million,  and then to $18 million.  All other
terms of the agreement, including the interest rate, maturity date and method of
evaluating  the  Company's  inventory  and  receivables  to  determine  eligible
collateral were left unchanged during the increases.

In June 2007, UCB offered to provide the Company with an  alternative  source of
financing- Purchase Order financing.  This line differed from all other forms of
financing in that the bank was offering to advance  funds  against our customers
specific purchase orders,  provided the customer met the bank's stringent credit
requirements.  The end result is that the  Company can use this credit line only



                                       13
<PAGE>

by  obtaining   purchase  orders  from  large  customers   before  ordering  the
merchandise.  The funds would then be advanced to the manufacturer after product
was shipped, and once the product was delivered to the customer,  and the status
of the order was changed from a purchase  order to a receivable,  the loan would
have to be paid back, or the balance transferred to the asset based credit line.
The Company began buying  merchandise under the Purchase Order financing line in
June 2007.

In June 2008,  the Purchase  Order finance line and the Asset Based Finance line
were  consolidated  as an Asset Based Finance Line with a $24 million limit.  At
June 30, 2008, the balance of the loan due to UCB was $23,907,492.

6. Gateway Trade Finance

During March 2008, the Company received a large order from a customer that could
not be financed by its current  credit  facilities.  The Company  negotiated for
Gateway  Trade  Finance  to issue a letter of  credit  to a vendor to  guarantee
payment  of the  production  run.  The  letter of credit was paid off during the
second  quarter.  The Company  has used  Gateway's  financing  during the second
quarter  as  needed to pay for goods  that  were not able to be  financed  using
traditional  methods.  The  terms  of  each  letter  of  credit  are  negotiated
independently.  The interest rate,  commission  rate, and other variables change
for each addendum.  At June 30, 2008, the Company owed Gateway  $3,198,539.  The
Company  does  not plan to  utilize  external  financing  like  this for  future
purchases  due  to the  high  cost,  but  may do so on a  limited  basis  if the
transaction warrants it.

7  Shareholders' Equity

a.   Common Stock

As of December 31, 2002, the Company had authorized  75,000,000 shares of common
stock with a par value of $0.001 per share.

Effective October 24, 2002, the Company issued 28,182,750 shares of common stock
to Ming Tung Chok and Nancy Chu, who are members of SOYO Nevada  management (see
Note 1).  The  shares of  common  stock  were  valued  at par  value,  since the
transaction was deemed to be a recapitalization  of SOYO Nevada.  During October
2002, the management of SOYO Nevada also separately  purchased  6,026,798 shares
of the  11,817,250  shares of common stock of VWHC  outstanding  prior to VWHC's
acquisition of SOYO Nevada, for $300,000 in personal funds. The 6,026,798 shares
represented 51% of the outstanding  shares of common stock. When the transaction
was complete, and control of the Company was transferred, SOYO Nevada management
owned 34,209,548  shares of the 40,000,000  outstanding  shares of the Company's
common stock.  Subsequent to the transaction,  management  distributed 8,000,000
shares of common stock to various  brokers,  bankers and other  individuals that
assisted with the transaction. In 2007, Mr. Chok gave a gift of 1,000,000 shares
to an individual. In March, 2008, Mr. Chok announced that he and his wife bought
776,000 shares of the Company's common stock in a private placement at $1.25 per



                                       14
<PAGE>

share.  No one  individual or  corporation  other than those named in Item 12 of
this report ever owned more than 5% of the common shares outstanding.

b.   Preferred Stock

Through the bylaws,  the Company has authorized  10,000,000  shares of preferred
stock with a par value $0.001 per share.

The Board of  Directors is vested with the  authority  to divide the  authorized
shares of preferred  stock into series and to determine the relative  rights and
preferences at the time of issuance of the series.

During the first quarter of 2004,  SOYO Taiwan entered into an agreement with an
unrelated  third party to sell the $12,000,000  long-term  payable due it by the
Company. As part of the agreement, SOYO Taiwan required that the purchaser would
be limited to  collecting a maximum of $1,630,000  of the  $12,000,000  from the
Company without the prior consent of SOYO Taiwan. SOYO Taiwan forgave debt in an
amount  equal  to the  difference  between  $12,000,000  and  the  value  of the
preferred stock. This forgiveness will be treated as a capital transaction.

Payment was received by SOYO Taiwan in February and March 2004. An agreement was
reached whereby 2,500,000 shares of Class B cumulative  Preferred stock would be
issued by the Company to the unrelated third party in exchange for the long-term
payable.

The Class B cumulative  Preferred stock has a stated  liquidation value of $1.00
per share and a 6% dividend,  payable quarterly in arrears, in the form of cash,
additional  shares of preferred  stock,  or common  stock,  at the option of the
Company. The Class B cumulative Preferred stock has no voting rights. The shares
of Class B cumulative Preferred stock are convertible,  in increments of 100,000
shares, into shares of common stock at any time through December 31, 2008, based
on the fair market value of the common  stock,  subject,  however,  to a minimum
conversion  price of $0.25 per  share.  No more than  500,000  shares of Class B
cumulative  Preferred  stock may be converted into common stock in any one year.
On December 31, 2008,  any  unconverted  shares of Class B cumulative  Preferred
stock automatically convert into shares of common stock based on the fair market
value of the common stock,  subject,  however,  to a minimum conversion price of
$0.25 per  share.  Beginning  one year  after  issuance,  upon ten days  written
notice,  the Company or its designee will have the right to repurchase  for cash
any portion or all of the  outstanding  shares of Class B  cumulative  Preferred
stock at 80% of the  liquidation  value  ($0.80 per  share).  During such notice
period,  the holder of the  preferred  stock will have the  continuing  right to
convert any such  preferred  shares  pursuant to which  written  notice has been
received  into common stock without  regard to the  conversion  limitation.  The
Class B cumulative Preferred stock has unlimited piggy-back registration rights,
and is non-transferrable.



                                       15
<PAGE>

On August 7, 2008,  the Company  reached an agreement with the  independent  3rd
party that owned the Class B preferred  stock to fix the conversion of the Class
B preferred stock to common stock at 2,750,000 common shares. With the mandatory
conversion  date less than six months away,  recent  volatility of the Company's
share price, weakness in the stock market and perceived market uncertainty,  the
Company  believed it was prudent to fix the  conversion  at this time.  Based on
these factors, the Company believes that it made a very favorable deal.


