SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


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

     For the fiscal quarter ended June 30, 2006


[_]  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 [ ]

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


                                       1
<PAGE>

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

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

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

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

     As of August 14, 2006, there were 48,987,511 shares Outstanding.

     Documents Incorporated by Reference: None




















                                       2
<PAGE>

                         SOYO GROUP, INC. AND SUBSIDIARY

                                      INDEX


PART I.   FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Condensed Consolidated Balance Sheets - June 30, 2006
              (Unaudited) and December 31, 2005

              Condensed Consolidated Statements of Operations (Unaudited) -
              Three Months and Six Months Ended June 30, 2006 and 2005

              Condensed Consolidated Statements of Cash Flows (Unaudited) -
              Six Months Ended June 30, 2006 and 2005

              Notes to Condensed Consolidated Financial Statements
              (Unaudited) - Three Months and Six Months Ended June 30, 2006
              and 2005


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

     Item 3.  Quantitative and Qualitative Disclosures about Market Risk

     Item 4.  Controls and Procedures


PART II.  OTHER INFORMATION

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

     Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES









                                       3
<PAGE>

                         SOYO Group, Inc. and Subsidiary
                      Condensed Consolidated Balance Sheets


                                        June 30,      December 31,
                                          2006            2005
                                      ------------    ------------
                                      (Unaudited)

ASSETS

CURRENT
  Cash and cash equivalents           $    757,911    $    828,294
  Accounts receivable, net of
    allowance for doubtful accounts
    of $256,203 and $589,224 at
    June 30, 2006 and December 31,
    2005, respectively                   7,667,217       7,278,520
  Inventories                            3,888,100       7,991,030
  Prepaid expenses                               0          20,984
                                      ------------    ------------
                                        12,313,228      16,118,828
                                      ------------    ------------

Property and equipment                     972,206         867,122
Less:  accumulated depreciation
  and amortization                        (167,870)       (115,480)
                                      ------------    ------------
                                           804,336         751,642
                                      ------------    ------------

Deposits                                   127,689          36,920
                                      ------------    ------------
                                      $ 13,245,253    $ 16,907,390
                                      ============    ============








                                   (continued)


                                       4
<PAGE>

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


                                       June 30,      December 31,
                                         2006            2005
                                     ------------    ------------
                                     (Unaudited)

LIABILITIES

CURRENT
  Accounts payable -
                                       10,540,512      13,977,579
  Accrued liabilities                     266,876       1,287,108
  Advances from officer,
    director and major
    shareholder                                 0               0
  Note payable                            100,000         165,000
                                     ------------    ------------
                                       10,907,388      15,429,687
                                     ------------    ------------


NON-CURRENT
  Long-term payable - SOYO
    Computer, Inc.                           --              --
                                     ------------    ------------


SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value
  Authorized - 10,000,000 shares
  Issued and outstanding -
      3,000,940 shares of Class B
      Convertible Preferred Stock,
      (2,788,948 shares in 2005)
      $1.00 per share stated
      liquidation value
      ($2,500,000 aggregate
      liquidation value)                1,804,940       1,702,486
Preferred Stock Backup Withholding       (115,735)        (84,999)
Common stock, $0.001 par value
  Authorized - 75,000,000 shares
  Issued and outstanding -
    48,987,511 shares
    (48,681,511 in 2005)                   48,988          48,682
  Additional paid-in capital           17,604,332      17,225,738
  Accumulated deficit                 (17,004,660)    (17,414,204)
                                     ------------    ------------
                                        2,337,865       1,477,703
                                     ------------    ------------
                                     $ 13,245,253    $ 16,907,390
                                     ============    ============


     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>

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


                                       Three Months Ended June 30,
                                       ----------------------------
                                           2006            2005
                                       ------------    ------------

Net revenues                           $ 10,787,515    $  8,494,311
Cost of revenues                          8,480,762       7,739,439
Prior Year's Purchases Discounts                  0        (300,000)
                                       ------------    ------------
Gross margin                              2,306,753       1,054,872
                                       ------------    ------------

Costs and expenses:
  Sales and marketing                       322,127         124,029
  General and administrative              1,269,686         881,355
  Provision for doubtful accounts            53,184           3,390
  Depreciation and amortization              26,574           9,338
                                       ------------    ------------
    Total costs and expenses              1,671,571       1,018,112
                                       ------------    ------------
Income from operations                      635,182          36,760
                                       ------------    ------------

Other income (expense):
  Interest income                             3,360            --
  Interest expense                          (78,082)        (12,157)
Miscellaneous revenue                           754          77,516
                                       ------------    ------------
Other income (expense), net                 (73,968)         65,359
                                       ------------    ------------
Net income                             $    561,214    $    102,119
                                       ============    ============

Less: Dividends on Class B
         Convertible Preferred Stock        (52,598)        (42,458)
Net Income attributable to
         Common Shareholders           $    508,616    $     59,661

Net income per common share -
  Basic                                $       0.01    $       0.00
  Diluted                              $       0.01    $       0.00


Weighted average number of
  common shares outstanding -
  Basic                                  48,987,511      40,000,000
  Diluted                                59,365,449      46,666,667


                                       6
<PAGE>

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

                                         Six Months Ended June 30,
                                       ----------------------------
                                           2006            2005
                                       ------------    ------------

Net revenues                           $ 22,335,702    $ 12,456,830
Cost of revenues,                        18,377,861      11,179,925
Prior Year's Purchase Discounts and
 Allowances                                       0      (1,300,000)
                                       ------------    ------------
Gross margin                              3,957,841       2,576,905
                                       ------------    ------------

Costs and expenses:
  Sales and marketing                       397,013         363,494
  General and administrative              2,754,679       1,815,328
  Provision for doubtful accounts           103,184          34,513
  Depreciation and amortization              52,390          18,087
                                       ------------    ------------
    Total costs and expenses              3,307,266       2,231,422
                                       ------------    ------------
Income from operations                      650,575         345,483
                                       ------------    ------------

Other income (expense):
  Interest income                             6,607            --
  Interest expense                         (150,469)        (23,378)
  Miscellaneous revenue                       5,285         166,688
                                       ------------    ------------
Other income (expense), net                (138,577)        143,310
                                       ------------    ------------
Income before provision for
  income taxes                              511,998         488,793

Provision for income taxes                     --              --
                                       ------------    ------------
Net income                             $    511,998    $    488,793
                                       ============    ============


Less: Dividends on Class B
         Convertible Preferred Stock       (102,454)        (81,671)

Net Income attributable to
         Common Shareholders           $    409,544    $    407,122
Net income per common share -
  Basic                                $       0.01    $       0.01
  Diluted                              $       0.01    $       0.01


Weighted average number of
  common shares outstanding -
  Basic                                  48,987,511      44,408,200
  Diluted                                59,365,449      49,279,410


     See accompanying notes to condensed consolidated financial statements.


