UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

         For the quarterly period ended March 31, 2004

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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 of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)


1420 South Vintage Avenue, Ontario, California                           91761
----------------------------------------------                        ----------
   (Address of principal executive offices)                           (Zip Code)


                                 (909) 292-2500
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


                                 Not Applicable
               ---------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  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). [ ]

         As of May 31, 2004,  the  registrant  had  40,000,000  shares of common
stock issued and 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, 2004
               (Unaudited) and December 31, 2003

               Condensed Consolidated Statements of Operations (Unaudited) -
               Three Months Ended March 31, 2004 and 2003

               Condensed Consolidated Statements of Cash Flows  Unaudited) -
               Three Months Ended March 31, 2004 and 2003

               Notes to Condensed Consolidated Financial Statements
               (Unaudited) - Three Months Ended March 31, 2004 and 2003


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

      Item 3.  Quantitative and Qualitative Disclosures about Market Risk

      Item 4.  Controls and Procedures


PART II.  OTHER INFORMATION

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

      Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES

















                                       2
<PAGE>


                         Soyo Group, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheets


                                                   March 31,       December 31,
                                                     2004              2003
                                                 ------------      ------------
                                                  (Unaudited)

ASSETS

CURRENT
  Cash and cash equivalents                      $    157,783      $    717,196
  Accounts receivable, net of
    allowance for doubtful accounts
    of $1,023,259 and $856,386 at
    March 31, 2004 and December 31,
    2003, respectively                              6,979,967         6,818,729
  Inventories, including $3,961,109
    and $3,426,342 purchased from
    Soyo Computer, Inc. at March 31,
    2004 and December 31, 2003,
    respectively                                    6,101,491         5,036,125
  Prepaid expenses                                     46,473            43,973
  Income tax refund receivable                         47,000            47,000
                                                 ------------      ------------
                                                   13,332,714        12,663,023
                                                 ------------      ------------

Property and equipment                                 89,983            86,483
Less:  accumulated depreciation
  and amortization                                    (49,143)          (45,088)
                                                 ------------      ------------
                                                       40,840            41,395
                                                 ------------      ------------

Deposits                                               25,035            25,035
                                                 ------------      ------------
                                                 $ 13,398,589      $ 12,729,453
                                                 ============      ============




















                                   (continued)

                                       3
<PAGE>

                         Soyo Group, Inc. and Subsidiary
                Condensed Consolidated Balance Sheets (continued)


                                                   March 31,       December 31,
                                                     2004              2003
                                                 ------------      ------------
(Unaudited)

LIABILITIES

CURRENT
  Accounts payable -
    Soyo Computer, Inc.                          $  7,258,743      $  6,557,253
    Other                                           4,975,051         5,475,999
  Accrued liabilities                                 753,123           592,984
  Advances from officer,
    director and major
    shareholder                                       240,000           240,000
  Note payable                                        213,750              --
                                                 ------------      ------------
                                                   13,440,667        12,866,236
                                                 ------------      ------------


NON-CURRENT
  Long-term payable - Soyo
    Computer, Inc.                                       --          12,000,000
                                                 ------------      ------------


SHAREHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value
  Authorized - 10,000,000 shares
  Issued and outstanding -
    1,000,000 shares of Class A
      Convertible Preferred Stock,
      $1.00 per share stated
      liquidation value
      ($1,000,000 aggregate
      liquidation value)                                1,000             1,000
    2,500,000 shares of Class B
      Convertible Preferred Stock,
      $1.00 per share stated
      liquidation value
      ($2,500,000 aggregate
      liquidation value)                            1,304,000              --
Common stock, $0.001 par value
  Authorized - 75,000,000 shares
  Issued and outstanding -
    40,000,000 shares                                  40,000            40,000
  Additional paid-in capital                       11,155,000           459,000
  Accumulated deficit                             (12,542,078)      (12,636,783)
                                                 ------------      ------------
                                                      (42,078)      (12,136,783)
                                                 ------------      ------------
                                                 $ 13,398,589      $ 12,729,453
                                                 ============      ============





     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>

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

                                                  Three Months Ended March 31,
                                                 ------------------------------
                                                     2004              2003
                                                 ------------      ------------
                                                                    (Restated -
                                                                      Note 6)

Net revenues                                     $  8,594,302      $  9,497,565
Cost of revenues, including
  inventories purchased from Soyo
  Computer, Inc. of $3,948,177
  and $4,934,401 in 2004 and
  2003, respectively                                7,481,134         8,326,699
                                                 ------------      ------------
Gross margin                                        1,113,168         1,170,866
                                                 ------------      ------------

Costs and expenses:
  Sales and marketing                                  37,152           218,946
  General and administrative                          810,383           808,040
  Provision for doubtful accounts                     166,873              --
  Depreciation and amortization                         4,055             4,035
                                                 ------------      ------------
    Total costs and expenses                        1,018,463         1,031,021
                                                 ------------      ------------
Income from operations                                 94,705           139,845
                                                 ------------      ------------

Other income (expense):
  Interest income                                        --                   5
  Interest expense                                       --              (9,399)
                                                 ------------      ------------
Other expense, net                                       --              (9,394)
                                                 ------------      ------------
Income before provision for
  income taxes                                         94,705           130,451

Provision for income taxes                               --              36,250
                                                 ------------      ------------
Net income                                       $     94,705      $     94,201
                                                 ============      ============


Net income per common share -
  Basic                                          $       --        $       --
  Diluted                                        $       --        $       --


Weighted average number of
  common shares outstanding -
  Basic                                            40,000,000        40,000,000
  Diluted                                          46,666,667        43,571,429





