SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


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

                   For the fiscal year ended December 31, 2007


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

     For the transition period from _________________ to __________________

                        Commission File Number 333-42036


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

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


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

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

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

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

     Indicate by check mark if the registrant is a well-known  seasoned  issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

     Indicate by check mark if the  registrant  is not  required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]


<PAGE>


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

    Check  if  disclosure  of  delinquent  filers  in  response  to Item  405 of
Regulation  S-K  (ss.229.405 of this chapter) is not contained in this form, and
no  disclosure  will be  contained  to the best of  registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]

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


     The aggregate market value of the voting and non-voting  common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity,  as of March
28, 2007 was  $48,884,376,  based on the closing bid price of $0.94 per share on
March 28, 2007.

     As of March 31, 2008, there were 52,004,656 shares Outstanding.

     Documents Incorporated by Reference: None















<PAGE>


                                SOYO GROUP, INC.
                                    FORM 10-K
                                      INDEX


                                     PART I
Item 1.          Business......................................................4
Item 1A.         Risk Factors.................................................14
Item 1B.         Unresolved Staff Comments....................................16
Item 2.          Properties...................................................16
Item 3.          Legal Proceedings............................................16
Item 4.          Submission of Matters to a Vote of Security Holders..........18

                                     PART II

Item 5.          Market for Registrant's Common Equity, Related Stockholder
                     Matters and Issuer Purchases of Equity Securities........18
Item 6.          Selected Financial Data......................................20
Item 7.          Management's Discussion and Analysis of Financial
                     Condition and Results of Operations......................21
Item 7A.         Quantitative and Qualitative Disclosures About Market Risk...34
Item 8.          Financial Statements and Supplementary Data..................35
Item 9.          Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure......................59
Item 9A.         Controls and Procedures......................................60
Item 9B.         Other Information............................................85

                                    PART III

Item 10.         Directors, Executive Officers and Corporate Governance.......60
Item 11.         Executive Compensation.......................................62
Item 12.         Security Ownership of Certain Beneficial Owners and
                     Management and Related Stockholder Matters...............65
Item 13.         Certain Relationships, Related Transactions and Director
                     Independence.............................................66
Item 14.         Principal Accountant Fees and Services.......................66

                                     PART IV

Item 15.         Exhibits and Financial Statement Schedules...................67
                 Signatures...................................................69




                                      iii

<PAGE>

PART I

ITEM 1. BUSINESS.

When used in this Form 10-K, the words "expects," "anticipates,  "estimates" and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are subject to risks and  uncertainties,  including  those set forth
below under "Risks and Uncertainties," that could cause actual results to differ
materially from those projected.  These forward-looking statements speak only as
of the date hereof.  We expressly  disclaim any  obligation  or  undertaking  to
release  publicly  any updates or revisions  to any  forward-looking  statements
contained herein to reflect any change in our  expectations  with regard thereto
or any change in events,  conditions or  circumstances on which any statement is
based. This discussion should be read together with the financial statements and
other financial information included in this Form 10-K.

Company History

SOYO  Group,  Inc.  formerly  Vermont  Witch  Hazel  Company,   Inc.,  a  Nevada
corporation (the "Company"),  was incorporated on August 3, 1994 in the State of
Vermont.  For seven years,  the Company  created and marketed  skin care and pet
care products.  The Company  manufactured  and distributed a line of witch hazel
based natural, hypoallergenic soaps, cleansers and other skin aids.

On December 3, 2001, the Company  transferred all its net assets and business to
its wholly  owned  subsidiary,  The Vermont  Witch Hazel Co.,  LLC, a California
limited  liability  company  which had been formed in October  2001.  Also,  the
Company's  board  of  directors  declared  a  dividend  of all of the  Company's
interest in the LLC to be distributed to the Company's shareholders of record on
December 10, 2001. Each shareholder received one member unit in the LLC for each
share of common stock held of record by the shareholder.

On December 27, 2001,  pursuant to a stock purchase agreement dated December 27,
2001, Kevin Halter Jr. purchased  6,027,000 shares of the Company's common stock
from Deborah Duffy  representing  approximately  51% of the Company's issued and
outstanding  shares of  common  stock.  Simultaneously  with the  purchase,  the
officers and directors of the Company,  namely,  Deborah Duffy, Rachel Braun and
Peter C.  Cullen,  resigned  and the  following  three  persons  were elected to
replace  them:  Kevin  Halter Jr.,  President  and  Director,  Kevin B.  Halter,
Secretary, Treasurer and Director and Pam Halter, a Director.

On October 8, 2002,  the Company  changed its domicile from the State of Vermont
to the State of Nevada.

On  October  24,  2002,  pursuant  to the  terms of a  Reorganization  and Stock
Purchase  Agreement  ("Reorganization  Agreement") dated as of October 15, 2002,
the Company  acquired (the  "Acquisition")  all of the equity  interest of SOYO,
Inc., a Nevada corporation  ("SOYO Nevada" or "SOYO Group"),  which was a wholly
owned subsidiary of SOYO Computer,  Inc., a Taiwan company ("SOYO Taiwan").  The
Acquisition  involved  several  simultaneous  transactions  which  are set forth
below.

     1.   Mr. Ming Tung Chok  ("Ming")  and Ms.  Nancy Chu  ("Nancy")  purchased
          jointly  6,026,798  shares of the Company's  common stock for $300,000
          from Kevin  Halter  Jr., a  controlling  shareholder  of the  Company,
          thereby  making  Ming  and  Nancy  the  majority  shareholders  of the
          Company.



                                       4
<PAGE>

     2.   The Company issued 1,000,000  shares of Class A Convertible  Preferred
          Stock,  par value  $0.001,  with a $1.00 per share stated  liquidation
          value to SOYO Taiwan in  exchange  for all of the  outstanding  equity
          interest in SOYO Group, Inc.

     3.   The  Company  issued  28,182,750  shares  of common  stock,  par value
          $0.001, to Ming and Nancy as part of the acquisition.

     4.   Kevin Halter Jr. resigned from his position as President and Director,
          Kevin B Halter resigned from his position as Secretary,  Treasurer and
          Director  and Pam  Halter  resigned  from her  position  as  Director.
          Effective  October 25, 2002, Nancy, Ming and Bruce Nien Fang Lin began
          serving  their terms as directors of the Company.  These newly elected
          directors then appointed the following persons as officers:


                          Name                              Title
                -------------------------    -----------------------------------
                Ming Tung Chok               President, Chief Executive Officer
                Nancy Chu                    Chief Financial Officer
                Nancy Chu                    Secretary

Bruce Nien Fang Lin resigned and left the Company in July 2003.

The  consideration  for the  Acquisition  was  determined  through  arms  length
negotiations  and a Form 8-K was filed on October 30, 2002, as amended by a Form
8-K/A filed on December 20, 2002. On November 15, 2002, the Company  changed its
name from Vermont Witch Hazel Company, Inc. to SOYO Group, Inc.

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

Through  October 24, 2002, the Company had only nominal  assets and  liabilities
and no current business operations. As a result of the Acquisition,  the Company
continued the business operations of SOYO Nevada, which are described here.

SOYO Inc. was incorporated in Nevada on October 22, 1998.

