SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


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

                 For the fiscal quarter ended September 30, 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 September 30, 2007 there were 49,039,286 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 - September 30, 2007
                   (Unaudited) and December 31, 2006 ......................    4
             Condensed Consolidated Statements of Operations
                   (Unaudited) - Three Months and Nine Months Ended
                   September 30, 2007 and 2006.............................    6
             Condensed Consolidated Statements of Cash Flows
                   (Unaudited) - Nine Months Ended September 30,
                   2007 and 2006...........................................    8
             Notes to Condensed Consolidated Financial Statements
                   (Unaudited)- Three Months and Nine Months
                   Ended September 30, 2007................................   10

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

Item 3.      Quantitative and Qualitative Disclosures about Market Risk....   28
Item 4.      Controls and Procedures.......................................   30

                                               PART II

Item 1.      Legal Proceedings.............................................   31
Item 1A      Risk Factors..................................................   33
Item 2.      Changes in Securities, Use of Proceeds and Issuer Purchases
                 of Equity Securities......................................   33
Item 3.      Defaults Upon Senior Securities...............................   33
Item 4.      Submission of Matters to a Vote of Security Holders...........   33
Item 5.      Other Information.............................................   33
Item 6.      Exhibits and Reports on Form 8-K..............................   33

Signatures.................................................................   33




<PAGE>
<TABLE>
<CAPTION>
                         SOYO Group, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheets

                                                                        September 30     December 31
                                                                            2007            2006
                                                                        ------------    ------------
<S>                                                                     <C>             <C>

                                                                        (Unaudited)      (Audited)
ASSETS
Current Assets
Cash and cash equivalents                                               $ 2 ,635,546    $  1,501,040
Accounts receivable, net of allowance for doubtful accounts of
  $ 665,537 and $388,958 at September 30, 2007 and December 31, 2006,
respectively                                                              31,987,044      16,467,135
Other receivables                                                            355,688
Inventories, net of allowance for inventory losses of $168,600 and
$88,114 at September 30, 2007 and December. 31, 2006, respectively        16,618,203       7,792,621

Prepaid expenses                                                             105,696          36,633
Deferred income tax assets                                                 1,547,746         177,177

Deposits                                                                     557,548         243,095

   Total current assets                                                   53,807,471      26,217,701
                                                                        ------------    ------------

Property and equipment                                                       744,071         711,015
Less: accumulated depreciation and amortization                             (227,459)       (159,300)
                                                                        ------------    ------------
                                                                             516,612         551,715
                                                                        ------------    ------------
Total Assets                                                            $ 54,324,083    $ 26,769,416
                                                                        ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                                        $ 19,904,651    $ 16,073,617
Accrued liabilities                                                        1,091,651         539,767
Business loan                                                             26,094,807       3,588,403
Short term loan                                                                 --           100,000
                                                                        ------------    ------------
   Total current liabilities                                              47,091,109      20,301,787

Long term payable                                                               --         3,735,198
                                                                        ------------    ------------
Total liabilities                                                         47,091,109      24,036,985
                                                                        ------------    ------------


<PAGE>


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                     2,114,640       1,918,974
Preferred stock backup withholding                                          (208,645)       (149,945)
Common stock, $0.001 par value.
   Authorized - 75,000,000 shares, issued and outstanding                       --
   49,039,156 shares (49,025,511 shares - 2006)                               49,039          49,026
Additional paid-in capital                                                19,042,780      17,866,531
Accumulated deficit                                                      (13,764,840)    (16,952,155)
                                                                        ------------    ------------
   Total shareholders' equity                                              7,232,974       2,732,431
                                                                        ------------    ------------
Total Liabilities and Shareholders' Equity                              $ 54,324,083    $ 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 September 30
                                                     ---------------------------
                                                         2007            2006
                                                     ------------    -----------
<S>                                                  <C>             <C>

Net revenues                                         $ 33,435,184    $ 10,005,084
Cost of revenues                                       29,804,822       7,771,723
                                                     ------------    ------------
Gross margin                                           3, 630,362       2,233,361
                                                     ------------    ------------
Costs and expenses:
  Sales and marketing                                    (315,296)        231,272
  General and administrative                            1,750,423       1,427,441
                                                                          151,541
  Bad debts                                                20,635
                                                                           22,461
  Depreciation and amortization                            27,107
                                                     ------------    ------------
   Total cost and expenses                              1,609,129       1,706,455
                                                     ------------    ------------