     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>

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


                                                   Three Months Ended March 31,
                                                  -----------------------------
                                                      2004              2003
                                                  -----------       -----------
                                                                    (Restated -
                                                                       Note 6)

OPERATING ACTIVITIES
  Net income                                      $    94,705       $    94,201
    Adjustments to reconcile net
      income to net cash used in
      operating activities:
        Depreciation and
          amortization                                  4,055             4,035
        Provision for doubtful
          accounts                                    166,873              --
        Changes in operating
          assets and liabilities:
          (Increase) decrease in:
            Accounts receivable                      (328,111)        1,363,745
            Inventories                            (1,065,366)          940,332
            Prepaid expenses                           (2,500)           (1,821)
          Increase (decrease) in:
            Accounts payable -
              Soyo Computer, Inc.                     701,490        (1,929,539)
            Accounts payable -
              other                                  (500,948)       (1,177,088)
            Accrued liabilities                       160,139           (73,759)
            Income taxes payable                         --              36,000
                                                  -----------       -----------
  Net cash used in operating
    activities                                       (769,663)         (743,894)
                                                  -----------       -----------


INVESTING ACTIVITIES
  Purchase of property and
    equipment                                          (3,500)             --
                                                  -----------       -----------
  Net cash used in investing
    activities                                         (3,500)             --
                                                  -----------       -----------














                                   (continued)

                                       6
<PAGE>

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


                                                  Three Months Ended March 31,
                                               --------------------------------
                                                   2004                2003
                                               ------------        ------------
(Restated -
Note 6)

FINANCING ACTIVITIES
  Advances from officer,
    director and major
    shareholder                                $       --          $    360,000
  Proceeds from issuance
    of note payable                                 213,750                --
                                               ------------        ------------
  Net cash provided by
    financing activities                            213,750             360,000
                                               ------------        ------------

CASH AND CASH EQUIVALENTS
  Net decrease                                     (559,413)           (383,894)
  At beginning of period                            717,196             623,296
                                               ------------        ------------
  At end of period                             $    157,783        $    239,402
                                               ============        ============


SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION

Cash paid for -
  Interest                                     $       --          $     12,230
  Income taxes                                 $       --          $     49,156



NON-CASH INVESTING AND
  FINANCING ACTIVITIES

Issuance of 2,500,000
  shares of Class B
  Convertible Preferred
  Stock as settlement of
  $12,000,000 long-term
  payable -
    Preferred stock                            $  1,304,000        $       --
    Additional paid-in
      capital                                  $ 10,696,000        $       --









     See accompanying notes to condensed consolidated financial statements.

                                        7
<PAGE>

                         Soyo Group, Inc. and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                   Three Months Ended March 31, 2004 and 2003


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.

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.

Soyo Taiwan also agreed to continue to provide  computer parts and components to
Soyo on an open account basis at the  quantities  required and on a timely basis
to enable  Soyo to  continue  to conduct  its  business  operations  at budgeted
levels,  which is not less than a level  consistent  with the operations of Soyo
Nevada's  business in 2001 and 2000. This supply commitment is effective through
December 31, 2005.

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  condensed  consolidated  financial
statements  include  the  accounts  of Soyo and  Soyo  Nevada.  All  significant
intercompany  accounts and transactions  have been eliminated in  consolidation.
The condensed consolidated financial statements have been prepared in accordance
with United States generally accepted accounting  principles.



                                       8
<PAGE>

Interim Financial Statements - The accompanying  interim 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,  2004,  the
results of  operations  for the three months ended March 31, 2004 and 2003,  and
cash flows for the three  months  ended March 31, 2004 and 2003.  The  condensed
consolidated balance sheet as of December 31, 2003 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,
2003, as filed with the Securities and Exchange Commission.

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.

The  results of  operations  for the three  months  ended  March 31, 2004 is not
necessarily  indicative of the results of operations to be expected for the full
fiscal year ending December 31, 2004.

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

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.

As of March 31, 2004,  potentially  dilutive  securities  consisted of 1,000,000
shares of Class A Convertible Preferred Stock with a stated liquidation value of
$1.00 per share that are convertible into common stock at fair market value, and
2,500,000  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 March 31,  2004,  16,666,667  shares of common  stock were  issuable  upon
conversion  of  the  Class  A  Convertible  Preferred  Stock  and  the  Class  B
Convertible  Preferred  Stock,  consisting  of 6,666,667  shares of common stock
issuable upon conversion of the Class A Convertible  Preferred  Stock,  based on
the average  price of $0.15 per common share during the three months ended March
31,  2004,  which was less than the closing  price of $0.19 per common  share on
March 31, 2004, and 10,000,000  shares of common stock issuable upon  conversion
of the Class B Convertible Preferred Stock, based on the $0.25 per share minimum
conversion price.

As of March 31,  2003,  3,571,429  shares of common  stock  were  issuable  upon
conversion  of the Class A  Convertible  Preferred  Stock,  based on the closing
price of $0.28 per common  share  during the three  months ended March 31, 2003,
which was in excess of the average  price of $0.37 per common  share  during the
three months ended March 31, 2003.


                                       9
<PAGE>

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, 2004 and 2003.

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.

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").

The  provisions of SFAS No. 123 allow  companies to either expense the estimated
fair value of stock options or to continue to follow the intrinsic  value method
set forth in Accounting  Principles Board Opinion No. 25,  "Accounting for Stock
Issued to  Employees",  but to disclose the pro forma effect on net loss and net
loss per  share had the fair  value of the stock  options  been  exercised.  The
Company has elected to continue to account for  stock-based  compensation  plans
utilizing the intrinsic value method.  Accordingly,  compensation cost for stock
options will be measured as the excess,  if any, of the fair market price of the
Company's  common  stock at the date of grant above the amount an employee  must
pay to acquire the common stock.

