SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


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

                 For the fiscal quarter ended September 30, 2008


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

     For the transition period from _________________ to __________________

                        Commission File Number 333-42036


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

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


                  1290 East Elm St. , Ontario, California 91761
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

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

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

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


<PAGE>

     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]                   Smaller reporting Company [ ]

     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 November 11, 2008 there were 61,718,656 shares Outstanding.

     Documents Incorporated by Reference: None

<PAGE>

SOYO GROUP, INC. AND SUBSIDIARY

                                      INDEX


PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements

           Condensed  Consolidated  Balance  Sheets  -  September 30, 2008
           (Unaudited) and December 31, 2007...................................4

           Condensed  Consolidated  Statements of  Operations  (Unaudited) -
           Three and Nine Months Ended -  September 30, 2008 and 2007..........6

           Condensed  Consolidated  Statements  of Cash Flows  (Unaudited) -
          Nine Months Ended -  September 30, 2008 and 2007.....................8

           Notes to Condensed  Consolidated Financial Statements (Unaudited)
           - Three and Nine Months Ended -  September 30, 2008 and 2007.......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 Securities....................................33

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

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

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


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

<PAGE>
<TABLE>
<CAPTION>

                         SOYO Group, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheets



                                                        September 30,   December 31,
                                                            2008           2007
                                                        ------------    ------------
                                                         (Unaudited)    (Restated)
<S>                                                     <C>             <C>

ASSETS
Current Assets
Cash and cash equivalents                                     44,186       1,848,249
Accounts receivable, net of allowance
  for doubtful accounts of $ 933,040 and $783,573  at
September 30, 2008 and December 31, 2007 respectively     43,309,525      27,123,985
Inventories, net of allowance for inventory
obsolescence of $222,044 and $168,600 at  September
30, 2008 and December 31, 2007 respectively                8,358,053      12,221,265
Prepaid expenses                                             130,075         187,749
Deferred income tax assets                                   586,000         544,688
Deposits                                                   2,390,967       8,808,408
                                                        ------------    ------------
   Total Current Assets                                   54,818,806      50,734,344
                                                        ------------    ------------

Investment in 247 MGI                                          4,000         400,000

Property and equipment                                       340,993         316,287
Less accumulated depreciation
   and amortization                                         (172,194)       (141,613)
                                                        ------------    ------------
                                                             168,799         174,674

Deferred income tax - noncurrent                             801,000         658,312
    Total noncurrent assets                                  973,799       1,232,986

Total Assets                                            $ 55,792,605    $ 51,967,330
                                                        ============    ============


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable                                        $ 10,770,431    $ 14,336,196
Accrued liabilities                                          217,707         789,526
Commercial Loans due to UCB                               25,495,237      27,824,490
Gateway Trade Finance                                      2,049,064               0
Short Term Note Payable                                      557,082               0

Income Tax Payable                                         1,378,698         889,518
                                                        ------------    ------------
   Total current liabilities                              40,468,219      43,839,730
                                                        ------------    ------------
<PAGE>


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



                                                        September 30,   December 31,
                                                            2008           2007
                                                        ------------    ------------
                                                         (Unaudited)    (Restated)


Long term payable                                                  0
                                                        ------------    ------------
Total liabilities                                         40,468,219      43,839,730
                                                        ------------    ------------

EQUITY
Class B Preferred stock, $0.001 par value,
  authorized - 10,000,000 shares, Issued
   and outstanding - 0 shares in 2008
   and 2,614,195 shares in 2007                                    0       2,187,165
Preferred stock backup withholding                                 0        (230,402)
Common stock, $0.001 par value.
   Authorized - 200,000,000 in 2008 and 75,000,000
shares in 2007, Issued and outstanding - 61,718,656
shares in 2008 and 52,004,656 shares in 2007                  61,719          52,005
Additional paid-in capital                                29,839,107      20,233,500
Accumulated deficit                                      (13,856,440)    (14,114,668)
Subscriptions Receivable                                    (720,000)              0
                                                        ------------    ------------
   Total shareholders' Equity                             15,324,386       8,127,600
                                                        ------------    ------------
Total liabilities and shareholders' equity              $ 55,792,605    $ 51,967,330
                                                        ============    ============
</TABLE>



                    See accompanying notes to the unaudited
                  condensed consolidated financial statements

<PAGE>

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

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

Net revenues                                  $ 29,481,939    $ 33,435,184
Cost of revenues                                24,091,542      29,804,822
                                              ------------    ------------
Gross margin                                     5,390,397       3,630,362
                                              ------------    ------------
Costs and expenses:
Sales and marketing                                896,805        (315,296)
General and                                      2,944,906       1,750,423
administrative
Provision for doubtful accounts                    346,419          20,635
Depreciation and amortization:
   Property and equipment                            5,417          27,107
                                              ------------    ------------
Total costs and expenses                         4,193,547       1,609,129
                                              ------------    ------------
Income from operations                           1,196,850       2,021,233
Other income (expense):
   Interest income                                      20          18,037
   Interest                                       (490,139)       (440,277)
expense
Unrealized gain (loss) on equity investment       (396,000)           --
                                              ------------    ------------
   Other income (expense)                          (21,415)         (6,399)
                                              ------------    ------------
   Other income (expense), net                    (907,534)       (177,786)
Income before provision for income                 289,316       1,843,447
taxes
Provision for income taxes                         290,000          78,379
Deferred income tax benefit                       (135,000)           --
Net income (loss)                                  134,316       2,509,857

Less: dividends on convertible preferred           111,676          68,744
stock
Net income (loss) attributable to common            22,640       2,441,113
shareholders
Net income (loss) per common share -                   .00             .05
Basic and diluted                                      .00             .05

Weighted average number of shares of            58,963,656      49,039,156
common stock outstanding - Basic and            62,736,230      54,163,754
diluted


                       See accompanying notes to unaudited
                  condensed consolidated financial statements.
<PAGE>


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


                                               Nine months     Nine months
                                                 ended           ended
                                              September 30,   September 30,
                                                  2008            2007
                                              ------------    ------------