Income from operations                                  2,021,233         526,906

                                                     ------------    ------------
Other income (expenses):
                                                                     ------------
  Interest income                                          18,037
  Interest expense                                       (440,277)       (200,939)
                                                                          244,454
  Other income (expenses)                                  (6,399)
                                                     ------------    ------------
      Other income (expenses) - net                      (177,786)       (207,338)
                                                     ------------    ------------
Income before provision (benefit) for income taxes      1,843,447         319,568

Provision (benefit) for income taxes                         --

  Current income tax                                       78,379            --
                                                                         (744,789)
  Deferred income tax                                        --
                                                     ------------    ------------
Net income                                              2,509,857         319,568
                                                                           55,491
Less:  Dividends on Convertible Preferred Stock            68,744
                                                     ------------    ------------
Net income attributable to common shareholders       $  2,441,113    $    264,077
                                                     ============    ============


Net income per common share - basic and diluted       $0.05/$0.05     $0.01/$0.01

Weighted average number of shares of                   49,039,156/     49,025,511/
      common stock outstanding - basic and diluted     54,163,754      58,591,295


</TABLE>








                  See accompanying notes to unaudited condensed
                       consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


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

                                                    Nine months ended September 30
                                                     ----------------------------
                                                         2007            2006
                                                     ------------    ------------
<S>                                                  <C>             <C>

Net revenues                                         $ 72,328,689    $ 32,340,785
Cost of revenues                                       62,287,039      26,149,583
                                                     ------------    ------------
Gross margin                                           10,041,650       6,191,202
                                                     ------------    ------------
Costs and expenses:
  Sales and marketing                                   1,400,442         628,286
  General and administrative                            5,496,795       4,182,118
  Bad debts                                               278,042         123,819
  Depreciation and amortization                            68,161          79,496
                                                     ------------    ------------
   Total cost and expenses                              7,243,440       5,013,719
                                                     ------------    ------------
Income from operations                                  3,144,672       1,177,483
                                                     ------------    ------------
Other income (expenses):
  Interest income                                          66,831           6,607
  Interest expense                                       (822,158)       (351,408)
  Other income (expenses)                                 139,888          (1,115)
                                                     ------------    ------------
      Other income (expenses) - net                      (615,439)       (345,916)
                                                     ------------    ------------
Income before provision (benefit) for income taxes      2,182,771         831,567
Provision (benefit) for income taxes
   Current income tax                                     271,239            --
  Deferred income tax                                  (1,471,449)           --
                                                     ------------    ------------
Net income                                              3,382,981         831,567
Less:  Dividends on Convertible Preferred Stock           195,667         157,945
                                                     ------------    ------------
Net income attributable to common shareholders       $  3,187,314    $    673,622
                                                     ============    ============


Net income per common share - basic and diluted       $0.06/$0.06     $0.01/$0.01
Weighted average number of shares of                   49,039,156/     49,025,511/
      Common stock outstanding - basic and diluted     54,163,754      58,591,295

</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

                                                                            Nine months ended September 30
                                                                            ----------------------------
                                                                                2007             2006
                                                                            ------------    ------------
<S>                                                                         <C>             <C>

OPERATING ACTIVITIES
Net Income                                                                  $  3,382,981    $    831,567
Adjustments to reconcile net income to net cash used in
operating activities:
     Depreciation and Amortization                                                68,159          79,496

    Non cash payments for director's compensation                                   --            37,110

     Non cash payments for public relations and promotion                          6,825          82,770
       Stock based compensation                                                1,169,437         398,484
       Bad debts                                                                 278,042         123,819
Payment of long-term debt                                                     (3,735,198)           --

Changes in operating assets and liabilities:
(Increase) decrease in:
     Accounts receivable                                                     (15,797,951)        151,682

     Other Receivables                                                          (355,688)           --
     Inventories                                                              (8,825,582)      2,839,171
      Prepaid expenses                                                           (69,063)         20,984
     Deposits                                                                   (314,453)       (377,806)
     Deferred income tax asset                                                (1,370,569)           --