In  accordance  with SFAS No. 123, as amended by SFAS No. 148,  the Company will
provide  prominent  footnote  disclosure  with respect to  stock-based  employee
compensation,  and the effect of the method used on reported results.  The value
of a stock-based award will be determined using the Black-Scholes option-pricing
model, whereby compensation cost is the fair value of the award as determined by
the pricing  model at the grant date or other  measurement  date.  The resulting
amount will be charged to expense on the straight-line  basis over the period in
which the Company  expects to receive  benefit,  which is generally  the vesting
period. Stock options issued to non-employee directors at fair market value will
be accounted for under the intrinsic value method.


                                       10
<PAGE>

The Company has not issued any stock-based compensation to date. Accordingly, no
pro forma financial disclosure has been presented.


2.  Advances from Officer, Director and Major Shareholder

During March 2003,  Nancy Chu, the Company's Chief Financial  Officer,  director
and major shareholder,  made short-term  advances to the Company of $360,000 for
working capital purposes, of which $120,000 was repaid during September 2003.


3.  Note Payable

On March 29, 2004,  an  individual  loaned the Company  $213,750  pursuant to an
unsecured  note payable due March 28, 2005,  with  interest at 4% per annum (see
Note 7).


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
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-transferrable.

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


                                       11
<PAGE>

$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 will be  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.  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,
                                                 -------------------------------
                                                    2004                 2003
                                                 ----------           ----------
Revenues
  Retailers                                      $5,713,801           $7,627,545
  Distributors                                    2,880,501            1,870,020
                                                 ----------           ----------
                                                 $8,594,302           $9,497,565
                                                 ==========           ==========


During the three months ended March 31, 2004 and 2003, the Company offered price
protection to certain customers under specific programs  aggregating  $3,636 and
$867,254,  respectively,  which  reduced net revenues  and  accounts  receivable
accordingly.

Information  with respect to  customers  that  accounted  for 10% or more of the
Company's revenues is presented below.

During the three  months  ended  March 31,  2004 and 2003,  the  Company had two
customers that accounted for revenues of $2,697,593 and  $2,871,751,  equivalent
to 31.4% and 30.2% of net revenues, respectively.

b.  Geographic Segments

Financial information by geographic segments is summarized as follows:

                                                   Three Months Ended March 31,
                                                 -------------------------------
                                                    2004                2003
                                                 -----------         -----------

Revenues
  North America                                  $ 6,315,640         $ 8,350,540
  Central and South America                        2,310,889           1,147,025
  Other locations                                    (32,227)               --
                                                 -----------         -----------
                                                 $ 8,594,302         $ 9,497,565
                                                 ===========         ===========


                                       12
<PAGE>

c.  Suppliers

A substantial  majority of the Company's  inventories  are  manufactured by Soyo
Taiwan and are  purchased  from Soyo Taiwan or an affiliate of Soyo Taiwan on an
open account basis.

Through  October 24, 2002,  Soyo Nevada was a  wholly-owned  subsidiary  of Soyo
Taiwan (see Note 1).  Subsequent to that date, Soyo Taiwan has agreed to provide
inventory to Soyo on an open account basis through December 31, 2005.

The following is a summary of the Company's  transactions and balances with Soyo
Taiwan as of March 31, 2004 and  December  31,  2003,  and for the three  months
ended March 31, 2004 and 2003:

                                                      March 31,     December 31,
                                                       2004           2003
                                                    ------------    ------------

Accounts payable to Soyo Taiwan                     $  7,258,743    $  6,557,253
Long-term payable to Soyo Taiwan                            --        12,000,000



                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                        2004             2003
                                                    ------------    ------------

Purchases from Soyo Taiwan                          $  4,482,944    $  5,967,371
Payments to Soyo Taiwan                                5,345,067       7,607,000


During the three  months  ended  March 31,  2003,  the  Company  received  price
protection from Soyo Taiwan aggregating $307,800,  which reduced inventories and
accounts  payable to Soyo  Taiwan  accordingly.  The Company did not receive any
price protection from Soyo Taiwan during the three months ended March 31, 2004.


6.  Restatement

In conjunction with the audit of the Company's consolidated financial statements
for the year ended December 31, 2003, the Company conducted a review of its 2003
interim financial  statements.  As a result of this review, the Company restated
its results of  operations  for the three months ended March 31, 2003,  June 30,
2003 and  September  30,  2003,  to reflect  various  adjustments,  primarily to
correct the intra-period allocation of net revenues and cost of revenues.

The  adjustments to the statement of operations for the three months ended March
31, 2003 are summarized as follows:

Net income, as reported                                            $    365,504

Adjustments to:
  Decrease revenues                                                     (86,821)
  Increase cost of revenues                                            (160,557)
  Increase selling, general
    and administrative expenses                                         (23,925)
                                                                   ------------
Net income, as revised                                             $     94,201
                                                                   ============


Net income per common share
  (basic and diluted), as
  reported                                                         $       0.01
                                                                   ============

Net income per common share
  (basic and diluted), as
  revised                                                          $       --
                                                                   ============


Weighted average number of
  common shares outstanding -
  Basic                                                              40,000,000
  Diluted                                                            43,571,429


7. Subsequent Events

On May 29, 2004,  the  individual  who loaned the Company  $213,750 on March 29,
2004 loaned the Company an  additional  $700,000  pursuant to an unsecured  note
payable due May 29, 2005, with interest at 4% per annum.




