SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


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

                   For the fiscal quarter ended June 30, 2007


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

     For the transition period from _________________ to __________________

                        Commission File Number 333-42036


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

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


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

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

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

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


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


<PAGE>



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

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

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

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

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

         As of August 10, 2007 there were 49,039,156 shares Outstanding.

                    Documents Incorporated by Reference: None





<PAGE>


                                SOYO GROUP, INC.
                                    FORM 10-Q
                                      INDEX


                                     PART I
Item 1.   Financial Statements
          Condensed Consolidated Balance Sheets - June 30, 2007................5
                (Unaudited) and December 31, 2006
          Condensed Consolidated Statements of Operations (Unaudited) -........7
                Three Months and Six Months Ended June 30, 2007 and 2006
          Condensed Consolidated Statements of Cash Flows (Unaudited) - .......9
                Six Months Ended June 30, 2007 and 2006
          Notes to Condensed Consolidated Financial Statements (Unaudited)-...10
                Three Months and Six Months Ended June 30, 2007

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

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

                                                                   June 30        December 31
                                                                     2007             2006
                                                                 ------------    ------------
<S>                                                              <C>    <C>      <C>
                                                                 (Unaudited)       (Audited)
ASSETS
Current Assets
Cash and cash equivalents                                        $  1,084,886    $  1,501,040
Accounts receivable, net of allowance for doubtful accounts of
  $513,996 and $388,958at June 30, 2007 and December 31, 2006,
   Respectively                                                    21,927,668      16,467,135
Inventories                                                        11,061,681       7,792,621

Prepaid expenses                                                       29,661          36,633

Deferred income tax assets                                            903,837         177,177
Deposits                                                            5,037,389         243,095
                                                                 ------------    ------------
   Total current assets                                            40,045,122      26,217,701
                                                                 ------------    ------------


Property and equipment                                                729,854         711,015
Less: accumulated depreciation and amortization                      (205,000)       (159,300)
                                                                 ------------    ------------
                                                                                      551,715
                                                                                      524,854
                                                                 ------------    ------------
Total Assets                                                     $ 40,569,976    $ 26,769,416
                                                                 ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                 $ 15,832,366    $ 16,073,617

Accrued liabilities                                                   632,349         539,767
Business loan                                                      19,571,727       3,588,403

Short term loan                                                          --           100,000
                                                                 ------------    ------------
   Total current liabilities                                       36,036,442      20,301,787
                                                                 ------------    ------------


Long term payable                                                        --         3,735,198
                                                                 ------------    ------------
Total liabilities                                                  36,036,442      24,036,985
                                                                 ------------    ------------

EQUITY
Class B Preferred stock, $0.001 par value,
  authorized - 10,000,000 shares, Issued
   and outstanding - 2,797,738 shares in 2007 and 2006              2,045,897      1,918,974
Preferred stock backup withholding                                   (188,022)       (149,945)
Common stock, $0.001 par value.
   Authorized - 75,000,000 shares, issued and outstanding                --
   49,025,511 shares (48,681,511 shares - 2006)                        49,039          49,026
Additional paid-in capital                                         18,832,573      17,866,531
Accumulated deficit                                               (16,205,953)    (16,952,155)
                                                                 ------------    ------------
   Total shareholders' equity                                       4,533,534       2,732,431
                                                                 ------------    ------------
Total Liabilities and Shareholders' Equity                       $ 40,569,976    $ 26,769,416
                                                                 ============    ============
</TABLE>

                  See accompanying notes to unaudited condensed
                       consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>


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

                                                       Three months ended June 30
                                                      ----------------------------
                                                          2007           2006
                                                     ------------    ------------
<S>                                                  <C>             <C>

Net revenues                                         $ 24,202,395    $ 10,787,515
Cost of revenues                                       20,399,303       8,480,762
                                                     ------------    ------------
Gross margin                                            3,803,092       2,306,753
                                                     ------------    ------------
Costs and expenses:
  Sales and marketing                                   1,124,882         322,127
  General and administrative                            2,168,198       1,269,686
  Bad debts                                               125,063          53,184
  Depreciation and amortization                            22,409          26,574
                                                     ------------    ------------
   Total cost and expenses                              3,440,552       1,671,571
                                                     ------------    ------------
Income (loss) from operations                             362,540         635,182
                                                     ------------    ------------
Other income (expenses):
                                                                          635,182
  Interest income                                          17,409           3,360
  Interest expense                                       (322,166)        (78,082)
  Other income (expenses)                                 (16,876)            754
                                                     ------------    ------------
      Other income (expenses) - net                      (321,633)        (73,968)
                                                     ------------    ------------
Income before provision (benefit) for income taxes         40,907         561,214
Provision (benefit) for income taxes                         --              --
  Current income tax                                      129,775            --
  Deferred income tax                                    (439,802)           --
                                                     ------------    ------------
Net income                                                350,934         561,214
Less:  Dividends on Convertible Preferred Stock           (65,160)        (52,598)
                                                     ------------    ------------
Net income attributable to common shareholders       $    285,774    $    508,616
                                                     ============    ============

Net income per common share - basic and diluted       $0.01/$0.01     $0.01/$0.01

Weighted average number of shares of                  49,039,156/     48,987,511/
      common stock outstanding - basic and diluted    56,541,914      59,365,449

</TABLE>






                 See accompanying notes to unaudited condensed
                       consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>


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

                                                          Six months ended June 30
                                                        ----------------------------
                                                            2007             2006
                                                        ------------    ------------
<S>                                                     <C>             <C>

Net revenues                                            $ 38,893,505    $ 22,335,702
Cost of revenues                                          32,482,217      18,377,861
                                                        ------------    ------------
Gross margin                                               6,411,288       3,957,841
                                                        ------------    ------------
Costs and expenses:

  Sales and marketing                                      1,715,738         397,013
  General and administrative                               3,746,372       2,754,679
  Bad debts                                                  126,501         103,184
  Depreciation and amortization                               45,700          52,390
                                                        ------------    ------------
   Total cost and expenses                                 5,634,311       3,307,266
                                                        ------------    ------------
Income from operations                                       776,977         650,575
                                                        ------------    ------------
Other income (expenses):