Net revenues                                  $ 86,472,214    $ 72,328,689
Cost of revenues                                72,989,631      62,287,039
                                              ------------    ------------
Gross margin                                    13,482,583      10,041,650
                                              ------------    ------------
Costs and expenses:
Sales and marketing                              2,464,819       1,400,442
General and                                      6,435,515       5,496,795
administrative
Provision for doubtful accounts                  1,527,546         278,042
Depreciation and amortization:
   Property and equipment                           30,581          68,161
                                              ------------    ------------
Total costs and expenses                        10,458,461       7,243,440
                                              ------------    ------------
Income from operations                           3,024,122       2,798,210
Other income (expense):
   Interest income                                  12,490          66,831
   Interest                                     (1,615,076)       (822,158)
expense
Unrealized gain (loss) on equity investment       (396,000)           --
   Other income                                     65,602         139,888
(expense)
   Other income (expense),                      (1,932,984)       (615,439)
net
Income before provision for income               1,091,138       2,182,771
taxes
Provision for income taxes                         748,000         271,239
Deferred income tax benefit                       (184,000)     (1,471,449)
Net income (loss)                                  527,138       3,382,981

Less: dividends on convertible preferred           268,911         195,667
stock
Net income (loss) attributable to common      $    258,227    $  3,187,314
shareholders
Net income (loss) per common share -                   .01             .06
Basic and diluted                                      .01             .06

Weighted average number of shares of            55,248,798      49,039,156
common stock outstanding - Basic and            59,021,372      54,163,754
diluted


                       See accompanying notes to unaudited
                  condensed consolidated financial statements.



<PAGE>

<TABLE>
<CAPTION>

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

                                                          Nine months     Nine months
                                                             ended           ended
                                                          September 30,  September 30,
                                                              2008            2007
                                                           -----------    -----------
<S>                                                        <C>            <C>

OPERATING ACTIVITIES
Net Income (loss)                                              527,138      3,382,981
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and Amortization                                   30,581         68,159
 Unrealized (gain) loss on investment in 247MGI                396,000           --
Non cash payments for public relations                           6,825
Stock based compensation                                       395,494      1,169,437
Provision for doubtful accounts                                149,467        278,042
Provision for Inventory Obsolescence                            53,444           --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts Receivable                                        (16,335,007)   (16,153,639)
Inventories                                                  3,809,768     (8,825,582)
Prepaid expenses                                                57,674        (69,063)
Deposits                                                     6,417,441       (314,453)
Deferred income tax asset                                     (184,000)    (1,370,569)
Increase (Decrease) in:
Accounts payable                                             2,438,263      3,831,034
Accrued liabilities                                           (571,819)       551,884
Income tax payable                                             489,180           --
                                                           -----------    -----------
Net cash used in operating activities                       (2,326,376)   (17,444,942)
                                                           -----------    -----------

INVESTING ACTIVITIES
Purchase of property and equipment                             (24,706)       (33,056)
Net cash used in investing activities                          (24,706)       (33,056)
                                                           -----------    -----------


FINANCING ACTIVITIES
Proceeds from business loan - net                              276,893     22,506,404

Payment of backup withholding tax on accreted                  (80,674)       (58,700)
dividends on preferred stock

Proceeds from Issuance of Common Stock                         350,800
Payment of Short term loan                                                   (100,000)
                                                           -----------    -----------
Payment of long term debt                                                  (3,735,198)
                                                           -----------    -----------
Net cash provided by (used in) financing activities            547,019     18,612,506
                                                           -----------    -----------
<PAGE>

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


                                                          Nine months     Nine months
                                                             ended           ended
                                                          September 30,  September 30,
                                                              2008            2007
                                                           -----------    -----------
CASH AND CASH EQUIVALENTS
Net Increase (Decrease)                                     (1,804,063)     1,134,506
At beginning of Period                                       1,848,249      1,501,040
                                                           -----------    -----------
At End of Period                                                44,186      2,635,546
                                                           ===========    ===========


Supplemental Disclosure of Cash Flow Information
         Cash paid for Interest                              1,572,517        822,158

         Cash paid for Income Taxes                            458,000         21,503

Non cash investing and financing activities
Accretion of discount on Class B preferred stock               268,911        195,666

Stock Option Compensation                                      395,494      1,169,437
Non Cash- conversion of accounts payable to common stock     6,004,028
Non Cash- conversion of convertible preferred stock to
common stock                                                 2,456,075

                       See accompanying notes to unaudited
                  condensed consolidated financial statements.

</TABLE>


<PAGE>


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

                   Nine Months Ended September 30, 2008 and 2007


1.   Organization and Basis of Presentation

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

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

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

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

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

Basis  of  Presentation  - The  accompanying  unaudited  condensed  consolidated
financial  statements  include  the  accounts  of  SOYO  and  SOYO  Nevada.

<PAGE>

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
September  30,  2008,  the results of  operations  for the three and nine months
ended  September  30, 2008 and 2007,  and cash flows for the nine  months  ended
September  30, 2008 and 2007.  The  condensed  consolidated  balance sheet as of
December 31, 2007 is derived from the Company's audited  consolidated  financial
statements.

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

The results of operations for the three and nine months ended September 30, 2008
are not  necessarily  indicative of the results of operations to be expected for
the full fiscal year ending December 31, 2008. The largest part of the Company's
business,  the  importing  and  resale of  consumer  electronic  products,  is a
seasonal  business.  The busiest time of the year is the holiday  season,  which
occurs at the end of the year.

Business - The Company sells  products under four  different  product lines:  1)
Computer products ; 2) Consumer Electronics; 3) Furniture 4) Bluetooth Devices.

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

<PAGE>


On December  31, 2007,  the Company  sold all of the assets  related to the VoIP
business to 247MGI of Fort Lauderdale, Florida for 40,000,000 shares of 247MGI's
common  stock.  The stock is traded on the OTC pink  sheets.  The Company has no
plans to dispose of the 247MGI  stock,  and intends to hold it  long-term  as an
investment.  The Company  revalues the stock on its balance  sheet each quarter,
based on the market price.  At September 30, 2008, the price was $0.0001,  which
reduced the value of the Company's shares to $4,000.

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

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

The agreement is for a minimum  period of 6.5 years and calls for the payment of
MINIMUM royalties by SOYO to Honeywell totaling $3,840,000 (Three Million, Eight
Hundred and Forty  Thousand  Dollars  U.S.).  Sales  levels in excess of minimum
agreed targets will result in associated  increases in the royalty payments due.
Minimum royalty  payments due under the agreement were $353,000 through December
31, 2007, and $469,000  through December 31, 2008. The Company made the required
payments in 2007,  and  through  September  30,  2008 had paid  $330,000 in 2008
royalties.

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


Accounting  Estimates - The  preparation  of financial  statements in conformity
with United States generally accepted accounting  principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities,  disclosure of contingent assets and liabilities at the date of the
financial  statements,  and the reported amounts of revenues and expenses during
the reporting period.

<PAGE>

Significant  estimates  primarily  relate to the  realizable  value of  accounts
receivable,  vendor programs and  inventories.  Actual results could differ from
those estimates.