                                       7
<PAGE>

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


                                       Six Months Ended June 30,
                                       --------------------------
                                           2006           2005
                                       -----------    -----------

OPERATING ACTIVITIES
  Net income                           $   511,998    $   488,793
    Adjustments to reconcile net
      income to net cash used in
      operating activities:
        Depreciation and
          amortization                      52,390         18,087
        Provision for doubtful
          accounts                         103,184         34,513
        Stock Based Compensation           271,560           --
        Non cash payments for
            Director's compensation         24,570           --
        Non cash payments for public
            Relations and promotion         82,770           --
        Changes in operating
          assets and liabilities:
          (Increase) decrease in:
            Accounts receivable           (491,881)    (3,239,016)
            Inventories                  4,102,930        896,489
            Prepaid expenses                20,984         21,479
                  Deposits                 (90,769)        15,840
          Increase (decrease) in:
            Accounts Payable- SOYO
                Computer Inc.                 --       (1,314,910)
            Accounts payable-other      (3,437,067)      (997,692)
            Accrued liabilities         (1,020,232)      (570,187)
                                       -----------    -----------
  Net cash provided by (used in)
    operating activities                   130,437     (4,646,604)
                                       -----------    -----------


INVESTING ACTIVITIES
  Purchase of property and
    equipment                             (105,084)       (50,911)
  Proceeds from sale of equipment             --           56,662
                                       -----------    -----------
  Net cash provided by (used in)
    investing activities                  (105,084)         5,751
                                       -----------    -----------


                                   (continued)

                                       8
<PAGE>

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


                                      Six Months Ended June 30,
                                      --------------------------
                                          2006           2005
                                      -----------    -----------

FINANCING ACTIVITIES
  Advances from officer,
    director and major
    shareholder                       $   (65,000)   $   (60,000)
  Payment of backup withholding tax
    on accreted dividends on
    preferred stock                       (30,736)          --
  Proceeds from issuance of
  Common Stock                               --        3,559,547
                                      -----------    -----------
  Net cash provided by (used in)
    financing activities                  (95,736)     3,499,547
                                      -----------    -----------

CASH AND CASH EQUIVALENTS
  Net decrease                            (70,383)    (1,141,306)
  At beginning of period                  828,294      1,288,351
                                      -----------    -----------
  At end of period                    $   757,911    $   147,045
                                      ===========    ===========


NON-CASH INVESTING AND
  FINANCING ACTIVITIES

  Accretion of dicount
    on preferred stock                    102,454    $    71,773











     See accompanying notes to condensed consolidated financial statements.


                                       9
<PAGE>

                         SOYO Group, Inc. and Subsidiary
        Notes to Condensed Consolidated Financial Statements (Unaudited)
            Three Months and Six Months Ended June 30, 2006 and 2005


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

Interim Financial Statements - The accompanying  interim condensed  consolidated
financial  statements  are  unaudited,  but in the opinion of  management of the
Company,  contain all adjustments,  which include normal recurring  adjustments,
necessary to present fairly the financial position at June 30, 2006, the results
of  operations  for the three and six months  ended June 30, 2006 and 2005,  and


                                       10
<PAGE>

cash  flows for the six  months  ended  June 30,  2006 and 2005.  The  condensed
consolidated balance sheet as of December 31, 2005 is derived from the Company's
audited consolidated financial statements.

Certain  information  and footnote  disclosures  normally  included in financial
statements  that have been prepared in  accordance  with  accounting  principles
generally  accepted in the United States have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission, although
management  of the Company  believes  that the  disclosures  contained  in these
condensed consolidated financial statements are adequate to make the information
presented  therein  not  misleading.  For  further  information,  refer  to  the
consolidated  financial  statements  and  the  notes  thereto  included  in  the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2005, as filed with the Securities and Exchange Commission.

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

The results of  operations  for the three and six months ended June 30, 2006 are
not  necessarily  indicative of the results of operations to be expected for the
full fiscal year ending December 31, 2006.

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

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

As of June 30,  2006,  potentially  dilutive  securities  consisted of 3,000,940
shares of Class B Convertible Preferred Stock with a stated liquidation value of
$1.00 per share that are convertible into common stock at fair market value, but
not less than $0.25 per share.

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

Comprehensive Income (Loss) - The Company displays comprehensive income or loss,
its  components  and  accumulated   balances  in  its   consolidated   financial
statements.  Comprehensive  income or loss includes all changes in equity except
those  resulting from  investments by owners and  distributions  to owners.  The
Company did not have any items of  comprehensive  income (loss) during the three
or six months ended June 30, 2006 and 2005.


                                       11
<PAGE>

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

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

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

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

Transition  methods  available to public  companies  include either the modified
prospective  or  modified  retrospective   adoption.  The  modified  prospective
transition method requires that compensation cost be recognized beginning on the
effective  date, or date of adoption if earlier,  for all  share-based  payments
granted after the date of adoption and for all unvested  awards  existing on the
date of adoption. The modified  retrospective  transition method, which includes
the requirements of the modified  prospective  transition  method,  additionally
requires the restatement of prior period financial  information based on amounts
previously recognized under SFAS No. 123 for purposes of pro-forma  disclosures.
The Company  adopted  SFAS No.  123(R)  effective  January 1, 2006.  The Company
adopted the modified  prospective  method. As a result, the Company recognized a
charge against earnings of $256,524 for the six months ended June 30, 2006.