Increase (Decrease) in:
       Accounts payable                                                        3,831,034      (2,432,944)
       Accrued liabilities                                                       551,884      (1,004,926)
                                                                            ------------    ------------
Net cash provided by (used in) operating activities                          (21,180,142)        749,407
                                                                            ------------    ------------

INVESTING ACTIVITIES
     Purchase of property and equipment                                          (33,056)       (109,448)
                                                                            ------------    ------------
Net cash used in investing activities                                            (33,056)       (109,448)
                                                                            ------------    ------------

FINANCING ACTIVITIES
     Payment of Note Payable                                                        --           (65,000)
     Proceeds from business loan-net                                          22,506,404            --
     Payment of backup withholding tax on
         accreted dividends on preferred stock                                   (58,700)        (47,384)
     Payment of short-term loan                                                 (100,000)           --
                                                                            ------------    ------------
Net cash provided by (used in) financing activities                           22,347,704        (112,384)
                                                                            ------------    ------------

CASH AND CASH EQUIVALENTS
      Net Increase (Decrease)                                                  1,134,506         527,575
      At beginning of Period                                                   1,501,040         828,294
                                                                            ------------    ------------
      At End of Period                                                      $  2,635,546    $  1,355,869
                                                                            ============    ============



<PAGE>


Supplemental disclosure of cash flow information
   Cash paid for interest                                                        822,158
   Cash paid for income taxes                                                     21,503

Non cash investing and financing activities:
Conversion of Business Loan of $913,750 and Accrued                                              965,302
Interest of $51,552 to common stock
Conversion of Accounts Payable of $554,871 to common stock                                       554,871
Accretion of discount on Class B preferred stock                                 195,666         157,945
Director's Compensation                                                             --
Stock Option Compensation                                                      1,169,437


</TABLE>



                  See accompanying notes to unaudited condensed
                       consolidated financial statements.



<PAGE>


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

                  Nine Months Ended September 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.


<PAGE>

Interim  Financial  Statements - The accompanying  interim  unaudited  condensed
consolidated  financial  statements  are  unaudited,   but  in  the  opinion  of
management  of the  Company,  contain  all  adjustments,  which  include  normal
recurring  adjustments,  necessary to present  fairly the financial  position at
September  30,  2007,  the results of  operations  for the three and nine months
ended  September  30, 2007 and 2006,  and cash flows for the nine  months  ended
September  30, 2007 and 2006.  The  condensed  consolidated  balance sheet as of
December 31, 2006 is derived from the Company's audited  consolidated  financial
statements.

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

The results of operations for the three and nine months ended September 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 products ; 2) Consumer  Electronics;  3)  Communications  Equipment and
Services (VoIP); 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 and third  quarters  of 2007,  the  Company  discussed  with
multiple third parties the possibility of selling the VoIP division, part of the
communications  equipment product line. . The Company's intent is to sell all of
the assets of the division.  As of the date of this report,  a preliminary  term
sheet has been signed by both parties,  and due  diligence is taking place.  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


<PAGE>

2007.  The agreement was  counter-signed  by SOYO Group Inc.'s CEO on February 8
2007.

The agreement is for a minimum  period of 6.5 years and calls for the payment of
MINIMUM royalties by SOYO to Honeywell totaling $3,840,000 (Three Million, Eight
Hundred and Forty  Thousand  Dollars  U.S.).  Sales  levels in excess of minimum
agreed targets will result in associated  increases in the royalty payments due.
Minimum royalty  payments due under the agreement are $353,000  through December
31, 2007, and $469,000  through December 31, 2008. As of September 30, 2007, the
Company has paid $243,000 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  nine  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 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.


<PAGE>


As of September 30, 2007, potentially dilutive securities consisted of 3,315,260
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 September  30, 2007,  3,382,918  shares of
common stock were issuable upon conversion of the Class B Convertible  Preferred
Stock based on the $0.98 per share conversion price.

As of September  30, 2006,  9,565,784  shares of common stock were issuable upon
conversion  of the Class B  Convertible  Preferred  Stock based on the $0.32 per
share conversion price.

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

         Shares outstanding at 9/30/2007                    49,039,156
         Add: Conversion of Preferred Stock                  3,382,918
         Add: Vested in the money options                    1,741,680
                                                           ------------
         Total fully diluted shares at 9/30/2007            54,163,754
                                                           ============

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 nine
months ended September 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.