2.   Earnings Per Share

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

         Weighted average Shares outstanding at 9/30/2008             55,248,798

              Vested in the money options                              3,772,574

         Total fully diluted shares at 9/30/2008                      59,021,372

On August 7, 2008,  the Company  reached an agreement with the  independent  3rd
party that owned the Class B preferred  stock to fix the conversion of the Class
B preferred stock to common stock at 2,750,000 common shares. With the mandatory
conversion  date less than six months away,  recent  volatility of the Company's
share price, weakness in the stock market and perceived market uncertainty,  the
Company  believed it was prudent to fix the  conversion at this time. If no deal
had been made, at September 30, 2008,  the amount of shares due to the 3rd party
investor would have been 6,234,950.

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
September 30, 2008,  the stock  options  granted in 2007 were "in the money" and
therefore are included in the computation of diluted EPS.


Comprehensive Income (Loss) - The Company reports  comprehensive income or loss,
its  components  and  accumulated   balances  in  its   consolidated   financial
statements.  Comprehensive  income or loss includes all changes in equity except
those  resulting from  investments by owners and  distributions  to owners.  The
Company did not have any items of  comprehensive  income (loss) during the three
and nine months ended September 30, 2008 and 2007.

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

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

On July 22, 2005, the Company issued  2,889,000  option grants to employees at a
strike price of $0.75.  One third of those options vested and were available for
purchase on July 22, 2006, one third vested on July 22, 2007, and one third will
vest on July 22, 2008.  The grants will expire if unused on July 22, 2010. As of
September 30, 2008,  none of the options had been  exercised,  none were "in the
money" and 1,200,000 options issued to Ming Chok and Nancy Chu had been returned
to the Company.  Seventeen  employees  who were issued stock options in 2005 had
left the Company,  and those 17 employees forfeited 714,000 options.  All of the
remaining  963,000  options  were  vested and 353,00 have benn  exercised  as of
September 30, 2008. If not  exercised,  all 609,500  options will expire on July
22, 2010.

The Company did not grant any stock options to employees,  officers or directors
in 2006.  On February 2, 2007,  the Company  issued  4,305,000  option grants to
employees  at a  strike  price  of  $0.35.  One  third  of  those  options  were
immediately  vested and  available  for purchase on February 2, 2007,  one third
vested on February 2, 2008, and the remaining one third will vest on February 2,
2009. The grants will expire if unused on February 2, 2012.

During 2007,  609,000 of the options granted in 2007 were exercised.  During the
nine months ended September 30, 2008,  113,000 stock options were exercised.  As
of September 30, 2008,  nine  individuals  who were granted  options in 2007 had
left the Company.  Those individuals  exercised a total of 232,000 options,  and
forfeited an additional 621,000 options.

As of  September  30,  2008,  employees  held  4,170,000  options of the options
granted in 2007, of which 3,707,074 have vested. The Company also issued 100,000
options to three new employees  later in 2007.  One of those  employees left the
Company and surrendered 50,000 options. Of the 50,000 remaining options,  32,000
have vested.

For the nine months  ended  September  30, 2008 and 2007,  the Company  recorded
$404,697 and $1,169,437  respectively,  in compensation  costs relating to stock
options  granted to  employees.  The  amounts  recorded  represent  equity-based
compensation  expense  related to options that were issued in 2005 and 2007. The
compensation costs are based on the fair value at the grant date.

<PAGE>

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

Revenue Recognition

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

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


3.   Investment in 247MGI

On December 31, 2007,  the Company  completed the sale of all assets of the VoIP
division to 247MGI,  Inc., a Miami,  Florida based publicly  traded  corporation
just beginning operations.  The sales price of the assets was $1,000,000,  which
was paid by  40,000,000  shares  of  247MGI's  restricted  common  stock.  As of
September 30, 2008, the shares had not been registered  under the Securities Act
of 1933,  and any future sale of the shares was  restricted  completely  for one
year,  and  subject  to volume  restrictions  after  that.  The  Company  has no
management  participation in 247MGI's business. At December 31, 2007, 247MGI had
only 75,272,814  common shares  outstanding,  so the Company owned a majority of
the outstanding  shares.  In February,  2008, 247MGI issued  335,000,000  common
shares,  diluting our holding to  approximately  10% of the  outstanding  common
shares. The Company intends to hold the 247MGI shares as a long-term investment.

Since the Company's  shares are  unregistered  and illiquid,  the net realizable
value of the Company's  investment  is difficult to  calculate.  The Company has
initially  recorded the  investment for $400,000 and will mark the investment to
market  each  quarter.  At  September  30,  2008,  the  Company  has  valued the
investment  at $4,000,  resulting  in an  unrealized  loss of  $396,000.

<PAGE>
<TABLE>
<CAPTION>

4.   Fair Value

     SFAS 157  establishes a fair value  hierarchy  which  requires an entity to
maximize  the use of  observable  inputs and  minimize  the use of  unobservable
inputs when measuring fair value. The standard  describes three levels of inputs
that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.

Level 2: Significant  other observable  inputs other than Level 1 prices such as
quoted prices for similar assets or  liabilities;  quoted prices in markets that
are not active;  or other inputs that are observable or can be  corroborated  by
observable market data.

Level 3: Significant  unobservable  inputs that reflect a reporting entity's own
assumptions about the assumptions that market  participants would use in pricing
and asset or liability.

         Assets measured at fair value are summarized below:


                                                      Fair Value Measurements at September 30, 2008 Using
                                                      ---------------------------------------------------

                                                         Quoted
                                                        Prices in
                                                         Active           Significant
                                                       Markets for           Other            Significant
                                                        Identical          Observable        Unobservable
                                    September 30,        Assets             Inputs              Inputs
                                       2008            (Level 1)           (Level 2)           (Level 3)
                                   --------------     ------------        -----------        ------------
<S>                                <C>                <C>                 <C>                <C>


I Investment in 247MGI             $        4,000     $      4,000               --                  --



5.   Accounts Payable

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


6    Commercial Loans Due to UCB

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

------------------------------------- ------------
Asset based financing                 $ 23,999,797
------------------------------------- ------------
Additional loan                          1,495,440
------------------------------------- ------------
      Total                           $ 25,495,237
------------------------------------- ------------

</TABLE>
<PAGE>

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

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

In June 2007, UCB offered to provide the Company with an  alternative  source of
financing- Purchase Order financing.  This line differed from all other forms of
financing in that the bank was offering to advance  funds  against our customers
specific purchase orders,  provided the customer met the bank's stringent credit
requirements.  The end result is that the  Company can use this credit line only
by  obtaining   purchase  orders  from  large  customers   before  ordering  the
merchandise.  The funds would then be advanced to the manufacturer after product
was shipped, and once the product was delivered to the customer,  and the status
of the order was changed from a purchase  order to a receivable,  the loan would
have to be paid back, or the balance transferred to the asset based credit line.
The Company began buying  merchandise under the Purchase Order financing line in
June 2007.