                                       13
<PAGE>

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 March 31, 2004
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, 2004  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:

The Company sells  computer  components  and  peripherals  to  distributors  and
retailers primarily in North, Central and South America. The Company operates in
one business  segment.  A  substantial  majority of the  Company's  products are
purchased  from Soyo Taiwan  pursuant  to an  exclusive  distribution  agreement
effective through December 31, 2005, and are 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
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 40,000,000 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".



                                       14
<PAGE>

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

                                           Three Months Ended March 31,
                                ------------------------------------------------
                                           2004                       2003
                                ---------------------      ---------------------
                                  Amount          %          Amount          %
                                ----------      -----      ----------      -----
Revenues
  Retailers                     $5,713,801       66.5      $7,627,545       80.3
  Distributors                   2,880,501       33.5       1,870,020       19.7
                                ----------      -----      ----------      -----
                                $8,594,302      100.0      $9,497,565      100.0
                                ==========      =====      ==========      =====


Information  with respect to  customers  that  accounted  for 10% or more of the
Company's revenues is presented below.

During the three  months  ended  March 31,  2004 and 2003,  the  Company had two
customers that accounted for revenues of $2,697,593 and  $2,871,751,  equivalent
to 31.4% and 30.2% of net revenues, respectively.

Financial information by geographic segments is summarized as follows:

                                              Three Months Ended March 31,
                                     -------------------------------------------
                                                2004                   2003
                                     --------------------    -------------------
                                       Amount         %         Amount       %
                                     -----------    -----    -----------   -----

Revenues
  North America                      $ 6,315,640     73.5    $ 8,350,540    87.9
  Central and South America            2,310,889     26.9      1,147,025    12.1
  Other locations                        (32,227)    (0.4)          --       --
                                     -----------    -----    -----------   -----
                                     $ 8,594,302    100.0    $ 9,497,565   100.0
                                     ===========    =====    ===========   =====

Financial Outlook:

During the years ended  December  31, 2000 and 2001,  the  Company's  sales were
$62,173,829 and $63,091,190,  respectively, with gross margins of 4.8% and 6.9%,
respectively.  During the year ended  December 31,  2002,  the  Company's  sales
decreased to  $49,644,417,  with a negative gross margin of 8.1%, due to various
factors,  including  the West Coast dock strike in September  and early  October
2002.  The impact of the initial supply  interruption,  combined with the abrupt
release of large amounts of inventory, caused a caused a rapid drop in wholesale
prices for the  Company's  products in November and December  2002.  The Company
incurred a net loss in 2001, 2002 and 2003.

During early 2003, as a result of the Company  changing its product mix to focus
on the sales of higher margin  products and the decrease in market  pressures on
the  Company's  gross  margin  resulting  from the West  Coast  dock  strike  in
September and early October 2002, the Company's gross margin  improved  compared
to 2002.  The  Company's  sales  for the  year  ended  December  31,  2003  were
$31,017,439, with a gross margin of 9.9%.



                                       15
<PAGE>

As of March 31,  2004,  the  Company  is  reliant  upon the cash  flows from its
operations.  The Company does not have any external sources of liquidity,  other
than advances from an officer,  director and major  shareholder and loans from a
private lender.

Since  October  24,  2002,  the date  that  Soyo  Nevada  became a  wholly-owned
subsidiary of VWHC, Soyo has attempted to implement various measures designed to
improve its operating results, cash flows and financial position,  including the
following:

- The Company has  reviewed  its product  mix, and has revised its sales plan to
focus on higher margin products.

- The  Company is  attempting  to expand  the  number and credit  quality of its
customer accounts.

- The Company is attempting to arrange  additional  supply sources and to reduce
its reliance on inventory purchases from Soyo Taiwan.

- The Company  moved its office and  warehouse  operations  into a larger,  more
efficient facility in September 2003.

- The Company is attempting to increase its operating liquidity by exploring the
availability of outside debt and equity financing, to the extent such funding is
available under reasonable terms and conditions.

There can be no assurances  that these measures will result in an improvement in
the  Company's  operations  or  liquidity.  To the  extent  that  the  Company's
operations and liquidity  does not improve,  the Company may be forced to reduce
operations to a level consistent with its available  working capital  resources.
The  Company may also have to  consider a formal or  informal  restructuring  or
reorganization.

As a  result  of these  factors,  the  Company's  independent  accountants  have
included  an  explanatory  paragraph  in  their  report  on the  Company's  2003
consolidated  financial  statements  indicating that there is substantial  doubt
about the Company's  ability to continue as a going  concern.  The  accompanying
consolidated  financial  statements have been prepared assuming that the Company
will continue as a going concern,  which  contemplates the realization of assets
and the  satisfaction  of  liabilities  in the normal  course of  business.  The
carrying  amounts  of  assets  and  liabilities  presented  in the  consolidated
financial  statements do not purport to represent  the  realizable or settlement
values, and do not include any adjustments that might result from the outcome of
this uncertainty.

Restatement:

In conjunction with the audit of the Company's consolidated financial statements
for the year ended December 31, 2003, the Company conducted a review of its 2003
interim financial  statements.  As a result of this review, the Company restated
its results of  operations  for the three months ended March 31, 2003,  June 30,
2003 and  September  30,  2003,  to reflect  various  adjustments,  primarily to
correct the  intra-period  allocation  of net revenues and cost of revenues (see
"ITEM 4. CONTROLS AND PROCEDURES"). The Company's restated results of operations
for the three  months  ended  March  31,  2003 are  summarized  at Note 6 to the
Condensed Consolidated Financial Statements.