For further  information,  refer to note 4, stock based compensation on page 14.
On March 7, 2005,  the Company  registered its 2005 Stock  Compensation  Plan on
Form S-8 with the Securities and Exchange  Commission,  registering on behalf of
our employees,  officers,  directors and advisors up to 5,000,000  shares of our
common stock  purchasable by them pursuant to common stock options granted under
our 2005 Stock  Compensation  Plan.  The plan was approved by  shareholder  vote
during a special meeting of shareholders  on February 17, 2006.  However,  since
Mr. Chok and Ms. Chu,  husband and wife,  are directors who own more than 50% of
the company,  shareholder  approval is essentially a formality,  hence the grant
date of the stock options is July 22, 2005.

On July 22, 2005, the Company issued  2,889,000  option grants to employees at a
strike price of $.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.


                                       12
<PAGE>

As of June 30, 2006, 9 employees who had been granted stock options had left the
Company, and grants totaling 462,000 options were returned to the Company. As of
June 30, 2006,  the Company has not issued any option grants to employees  other
than the 2,889,000 option grants issued on July 22, 2005.


2.   Short Term Loan

In October 2005,  the Company  borrowed  $165,000 from an individual for working
capital purposes.  As of June 30, 2006, $65,000 of the loan had been repaid, and
$100,000 is still outstanding.


3.   Equity-Based Transactions

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

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

The Company  recorded  the  issuance of the Class B preferred  stock at its fair
market  value on March  31,  2004 of  $1,304,000,  which  was  determined  by an
independent  investment  banking firm. The  $10,696,000  difference  between the
$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.


                                       13
<PAGE>

4.   Stock-Based Compensation

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

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

SFAS 123R requires forfeitures to be estimated at the time of grant and revised,
if necessary,  in subsequent  periods if actual  forfeitures differ from initial
estimates.  Stock-based  compensation expense has been recorded net of estimated
forfeitures  for the period  ended June 30, 2006 such that  expense was recorded
only for those  stock-based  awards that are expected to vest.  Previously under
APB 25 to the extent awards were forfeited prior to vesting,  the  corresponding
previously recognized expense was reversed in the period of forfeiture.

The proforma  disclosure  as required by SFAS 148 is not  necessary  because the
stock  options  were granted in July 2005.  Therefore,  there would have been no
stock-based  compensation  recorded  for the period  ended  June 30,  2005 using
either the intrinsic value or fair value based method.


5.   Significant Concentrations

a.   Customers

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

                 Three Months Ended June 30,     Six Months Ended June 30,
                 ---------------------------    ---------------------------
                     2006           2005            2006           2005
                 ------------   ------------    ------------   ------------
Revenues
  Distributors   $  9,273,290   $  6,600,654    $ 16,848,648   $  9,121,834
  Retailers           963,656      2,146,678       4,546,697      3,588,017
  Others              550,569       (253,021)        940,357       (253,021)
                 ------------   ------------    ------------   ------------
                 $ 10,787,515   $  8,494,311    $ 22,335,702   $ 12,456,830
                 ============   ============    ============   ============


                                       14
<PAGE>

During the three months ended June 30, 2006 and 2005, the Company  offered price
protection to certain customers under specific programs  aggregating $25,078 and
$7,142,  respectively,  which  reduced  net  revenues  and  accounts  receivable
accordingly.

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

During the three months ended June 30, 2006,  the Company had two customers that
accounted for revenues of  $1,141,120  and  $2,205,201,  equivalent to 10.6% and
20.4% of net revenues,  respectively. The two customers were D & H Distributing,
Inc., and SED  International,  Inc. Both companies are distributors who sell the
Company's products to retailers in the United States.

b.   Geographic Segments

Financial information by geographic segments is summarized as follows:

                    Three Months Ended June 30,    Six Months Ended June 30,
                    ---------------------------   ---------------------------
                        2006            2005          2006            2005
                    -----------     -----------   -----------     -----------

Revenues
  United States     $ 8,019,132     $ 3,521,249   $17,323,011     $ 5,032,339
  Canada                790,316         212,310     1,511,007         262,052
  Central and
  South America       1,975,627         247,929     3,364,911         528,552
  Other locations         2,440       4,512,823       136,773       6,633,887
                    -----------     -----------   -----------     -----------
                    $10,787,515     $ 8,494,311   $22,335,702     $12,456,830
                    ===========     ===========   ===========     ===========


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

                   Three Months Ended June 30,     Six Months Ended June 30,
                   ---------------------------    ---------------------------
                   2006             2005          2006            2005
                   -----------      -----------   -----------     -----------
Revenues
  Consumer
   Electronics     $10,237,351      NOT           $21,442,272     NOT
  Computer
   Products            496,226      AVAILABLE         747,737     AVAILABLE
  VOIP                  53,938                        145,693
                   -----------                    -----------
                   $10,787,515                    $22,335,702
                   ===========                    ===========


                                       15
<PAGE>

d.   Suppliers

Of the products the Company sold in 2005,  no more than 39% of the products were
produced by any one vendor. The Company is working to reduce that dependency and
expects that no more than 20% of any  products  sold in 2006 will be produced by
one vendor.


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

Background and Overview:

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

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

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


                                       16
<PAGE>

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:


As of June 30,  2006,  the  Company  is  reliant  upon the cash  flows  from its
operations.  The Company does not have any external sources of liquidity,  other
than a company that advances funds to the Company against receivables,  advances
from an officer, director and major shareholder and loans from a private lender.

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

- The Company has changed its product mix  substantially  in the past two years,
and has changed its sales plan to focus on higher margin products.

- The  Company  has  expanded  the  number and  credit  quality of its  customer
accounts.

- The Company is negotiating with additional  suppliers,  but the ability to buy
goods from those suppliers is reliant on cash flows.

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

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


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


                                       17
<PAGE>

Critical Accounting Policies:

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

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

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

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

Vendor Programs:

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


Accounts Receivable:

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

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


                                       18
<PAGE>

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

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

Each month,  management reviews the accounts receivable aging report and adjusts
the allowance for bad debts based on that review.  The  adjustment is made based
on historical  experience and management's  evaluation of the  collectibility of
outstanding  accounts  receivable over 90 days. At all times,  the allowance for
bad debts is large  enough  to cover  all  receivables  that  management  is not
certain  it  will  collect,  plus  another  one  percent  of  the  net  accounts
receivable.  At June 30, 2006,  the allowance  was  $256,203.  Since the net A/R
balance  was  approximately  $7.7  million,  the amount the  Company  considered
uncollectible was under $180,000.