In June 2008,  the Purchase  Order finance line and the Asset Based Finance line
were  consolidated  as an Asset Based  Finance  Line with a $24  million  limit.
During  the 3rd  quarter,  the  bank  issued a Letter  of  Credit  to one of the
Company's suppliers for $1.5 million. At September30, 2008, the total balance of
the loan due to UCB was $25,495,237.

7.   Gateway Trade Finance

During March 2008, the Company received a large order from a customer that could
not be financed by its current  credit  facilities.  The Company  negotiated for
Gateway  Trade  Finance  to issue a letter of  credit  to a vendor to  guarantee
payment  of the  production  run.  The  letter of credit was paid off during the
second  quarter.  The Company  has used  Gateway's  financing  during the second
quarter  as  needed to pay for goods  that  were not able to be  financed  using
traditional  methods.  The  terms  of  each  letter  of  credit  are  negotiated
independently.

<PAGE>

The interest rate, commission rate and other variables change for each addendum.
At September 30, 2008, the Company owed Gateway $2,049,064. The Company does not
plan to utilize  external  financing  like this for future  purchases due to the
high cost, but may do so on a limited basis if the transaction warrants it.

8.   Short Term Loan

During the quarter, a third party individual  provided $557,082 on the Company's
behalf, which served as the deposit required for the Company to post a letter of
credit and obtain finished goods from a vendor.  The individual,  who has had no
other dealings with the Company and is not a shareholder, is affiliated with the
vendor  manufacturing the goods, and agreed to post the deposit required for the
letter of  credit.  The  entire  amount of  $557,082  was still  outstanding  at
September 30,2008.  The individual  received no collateral for his deposit,  and
will be repaid his principal plus a weekly fee. There is no designated  interest
rate on the loan.

9    Shareholders' Equity

     a.   Common Stock

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

On August 4, 2008,  during the  Company's  2007 annual  meeting,  the  Company's
shareholders  voted to increase the number of authorized  shares to  200,000,000
shares of common stock with a par value of $0.001 per share.

Effective October 24, 2002, the Company issued 28,182,750 shares of common stock
to Ming Tung Chok and Nancy Chu, who are members of SOYO Nevada  management (see
Note 1).  The  shares of  common  stock  were  valued  at par  value,  since the
transaction was deemed to be a recapitalization  of SOYO Nevada.  During October
2002, the management of SOYO Nevada also separately  purchased  6,026,798 shares
of the  11,817,250  shares of common stock of VWHC  outstanding  prior to VWHC's
acquisition of SOYO Nevada, for $300,000 in personal funds. The 6,026,798 shares
represented 51% of the outstanding  shares of common stock. When the transaction
was complete, and control of the Company was transferred, SOYO Nevada management
owned 34,209,548  shares of the 40,000,000  outstanding  shares of the Company's
common stock.  Subsequent to the transaction,  management  distributed 8,000,000
shares of common stock to various  brokers,  bankers and other  individuals that
assisted with the transaction. In 2007, Mr. Chok gave a gift of 1,000,000 shares
to an individual. In March, 2008, Mr. Chok announced that he and his wife bought
776,000 shares of the Company's common stock in a private placement at $1.25 per
share.  No one  individual or  corporation  other than those named in Item 12 of
this report ever owned more than 5% of the common shares outstanding.

During the nine months ended  September 30, 2008,  288,000 shares were issued to
employees  exercising  stock option,  5,900,00 shares were issued to a vendor in
leiu of payment, and 2,750,000 shares were issued to Urmstrom Capital as payment
for preferred stock.

<PAGE>


     b.   Preferred Stock

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

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

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

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

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

On August 7, 2008,  the Company  reached an agreement with the  independent  3rd
party that owned the Class B preferred  stock to fix the conversion of the Class
B preferred  stock to common stock at 2,750,000  restricted  common shares.  The
shares  were  issued by the  Company  on August  14,  2008.  With the  mandatory
conversion  date less than six months away,  recent  volatility of the Company's
share price, weakness in the stock market and perceived market uncertainty,  the
Company  believed it was prudent to fix the  conversion  at this time.  Based on
these factors, the Company believes that it made a very favorable deal.
<PAGE>

<TABLE>
<CAPTION>

     10.  Income Taxes

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

                                                                                 Nine
                                                    Year           Year         Months
                                                   Ended          Ended          Ended
                                                 12/31/2006     12/31/2007     9/30/2008
                                                -----------    -----------    -----------
<S>                                             <C>            <C>            <C>

     Current:
        Federal                                 $     1,000    $   515,000    $   623,000
        State                                        52,000        324,000        125,000
                                                -----------    -----------    -----------
        Total                                        53,000        839,000        748,000
                                                -----------    -----------    -----------

     Deferred:
        Federal                                        --       (1,038,000)      (150,000)
        State                                          --         (165,000)       (34,000)
                                                -----------    -----------    -----------
        Total                                          --       (1,203,000)      (184,000)
                                                -----------    -----------    -----------
     Total                                      $    53,000    $  (364,000)   $   564,000
                                                ===========    ===========    ===========


Components of deferred income taxes as of:

                                                 12/31/2006     12/31/2007      9/30/2008
                                                -----------    -----------    -----------


     Net operating loss carryforwards           $ 1,310,000    $      --      $      --
     Depreciation                                   288,000        214,000        202,000
     Reserves and allowances                        214,000        442,000        682,000

     Shares-based compensation                         --          444,000        441,000
     State income taxes                              69,000        103,000         62,000
                                                -----------    -----------    -----------
     Total deferred tax assets                    1,881,000      1,203,000      1,387,000

     Valuation allowance                         (1,881,000)          --             --
                                                -----------    -----------    -----------



     Net deferred tax assets                    $      --      $ 1,203,000    $ 1,387,000
                                                ===========    ===========    ===========
<PAGE>


Reconciliation of federal income tax
rate:

                                                                                 Nine
                                                    Year           Year         Months
                                                   Ended          Ended          Ended
                                                 12/31/2006     12/31/2007     9/30/2008
                                                -----------    -----------    -----------