<PAGE>

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.  For  further  information,  refer  to note 5,  Stock  Based
Compensation.

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 in accordance with contractual  agreements
with the  customer;  generally  at the time the  product is shipped  and in some
cases 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

------------------------------------------------------- -----------------
            At September 30, 2007:
------------------------------------------------------- -----------------
Asset Based Financing Due to UCB                        $15,257,100
------------------------------------------------------- -----------------
Purchase Order Financing Due to UCB                       10,837,707
------------------------------------------------------- -----------------
                                    Total Due to UCB    $26,094,807
------------------------------------------------------- -----------------

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 September  30, 2007,  the
amount SOYO owed to UCB was  $15,257,100.  The amount  temporarily  exceeded the
maximum loan  balance,  with the  permission of the lender,  pending  receipt of
several payments.

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


<PAGE>

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  September  30,  2007,  the  amount  SOYO  owed  to  UCB  was
$10,837,707.

4. Equity-Based Transactions

Effective  December 30,  2003,  SOYO Taiwan  entered  into an agreement  with an
unrelated  third party to sell the $12,000,000  long-term  payable due it by the
Company. As part of the agreement, SOYO Taiwan required that the purchaser would
be limited to  collecting a maximum of $1,630,000  of the  $12,000,000  from the
Company  without the prior  consent of SOYO Taiwan.  In  substance,  SOYO Taiwan
forgave debt in an amount equal to the difference  between the  $12,000,000  and
the  value of the  preferred  stock  issued in  settlement  of this  debt.  This
forgiveness of debt was treated as a capital transaction. Payment from the third
party was received by SOYO Taiwan in February and March 2004.  An agreement  was
reached during the three months ended March 31, 2004 whereby 2,500,000 shares of
Class B preferred  stock would be issued by the Company to the  unrelated  third
party in exchange for the long-term payable.

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


<PAGE>

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
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.  An  additional  100,000  options  were issued  during the 3rd
quarter to new  employees.  All options were issued to employees on the 91st day
of their  employment at the end of their  probationary  employment  period.  All
options were issued at market value on the day of the grant.

As of September 30, 2007,  none of the options  granted in 2005 or 2007 had been
exercised.  As of September  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. Additionally, Ming Chok and Nancy Chu, the CEO and CFO,
who had each been granted 600,000  options in 2005,  forfeited those options and
returned them to the Company.  Four  employees who were granted stock options in
2007 had left the Company as of the date of this  report,  and  145,000  options
were returned to the Company.

For the  nine  months  ended  September  2007 and  2006,  the  Company  recorded
$1,270,317 and $398,484,  respectively,  in compensation costs relating to stock
options  granted to  employees.  The  amounts  recorded  represent  equity-based
compensation  expense  related to the options that were issued in 2005 and 2007.
The compensation  costs are based on the fair value at the grant date. There 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 2005 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.


<PAGE>
<TABLE>
<CAPTION>

As a result,  the Company  recognized  income tax expense of $78,379  during the
quarter,  and $271,239  during the nine month period ended  September  30, 2007.
Additionally,  the Company  recognized  deferred  income tax benefit of $744,789
during the quarter and $1,471,449  during the nine month period ended  September
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:


                        Three Months Ended September 30,              Nine Months Ended September 30,
                               2007              2006                       2007              2006
                        ---------------- -----------------       ------------------- -------------------
<S>                     <C>              <C>                     <C>                 <C>

Revenues:
     Distributors           $15,997,750        $7,570,129               $42,134,450         $23,113,748
     Retailers               14,652,522         2,068.429                23,420,813           8,264,126
     Others                   2,784,912           366,526                 6,773,426             962,911
                        ---------------- -----------------       ------------------- -------------------
Total                       $33,435,184       $10,005,084               $72,328,689         $32,340,785
                        ---------------- -----------------       ------------------- -------------------
</TABLE>
<TABLE>
<CAPTION>


During the three months ended  September 30, 2007 and 2006, the Company  offered
price  protection  to certain  customers  under  specific  programs  aggregating
$299,853  and  $95,752,  respectively,  which  reduced net revenues and accounts
receivable accordingly.

