SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                   FORM 10-Q/A


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

                   For the fiscal quarter ended March 31, 2007


[ ]  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)


<PAGE>


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 6, 2007 there were 49,039,156 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  -  March 31, 2007
           (Unaudited) and December 31, 2006...................................5

           Condensed  Consolidated  Statements of  Operations  (Unaudited) -
           Three Months Ended March 31, 2007 and 2006..........................7


           Condensed  Consolidated  Statements  of Cash Flows  (Unaudited) -
           Three Months Ended March 31, 2007 and 2006..........................8

           Notes to Condensed  Consolidated Financial Statements (Unaudited)
           - Three Months Ended March 31, 2007 and 2006.......................10



   Item 2. Management's  Discussion and Analysis of Financial  Condition and
           Results of Operations..............................................18

   Item 3. Quantitative and Qualitative Disclosures about Market Risk.........28

   Item 4. Controls and Procedures............................................28


PART II. OTHER INFORMATION

   Item 1. Legal Proceedings..................................................30

   Item 1A.  Risk Factors.....................................................32

   Item 2. Changes in  Securities,  Use of Proceeds and Issuer  Purchases of
           Equity Securities..................................................33

   Item 3. Defaults upon Senior Securites.....................................33

   Item 4. Submission of Matters to a Vote of Security Holders................33



<PAGE>


   Item 5. Other Information..................................................33

   Item 6. Exhibits and Reports on Form 8-K...................................33


SIGNATURES....................................................................33
























<PAGE>




                         SOYO Group, Inc. and Subsidiary
                           Consolidated Balance Sheets

Consolidated Balance Sheets

                                                  March 31,    December 31,
                                                    2007           2006
                                                -----------    -----------
                                                 (Restated)     (Restated)
ASSETS
Current Assets
Cash and cash equivalents                         1,919,248      1,501,040
Accounts receivable, net of allowance
  for doubtful accounts of $388,958 at
  March 31, 2007 and December 31, 2006
  Respectively                                   16,235,424     16,467,135
Inventories                                       8,334,469      7,792,621
Prepaid expenses                                     29,324         36,633
Deferred  tax assets                                464,035        177,177
Deposits                                            313,228        243,095
                                                -----------    -----------
   Total Current Assets                          27,295,728     26,217,701
                                                -----------    -----------

Property and equipment                              720,806        711,015
Less: accumulated depreciation
   and amortization                                (182,590)      (159,300)
                                                -----------    -----------
                                                    538,216        551,715
                                                -----------    -----------
                                                               -----------
Total Assets                                     27,833,944     26,769,416
                                                ===========    ===========


LIABILITIES
Current
Accounts payable                                 12,877,013     16,073,617
Accrued liabilities                                 543,533        539,767
Business loan                                    11,000,512      3,588,403
Short term loan                                           0        100,000
                                                -----------    -----------
   Total current liabilities                     24,421,058     20,301,787
                                                -----------    -----------
Long term payable                                         0      3,735,198
                                                -----------    -----------
Total liabilities                                24,421,058     24,036,985
                                                -----------    -----------

EQUITY
Class B Preferred stock, $0.001 par value,
  authorized - 10,000,000 shares, Issued
   and outstanding - 3,181,357shares in 2007
   and 2,797,738 shares in 2006                   1,980,737      1,918,974
Preferred stock backup withholding                 (168,474)      (149,945)


<PAGE>

Common stock, $0.001 par value.
   Authorized - 75,000,000 shares, Issued and
    outstanding - 49,025,511 shares                  49,026         49,026
Additional paid-in capital                       18,043,325     17,866,531
Accumulated deficit                             (16,491,728)   (16,952,155)
                                                -----------    -----------
   Total shareholders' Equity                     3,412,886      2,732,431
                                                -----------    -----------

Total liabilities and shareholders' equity       27,833,944     26,769,416
                                                ===========    ===========
                                                          0              0




     See accompanying notes to the unaudited condensed financial statements














<PAGE>

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


                                                  Three months ended March 31,

                                                      2007           2006
                                                 ------------    ------------

Net revenues                                     $ 14,691,110    $ 11,548,187
                                                 ------------    ------------

Cost of revenues                                   12,082,914       9,897,099

                                                 ------------    ------------
Gross margin                                        2,608,196       1,651,088
                                                 ------------    ------------
Costs and expenses:
                                                 ------------    ------------
Sales and marketing                                   590,856          74,886
                                                 ------------    ------------
General and                                         1,578,174       1,484,994
administrative
                                                 ------------    ------------
Provision for doubtful accounts                         1,438          50,000
                                                 ------------    ------------
Depreciation and amortization:
                                                 ------------    ------------
   Property and equipment                              23,291          25,815
                                                 ------------    ------------
Total costs and expenses                            2,193,759       1,635,695
                                                 ------------    ------------
Income (loss) from operations                         414,437          15,393
                                                 ------------    ------------
Other income (expense):
                                                 ------------    ------------
   Interest income                                     31,385           3,247
                                                 ------------    ------------
   Interest expense                                   (59,715)        (72,387
                                                 ------------    ------------
   Other income (expense)                             (87,690)          4,531
                                                 ------------    ------------
Other income (expense), net                          (116,020)        (64,609)
                                                 ------------    ------------
Income (Loss) before provision (benefit) for          298,417         (49,216)
income taxes
                                                 ------------    ------------
Provision (benefit) for income taxes                   63,085            --
                                                 ------------    ------------
Deferred income tax benefit                          (286,858)           --
                                                 ------------    ------------
Net income (loss)                                     522,190         (49,216)
                                                 ------------    ------------

                                                 ------------    ------------
Less: dividends on convertible preferred               61,763          49,856
stock
                                                 ------------    ------------
Net income (loss) attributable to common              460,427         (99,072)
shareholders
                                                 ------------    ------------
Net income (loss) per common share -                      .01             N/A
Basic and diluted                                         .01
                                                 ------------    ------------
Weighted average number of shares of common        49,025,511      48,540,681
stock outstanding - Basic and diluted              54,706,506      53,296,071
                                                 ------------    ------------


See accompanying notes to unaudited condensed consolidated financial statements.