Through 2004, the Company was a distributor of computer products,  a substantial
portion of which were  manufactured  in Taiwan and China.  The Company offered a
full  line of  designer  motherboards  and  related  peripherals  for  intensive
multimedia applications,  corporate alliances,  telecommunications and specialty
market  requirements.  The product line included basic bare bones PC motherboard
systems,  flash  memory,  small disk  drives  for  corporate  and mobile  users,
internal multimedia reader/writer and wireless networking solutions products for
the small office and home office (SOHO) market segment.

In 2004, the Company  expanded its product  offerings into new and higher margin
segments.  The offerings were divided into three areas:  Computer Components and
Peripherals, Communications Equipment, and Consumer Electronics.

SOYO Group's  products  have always been sold  through an  extensive  network of
authorized  distributors to resellers,  and value-added resellers (VARs). SOYO's
distribution  network also includes  product  sales  through major  retailers to
consumers throughout North America and Latin America.



                                       5
<PAGE>

PRODUCTS

SOYO, Inc. is the exclusive  provider of all SOYO brands of products in the USA,
Canada,  and Latin  America,  and  actively  promotes  the SOYO  brands in these
regions.  SOYO, Inc.'s brands include Prive, SOYO, Honeywell and Le Vello. Other
electronics  products and brands are licensed,  such as the  Honeywell  Brand of
Consumer Electronics Products.


All of the products  available to SOYO customers  fall into the product  groups:
Consumer Electronics, Computer Peripherals and Communications.

Consumer Electronics Products

SOYO distributes products under the following brands:

SOYO:

The SOYO brand has been in use since SOYO's inception.  The brand is designed as
SOYO's  mid-tier  product line,  the goal is a quality  product at an affordable
price.  The SOYO Brand is the largest and most diverse brand the Company  sells.
Under this brand name, SOYO carries LCD TV's, LCD monitors,  Bluetooth Headsets,
Wall-Mounts and Portable  Storage Devices.  Products come in various series,  as
follows:

LCD TV's
--------
Onyx Series: 26", 32", 37", 42"
Dymond Series: 32", 42", 47"
Crystal Series: 32", 42", 47"

In 2007 SOYO's flat-panel, HD-Ready LCD TV's ranged in sizes from 20-inch at 640
x 480 resolution to 47-inch at 1920 x 1080 resolution. The products offer a wide
range of inputs for connecting almost any device,  and can even act as a display
unit for a PC while incorporating  advanced imaging  technology.  SOYO TV's also
offer  features such as three HDMI inputs,  SRS audio surround  sound,  3:2 pull
down,  progressive scan and a digital 3D comb filter that brings larger, clearer
pictures.  The Atlas LCD TV features two removable 10-watt speakers that deliver
stereo surround sound.


LCD Monitors
------------
SOYO: 14.1" Wide, 15", 15.4" Wide
Citrine Series: 17", 17" Wide, 19", 19" Wide, 20.1" Wide, 22" Wide
Emerald Series: 19"
Topaz Series: 24"S, 24"LC
Opal Series: 17"

SOYO Vista Certified Wide Screen LCD Monitors 17"W, 20", 22"W and 24"W

SOYO LCD Monitors incorporate TFT (Thin Film Transistor) display technology in a
compact design that frees up desk space.  Designed to provide a display solution
for a wide  variety of  applications  at the  office,  home or school,  the SXGA
(Super Extended Graphics Array) technology delivers text and images to assist in



                                       6
<PAGE>

creating  spreadsheets  and reports,  writing emails,  preparing  presentations,
watching movies, playing games, or surfing the Internet.

Prive:

The Prive brand is comprised of a 26 inch LCD TV, a 32 inch LCD TV and a 24 inch
LCD monitor and is  positioned  as SOYO's entry level price point brand.  The 26
inch LCD TV's and 32 inch LCD TV's  were  first  introduced  in May 2007 and are
available at Wal-Mart  Canada stores.  The 24 inch LCD monitor was introduced in
October  2007 and is  available  at Fry's  Electronics  and Office  Depot Canada
stores.


Portable Storage
----------------

SlimEX 1.8" USB 2.0 20GB  External Hard Drive (same hard drive as the hard drive
in Apple's iPod) assembled in the USA

SlimEX 1.8" USB 2.0 40GB  external Hard Drive (same hard drive as the hard drive
in Apple's iPod) assembled in the USA

The SlimEx 20GB and 40GB USB 2.0 Hard Drives are designed for desktop and laptop
users who need high capacity portable storage in an ultra-small package.  Audio,
video and picture files can be quickly  displayed,  copied or transported to any
Computer with USB  interface.  Incorporating  a 1.8-inch hard disk from Toshiba,
the Slim  Drives  measure  just 3.9" x 2.4" x 0.4" (LWH) and weigh only 2.85 oz.
The Slim  Drives fit easily into a pocket,  purse or  briefcase  for  convenient
travel and leave a small footprint on the desktop.  The drive is compatible with
both PC and Macintosh operating systems. The SlimEx's USB 2.0 interface delivers
fast  transfer  rates of up to 480Mbps and does not require any  external  power
supplies or batteries.

Flash memory is a specialized  type of memory  component used to store user data
and  program  codes.  It retains  such  information  even when the power is off.
Although flash memory is currently used predominantly in mobile phones and PDAs,
it is also  found in common  consumer  products,  including  MP3 music  players,
handheld voice recorders and digital answering  machines.  Portable flash memory
has assumed  many  various  forms over time.  To address  this  growing  product
segment, SOYO currently offers a 12-in-1, 9-in-1 and 6-in-1 flash media reader /
writer. With both internal and external system configurations  available,  these
products allow for connectivity of multiple devices to computers and the ability
to download  digital  photos,  video,  MP3 music or  synchronize  with  handheld
devices all at the same time.  The multiple  memory  reader/writer  slots can be
used simultaneously.  The systems are designed to be universally compatible with
all CPU systems and external devices.

Bluetooth Products
------------------

SOYO's  Wireless  Bluetooth   FreeStyler(TM)   HS11  wireless  Bluetooth  Stereo
Headphones (with up to 6 hours of use before  recharging) offer a convenient way
to listen to your favorite music player (iPod, MP3 Player,  Radio, TV or similar
device).  The SOYO FreeStyler HS 11 comes with a Bluetooth wireless  transmitter
which  syncs with the  FreeStyler  HS 11 Stereo  Headphones  or other  Bluetooth
receivers  with just a touch of a button.  The SOYO  FreeStyler  HS 11 also will
sync to any  Bluetooth  equipped  mobile phone or PDA.  This  function will also
allow you to use the  FreeStyler  HS 11 as a wireless  headset  for your  mobile
phone or PDA at ranges up to 30 feet.



                                       7
<PAGE>

SOYO's  FreeStyler(TM)  500 Bluetooth  Headset offers up to 6 hours of talk time
and up to 170 hours of standby  time.  It was  SOYO's  first  mono  headset  and
offered  Bluetooth 1.2 technology.  As the technology has matured the technology
has gotten  better.  Some of the  advances  in the new  Bluetooth  2.0  standard
include clear sound, smaller more lightweight design and longer battery life.

SOYO  FreeStyler(TM)  600 Mono  Bluetooth  Headset  offers up to 8 hours of talk
time,  and up to 200 hours of standby time. It is the ideal  accessory for hands
free operation of your mobile phone or PDA. The FreeStyler 600 offers the latest
Bluetooth  2.0  technology  and offers a light weight design with a flexible ear
hook making the FreeStyler 600 easy to adjust for maximum comfort.