8 Income Taxes

Components of the provision (benefit) for income taxes for the periods ended:

                                                                     Six
                                      Year           Year           Months
                                     Ended          Ended           Ended
                                   12/31/2006     12/31/2007      6/30/2008
                                   -----------    -----------    -----------
Current:
   Federal                         $     1,000    $   515,000    $   381,000
   State                                52,000        324,000         77,000
                                   -----------    -----------    -----------
   Total                                53,000        839,000        458,000
                                   -----------    -----------    -----------

Deferred:
   Federal                                --       (1,038,000)       (38,000)

   State                                  --         (165,000)       (11,000)
                                   -----------    -----------    -----------
   Total                                  --       (1,203,000)       (49,000)
                                   -----------    -----------    -----------

Total                              $    53,000    $  (364,000)   $   409,000
                                   ===========    ===========    ===========


Components of deferred income taxes as of:


                                   12/31/2006     12/31/2007      6/30/2008
                                   -----------    -----------    -----------

Net operating loss carryforwards   $ 1,310,000    $      --      $      --
Depreciation                           288,000        214,000        202,000
Reserves and allowances                214,000        442,000        501,000

Shares-based compensation                 --          444,000        475,000
State income taxes                      69,000        103,000         74,000
                                   -----------    -----------    -----------
Total deferred tax assets            1,881,000      1,203,000      1,252,000
Valuation allowance                 (1,881,000)          --             --
                                   -----------    -----------    -----------



Net deferred tax assets            $      --      $ 1,203,000    $ 1,238,000
                                   ===========    ===========    ===========



                                       16
<PAGE>
<TABLE>
<CAPTION>

Reconciliation of federal income tax rate:
                                                                       Six
                                    Year             Year             Months
                                   Ended            Ended             Ended
                                 12/31/2006       12/31/2007        6/30/2008
                                 ----------       ----------       -----------

  Federal statutory rate             34.0%            34.0%             34.0%
  Stock-based compensation           33.0%             9.5%             12.3%
  State income taxes                  6.5%             3.6%              5.5%
  Non-deductible expenses             2.9%             0.6%              0.3%
  Change in valuation allowance     -67.2%           -60.0%              0.0%
  Other                               0.8%             0.0%             -1.1%
                                 ----------       ----------       -----------

  Effective tax rate                 10.0%           -12.3%             51.0%
                                 ==========       ==========       ===========

9 Significant Concentrations

a. Customers

The Company sells to both  distributors  and  retailers.  Revenues  through such
distribution channels are summarized as follows:

                                                              Three Months Ended June 30,
---------------------------------------------   -----------   -------------   -----------   -----------
                                                   2008             %             2007           %
---------------------------------------------   -----------   -------------   -----------   -----------
<S>                                                                                         <C>
Revenues:
---------------------------------------------   -----------   -------------   -----------   -----------
     Distributors                               $22,732,206           70.61   $14,253,365         58.89
---------------------------------------------   -----------   -------------   -----------   -----------
     Retailers                                    6,407,805           19.90     7,826,878         32.33
---------------------------------------------   -----------   -------------   -----------   -----------
     Others                                       3,054,949            9.49     2,122,152          8.78
---------------------------------------------   -----------   -------------   -----------   -----------
Total                                           $32,194,960          100.00   $24,202,395        100.00
---------------------------------------------   -----------   -------------   -----------   -----------


                                                               Six Months Ended June 30,
---------------------------------------------   -----------   -------------   -----------   -----------
                                                   2008             %             2007           %
---------------------------------------------   -----------   -------------   -----------   -----------
Revenues:
---------------------------------------------   -----------   -------------   -----------   -----------
     Distributors                               $35,549,427           62.38   $26,136,700         67.20
---------------------------------------------   -----------   -------------   -----------   -----------
     Retailers                                   17,039,249           29.90     8,768,291         22.54
---------------------------------------------   -----------   -------------   -----------   -----------
     Others                                       4,401,599            7.72     3,988,514         10.26
---------------------------------------------   -----------   -------------   -----------   -----------
Total                                           $56,990,275          100.00   $38,893,505        100.00
---------------------------------------------   -----------   -------------   -----------   -----------


During the three months ended June 30, 2008 and 2007, the Company  offered price
protection to certain  customers under specific  programs  aggregating $ 198,000
and $434,475  respectively,  which reduced net revenues and accounts  receivable
accordingly.

During the three months ended June 30, 2008,  the Company had no customers  that
accounted for more than 10% of net revenues during the quarter.

During the three months ended June 30, 2007,  the Company had no customers  that
accounted for more than 10% of net revenues during the quarter.



                                       17
<PAGE>

b. Geographic Segments

Financial information by geographic segments is summarized as follows:


                                                       Three Months Ended June 30,
------------------------------------   ------------    ------------   ------------   ----------------
                                          2008               %            2007                %
------------------------------------   ------------    ------------   ------------   ----------------
Gross revenues:
------------------------------------   ------------    ------------   ------------   ----------------
     United States                     $ 18,330,448           56.94   $ 15,802,272              65.29
------------------------------------   ------------    ------------   ------------   ----------------
     Canada                              (1,163,136)          (3.61)     3,750,830              15.49
------------------------------------   ------------    ------------   ------------   ----------------
     Central and South America            1,201,867            3.73      4,635,606              19.15
------------------------------------   ------------    ------------   ------------   ----------------
     Others                              13,825,781           42.94         13,687               0.07
------------------------------------   ------------    ------------   ------------   ----------------
Total                                  $ 32,194,960          100.00   $ 24,202,395             100.00
------------------------------------   ------------    ------------   ------------   ----------------

                                                        Six Months Ended June 30,
------------------------------------   ------------    ------------   ------------   ----------------
                                          2008               %            2007                %
------------------------------------   ------------    ------------   ------------   ----------------
Gross revenues:
------------------------------------   ------------    ------------   ------------   ----------------
     United States                     $ 38,509,745           67.57   $ 28,723,443              73.85
------------------------------------   ------------    ------------   ------------   ----------------
     Canada                                (239,740)           (.42)     3,715,965               9.55
------------------------------------   ------------    ------------   ------------   ----------------
     Central and South America            2,733,399            4.80      5,199,902              13.38
------------------------------------   ------------    ------------   ------------   ----------------
     Asia and Others                     15,986,871           28.05      1,254,195               3.22
------------------------------------   ------------    ------------   ------------   ----------------
Total                                  $ 56,990,275          100.00   $ 38,893,505             100.00
------------------------------------   ------------    ------------   ------------   ----------------


                                                       Three Months Ended June 30,
------------------------------------   ------------    ------------   ------------   ----------------
                                          2008               %            2007                %
------------------------------------   ------------    ------------   ------------   ----------------
Revenues:
------------------------------------   ------------    ------------   ------------   ----------------
     Computer Parts and Peripherals    $ 26,204,643           81.40   $ 12,091,899              49.96
------------------------------------   ------------    ------------   ------------   ----------------
     Consumer Electronics                 5,875,953           18.25     12,074,241              49.89
------------------------------------   ------------    ------------   ------------   ----------------
     VoIP                                                                   17,773                .07
------------------------------------   ------------    ------------   ------------   ----------------
Furniture                                   114,364             .35         18,482                .08
------------------------------------   ------------    ------------   ------------   ----------------
Total                                  $ 32,194,960          100.00   $ 24,202,395             100.00
------------------------------------   ------------    ------------   ------------   ----------------