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

During the nine  months  ended  September  30,  2007,  the  following  customers
accounted for more than 10% of net revenues:

                       Customer                       Revenues
                      Office Max                     $8,207,597


b. Geographic Segments

Financial information by geographic segments is summarized as follows:

                         Three Months Ended September 30,               Nine Months Ended September 30,
                                 2007             2006                       2007            2006
                        ---------------- -----------------       --------------------- -----------------
<S>                     <C>              <C>                     <C>                   <C>

Revenues:
  United States             $25,048,776        $5,292,158                 $53,772,219       $22,751,676
  Canada                      3,651,806         1,660,253                   7,367,771         2,500,052
  Central and South           1,993,723         3,046,713                   7,193,625         6,790,067
America
  Other                       2,740,879             5,960                   3,995,074           298,990
                        ---------------- -----------------       --------------------- -----------------
Total                       $33,435,184       $10,005,084                 $72,328,689       $32,340,785
                        ---------------- -----------------       --------------------- -----------------

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

c. Product lines


                                 Three Months Ended September 30,       Nine Months Ended September 30,
                                      2007             2006                2007              2006
                                ----------------- ----------------    ---------------- -----------------
<S>                             <C>               <C>                 <C>              <C>

Revenues:
  Computer Products                  $14,340,348     $ 1,760,853          $38,115,666       $ 4,862,719
  Consumer Electronics                19,032,619       7,803,431           34,088,058        27,093,098
  VoIP                                    21,557          440,800              65,823           384,968
  Furniture                               40,660              N/A              59,142               N/A
                                ----------------- ----------------    ---------------- -----------------
Total                                $33,435,184  $10,005,084             $72,328,689       $32,340,785
                                ----------------- ----------------    ---------------- -----------------

</TABLE>


d. Suppliers

During 2007, no more than 26% of the products distributed by the SOYO Group were
supplied by any 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,  and to
reduce reliance on any one supplier.

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,
2007 contains "forward-looking  statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended,  including  statements  that include the
words  "believes",  "expects",  "anticipates",  or  similar  expressions.  These
forward-looking   statements  include,   but  are  not  limited  to,  statements
concerning   the   Company's   expectations   regarding   its  working   capital
requirements,  financing requirements,  business prospects, and other statements
of expectations,  beliefs,  future plans and strategies,  anticipated  events or
trends,  and similar  expressions  concerning  matters  that are not  historical
facts. The forward-looking  statements in this Quarterly Report on Form 10-Q for
the quarterly  period ended  September 30, 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.


<PAGE>

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
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 three months ended September 30, 2007, the Company earned $2,441,113, or
$0.05 per share before  dividends on preferred stock and $3,187,314 for the nine
months ended September 30, 2007 or $0.06 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:


<PAGE>


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

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

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

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

In April 2007, by mutual agreement of the parties,  the maximum loan balance was
increased  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 September  30, 2007,  the
amount SOYO owed to UCB was  $15,257,100.  The amount  temporarily  exceeded the
maximum loan  balance,  with the  permission of the lender,  pending  receipt of
several payments.

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  September  30,  2007,  the  amount  SOYO  owed  to  UCB  was
$10,837,707.

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


<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
collectibles 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 considered 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.

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 September 30, 2007 and 2006:

Net Revenues.  Net revenues  increased by $23,430,100 or 234%, to $33,435,184 in
the three months ended  September 30, 2007, as compared to  $10,005,084 in 2006.
The  increase in revenues can be  attributed  mainly to sales of LCD monitors in
the United States,  and LCD televisions sold under the Prive line in Canada. Our
sales  of LCD  computer  monitors  grew  significantly  during  the  period,  as
OfficeMax, a large national retailer, featured the SOYO brand 24" monitor in its
retail ads during the period. For a period of time within the quarter,  the SOYO
24" LCD monitor was the top selling computer  monitor in the United States,  and
was  available  exclusively  at  OfficeMax.  The strong  performance  of the LCD
televisions was due primarily to the Prive line sold by Wal Mart Canada.