The FreeStyler(TM)  Bluetooth product line is available in stereo and single ear
versions.  Supported by Bluetooth 2.0 Technology,  FreeStyler(TM) provides up to
10 meter  operation  (33  feet)  range  hands  free,  and its auto  pairing  and
authentication  function allows users to connect to their cellular phone and PDA
wirelessly.  With up to 6-8 hours of talk time and up to 200 hours standby time,
the 120mA 3.7V rechargeable battery requires 1.5~2.0 hours charging time.


Dragon HD Accessories
---------------------

SOYO's UL Approved  Dragon  Wall Mounts come in Pro Series and Pro Series  Slim.
The Pro Series Pro 120 Wall  Mounts  hold  22"-37" TV and the Pro Series Pro 110
Wall  Mounts  hold a 37" to 60" TV.  Both  have a 0 to 15 degree  tilt.  The Pro
Series  Slim Pro 120 holds a 22" to 37" TV and the Pro Series Pro 110 Slim holds
a 37" to 60" TV.


Motherboards/Bare Bones Systems

The motherboard,  which is the physical  arrangement in a computer that contains
the computer's basic circuitry and components, has been an integral part of most
personal computers for more than twenty years.  SOYO's Bare Bones System product
solution  is the basis for any  computer  system and is offered in AMD and Intel
platform configurations. Of the more than 300 motherboard products that SOYO has
sold in the past there remain a few active  products in this category as well as
ongoing support for the install base. SOYO now focuses on specialty  markets for
its motherboard systems.

Le Vello

The Le Vello Brand of Designer  Home Theatre  Furniture  was  introduced  in May
2007,  and is a natural  extension  to  SOYO's  LCD TV  business.  Le Vello is a
stylish and affordable complement to today's contemporary  lifestyle,  and comes
in two series:

The  Glasse  Series is made with  reinforced  steel  and  fingerprint  resistant
tempered glass shelving. The Glasse Series comes in the following models: Axion,
Nextor, Vesta and Prelude. The Axion is the top of the line product which offers
striking,  architectural  lines and the appearance of shelves that "float".  The
Nextor offer the ultimate in form and function  featuring  frosted  temper glass
shelving.  The Vesta  utilizes an "open air" design to  maximize  air flow.  The
Prelude is an introduction  to style,  elegance,  and quality.  This unit offers
Frosted glass shelving and a very sturdy steel construction.

The  Woodideas  Series is made of wood (MDF) and tempered  Glass  shelving.  The
Woodideas  Series comes in the  following  models:  Titans,  Selene,  Urbano and
Costar.  The Titans  series is available in  piano-black  finish or a high gloss
dark  Mahogany.  The Selene  series is available in piano black or matte silver.



                                       8
<PAGE>

The Urbano  series  which  holds up to a 50 inch TV offers a two tone  finish in
silver and black. The Costar series is available in both black or matte silver.

Honeywell

SOYO  introduced the Honeywell  Brand of Consumer  Electronics in 2007 as SOYO's
Top Tier  Brand.  The product  line was created to compete  with Tier One Brands
like Sony,  Samsung,  and Sharp.  The  products  are feature rich and offered at
competitive prices.  Through a licensing agreement with Honeywell  International
Inc.,  SOYO has the  ability  to  produce  many  types of  consumer  electronics
products,  but have  elected  to start the  product  offering  with  their  core
competencies; listed as follows:

Honeywell SecuraDrive(TM) 1.8 inch Hard Drives
----------------------------------------------

Announced  in October  2007,  the  Honeywell  SecuraDrive(TM)  USB 1.8 inch Hard
Drives are  currently  available in 80GB and, 120 GB  capacities,  with a 160 GB
capacity available in early 2008. The  SecuraDrives(TM)  products are compatible
with all PC computers and utilize the Samsung SpinPoint N2 line of 1.8 inch hard
drives,   which  feature  an  8  MB  buffer,  4200  RPM,  and  up  to  1500G  of
non-operational   linear  shock.  The   SecuraDrive's(TM)   metal  alloy  casing
dissipates heat and adds additional shock resistance.  The major feature of this
product line is the security of data via password protection technology allowing
the user to allocate part or all of the hard drive to be protected by the user's
own private password,  which secures data in the event that the  SecuraDrive(TM)
is lost or stolen.  The drive is a perfect  solution  for storing  sensitive  or
private data, backing-up your Laptop or desktop, storing MP3 music files, videos
files and photos.

Honeywell Arius(TM) LCD Monitors
--------------------------------

Announced in December 2007, the 19 inch and 22 inch models will be available for
sale at the end of the  first  quarter  of 2008.  The  Honeywell  Arius(TM)  LCD
Monitors  ultimately  will be available in 19, 22 and 24 inches.  SOYO created a
unique design for the  monitors.  The design is full  function,  meaning that it
features  four ranges of motion:  tilt,  swivel,  rotate and height  adjustment,
instead  of the  standard  one or two ranges of motion.  The  monitors  can also
swivel left to right 180 degrees and rotate  counter-clockwise 90 degrees.  This
design is exclusive to the Honeywell LCD Arius(TM) Monitors.  These monitors are
designed to compete with Samsung, Dell, and Gateway.

The 24 inch wide LCD Monitor  features three USB ports as well as a built-in 1.3
mega pixel webcam and built-in microphone. It also features a 2ms response time,
500 nits brightness,  1,000:1  contrast ratio and a native  resolution of 1920 x
1200 at 60 Hz.

The 22 inch wide LCD Monitor  features three USB ports as well as a built-in 1.3
mega pixel  webcam and  built-in  microphone.  The monitor  also  features a 2ms
response time, 300 nits brightness, 700:1 contrast ratio and a native resolution
of 1680 x 1050 at 60 Hz.

The 19 inch wide LCD Monitor  features four USB ports,  a 2ms response time, 300
nits brightness,  500:1 contrast ratio and native resolution of 1440 x 900 at 60
Hz.

Honeywell Airlite(TM) Bluetooth Headsets
----------------------------------------

The Honeywell  Airlite(TM)  700 Bluetooth  Headset  features  Bluetooth  2.0+EDR
technology   Enhanced   Data  Rate  (EDR)   technology,   with   crystal   clear
communications  for quality and reliability.  Weighing only nine grams (.32 oz),
the Honeywell  Airlite(TM)  700  Bluetooth  Headset has a  lightweight,  stylish
design  and  features  up to  seven  hours of talk  time and up to 200  hours of
standby time. The Bluetooth  Headset can be worn on either the left ear or right



                                       9
<PAGE>

ear and comes with two ear hooks and three  sizes of soft ear caps to ensure the
most  comfortable  fit.  Additionally,  the Honeywell  Airlite(TM) 700 Bluetooth
Headset  features a  multi-function  button,  which  allows  for easy  one-touch
control to answer  calls and end calls as well as a flashing  LED light to alert
the user when to charge the device's battery.

Honeywell Altura(TM) LCD HDTV's
-------------------------------

In 2008,  SOYO will  release  the line of  Honeywell  Altura(TM)  LCD full 1080P
HDTV's  in 57,  65,  70 and 82 inch  models.  The  Altura(TM)  Series  will have
multiple HDMI inputs,  1080P, and will be designed to compete with Sony, Samsung
and Sharp with similar technology and a better price tag.

The Honeywell line of Altura(TM) LCD HDTV's include the following features:

-High definition native resolution 1920x1080 with response times of 4ms (57 inch
and 65 inch) and 3ms (70 inch) for crystal clear images and crystal clear action
viewing.