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.

Prior Year's Purchases and Discounts:

The company  negotiated with its suppliers for discounts and allowances  related
to  purchases  made in  2004.  The  company  and  its  suppliers  settled  their
differences in 2005. The company  accounted in 2005 for the settlement as a gain
contingency, in accordance with FAS 5, Accounting for Contingencies.

The  company  also  accounted  in 2005  for its  settlement  with  suppliers  of
discounts and  allowances as a reduction of cost of goods sold because  purchase
discounts and allowances are of a "character  typical of the customary  business
activities  of the  entity"  in  accordance  with APB 9, as  amended  by APB 30,
Reporting  the  Results of  Operations-Reporting  the  Effects of  Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and Transactions.

Results of Operations:

Three Months Ended June 30, 2006 and 2005:

Net Revenues.  Net revenues  increased by $2,293,204 or 27.0%, to $10,787,515 in
the three months ended June 30, 2006,  as compared to  $8,494,311  in 2005.  The
increase in the net revenues  was due to the  company's  shift in product  focus
from our  traditional  motherboard  business to a more diverse product base that
includes  Broadband VoIP,  Computer  Peripherals and Consumer  Electronics.  The
Company began to sell the LCD products during the second quarter of 2005, and in


                                       19
<PAGE>

the past  year has  greatly  expanded  its  distribution  channel.  The  Company
continues to sell products to new customers.  Customers who bought products from
the  Company in the three  months  ended June 30,  2006 that had not  previously
purchased our products included The Home Depot, Target, Walmart.com,  Sam's Club
Canada,  and RTO  Distribution  Inc., a large lessor of  electronic  products in
Canada.

Gross  Margin.  Gross  margin was  $2,306,753  or 21.4% in 2006,  as compared to
$1,054,872 or 12.4% in 2005. The increase in the gross margin as a percentage of
sales can be attributed entirely to the new product lines, and a couple of deals
that were completed with extremely high gross margins. The Company believes that
gross margins will stabilize around 16% in the future.

Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$198,098 to $322,127 in 2006,  as compared to $124,029 in 2005.  The increase is
entirely  due to the  Company  beginning  to utilize  outside  sales  reps.  The
commissions  to the outside  sales reps were the entire  difference in sales and
marketing  expenses  between the two quarters.  The Company has been  successful
breaking into new markets and signing new customers because of the outside reps.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $388,331 to  $1,269,686  in 2006,  as compared to $881,355 in 2005.
The increase can be explained by two factors.

On April  14,  2005 a  lawsuit  was  filed  in  Superior  Court of the  State of
California,  County of San Bernardino,  entitled Afshin Pourvajdi v. SOYO Group,
Inc.,  Nancy Chu and various Doe  defendants.  Case RCV  086992.  The  complaint
alleged  causes of action for: 1) Double  damages  for  violation  of labor code
Section  970; 2)  Misrepresentation;  3)  Intentional  Infliction  of  Emotional
Distress;  4) Breach of Contract.  The prayer for relief in the Complaint sought
damages of no less than $200,000 on the first and second causes of action,  plus
an unspecified  amount of punitive damages and an unspecified  amount of general
and punitive  damages on the third cause of action and an unspecified  amount of
general  and  punitive  damages on the fourth  cause of action.  Plaintiff  also
sought to recover all costs and attorney  fees. The case arose from a consultant
who worked for the Company in 2004 and whose  contract was not  renewed.  During
the second quarter, the Company settled the case for $70,000,  which it believed
to be less  than  the  cost of the  upcoming  trial.  As a  result,  the  entire
settlement  amount was accrued and expensed  during the  quarter,  and the legal
fees spent preparing for the case have been paid and expensed during the quarter
as well.

The  second  factor  in the  increased  G&A costs  was the  Company's  mandatory
implementation  of SFAS No. 123(R).  In December 2004, the FASB issued Statement
of Financial  Accounting  Standards No. 123 (revised 2004),  Share-Based Payment
("SFAS No.  123(R)")  which replaces SFAS No. 123,  Accounting  for  Stock-Based
Compensation  and supersedes APB Opinion No. 25,  Accounting for Stock Issued to
Employees.  SFAS No. 123(R)  requires that companies  recognize all  share-based
payments to  employees,  including  grants of  employee  stock  options,  in the
financial statements.  The cost will be based on the fair value of the equity or
liability  instruments  issued and recognized over the respective vesting period
of the  stock  option.  Pro forma  disclosure  of this cost will no longer be an
alternative  under  SFAS No.  123(R).  SFAS  123(R)  was  effective  for  public
companies  at the  beginning of the first fiscal year that begins after June 15,
2005.

The Company  adopted  SFAS No.  123(R)  effective  January 1, 2006.  The Company
adopted  the modified prospective method.  As a result, the Company recognized a


                                       20
<PAGE>

charge against earnings of $121,573 for the three months ended June 30, 2006.

Taken  together,  the  lawsuit  and the  adoption  of  SFAS  123  accounted  for
approximately  $192,000 of expenses  that were not  incurred in the three months
ended June 30, 2005.

Provision for Doubtful  Accounts.  The Company recorded a provision for doubtful
accounts  of  $53,184  in the three  months  ended June 30,  2006.  The  Company
recorded a provision for doubtful  accounts of $3,390 for the three months ended
June 30, 2005.  As of June 30, 2006,  the Company  believes  its  provision  for
doubtful accounts is adequate.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $26,574 for the three months ended June 30, 2006,  as compared to
$9,338 in 2005.  The increase is a result of the use of  leasehold  improvements
provided  by the  landlord  after the move from  Fremont  to  Ontario,  CA,  and
depreciable assets purchased in December 2005 in China for the VoIP business.

Income from  Operations.  The income from  operations was $635,182 for the three
months  ended June 30,  2006,  as compared to $36,760 for the three months ended
June 30,  2005.  This is a result of the  improved  sales  volume and  operating
margins described above.

Miscellaneous  Income.  Miscellaneous income was $754 for the three months ended
June 30, 2006.  Miscellaneous  income was $77,516 in the three months ended June
30, 2005.