<PAGE>


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

                                                   Three months ended March 31,
                                                        2007           2006
                                                    -----------    -----------
OPERATING ACTIVITIES

Net Income (loss)                                      522,190       (274,135)
Adjustments to reconcile net income to net cash
used in operating activities:

Depreciation and Amortization                           23,290         25,815

Non cash payments for director's compensation                          24,570

Stock based compensation                               176,794        359,871

Provision for doubtful accounts                          1,438         50,000

Payment of accounts payable previously
converted to long term debt                         (3,735,198)

Changes in operating assets and liabilities:
(Increase) decrease in:

Accounts Receivable                                    230,273        407,037

Inventories                                           (541,848)    (3,263,986)

Prepaid expenses                                         7,309         18,879

Deposits                                               (70,133)        (5,525)

Deferred income tax asset                             (286,858)
Increase (Decrease) in:

Accounts payable                                    (3,196,604)     2,953,329

Accrued liabilities                                      3,766       (939,599)
                                                   -----------    -----------
Net cash used in operating activities               (6,865,581)      (643,744)
                                                   -----------    -----------


INVESTING ACTIVITIES

Purchase of property and equipment                      (9,791)       (50,182)
Proceeds from sale of equipment
                                                   -----------    -----------
Net cash used in investing activities                   (9,791)       (50,182)
                                                   -----------    -----------


<PAGE>



FINANCING ACTIVITIES

Advances from Officers, Directors, Shareholders                       (65,000)

Proceeds from accounts receivable discounting        1,294,217

Repayments of accounts receivable discounting       (4,882,620)

Proceeds from business loan                         11,000,512           --

Payment of backup withholding tax on accreted
 dividends on preferred stock                          (18,529)       (14,957)

Short term loan                                       (100,000)
                                                   -----------    -----------
Net cash used in financing activities                7,293,580        (79,957)
                                                   -----------    -----------


CASH AND CASH EQUIVALENTS

Net Increase (Decrease)                                418,208       (773,883)

At beginning of Period                               1,501,040        828,294
                                                   -----------    -----------
At End of Period
                                                     1,919,248         54,411
                                                   ===========    ===========



Supplemental disclosure of cash flow information

Cash paid for interest                                 159,715         72,387
                                                   -----------    -----------
Cash paid for income taxes                              30,805
                                                   -----------    -----------

Non cash investing and financing activities

Accretion of discount on Class B preferred stock        61,763         49,856

Director's Compensation                                   --           24,570

Stock Option Compensation                              176,794        359,871



See accompanying notes to unaudited condensed consolidated financial statements.




<PAGE>


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

                   Three Months Ended March 31, 2007 and 2006


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, therFe 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.

In conjunction with this  transaction,  SOYO Nevada  transferred  $12,000,000 of
accounts  payable to SOYO Taiwan to long-term  payable,  without  interest,  due
December  31, 2005.  During the three  months ended March 31, 2004,  the Company
agreed with a third  party to convert the  long-term  payable  into  convertible
preferred stock.

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".


<PAGE>


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..

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
March 31, 2007,  the results of operations  for the three months ended March 31,
2007 and 2006,  and cash flows for the three  months  ended  March 31,  2007 and
2006.  The  condensed  consolidated  balance  sheet as of  December  31, 2006 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,
2006, as filed with the Securities and Exchange Commission.

The  results of  operations  for the three  months  ended March 31, 2007 are not
necessarily  indicative of the results of operations to be expected for the full
fiscal  year  ending  December  31,  2007.  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 fourth quarter.

Business - The Company sells products under three  different  product lines:  1)
Computer   Components   and   Peripherals   2)  Consumer   Electronics   and  3)
Communications Equipment and Services. The products are sold to distributors and
retailers primarily in North and South America.

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


<PAGE>

value of accounts  receivable,  vendor programs and inventories.  Actual results
could differ from those estimates.

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 per share is
computed by dividing net income 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 owned by employees.

As of March 31, 2007,  potentially  dilutive  securities  consisted of 3,181,357
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 March 31, 2007,  5,680,995 shares of common
stock were issuable upon  conversion of the Class B Convertible  Preferred Stock
based on the $0.56 per share conversion price.

As of March 31,  2006,  4,755,390  shares of common  stock  were  issuable  upon
conversion  of the Class B  Convertible  Preferred  Stock based on the $0.62 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
March 31, 2007,  out-of-the-money  awards are not included in the computation of
diluted EPS.  Since the 2005 options  granted are all out of the money,  and the
2007 options awarded are unvested,  the only potentially dilutive securities are
the 3,181,357 shares of Class B Convertible Preferred Stock.

Comprehensive Income (Loss) - The Company displays 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
Company did not have any items of  comprehensive  income (loss) during the three
months ended March 31, 2007 and 2006.

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,
continual improvement in product price/performance characteristics, and changing
consumer demand.


<PAGE>


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-Based  Compensation  - The  Company  has adopted  Statement  of  Financial
Accounting Standards No. 123,  "Accounting for Stock-Based  Compensation" ("SFAS
No. 123"),  which  establishes a fair value method of accounting for stock-based
compensation plans, as amended by Statement of Financial Accounting Standard No.
148,  "Accounting  for  Stock-Based  Compensation - Transition  and  Disclosure"
("SFAS No. 148").

SFAS No. 123(R) requires that companies  recognize all  share-based  payments to
employees,  including  grants  of  employee  stock  options,  in  the  financial
statements.  The cost will be based on the fair value of the equity or liability
instruments  issued and  recognized  over the  respective  vesting period of the
stock option. Pro forma disclosure of this cost will no longer be an alternative
under SFAS No.  123(R).  SFAS 123(R) is  effective  for public  companies at the
beginning of the first fiscal year that begins after June 15, 2005.