  Interest income                                             48,794           6,607
  Interest expense                                          (381,881)       (150,469)
  Other income (expenses)                                   (104,566)          5,285
                                                        ------------    ------------
      Other income (expenses) - net                         (437,653)       (138,577)
                                                        ------------    ------------
Income before provision (benefit) for income taxes           339,324         511,998
Provision (benefit) for income taxes
  Current income tax                                         192,860            --
  Deferred income tax                                       (726,660)           --
                                                        ------------    ------------
Net income                                                   873,124         511,998
Less:  Dividends on Convertible Preferred Stock              126,923         102,454
                                                        ------------    ------------
Net income (loss) attributable to common shareholders   $    746,201    $    409,544
                                                        ============    ============


Net  per common share - basic and diluted                $0.02/$0.02     $0.01/$0.01
Weighted average number of shares of                      49,039,156/     48,987,511/
      common stock outstanding - basic and diluted        56,541,914      59,365,449

</TABLE>







                  See accompanying notes to unaudited condensed
                       consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


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

                                                                Six months ended June 30
                                                             ----------------------------
                                                                  2007            2006
                                                             ------------    ------------
<S>                                                          <C>             <C>

OPERATING ACTIVITIES
Net Income                                                  $    873,124    $    511,998
Adjustments to reconcile net income to net cash used
in operating activities:
     Depreciation and Amortization                                45,700          52,390

    Non cash payments for director's compensation                   --            24,570

     Non cash payments for public relations and promotion          6,825          82,770

       Stock based compensation                                  959,230         271,560

       Bad debts                                                 126,501         103,184

Payment of long-term debt                                     (3,735,198)           --

Changes in operating assets and liabilities:
(Increase) decrease in:
     Accounts receivable                                      (5,587,034)       (491,881)
     Inventories                                              (3,269,060)      4,102,930
     Prepaid expenses                                              6,972          20,984

     Deposits                                                 (4,794,294)        (90,769)

     Deferred income tax asset                                  (726,660)           --

Increase (Decrease) in:
       Accounts payable                                         (241,251)     (3,437,067)
       Accrued liabilities                                        92,582      (1,020,232)

                                                            ------------    ------------
Net cash provided by (used in) operating activities          (16,242,562)        130,437
                                                            ------------    ------------
INVESTING ACTIVITIES
     Purchase of property and equipment                           18,839)       (105,084)
                                                            ------------    ------------
Net cash used in investing activities                            (18,839)       (105,084)
                                                            ------------    ------------

FINANCING ACTIVITIES
     Advances from Officers, Directors, Shareholders                --           (65,000)
     Proceeds from business loan-net                          15,983,324            --
     Payment of backup withholding tax on
         accreted dividends on preferred stock                   (38,077)        (30,736)
     Payment of short-term loan                                 (100,000)           --

                                                            ------------    ------------
Net cash provided by (used in) financing activities           15,845,247         (95,736)
                                                            ------------    ------------
CASH AND CASH EQUIVALENTS
      Net Increase (Decrease)                                   (416,154)        (70,383)
      At beginning of Period                                   1,501,040         828,294
                                                            ------------    ------------
      At End of Period                                      $  1,084,886    $    757,911
                                                            ============    ============


<PAGE>


Supplemental disclosure of cash flow information
   Cash paid for interest                                  $     381,881
   Cash paid for income taxes                                       --

Non cash investing and financing activities

Accretion of discount on Class B preferred stock                 126,923         102,454
Director's Compensation                                             --            24,570
Stock Option Compensation                                        959,230         271,560




</TABLE>
























                  See accompanying notes to unaudited condensed
                       consolidated financial statements.


<PAGE>

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

                     Six Months Ended June 30, 2007 and 2006


1.   Organization and Basis of Presentation

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

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

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

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

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

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

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

Interim  Financial  Statements - The accompanying  interim  unaudited  condensed
consolidated  financial  statements  are  unaudited,   but  in  the  opinion  of

<PAGE>

management  of the  Company,  contain  all  adjustments,  which  include  normal
recurring  adjustments,  necessary to present  fairly the financial  position at
June 30, 2007, the results of operations for the three and six months ended June
30,  2007 and 2006,  and cash flows for the six months  ended June 30,  2007 and
2006.  The  condensed  consolidated  balance  sheet as of  December  31, 2006 is
derived from the Company's audited condensed consolidated financial statements.

Certain  information  and footnote  disclosures  normally  included in financial
statements  that have been prepared in  accordance  with  accounting  principles
generally  accepted in the United States have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission, although
management  of the Company  believes  that the  disclosures  contained  in these
condensed consolidated financial statements are adequate to make the information
presented  therein  not  misleading.  For  further  information,  refer  to  the
consolidated  financial  statements  and  the  notes  thereto  included  in  the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2006, as filed with the Securities and Exchange Commission.

The results of  operations  for the three and six months ended June 30, 2007 are
not  necessarily  indicative of the results of operations to be expected for the
full fiscal year ending  December  31, 2007.  The largest part of the  Company's
business,  the  importing  and  resale of  consumer  electronic  products,  is a
seasonal  business.  The busiest time of the year is the holiday  season,  which
occurs at the end of the year. Accordingly, sales for the year should improve as
the year passes, culminating in strongest sales in the fourth quarter.

Business - The Company sells  products under four  different  product lines:  1)
Computer Components and Peripherals;  2) Consumer Electronics; 3) Communications
Equipment and Services; and 4) Furniture.

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.

During the second  quarter of 2007,  the Company  discussed  with multiple third
parties the possibility of selling the VoIP division. The Company's intent is to
sell all of the  assets  of the  division.  As of the date of this  report,  the
Company is still  negotiating  the potential sale, and there is no guarantee the
sale will be completed in the near future.

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  Intellectual
Properties Inc. and Honeywell  International  Inc.,  effective  January 1, 2007,
under which SOYO will create and market certain  consumer  electronics  products
under the Honeywell Brand.  Negotiations were concluded between the parties, and
the final  agreement  was signed by authorized  Honeywell  Executives in January
2007. The agreement has been counter-signed by SOYO Group Inc.'s CEO on February
8 2007 and is now in effect.