Interest Income.  Interest income was $3,360 for the three months ended June 30,
2006. There was no interest income in 2005.

Interest  Expense.  Interest expense was $78,082 for the three months ended June
30, 2006. Interest expense was $12,157 for the three months ended June 30, 2005.
The  increase  was due to several  factors.  The Company  has been  aggressively
borrowing  funds on a short  term  basis as needed to support  its  growth.  The
Company is  factoring  all  receivables  to improve  cash flow and has needed to
provide Letters of Credit on different occasions to guarantee payment for goods.
Both of these programs are extremely expensive,  but were necessary to guarantee
the uninterrupted flow of goods from our suppliers overseas. The lack of an open
and ongoing credit  facility has been the Company's  biggest problem in managing
growth.  The  establishment of such a facility is the Company's primary goal for
2006.

Provision for Income  Taxes.  There was no provision for income taxes in 2006 or
in 2005.

Net Income. Net income was $561,214 for the three months ended June 30, 2006, as
compared to $102,119 for the three months ended June 30, 2005.

Six Months Ended June 30, 2006 and 2005:

Net Revenues.  Net revenues  increased by $9,878,872 or 79.3%, to $22,335,702 in
2006, as compared to $12,456,830 in 2005. The large increase in the net revenues
was due to the  company's  2005  shift in  product  focus  from our  traditional
motherboard  business to a more  diverse  product base that  includes  Broadband
VoIP, Computer Peripherals and Consumer  Electronics.  During the second quarter
of 2005,  the consumer  electronics  products were first received from suppliers
and available for sale.  Although the products sold well from the first day, the
products  were new,  there was no  publicity,  and the products had not yet been


                                       21
<PAGE>

tested or written up by  different  publications.  Now, a year later,  all those
steps have been taken,  and the sales force has had a year to build the customer
base.  Sales  during  the  quarter  were  made to over a  dozen  new  customers,
including  The Home  Depot,  Target,  Walmart.com,  Sam's Club  Canada,  and RTO
Distribution Inc., a large lessor of electronic  products in Canada. The Company
expects  sales to continue to increase at a  comparable  rate through the end of
the year, subject to supply interruptions.

Gross Margin.  Gross margin was  $3,957,841 or 17.7% for the six months ended in
2005,  as compared to  $2,576,905  or 20.7% in 2005.  The  decrease in the gross
margin is  distorted,  as the 2005  number is a result  of the  settlement  of a
dispute  with a vendor,  resulting  in large  returns  during  the  period  that
affected the gross margin.  The Company  believes that as the LCD market becomes
more mature, gross margin is likely to stabilize in the 15-16% range.


Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$33,519 to $397,013 in 2006,  as compared to $363,494 in 2005.  The  increase is
due to outside  sales reps that the  Company  has been using to develop  the new
customer  base.  This  increase  is offset by  reduced  travel  and  promotional
expenses.  It has been a full year that has passed since the Company  introduced
the new product  line. A lot of start up expenses,  travel and  promotions  that
occurred for the product launch last year were not repeated in 2006.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $939,351 to  $2,754,679 in 2006, as compared to $1,815,328 in 2005.
The increase is primarily due to three factors.

First, the cost of the annual audit increased by approximately  $75,000 over the
prior year.  The increase was primarily  due to the  Company's  untimely loss of
accounting  personnel as  described in Item 9A of report 10K dated  December 31,
2005.  The Company  believes the problem has been  solved,  and expects that the
cost of future audits will be in line with prior years.

Second,  on April 14, 2005 a lawsuit was filed in Superior Court of the State of
California,  County of San Bernardino,  entitled Afshin Pourvajdi v. SOYO Group,
Inc.,  Nancy Chu and various Doe  defendants.  Case RCV  086992.  The  complaint
alleged  causes of action for: 1) Double  damages  for  violation  of labor code
Section  970; 2)  Misrepresentation;  3)  Intentional  Infliction  of  Emotional
Distress;  4) Breach of Contract.  The prayer for relief in the Complaint sought
damages of no less than $200,000 on the first and second causes of action,  plus
an unspecified  amount of punitive damages and an unspecified  amount of general
and punitive  damages on the third cause of action and an unspecified  amount of
general  and  punitive  damages on the fourth  cause of action.  Plaintiff  also
sought to recover all costs and attorney  fees. The case arose from a consultant
who worked for the Company in 2004 and whose  contract was not  renewed.  During
the second quarter, the Company settled the case for $70,000,  which it believed
to be less  than  the  cost of the  upcoming  trial.  As a  result,  the  entire
settlement  amount was accrued and expensed  during the  quarter,  and the legal
fees spent  preparing for the case have been paid and expensed during the period
as well.

The  biggest  factor in the  increased  G&A costs  was the  Company's  mandatory
implementation  of SFAS No. 123(R).  In December 2004, the FASB issued Statement
of Financial  Accounting  Standards No. 123 (revised 2004),  Share-Based Payment
("SFAS No.  123(R)")  which replaces SFAS No. 123,  Accounting  for  Stock-Based
Compensation  and supersedes APB Opinion No. 25,  Accounting for Stock Issued to
Employees.  SFAS No. 123(R)  requires that companies  recognize all  share-based
payments to  employees,  including  grants of  employee  stock  options,  in the
financial statements.  The cost will be based on the fair value of the equity or


                                       22
<PAGE>

liability  instruments  issued and recognized over the respective vesting period
of the  stock  option.  Pro forma  disclosure  of this cost will no longer be an
alternative  under  SFAS No.  123(R).  SFAS  123(R)  was  effective  for  public
companies  at the  beginning of the first fiscal year that begins after June 15,
2005.

The Company  adopted  SFAS No.  123(R)  effective  January 1, 2006.  The Company
adopted the modified  prospective  method. As a result, the Company recognized a
charge  against  earnings of $134,952  for the three months ended March 31, 2006
and $121,573 for the three  months ended June 30, 2006.  The complete  effect of
the adoption was a non cash charge against  earnings of  approximately  $257,000
over the six month period.


Provision for Doubtful  Accounts.  The Company recorded a provision for doubtful
accounts  of  $103,184  for the six months  ended  June 30,  2006.  The  Company
recorded a provision  for doubtful  accounts of $34,513 for the six months ended
June 30,  2005.The  increase in the  provision is directly  attributable  to the
large sales  increase,  and the  Company's  conservative  approach.  The Company
believes that the  provision for doubtful  accounts is sufficient as of June 30,
2006.


Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $52,390 for the six months  ended June 30,  2006,  as compared to
$18,087 in 2005.  The increase is a result of the use of leasehold  improvements
provided by the  landlord  after the move from  Fremont to Ontario,  CA, and the
purchase  of  depreciable  equipment  in  December  2005 in  China  for the VoIP
business.

Income from  Operations.  The income from  operations  was  $650,575 for the six
months ended June,  2006, as compared to income from  operations of $345,483 for
the six months ended June 30,  2005.  This is a direct  result of the  increased
sales volumes and strong margins.

Miscellaneous  Income.  Miscellaneous income was $5,285 for the six months ended
June 30, 2006, as opposed to $166,688 for the six months ended June 30, 2005.

Interest  Income.  Interest  income was $6,607 for the six months ended June 30,
2006. There was no interest income in 2005.

Interest  Expense.  Interest  expense was $150,469 for the six months ended June
30, 2006.  Interest  expense was $23,378 for the six months ended June 30, 2005.
The  increase  was due to several  factors.  The Company  has been  aggressively
borrowing  funds on a short  term  basis as needed to support  its  growth.  The
Company is  factoring  all  receivables  to improve  cash flow and has needed to
provide Letters of Credit on different occasions to guarantee payment for goods.
Both of these  programs were  necessary to guarantee the  uninterrupted  flow of
goods  from our  suppliers  overseas.  The  sale of all  invoices  is done  with
recourse,  which means that if the factor is not paid,  they can charge back the
Company for the unpaid  invoice plus  interest.  The lack of an open and ongoing
credit  facility to enhance  and manage  growth has been the  Company's  biggest
challenge.  The  establishment of such a facility is the Company's  primary goal
for 2006.


                                       23
<PAGE>

Provision for Income  Taxes.  There was no provision for income taxes in 2006 or
in 2005.

Net Income.  Net income was $511,998 for the six months ended June 30, 2006,  as
compared to $488,793 for the six months  ended June 30,  2005.  The 2006 numbers
include the charges for the  adoption of SFAS 123R.  Looking at the numbers on a
comparable basis, the 2006 numbers are significantly  better,  which is a result
of strong sales volume and strong operating margins.

Financial Condition - June 30, 2006:

Liquidity and Capital Resources:
As of June 30,  2006,  the  Company  is  reliant  upon the cash  flows  from its
operations.  The Company does not have any external sources of liquidity,  other
than advances from an officer,  director and major  shareholder and loans from a
private lender.

Operating  Activities.  The Company  generated  cash of  $130,437  in  operating
activities  during the six months ended June 30, 2006,  as compared to utilizing
cash of $4,646,604 in operating  activities during the six months ended June 30,
2005.

At June 30, 2006,  the Company had cash and cash  equivalents  of  $757,911,  as
compared to $828,294 at December 31, 2005.

The Company had working  capital of  $1,405,840 at June 30, 2006, as compared to
working capital of $689,141 at December 31, 2005, resulting in current ratios of
1.13:1 and 1.04:1 at June 30, 2006 and December 31, 2005, respectively.

Accounts  receivable  increased to  $7,667,217  at June 30, 2006, as compared to
$7,278,520  at  December  31,  2005,  an  increase of  $388,697.  The  Company's
provision  for  doubtful  accounts  stood at  $256,203 as of June 30,  2006,  as
compared to $589,224 at December 31, 2005.

Inventories  decreased to $3,888,100 at June 30, 2006, as compared to $7,991,030
at December  31,  2005, a decrease of  $4,102,930  or 51%.  The Company  expects
inventory  levels to remain low until new  products are offered for sale and the
Company  obtains  outside  financing.  Currently,  the Company does not have the
liquidity to purchase large quantities of inventory.

Accounts  payable  decreased to  $10,540,512  at June 30,  2006,  as compared to
$13,977,579 at December 31, 2005, a decrease of  $3,437,067,  as a direct result
of reduced  inventory  purchases.  The decrease in payables is comparable to the
decrease in inventory levels as older purchases were paid for and newer purchase
volumes declined.

Accrued  liabilities  decreased  to  $266,876 at June 30,  2006,  as compared to
$1,287,108  at December 31, 2005, a decrease of  $1,020,232  or 79.3%.  The main
reason for the  decrease  is reduced  accruals  for RMA  expenses.  Now that the
Company has been  selling the LCD  products  for a full year,  the Company has a
track record at estimating returns and repairs. The Company believes its current
accruals are sufficient to handle all expected returns and reserves.

Financing  Activities.  In October 2005, the Company  borrowed  $165,000 from an
individual for working capital purposes.  As of June 30, 2006,  $100,000 is owed
to that individual.


                                       24
<PAGE>

Principal Commitments:

A summary of the Company's  contractual  cash obligations as of June 30, 2006 is
as follows:


                                        Payments Due By Period
                                        ----------------------

Contractual                          Less than   Between    Between    After
Cash Obligations         Total       1 year      1-2 years  3-5 years  5 years
                         ----------  ----------  ---------  ---------  --------

Operating leases         $  514,005  $  212,692  $ 301,313       --    $   --
Note payable                100,000     100,000       --         --        --
Purchase Commitments        837,570     837,570       --         --        --
Total contractual cash
  obligations            $1,451,575  $1,150,262  $ 301,313  $    --    $   --
                         ----------  ----------  ---------  ---------  --------

Purchase Commitments:

At June 30, 2006 the company had purchased inventory that had not yet arrived in
the warehouse costing $837,570. The company had no other long term or short term
purchase commitments.

Off-Balance Sheet Arrangements:

At June 30,  2006,  the Company did not have any  transactions,  obligations  or
relationships that could be considered off-balance sheet arrangements.

Commitments and Contingencies:

At June 30, 2006, the Company did not have any material  commitments for capital
expenditures.

Recent Accounting Pronouncements:

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections,
a replacement  of APB Opinion No. 20 and FASB  Statement No. 3. SFAS 154 applies
to all voluntary  accounting principle changes as well as the accounting for and
reporting of such  changes.  SFAS 154 is effective  for  accounting  changes and
corrections of errors made in fiscal years beginning after December 15, 2005.