     Federal statutory rate                            34.0%          34.0%          34.0%
     Stock-based compensation                          33.0%           9.5%          12.6%
     State income taxes                                 6.5%           3.6%           5.6%
     Non-deductible expenses                            2.9%           0.6%           1.6%
     Change in valuation allowance                    -67.2%         -60.0%           0.0%
     Other                                              0.8%           0.0%          -2.1%
                                                -----------    -----------    -----------
     Effective tax rate                                10.0%         -12.3%          51.7%
                                                ===========    ===========    ===========




11 Significant Concentrations

     a.   Customers

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

                                                              Three Months Ended September 30,
-------------------------------------------------------------------------------------------------------------
                                                      2008              %              2007            %
--------------------------------------------- ------------------- ------------- ----------------- -----------
Revenues:
--------------------------------------------- ------------------- ------------- ----------------- -----------
     Distributors                              $       20,998,180         71.22 $      15,997,750       47.85
--------------------------------------------- ------------------- ------------- ----------------- -----------
     Retailers                                          7,868,246         26.69        14,652,522       43.82
--------------------------------------------- ------------------- ------------- ----------------- -----------
     Others                                               615,513          2.09         2,784,912        8.33
--------------------------------------------- ------------------- ------------- ----------------- -----------
Total                                          $       29,481,939        100.00 $      33,435,184      100.00
--------------------------------------------- ------------------- ------------- ----------------- -----------


                                                               Nine Months Ended September 30,
-------------------------------------------------------------------------------------------------------------
                                                      2008              %              2007            %
--------------------------------------------- ------------------- ------------- ----------------- -----------
Revenues:
--------------------------------------------- ------------------- ------------- ----------------- -----------
     Distributors                             $        56,659,381         65.52 $      42,134,450       58.25
--------------------------------------------- ------------------- ------------- ----------------- -----------
     Retailers                                         24,796,222         28.68        23,420,813       32.38
--------------------------------------------- ------------------- ------------- ----------------- -----------
     Others                                             5,016,611          5.80         6,773,426        9.37
--------------------------------------------- ------------------- ------------- ----------------- -----------
Total                                         $        86,472,214        100.00 $      72,328,689      100.00
--------------------------------------------- ------------------- ------------- ----------------- -----------

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

During the three months ended  September 30, 2008 and 2007, the Company  offered
price  protection to certain  customers  under specific  programs  aggregating $
428,536 and  $299,853  respectively,  which  reduced net  revenues  and accounts
receivable accordingly.

During the nine months ended  September 30, 2008 and 2007,  the Company  offered
price  protection  to certain  customers  under  specific  programs  aggregating
$1,159,208  and $840,005  respectively,  which reduced net revenues and accounts
receivable accordingly.


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

During the three months ended  September 30, 2007,  the Company had one customer
that accounted for more than 10% of net revenues during the quarter.

Customer                        Revenues
Office Max                     $8,207,597


     b.   Geographic Segments

Financial information by geographic segments is summarized as follows:


                                                             Three Months Ended September 30,
--------------------------------------------------------------------------------------------------------------
                                             2008                %              2007                 %
----------------------------------- ---------------------- ------------ --------------------- ----------------
<S>                                 <C>                    <C>          <C>                   <C>

Gross revenues:
----------------------------------- ---------------------- ------------ --------------------- ----------------
     United States                  $           15,971,149        54.17 $          25,048,776            74.92
----------------------------------- ---------------------- ------------ --------------------- ----------------
     Canada                                      2,293,622         7.78             3,651,806            10.92
----------------------------------- ---------------------- ------------ --------------------- ----------------

     Central and South America                  11,231,552        38.10             1,993,723             5.96
----------------------------------- ---------------------- ------------ --------------------- ----------------
     Others                                        (14,384)        (.05)            2,740,879             8.20
----------------------------------- ---------------------- ------------ --------------------- ----------------
Total                               $           29,481,939       100.00 $          33,435,184           100.00


                                                              Nine Months Ended September 30,
--------------------------------------------------------------------------------------------------------------
                                             2008                %              2007                 %
----------------------------------- ---------------------- ------------ --------------------- ----------------
Gross revenues:
----------------------------------- ---------------------- ------------ --------------------- ----------------
     United States                  $           50,264,710        58.13 $          53,772,219            74.34
----------------------------------- ---------------------- ------------ --------------------- ----------------
     Canada                                      2,280,430         2.64             7,367,771            10.19
----------------------------------- ---------------------- ------------ --------------------- ----------------
     Central and South America                  33,141,321        38.33             7,193,625             9.95
----------------------------------- ---------------------- ------------ --------------------- ----------------
     Asia and Others                               785,753        00.90             3,995,074             5.52
----------------------------------- ---------------------- ------------ --------------------- ----------------
Total                               $           86,472,214       100.00 $          72,328,689           100.00
----------------------------------- ---------------------- ------------ --------------------- ----------------

<PAGE>

                                                             Three Months Ended September 30,
--------------------------------------------------------------------------------------------------------------
                                             2008                %              2007                 %
------------------------------------ --------------------- ------------ --------------------- ----------------
Revenues:
------------------------------------ --------------------- ------------ --------------------- ----------------
     Computer Parts and Peripherals  $          25,294,205        85.80 $          14,340,348            42.89
------------------------------------ --------------------- ------------ --------------------- ----------------
     Consumer Electronics                        4,130,370        14.01            19,032,619            56.92
------------------------------------ --------------------- ------------ --------------------- ----------------
     VoIP                                                                              21,557             0.07
------------------------------------ --------------------- ------------ --------------------- ----------------
Furniture                                           57,364         0.19                40,660             0.12
------------------------------------ --------------------- ------------ --------------------- ----------------
Total                                $          29,481,939       100.00 $          33,435,184           100.00
------------------------------------ --------------------- ------------ --------------------- ----------------