The  agreement  is for a minimum  period of 6.5 (six point five) years and calls
for the payment of MINIMUM  royalties by SOYO to Honeywell  totaling  $3,840,000


<PAGE>

(Three Million,  Eight Hundred and Forty Thousand Dollars U.S.). Sales levels in
excess of minimum  agreed  targets  will result in  associated  increases in the
royalty  payments  due.  Minimum  royalty  payments due under the  agreement are
$353,000  through  December 31, 2007, and $469,000 through December 31, 2008. As
of June 30, 2007, the Company has paid $184,000 to Honeywell as minimum  royalty
payments..

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.

The  first  six  months  of  the   contract   were  spent   developing   product
specifications and marketing launch plans for the first products to be released.
The Company plans a 2007 release of a 1.8 inch 100GB portable storage drive with
data encryption.  Additionally,  there will be a 2007 release of a series of LCD
monitors,  beginning with a 22 inch wide model,  and featuring  height,  swivel,
tilt and 90 degree rotations,  with a built in web cam. The Company is currently
working on a larger screen television launch, which is currently projected for a
2008 release. Features of the larger screen TV are considered confidential,  and
will not be released to the public until the television is ready for launch.

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

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

As of June 30,  2007,  potentially  dilutive  securities  consisted of 3,246,517
shares of Class B Convertible Preferred Stock with a stated liquidation value of
$1.00 per share that are convertible into common stock at fair market value, but
not less than $0.25 per share. As of June 30, 2007,  5,902,758  shares of common
stock were issuable upon  conversion of the Class B Convertible  Preferred Stock
based on the $0.55 per share conversion price.

As of June 30,  2006,  9,377,938  shares  of common  stock  were  issuable  upon
conversion  of the Class B  Convertible  Preferred  Stock based on the $0.32 per
share conversion price.


<PAGE>


The Company  applies the treasury stock method to each  individual  compensation
grant. If a grant is  out-of-the-money  based on the stated exercise price,  the
effects of including any component of the assumed proceeds  associated with that
grant in the treasury stock method  calculation would be antidilutive.  A holder
would not be expected to exercise  out-of-the money awards. For the period ended
June 30, 2007,  out-of-the-money  awards are not included in the  computation of
diluted EPS. Since the 2005 options  granted are all out of the money,  the only
potentially  dilutive securities are the 3,246,517 shares of Class B Convertible
Preferred Stock, and the vested options granted in 2007. Based on the above, the
filly diluted shares can be calculated as follows:

         Shares outstanding at 6/30/2007
         Add: Conversion of Preferred Stock                49,039,156
                                                            5,902,758
         Add: Vested in the money options                   1,600,000
         Total fully diluted shares at 6/30/2007           56,541,914
                                                           ==========

Comprehensive Income (Loss) - The Company displays comprehensive income or loss,
its  components  and  accumulated   balances  in  its   consolidated   financial
statements.  Comprehensive  income or loss includes all changes in equity except
those  resulting from  investments by owners and  distributions  to owners.  The
Company did not have any items of  comprehensive  income  (loss)  during the six
months ended June 30, 2007 and 2006.

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

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

Stock-Based  Compensation  - Effective  January 1, 2006, the Company has adopted
Statement of Financial  Accounting  Standards No. 123 (R), "Share Based Payment"
("SFAS No.  123(R)").  Under SFAS 123(R),  stock-based  awards  granted prior to
January 1, 2006 will be charged to expense over the  remaining  portion of their
vesting period.  These awards will be charged to expense under the straight-line
method using the same fair value measurements which were used in calculating pro
forma stock-based  compensation  expense under SFAS 123. For stock-based  awards
granted  on or  after  January  1,  2006,  the  Company  determined  stock-based
compensation  based on the fair  value  method  specified  in SFAS  123(R),  and
amortized  stock-based  compensation expense on the straight-line basis over the
requisite service period.

SFAS  123(R)  requires  forfeitures  to be  estimated  at the time of grant  and
revised,  if necessary,  in subsequent periods if actual forfeitures differ from
initial  estimates.  Previously under APB 25 to the extent awards were forfeited
prior to vesting, the corresponding  previously  recognized expense was reversed
in the period of  forfeiture.  For further  information,  refer to note 5, Stock
Based Compensation.


<PAGE>


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.

2.   Short Term Loan

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

3.   Business Loan

During the 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  from $12 million to $14  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.  For  reporting  purposes,  the loan has been  segregated  from other
payables and reported as a separate line item.  As of June 30, 2007,  the amount
SOYO owed to UCB was $13,595,447.

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. As of the June 30, 2007, the amount SOYO owed to UCB was $5,976,280.

4.   Equity-Based Transactions

Effective  December 30,  2003,  SOYO Taiwan  entered  into an agreement  with an
unrelated  third party to sell the $12,000,000  long-term  payable due it by the
Company. As part of the agreement, SOYO Taiwan required that the purchaser would


<PAGE>

be limited to  collecting a maximum of $1,630,000  of the  $12,000,000  from the
Company  without the prior  consent of SOYO Taiwan.  In  substance,  SOYO Taiwan
forgave debt in an amount equal to the difference  between the  $12,000,000  and
the  value of the  preferred  stock  issued in  settlement  of this  debt.  This
forgiveness of debt was treated as a capital transaction. Payment from the third
party was received by SOYO Taiwan in February and March 2004.  An agreement  was
reached during the three months ended March 31, 2004 whereby 2,500,000 shares of
Class B preferred  stock would be issued by the Company to the  unrelated  third
party in exchange for the long-term payable.