-SRS(R) TruBass and TruSurround,  Dolby Digital ProLogicII(R) Sound and MTS/SAP,
AV Stereo.

-Connector options including: Three HDMI inputs, One VGA, One S-Video input, Two
Component Inputs, One Composite Input, One Audio Stereo Input, One SPDIF Optical
Input,  One Audio Input (RCA),  One Audio Output (RCA), and One set of 5.1 Audio
Output.

-Menu available in eight languages:  English,  Spanish, French, Italian, German,
Greek, Portuguese and Dutch

-Universal Remote compatible with most DVRs, DVD players,  BluRay/HD DVD Players
and VCRs

- Dynamic Contrast Ratio of 120,000:1

-V-Chip for Parental Control

-Connector  Reference Guide depicting how to choose the best possible connection
of your other components such as DVD Players,  Digital Video Recorder,  and Home
Theater system with the Honeywell Line of Altura(TM) LCD HDTV's.

-Included  with the Honeywell  Altura series of TV's will be one Honeywell  HDMI
Cable.

-Five Year Limited Warranty

PRODUCTION

SOYO Group does not produce the components  that it  distributes.  Approximately
95% of SOYO Group,  Inc.'s products are supplied by companies  located in Taiwan
and China. As of December 31, 2007, the Company purchased 63% of the products it
sells from its top 3 suppliers.  No one supplier  produced  more than 31% of the
products distributed and sold by the Company.

TRANSPORTATION AND DISTRIBUTION



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<PAGE>

The Company is involved  with the design and  function of the products it sells.
SOYO uses contract  manufacturers to produce it's products in Taiwan,  China and
Mexico.  The  majority of SOYO  products  originate  in the Far East (Taiwan and
China) SOYO sell it products  thru an  authorized  network of  distributors  and
retailers  primarily  across North and Latin America.  Products are bulk shipped
via sea cargo carriers to US ports, cleared through customs and are freighted in
to SOYO  distribution  centers  to be  ultimately  sent on to SOYO's  Authorized
network of distributors and retailers.

The process usually takes 6 to 8 weeks.  Any deviation from this planned routine
will  typically  increase  product costs.  Deviations  from the normal course of
transit such as dock worker strikes, increases in fuel costs, expedited delivery
times,  customs delays,  shipment damage, lost cargo and other unforeseen issues
can result in unsatisfied customers.

As all product  transportation  and movement  activities  are dependent on fuel,
this  commodity  has  significantly  affected  the  costs of SOYO's  goods  from
origination  through  to final  destination  and  continuing  with  shipping  on
returned  goods.  It is  unlikely  that any further  short run  increase in fuel
prices can be passed along to consumers.  The continued  long term  increases in
fuel  costs  have begun to be passed  along to SOYO's  customers  in the form of
increased prices effective December 1, 2007.

MARKETING

In 2007 SOYO increased the marketing staff by adding an internal web master, one
additional part time Graphic Designer, and a full time Investor relations and PR
specialist  to the team.  The marketing  team  achieved  several goal in 2007 by
improving product packaging,  creating new product packages, launching of SOYO's
new web site, the creation of mini sites,  the design and launch of the Honeywel
lCE web site,  the  creation  and launch of the Prive  brand,  the  creation and
launch of the Le Vello  Brand,  and the  creation  and  launch of the  Honeywell
Brand.  Additionally the Company increased  communication with share holders via
share holder  letters,  relevant  Press  Releases,  and  quarterly  share holder
conference calls.

In terms of pure marketing SOYO took a more viral  approach,  by partnering with
LG Sports Marketing to sponsor a team of Mixed Martial Artists (MMA). This sport
has  risen  to be one of the  fast  growing  sports  in the  USA.  Through  that
sponsorship  SOYO had 39 fights and  received  over 350  minutes of  exposure on
network  television.  These networks  include ION, HBO, Spike TV and others at a
cost of under  $550 per  minute or air time.  These  fights  continue  to air as
reruns and SOYO sponsored  fighters can be seen in several MMA magazines and DVD
related to the sport.

In 2007,  SOYO  continued  in-content  advertising  by way of Mixed Martial Arts
(MMA) to target the male 18-34 demographic. Mixed Martial Arts has continued its
rapid  growth  into  mainstream  sports in North and  Latin  America  as well as
Canada,  and had  television  ratings that outranked the first game of the World
Series,  the Lakers  playoff game five and the NASCAR Busch Series.  The MMA fan
base falls well within one of SOYO's target demographics and responds positively
to brand promotions.

SOYO sponsored a team of up-and-coming  fighters and some professional  fighters
who participated in a total of 39 fights in 2007, ranging from UFC fights, Bodog
fights,  WEC fights,  IFL fights and smaller private fights.  SOYO fighters wore
SOYO's logo on their shorts, sweatpants, sweatshirts and t-shirts. The SOYO logo
received  over 350 minutes of airtime on channels  such as  Showtime,  Spike TV,
Mark Cuban's HDNet and the Versus  Channel as well as MMA  magazines,  DVD's and
websites.

These  actions  marked a  substantial  change in SOYO's  role  with  respect  to
marketing and brand promotion,  yet is in line with the new strategic  direction
of building  stronger  brand  recognition  and  building the quality of the SOYO
product portfolio.  SOYO intends to build on these early promotional experiences



                                       11
<PAGE>

in the  years  to come  and  create a name and  product  line  that can  compete
effectively at a higher level in the competitive hierarchy.

Other advertising  outlets that SOYO will use to reach the consumer side include
the internet,  periodicals and other sports related  advertising.  On the resale
side, the internet,  trade journals,  and trade show attendance will be utilized
to promote the brand and acquire key industry contacts.

SOYO currently  also engages in some trade show  activity.  The largest of these
events is the Consumer  Electronics  Show (CES).  Some others include the Custom
Electronics Design and Installation Association (CEDIA) show (www.cedia.net) and
Retail Vision (www.retailvision.com).

SALES

In February 2007 Harvey  Schneider was promoted to Director of Sales.  Under Mr.
Schneider's  direction  and support  from upper  management  the SOYO sales team
evaluated the current  customer base and eliminated  those  customers which were
not profitable for SOYO.  Additionally,  SOYO, Inc. has established a network of
sales offices to service its customers'  needs,  from prompt order processing to
after-sales  customer care.  SOYO,  Inc.'s primary markets are North America and
Latin America.

In 2007 SOYO,  Inc.'s principal sales strategy  targets three main markets:  (1)
end-user consumers;  (2) small business users; and (3) small office / home users
or SOHO's.  To reach target  customers,  SOYO sells its products  through a wide
range of sales channels  including national and regional  distributors,  such as
DBL and BDI Laguna,  along with  distributors  that  specialize in promoting our
products to resellers,  e-tailers, system builders and other small retailers. To
reach end-user consumers and small business users, SOYO partners with electronic
chains, retail stores, and ecommerce resellers throughout the continental U.S.A.
and  Canada.  Our Sales team met many  goals and  challenges  in 2007  including
expansion into Canada and Mexico. In 2007 we added one national retailer (Office
Max) to our customer  base,  and increased  the number of regional  retailers by
adding Fry's Electronics,  HHGregg and American TV and Appliance as resellers of
the SOYO brands of products.