SFAS 154 requires  voluntary changes in accounting  principle be retrospectively
applied to financial statements from previous periods unless such application is
impracticable.   Changes  in  depreciation,   amortization,   or  depletion  for
long-lived,  non-financial  assets are  accounted  for as a change in accounting
estimate that is affected by a change in accounting  principle,  under the newly
issued standard.

SFAS 154 replaces  APB Opinion No. 20 and SFAS 3. SFAS 154 carries  forward many
provisions of Opinion 20 and SFAS 3 without change  including  those  provisions
related to  reporting a change in  accounting  estimate,  a change in  reporting
entity,  correction  of an error and  reporting  accounting  changes  in interim
financial statements. The FASB decided to completely replace Opinion 20 and SFAS
3 rather than amending them in keeping to the goal of simplifying U.S. GAAP. The
provisions  of SFAS No. 154 are not  expected  to have a material  effect on the
Company's consolidated financial position or results of operation.

In  December  2004,  the FASB issued SFAS No.  153,  "Exchanges  of  Nonmonetary
Assets,  an amendment of APB Opinion No. 29". SFAS 153 addresses the measurement
of exchanges of nonmonetary  assets. It eliminates the exception from fair value
measurement for nonmonetary  exchanges of similar productive assets in paragraph
21(b)  of APB  Opinion  No.  29,  Accounting  forNonmonetary  Transactions,  and
replaces  it  with an  exception  for  exchanges  that  do not  have  commercial
substance.  SFAS  153  specifies  that a  nonmonetary  exchange  has  commercial


                                       25
<PAGE>

substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly as a result of the exchange.

The exception under APB 29 required that some  nonmonetary  exchanges,  although
commercially substantive,  be recorded on a carryover basis. SFAS 153 eliminates
the  exception  to fair value for  exchanges  of similar  productive  assets and
replaces it with a general exception for exchange  transactions that do not have
commercial  substance--that  is, transactions that are not expected to result in
significant changes in the cash flows of the reporting entity.

SFAS 153 is  effective  on  January  1, 2006.  The  adoption  of SFAS 153 is not
expected to have an impact on the Company's consolidated financial statements or
disclosures.

In December 2004, the FASB issued  Statement of Financial  Accounting  Standards
No. 123 (revised 2004),  Share-Based  Payment ("SFAS No. 123(R)") which replaces
SFAS No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion
No. 25, Accounting for Stock Issued to Employees.  SFAS No. 123(R) requires that
companies recognize all share-based  payments to employees,  including grants of
employee stock options, in the financial  statements.  The cost will be based on
the fair value of the equity or liability instruments issued and recognized over
the respective  vesting period of the stock option. Pro forma disclosure of this
cost will no longer be an  alternative  under SFAS No.  123(R).  SFAS  123(R) is
effective  for public  companies at the  beginning of the first fiscal year that
begins after June 15, 2005.

Transition  methods  available to public  companies  include either the modified
prospective  or  modified  retrospective   adoption.  The  modified  prospective
transition method requires that compensation cost be recognized beginning on the
effective  date, or date of adoption if earlier,  for all  share-based  payments
granted after the date of adoption and for all unvested  awards  existing on the
date of adoption. The modified  retrospective  transition method, which includes
the requirements of the modified  prospective  transition  method,  additionally
requires the restatement of prior period financial  information based on amounts
previously recognized under SFAS No. 123 for purposes of pro-forma  disclosures.
The Company  adopted  SFAS No.  123(R)  effective  January 1,  2006.The  Company
adopted the modified  prospective  method. As a result, the Company recognized a
charge against earnings of $256,524 for the six months ended June 30, 2006.

In November 2004, the FASB issued SFAS No. 151,  "Inventory  Costs, an amendment
of ARB No. 43,  Chapter 4." SFAS 151 amends the guidance in ARB No. 43,  Chapter
4, "Inventory  Pricing," to clarify the accounting for abnormal  amounts of idle
facility  expense,  freight,  handling costs,  and wasted  material  (spoilage).
Paragraph  5 of ARB 43,  Chapter  4,  previously  stated  that ". . . under some
circumstances,  items such as idle facility expense,  excessive spoilage, double
freight,  and  rehandling  costs may be so abnormal as to require  treatment  as
current period charges.  . . ." SFAS 151 requires that those items be recognized
as current-period  charges  regardless of whether they meet the criterion of "so
abnormal." In addition,  SFAS 151 requires that  allocation of fixed  production
overheads  to the costs of  conversion  be based on the normal  capacity  of the
production facilities.

SFAS 151 is effective on January 1, 2006.  Earlier  application is permitted for


                                       26
<PAGE>

inventory costs incurred  beginning  January 1, 2005. The provisions of SFAS 151
shall be applied prospectively. The adoption of SFAS 151 is not expected to have
an impact on the Company's consolidated financial statements or disclosures.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

As the Company's debt obligations at March 31, 2006 are primarily  short-term in
nature and  non-interest  bearing,  the  Company  does not have any risk from an
increase in interest rates. However, to the extent that the Company arranges new
interest-bearing borrowings in the future, an increase in current interest rates
would cause a  commensurate  increase in the  interest  expense  related to such
borrowings.

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

ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure and Control Procedures
-----------------------------------------------

Based on a current  evaluation under the supervision and with the  participation
of the Company's  management,  the  Company's  principal  executive  officer and
principal  financial  officer  have  concluded  that  the  Company's  disclosure
controls and  procedures as defined in rules  13a-15(e) and 15d-15(e)  under the
Securities Exchange Act of 1934, as amended (Exchange Act) were not effective as
of June 30, 2006 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 (i)
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 adequate.
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 adequate 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  adequate  financial  reporting  process  because of the  aforementioned
material  weaknesses,  including the  difficulty in  identifying  and assembling
relevant  contemporaneous  documentation for ongoing business transactions,  and
significant  turnover  in  the  Company's  financial  staff.  Accordingly,   the
Company's Chief Executive  Officer and Chief  Financial  Officer  concluded that


                                       27
<PAGE>

there were  significant  deficiencies,  including  material  weaknesses,  in the
Company's  internal  controls  over its  financial  reporting  at the end of the
period ended June 30, 2006.