The Class B preferred  stock has a stated  liquidation  value of $1.00 per share
and a 6% dividend, payable quarterly in arrears, in the form of cash, additional
shares of preferred  stock, or common stock,  at the option of the Company.  The
Class B preferred  stock has no voting  rights.  The shares of Class B preferred
stock are  convertible,  in increments of 100,000 shares,  into shares of common
stock based on the $1.00 stated  value,  at any time through  December 31, 2008,
based on the fair  market  value of the common  stock,  subject,  however,  to a
minimum  conversion  price of $0.25 per share.  No more than  500,000  shares of
Class B preferred  stock may be converted  into common stock in any one year. On
December  31,  2008,  any   unconverted   shares  of  Class  B  preferred  stock
automatically convert into shares of common stock based on the fair market value
of the common stock,  subject,  however,  to a minimum conversion price of $0.25
per share. Beginning one year after issuance,  upon ten days written notice, the
Company or its designee will have the right to  repurchase  for cash any portion
or all of the  outstanding  shares  of  Class B  preferred  stock  at 80% of the
liquidation  value ($0.80 per share).  During such notice period,  the holder of
the preferred stock will have the continuing right to convert any such preferred
shares   pursuant  to  which  written  notice  has  been  received  into  common
stockwithout  regard to the conversion  limitation.  The Class B preferred stock
has unlimited piggy-back registration rights, and is non-transferable.

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

5.   Stock-Based Compensation

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

On July 22, 2005, the Company issued  2,889,000  option grants to employees at a
strike price of $0.75. One third of those options will vest and be available for


<PAGE>

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

On February 2, 2007, the Company issued  4,805,000 option grants to employees at
a strike price of $0.35. One third of those options were immediately  vested and
available  for purchase on February 2, 2007,  one third will vest on February 2,
2008,  and one third on  February  2, 2009.  The grants will expire if unused on
February 2, 2012.

As of June 30, 2007, 10 employees who had been granted stock options in 2005 had
left the Company,  and grants  totaling  462,000  options  were  returned to the
Company. One employee who was granted stock options in 2007 had left the Company
as of the date of this report, and 10,000 options were returned to the Company.

For the six months ended June 2007 and 2006, the Company  recorded  $826,134 and
$271,560,  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.here  was no such  expense  recorded
during our fiscal year 2005.

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 weighted  average fair value of the options  granted in July 2007 was
approximately $1.3 million.

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 4.820%, expected life of five (5) years and expected volatility
129%.  The weighted  average fair value of the options  granted in February 2007
was approximately $1.4 million.

6.   Income Taxes

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

As a result,  the Company  recognized  income tax expense of $129,775 during the
quarter,  and  $192,860  during  the six  month  period  ended  June  30,  2007.
Additionally,  the Company  recognized  a gain  related to  deferred  income tax
assets of $439,802  during the quarter and $726,660  during the six month period
ended June 30, 2007,  resulting from timing  differences  between taxable income
and US GAAP.

7.   Significant Concentrations

a.   Customers

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


<PAGE>
<TABLE>
<CAPTION>



                               Three Months Ended June 30,                    Six Months Ended June 30,
                                2007              2006                        2007              2006
                                ----              ----                        ----              ----
<S>                          <C>               <C>                        <C>               <C>

Revenues:
     Distributors           $14,253,365        $9,273,290                 $26,136,700       $16,848,648
     Retailers                7,826,878           963,656                   8,768,291         4,546,697
     Others                   2,122,152           550,569                   3,988,514           940,357
Total                       $24,202,395       $10,787,515                 $38,893,505       $22,335,702

</TABLE>
<TABLE>
<CAPTION>


During the three months ended June 30, 2007 and 2006, the Company  offered price
protection to certain customers under specific programs aggregating  $434,475and
$25,078,  respectively,  which  reduced net  revenues  and  accounts  receivable
accordingly.

During the six months ended June 30, 2007 and 2006,  the Company  offered  price
protection to certain customers under specific programs aggregating $526,831 and
$25,078,  respectively,  which  reduced net  revenues  and  accounts  receivable
accordingly.

During the three and six months ended June 30, 2007, the Company had no customer
that accounted for more than 10% of net revenues.

b.   Geographic Segments

Financial information by geographic segments is summarized as follows:

                                Three Months Ended June 30,                  Six Months Ended June 30,
                                 2007             2006                         2007            2006
                                 ----             ----                         ----            ----
<S>                         <C>               <C>                         <C>               <C>

Revenues:
  United States             $15,802,272       $ 8,019,132                 $28,723,443       $17,323,011
  Canada                      3,750,830           790,316                   3,715,965         1,511,007
  Central and South           4,635,606         1,975,627                   5,199,902         3,364,911
America
  Other                          13,687             2,440                   1,254,195           136,773
Total                       $24,202,395       $10,787,515                 $38,893,505       $22,335,702




c. Product lines


                                     Three Months Ended June 30,             Six Months Ended June 30,
                                      2007                2006                 2007              2006
Revenues:
  Computer Products                  $12,091,899     $   496,166          $23,775,318       $   747,737
  Consumer Electronics                12,074,241      10,237,351           15,055,439        21,442,272
  VoIP                                    17,773          53,998               44,266           145,693
  Furniture                               18,482             N/A               18,482               N/A
Total                                $24,202,395     $10,787,515          $38,893,505       $22,335,702

</TABLE>

<PAGE>

d.   Suppliers

During 2006, 44% of the products  distributed by the SOYO Group were supplied by
a  third  party  vendor..  SOYO  Group,  Inc.  is  currently   establishing  new
partnerships  with other OEM manufacturers in the North America and Asia Pacific
Regions in order to provide innovative products for consumers.

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

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

This Quarterly  Report on Form 10-Q for the quarterly period ended September 30,
2006 contains "forward-looking  statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended,  including  statements  that include the
words  "believes",  "expects",  "anticipates",  or  similar  expressions.  These
forward-looking   statements  include,   but  are  not  limited  to,  statements
concerning   the   Company's   expectations   regarding   its  working   capital
requirements,  financing requirements,  business prospects, and other statements
of expectations,  beliefs,  future plans and strategies,  anticipated  events or
trends,  and similar  expressions  concerning  matters  that are not  historical
facts. The forward-looking  statements in this Quarterly Report on Form 10-Q for
the  quarterly  period  ended March 31, 2007  involve  known and unknown  risks,
uncertainties and other factors that could cause the actual results, performance
or achievements  of the Company to differ  materially from those expressed in or
implied by the forward-looking statements contained herein.