For the Latin American market,  system builders and value-added  resellers (VAR)
are the primary targets.  To reach these customers,  SOYO Inc. uses an extensive
network of international, national and regional distributors. SOYO added service
centers in Latin America in 2007 to add additional  support to the reseller base
of customers.  SOYO has a sales offices in Sao Paolo,  Brazil, to better service
our Latin  America  customers in both Brazil and  Argentina.  As of December 31,
2007,  approximately  10% of the SOYO sales and revenues were generated from the
Latin American market.

Within  the  three   segments  that  SOYO   distributes   product  in,   namely,
communications,   consumer  electronics  and  computer  peripherals,   both  B2B
(business to business) marketing tactics (such as computer motherboards) and B2C
(business to consumer) marketing tactics (such as LCD TV's) are required. In the
past,  product  promotion  was primarily  done at the retailer  level and not at
SOYO's level.  Typically,  big box retailers  will hold back some of the product
price to cover these marketing costs at their level.  This is commonly  referred
to as Market  Development  Funding (MDF) or Marketing  Cooperation  Fees (COOP).
SOYO decided to eliminate this practice and move to a net, net pricing model. As
a result,  there is less ambiguity regarding  receivables and amounts to be paid
by customers, resulting in more definitive cash flows.

CUSTOMERS

                                       12
<PAGE>

The primary customer base is in North America, where the products have long been
recognized for premium quality and competitive prices. SOYO Group, Inc. also has
a broad customer base in Latin America.

SOYO Group,  Inc. also has an ancillary base of customers in the United Kingdom,
Europe,   Asia  and  South  Africa,   which  are  serviced   through   preferred
relationships with independent distributors local to those markets.

SOYO is  continually  evolving  to meet the  needs of its  customer  base and to
resonate well with them.  SOYO has recognized the 18-34 year old  demographic as
one such key group that we are reaching out to.

The  following  table shows all  customers  that  accounted for more than 10% of
Company sales in a given year:

     Year end      Key Customer               Revenues        % of Net Revenue
      2007      Wal Mart Canada            $  15,752,660             14.2%
      2007      Office Max                 $  13,560,291             12.3%
      2006      Not applicable             $     --                   --
      2005      E23                        $  13,552,324             35%
      2004      SYX Distribution, Inc.     $   8,591,711             26%
                a.k.a. Tiger Direct
      2003      SYX Distribution, Inc.     $   9,943,855             32%
                a.k.a. Tiger Direct

SUPPLIERS

SOYO Group does not produce the components  that it  distributes.  Approximately
95% of SOYO Group,  Inc.'s products are supplied by companies  located in Taiwan
and China. As of December 31, 2007, the Company purchased 63% of the products it
sells from its top 3  suppliers.  No one supplier  produced  more than 31%of the
products distributed and sold by the Company.

In  continuing  efforts to work with and leverage its supply base,  SOYO entered
into an agreement  with GE Capital in 2006 whereby GE  guarantees  payment to GE
approved  vendors  thereby  facilitating  larger  orders,  decreasing  risk  and
allowing  SOYO to  seamlessly  finance these  transactions.  That  agreement was
discontinued in 2007 when the Company entered into a banking  relationship  with
UCB of California.  As collateral for the loan, the Company agreed to give UCB a
first lien on Company assets.  As a result,  GE Capital was no longer willing to
guarantee payments to vendors.  As of December 31, 2007, all payments to vendors
are made using the  Company's  cash flow,  or borrowed  from UCB under the asset
based credit line.

REGULATIONS

SOYO Group,  Inc. is subject,  to various laws and  regulations  administered by
various  state,  local  and  international  government  bodies  relating  to the
operation of its distribution  facilities.  SOYO Group, Inc. believes that it is
in compliance with all governmental laws and regulations related to its products
and facilities,  and it does not expect to make any material expenditure in 2008
with respect to compliance with any such regulations.

COMPETITION

With the wide range of  product  offerings,  SOYO,  Inc.  competes  with a large
number of small and  well-established  companies  that  produce  and  distribute
products in all categories.



                                       13
<PAGE>

SOYO  competes with many  companies  that import,  distribute  and act as OEM's.
However,  there are few companies that follow SOYO's business model and methods.
Overall most of the companies acting as OEM's spend significantly on R&D whereas
SOYO relies upon its industry  knowledge and  relationships  with  suppliers for
such services. SOYO's primary competitors by product line are:

Bluetooth Wireless Headsets:
Among  those  that  SOYO  competes  with  directly  in  the  retail  market  are
competitors such as Motorola, Jabra, Plantronics and some private label products
from the various mobile phone  companies.  Additionally  there are several other
competitor  who are lesser know or have less market  share such as Nokia,  Sony,
LG, Samsung, Blue Ant and jawbone.

USB External Storage:
SOYO has only a few competitors in this category.  Retailers who compete in this
space are  SmartDisk,  La Cie and Apricom with market share and a few additional
competitors with online presence.

LCD Monitors:
Among those that SOYO competes with directly in the retail  marketplace  in this
category are majors such as HP, Dell, ViewSonic, LG, Samsung, NEC, and Acer most
of these  competitors are available at big box retailers.  In addition there are
several other competitors who sell trough Distributors and on-line.

LCD HDTV's:
Among  those  that  the  SOYO  Brands  competes  with  directly  in  the  retail
marketplace  in this category are majors such as Samsung,  Sharp,  Sony,  Vizio,
Olevia,  Westinghouse,  Toshiba,  JVC, Mitsubishi,  and Panasonic.  Additionally
there  are a total of 87  brands  with  some  kind of  market  share in this hot
product category.

Among those that SOYO competes with directly in the  marketplace in the consumer
electronics industry the primary product offering common among this group is LCD
TV's  which  account  for a  substantial  portion  of  SOYO  sales.  Most of the
competition  in this product line pivots  around price point in TV's under $3000
and brand identity at price points above $3000 and to a lesser extent, features.
Secondary  product  offerings  such as  furniture,  Mounts and  Accessories  are
substantially   less   competitive   and  offer  the   opportunity  for  product
differentiation and better margins.

Some computer component competitors include Dell, Hewlett-Packard,  Gateway, and
ViewSonic,   which  compete  in  multiple  product   categories   including  the
motherboard and computer  monitors.  Unlike LCD TV's however,  computer monitors
offer more favorable margins.  Some other computer component competitors include
Abit,  Asus,  Gigabyte,  MSI, and SimpleTech  which compete in the other product
categories.

EMPLOYEES

As of March  31,  2008,  the  Company  employed  forty  two (42)  people  at its
headquarters   in  Ontario,   California.   The  Company  also  employs  outside
consultants as needed to meet business objectives.

ITEM 1A. RISK FACTORS

In  addition  to the other  information  set forth in this  report,  you  should
carefully  consider the  following  factors  which could  materially  affect our
business,  financial condition or future results.  The risks described below are
not the only risks facing our Company.  Additional risks and  uncertainties  not



                                       14
<PAGE>

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.

Our inability to finance future growth could hurt our business.

Our revenues and profit  margins are based on our ability to supply  substantial
amounts of inventory to our  customers at a very rapid pace. If we are unable to
obtain  sufficient  inventory  from  our  distributors,  our  customers  will be
affected,  which could harm our long term ability to sell products through those
sales channels. As the Company sales have increased by 48% in 2006, and then 95%
in 2007,  financing  our growth  has become  more  challenging.  The  Company is
currently  negotiating  a large  credit  expansion,  but has not yet  come to an
agreement on terms.

Increased competition could hurt our business.