                                                              Nine Months Ended September 30,
--------------------------------------------------------------------------------------------------------------
                                             2008                %              2007                 %
------------------------------------ --------------------- ------------ --------------------- ----------------
Revenues:
------------------------------------ --------------------- ------------ --------------------- ----------------
     Computer Parts and Peripherals  $          71,028,384        82.14 $          38,115,666            52.70
------------------------------------ --------------------- ------------ --------------------- ----------------
     Consumer Electronics                       15,213,975        17.59            34,088,058            47.13
------------------------------------ --------------------- ------------ --------------------- ----------------
     VoIP                                                                              65,823             0.09
------------------------------------ --------------------- ------------ --------------------- ----------------
Furniture                                          229,855         0.27                59,142             0.08
------------------------------------ --------------------- ------------ --------------------- ----------------
Total                                $          86,472,214       100.00 $          72,328,689           100.00
------------------------------------ --------------------- ------------ --------------------- ----------------

     d.   Suppliers

As of September  30, 2008, no more than 28% of the products  distributed  by the
SOYO  Group in 2008 were being  supplied  by any one  supplier.  Other than that
single supplier, no other vendor supplied more than 24% percent of the Company's
inventory  available for sale. SOYO Group, Inc. is establishing new partnerships
with other OEM  manufacturers  in the North America and Asia Pacific  Regions in
order to provide innovative products for consumers.
</TABLE>
<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 September 30,
2008 contains "forward-looking  statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended,  including  statements  that include the
words  "believes",  "expects",  "anticipates",  or  similar  expressions.  These
forward-looking   statements  include,   but  are  not  limited  to,  statements
concerning   the   Company's   expectations   regarding   its  working   capital
requirements,  financing requirements,  business prospects, and other statements
of expectations,  beliefs,  future plans and strategies,  anticipated  events or
trends,  and similar  expressions  concerning  matters  that are not  historical
facts. The forward-looking  statements in this Quarterly Report on Form 10-Q for
the quarterly  period ended  September 30, 2008 involve known and unknown risks,
uncertainties and other factors that could cause the actual results, performance
or achievements  of the Company to differ  materially from those expressed in or
implied by the forward-looking statements contained herein.


Financial Outlook:


For the nine months ended  September 30, 2008,  the Company  earned  $527,138 or
$0.01 per share before dividends on preferred stock

For the nine months ended September 30, 2007, The Company earned $3,382,981,  or
..06 per share before dividends on preferred stock.

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

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

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

<PAGE>


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

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

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

During  2008,  the Company had its lending  limits cut as a result of the global
"credit crunch". As of September 30, 2008, the Company's ABL line with UCB had a
limit of  $24,000,000.  UCB also  extended  further  credit  to the  Company  of
$1,500,000.  As of September 30, 2008, the Company's borrowings from UCB were at
the maximum levels.

At  September  30,  2008,  the Company  also owed  $2,049,064  to Gateway  Trade
Finance, and $557,082 to an individual. See footnotes 7 and 8 for more details.

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

<PAGE>

Critical Accounting Policies:

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

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

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

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

Vendor Programs:

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


<PAGE>

Accounts Receivable:

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

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

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

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

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.
<PAGE>


Inventories:

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

Income Taxes:

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



Results of Operations:

Three Months Ended September 30, 2008 and 2007:

Net Revenues.  Net revenues  decreased by $3,953,245 or 11.8%, to $29,481,939 in
the three months ended  September 30, 2008, as compared to  $33,435,184 in 2007.
The decrease in revenues was mainly due to reduced  sales in the United  States,
resulting  from the poor  economy and the  Company's  reducing  its credit risk.
Additionally,  the Company  was unable to purchase  some goods due to its credit
limits being decreased by lenders..

Gross  Margin.  Gross  margin was  $5,390,397  or 18.3% in 2008,  as compared to
$3,630,362 or 10.9% in 2007.  The large increase in gross margin has two causes.
First,  due to the  current  economic  climate,  the  Company  has  cut  out all
marketing and sales  promotion  expenses.  The Company feels that in the current
climate,  with sales  prices and margins  squeezed as they  currently  are,  the
Company is unwilling to spend any funds on promotions. Secondly, the Company has
employed a logistics  Company to coordinate  movement of the Company's  products
throughout  the world,  including the initial  purchases of goods from Asia. The
corresponding  savings in  transportation  costs reduced the landed costs of the
goods and increased the gross margin on sales.
<PAGE>

Sales and Marketing  Expenses.  Selling and marketing  expenses were $896,805 in
2008, as compared to $ (315,296) in 2007.  The Company began using outside sales
reps to open new markets in 2006, and as the sales have grown,  the  commissions
grew.  The Company  continues to believe this is a cost  effective way to obtain
shelf  space at various  retailers,  so the  outside  commissions  are likely to
continue  to grow  larger as the  business  continues  to grow and  mature.  The
negative  expense in 2007 resulted  from a $1,100,000  one time  concession  the
Company was able to negotiate from one of its suppliers.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $1,194,483  to $2,944,906 in the quarter ended  September 30, 2008,
as compared to $1,750,423 in 2007.  There are several  reasons for the increase.
The Company incurred penalties during the quarter of almost $300,000 due to late
shipments to big box retailers in the US.  Additionally,  costs  relating to the
Company's proxy statement, annual meeting and shareholder vote were not incurred
in 2007, and the Company's  search for additional third party financing has been
expensive,.

Bad Debts. The Company recorded a provision for doubtful accounts of $346,419 in
the three months  ended  September  30,  2008,  and $20,635 for the three months
ended  September 30, 2007.  The provision  has  increased  substantially  as the
Company's  revenues  have grown.  During the  quarter,  the Company  began using
credit  insurance  to hedge  against  bad debts,  as the Company has had trouble
collecting  from some smaller  independent  accounts  during  2008.  The Company
believes the bad debts are reasonable at approximately 1% of revenues during the
quarter.  With the  insurance  policy in place  during  the third  quarter,  the
Company's credit risk has been substantially reduced.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $5,417 for the three months ended  September 30, 2008, as compared
to $27,107 for the three  months  ended  September  30,  2007.  The decrease was
caused by the sale of the VoIP assets in December  2007.  The Company  owns less
property and equipment subject to depreciation.

Income from Operations.  The income from operations was $1,196,850 for the three
months ended  September 30, 2008, as compared to $2,021,233 for the three months
ended  September  30, 2007 This is a result of the large  increase in  operating
expenses described above.

Miscellaneous  Income  (Loss).  The  miscellaneous  income  (loss) for the three
months  ended  September  30,  2008  was a loss of  $417,415.  That was due to a
$396,000  unrealized  loss on investment  in 247MGI which was  marked-to-market.
Miscellaneous  income was a loss of $6,399 for the three months ended  September
30, 2007.

<PAGE>

Interest  Income.  Interest  income was $20 for the three months ended September
30, 2008, as compared to $18,037 for the three months ended  September 30, 2007.
The  decrease is due to the  Company  having less cash on hand due to very tight
credit constraints. All available cash is being used to purchase inventory.

Interest  Expense.  Interest  expense was  $490,139  for the three  months ended
September  30,  2008.  Interest  expense was $440,277 for the three months ended
September  30,  2007.  The increase was due to a single  factor.  The  Company's
revenues have grown significantly  throughout the last year, as has the need for
capital.   The  Company  is  borrowing   more  money  under  its  credit  lines.
Additionally,  to finance  customer  purchase  orders,  the Company has borrowed
money from non traditional sources such as Gateway Finance, which is a much more
expensive source than using banks.