Background and Overview:

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

Effective  October  24,  2002,  Vermont  Witch  Hazel  Company,  Inc.,  a Nevada
corporation ("VWHC"), acquired SOYO, Inc., a Nevada corporation ("SOYO Nevada"),
from SOYO Computer,  Inc., a Taiwan corporation ("SOYO Taiwan),  in exchange for
the issuance of 1,000,000  shares of convertible  preferred stock and 28,182,750
shares of common stock, and changed its name to SOYO Group, Inc.  ("SOYO").  The
1,000,000  shares  of  preferred  stock  were  issued  to  SOYO  Taiwan  and the
28,182,750  shares of common stock were issued to certain members of SOYO Nevada
management.  During  October  2002,  certain  members of the  management of SOYO
Nevada also separately  purchased  6,026,798 shares of the 11,817,250  shares of
common stock of VWHC outstanding prior to VWHC's acquisition of SOYO Nevada, for
$300,000  in  personal  funds.  The  6,026,798  shares  represented  51%  of the
outstanding  shares of VWHC  common  stock.  Accordingly,  SOYO  Taiwan and SOYO
Nevada management  currently own 34,209,548 shares of the Company's common stock
outstanding.

Subsequent to this  transaction,  SOYO Taiwan  maintained an equity  interest in
SOYO, continued to be the primary supplier of inventory to SOYO, and was a major
creditor. In addition,  there was no change in the management of SOYO and no new
capital invested, and there was a continuing family relationship between certain
members of the  management of SOYO and SOYO Taiwan.  As a result,  for financial


<PAGE>

reporting purposes,  this transaction was accounted for as a recapitalization of
SOYO Nevada,  pursuant to which the  accounting  basis of SOYO Nevada  continued
unchanged subsequent to the transaction date.  Accordingly,  the pre-transaction
financial  statements of SOYO Nevada are now the historical financial statements
of the Company.

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

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

Financial Outlook:

For the six months ended June 30, 2007,  the Company earned  $873,124,  or $0.02
per share before  dividends  on preferred  stock and $511.998 for the six months
ended June 30, 2006 or $0.01 per share before  dividends on preferred stock, The
large  increases in sales of LCD  televisions  and LCD monitors  were  primarily
responsible for the large increase in net revenues.

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

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

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

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

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


<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.  The  Company  records  estimated  reductions  to
revenues for incentive offerings and promotions. Depending on market conditions,
the Company may  implement  actions to increase  customer  incentive  offerings,
which  may  result  in an  incremental  reduction  of  revenue  at the  time the
incentive is offered.  The Company records the  corresponding  effect in cost or
expense at the time it has a firm agreement with a vendor.

Accounts Receivable:

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

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


<PAGE>


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.

Inventories:

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

Income Taxes:

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

Results of Operations:

Three Months Ended June 30, 2007 and 2006:

Net Revenues.  Net revenues  increased by $13,414,880 or 124%, to $24,202,395 in
the three months ended June 30, 2007, as compared to  $10,787,515  in 2006.  The
increase in revenues can be attributed mainly to sales of LCD televisions in the
United States, and LCD computer monitors in South America.  Gross sales in South
America more than doubled  during the period from $2.0 million to $4.6  million.
Our sales of LCD  televisions  grew  exponentially  from the  period a year ago,
helped by the sales of the Prive  brand to Wal Mart  Canada,  and the opening of
new retail and reseller accounts throughout the United States.


<PAGE>


Gross  Margin.  Gross  margin was  $3,803,092  or 15.7% in 2007,  as compared to
$2,306,753  or 21.4% in 2006.  As noted in the 10-Q report for the period  ended
June 30, 2006, the Company  expects to maintain  around a 16% gross margin based
on the current product mix. The gross margin for the three months ended June 30,
2006 was abnormally high due to a few deals completed with high gross margins as
new products were introduced.  The gross margin was also negatively  impacted by
$434,475 of price protection granted to customers during the quarter.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$802,755 to $1,124,882 in 2007, as compared to $322,127 in 2006. The increase is
due to higher  commissions to outside sales  representatives.  The Company began
using  outside  sales  representatives  to open new markets in 2006,  and as the
sales have grown,  the commissions  have grown.  The Company  believes this is a
cost  effective way to obtain shelf space at various  retailers,  so the outside
commissions  are likely to continue to grow  larger.  Additionally,  the Company
launched the Prive  television  line for Wal Mart Canada  during the period,  as
well as the Levello  furniture line. Prive products began shipping in April, and
the Levello  products in June.  The start up costs of both lines are included in
the sales and marketing  expenses.  Finally,  a large component of the sales and
marketing  expenses is the initial cost of creating and  launching the Honeywell
consumer  electronics  products.  As the  Company  begins to sell the  Honeywell
products  in the third and fourth  quarters,  it expects to see a return on that
investment.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $898,512 to  $2,168,198 in 2007, as compared to $1,269,686 in 2006.
The  increase is due almost  entirely to increased  labor  costs.  As sales have
almost tripled in the last two years,  the Company has added staff in the sales,
finance  and  operations  areas.  The staff has been  needed to keep up with the
increased business volume.  Approximately $500,000 of the increase is due to the
expense recognized for the employee stock option program. Those expenses are non
cash expenses,  which do not effect the Company's ability to grow top line sales
and profits.

Bad debts. The Company recorded a provision for doubtful accounts of $125,063 in
the three  months  ended June 30,  2007.  The Company  recorded a provision  for
doubtful accounts of $53,184 for the three months ended June 30, 2006.  Increase
of $71,879 is due to increase in receivable  balance.  As of June 30, 2007,  the
Company believes its provision for doubtful accounts is adequate.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $22,409 for the three months ended June 30, 2007,  as compared to
$26,574 in 2006. Depreciation expense is lower than a year ago since the Company
is no longer  depreciating  certain  assets  in China  that are part of the VoIP
business.  The assets were  written down to fair value in 2006 and are no longer
being depreciated.

Income from  Operations.  The income from  operations was $362,540 for the three
months ended June 30,  2007,  as compared to $635,182 for the three months ended
June 30,  2006.  This is a result  of the  increased  expenses  described  above
offsetting  the higher gross margin,  and the cost of the employee stock options
being absorbed into the calculation.

Miscellaneous  Income.  Miscellaneous income was a loss of $16,876 for the three
months  ended June 30, 2007.  Miscellaneous  income was $754 in the three months
ended June 30, 2006.  The loss was mainly due to expenses  related to setting up
our Canadian  business for the Prive sales that began during the quarter.  We do
not expect the expenses to be recurring.