                                                        Six Months Ended June 30,
------------------------------------   ------------    ------------   ------------   ----------------
                                          2008               %            2007                %
------------------------------------   ------------    ------------   ------------   ----------------
Revenues:
------------------------------------   ------------    ------------   ------------   ----------------
     Computer Parts and Peripherals    $ 44,941,025           78.87   $ 23,775,318              61.07
------------------------------------   ------------    ------------   ------------   ----------------
     Consumer Electronics                11,628,194           20.40     15,055,439              38.70
------------------------------------   ------------    ------------   ------------   ----------------
     VoIP                                                                   44,266                .17
------------------------------------   ------------    ------------   ------------   ----------------
Furniture                                   421,056             .73         18,482                .06
------------------------------------   ------------    ------------   ------------   ----------------
Total                                  $ 56,990,275          100.00   $ 38,893,505             100.00
------------------------------------   ------------    ------------   ------------   ----------------
</TABLE>



                                       18
<PAGE>


d. Suppliers

As of June 30, 2008,  no more than 37% of the products  distributed  by the SOYO
Group in 2008 were being  supplied by any one  supplier.  Other than that single
supplier,  no other  vendor  supplied  more than 27%  percent  of the  Company's
inventory  available for sale. SOYO Group, Inc. is establishing new partnerships
with other OEM  manufacturers  in the North America and Asia Pacific  Regions in
order to provide innovative products for consumers.


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

Cautionary   Statement  Pursuant  to  Safe  Harbor  Provisions  of  the  Private
Securities Litigation Reform Act of 1995:

This Quarterly  Report on Form 10-Q for the quarterly period ended June 30, 2008
contains  "forward-looking  statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended,  including statements that include the words
"believes",   "expects",    "anticipates",   or   similar   expressions.   These
forward-looking   statements  include,   but  are  not  limited  to,  statements
concerning   the   Company's   expectations   regarding   its  working   capital
requirements,  financing requirements,  business prospects, and other statements
of expectations,  beliefs,  future plans and strategies,  anticipated  events or
trends,  and similar  expressions  concerning  matters  that are not  historical
facts. The forward-looking  statements in this Quarterly Report on Form 10-Q for
the  quarterly  period  ended June 30, 2008  involve  known and  unknown  risks,
uncertainties and other factors that could cause the actual results, performance
or achievements  of the Company to differ  materially from those expressed in or
implied by the forward-looking statements contained herein.




Financial Outlook:


For the six months ended June 30, 2008, the Company earned $392,822 or $0.01 per
share before dividends on preferred stock.

For the six months ended June 30, 2007, The Company earned $873,124,  or .02 per
share before dividends on preferred stock.



                                       19
<PAGE>


As a general rule, the Company has been totally reliant upon the cash flows from
its  operations to fund future  growth.  In the last few years,  the Company has
begun and continues to implement  the following  steps to increase its financial
position, liquidity, and long term financial health:

In 2005,  the  Company  completed a small  private  placement,  began  factoring
invoices to improve cash flows, and converted several million dollars of debt to
equity, all of which improved the Company's financial condition.

In 2006,  the Company  changed  factors to a more  beneficial  arrangement,  and
entered  into a Trade  Finance  Flow  facility  with GE Capital  to fund  "Star"
transactions. The agreement provided for GE Capital to guarantee payment, on the
Company's behalf, for merchandise ordered from GE Capital approved manufacturers
in Asia. GE Capital  guarantees the payment subject to a purchase order from one
of our customers.  The Company accepts delivery of the goods in the US, and then
has the  option to either  pay for the  goods or sell the  receivable  (from the
customer) to our factor, which pays GE Capital.

In March 2007,  the Company  announced  that it had secured a $12 million  Asset
Based Credit Facility from UCB, a California bank, to provide funding for future
growth.

During the first quarter of 2007, the Company began to use the $12 million asset
based credit facility  arranged with United  Commercial Bank (see Form 8-K dated
March 2,  2007).  The  agreement  calls  for UCB to  provide  funds  for SOYO to
purchase  inventory in an amount  determined by an evaluation of SOYO's  current
inventory and accounts receivable.  According to the terms of the agreement, all
accounts receivable sold to other factors were purchased by UCB.

In April 2007, by mutual agreement of the parties,  the maximum loan balance was
increased  several  times.  All  other  terms of the  agreement,  including  the
interest rate,  maturity date and method of evaluating  the Company's  inventory
and  receivables  to determine  eligible  collateral  were left  unchanged.  For
reporting  purposes,  the loan has  been  segregated  from  other  payables  and
reported as a separate line item on the balance sheet.

In June 2007, UCB offered to provide the Company with an  alternative  source of
financing- Purchase Order financing.  This line differed from all other forms of
financing in that the bank was offering to advance  funds  against our customers
specific purchase orders,  provided the customer met the bank's stringent credit
requirements.  The end result is that the  Company can use this credit line only
by  obtaining   purchase  orders  from  large  customers   before  ordering  the
merchandise.  The funds would then be advanced to the manufacturer after product



                                       20
<PAGE>

was shipped, and once the product was delivered to the customer,  and the status
of the order was changed from a purchase  order to a receivable,  the loan would
have to be paid back, or the balance transferred to the asset based credit line.
The Company began buying  merchandise under the Purchase Order financing line in
June 2007.

In September 2007, the Company announced to shareholders that it was negotiating
with several  independent  third parties to raise capital.  The capital would be
used  to  improve  the  balance  sheet  and  increase  the  Company's  borrowing
capabilities.  The Company further stated that with the large increases in sales
during the year,  all of the Company's  credit had been  utilized,  and that the
Company was having difficulties  purchasing enough products to maintain the 2007
level of sales  growth.  As of the date of this report,  the Company had not yet
finalized any capital transaction with an outside party.

Critical Accounting Policies:

The  Company  prepared  its  condensed   consolidated  financial  statements  in
accordance with accounting principles generally accepted in the United States of
America.  The  preparation  of these  financial  statements  requires the use of
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and the reported  amount of revenues and expenses
during the reporting period. Management periodically evaluates the estimates and
judgments  made.  Management  bases its  estimates  and  judgments on historical
experience and on various  factors that are believed to be reasonable  under the
circumstances.  Actual  results may differ from these  estimates  as a result of
different assumptions or conditions.

The Company  operates in a highly  competitive  industry  subject to  aggressive
pricing  practices,  pressures on gross margins,  frequent  introductions of new
products,  rapid  technological  advances,   continual  improvement  in  product
price/performance characteristics, and changing consumer demand.

As a result of the  dynamic  nature of the  business,  it is  possible  that the
Company's  estimates  with  respect  to the  realizability  of  inventories  and
accounts  receivable  may be materially  different  from actual  amounts.  These
differences  could  result in higher than  expected  allowance  for bad debts or
inventory  reserve  costs,  which could have a materially  adverse effect on the
Company's financial position and results of operations.