There are many  manufacturers  and distributors of many of the products we sell.
Since consumer electronics and communications  equipment have traditionally been
high volume/high profit areas,  increased competition could enter the market and
adversely affect our sales and profitability.
Segments of our business,  particularly the LCD television business, are subject
to rapidly  changing prices.  As a result,  we must often negotiate new pricing,
discounts and price  protection  issues with customers while inventory is either
in transit or just landed.

SOYO Group does not produce the components  that it  distributes.  Approximately
95% of SOYO Group,  Inc.'s products are supplied by companies  located in Taiwan
and China. As of December 31, 2007, the Company purchased 63% of the products it
sells from its top 3  suppliers.  No one supplier  produced  more than 31%of the
products distributed and sold by the Company.

Increases in cost or disruption of supply could harm our business.

Our  business  and  profitability  is reliant on our ability to order and obtain
product  within  specified  timelines.  Any shortages of materials,  such as LCD
panels, could affect our ability to obtain merchandise and harm our business.

Increases in the cost of energy could affect our profitability.

We were adversely  affected in 2007 by the skyrocketing price of fuel, which led
to higher  freight  costs.  If the price of shipping  merchandise  continues  to
climb, it will affect our future profitability.

Litigation or legal proceedings  could expose us to significant  liabilities and
thus negatively affect our financial results.

From time to time, we have been party to several  different  legal  proceedings,
which are  described  in Item 2 of this  report.  We evaluate  these  litigation
claims and legal  proceedings to assess the  likelihood of unfavorable  outcomes
and to estimate,  if possible,  the amount of potential  losses.  Based on these
assessments and estimates, we establish reserves as required.  These assessments
and estimates are based on the  information  available to management at the time
and involve  management's best judgment.  It is possible that actual outcomes or
losses may differ  materially from those  envisioned by our current  assessments
and estimates.  In addition,  new or adverse developments in existing litigation
claims or legal proceedings  involving our Company could require us to establish
or increase litigation reserves or enter into unfavorable settlements or satisfy
judgments for monetary  damages for amounts  significantly  in excess of current
reserves, which could adversely affect our financial results for future periods.



                                       15
<PAGE>
<TABLE>
<CAPTION>

As of December 31, 2007, there were no proceedings  pending against the Company,
except a counter suit where the Company  initiated legal  proceedings  against a
former supplier.

Changes in  accounting  standards  and  taxation  requirements  could affect our
financial results.

New accounting  standards or  pronouncements  that may become  applicable to our
Company  from  time to  time,  or  changes  in the  interpretation  of  existing
standards and  pronouncements,  could have a significant  effect on our reported
results for the affected periods.

If we are not able to  achieve  our  overall  long term  goals,  the value of an
investment in our Company could be negatively affected.

We have established and publicly  announced certain long-term growth objectives.
These objectives were based on our evaluation of our growth prospects, which are
generally based on volume and sales  potential of many product types,  and on an
assessment of potential level or mix of product sales. There can be no assurance
that we will  achieve the required  volume or revenue  growth or mix of products
necessary to achieve our growth objectives.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

ITEM 2. PROPERTIES

The Company's corporate  headquarter is located at 1420 S. Vintage Ave. Ontario,
California, 91761. The property is under a lease agreement expiring November 30,
2008 with terms and conditions as stipulated below:
<S>     <C>                      <C>                       <C>            <C>            <C>
                                                             Lease          Lease           Area
              Facility                 Address             Inception      Expiration        ----
              --------                 -------             ---------      ----------
       Office and warehouse    1420 S. Vintage Ave.        09/01/2003     11/30/2008     42,723 sq.
                               Ontario, CA                                                   ft.

Rent Schedule:

                  Start Date                        End Date                Base Rent (NNN)
                  ----------                        --------                ---------------
               October 1, 2004                 February 28, 2006              $ 16,869.84
                March 1, 2006                  November 30, 2008              $ 17,724.30
</TABLE>


The  Company  owns an option to extend  the term of the leased  property  for an
additional five ( 5) years that can be exercised by providing  written notice to
the lessor at least six (6) months but not more than 12 months prior to the date
that the option  period  would  commence.  The  Company  also  maintains a sales
representation  office  in  Brazil,  located  at Rua Andre  Ampere  153 andar 17
sala171/172, Brooklin Novo, Sao Paulo, SP, Brazil.

ITEM 3. LEGAL PROCEEDINGS.

On January 26, 2007, the Company filed a lawsuit against Astar  Electronics USA,
Inc., KXD  Technology,  Inc. and Does 1 - 25 in the Superior Court of California
for the County of Los Angeles, Central District (Case No. BC365349). The Company
alleges claims for breach of contract,  fraud,  and tortuous  interference  with
economic  relations  and seeks  compensatory  and punitive  damages.  Both named
defendants were served on January 26, 2007. On May 17, 2007, the Company filed a



                                       16
<PAGE>

First  Amended  Complaint  against  Defendants  alleging  additional  claims for
trademark  infringement,   trademark  dilution,  unfair  competition  and  false
advertising.  In or  about  June  2007,  Astar  Electronics  USA,  Inc.  and KXD
Technology,  Inc.  answered and KXD  Technology,  Inc.  filed a  cross-complaint
against the Company and two of its  officers,  Nancy Chu and Ming Chok  alleging
claims  for breach of  contract,  fraud,  tortuous  interference  with  economic
relations and common counts.  In or about July 2007, Astar Electronics USA, Inc.
filed a notice of dissolution with the California  Secretary of State. On August
15, 2007, KXD  Technology,  Inc.  filed for bankruptcy  protection in the United
States Bankruptcy Court, Central District of California.  On September 13, 2007,
the Court  entered  an order sua sponte to stay the entire  action  pending  the
resolution of the bankruptcy proceeding. No trial date has been set.

On March 22, 2007,  Semiconductor  Energy  Laboratory  Co.,  Ltd.  instituted an
action against several  defendants,  including the Company, in the United States
District  Court for the Northern  District of California  (Case No. C071667 MHP)
alleging  patent  infringement  with respect to certain  products the Company is
alleged  to have  imported  and  sold in the  United  States.  On July 5,  2007,
Plaintiff filed a dismissal without prejudice as to the Company.

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

On June 30,  2006,  a lawsuit  was filed in the United  States  District  Court,
Central District of California,  Eastern Division, entitled Robert Lewis, Jr. v.
Soyo Group, Inc., et al., Case No. EDCV 06-699 VAP (JWJx). The case sought class
action  status and alleged  failures to timely pay rebates to purchasers of Soyo
products  allegedly in  violation of unfair  competition  laws,  the  California
Consumer Legal Remedies Act and contracts with purchasers.  The plaintiff sought
disgorgement  of all amounts  obtained by the Company as a result of the alleged
misconduct, plus actual damages, punitive damages and attorneys' fees and costs.
The Company agreed to settle the matter, the court approved the settlement,  and
the Company's final settlement payment is due on April 2, 2008.

On May 22, 2006, the Company received notice of an investigation by the Attorney
General of the State of California  (the "AG")  regarding the Company's  alleged
failures  to timely pay  rebates to  purchasers  of Soyo  products.  The Company
cooperated with the  investigation  and agreed to the terms of a stipulation for
entry of final judgment and permanent injunction (the "Injunction")  relating to
the Company's  administration of rebate claims. On March 7, 2007, the Injunction
was filed by the AG and entered by the Superior Court of  California,  County of
San Diego in the  action  entitled  People of the  State of  California  v. Soyo
Group, Inc., et al., Case No. GIC 8813770.