<PAGE>


Interest Income. Interest income was $17,409 for the three months ended June 30,
2007, as compared to $3,360 for the three months ended June 30, 2006.

Interest Expense.  Interest expense was $322,166 for the three months ended June
30, 2007. Interest expense was $78,082 for the three months ended June 30, 2006.
The increase was due to a single  factor.  The Company now has access to a large
asset based credit line to finance  inventory  purchases and future growth.  The
large sales increases,  market penetration,  and improved  performance would not
have happened without the asset based line and subsequent interest expense.

Provision for Income Taxes. The Company  recognized a provision for income taxes
of $129,775 for the three months ended June 30, 2007.  There was no provision in
2006.  The provision is now necessary as net operating  loss carry forwards will
no longer offset all of the Company's tax liabilities.

Deferred Income Tax Gain (Expense): The deferred income tax gain (expense) was a
gain of $439,802 for the three  months ended June 30, 2007.  This is a result of
timing  differences  between  GAAP  income  and  taxable  income,  and is mainly
attributable to the required  accounting  treatment of the stock options granted
to employees.  There was no deferred income tax gain or loss in the three months
ended June 30, 2006.

Net Income. Net income was $350,934 for the three months ended June 30, 2007, as
compared to $561,214 for the three months ended June 30, 2006. Increases in
sales and marketing expenses, as well as increased labor costs offset the higher
gross margin earned in the period.

Six Months ended June 30, 2007 and 2006:

Net Revenues.  Net revenues  increased by  $16,557,803 or 74%, to $38,893,505 in
the six months  ended June 30, 2007,  as compared to  $22,335,702  in 2006.  The
increase in revenues  was mainly due to new  markets  being  opened by the sales
department  for LCD  television  sales,  as well as  increased  sales  in  Latin
America.  New customers during the period included American TV (15 stores in the
Midwest  U.S.),  6th Avenue  Electronics,  featured  spots  during the period on
ShopNBC,  as well as sales of the Prive line to Wal Mart Canada, and the initial
shipment of LCD computer monitors to OfficeMax.

Gross  Margin.  Gross  margin was  $6,411,288  or 16.5% in 2007,  as compared to
$3,957,841 or 17.7% in 2006.  Gross margins  increased both on a numerical and a
percentage  basis as the Company  increased sales in higher margin areas such as
South  America and of higher  margin  products such as LCD monitors and wireless
Bluetooth devices.  Gross margins were negatively  impacted by $526,831 of price
protection granted to customers during the period.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$1,318,725 to $1,715,738 in 2007, as compared to $397,013 in 2006.  The increase
is due to a number of factors.  The first  component  is higher  commissions  to
outside   sales   representatives.   The  Company   began  using  outside  sales
representatives  to open new markets in 2006,  and as the sales have grown,  the
commissions  have grown.  The Company  believes this is a cost  effective way to
obtain shelf space at various retailers,  so the outside  commissions are likely
to continue to grow larger as sales continue to grow. Additionally,  the Company
launched the Prive  television  line for Wal Mart Canada  during the period,  as
well as the  Levello  furniture  line.  The  start up costs  of both  lines  are
included in the sales and marketing expenses.  Finally, a large component of the
sales and  marketing  expenses is the initial cost of creating and launching the


<PAGE>

Honeywell  consumer  electronics  products.  As the  Company  begins to sell the
Honeywell products in the third and fourth quarters,  it expects to see a return
on that investment.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $991,693 to  $3,746,372 in 2007, as compared to $2,754,679 in 2006.
The  increase is due almost  entirely to increased  labor  costs.  As sales have
almost tripled in the last two years,  the Company has added staff in the sales,
finance  and  operations  areas.  The staff has been  needed to keep up with the
increased business volume.  Approximately $500,000 of the increase can be traced
directly to the stock options issued to employees.

Bad debts. The Company recorded a provision for doubtful accounts of $126,501 in
the six months  ended June 30,  2007.  The  Company  recorded  a  provision  for
doubtful accounts of $103,184 for the six months ended June 30, 2006. As of June
30, 2007, the Company believes its provision for doubtful accounts is adequate.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $45,700 for the six months  ended June 30,  2007,  as compared to
$52,390 in 2006. Depreciation expense is lower than a year ago since the Company
is no longer  depreciating  certain  assets  in China  that are part of the VoIP
business.  The assets were  written down to fair value in 2006 and are no longer
being depreciated.


Income from  Operations.  The income from  operations  was  $776,977 for the six
months  ended June 30,  2007,  as compared to $650,575  for the six months ended
June 30, 2006.  This is a result of the increased  sales and gross margins being
offset by the higher sales and marketing  expenses  described  above, as well as
increased  labor costs  including an  approximately  $500,000 charge for issuing
employee stock options.

Miscellaneous  Income.  Miscellaneous  income was a loss of $104,566 for the six
months ended June 30, 2007.  Miscellaneous income was $4,531 in the three months
ended June 30,  2006.  The  majority of the loss was due to a large order of LCD
televisions  that was  processed  incorrectly  by the factory.  The TV's did not
contain  the  proper  tuners,  and as  such,  could  not  be  sold  through  the
traditional  retail channel.  The products were sold at a substantial loss, most
of which was absorbed by the factory. Since the Company was partly at fault, the
Company took a percentage of the loss  (approximately  $80,000 ) and  segregated
that loss for financial  reporting  purposes.  The Company then  implemented  an
entirely  new sign off  procedure  for such  transactions  to make  sure  that a
similar error could not be repeated.

Interest  Income.  Interest income was $48,794 for the six months ended June 30,
2007, as compared to $6,607 for the six months ended June 30, 2006. The increase
is due to the  Company  having  more  cash on  hand  due to  improved  financial
performance over the last year.

Interest  Expense.  Interest  expense was $381,881 for the six months ended June
30, 2007.  Interest expense was $150,469 for the six months ended June 30, 2006.
The  increase  was due to a single  factor.  The Company was  operating  under a
factoring  agreement in 2006, but has since obtained an asset based credit line.
Borrowings are way up, which has led to increased inventory turnover,  sales and
receivables.  The 74%  increase  in net  revenues  would not have been  possible
without the credit line, and therefore the interest expense.