A significant  deficiency  should be  classified  as a material  weakness if, by
itself or in  combination  with other control  deficiencies,  it results in more
than a remote likelihood that a material misstatement in the company's annual or
interim financial statements will not be prevented or detected.

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

     >>   The  Company  hired  a  new  Accounting  Manager,  then  replaced  the
          Accounting  Manager with a more  qualified  candidate.  That  employee
          recently left the Company to return  overseas for a family  emergency.
          The employee will not be returning to the Company, which means that as
          of March 31,  2006,  the Company is  operating  without an  Accounting
          Manager  or   Controller.   While  the  Company  is  searching  for  a
          replacement,  the Company  has  retained a  financial  consultant  and
          former  CPA to oversee  the day to day  management  of the  accounting
          department.  The Company has recently  added  additional  personnel to
          complete  the  day  to day  accounting  tasks.  The  Company  hired  a
          qualified  accounting  manager but resigned  around  August 2006.  The
          Company needs and is seeking to immediately hire an Accounting Manager
          and  additional   personnel  to  focus  on  financial  accounting  and
          reporting issues.

     >>   Each  month,   the  Company's   Accounting   Manager   supervises  the
          reconciliation  of the accounts  payable  subsidiary  ledgers with the
          general  ledger,  and  approves  adjustments  to  inventory  based  on
          reconciliation  of the general  ledger to physical  inventory  counts.
          Each quarter, the Accounting Manager records inventory  adjustments to
          the lower of cost or market.  These  tasks will be  supervised  by the
          financial consultant until the new Accounting Manager is hired.

     >>   Every month, the Accounting  Manager  reconciles the bank accounts and
          compares the bank  reconciliation  with the balance per general ledger
          and the daily cash report,  reviews the recording of accounts  payable
          to  vendors  for  purchases  of  inventory,   and  prepares  financial
          statements  with a complete  set of  adjustments.  These tasks will be
          supervised  by the  financial  consultant  until  the  new  Accounting
          Manager is hired.

     >>   A complete  inventory is physically  counted and reconciled at the end
          of every month.


Changes in Internal Control over Financial Reporting
----------------------------------------------------
We made  changes  during  our most  recently  completed  fiscal  quarter  in our
internal control over financial reporting that have materially affected , or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

In light of the foregoing,  in 2006,  management  took the following  actions to
rectify the significant deficiencies and material weaknesses as described above.

     >>   Management  hired  experts  to  assist  with the  financial  reporting
          required,  and to train Company employees to perform such tasks in the
          future.


                                       28
<PAGE>

     >>   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 software  will be
          installed and operational during the fourth quarter of 2006.


In conjunction with the audit review of the Company's  financial  statements for
the quarter ended June 30, 2006, the Company's Chief  Executive  Officer and its
Chief  Financial  Officer  reviewed and evaluated the corrective  actions listed
above. The officers  believed that such corrective  actions minimize the risk of
material misstatement,  but the corrective actions continued to have significant
deficiencies.

As of June 30,  2006,  the  Company  is working  quickly  to hire an  Accounting
Manager and additional  finance  personnel.  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,
and the new Accounting Manager is hired, all significant  deficiencies will have
been addressed and corrected.


                           PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

On August 2, 2004, a lawsuit was filed in  California  Superior  Court  entitled
Gerry Normandan.  et al, v. SOYO Inc. Case No. RCV 082128.  The case seeks class
action status and alleges defects in motherboards  which Soyo  distributes,  and
that the  Company  misrepresented  and omitted  material  facts  concerning  the
motherboards.  The plaintiff seeks  restitution and  disgorgement of all amounts
obtained by defendant as a result of alleged misconduct,  plus interest,  actual
damages,  punitive  damages  and  attorneys'  fees.  The  Company is  vigorously
defending  the lawsuit and  believes  that it will be resolved  with no material
adverse effect on the Company.

On April  14,  2005 a  lawsuit  was  filed  in  Superior  Court of the  State of
California,  County of San Bernardino,  entitled Afshin Pourvajdi v. SOYO Group,
Inc.,  Nancy Chu and various Doe  defendants.  Case RCV  086992.  The  complaint
alleged  causes of action for: 1) Double  damages  for  violation  of labor code
Section  970; 2)  Misrepresentation;  3)  Intentional  Infliction  of  Emotional
Distress;  4) Breach of Contract.  The prayer for relief in the Complaint sought
damages of no less than $200,000 on the first and second causes of action,  plus
an unspecified  amount of punitive damages and an unspecified  amount of general
and punitive  damages on the third cause of action and an unspecified  amount of
general  and  punitive  damages on the fourth  cause of action.  Plaintiff  also
sought to recover all costs and attorney  fees. The case arose from a consultant
who  worked for the  Company in 2004 and whose  contract  was not  renewed.  The
Company settled the case during the second quarter of 2006 for $70,000. Although
the Company  believes  that it committed no  wrongdoing,  the cost of trying the
case  and  retaining  expert  witnesses  would  have  exceeded  the  cost of the
settlement.  The Company made a business  decision to end the litigation with no
possible further costs.

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


                                       29
<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, 2005, 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 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















                                       30
<PAGE>

SIGNATURES

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




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




DATE:  August 14, 2006                                By: /s/ Ming Tung Chok
                                                         -----------------------
                                                         Ming Tung Chok
                                                         President and Chief
                                                         Executive Officer


DATE:  August 14, 2006                                By: /s/ Nancy Chu
                                                         -----------------------
                                                         Nancy Chu
                                                         Chief Financial Officer


DATE:  August 14, 2006                                By: /s/ Paul F. Risberg
                                                         -----------------------
                                                         Name: Paul F. Risberg
                                                         Title: Director


DATE:  August 14, 2006                                By: /s/ Chung Chin Keung
                                                         -----------------------
                                                         Name: Chung Chin Keung
                                                         Title: Director


DATE:  August 14, 2006                                By: /s/ Zhi Yang Wu
                                                         -----------------------
                                                         Name: Zhi Yang Wu
                                                         Title: Director





                                       31
<PAGE>

                               INDEX TO EXHIBITS



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


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

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

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

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



















                                       32