Transition  methods  available to public  companies  include either the modified
prospective  or  modified  retrospective   adoption.  The  modified  prospective
transition method requires that compensation cost be recognized beginning on the
effective  date, or date of adoption if earlier,  for all  share-based  payments
granted after the date of adoption and for all unvested  awards  existing on the
date of adoption. The modified  retrospective  transition method, which includes
the requirements of the modified  prospective  transition  method,  additionally
requires the restatement of prior period financial  information based on amounts
previously recognized under SFAS No. 123 for purposes of pro-forma  disclosures.
The Company  adopted  SFAS No.  123(R)  effective  January 1, 2006.  The Company
adopted the modified  prospective  method. As a result, the Company recognized a
charge  against  earnings of $176,794 for the three months ended March 31, 2007.
For further information, refer to note 4, Stock Based Compensation on page 14.

On March 7, 2005,  the Company  registered its 2005 Stock  Compensation  Plan on
Form S-8 with the Securities and Exchange  Commission,  registering on behalf of
our employees,  officers,  directors and advisors up to 5,000,000  shares of our
common stock  purchasable by them pursuant to common stock options granted under
our 2005 Stock  Compensation  Plan.  The plan was approved by  shareholder  vote
during a special meeting of shareholders  on February 17, 2006.  However,  since
Mr. Chok and Ms. Chu,  husband and wife,  are directors who own more than 50% of
the Company,  shareholder  approval is essentially a formality,  hence the grant
date of the stock options is July 22, 2005.


<PAGE>


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 will vest and be available for
purchase on July 22, 2006, one third on July 22, 2007, and one third on July 22,
2008. The grants will expire if unused on July 22, 2010.

On February 2, 2007, the Company issued  4,305,000 option grants to employees at
a strike price of $0.35.  One third of those  options will vest and be available
for purchase on February 2, 2008,  one third on February 2, 2009,  and one third
on February 2, 2010.

The fair  value  of  options  granted  was  estimated  using  the  Black-Scholes
option-pricing model with the following assumptions:  risk free interest rate of
4.82%,  expected life of 5 years and expected  volatility  of 129.24%.  The fair
value of options  granted  during the first quarter of 2007 is $1,308,591  which
will be  recognized  as expense over a three-year  period from date of issuance.
Compensation  expense of $72,700 was  recognized  during the three  months ended
March 31, 2007.

On May 17, 2007,  the Company  modified the vesting  period of these  options as
follows:  one third of those options vests immediately at date of issuance,  one
third  will vest on  February  2,  2008,  and one  third on  February  2,  2009.
Accordingly,  an additional  $436,197 of  compensation  expense will be recorded
during the second  quarter ended June 30, 2007 to recognize  options that vested
at date of issuance.

As of March 31, 2007,  10 employees  who had been granted  stock options in 2005
had left the Company,  and grants totaling  462,000 options were returned to the
Company.  No  employees  who were  granted  stock  options  in 2007 had left the
Company as of the date of this report.

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.


<PAGE>


2.   Short Term Loan

In October 2005, the Company borrowed $165,000 from an unrelated third party for
working capital purposes.  As of December 31, 2006, $65,000 of the loan had been
repaid, and $100,000 was still outstanding.  The balance was paid off during the
first quarter of 2007.

3.   Business Loan

During the quarter,  the Company began to use the $12 million asset based credit
facility arranged with United Commercial Bank (UCB) (see Form 8-K dated March 2,
2007).  The  agreement  calls for UCB to  provide  Soyo with  funds to  purchase
inventory.  The  maximum  amount to be extended at any point in time is based on
the Company's accounts receivable and inventory,  which will serve as collateral
for the loan.  The initial  interest rate is 8.375% and varies from time to time
based on changes in an independent  index which is the Wall Street Journal Prime
Rate. Any  outstanding  loan plus accrued  interest is payable in one payment on
February  5,  2008.  As of March  31,  2007,  the  amount  Soyo  owed to UCB was
$11,000,512.

The credit  facility has been  personally  guaranteed by the CEO and the CFO for
$6.5  million.  Events of default  include  insolvency,  creditor or  forfeiture
proceedings,  payment defaults, events affecting guarantor,  change in ownership
of 25% or more on the common stock of Soyo,  and any material  adverse change in
the Company's financial condition.

The balance of business loan of  $3,588,403  as of December 31, 2006  represents
payable to Accord  Financial  Services  relating to the  discounting of accounts
receivable. This has been paid off as of March 31, 2007.

4.   Equity-Based Transactions

Effective  December 30,  2003,  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.  In  substance,  SOYO Taiwan
forgave debt in an amount equal to the difference  between the  $12,000,000  and
the  value of the  preferred  stock  issued in  settlement  of this  debt.  This
forgiveness of debt was treated as a capital transaction. Payment from the third
party was received by SOYO Taiwan in February and March 2004.  An agreement  was
reached during the three months ended March 31, 2004 whereby 2,500,000 shares of
Class B preferred  stock would be issued by the Company to the  unrelated  third
party in exchange for the long-term payable.

The Class B 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


<PAGE>

Class B preferred  stock has no voting  rights.  The shares of Class B preferred
stock are  convertible,  in increments of 100,000 shares,  into shares of common
stock based on the $1.00 stated  value,  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 preferred  stock may be converted  into common stock in any one year. On
December  31,  2008,  any   unconverted   shares  of  Class  B  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  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 preferred  stock has
unlimited piggy-back registration rights, and is non-transferable.

The Company  recorded  the  issuance of the Class B preferred  stock at its fair
market  value on March  31,  2004 of  $1,304,000,  which  was  determined  by an
independent  investment  banking firm. The  $10,696,000  difference  between the
$12,000,000  long-term payable and the $1,304,000 fair market value of the Class
B preferred  stock was credited to additional  paid-in  capital.  The difference
between the fair market value and the liquidation value of the Class B preferred
stock is being  recognized  as an  additional  dividend to the Class B preferred
stockholder,  and as a reduction to earnings  available to common  stockholders,
and will be accreted from April 1, 2004 through December 31, 2008.