The following critical accounting policies affect the more significant judgments
and estimates used in the  preparation of the Company's  condensed  consolidated
financial statements.



                                       21
<PAGE>


Vendor Programs:

Firm agreements with vendors for price  protection,  product rebates,  marketing
and training,  product returns and promotion  programs are generally recorded as
adjustments to product costs, revenue or sales and marketing expenses according
to the nature of the program.  Depending on market  conditions,  the Company may
implement actions to increase customer incentive offerings,  which may result in
a reduction of revenue at the time the incentive is offered. The Company records
the  corresponding  cost or expense at the time it has a firm  agreement  with a
vendor.


Accounts Receivable:

The Company  recognizes  revenue  when  persuasive  evidence  of an  arrangement
exists,  delivery has occurred,  the sales price is fixed or  determinable,  and
collectibility is probable.

The Company records estimated  reductions to revenue for incentive offerings and
promotions. Depending on market conditions, the Company may implement actions to
increase  customer  incentive  offerings,  which may  result  in an  incremental
reduction of revenue at the time the incentive is offered.  The Company  records
the  corresponding  effect on receivable and revenue when the Company offers the
incentive to customers.  All accruals  estimating sales incentives,  warranties,
rebates  and  returns  are  based  on  historical  experience  and  the  Company
management's  collective  experience in anticipating  customers  actions.  These
amounts  are  reviewed  and updated  each month when  financial  statements  are
generated.

Complicating  these estimates is the Company's  different return  policies.  The
Company does not accept  returns  from  customers  for refunds,  but does repair
merchandise as needed.  The cost of the shipping and repairs may be borne by the
customer or the  Company,  depending on the amount of time that has passed since
the sale and the product warranty.

The Company has different  return policies with different  customers.  While the
Company does not  participate in "guaranteed  sales"  programs,  the Company has
begun to sell products to several  national retail chains.  Some of these chains
have standard  contracts  which require the Company to accept returns for credit
within standard return periods,  usually sixty days. While these return policies
are more  generous  than the Company  usually  offers,  management  has made the
decision to accept the policies and sell the products to these  national  chains
for both the business volume and exposure such sales generate.  These sales have
been taking  place since late 2005,  and returns  have  consistently  been below
management's expectations. Therefore, no adjustments to the financial statements
have been necessary.



                                       22
<PAGE>

Each month,  management reviews the accounts receivable aging report and adjusts
the allowance for bad debts based on that review.  The  adjustment is made based
on historical  experience and management's  evaluation of the  collectibility of
outstanding  accounts  receivable over 90 days. At all times,  the allowance for
bad debts is large  enough  to cover  all  receivables  that  management  is not
certain  it  will  collect,  plus  another  one  percent  of  the  net  accounts
receivable.

Inventories:

Inventories  are stated at the lower of cost or market.  Cost is  determined  by
using the  average  cost  method.  The Company  maintains a perpetual  inventory
system which  provides for  continuous  updating of average  costs.  The Company
evaluates  the market value of its  inventory  components on a regular basis and
reduces the computed average cost if it exceeds the component's market value.

Income Taxes:

The  Company  accounts  for income  taxes using the asset and  liability  method
whereby  deferred  income  taxes  are  recognized  for the tax  consequences  of
temporary differences by applying statutory tax rates applicable to future years
to  differences  between the financial  statement  carrying  amounts and the tax
bases of certain  assets and  liabilities.  Changes in  deferred  tax assets and
liabilities  include the impact of any tax rate changes enacted during the year.
Through 2006, a valuation  allowance was provided for the amount of deferred tax
assets  that,  based on  available  evidence,  were not expected to be realized.
Beginning in 2007, the Company  discontinued the use of the valuation allowance.
Based on its current  financial  condition,  current business and  profitability
forecasts, the Company believes that the benefits accrued as deferred tax assets
were more likely than not to be realized in future periods.



Results of Operations:

Three Months Ended June 30, 2008 and 2007::

Net Revenues.  Net revenues  increased by $7,992,565 or 33.0%, to $32,194,960 in
the three months ended June 30, 2008, as compared to  $24,202,395  in 2007. The
increase  in  revenues  was  mainly  due to  opening  new  accounts,  the strong
relationship  with  Office  Max  that  began  in 2007,  and  increased  sales of
components in Asia.

Gross  Margin.  Gross  margin was  $4,986,082  or 15.4% in 2008,  as compared to
$3,803,092 or 15.7% in 2007.  Gross margins  decreased on a percentage  basis as
the Company  increased sales to larger  national retail chains,  and the cost of
shipping goods  increased  substantially  as a result of higher fuel costs.  The
Company's  internal  analysis  shows that shipping costs during the quarter were
more than $1.3  million  above  forecast  for the volume of goods  shipped.  The
Company  expects  gross  margins  to  stabilize  around  15%  and  remain  there
throughout the year, as sales of higher margin products  increase.  However,  if
the price of fuel continues to increase,  leading to higher shipping costs,  the



                                       23
<PAGE>

Company  is going to be  forced  to pass  those  costs  on to  buyers,  possible
affecting sales volumes.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$15,497 to $1,140,379  in 2008, as compared to $1,124,882 in 2007.  The increase
is due entirely to the product  development cost of creating and rolling out the
new Honeywell brand of consumer  electronics  products.  During the quarter, the
first  computer  monitors were shipped from the factory to the Company,  and the
planning and development of the televisions was completed.

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased by $81,766 to  $2,086,432  in 2008, as compared to $2,168,198 in 2007.
During the first part of 2007, the Company was defending  itself against several
lawsuits and  investigations  filed by various entities  accusing the Company of
not  processing  rebate  claims  correctly.  The  Company  cooperated  with  the
investigations,  but the cost of  defending  the  investigations  and fixing the
rebate problems was  substantial.  The Company has spent a  substantially  lower
amount on legal fees in 2008.  That decrease is partially  offset by the cost of
organizing and staging a proxy vote and an annual meeting, and increased payroll
costs for adding two  executives  to manage  and  supervise  the roll out of the
Honeywell line of consumer electronics. .

Bad Debts. The Company recorded a provision for doubtful accounts of $729,037 in
the three months  ended June 30,  2008,  and $125,063 for the three months ended
June 30, 2007.  The  provision  has  increased  substantially  as the  Company's
revenues  have grown,  and as the Company has had trouble  collecting  from some
smaller independent  accounts during the quarter. The problem began in the first
quarter,  and has carried over to the second quarter.  As a result,  the Company
has  tightened  its credit  policies to protect  against  bad debts,  cut credit
limits to several  customers,  and has been  negotiating  with several  external
parties in an attempt to obtain credit insurance at a reasonable price.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $12,529 for the three months ended June 30, 2008, as compared to
$22,409 for the three months ended June 30, 2007. The decrease was caused by the
sale of the VoIP assets in December  2007.  The Company  owns less  property and
equipment subject to depreciation.