                                       16
<PAGE>

Critical Accounting Policies:

The  Company  prepared  its  condensed   consolidated  financial  statements  in
accordance with United States  generally  accepted  accounting  principles.  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.

Vendor Programs:

Funds received from 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.

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.

In order to  determine  the  value of the  Company's  accounts  receivable,  the
Company  records a provision  for  doubtful  accounts to cover  probable  credit
losses.  Management  reviews and adjusts this  allowance  periodically  based on
historical  experience and its evaluation of the  collectibility  of outstanding
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.
Inventories  consist  primarily of computer parts and components  purchased from
Soyo Taiwan.



                                       17
<PAGE>

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.

Results of Operations:

Three Months Ended March 31, 2004 and 2003:

Net Revenues. Net revenues decreased by $903,263 or 9.5%, to $8,594,302 in 2004,
as compared  to  $9,497,565  in 2003.  The  decrease in net  revenues in 2004 as
compared  to 2003 was a result of the  Company  focusing  its sales  efforts  on
higher  margin  accounts  with lower  credit risk that  require  reduced  vendor
support programs.

During the three  months  March 31,  2004 and 2003,  the Company  offered  price
protection to certain customers under specific programs  aggregating  $3,636 and
$867,254,  respectively,  which  reduced net revenues  and  accounts  receivable
accordingly.

Gross  Margin.  Gross  margin was  $1,113,168  or 13.0% in 2004,  as compared to
$1,170,866 or 12.3% in 2003.  During the three months ended March 31, 2003,  the
Company recorded  inventory  write-downs of $30,000.  The Company did not record
any inventory write-downs during the three months ended March 31, 2004.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  decreased  by
$181,794  or 83.0%,  to  $37,152  in 2004,  as  compared  to  $218,946  in 2003,
reflecting  in part  reduced  vendor  support  programs  funded by the  Company.
Co-operative marketing program expense was $131,382 in 2003. The Company did not
have any co-operative marketing program expense in 2004.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  by $2,343 or 0.3%,  to $810,383  in 2004,  as compared to $808,040 in
2003.

Provision for Doubtful  Accounts.  The Company recorded a provision for doubtful
accounts of $166,873 for the three months ended March 31, 2004.  The Company did
not record a provision  for  doubtful  accounts for the three months ended March
31, 2003.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $4,055 in 2004, as compared to $4,035 in 2003.

Income from Operations.  Income from operations was $94,705 for the three months
ended March 31, 2004, as compared to income from  operations of $139,845 for the
three months ended March 31, 2003.

Interest Income. Interest income was $5 in 2003. There was no interest income in
2004.


                                       18
<PAGE>

Interest  Expense.  Interest  expense was $9,399 in 2003.  There was no interest
expense in 2004.

Provision for Income Taxes.  The provision for income taxes was $36,250 in 2003.
There was no provision for income taxes in 2004.

Net Income. Net income was $94,705 for the three months ended March 31, 2004, as
compared to net income of $94,201 for the three months ended March 31, 2003.

Financial Condition - March 31, 2004:

Liquidity and Capital Resources:

Transactions  with Soyo  Taiwan.  Since the  formation of Soyo Nevada in October
1998,  the  Company  has relied on the  financial  support  from Soyo Taiwan for
inventory and capital to provide the resources  necessary to conduct operations.
Through  October 24, 2002,  Soyo Nevada was a  wholly-owned  subsidiary  of Soyo
Taiwan.  Subsequent to that date, Soyo Taiwan continues to provide  inventory to
Soyo, and has agreed to continue to provide inventory to Soyo on an open account
basis through December 31, 2005.

In  conjunction  with  October  2002   transaction,   Soyo  Nevada   transferred
$12,000,000  of accounts  payable to Soyo Taiwan to long-term  payable,  without
interest,  due December 31, 2005. Soyo Taiwan also agreed to continue to provide
computer parts and components to Soyo on an open account basis at the quantities
required  and on a timely  basis to  enable  Soyo to  continue  to  conduct  its
business  operations  at  budgeted  levels,  which  is not  less  than  a  level
consistent with the operations of Soyo Nevada's  business in 2001 and 2000. This
supply commitment is effective through December 31, 2005.

During the three  months  ended March 31, 2004 and 2003,  the Company  purchased
inventory from Soyo Taiwan aggregating  $4,482,944 and $5,967,371.  At March 31,
2004, the Company had short-term  accounts payable to Soyo Taiwan of $7,258,743.
At December 31, 2003, the Company had short-term accounts payable to Soyo Taiwan
of $6,557,253 and a long-term payable to Soyo Taiwan of $12,000,000.

During the three  months  ended  March 31,  2003,  the  Company  received  price
protection from Soyo Taiwan aggregating $307,800,  which reduced inventories and
accounts payable to Soyo Taiwan accordingly. During the three months ended March
31, 2004, the Company did not receive any price protection from Soyo Taiwan. The
Company does not have any formal price  protection  agreement  with Soyo Taiwan.
The Company  periodically  negotiates  price  protection  adjustments  with Soyo
Taiwan based on current market conditions.

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.


                                       19
<PAGE>

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
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-transferrable.

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 will be  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.

Going  Concern.  The  Company is  implementing  various  measures  to attempt to
improve its operations and liquidity as described above at "Financial  Outlook".
To the extent that the Company's  operations and liquidity does not improve, the
Company  may be forced  to  reduce  operations  to a level  consistent  with its
available  working  capital  resources.  The Company may also have to consider a
formal or informal restructuring or reorganization.