5.   Stock-Based Compensation

Prior to  January  1, 2006,  the  Company  accounted  for  employee  stock-based
compensation  using  the  intrinsic  value  method  supplemented  by  pro  forma
disclosures in accordance  with APB 25 and SFAS 123  "Accounting for Stock-Based
Compensation" ("SFAS 123"). Under the intrinsic value based method, compensation
cost is the  excess,  if any, of the quoted  market  price of the stock at grant
date or other  measurement  date over the amount an employee must pay to acquire
the stock.

Effective  January 1, 2006 the  Company  adopted  SFAS 123R  using the  modified
prospective  approach and  accordingly  prior  periods have not been restated to
reflect the impact of SFAS 123R.  Under SFAS 123R,  stock-based  awards  granted
prior to its  adoption  will be  expensed  over the  remaining  portion of their
vesting  period.   These  awards  will  be  expensed  under  the  straight  line
amortization  method using the same fair value  measurements  which were used in
calculating  pro forma  stock-based  compensation  expense  under SFAS 123.  For


<PAGE>

stock-based  awards  granted  on or after  January  1, 2006,  the  Company  will
amortize  stock-based  compensation  expense on a  straight-line  basis over the
requisite service period, which is generally a three-year vesting period.

SFAS 123R requires forfeitures to be estimated at the time of grant and revised,
if necessary,  in subsequent  periods if actual  forfeitures differ from initial
estimates.  Stock-based  compensation expense has been recorded net of estimated
forfeitures  for the period  ended March 31, 2007 such that expense was recorded
only for those  stock-based  awards that are expected to vest.  Previously under
APB 25 to the extent awards were forfeited prior to vesting,  the  corresponding
previously recognized expense was reversed in the period of forfeiture.

6.   Income Taxes

Through 2006,  the Company used net operating loss  carryforwards  to offset all
income taxes payable. As of December 31, 2006, the Company had federal operating
loss carryforwards of approximately $4,195,130 expiring in various years through
2024, which can be used to offset future taxable income,  if any. As of December
31, 2006,  there were no state  operating  loss  carryforwards  available to the
Company.

As a result,  the Company  recognized  income tax expense of $63,805  during the
quarter.  Additionally,  the Company  recognized  a gain related to deferred tax
assets of $286,858, resulting from timing differences between taxable income and
US GAAP.

7.   Significant Concentrations

a.   Customers

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

                        Three Months Ended March 31,

                            2007          2006
                      ----------------- ---------
Revenues:
--------------------- ----------------- ---------
     Distributors       $11,883,335   $ 4,479,959
---------------------   -----------   -----------
     Retailers              941,413     7,068,228
---------------------   -----------   -----------
     Others               1,866,362          --
---------------------   -----------   -----------
Total                   $14,691,110   $11,548,187
---------------------   -----------   -----------

During the three months ended March 31, 2007 and 2006, the Company offered price
protection to certain customers under specific programs aggregating $200,354 and
$0,   respectively,   which   reduced  net  revenues  and  accounts   receivable
accordingly.

During the three months ended March 31, 2007,  the Company had no customer  that


<PAGE>

accounted for more than 10% of net revenues.

b.   Geographic Segments

Financial information by geographic segments is summarized as follows:


                                       Three Months Ended March 31,

                                           2007            2006
                                       ------------    ------------
Revenues:
------------------------------------   ------------    ------------
     United States                     $ 12,921,171    $  9,114,585
------------------------------------   ------------    ------------
     Canada                                 (34,865)            N/A
------------------------------------   ------------    ------------
     Central and South America              564,296       2,205,222
------------------------------------   ------------    ------------
     Others                               1,240,508         228,380
------------------------------------   ------------    ------------
Total                                  $ 14,691,110    $ 11,548,187
------------------------------------   ------------    ------------



NOTE:  Prior to mid 2006,  the Company  reported all United  States and Canadian
revenue as a single  line item under the caption  North  America.  As such,  the
breakout  between US and  Canadian  revenue is not  available.  The 2006 revenue
reported as US revenue includes sales to Canada.

c.   During the quarter ended June 30, 2006, the Company began  calculating  net
     revenue by product line for  financial  reporting  purposes.  2007 sales by
     product line are as follows:



                                                    Three Months Ended March 31,

                                                            2007         2006
 Revenues:                                              -----------   ----------

------------------------------------------------------- -----------   ----------
     Computer Parts and Peripherals                     $11,683,419      N/A
------------------------------------------------------- -----------   ----------
     Consumer Electronics                                 2,981,198      N/A
------------------------------------------------------- -----------   ----------
     VoIP                                                    26,493      N/A
------------------------------------------------------- -----------   ----------
Total                                                   $14,691,110
------------------------------------------------------- -----------   ----------


d.   Suppliers

During 2006, no more than 44% of the products distributed by the SOYO Group were
supplied  by a  third  party  vendor.  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.


<PAGE>


In  continuing  efforts to work with and leverage its supply base,  SOYO entered
into an agreement  with GE Capital in 2006 whereby GE  guarantees  payment to GE
approved  vendors  thereby  facilitating  larger  orders,  decreasing  risk  and
allowing SOYO to seamlessly finance these transactions.


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 September 30,
2006 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 March 31, 2007  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.


Background and Overview:

Historically,  the Company  has sold  computer  components  and  peripherals  to
distributors and retailers  primarily in North,  Central and South America.  The
Company  operated  in  one  business  segment.  A  substantial  majority  of the
Company's  products  were  purchased  from SOYO Taiwan  pursuant to an exclusive
distribution  agreement effective through December 31, 2005, and were sold under
the "SOYO" brand.

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


<PAGE>

management.  During  October  2002,  certain  members of 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 VWHC  common  stock.  Accordingly,  SOYO  Taiwan and SOYO
Nevada management  currently own 34,209,548 shares of the Company's common stock
outstanding.

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,  for financial
reporting purposes,  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.

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

In 2004, the Company decided to make a significant  change in the core offerings
for sale. The emphasis  switched from  motherboards and hardware to peripherals,
leading to a more diverse product offering. Also in 2004, the Company introduced
its VoIP products. In 2005, SOYO Group, Inc. entered the LCD display market with
the  introduction  of 17- and  19-inch  LCD  monitors,  and 32 and 37  inch  LCD
televisions.  Both  products  were  introduced  in the  second  quarter of 2005.
Currently,  the Company sells products under three  different  product lines: 1)
Computer   Components   and   Peripherals   2)  Consumer   Electronics   and  3)
Communications Equipment and Services. The products are sold to distributors and
retailers primarily in North, Central and South America.