<PAGE>


Provision for Income Taxes. The Company  recognized a provision for income taxes
of  $192,860 in 2007.  There was no  provision  in 2006.  The  provision  is now
necessary as net operating  loss carry forwards will no longer offset all of the
Company's tax liabilities.

Deferred Income Tax Gain (Expense): The deferred income tax gain (expense) was a
gain of $726,660  for the six months  ended June 30,  2007.  This is a result of
timing differences between GAAP income and taxable income. There was no deferred
income tax gain or loss in the three months ended June 30, 2006.

Net Income.  Net income was $873,124 for the six months ended June 30, 2007,  as
compared to $511,998 for the three months ended June 30, 2006.

Financial Condition - June 30, 2007:

Liquidity and Capital Resources:

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

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

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

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

In April 2007, by mutual agreement of the parties,  the maximum loan balance was
increased from $12 million to $14 million.

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.


<PAGE>


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

Operating  Activities.  The Company  utilized cash of $16,242,562 from operating
activities  during the six months ended June 30, 2007, as compared to generating
cash of $130,437 from operating  activities during the six months ended June 30,
2006.  The  Company's  need for cash  continues  to grow as revenues  grow.  The
Company's total assets have grown from under  $27,000,000 to over $40,000,000 in
the last six  months.  That is all due to  increased  sales,  leading  to higher
receivables and the need for higher inventory levels.  Refundable  deposits have
also grown to over $5 million as of June 30, 2007.

At June 30, 2007,  the Company had cash and cash  equivalents  of  $1,084,886 as
compared to $1,501,040 at December 31, 2006.

The Company had working  capital of  $4,008,680 at June 30, 2007, as compared to
working capital of $5,915,914 at December 31, 2006,  resulting in current ratios
of 1.11:1 and 1.30:1 at June 30, 2007 and December 31,  2006,  respectively.  At
year end,  the  Company  had  classified  almost $4 million of debt as long term
debt.  That debt has now been  reclassified  as current debt, and is now part of
the calculation of working capital.

Accounts  receivable  increased to  $21,927,668 at June 30, 2007, as compared to
$16,467,135  at December  31, 2006,  an increase of  $5,460,533.  The  Company's
allowance  for  doubtful  accounts  stood at  $513,996  as of June 30,  2007 and
$388,958 at December 31, 2006.

Inventories increased to $11,061,681 at June 30, 2007, as compared to $7,792,621
at  December  31,  2006,  an increase of  $3,269,060.  Inventory  in transit was
$3,958,385 at June 30, 2007, down slightly from $4,005,265 at December 31, 2006.

Accounts  payable  decreased to  $15,832,366  at June 30,  2007,  as compared to
$16,073,617  at December  31,  2006.  The  decrease is  meaningless,  as we have
reclassified  liabilities  on the balance  sheet.  When taken with other current
liabilities, current liabilities have increased from $16,713,384 to $36,036,442,
which offsets the large increase to receivables, inventories and deposits.

Accrued  liabilities  increased  to  $632,349 at June 30,  2007,  as compared to
$539,767 at December 31, 2006, an increase of $92,582.




<PAGE>
<TABLE>
<CAPTION>

Principal Commitments:

A summary of the Company's contractual cash obligations as of June 30, 2007, is
as follows:
                                                 Less than 1
                                                    year          1-3 years       4-5 years     Over 5 years
                                               ---------------- --------------- --------------- -------------
<S>                                            <C>              <C>             <C>             <C>

Contractual Cash Obligations
    Operating Leases                                  $212,692       $  88,622            $  -          $  -
    Royalties Payable                                  424,000       1,178,000       1,606,000       448,000
    Purchase Commitments                             3,958,385
                                               ---------------- --------------- --------------- -------------
Total                                               $4,595,077      $1,266,622      $1,606,000     $ 448,000
                                               ================ =============== =============== =============

</TABLE>

At June 30,  2007,  the Company did not have any long term  purchase  commitment
contracts to honor.  The only purchase  commitments  were for inventory  already
purchased and in transit of $3,958,385.

At June 30, 2007 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  Intellectual  Properties Inc. and Honeywell
International  Inc.,  ffective January 1, 2007, under which SOYO will supply and
market certain consumer electronics products under the Honeywell Brand.

The  agreement  is for a minimum  period of 6.5 (six point five) years and calls
for the payment of MINIMUM  royalties by SOYO to Honeywell  totaling  $3,840,000
(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
$353,000 through December 31, 2007, and $469,000 in 2008.


Off-Balance Sheet Arrangements:

At June 30,  2007,  the Company did not have any  transactions,  obligations  or
relationships that could be considered off-balance sheet arrangements.

Commitments and Contingencies:

At June 30, 2007, the Company did not have any material  commitments for capital
expenditures.

Recent Accounting Pronouncements:


<PAGE>


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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company  does not have any  market  risk with  respect  to such  factors as
commodity  prices,  equity  prices,  and other market changes that affect market
risk sensitive investments.

As the Company's debt  obligations at June 30, 2007 are primarily  short-term in
nature and  non-interest  bearing,  the  Company  does not have any risk from an
increase in interest rates. However, to the extent that the Company arranges new
interest-bearing borrowings in the future, an increase in current interest rates
would cause a  commensurate  increase in the  interest  expense  related to such
borrowings.

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

4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure and Control Procedures

Based on a current  evaluation under the supervision and with the  participation
of the Company's  management,  the  Company's  principal  executive  officer and
principal  financial  officer  have  concluded  that  the  Company's  disclosure
controls and  procedures as defined in rules  13a-15(e) and 15d-15(e)  under the
Securities Exchange Act of 1934, as amended (Exchange Act) were not effective as
of June 30, 2007 and did not ensure that information required to be disclosed by
the  Company  in  reports  that it files or submits  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in the Securities and Exchange  Commission  rules and forms and (ii) accumulated
and communicated to the Company's management,  including its principal executive
officer  and  principal  financial  officer,  as  appropriate  to  allow  timely
decisions regarding required  disclosure.  Based on that evaluation,  that as of
such date, the Company's  disclosure controls and procedures were not effective.
In addition,  the Company's  automated  financial  reporting  systems are overly
complex, poorly integrated and inconsistently implemented.