Income from Operations.  The income from operations was $1,017,705 for the three
months ended June 30,  2008,  as compared to $362,540 for the three months ended
June 30,  2007  This is a result of the  increased  revenues  and gross  margins
described above.

Miscellaneous Income (Loss). The miscellaneous income (loss)for the three months
ended  June  30,  2008  was a loss  of  $312,983.  That  was  due to a  $400,000
unrealized   loss  on   investment   in  247MGI   which  was   marked-to-market.
Miscellaneous  income was a loss of $16,867 for the three  months ended June 30,
2007.

Interest  Income.  Interest  income was $363 for the three months ended June 30,



                                       24
<PAGE>

2008,  as compared  to $17,409 for the three  months  ended June 30,  2007.  The
decrease,  while  insignificant,  is due to the Company having less cash on hand
due to very  tight  credit  constraints.  All  available  cash is being  used to
purchase inventory.

Interest Expense.  Interest expense was $739,790 for the three months ended June
30,  2008.  Interest  expense was  $322,166  for the three months ended June 30,
2007. The increase was due to a single factor. The Company's revenues have grown
significantly throughout the last year, as has the need for capital. The Company
is  borrowing  more  money  under its  credit  lines.  Additionally,  to finance
customer  purchase  orders,  the Company has borrowed money from non traditional
sources  such as Gateway  Finance,  which is a much more  expensive  source than
using banks.

Provision for Income Taxes. The Company's provision for income taxes
For the three months ended June 30, 2008 is $24,820. The reduction was permitted
by the flat earnings during the quarter.  The Company's provision and income tax
liability are correctly stated on the Company's interim balance sheet as of June
30, 2008

Deferred  Income  Tax  Benefit/  (Expense):  The  deferred  income  tax  benefit
(expense)  was ($8,000)  for the three  months  ended June 30,  2008.  This is a
result of timing differences between GAAP income and taxable income.

Net Income (loss). Net income (loss) was $29,878 for the three months ended June
30, 2008, as compared to $285,174 for the three months ended June 30, 2007.


Six Months Ended June 30, 2008 and 2007::

Net Revenues.  Net revenues increased by $18,096,770 or 46.6%, to $56,990,275 in
six Months Ended June 30, 2008, as compared to $38,893,505 in 2007. The increase
in revenues was mainly due to strong US sales,  and several new accounts  opened
during the first half of the year.  The Company  managed to increase  revenue by
over 46 percent  despite having no single  customers that accounted for over 10%
of revenues.

Gross  Margin.  Gross  margin was  $8,092,186  or 14.2% in 2008,  as compared to
$6,411,288 or 16.5% in 2007.  Gross margins  decreased on a percentage  basis as
the cost of  delivering  goods to customers  was  markedly  higher than in prior
periods due to increased fuel prices. The Company's cost of delivering goods was
significantly higher than forecast, leading to profit shortfalls.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  decreased  by
$147,724 to $1,568,014 in 2008, as compared to $1,715,738 in 2007.  The decrease
is due to the Company not sponsoring MMA marketing  programs  during the period.
The Company plans to use its  marketing  budget to publicize the roll out of the
Honeywell  product line. The Company  continued to use outside sales reps during
the period.  The Company  began using  outside sales reps to open new markets in



                                       25
<PAGE>

2006,  and as the sales have grown,  the  commissions  grew  through  2007.  The
Company  has not  employed  a lot of new  outside  sales  reps over the last few
quarters,  although that number will grow again when the Honeywell  products are
available for sale in the second half of 2008. The Company  continues to believe
this is a cost effective way to obtain shelf space at various retailers,  so the
outside  commissions  are  likely to  continue  to grow  larger as the  business
continues to grow and mature.

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased by $255,763 to  $3,490,609 in 2008, as compared to $3,746,372 in 2007.
The primary  reason for the  decrease is the lower  expense  recorded  for stock
options  issued to employees.  Over the six month period,  the amount dropped by
approximately  $500,000 due to the amount of options previously  exercised,  and
the relatively  small amount of options  issued in the last twelve months.  That
decrease is partly  offset by higher bank charges and  insurance  costs.  Rental
expense will rise significantly beginning later this year when the Company moves
to a new corporate headquarters, doubling both the size of the warehouse and the
rental expense.  (see the principal  commitments section of this report for more
details).

Bad Debts.  The Company  recorded a provision for bad debts of $1,181,127 in the
six months ended June 30,  2008,  and $126,501 for the six months ended June 30,
2007.  The provision has jumped as the Company's  revenues have increased 46% in
the comparable period. Additionally, the Company has had trouble collecting from
some smaller accounts during the quarter. As a result, the Company has tightened
its credit policies to protect against bad debts.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $25,164 for the six months  ended June 30,  2008,  as compared to
$45,700 for the six months ended June 30,  2007.  The decrease was caused by the
sale of the VoIP assets in December  2007.  The Company  owns less  property and
equipment subject to depreciation.

Income from  Operations.  The income from  operations was $1,827,272 for the six
months  ended June 30,  2008,  as compared to $776,977  for the six months ended
June 30,  2007  This is a result of the  increased  revenues  and gross  margins
described above.

Miscellaneous Income. The miscellaneous income for the six months ended June 30,
2008  amounted to $87,017.  Miscellaneous  income was a loss of $104,566 for the
six months ended June 30, 2007.

Interest  Income.  Interest income was $12,470 for the six months ended June 30,
2008,  as  compared  to $48,794  for the six months  ended  June 30,  2007.  The
decrease,  while  insignificant,  is due to the Company having less cash on hand
due to very  tight  credit  constraints.  All  available  cash is being  used to
purchase inventory.

Interest Expense.  Interest expense was $1,124,937 for the six months ended June
30, 2008.  Interest expense was $381,881 for the six months ended June 30, 2007.



                                       26
<PAGE>

The increase  was due to a single  factor.  The  Company's  revenues  have grown
significantly throughout the last year, as has the need for capital. The Company
is borrowing more money under its credit lines,  and is not getting as favorable
terms on its borrowings.  The Company has even used non traditional lenders such
as Gateway Finance Corp. to meet its obligations to its customers.

Provision for Income Taxes. The Company  recognized a provision for income taxes
of $458,000 in 2008, as compared to $192,860.  The provision is now necessary as
net operating loss carry forwards will no longer offset all of the Company's tax
liabilities.

Deferred  Income  Tax  Benefit/  (Expense):  The  deferred  income  tax  benefit
(expense)  was $49,000 for the six months ended June 30, 2008.  This is a result
of timing  differences  between  GAAP income and taxable  income.  The  deferred
income tax  benefit  was  $726,660 in the six months  ended June 30,  2007.  The
difference  is mainly  due to the  decreased  cost  related  to  employee  stock
options, from which a large portion of the deferred tax benefit is generated.

Net Income.  Net income was $235,587 for the six months ended June 30, 2008,  as
compared to $746,201 for the six months ended June 30, 2007.