Financial Outlook:


For the year  2006,  the  Company  earned  $678,537,or  $0.01 per  share  before
dividends on preferred  stock,  The large  increases in sales of LCD televisions
and LCD  monitors  were  primarily  responsible  for the large  increase  in net
revenues.

For the year 2005, the Company earned $540,310 or $0.01 cents per share,  before
preferred dividends,  and revamped its core product offerings.  As a result, the
consumer  electronics  division,  featuring LCD  televisions  and monitors,  was
responsible  for over 30% of the Company's  sales, a number that was expected to
grow in the coming years.


<PAGE>


For the year 2004, the Company incurred a net loss before preferred dividends of
($3,920,245).

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, who pays GE Capital.

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

There can be no assurances  that these measures will result in an improvement in
the  Company's  profitability  or  liquidity.  To the extent that the  Company's
profitability and liquidity do not improve,  the Company may be forced to reduce
operations to a level consistent with its available working capital resources.

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


<PAGE>

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.

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.  The  Company  records  estimated  reductions  to
revenues 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 in 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


<PAGE>

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.

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  records a valuation  allowance to reduce its deferred tax assets to
the amount that is more likely than not to be realized. In the event the Company
was to determine that it would be able to realize its deferred tax assets in the
future in excess of its  recorded  amount,  an  adjustment  to the  deferred tax
assets  would be credited to  operations  in the period such  determination  was
made.  Likewise,  should  the  Company  determine  that it would  not be able to
realize all or part of its deferred tax assets in the future,  an  adjustment to
the  deferred  tax  assets  would be charged to  operations  in the period  such
determination was made.


<PAGE>



Results of Operations:

Three Months Ended March 31, 2007 and 2006::

Net Revenues.  Net revenues  increased by $3,142,923 or 27.2%, to $14,691,110 in
the three months ended March 31, 2007, as compared to  $11,548,187  in 2006. The
increase in revenues  was mainly due to new  markets  being  opened by the sales
department for LCD television  sales.  New customers during the quarter included
American  TV (15  stores in the  Midwest  U.S.),  6th  Avenue  Electronics,  and
featured spots during the quarter on ShopNBC.

Gross  Margin.  Gross  margin was  $2,608,196  or 17.7% in 2007,  as compared to
$1,651,088 or 14.3% in 2006.  Gross margins  increased both on a numerical and a
percentage  basis as the Company  increased sales of higher margin products such
as LCD monitors and wireless Bluetooth devices.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$515,970 to $590,856 in 2007,  as compared to $74,886 in 2006.  The  increase is
due to higher commissions to outside sales reps. The Company began using outside
sales  reps to open new  markets  in 2006,  and as the  sales  have  grown,  the
commissions  have grown.  The Company  believes this is a cost  effective way to
obtain shelf space at various retailers,  so the outside  commissions are likely
to continue to grow larger.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $93,180 to  $1,578,174  in 2007, as compared to $1,484,994 in 2006.
The  increase is due entirely to  increased  labor  costs.  As sales have almost
tripled in the last two years, the Company has added staff in the sales, finance
and  operations  areas.  The staff has been needed to keep up with the increased
business volume. Approximately $50,000 of the increase is due to increased costs
of  implementing  FASB  123(R).   The  non  cash  charge  against  earnings  was
approximately  $135,000 in the quarter  ended March 31, 2006 and $177,000 in the
quarter ended March 31, 2007

Bad Debts. The Company recorded a provision for bad debts of $1,438 in the three
months  ended March 31,  2007,  and $50,000 for the three months ended March 31,
2006. As of March 31, 2007, the Company  believes its provision for bad debts is
adequate.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $23,291 for the three months ended March 31, 2007, as compared to
$25,815 in 2006.

Income from  Operations.  The income from  operations was $414,437 for the three
months ended March 31,  2007,  as compared to $15,393 for the three months ended
March 31,  2006.  This is a result of the  increased  expenses  described  above
offsetting the higher gross margin.

Miscellaneous  Income.  Miscellaneous income was a loss of $87,690 for the three


<PAGE>

months ended March 31, 2007. Miscellaneous income was $4,531 in the three months
ended March 31, 2006.

Interest  Income.  Interest  income was $31,385 for the three months ended March
31, 2007,  as compared to $3,247 for the three months ended March 31, 2006.  The
increase  is due to the  Company  having  more  cash  on  hand  due to  improved
financial performance over the last year.

Interest Expense.  Interest expense was $59,715 for the three months ended March
31,  2007.  Interest  expense was $72,387 for the three  months  ended March 31,
2006. The decrease was due to a single factor.  The Company was operating  under
an expensive  factoring  agreement in 2006,  but has since  obtained much better
terms on its financing. As a result, the cost of the financing is lower.

Provision for Income Taxes. The Company  recognized a provision for income taxes
of  $63,085  in 2007.  There was no  provision  in 2006.  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 Gain/ (Expense):  The deferred income tax gain (expense) was
a gain of $286,858 for the three  months ended March 31, 2007.  This is a result
of timing  differences  between  GAAP  income and taxable  income.  There was no
deferred income tax gain or loss in the three months ended March 31, 2006.

Net Income.  Net income was  $522,190 for the three months ended March 31, 2007,
as  compared to a net loss of  ($49,216)  for the three  months  ended March 31,
2006.


Financial Condition - March 31, 2007:

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 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


<PAGE>

customer) to our factor, who pays GE Capital.

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

On December 27, 2006,  the Company  filed Form 8-K detailing  SOYO's  agreements
with vendors  Eastech and Corion  regarding  SOYO's payment of trade debts.  The
Company had several  issues with the quality of the  merchandise  received  from
both vendors,  and refused to pay for the  merchandise  without  concessions  in
regard to price,  RMA, and other  factors.  Ultimately,  the Company was able to
come to mutually  agreeable terms with both vendors.  The end result is that the
Company will pay both vendors over time, which results in a portion of each debt
being  reclassified  to long term debt, and helps the Company's  liquidity.  The
Company  does not expect that any other trade  receivables  or payables  will be
settled in such a manner.