<PAGE>

Gross  Margin.  Gross  margin was  $3,630,362  or 10.9% in 2007,  as compared to
$2,233,361 or 22.3% in 2006. As noted above, sales of the Company's LCD monitors
and LCD television  products were very strong.  These are among the lower margin
products that the Company sells.  Sales of higher margin  products,  such as the
Levello  furniture  line,  were in line with the  Company's  expectations.  As a
result,  gross margin,  when expressed as a percentage of sales,  was lower than
anticipated, but the gross margin, when expressed in dollars, was well above our
forecast.

Sales and Marketing  Expenses.  Selling and marketing  expenses were  ($315,296)
during the  quarter,  as compared  to $231,272 in 2006.  The Company was able to
negotiate  a one  time  $1,100,000  reduction  of  the  purchase  price  of  LCD
televisions for marketing and advertising  funds. The Company has purchased over
$12,000,000 of product from this supplier in 2007.  Without the one time credit,
sales and marketing  expenses would have been  approximately  $785,000,  a large
increase  over the $231,000  spent in the same period in 2006.  The increase was
due to a higher amount of commissions paid to outside sales  representatives for
getting the Company's products placed in premium locations for sale. The Company
is expects that this expense will continue to increase as revenues increase.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $322,982 to  $1,750,423 in 2007, as compared to $1,427,441 in 2006.
Labor costs and costs related to stock options have increased  substantially  as
revenues  have grown and  additional  staff was  needed.  Those  costs have been
partially  offset by  significantly  lower  attorney's  fees.  The  Company  has
retained  a law firm to  handle  day to day  matters,  which  has  substantially
reduced the need for outside counsel.  Additionally, the Company was involved in
several lawsuits in 2006, causing high legal fees.

Bad debts. The Company recorded a provision for doubtful accounts of $151,541 in
the three months ended September 30, 2007. The Company  recorded a provision for
doubtful  accounts of $20,635 for the three months ended September 30, 2006. The
increase of $130,906 is due to the large increase in receivables  balance. As of
September 30, 2007, the Company believes its provision for doubtful  accounts is
adequate.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $22,461 for the three months ended September 30, 2007, as compared
to  $27,107  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 $2,021,233 for the three
months ended  September  30, 2007,  as compared to $526,906 for the three months
ended  September 30, 2006.  This is a result of the  increased  revenues and the
reduced selling and marketing expenses.

Interest  Income.  Interest  income  was  $18,037  for the  three  months  ended
September  30,  2007.  There was no interest  income for the three  months ended
September 30, 2006.,

Interest  Expense.  Interest  expense was  $440,277  for the three  months ended
September  30,  2007.  Interest  expense was $200,939 for the three months ended
September 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.


<PAGE>

Provision for Income Taxes. The Company  recognized a provision for income taxes
of $78,379 for the three months ended September 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 benefit  (expense)
was $744,789 for the three months ended  September 30, 2007. This is a result of
timing  differences  between  GAAP  income  and  taxable  income,  and is mainly
attributable  to the net  operating  loss  carryforward.  There was no  deferred
income tax gain or loss in the three months ended September 30, 2006.

Net Income.  Net income was $2,441,113 for the three months ended  September 30,
2007,  as compared to $264,077 for the three months  ended  September  30, 2006.
Increases in sales and  marketing  expenses,  as well as  increased  labor costs
offset the higher gross margin earned in the period.

Nine Months ended September 30, 2007 and 2006:

Net Revenues.  Net revenues  increased by $39,987,904 or 124%, to $72,328,689 in
the nine months ended  September 30, 2007, as compared to  $32,340,785  in 2006.
The increase in revenues was mainly due to new markets being opened by the sales
department for LCD television  sales,  large sales of computer  monitors through
Office Max, a national chain, and increased sales in Latin America.  The largest
increase in LCD television  sales was in Canada,  where the Prive line developed
by the Company was well received, and sold primarily through Wal Mart.