<PAGE>


The Company's  Chief Executive  Officer and Chief  Financial  Officer arrived at
this  conclusion  based on a number  of  factors,  including  the fact  that the
Company's system of internal control requires  considerable  manual intervention
to do the  following:  (1) to properly  record  accounts  payable to vendors for
purchases of inventory,  (2) to properly record adjustments to inventory per the
general ledger to physical inventory balances,  (3) to properly record inventory
adjustments to the lower of cost or market using the average  inventory  method,
(4)to have effective controls over interim physical inventory procedures, and 5)
to  generate  timely  and  accurate  financial  information  to  allow  for  the
preparation  of timely and complete  financial  statements.  The Company did not
have an effective  financial  reporting  process  because of the  aforementioned
material  weaknesses.  Accordingly,  the Company's Chief  Executive  Officer and
Chief  Financial  Officer  concluded that there were  significant  deficiencies,
including  material  weaknesses,  in the  Company's  internal  controls over its
financial reporting at the end of the period ended June 30, 2007.

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

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

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

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

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

As of June 30, 2007, the Chief Executive Officer and the Chief Financial Officer
are satisfied that with the personnel in place, and with the additional  efforts
of the  Financial  Consultant/  CPA,  that  the  books  and  records  portray  a
completely  accurate  picture of the Company's  financial  position and that all
transactions  are being captured and reported as required.  The Company believes
that  once the new  software  is  installed  and  operational,  all  significant
deficiencies will have been addressed and corrected.

                           PART II. OTHER INFORMATION


<PAGE>

ITEM 1. LEGAL PROCEEDINGS


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

     On January 12, 2007, the Court ordered that summary adjudication be granted
in favor of Soyo on two of the four claims in Soyo's Complaint  against XtraPlus
(Soyo  voluntarily  dismissed  the other two claims),  and that Soyo recover the
remaining balance due on its claim. The Court also ordered that summary judgment
be granted in favor of Soyo and against  XtraPlus  on all of the claims  against
Soyo that were contained in the XtraPlus  Cross-Complaint.  The formal  judgment
has been entered and satisfied, and the period for an appeal has expired. Hence,
this action has been formally concluded.

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

     The parties have reached a settlement of the action and a formal settlement
agreement has been  executed  which,  among other things,  requires a payment by
Soyo of  $175,000.  The  Court in which  the  action  is  pending  has given its
preliminary  approval to the settlement,  and Soyo is required to give notice to
the class of the proposed settlement. After notice has been given and the period
within which class members have to object to the settlement expires,  there will
be a Final Hearing  where the Court will be asked to give Final  Approval to the
Settlement.

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


<PAGE>


     The dispute was  mediated,  and an agreement in principle to resolve it was
reached on December 21, 2006. The formal settlement  agreement is being prepared
and has not yet been executed by any of the parties. We cannot predict whether a
formal agreement will be executed, or the outcome of this action if it is not.

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

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

On February 15, 2006, the Company received notice of an investigation by counsel
for the Federal Trade  Commission  (the "FTC")  regarding the Company's  alleged
failures  to timely pay  rebates to  purchasers  of Soyo  products.  The Company
cooperated  with the  investigation  and  agreed  to the  terms of an  agreement
containing a consent order (the "Consent Order") to be filed by the FTC relating
to the Company's  administration of rebate claims.  The FTC approved the Consent
Order and served it on the Company on June 18, 2007.

On January 26, 2007, the Company filed a lawsuit against Astar  Electronics USA,
Inc., KXD  Technology,  Inc. and Does 1 - 25 in the Superior Court of California
for the County of Los Angeles, Central District (Case No. BC365349). The Company
alleges claims for breach of contract,  fraud,  and tortious  interference  with
economic  relations  and seeks  compensatory  and punitive  damages.  Both named
defendants were served on January 26, 2007. 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.   On  or  about  June  22,  2007,  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,  tortious interference with
economic relations and common counts. The Company is vigorously  prosecuting its
claims  against  defendants  and defending  itself in the action.  Discovery has
commenced, but no trial date has been set.

On March 22, 2007,  Semiconductor  Energy  Laboratory  Co.,  Ltd.  instituted an
action against several  defendants,  including the Company, in the United States
District  Court for the Northern  District of California  (Case No. C071667 MHP)
alleging  patent  infringement  with respect to certain  products the Company is
alleged to have imported and sold in the United  States.  No trial date has been
set.  Pursuant to order of the Court,  the Company's  deadline to respond to the


<PAGE>

Complaint  is currently on July 12,  2007.  On July 5, 2007,  Plaintiff  filed a
dismissal without prejudice as to the Company.

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

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

ITEM 1A: RISK FACTORS

In  addition  to the other  information  set forth in this  report,  you  should
carefully  consider the factors  discussed in Part I, "Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2006, which could
materially affect our business, financial condition or future results. The risks
described  in our Annual  Report on Form 10-K are not the only risks  facing our
Company. Additional risks and uncertainties not currently known to us or that we
currently  deem to be  immaterial  also  may  materially  adversely  affect  our
business, financial condition and/or operating results.


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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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:  August 13, 2007                             By: /s/ Ming Tung Chok
                                                      -----------------------
                                                      Ming Tung Chok
                                                      President and Chief
                                                      Executive Officer



DATE:  August 13, 2007                              By: /s/ Nancy Chu
                                                      -----------------------
                                                      Nancy Chu
                                                      Chief Financial Officer



DATE:  August 13, 2007                             By /s/ Paul F. Risberg
                                                      --------------------------
                                                      Name: Paul F. Risberg
                                                      Title: Director

DATE:  August 13, 2007                        By /s/ Chung Chin Keung
                                                      --------------------------
                                                      Name: Chung Chin Keung
                                                      Title: Director

DATE:  August 13, 2007                            By /s/ Zhi Yang Wu
                                                      --------------------------
                                                      Name: Zhi Yang Wu
                                                      Title: Director



<PAGE>


                                INDEX TO EXHIBITS



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

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