Operating  Activities.  The Company  utilized cash of $6,865,581  from operating
activities  during  the three  months  ended  March 31,  2007,  as  compared  to
utilizing cash of $643,744 in operating activities during the three months ended
March 31, 2006.

At March 31, 2007, the Company had cash and cash  equivalents of $1,919,248,  as
compared to $1,501,040 at December 31, 2006.

The Company had working  capital of $2,874,670 at March 31, 2007, as compared to
working capital of $5,915,914 at December 31, 2006,  resulting in current ratios
of 1.12:1 and 1.29:1 at March 31, 2007 and December 31, 2006, respectively.  At
year end,  the  Company  had  classified  almost $4 million of debt as long term
debt.  That debt has now been  reclassified  as current debt, and is now part of
the calculation of working capital.

Accounts  receivable  decreased to $16,235,424 at March 31, 2007, as compared to
$16,467,135  at  December  31,  2006,  a decrease  of  $231,711.  The  Company's
provision  for  doubtful  accounts  stood at  $388,958  as of March 31, 2007 and
December 31, 2006.

Inventories increased to $8,334,469 at March 31, 2007, as compared to $7,792,621
at December  31, 2006,  an increase of $541,848 or 7%.  Inventory in transit was
$2,024,520 at March 31, 2007, down from $4,005,265 at December 31, 2006.

Accounts  payable  decreased to  $12,877,013  at March 31, 2007,  as compared to
$16,073,617 at December 31, 2006, a decrease of $3,196,604.  The decrease is due
to the Company's  trade  accounts and payables being  segregated  into different
balance sheet captions.  The Company owed  $11,000,512 to UCB at March 31, which
is segregated on the balance sheet. On all previous  financial  statement dates,


<PAGE>

the amount owed to factors or bankers was included in current  liabilities.  Now
that the Company has secured a sophisticated  borrowing arrangement,  the amount
will be segregated on all published balance sheets.

Accrued  liabilities  increased  to $543,533 at March 31,  2007,  as compared to
$539,767 at December 31, 2006, an increase of $3,766 or less than one percent..

Business  loan  increased  to  $11,000,512  at March 31,  2007,  as  compared to
$3,588,403  at December 31,  2006.  The large  increase is due to the  Company's
considerable growth in sales in receivables.

Financing  Activities.  In October 2005, the Company  borrowed  $165,000 from an
individual for working capital  purposes.  As of March 31, 2007, the entire loan
had been repaid.

In March 2007,  the Company  announced  that it had secured a $12 MM Asset Based
Credit Facility from a California bank to provide funding for future growth.  As
of March 31, 2007, the Company owed UCB bank  $11,000,512 that had been borrowed
under the  facility.  The  $11,005,512  is included in the  payables and working
capital calculations described above.

Principal Commitments:

A summary of the Company's contractual cash obligations as of March 31, 2007, is
as follows:

------------------------------- ----------- --------- --------- -------------
                                Less than 1 1-3 years 4-5 years Over 5 years
                                year
------------------------------- ----------- --------- --------- -------------
Contractual Cash Obligation
------------------------------- ----------- --------- --------- -------------
    Operating Leases              212,692    141,794
------------------------------- ----------- --------- --------- -------------
    Royalties Payable             353,000   1,047,000 1,480,000    960,000
------------------------------- ----------- --------- --------- -------------
    Purchase Commitments        2,024,520
------------------------------- ----------- --------- --------- -------------
Total                           2,590,122   1,188,794 1,480,000    960,000
------------------------------- ----------- --------- --------- -------------


At March 31, 2007,  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 $2,024,520.

At December 31,  2006,  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  Properties Inc. and 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  totaling  $3,840,000


<PAGE>

(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
$184,000  through  December  31,  2007,  and  $424,000  in 2008.

Off-Balance Sheet Arrangements:

At March 31, 2007,  the Company did not have any  transactions,  obligations  or
relationships that could be considered off-balance sheet arrangements.

Commitments and Contingencies:

At March 31, 2007, the Company did not have any material commitments for capital
expenditures.

Recent Accounting Pronouncements:


In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial Assets and Financial  Liabilities" ("SFAS 159") which permits entities
to choose to measure many financial  instruments and certain other items at fair
value that are not  currently  required to be  measured at fair value.  SFAS 159
will be effective  for the Company on January 1, 2008.  The Company is currently
evaluating the impact SFAS 159 may have on its financial condition or results of
operations.

In September  2006,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement  of Financial  Accounting  Issues No. 157,  "Fair Value  Measurements"
("SFAS  157"),  which  defines  the fair  value,  establishes  a  framework  for
measuring fair value and expands disclosures about fair value measurements. This
statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning  after  November 15,  2007,  and interim  periods  within those fiscal
years.  Early  adoption  is  encouraged,  provided  that the Company has not yet
issued  financial  statements  for that fiscal  year,  including  any  financial
statements  for an interim  period  within  that  fiscal  year.  The  Company is
currently  evaluating the impact SFAS 157 may have on its financial condition or
results of operations.

In June 2006,  the FASB  released FASB  Interpretation  No. 48,  Accounting  for
Uncertainty in Income Taxes,  an  interpretation  of FASB Statement No. 109 (FIN
48). FIN 48 clarifies the accounting and reporting for  uncertainties  in income
tax law. This interpretation  prescribes a comprehensive model for the financial
statement recognition, measurement, presentation and disclosure of uncertain tax
positions taken or expected to be taken in income tax returns. This statement is
effective for fiscal years  beginning  after  December 15, 2006.  The Company is
currently  evaluating  the impact FIN 48 may have on its financial  condition or
results of operations.


<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company  does 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.

As the Company's debt obligations at March 31, 2007 are primarily  short-term in
nature and  non-interest  bearing,  the  Company  does not have any risk from an
increase in interest rates. However, 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.