Financial Condition - June 30, 2008:

Liquidity and Capital Resources:

As a general rule, the Company has been totally reliant upon the cash flows from
its  operations to fund future  growth.  In the last few years,  the Company has
begun and continues to implement  the following  steps to increase its financial
position, liquidity, and long-erm financial health:

In 2005,  The  Company  completed a small  private  placement,  began  factoring
invoices to improve cash flows, and converted several million dollars of debt to
equity, all of which improved the Company's financial condition.

In 2006,  the Company  changed  factors to a more  beneficial  arrangement,  and
entered  into a Trade  Finance  Flow  facility  with GE Capital  to fund  "Star"
transactions. The agreement provided for GE Capital to guarantee payment, on the
Company's behalf, for merchandise ordered from GE Capital approved manufacturers
in Asia. GE Capital  guarantees the payment subject to a purchase order from one
of our customers. The Company accepts delivery of the goods in the US, and then
has the  option to either  pay for the  goods or sell the  receivable  (from the
customer) to our factor, who pays GE Capital.

In March 2007,  the Company  announced  that it had secured a $12 million  Asset
Based  Credit  Facility  from a  California  bank to provide  funding for future
growth.

In September 2007, the Company announced to shareholders that it was negotiating



                                       27
<PAGE>

with several  independent  third parties to raise capital.  The capital would be
used  to  improve  the  balance  sheet  and  increase  the  Company's  borrowing
capabilities.  The Company further stated that with the large increases in sales
during the year,  all of the Company's  credit had been  utilized,  and that the
Company was having difficulties  purchasing enough products to maintain the 2007
level of sales  growth.  As of the date of this report,  the Company had not yet
agreed with any outside party on any capital transaction.

In March 2008, Ming Chok, Chief Executive  Officer,  purchased 776,000 shares of
the  Company's  common stock in a private  placement at $1.25 per share,  At the
same time, he announced plans to invest approximately  another $1 million in the
Company's common stock during the second quarter of 2008.

Operating  Activities.  The Company  utilized  cash of $850,094  from  operating
activities  during the six months ended June 30, 2008,  as compared to utilizing
cash of $16,242,562 in operating activities during the six months ended June 30,
2007.

At June 30, 2008,  the Company had cash and cash  equivalents  of  $571,855,  as
compared to $1,848,249 at December 31, 2007.

The Company had working  capital of $14,142,823 at June 30, 2008, as compared to
working capital of $6,894,614 at December 31, 2007,  resulting in current ratios
of 1.37:1 and 1.16:1 at June 30, 2008 and December 31, 2007, respectively.

Accounts  receivable  increased to  $30,211,898 at June 30, 2008, as compared to
$27,123,985  at December  31, 2007,  an increase of  $3,087,913.  The  Company's
provision for doubtful accounts increased to $1,134,900 as of June 30, 2008.

Inventories   increased  to  $14,960,525  at  June  30,  2008,  as  compared  to
$12,221,265  at December  31,  2007,  an increase of  $2,739,260.  Inventory  in
transit was $2,462,192 at June 30, 2008.

Accounts payable decreased to $8,327,606 at June 30, 2008, as compared to
$14,336,196 at December 31, 2007, a decrease of $5,788,590.  During the quarter,
the Company was able to reach an agreement  with a former  supplier  over unpaid
debts. To settle the debt, the Company issued 5,900,000 shares of its restricted
common stock to the supplier in return for the retirement of $6,004,028 of debt.

Accrued  liabilities  decreased  to  $742,202 at June 30,  2008,  as compared to
$789,526 at December 31, 2007, a decrease of $47,324 or less than eight percent.

Commercial  loans due to UCB  decreased  to  $23,907,492  at June 30,  2008 from
$27,824,490  at December 31,  2007.  The decrease is due to payments the Company
made on the Purchase Order financing line.



                                       28
<PAGE>
<TABLE>
<CAPTION>

Due to Gateway Trade Finance was $3,198,539 at June 30, 2008. During March 2008,
the Company received a large order from a customer that could not be financed by
its current credit facilities.  The Company negotiated for Gateway Trade Finance
to guarantee payment of the production run. This balance was paid off during the
second quarter,  however the Company ran into the same issues with credit lines,
and again  turned to a non  conventional  lender.  The Company  does not plan to
utilize external  financing like this for future purchases due to the high cost,
but may do so on a limited basis if the transaction warrants it.

Principal Commitments:

A summary of the Company's  contractual cash obligations as of June 30, 2008, is
as follows:

                                         Less than 1
    Contractual Cash Obligations            year           2-3 years         4-5 years        Over 5 years
                                       ---------------- ---------------- ------------------- ----------------
<S>                                                                                          <C>

Operating Leases                          $236,119           $909,632      $1,047,916             $122,322
Advances from Directors                      N/A              N/A               N/A                N/A
Notes Payable/ Short Term Loan               N/A              N/A               N/A                N/A
Purchase Commitments                     $2,462,192           N/A

Royalty Payments Due                      $479,000        $1,287,500         $1,250,500
Long-Term Debt                                --                --                 --                 --
                                       ---------------- ---------------- ------------------- ----------------
Total                                    $3,177,311       $2,1,97,132        $2,298,416           $122,322
                                       ================ ================ =================== ================
</TABLE>

At June 30, 2008,  the Company did not have any  long-term  purchase  commitment
contracts to honor.  The only purchase  commitments  were for inventory  already
purchased and in transit of $5,062,989.

On July 15, 2008, the Company announced that it had signed a five-year agreement
to lease a 74,731 square foot multi-purpose  facility,  which will nearly double
its  headquarters,  operations  and  warehouse  space.  The lease term begins on
September 15, 2008 and extends for five years.

At June 30, 2008, the Company did not have any material  commitments for capital
expenditures or have any transactions,  obligations or relationships  that could
be considered off-balance sheet arrangements.

On February 8, 2007,  SOYO Group  announced  that the Company had entered into a
licensing  agreement with Honeywell  International  Inc.,  effective January 1st
2007,  under  which SOYO will  supply and market  certain  consumer  electronics
products under the Honeywell Brand.

The  agreement  is for a minimum  period of 6.5 (six point five) years and calls
for the payment of MINIMUM  royalties  by SOYO to Honeywell  International  Inc.
totaling  $3,840,000  (Three Million,  Eight Hundred and Forty Thousand  Dollars
U.S.).  Sales  levels  in  excess  of  minimum  agreed  targets  will  result in
associated  increases in the royalty  payments due. Minimum royalty payments due
under the  agreement  are  $424,000 in 2008.  Although  the  Company  signed the
agreement in 2007 and no sales of Honeywell  branded products were made in 2007,
$383,000 in royalties  were paid to Honeywell  International  Inc. in 2007,  and
$255,000 has been paid in 2008.



                                       29
<PAGE>

Off-Balance Sheet Arrangements:

At June 30,  2008,  the Company did not have any  transactions,  obligations  or
relationships that could be considered off-balance sheet arrangements.