Gross  Margin.  Gross margin was  $10,041,650  or 13.9% in 2007,  as compared to
$6,191,202  or 19.1% in  2006.  Gross  margins  increased  on a dollar  basis as
revenues more than doubled over the same period in 2006.  Gross margin decreased
on a  percentage  basis as the large  increase in revenues  was due to very high
sales to national retail chains of lower margin products.  These sales were good
for the Company as they were  profitable  and  promoted the SOYO and Prive brand
names,  even though  margins were below the  Company's  target.  Sales of higher
margin  products  such as the  Levello  furniture  line  met  expectations,  and
contributed to increasing the blended gross margin on all products.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$772,156 to $1,400,442 in 2007, as compared to $628,286 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  Honeywell  consumer
electronics products.  These factors are offset by a $1,100,000 reduction in the
purchase price of LCD televisions from one of the Company's suppliers.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by  $1,314,677  to  $5,496,333  in 2007,  as compared to $4,182,118 in
2006.  The increase is due almost  entirely to increased  labor costs.  As sales


<PAGE>

have  almost  tripled in the last two years,  the Company has added staff in the
sales,  finance and operations  areas.  The staff was needed to keep up with the
increased business volume.  Approximately $700,000 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 $278,042 in
the nine months ended  September 30, 2007. The Company  recorded a provision for
doubtful  accounts of $123,819 for the nine months ended September 30, 2006. The
increase is necessary just based on the increased balance of the receivables. As
of September 30, 2007, the Company believes its provision for doubtful  accounts
is adequate.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $68,161 for the nine months ended  September 30, 2007, as compared
to  $79,496  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 $2,798,210 for the nine
months ended  September 30, 2007, as compared to $1,177,483  for the nine months
ended  September  30, 2006.  This is a result of the  increased  sales and gross
margins being partially offset by the higher general and administrative expenses
and other expenses described above.

Interest Income. Interest income was $66,831 for the nine months ended September
30, 2007,  as compared to $6,607 for the nine months ended  September  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  $822,158  for the nine  months  ended
September  30,  2007.  Interest  expense was  $351,408 for the nine months ended
September  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 increases in net revenues would not have
been possible without the credit line, and therefore the interest expense.

Provision for Income Taxes. The Company  recognized a provision for income taxes
of  $271,239 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 benefit  (expense)
was $1,471,449 for the nine months ended September 30, 2007. This is a result of
timing differences  between GAAP income and taxable income mainly due to the net
operating loss  carryforward.  There was no deferred  income tax gain or loss in
the three months ended September 30, 2006.

Net Income.  Net income was $3,187,314  for the nine months ended  September 30,
2007, as compared to $673,622 for the three months ended September 30, 2006.

Financial Condition - September 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


<PAGE>

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.

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 $21,180,142 from operating
activities  during the nine months  ended  September  30,  2007,  as compared to
generating  cash of $749,407 from  operating  activities  during the nine months
ended September 30, 2006.

At September 30, 2007,  the Company had cash and cash  equivalents of $2,635,546
as compared to $1,501,040 at December 31, 2006.

The Company had working capital of $6,716,362 at September 30, 2007, as compared
to working  capital of  $5,915,914  at December 31,  2006,  resulting in current
ratios of 1.14:1  and  1.29:1 at  September  30,  2007 and  December  31,  2006,
respectively.  At year end, the Company had classified almost $4 million of debt


<PAGE>
<TABLE>
<CAPTION>

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 $31,987,044 at September 30, 2007, as compared
to $16,467,135 at December 31, 2006, an increase of  $15,519,909.  The Company's
allowance for doubtful  accounts  stood at $665,537 as of September 30, 2007 and
$388,958 at December 31, 2006.

Inventories  increased  to  $16,618,203  at September  30, 2007,  as compared to
$7,792,621 at December 31, 2006, an increase of $8,825,582. Inventory in transit
was $4,993,095 at September 30, 2007.

Accounts payable  increased to $19,904,651 at September 30, 2007, as compared to
$16,073,617  at  December  31,  2006.  When taken  together  with other  current
liabilities,  the balance has increased from  $16,613,384 to $47,128,290,  which
offsets the large increase to receivables, inventories and deposits.

Accrued  liabilities  increased to $1,091,651 at September 30, 2007, as compared
to $539,767 at December 31, 2006, an increase of $589,065.

Principal Commitments:

A summary of the  Company's  contractual  cash  obligations  as of September 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         $35,449            $  -          $  -
    Royalties Payable                                  424,000       1,178,000       1,606,000       448,000
    Purchase Commitments                             4,993,095
                                               ---------------- --------------- --------------- -------------
Total                                               $5,629,787      $1,213,449      $1,606,000     $ 448,000
                                               ================ =============== =============== =============

</TABLE>

At  September  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 $4,993,095.