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

All amounts paid by the Company in 2007 and 2006 in regard to legal  proceedings
are recorded as general and adminstrative expenses.

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

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



                                       17
<PAGE>

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

During the fourth quarter of the fiscal year ended December 31, 2007, there were
no matters submitted to the shareholders for approval.


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
     ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Prices of Common Stock

The  Company's  common  stock is traded on the Over the Counter  Bulletin  Board
under the symbol  "SOYO."  The high and low bid  intra-day  prices of the common
stock were not reported on the OTCBB for the time periods indicated on the table
below. Accordingly, the Company has set forth the high and low closing prices of
our common stock as reported on the OTCBB over the last two years.  Further, the
sales prices listed below represent  prices between dealers without  adjustments
for retail markups,  breakdown or commissions and they may not represent  actual
transactions.

                                                               Price Range
                                                               -----------
                                                           High            Low
                                                           ----            ---
              Fiscal Year Ended December 31, 2006
                  First Quarter                           $ 0.74         $ 0.50
                  Second Quarter                            0.62           0.31
                  Third Quarter                             0.40           0.28
                  Fourth Quarter                            0.40           0.27

              Fiscal Year Ended December 31, 2007
                  First Quarter                           $0.60          $0.28
                  Second Quarter                           0.62           0.31
                  Third Quarter                            0.98           0.40
                  Fourth Quarter                           1.80           0.90

(b) Shareholders

The Company's common shares are issued in registered form.  Securities  Transfer
Corporation,  Dallas,  Texas,  is the  registrar  and  transfer  agent  for  the
Company's common stock. As of December 31, 2007 there were 52,004,656  shares of
the  Company's   common  stock   outstanding  and  the  Company  had  over  1100
shareholders of record.

(c) Dividends

The Company has never  declared or paid any cash  dividends  on our common stock
and it does not anticipate paying any cash dividends in the foreseeable  future.
The Company  currently  intends to retain  future  earnings,  if any, to finance
operations and the expansion of its business.  Any future  determination  to pay
cash  dividends  will be at the discretion of the board of directors and will be
based  upon  the  Company's  financial  condition,  operating  results,  capital
requirements,  plans  for  expansion,  restrictions  imposed  by  any  financing
arrangements and any other factors that the board of directors deems relevant.



                                       18
<PAGE>

During 2007 we declared no dividends on the Class B Preferred Stock outstanding.
The  dividends  recognized  and  booked  in 2007  were  the  accreted  dividends
resulting  from the valuation of the Series B Preferred  Stock at issuance.  See
"Recent Sales of Unregistered Securities." for more information.

(d) Penny Stock

Until the  Company's  shares  qualify for  inclusion in the NASDAQ  system or on
another exchange, the public trading, if any, of the Company's common stock will
be on the OTC Bulletin  Board or the Pink Sheets.  As a result,  an investor may
find it more difficult to dispose of, or to obtain accurate quotations as to the
price of, the common stock  offered.  The  Company's  common stock is subject to
provisions  of Section  15(g) and Rule 15g-9 of the  Securities  Exchange Act of
1934, as amended (the "Exchange Act"),  commonly referred to as the "penny stock
rule." Section 15(g) sets forth certain  requirements  for transactions in penny
stocks,  and Rule 15g-9(d)  incorporates the definition of "penny stock" that is
found in Rule 3a51-1 of the  Exchange  Act. The SEC  generally  defines a "penny
stock" to be any  equity  security  that has a market  price less than $5.00 per
share, subject to certain exceptions. If the Company's common stock is deemed to
be a penny  stock,  trading in the shares  will be subject to  additional  sales
practice  requirements on  broker-dealers  who sell penny stock to persons other
than established customers and accredited investors.  "Accredited investors" are
persons with assets in excess of $1,000,000 or annual income exceeding  $200,000
or $300,000 together with their spouse. For transactions covered by these rules,
broker-dealers must make a special suitability determination for the purchase of
such security and must have the  purchaser's  written consent to the transaction
prior to the  purchase.  Additionally,  for any  transaction  involving  a penny
stock,  unless  exempt,  the  rules  require  the  delivery,  prior to the first
transaction, of a risk disclosure document, prepared by the SEC, relating to the
penny stock market. A broker-dealer  also must disclose the commissions  payable
to  both  the  broker-dealer  and the  registered  representative,  and  current
quotations  for  the  securities.  Finally,  monthly  statements  must  be  sent
disclosing  recent price information for the penny stocks held in an account and
information  on the limited  market in penny stocks.  Consequently,  these rules
restrict the ability of  broker-dealers to trade and/or maintain a market in the
Company's common stock and may affect the ability of the Company's  shareholders
to sell their shares.

(e) Recent Sales of Unregistered Securities

During the  calendar  year 2007,  the Company  issued an  aggregate of 2,979,145
shares of its common stock to various entities for various reasons.

During  the  year,  40,000  unregistered  shares  were  issued  to our  two  new
directors,  Henry Song and Jay Schrankler upon their joining the Company's Board
of Directors.

Through  the year,  an  additional  764,645  unregistered  shares were issued to
consultants,  contractors  and vendors for services  performed on the  Company's
behalf.

During the fourth quarter, 674,500 shares were issued to employees who exercised
stock options granted to them in 2007. All of the options  exercised were issued
with a strike price of $.35.

During December 2007, 1,500,000 unregistered shares were issued to the Company's
quality control team located in Asia.

(f) Equity Compensation Plan Information



                                       19
<PAGE>
<TABLE>
<CAPTION>

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.

On July 22, 2005, the Company issued  2,889,000  option grants to employees at a
strike price of $0.75. One third of those options will vest and be available for
purchase on July 22, 2006, one third on July 22, 2007, and one third on July 22,
2008. The grants will expire if unused on July 22, 2010.

On February 2, 2007, the Company issued  4,805,000 option grants to employees at
a strike price of $0.35. One third of those options were immediately  vested and
available  for purchase on February 2, 2007,  one third will vest on February 2,
2008,  and one third on  February  2, 2009.  The grants will expire if unused on
February 2, 2012.  An  additional  100,000  options  were issued  during the 3rd
quarter to new  employees.  All options were issued to employees on the 91st day
of their  employment at the end of their  probationary  employment  period.  All
options were issued at market value on the day of the grant.

During 2007, 674,500 of the options granted in 2007 were exercised.  None of the
options  granted  in 2005 have been  exercised.  As of  December  31,  2007,  17
individuals who had been granted options in 2005 had left the Company, resulting
in the forfeiture of 552,000 of the 2005 options.  Furthermore,  six individuals
who were granted options in 2007 had left the Company. Those six individuals had
exercised  58,000  options,  but forfeited  30,000 options  granted in 2005, and
262,000  options  granted in 2007 upon leaving the  Company.  As of December 31,
2007,  646,000  options  issued  in 2005  were  vested  but not  exercised,  and
1,320,000 options issued in 2007 were vested but not exercised.


ITEM 6. SELECTED FINANCIAL DATA

The following selected  consolidated  financial data of the Company is presented
as of and for each of the five years ended December 31, 2007,  2006,  2005, 2004
and 2003. The selected  financial  data should be read in  conjunction  with the
Company's audited  consolidated  financial statements and the notes thereto, and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations".