Provision  for Income Taxes.  The  Company's  provision for income taxes for the
three months ended  September  30, 2008 is $290,000,  as compared to $78,379 for
the three months ended  September  30, 2007.  The increased  provision,  despite
lower  earnings,  is due to the Company no longer having any loss carry forwards
to offset income.

Deferred  Income  Tax  Benefit/  (Expense):  The  deferred  income  tax  benefit
(expense) was ($135,000) for the three months ended  September 30, 2008. This is
a result of timing differences between GAAP income and taxable income.

Net Income  (loss).  Net income  (loss) was $22,640 for the three  months  ended
September  30,  2008,  as  compared to  $2,441,113  for the three  months  ended
September 30, 2007.


Nine Months Ended September 30, 2008 and 2007:

Net Revenues. Net revenues increased by $14,143,525 or 19.55%, to $86,472,214 in
the nine months ended  September 30, 2008, as compared to  $72,328,689  in 2007.
The  increase  in  revenues  was  mainly due to strong US sales in the first six
months,  and several new accounts  opened during the first half of the year. The
third quarter of 2008 was the first quarter in almost two years that the Company
did post a year over year revenue increase of at least 40%.

Gross  Margin.  Gross margin was  $13,482,583  or 16.0% in 2008,  as compared to
$10,041,650 or 14.0% in 2007.  Gross margins  increased on a percentage basis as
the Company  drastically  cut all promotion and marketing  costs.  Additionally,
gross  margins  were  helped as the  Company  increased  its  business  in Latin
America, where the margins are better than on US sales.
<PAGE>


Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$1,064,377  to  $2,464,819  in 2008,  as compared  to  $1,400,442  in 2007.  The
increase is due completely to the continued use of outside sales reps during the
period.  The Company began using outside sales reps to open new markets in 2006,
and as the sales have grown,  the  commissions  grew.  The Company  continues to
believe this is a cost effective way to obtain shelf space at various retailers,
so the outside commissions are likely to continue to grow larger as the business
continues to grow and mature.  However,  these costs must be monitored carefully
as margins and prices shrink in difficult economic circumstances.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $938,720 to  $6,435,515 in 2008, as compared to $5,496,795 in 2007.
There are several  reasons for the increase.  First,  royalties to Honeywell are
being  booked as expenses in 2008,  whereas they were booked as  prepayments  in
2007.  The  Company  also  incurred  penalties  of almost  $300,000  due to late
shipments  to big box  retailers  in the US.  Third,  costs  relating to RMA and
repair of goods has increased as sales have increased,  and lastly,  the cost of
funding the Company's  operations  has increased  significantly.  Although those
costs are primarily  interest related,  there are several fees relating to those
costs that are booked to SG&A expenses.

Future quarters will see rental expense will rise significantly.  On November 3,
2008, the Company moved to a new corporate headquarters,  doubling both the size
of the warehouse and the rental expense.  (see the principal commitments section
of this report for more details).

Bad Debts.  The Company recorded a provision for bad debts of $1,527,546 for the
nine months ended  September  30,  2008,  and $278,042 for the nine months ended
September 30, 2007. The provision has increased  substantially  as the Company's
revenues  have grown,  and as the Company has had trouble  collecting  from some
smaller  independent  accounts  during the year.  The problem began in the first
quarter,  and carried over to the second quarter.  As a result,  the Company has
tightened its credit policies to protect against bad debts, cut credit limits to
several  customers,  and has been buying credit  insurance  when  management has
deemed that the prudent course of action. .

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $30,581 for the nine months ended  September 30, 2008, as compared
to $68,161 for the nine months ended September 30, 2007. The decrease was caused
by the sale of the VoIP assets in December  2007. The Company owns less property
and equipment subject to depreciation.

<PAGE>

Income from  Operations.  The income from operations was $3,024,122 for the nine
months ended  September 30, 2008, as compared to $2,798,210  for the nine months
ended September 30, 2007.  This is a result of the increased  revenues and gross
margins described above.

Miscellaneous  Income.  The  miscellaneous  income  for the  nine  months  ended
September  30, 2008 amounted to $65,602.  Miscellaneous  income was $139,888 for
the nine months ended  September 30, 2007.  The difference is due to less income
earned on foreign currency exchange as a result of transactions done in Canadian
dollars.

Interest Income. Interest income was $12,490 for the nine months ended September
30, 2008,  as compared to $66,831 for the nine months ended  September 30, 2007.
The decrease,  while  insignificant,  is due to the Company  having less cash on
hand due to very tight credit  constraints.  All available cash is being used to
purchase inventory.

Interest  Expense.  Interest  expense was  $1,615,076  for the nine months ended
September  30,  2008.  Interest  expense was  $822,158 for the nine months ended
September  30,  2007.  The increase was due to a single  factor.  The  Company's
revenues have grown significantly  throughout the last year, as has the need for
capital.  The Company is borrowing more money under its credit lines, and is not
getting as  favorable  terms on its  borrowings.  The  Company has even used non
traditional lenders such as Gateway Finance Corp. to meet its obligations to its
customers.

Provision for Income Taxes. The Company  recognized a provision for income taxes
of $748,000 in 2008, as compared to $271,239.  The provision is now necessary as
net  operating  loss carry  forwards  will no longer  offset the  Company's  tax
liabilities.

Deferred  Income  Tax  Benefit/  (Expense):  The  deferred  income  tax  benefit
(expense) was $184,000 for the nine months ended  September 30, 2008.  This is a
result of timing  differences  between  GAAP  income  and  taxable  income.  The
deferred  income tax benefit was $1,471,449 for the nine months ended  September
30, 2007. The difference is mainly due to the decreased cost related to employee
stock  options,  from  which a large  portion  of the  deferred  tax  benefit is
generated.

Net Income.  Net income was  $527,138 for the nine months  ended  September  30,
2008, as compared to $3,382,981 for the nine months ended September 30, 2007.

<PAGE>

Financial Condition - September 30, 2008:

Liquidity and Capital Resources:

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

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

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

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

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

In March 2008, Ming Chok, Chief Executive  Officer,  purchased 776,000 shares of
the Company's common stock in a private placement at
$1.25 per share.
<PAGE>

Operating  Activities.  The Company  utilized cash of $2,326,376  from operating
activities  during the nine months  ended  September  30,  2008,  as compared to
utilizing  cash of $17,444,944  in operating  activities  during the nine months
ended September 30, 2007.