Commitments and Contingencies:

At June 30, 2008, the Company did not have any material  commitments for capital
expenditures.

Recent Accounting Pronouncements:


In September 2006, the FASB issued SFAS No. 157, Fair Value  Measurements . SFAS
No.  157  provides   accounting  guidance  on  the  definition  of  fair  value,
establishes  a  framework  for  measuring  fair  value  and  requires   expanded
disclosures about fair value measurements. SFAS 157 is effective for the Company
starting  January  1,  2008 and did not have an  impact  on the  Company  as the
Company does not have financial  instruments  subject to the expanded disclosure
requirements  of SFAS 157. In February 2008, the FASB issued FASB Staff Position
FAS 157-2,  Effective  Date of FASB Statement No. 157, which provides a one year
delay of the effective date of FAS 157 as it relates to nonfinancial  assets and
liabilities,  except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The provisions of
SFAS 157 relating to nonfinancial assets and liabilities will be effective as of
the beginning of the Company's 2009 fiscal year.

Effective  January 1, 2008, the Company  adopted SFAS No. 159 ("FAS 159"),  "The
Fair Value Option for Financial Assets and Financial  Liabilities - Including an
Amendment  of FASB  Statement  No.  115." FAS 159 permits  entities to choose to
measure many financial  instruments  and certain other items at fair value,  and
establishes  presentation  and  disclosure  requirements  designed to facilitate
comparisons  between entities that choose different  measurement  attributes for
similar types of assets and  liabilities.  The adoption of FAS 159 had no impact
on the  Company's  financial  statements  as the  Company did not elect the fair
value option.

In December 2007, the FASB issued  Statement No. 141 (revised  2007),  "Business
Combinations."  The new  standard  requires the  acquiring  entity in a business
combination  to recognize  all (and only) the assets  acquired  and  liabilities
assumed in the transaction;  establishes the acquisition-date  fair value as the
measurement  objective  for all assets  acquired and  liabilities  assumed;  and
requires  the  acquirer  to  disclose  to  investors  and other users all of the
information they need to evaluate and understand the nature and financial effect
of the  business  combination.  This  statement  is  effective  for fiscal years
beginning  January 1, 2009 and the Company  believes this will have no impact on
its financial statements.

In December, 2007, the FASB issued Statement No. 160, "Noncontrolling  Interests
in  Consolidated  Financial  Statements--an  amendment  of  ARB  No.  51."  This
statement establishes  accounting and reporting standards for the noncontrolling



                                       30
<PAGE>

interest in a  subsidiary  and for the  deconsolidation  of a  subsidiary.  This
statement  is  effective   prospectively,   except  for  certain   retrospective
disclosure requirements, for fiscal years beginning after December 15, 2008. The
Company believes this will have no impact on its financial statements.

 In March 2008, the Financial Accounting Standards Board (FASB) issued Statement
No. 161, "Disclosures about Derivative Instruments and Hedging Activities." This
statement requires companies with derivative instruments to disclose information
that should enable financial statement users to understand how and why a company
uses derivative instruments, how derivative instruments and related hedged items
are  accounted  for under FASB  Statement No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities" and how derivative  instruments and related
hedged items affect a company's  financial position,  financial  performance and
cash flows.  This  statement is effective  for financial  statements  issued for
fiscal  years and interim  periods  beginning  after  November  15, 2008 and the
Company believes this will have no impact on its financial statements.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally  Accepted
Accounting  Principles  ("SFAS  No.  162").  SFAS 162  identifies  a  consistent
framework,  or  hierarchy,  for  selecting  accounting  principles to be used in
preparing  financial  statements  that are  presented  in  conformity  with U.S.
generally  accepted  accounting  principles  for  nongovernmental  entities (the
"Hierarchy").  The Hierarchy  within SFAS 162 is consistent with that previously
defined in the AICPA  Statement  on Auditing  Standards  No. 69, "The Meaning of
Present Fairly in Conformity  With  Generally  Accepted  Accounting  Principles"
("SAS 69"). SFAS 162 is effective 60 days following the United States Securities
and Exchange  Commission's (the "SEC") approval of the Public Company Accounting
Oversight Board  amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles".  The adoption of SFAS
162 will not have a material  effect on the  Consolidated  Financial  Statements
because the Company has utilized the guidance within SAS 69.

In May 2008, the FASB issued SFAS No. 163,  "Accounting for Financial  Guarantee
Insurance  Contracts--an  interpretation  of FASB  Statement  No. 60 ("SFAS  No.
163"). SFAS 163 requires recognition of an insurance claim liability prior to an
event of default when there is evidence that credit  deterioration  has occurred
in an  insured  financial  obligation.  SFAS  163  is  effective  for  financial
statements  issued for fiscal years  beginning  after December 15, 2008, and all
interim periods within those fiscal years.  Early  application is not permitted.
The  Company's  adoption  of SFAS 163 will not  have a  material  effect  on the
Consolidated Financial Statements.



                                       31
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Through December 31, 2007,  Company did not have any market risk with respect to
such factors as commodity prices,  equity prices,  and other market changes that
affect market risk sensitive investments. On December 31, 2007, the Company sold
all of the assets  related to the VoIP  business  to 247MGI of Fort  Lauderdale,
Florida for 40,000,000  shares of 247MGI's common stock.  The stock is traded on
the OTC pink  sheets.  The Company has no plans to dispose of the 247MGI  stock,
and intends to hold it as a long-term investment.

The Company's debt  obligations  at June 30, 2008 were  primarily  short-term in
nature.  As of June 30,  2008,  The Company  does not have any  long-term  debt.
However,  the Company does have $23,907,492 of debt at a variable interest rate.
As a result,  the  Company  does have some  financial  risk from an  increase in
interest  rates.  To the extent that the Company  arranges new  interest-bearing
borrowings in the future,  an increase in current  interest  rates would cause a
commensurate increase in the interest expense related to such borrowings.

Through  2006,  The Company had  absolutely  no foreign  currency  risk,  as its
revenues and expenses,  as well as its debt  obligations,  are  denominated  and
settled in United States dollars.  In 2007, the Company began selling product to
a Canadian vendor who paid in Canadian  dollars.  The Company believes that risk
is  immaterial to its overall  business,  and has no plans to hedge that risk in
2008.  If the  risk  grows,  or the  Company  begins  to sell  product  to other
customers in non US dollar related transactions, the Company may reevaluate that
position.

4. CONTROLS AND PROCEDURES

Evaluation of Disclosure and Control Procedures

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) of the  Exchange  Act.  Our  internal  control  system was designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial statements for external purposes, in accordance
with United States generally accepted accounting principles. Because of inherent
limitations,  a system of internal  control  over  financial  reporting  may not
prevent  or  detect  misstatements.  Also,  projections  of  any  evaluation  of
effectiveness to future periods are subject to the risk that controls may become
inadequate  due to change in conditions,  or that the degree of compliance  with
the policies or procedures may deteriorate.