The  Company  does not have any  foreign  currency  risk,  as its  revenues  and
expenses, as well as its debt obligations, are denominated and settled in United
States dollars.

4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure and Control Procedures

Based on a current  evaluation under the supervision and with the  participation
of the Company's  management,  the  Company's  principal  executive  officer and
principal  financial  officer  have  concluded  that  the  Company's  disclosure
controls and  procedures as defined in rules  13a-15(e) and 15d-15(e)  under the
Securities Exchange Act of 1934, as amended (Exchange Act) were not effective as
of March 31, 2007 and did not ensure that  information  required to be disclosed
by the Company in reports  that it files or submits  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in the Securities and Exchange  Commission  rules and forms and (ii) accumulated
and communicated to the Company's management,  including its principal executive
officer  and  principal  financial  officer,  as  appropriate  to  allow  timely
decisions regarding required  disclosure.  Based on that evaluation,  that as of
such date, the Company's  disclosure controls and procedures were not effective.
In addition,  the Company's  automated  financial  reporting  systems are overly
complex, poorly integrated and inconsistently implemented.

The Company's  Chief Executive  Officer and Chief  Financial  Officer arrived at
this  conclusion  based on a number  of  factors,  including  the fact  that the
Company's system of internal control requires  considerable  manual intervention
to do the  following:  (1) to properly  record  accounts  payable to vendors for
purchases of inventory,  (2) to properly record adjustments to inventory per the
general ledger to physical inventory balances,  (3) to properly record inventory
adjustments to the lower of cost or market using the average  inventory  method,
(4)to have effective controls over interim physical inventory procedures, and 5)
to  generate  timely  and  accurate  financial  information  to  allow  for  the


<PAGE>

preparation  of timely and complete  financial  statements.  The Company did not
have an effective  financial  reporting  process  because of the  aforementioned
material  weaknesses.  Accordingly,  the Company's Chief  Executive  Officer and
Chief  Financial  Officer  concluded that there were  significant  deficiencies,
including  material  weaknesses,  in the  Company's  internal  controls over its
financial reporting at the end of the period ended March 31, 2007.

To address these significant  deficiencies and material weaknesses,  the Company
Has taken the following corrective actions:

The Company is operating without a permanent Accounting Manager or Controller.

While the Company does not have a permanent  Accounting  Manager or  Controller,
the Company believes it has enough staff working in the accounting department to
complete  all work  required  on a timely  basis.  The  Company  has  retained a
financial  consultant and former CPA to oversee the day to day management of the
accounting  department.  The Company has recently added additional  personnel to
complete the day to day accounting  tasks.  The Company promoted a bookkeeper to
Acting Accounting Manager.

Management hired experts to assist in the evaluation and  implementation  of new
accounting  software.  The evaluation  was completed,  and the software has been
paid for. The Company has been testing and customizing the software for the last
few months,  and expects that the software  will be  installed  and  operational
during the third quarter of 2007.

In  conjunction  with the Company's  financial  statements for the quarter ended
March 31, 2007, the Company's  Chief  Executive  Officer and its Chief Financial
Officer reviewed and evaluated the corrective actions listed above. The officers
believed   that  such   corrective   actions   minimize  the  risk  of  material
misstatement,   but  the  corrective   actions  continued  to  have  significant
deficiencies.

As of March  31,  2007,  the Chief  Executive  Officer  and the Chief  Financial
Officer are satisfied that with the personnel in place,  and with the additional
efforts of the Financial  Consultant/  CPA, that the books and records portray a
completely  accurate  picture of the Company's  financial  position and that all
transactions  are being captured and reported as required.  The Company believes
that  once the new  software  is  installed  and  operational,  all  significant
deficiencies will have been addressed and corrected.


<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


     Soyo Inc. v. XtraPlus,  etc, et al. On or about  September 27, 2004,  Soyo,
Inc.   ("Soyo")  sold  computer   components   to  XtraPlus   Corporation,   dba
ZipZoomFly.com  ("XtraPlus"),  a computer  retailer.  Soyo invoiced XtraPlus for
$183,600,  but XtraPlus  failed to pay the invoice  and, on March 4, 2005,  Soyo
filed a civil complaint  against  XtraPlus in the Superior Court of the State of
California for the County of San Bernardino ("Court"). XtraPlus thereafter filed
a  Cross-Complaint  against Soyo on May 11, 2005 in which it alleged claims for:
(1) Breach of  Contract;  (2)  Breach of  Warranty;  (3)  Breach of the  Implied
Covenant  of Good  Faith and Fair  Dealing;  and (4)  Violation  of  Business  &
Professions  Code ss.  17200.  In its  prayer in the  Cross-Complaint,  XtraPlus
sought special and general  damages in excess of $100,000,  attorneys'  fees and
costs, and such other relief as the Court might determine to be just and proper.
After it filed its Complaint,  Soyo also sought an attachment of $183,600,  plus
interest and costs. Ultimately, XtraPlus paid Soyo $40,000 of the amount sought,
and  deposited  into the  registry  of the Court the sum of  $140,000  until the
action was concluded.

     On January 12, 2007, the Court ordered that summary adjudication be granted
in favor of Soyo on two of the four claims in Soyo's Complaint  against XtraPlus
(Soyo  voluntarily  dismissed  the other two claims),  and that Soyo recover the
remaining balance due on its claim. The Court also ordered that summary judgment
be granted in favor of Soyo and against  XtraPlus  on all of the claims  against
Soyo that were contained in the XtraPlus  Cross-Complaint.  The formal order and
the proposed  judgment  reflecting this disposition were entered on February 14,
2007.  XtraPlus  paid the  Judgment  of  $168,498.20  plus  additional  costs of
$5,176.03 for a total of  $173,674.23  and a full  Satisfaction  of Judgment has
been filed.