As a  result  of these  factors,  the  Company's  independent  accountants  have
included  an  explanatory  paragraph  in  their  report  on the  Company's  2003
consolidated  financial  statements  indicating that there is substantial  doubt
about the Company's  ability to continue as a going  concern.  The  accompanying
consolidated  financial  statements have been prepared assuming that the Company
will continue as a going concern,  which  contemplates the realization of assets
and the  satisfaction  of  liabilities  in the normal  course of  business.  The
carrying  amounts  of  assets  and  liabilities  presented  in the  consolidated
financial  statements do not purport to represent  the  realizable or settlement
values, and do not include any adjustments that might result from the outcome of
this uncertainty.

Operating  Activities.  The  Company  utilized  cash of  $769,663  in  operating
activities during the three months ended March 31, 2004, as compared to $743,894
in operating activities during the three months ended March 31, 2003.

At March 31, 2004,  the Company had cash and cash  equivalents  of $157,783,  as
compared to $717,196 at December 31, 2003.


                                       20
<PAGE>

The Company had a working  capital  deficiency of $107,953 at March 31, 2004, as
compared to a working  capital  deficiency  of $203,213  at December  31,  2003,
resulting  in current  ratios of .99:1 and .98:1 at March 31, 2004 and  December
31, 2003, respectively.

Accounts  receivable  increased to  $8,003,226 at March 31, 2004, as compared to
$7,675,115  at December 31, 2003,  an increase of $328,111 or 4.3%.  The Company
recorded a provision  for  doubtful  accounts of $166,873  for the three  months
ended  March 31,  2004.  The Company  did not record a  provision  for  doubtful
accounts for the three months ended March 31, 2003.

Inventories increased to $6,101,491 at March 31, 2004, as compared to $5,036,125
at  December  31,  2003,  an  increase  of  $1,065,366  or 21.2% as a result  of
increased  inventory  purchases during the three months ended March 31, 2004. At
March  31,  2004 and  December  31,  2003,  $3,961,109  and  $3,426,342  of such
inventories had been purchased from Soyo Taiwan.

Accounts  payable - Soyo  Computer,  Inc.  increased to  $7,258,743 at March 31,
2004, as compared to $6,557,253 at December 31, 2003, an increase of $701,490 or
10.7%, as a result of increased inventory purchases.

Accounts  payable - other decreased to $4,975,051 at March 31, 2004, as compared
to  $5,475,999 at December 31, 2003, a decrease of $500,948 or 9.1%, as a result
of reduced inventory purchases.

Accrued  liabilities  increased  to $753,123 at March 31,  2004,  as compared to
$592,984 at December 31, 2003, an increase of $160,139 or 27.0%,  as a result of
increased   accruals   with  respect  to   professional   fees,   insurance  and
personnel-related costs.

Investing  Activities.  The Company  expended $3,500 in 2004 for the purchase of
property and equipment.  The Company did not purchase any property and equipment
in 2003.

Financing  Activities.  During  March  2003,  Nancy  Chu,  the  Company's  Chief
Financial Officer,  director and major shareholder,  made short-term advances to
the Company of $360,000  for working  capital  purposes,  of which  $120,000 was
repaid during September 2003.

On March 29, 2004,  an  individual  loaned the Company  $213,750  pursuant to an
unsecured note payable due March 28, 2005, with interest at 4% per annum. On May
29, 2004, the same individual loaned the Company an additional $700,000 pursuant
to an unsecured note payable due May 29, 2005, with interest at 4% per annum.


Principal Commitments:

A summary of the Company's  contractual cash obligations as of March 31, 2004 is
as follows:

<TABLE>
<CAPTION>

                                                   Payments Due By Period
                                      -------------------------------------------------
Contractual                            Less than     Between      Between       After
Cash Obligations            Total       1 year      2-3 years    4-5 years     5 years
----------------         ----------   ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>          <C>          <C>
Operating leases         $  845,915   $  184,563   $  369,527   $  292,225   $     --
Note payable                213,750      213,750         --           --           --
Advances from officer,
  director and major
  shareholder               240,000      240,000         --           --           --
                         ----------   ----------   ----------   ----------   ----------
Total contractual cash
  obligations            $1,299,665   $  638,313   $  369,527   $  292,225   $     --
                         ==========   ==========   ==========   ==========   ==========
</TABLE>


                                       21
<PAGE>

Off-Balance Sheet Arrangements:

At March 31, 2004,  the Company did not have any  transactions,  obligations  or
relationships that could be considered off-balance sheet arrangements.

Commitments and Contingencies:

At March 31, 2004, the Company did not have any material commitments for capital
expenditures.

Recent Accounting Pronouncements:

In August  2001,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of  Financial  Accounting  Standards  No. 143,  "Accounting  for Asset
Retirement  Obligations"  ("SFAS No.  143").  SFAS No. 143 addresses the diverse
accounting practices for obligations  associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Company adopted
SFAS No. 143  effective  January 1, 2003.  The  adoption of SFAS No. 143 did not
have a significant effect on the Company's financial  statement  presentation or
disclosures.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets",  which  addresses  financial  accounting  and
reporting for the  impairment or disposal of long-lived  assets.  While SFAS No.
144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", it retains many of the fundamental
provisions of that statement. The Company adopted SFAS No. 144 effective January
1, 2002.  The adoption of SFAS No. 144 did not have a significant  effect on the
Company's financial statement presentation or disclosures.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections".
SFAS No.  145  rescinds  SFAS 4,  which  required  all  gains  and  losses  from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. Upon adoption of SFAS No.
145,  the Company  will be required to apply the criteria in APB Opinion No. 30,
"Reporting  the Results of  Operations--  Reporting the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and Transactions"  (Opinion No. 30), in determining the classification of
gains and losses resulting from the extinguishment of debt.  Additionally,  SFAS
No. 145 amends SFAS No. 13 to require that certain lease modifications that have
economic effects similar to  sale-leaseback  transactions to be accounted for in
the same manner as sale-leaseback transactions. The Company adopted SFAS No. 145
effective  January 1, 2003. The adoption of SFAS No. 145 for  long-lived  assets
held  for use did not  have a  significant  effect  on the  Company's  financial
statement presentation or disclosures.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit and Disposal Activities".  SFAS No. 146 nullifies Emerging Issues Task
Force  ("EITF")  Issue No. 94-3,  "Liability  Recognition  for Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring)".  Under EITF Issue No. 94-3, a liability for
an exit cost is  recognized  at the date of an  entity's  commitment  to an exit
plan.  Under SFAS No. 146, the  liabilities  associated with an exit or disposal
activity  will be measured at fair value and  recognized  when the  liability is
incurred  and meets the  definition  of a  liability  in the  FASB's  conceptual
framework.  SFAS No. 146 is effective for exit or disposal activities  initiated
after  December  31, 2002.  The adoption of SFAS 146 did not have a  significant
effect on the Company's financial statement presentation or disclosures.


                                       22
<PAGE>

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation--Transition and Disclosure--an amendment of SFAS No. 123". SFAS No.
148 provides  alternative  methods of transition  for a voluntary  change to the
fair value based method of accounting  for  stock-based  employee  compensation.
SFAS No. 148 also  amends the  disclosure  requirements  of SFAS No. 123 and APB
Opinion No. 28, "Interim Financial Reporting",  to require prominent disclosures
in both annual and interim  financial  statements about the method of accounting
for  stock-based  employee  compensation  and the effect of the  method  used on
reported results.  The Company  implemented SFAS No. 148 effective  December 31,
2002.  The  Company  has  determined  that  it  will  continue  to  account  for
stock-based employee compensation in accordance with APB No. 25.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  SFAS  No.  149  amends  and
clarifies under what circumstances a contract with initial investments meets the
characteristics  of a  derivative  and when a  derivative  contains a  financing
component.  SFAS No. 149 is  effective  for  contracts  entered into or modified
after June 30,  2003.  The  adoption of SFAS No. 149 did not have a  significant
effect on the Company's financial statement presentation or disclosures.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity".  SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities  and  equity.  SFAS No.  150  requires  that an  issuer  classify  a
financial  instrument  that is within its scope as a  liability  (or an asset in
some circumstances)  because that financial instrument embodies an obligation of
the issuer. SFAS No. 150 is effective for financial  instruments entered into or
modified  after May 31, 2003 and  otherwise is effective at the beginning of the
first  interim  period  beginning  after  June 15,  2003.  SFAS No. 150 is to be
implemented  by  reporting  the  cumulative  effect  of a change  in  accounting
principle for financial instruments created before the issuance date of SFAS No.
150 and still  existing  at the  beginning  of the interim  period of  adoption.
Restatement  is not  permitted.  The  adoption  of SFAS  No.  150 did not have a
significant  effect  on  the  Company's  financial  statement   presentation  or
disclosures.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness to Others" ("FIN 45"), an interpretation of FASB Statements Nos. 5,
57 and 107 and a rescission of FASB  Interpretation No. 34. FIN 45 elaborates on
the  disclosures  to be made by a guarantor in its interim and annual  financial
statements about its obligations under guarantees  issued. FIN 45 also clarifies
that a guarantor  is required to  recognize,  at  inception  of a  guarantee,  a
liability  for  the  fair  value  of  the  obligation  undertaken.  The  initial
recognition  and  measurement  provisions of FIN 45 are applicable to guarantees
issued or modified after December 31, 2002. The disclosure  requirements  of FIN
45 are effective for  financial  statements of interim and annual  periods ended
after  December  15,  2002.  The  adoption of FIN 45 did not have a  significant
effect on the Company's financial statement presentation or disclosures.

In November 2002, the FASB's Emerging Issues Task Force ("EITF") issued EITF No.
00-21  "Revenue  Arrangements  with  Multiple  Deliverables".   EITF  No.  00-21
addresses  certain aspects of the accounting by a vendor for arrangements  under
which it will perform multiple revenue-generating activities.



                                       23
<PAGE>

Specifically,  EITF No. 00-21 addresses how to determine  whether an arrangement
involving multiple  deliverables  contains more than one unit of accounting.  In
applying  EITF No.  00-21,  separate  contracts  with the same entity or related
parties that are entered into at or near the same time are presumed to have been
negotiated  as a  package  and  should,  therefore,  be  evaluated  as a  single
arrangement  in  considering  whether there are one or more units of accounting.
That  presumption  may be  overcome  if  there  is  sufficient  evidence  to the
contrary. EITF No. 00-21 also addresses how arrangement  consideration should be
measured and allocated to the separate  units of accounting in the  arrangement.
The  guidance in EITF No. 00-21 is effective  for revenue  arrangements  entered
into in fiscal periods  beginning  after June 15, 2003. The Company adopted EITF
No. 00-21  effective July 1, 2003. The adoption of EITF No. 00-21 did not have a
significant  effect  on  the  Company's  financial  statement   presentation  or
disclosures.