An  internal  control  material  weakness  is  a  significant   deficiency,   or
combination  of  significant  deficiencies,  that  results in more than a remote
likelihood that a material  misstatement of the financial statements will not be
prevented or detected.

Our  management,   including  our  principal  executive  officer  and  principal
accounting officer, conducted an evaluation of the effectiveness of our internal
controls  as of December  31,  2007,  and this  assessment  identified  material
weaknesses in our internal  control over the  financial  reporting  process.  In
particular,  our  accounting  system can not be relied  upon to  properly  value
inventory, or to generate timely and accurate financial information to allow for
the preparation of timely and complete financial statements. The system's output
has been  reviewed,  and our financial  statements for the period ended June 30,
2008 properly reflect the Company's financial position.



                                       32
<PAGE>


In making the assessment of internal control over financial reporting management
used the criteria set forth by the Committee of Sponsoring  Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated  Framework. Because of
the material  weakness  described in the  preceding  paragraph,  our  management
concluded that our internal  control over financial  reporting was not effective
as of June 30, 2008.


We are actively engaged in the implementation of remediation  efforts to address
the  material  weakness in internal  control  over  financial  reporting.  These
remediation  efforts include  devising and  implementing  effective  controls to
review and monitor  the system  output,  and to replace  our current  accounting
software with new software. Management hired experts to assist in the evaluation
and implementation of new accounting software. The evaluation was completed, the
software has been paid for, and significant  customization has been performed to
adapt the software to the Company's business. All employees,  managers and other
system  users have been trained and tested on the use of the new  software.  The
Company has begun parallel testing of the software,  and the software is not yet
stable enough to "go live".  The software  will be "live" once all  deficiencies
have been addressed..

The Company  believes that once the new software is installed  and  operational,
all significant deficiencies will have been addressed and corrected.

Changes in Internal Control over Financial Reporting

         There have been no  changes  in our  internal  control  over  financial
reporting  (as defined in Rules  13a-15(f) and  15d-15(f)  under the  Securities
Exchange  Act of 1934) during the fiscal  quarter  ended June 30, 2008 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.


                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


     On January 26, 2007, the Company filed a lawsuit against Astar  Electronics
USA,  Inc.,  KXD  Technology,  Inc.  and  Does 1 - 25 in the  Superior  Court of
California for the County of Los Angeles,  Central District (Case No. BC365349).
The  Company  alleges  claims  for  breach  of  contract,  fraud,  and  tortuous
interference  with  economic  relations  and  seeks  compensatory  and  punitive
damages. Both named defendants were served on January 26, 2007. On May 17, 2007,
the  Company  filed  a  First  Amended  Complaint  against  Defendants  alleging
additional  claims  for  trademark  infringement,   trademark  dilution,  unfair
competition and false advertising. In or about June 2007, Astar Electronics USA,
Inc.  and KXD  Technology,  Inc.  answered  and  KXD  Technology,  Inc.  filed a
cross-complaint against the Company and two of its officers,  Nancy Chu and Ming
Chok alleging claims for breach of contract,  fraud,  tortuous interference with
economic  relations and common counts.  In or about July 2007, Astar Electronics
USA, Inc. filed a notice of dissolution with the California  Secretary of State.
On August 15, 2007, KXD Technology,  Inc. filed for bankruptcy protection in the
United States Bankruptcy Court, Central District of California. On September 13,
2007,  the Court entered an order sua sponte to stay the entire  action  pending
the resolution of the bankruptcy proceeding. No trial date has been set.



                                       33
<PAGE>

On November 11, 2007, the Company filed a lawsuit against MDG Computers  Canada,
Inc. in the Ontario  Superior  Court of Justice in Canada.  The Company  alleges
claims for trademark infringement,  passing off and false designation related to
the sales of televisions  by MDG Computers  Canada,  Inc.  bearing the Company's
trademarks.  On December 18, 2007, MDG Computers Canada, Inc. filed an answer to
the  complaint.  The  Company  shall  continue to  vigorously  pursue its claims
against MDG Computers Canada, Inc. No trial date has been set.


There are no other legal proceedings that have been filed against the Company.

None of the Company's directors,  officers or affiliates,  or owner of record of
more than five  percent  (5%) of its  securities,  or any  associate of any such
director, officer or security holder, is a party adverse to the Company or has a
material interest adverse to the Company in reference to pending litigation.


ITEM 1A: RISK FACTORS

In  addition  to the other  information  set forth in this  report,  you  should
carefully  consider the factors  discussed in Part I, "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2007, which could
materially affect our business, financial condition or future results. The risks
described  in our Annual  Report on Form 10-K are not the only risks  facing our
Company. Additional risks and uncertainties not currently known to us or that we
currently  deem to be  immaterial  also  may  materially  adversely  affect  our
business, financial condition and/or operating results.


ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
         SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None


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

None

ITEM 5. OTHER INFORMATION

None



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<PAGE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits
A list of  exhibits  required to be filed as part of this report is set forth in
the  Index  to  Exhibits,  which  immediately  precedes  such  exhibits,  and is
incorporated herein by reference.

(b) Reports on Form 8-K

None

SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.




                                                      SOYO GROUP, INC.
                                                      --------------------
                                                      (Registrant)




DATE:      August 14, 2008                        By: /s/ Ming Tung Chok
                                                      -----------------------
                                                      Ming Tung Chok
                                                      President and Chief
                                                      Executive Officer



DATE:  August 14, 2008                            By: /s/ Nancy Chu
                                                      -----------------------
                                                      Nancy Chu
                                                      Chief Financial Officer



DATE:  August 14, 2008                            By  /s/ Jay Schrankler
                                                      --------------------------
                                                      Name: Jay Schrankler
                                                      Title: Director

DATE:  August 14, 2008                            By  /s/ Chung Chin Keung
                                                      --------------------------
                                                      Name: Chung Chin Keung
                                                      Title: Director

DATE:  August 14, 2008                            By  /s/ Henry Song
                                                      --------------------------
                                                      Name: Henry Song
                                                      Title: Director



                                       35
<PAGE>

                                INDEX TO EXHIBITS

Exhibit
Number         Description of Document
------         -----------------------

10.6        SOYO Group Agreement with UCB Bank, dated March 2, 2007

10.7        SOYO Group Agreement with Urmstrom Capital dated August 7, 2008

10.8        SOYO Group Agreement with Tatung dated June 27, 2008

23.1        Consent of Independent  Registered Public Accounting Firm, Vasquez &
            Company LLP

31.1        Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act of
            2002 - Ming Tung Chok

31.2        Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act of
            2002 - Nancy Chu

32.1        Certification  pursuant to Section 906 of the  Sarbanes-Oxley Act of
            2002 - Ming Tung Chok

32.2        Certification  pursuant to Section 906 of the  Sarbanes-Oxley Act of
            2002 - Nancy Chu














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