     Normandin v. Soyo Group,  Inc. et al. On August 2, 2004,  Gerry  Normandin,
individually and on behalf of a proposed nationwide class of consumers,  filed a
Complaint in the Superior Court of the State of California for the County of San
Bernardino  against the Company and DOES 1 through 100. Normandin asserted three
causes of action in his Complaint:  (1) Violation of the Consumer Legal Remedies
Act, Civil Code Section 1750 et seq.; (2) Violation of Business and  Professions
Code Section 17200 et seq.; and (3) Violation of Business and  Professions  Code
Section 17500 et seq.  Normandin  prayed for an order  certifying  the case as a
class action,  an award of actual damages suffered by plaintiff and the class in
an  amount  not less than  $1,000  per  person,  an order  for  restitution  and
disgorgement of monies  wrongfully  acquired by defendants  through the sales of
motherboards  having defective  capacitors,  an order enjoining the Company from
further sales of motherboards  with defective  capacitors,  an award of punitive
damages,  attorneys' fees and costs, pre-judgment interest and such other relief
as the Court may deem just and proper.

     The parties have reached a settlement  of the action.  However,  the agreed
upon settlement agreement must receive Preliminary Approval by the Court after a
noticed hearing. Then, if preliminarily approved,  Class Notice must be given to
members  of the class  whom  Normandin  represents,  and any  objections  to the


<PAGE>

settlement  considered and addressed by the Court.  The papers necessary for the
Preliminary Approval Hearing are being drafted and will be filed within 30 days.
We cannot  predict  the  outcome  of these  pending  matters,  nor  whether  the
settlement agreement will ultimately be approved and the case dismissed.


     Soyo v. Hartford:  Soyo tendered a claim to Hartford  Insurance  Company of
the Midwest  ("Hartford")  under which it sought a defense and indemnity for the
claims asserted in the Normandin  action.  Hartford  rejected that claim, and on
May 1, 2006,  Soyo Group Inc. filed an action for: (1) Declaratory  Relief;  (2)
Breach  of  Contract;  and  (3) Bad  Faith  against  Hartford.  Soyo,  Inc.  was
subsequently  added as a Plaintiff in a First Amended Complaint ("FAC") that was
filed in the action. In the Prayer in the FAC, Soyo sought general,  special and
punitive damages in amounts that were unspecified, as well as interest costs and
attorneys fees.

     The dispute was  mediated,  and an agreement in principle to resolve it was
reached on December 21, 2006. The formal settlement  agreement is being prepared
and has not yet been executed by any of the parties.

On June 30,  2006,  a lawsuit  was filed in the United  States  District  Court,
Central District of California,  Eastern Division, entitled Robert Lewis, Jr. v.
Soyo Group,  Inc., et al., Case No. EDCV 06-699 VAP (JWJx). The case seeks class
action  status and alleges  failures to timely pay rebates to purchasers of Soyo
products  allegedly in  violation of unfair  competition  laws,  the  California
Consumer Legal Remedies Act and contracts with  purchasers.  The plaintiff seeks
disgorgement  of all amounts  obtained by the Company as a result of the alleged
misconduct, plus actual damages, punitive damages and attorneys' fees and costs.
The Company has agreed to the terms of a settlement  which is  currently  before
the court for approval.

On May 22, 2005, the Company received notice of an investigation by the Attorney
General of the State of California  (the "AG")  regarding the Company's  alleged
failures to timely pay rebates to purchasers of Soyo  products.  The Company has
cooperated with the  investigation  and has agreed to the terms of a stipulation
for entry of final judgment and permanent injunction (the "Injunction") relating
to the  Company's  administration  of  rebate  claims.  On  March 7,  2007,  the
Injunction  was filed by the AG and entered by the Superior Court of California,
County of San Diego in the action  entitled People of the State of California v.
Soyo Group,  Inc.,  et al.,  Case No. GIC  8813770.  The Company  believes  that
compliance with the terms of the Injunction will have no material adverse effect
on the Company.

On February 15, 2006, the Company received notice of an investigation by counsel
for the Federal Trade  Commission  (the "FTC")  regarding the Company's  alleged
failures to timely pay rebates to purchasers of Soyo  products.  The Company has
cooperated  with the  investigation  and has agreed to the terms of an agreement
containing  a consent  order to be filed by the FTC  relating  to the  Company's
administration of rebate claims, which is currently before the FTC for approval.

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 Tortious  Interference  with
Economic  Relations  and seeks  compensatory  and punitive  damages.  Both named
defendants  were served on January  26,  2007.  No trial date has been set.  The
Company  is  vigorously   asserting  its  claims  against  the  defendants.   No
counterclaims have been asserted against the Company in the action to date.

On March 22, 2007,  Semiconductor  Energy  Laboratory  Co.,  Ltd.  instituted an
action against several  defendants,  including the Company, in the United States
District  Court for the Northern  District of California  (Case No. C071667 MHP)
alleging  patent  infringement  with respect to certain  products the Company is
alleged to have imported and sold in the United  States.  No trial date has been
set.  Pursuant to order of the Court,  the Company's  deadline to respond to the
Complaint is currently on July 12, 2007. Discovery has not commence and no trial
date has been set. The Company  strongly dispute any liability in the matter and
will vigorously defend itself in the action.

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, 2006, 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


<PAGE>


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

None

ITEM 5. OTHER INFORMATION

None

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 7, 2007                             By: /s/ Ming Tung Chok
                                                      -----------------------
                                                      Ming Tung Chok
                                                      President and Chief
                                                      Executive Officer


<PAGE>




DATE:  August 7, 2007                              By: /s/ Nancy Chu
                                                      -----------------------
                                                      Nancy Chu
                                                      Chief Financial Officer



DATE:  August 7, 2007                             By /s/ Paul F. Risberg
                                                      --------------------------
                                                      Name: Paul F. Risberg
                                                      Title: Director

DATE:  August 7, 2007                             By /s/ Chung Chin Keung
                                                      --------------------------
                                                      Name: Chung Chin Keung
                                                      Title: Director

DATE:  August 7, 2007                              By /s/ Zhi Yang Wu
                                                      --------------------------
                                                      Name: Zhi Yang Wu
                                                      Title: Director

                                INDEX TO EXHIBITS

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

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

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



<PAGE>