In February 2003, the Financial Accounting Standards Board issued Interpretation
No.  46,  "Consolidation  of  Variable  Interest  Entities"  ("FIN  46"),  which
addresses  the  consolidation  by  business  enterprises  of  variable  interest
entities,  which  have  one or both of the  following  characteristics:  (1) the
equity  investment at risk is not sufficient to permit the entity to finance its
activities without additional  financial support from other parties,  or (2) the
equity investors lack one or more of the following essential  characteristics of
a controlling  financial  interest:  (a) the direct or indirect  ability to make
decisions about the entity's  activities  through voting or similar rights,  (b)
the obligation to absorb the expected losses of the entity if they occur, or (c)
the right to receive the expected  residual returns of the entity if they occur.
In addition,  FIN 46 contains detailed disclosure  requirements.  FIN 46 applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date.  It applies in the first fiscal year or interim  period ending after March
15, 2004, to variable  interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003.  Early adoption is permitted.
The Company  adopted FIN 46 as of December 31, 2003.  The adoption of FIN 46 did
not have a significant effect on the Company's financial statement  presentation
or disclosures.

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, 2004 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.

ITEM 4.  CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

During and  subsequent  to the three months ended March 31, 2004,  the Company's
Chief Executive  Officer and its Chief Financial  Officer reviewed and evaluated
the  effectiveness  of the  Company's  disclosure  controls and  procedures  (as
defined in Exchange Act Rule  13a-15(e)  and  15d-15(e)),  which are designed to


                                       24
<PAGE>

ensure that material  information the Company must disclose in its reports filed
or  submitted  under  the  Securities  Exchange  Act of 1934,  as  amended  (the
"Exchange  Act"),  is recorded,  processed,  summarized and reported on a timely
basis, and have concluded,  based on that evaluation,  that as of such date, the
Company's  disclosure  controls and procedures were not adequate.  The Company's
Chief Executive  Officer and Chief Financial  Officer arrived at this conclusion
based on a number of factors,  including  that the Company's  system of internal
control did not: (1) properly record  accounts  payable to vendors for purchases
of  inventory,  (2) did not properly  record  adjustments  of inventory  per the
general  ledger to physical  inventory  balances,  (3) did not  properly  record
inventory  adjustments  to the lower cost or market using the average  inventory
method, (4) did not periodically  reconcile the Company's main bank account, (5)
did not have adequate controls over interim physical inventory  procedures,  and
(6) did not generate timely and accurate financial  information to allow for the
preparation of timely and complete  financial  statements.  The Company does not
have an  adequate  financial  reporting  process  because of the  aforementioned
material weaknesses,  including the difficulty in identifying and assembling all
relevant  contemporaneous   documentation  for  ongoing  business  transactions;
significant  turnover  in  the  Company's  financial  staff.  Accordingly,   the
Company's  Chief Executive  Officer and Chief  Financial  Officer have concluded
that there were significant deficiencies,  including material weaknesses, in the
Company's  internal  controls  over its  financial  reporting  at the end of the
fiscal period covered by this report.

In view of the fact that the financial  information  presented in this quarterly
report was prepared in the absence of adequate  internal controls over financial
reporting, the Company devoted a significant amount of time and resources to the
analysis of the financial information and documentation underlying the financial
statements  contained  in this  quarterly  report.  In  particular,  the Company
reviewed all  significant  account  balances  and  transactions  underlying  the
financial  statements  to  verify  the  accuracy  of  the  financial  statements
contained in this quarterly report.

The Company's automated  financial reporting systems are overly complex,  poorly
integrated and  inconsistently  implemented.  As a result, the Company is in the
process of implementing a new software application.

When the  Company's  senior  management  realized  that there  were  significant
deficiencies,  including  material  weaknesses,  in its  internal  control  over
financial  reporting,  it  retained  outside  advisors  to assist the  Company's
financial staff in preparing the Company's financial statements.

The Company has  experienced a substantial  turnover in finance  personnel.  The
Company's finance operations  continue to be understaffed and its personnel lack
comprehensive  accounting  policies and procedures to follow.  In addition,  the
Company's  personnel  need to be further  trained with respect to procedures and
systems.  The Company has hired a controller  and currently is seeking to hire a
financial analyst to focus on financial reporting and analysis.

The Company  estimates  that it may take  several  months to fully  rectify this
situation.

(b) Changes in internal control over financial reporting:

In light of the  foregoing,  management  is  taking  the  actions  that it deems
necessary to rectify the current deficiencies as described above.


                                       25
<PAGE>

                           PART II. OTHER INFORMATION


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

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.  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
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-transferrable.

The shares of preferred stock were issued without  registration in reliance upon
the  exemption  afforded  by  Section  4(2) of the  Securities  Act of 1933,  as
amended, based on certain representations made to the Company by the recipient.


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

Three Months Ended March 31, 2004:

The  Company did not file a Current  Report on Form 8-K during the three  months
ended March 31, 2004.



                                       26
<PAGE>

                                   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:  June 14, 2004                    By: /s/ Ming Tung Chok
                                           -----------------------
                                           Ming Tung Chok
                                           President and Chief
                                           Executive Officer







DATE:  June 14, 2004                    By: /s/ Nancy Chu
                                           -----------------------
                                           Nancy Chu
                                           Chief Financial Officer
















                                       27
<PAGE>

                                INDEX TO EXHIBITS



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


3              Soyo  Group,  Inc.  Certificate  of  Designation  of the  Class B
               Convertible Preferred Stock

4.1            Investment  Agreement By and Between Soyo Group, Inc. and Urmston
               Capital Limited

4.2            Registration Rights Agreement By and Between Soyo Group, Inc. and
               Urmston Capital Limited

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             Certification  pursuant to Section 906 of the  Sarbanes-Oxley Act
               of 2002 - Ming Tung Chok and Nancy Chu





































                                       28