At  September  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.,  effective 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


<PAGE>

excess of minimum  agreed  targets  will result in  associated  increases in the
royalty  payments  due.  Minimum  royalty  payments due under the  agreement are
$424,000 in 2008.

Off-Balance Sheet Arrangements:

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

Commitments and Contingencies:

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

Recent Accounting Pronouncements:

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

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

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 September 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.

Through  2006,  the  Company  did not have any  foreign  currency  risk,  as its
revenues and expenses, as well as its debt obligations, were all denominated and
settled in United States  dollars.  In 2007, the Company began selling the Prive
line of LCD televisions to Wal Mart Canada.  The Company was unable to negotiate
a contract  with the  customer  to be paid in US  dollars,  and has been paid in
Canadian  dollars  for these  products.  The  Company has not hedged the foreign
exchange exposure on these transactions.  The amount earned is immaterial to the
financial  statements,  and is included in the  financial  statements  under the
caption "other income". The Company has not decided whether to hedge all foreign
exchange risks in the future.


<PAGE>

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  September  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.

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 September 30, 2007.

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

The  Company  promoted a  bookkeeper  to Acting  Accounting  Manager.  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.

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 on
January 1, 2008.


<PAGE>

In  conjunction  with the Company's  financial  statements for the quarter ended
September  30,  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 September 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

ITEM 1. LEGAL PROCEEDINGS

Normandin  v. Soyo  Group,  Inc.  et al.:  On August 2, 2004,  Gerry  Normandin,
individually and on behalf of a proposed nationwide class of consumers,  filed a
Complaint in the Superior Court of the State of California for the County of San
Bernardino  against the Company and DOES 1 through 100. Normandin asserted three
causes of action in his Complaint:  (1) Violation of the Consumer Legal Remedies
Act, Civil Code Section 1750 et seq.; (2) Violation of Business and  Professions
Code Section  17200 et seq.;  (3)  Violation of Business  and  Professions  Code
Section  17500 et seq.  Normandin  asked 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 reached a settlement of the action and a formal settlement agreement
has been signed. The Judge approved the settlement  agreement which, among other
things, requires a payment by Soyo of $175,000 and resolves all claims involving
actual or potential class members'  claims.  The case has been dismissed but the
statutory 60 days within  which to file an appeal has not yet expired.  Once the
appeal period has expired (on or about  December 5, 2007),  Soyo intends to make
the required  payment and after it is made,  the case will be resolved.

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.  Earlier in 2007, the dispute was resolved,  and the action was
thereafter formally and completely dismissed.

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


<PAGE>

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  preliminarily
approved the settlement,  and the final settlement approval hearing is scheduled
for November 19, 2007.

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 has
cooperated  with the  investigation  and has agreed to the terms of an agreement
containing a consent  order (the "Consent  Order"),  which has been approved and
filed by the FTC, relating to the Company's administration of rebate claims.

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

On March 22, 2007,  Semiconductor  Energy  Laboratory  Co.,  Ltd.  instituted an
action against several  defendants,  including the Company, in the United States
District  Court for the Northern  District of California  (Case No. C071667 MHP)
alleging  patent  infringement  with respect to certain  products the Company is
alleged to have imported and sold in the United  States.  No trial date has been
set.  Pursuant to order of the Court,  the Company's  deadline to respond to the
Complaint  is currently on July 12,  2007.  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.


<PAGE>

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



SIGNATURES


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




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




DATE:  November 14, 2007                             By: /s/ Ming Tung Chok
                                                      -----------------------
                                                      Ming Tung Chok
                                                      President and Chief
                                                      Executive Officer



DATE:  November 14, 2007                              By: /s/ Nancy Chu
                                                      -----------------------
                                                      Nancy Chu
                                                      Chief Financial Officer



DATE:  November 14, 2007                             By /s/ Jay Schrankler
                                                      --------------------------
                                                      Name: Jay Schrankler
                                                      Title: Director

DATE:  November 14, 2007                            By /s/ Chung Chin Keung
                                                      --------------------------
                                                      Name: Chung Chin Keung
                                                      Title: Director

DATE:  November 14, 2007                            By /s/ Henry Song
                                                      --------------------------
                                                      Name: Henry Song
                                                      Title: Director


                                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