At September 30, 2008, the Company had cash and cash equivalents of $44,186,  as
compared to $1,848,249 at December 31, 2007.

The Company  had working  capital of  $14,350,587  at  September  30,  2008,  as
compared to working  capital of  $6,894,614  at December 31, 2007,  resulting in
current ratios of 1.35:1 and 1.16:1 at September 30, 2008 and December 31, 2007,
respectively.

Accounts receivable  increased to $43,309,525 at September 30, 2008, as compared
to $27,123,985 at December 31, 2007, an increase of  $16,185,540.  The Company's
provision for doubtful accounts was $933,040 as of September 30, 2008.

Inventories  decreased  to  $8,358,053  at September  30,  2008,  as compared to
$12,221,265 at December 31, 2007, a decrease of $3,683,213. Inventory in transit
was $668,168 at September 30, 2008.

Accounts payable  decreased to $10,770,431 at September 30, 2008, as compared to
$14,336,196 at December 31, 2007, a decrease of $3,565,765. During the year, the
Company was able to reach an agreement with a former supplier over unpaid debts.
To settle the debt, the Company issued 5,900,000 shares of its restricted common
stock to the supplier in return for the retirement of $6,004,028 of debt.

Accrued liabilities  decreased to $217,707 at September 30, 2008, as compared to
$789,526 at December 31, 2007, a decrease of $571,819.

Commercial  loans due to UCB increased to $25,495,237 at September 30, 2008 from
$27,824,490 at December 31, 2007. See footnote 6 for more information.

Due to Gateway Trade Finance was $2,049,064 at September 30, 2008.  During March
2008,  the  Company  received a large  order  from a customer  that could not be
financed by its current credit  facilities.  The Company  negotiated for Gateway
Trade Finance to guarantee  payment of the production run. This balance was paid
off during the second quarter, however the Company ran into the same issues with
credit lines,  and again turned to a non conventional  lender.  The Company does
not plan to utilize external financing like this for future purchases due to the
high cost, but may do so on a limited basis if the transaction warrants it.

<PAGE>
<TABLE>
<CAPTION>

Principal Commitments:

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

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

Operating Leases                        $  236,119   $   909,632   $1,047,916   $  122,322
Advances from Directors                        N/A           N/A          N/A          N/A
Notes Payable/ Short Term Loan          $  557,082           N/A          N/A          N/A
Purchase Commitments                    $  668,168           N/A

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

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

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

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

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

The  agreement  is for a minimum  period of 6.5 (six point five) years and calls
for the payment of MINIMUM  royalties  by SOYO to Honeywell  International  Inc.
totaling  $3,840,000  (Three Million,  Eight Hundred and Forty Thousand  Dollars
U.S.).  Sales  levels  in  excess  of  minimum  agreed  targets  will  result in
associated  increases in the royalty  payments due. Minimum royalty payments due
under the  agreement  are  $469,000 in 2008.  Although  the  Company  signed the
agreement in 2007 and no sales of Honeywell  branded products were made in 2007,
$353,000 in royalties  were paid to Honeywell  International  Inc. in 2007,  and
$330,000 has been paid so far in 2008.
</TABLE>

<PAGE>

Off-Balance Sheet Arrangements:

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

Commitments and Contingencies:

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

Recent Accounting Pronouncements:

In September 2006, the FASB issued SFAS No. 157, Fair Value  Measurements . SFAS
No.  157  provides   accounting  guidance  on  the  definition  of  fair  value,
establishes  a  framework  for  measuring  fair  value  and  requires   expanded
disclosures about fair value measurements. SFAS 157 is effective for the Company
starting  January  1, 2008 and the  Company  added a footnote  to the  financial
statements  regarding  the  investment  in 247MGI to  comply  with the  expanded
disclosure  requirements  of SFAS 157.  In February  2008,  the FASB issued FASB
Staff  Position  FAS 157-2,  Effective  Date of FASB  Statement  No. 157,  which
provides  a one year  delay of the  effective  date of FAS 157 as it  relates to
nonfinancial  assets  and  liabilities,  except  those  that are  recognized  or
disclosed at fair value in the  financial  statements  on a recurring  basis (at
least annually).  The provisions of SFAS 157 relating to nonfinancial assets and
liabilities  will be effective as of the beginning of the Company's  2009 fiscal
year.

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

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

In December, 2007, the FASB issued Statement No. 160, "Noncontrolling  Interests
in Consolidated Financial Statements-an amendment of ARB No. 51." This statement
establishes  accounting and reporting standards for the noncontrolling  interest
in a subsidiary and for the  deconsolidation of a subsidiary.  This statement is
effective   prospectively,   except   for   certain   retrospective   disclosure
requirements,  for fiscal years  beginning  after December 15, 2008. The Company
believes this will have no impact on its financial statements.

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

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

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

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

The Company's debt  obligations at September 30, 2008 were primarily  short-term
in nature.  As of September  30, 2008,  The Company does not have any  long-term
debt. However,  the Company does have $25,495,237 of debt at a variable interest
rate. As a result, the Company does have some financial risk from an increase in
interest  rates.  To the extent that the Company  arranges new  interest-bearing
borrowings in the future,  an increase in current  interest  rates would cause a
commensurate increase in the interest expense related to such borrowings.

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

4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure and Control Procedures

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

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

<PAGE>

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

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

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

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

Changes in Internal Control over Financial Reporting

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

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

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

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


ITEM 1A: RISK FACTORS

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

<PAGE>

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None


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

None

ITEM 5. OTHER INFORMATION

None

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

<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:      November 11, 2008                          By: /s/ Ming Tung Chok
                                                      -----------------------
                                                      Ming Tung Chok
                                                      President and Chief
                                                      Executive Officer



DATE:  November 11, 2008                              By: /s/ Nancy Chu
                                                      -----------------------
                                                      Nancy Chu
                                                      Chief Financial Officer



DATE:  November 11, 2008                              By /s/ Jay Schrankler
                                                      --------------------------
                                                      Name: Jay Schrankler

                                                      Title: Director

DATE:  November 11, 2008                              By /s/ Chung Chin Keung
                                                      --------------------------
                                                      Name: Chung Chin Keung
                                                      Title: Director

DATE:  November 11, 2008                              By /s/ Henry Song
                                                      --------------------------
                                                      Name: Henry Song
                                                      Title: Director
<PAGE>

                                INDEX TO EXHIBITS

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

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

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

10.8           SOYO Group Agreement with Tatung dated August 10, 2008

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


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

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

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

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