Selected Consolidated Statements of Operations Data:

                                                         Year Ended December 31

                                    2007            2006           2005            2004            2003
                                    ----            ----           ----            ----            ----
<S>                            <C>              <C>            <C>    <C>     <C>             <C>

Net revenue                   110,922,809       $56,758,688    $38,263,032    $32,426,414     $31,034,239
Income (loss) from              4,477,878         1,519,271        514,290     (3,913,683)       (980,347)
operations
Net income (loss)
attributable to common          3,047,353           252,182       (633,443)    (4,143,978)       (984,588)
shareholders
Net income (loss) per               $0.07            $0.01          ($0.01)        ($0.10)         ($0.02)
common share-basic

</TABLE>



                                       20
<PAGE>
<TABLE>
<CAPTION>

Selected Consolidated Balance Sheet Data:

                                                                  December 31
                                       2007           2006           2005           2004           2003
                                       ----           ----           ----           ----           ----
<S>                                <C>            <C>            <C>            <C>             <C>

Total assets                       51,967,330     $26,592,239    $16,907,390    $7,500,437      $12,729,453
Long-term payable to Soyo
     Taiwan                                 -               -              -             -       12,000,000
Shareholders' Equity (Deficit)      8,127,600       2,522,564      1,477,703    (4,057,028)     (12,136,783)
Cash dividends declared per
     common share                         N/A             N/A            N/A           N/A              N/A

</TABLE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with the  Company's
consolidated  financial  statements and the notes thereto appearing elsewhere in
this Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Background and Overview:

Incorporated in Nevada on October 22, 1998, SOYO Group, Inc. is a distributor of
consumer  electronics,  communications and computer parts. A substantial portion
of the products are manufactured in Taiwan and China.  Through SOYO Group,  Inc.
the Company offers a line of LCD  televisions  and computer  monitors,  wireless
headset devices,  motherboards and related peripherals for intensive  multimedia



                                       21
<PAGE>
<TABLE>
<CAPTION>

applications.  The product line also includes Bare Bone systems, flash memory as
well as small hard disk drives for corporate and mobile users.

SOYO  Group's  products  are sold  through an  extensive  network of  authorized
distributors to resellers,  system  integrators,  value-added  resellers (VARs).
These products are also sold through major retailers, distributors and e-tailers
to the consumers throughout North America and Latin America.

The Company sells to distributors, retailers and directly to consumers. Revenues
through such  distribution  channels for each of the three years ended  December
31, 2007, 2006 and 2005 are summarized as follows:

                                                  Year Ended December 31
                             2007             %            2006            %           2005            %
                             ----             -            ----            -           ----            -
<S>                      <C>                <C>       <C>               <C>        <C>               <C>
Revenues
  Distributors          $   55,609,498      50.1      $35,510,804        62.6      $22,312,488       58.3
  Retailers                 46,706,227      42.1       15,187,152        26.8       15,742,332       41.2
  Others                     8,607,085       7.8        6,060,732        10.6          208,212        0.5

Total                   $  110,922,809     100.0      $56,758,688       100.0      $38,263,032      100.0

During the year ended December 31, 2007,  two customers  accounted for more than
10 % of sales. Wal Mart Canada purchased  $15,752,660 of goods from the Company,
equal to 14.2% of total revenues, and Office Max purchased $13,560,291 of goods,
equal to 12.3% of total revenues.

During the year ended  December  31,  2006,  the Company had no  customers  that
accounted for more than 10% of revenues.

During the year ended December 31, 2005, the Company had one customer (E23) that
accounted for revenues of $13,552,324, equivalent to 35% of net revenues.

Revenues by geographic segment are summarized as follows:
                                                             Year Ended December 31
                                         2007          %         2006          %         2005          %
                                         ----          -         ----          -         ----          -
Revenues
  United States                        79,412,207    71.5    $42,628,547     75.2    $20,686,944     54.1
  Other N. America                     17,297,999    15.6      2,472,209      4.4        983,606      2.6
  Central and South America            10,054,602     9.1     10,253,665     18.0      2,993,532      7.8
  Hong Kong                             2,862,564     2.6        139,490      0.2     13,598,950     35.4
  Other locations                       1,295,437     1.2      1,264,777      2.2            N/A      N/A
Total                                1 10,922,809   100.0    $56,758,688    100.0    $38,263,032    100.0
</TABLE>

During the first part of 2005,  the  Company  had made a  commitment  to its new
product lines,  but did not have much  inventory to sell.  While waiting for the
initial inventory shipments,  the Company entered into a short term agreement to
make sales of computer  components to a vendor in Hong Kong (E23). The sales had
relatively low margin, and not a business that the Company planned to be in long
term. Nevertheless, the sales of such products in 2005 represented a significant
portion of the Company's business.

Revenues by product line are summarized as follows:



                                       22
<PAGE>
<TABLE>
<CAPTION>

                                                             Year Ended December 31
                                         2007          %         2006          %         2005          %
                                         ----          -         ----          -         ----          -
<S>                                   <C>            <C>     <C>             <C>     <C>            <C>

Revenues
  Consumer electronics                 53,786,883    48.5    $27,543,873     48.5    $18,739,719     49.0
  Computer parts and                   56,830,322    51.3     29,204,792     51.5     18,906,367     49.4
       peripherals
  Furniture                               249,803     0.2
  Voice and communication                  55,801                 10,023      --         616,946      1.6
Total                                 110,922,809    100.0   $56,758,688     100.0   $38,263,032    100.0
</TABLE>


On  December  31,  2007,  all of the  assets of the VoIP  division  were sold to
247MGI, a Florida company.

Financial Outlook:

In 2007,  the Company  earned  $3,315,544 or $.06 per share before  dividends on
preferred  stock. The large increase in top line revenues and profits was due to
our new sales team opening up sales  channels to big box retailers in the United
States, and opening up the Canadian market.

In 2006,  the Company  earned  $468,670 or $0.01 per share  before  dividends on
preferred  stock,  The  large  increases  in  sales of LCD  televisions  and LCD
monitors were primarily responsible for the large increase in net revenues.

In 2005, the Company earned $540,310 or $0.01 cents per share,  before preferred
dividends,  after  revamping its core product  offerings.  The Company no longer
sold  products  purchased  from SOYO  Taiwan,  and  instead  focused on consumer
electronics, notably LCD televisions and computer monitors.

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

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

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

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

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



                                       23
<PAGE>

unchanged  during both  increases.  For  reporting  purposes,  the loan has been
segregated from other payables and reported as a separate line item. At December
31, 2007, the balance of the loan due to UCB was $16,863,909.

In June 2007, UCB offered to provide the Company with an  alternative  source of
financing- Purchase Order financing.  This line differed from all other forms of
financing in that the bank was offering to advance  funds  against our customers
specific purchase orders,  provided the customer met the bank's stringent credit
requirements.  The end result is that the  Company can use this credit line only
by  obtaining   purchase  orders  from  large  customers   before  ordering  the
merchandise.  The funds would then be advanced to the manufacturer after product
was shipped, and once the product was delivered to the customer,  and the status
of the order was changed from a purchase  order to a receivable,  the loan would
have to be paid back, or the balance transferred to the asset based credit line.
The Company began buying  merchandise under the Purchase Order financing line in
June 2007. As of December 30, 2007, the amount SOYO owed to UCB was $10,960,581.

The Company  continues to work towards  expanding its current credit  facilities
and  purchasing  power.  Net revenues have  increased by 48% and then 95% in the
last two fiscal  years,  but the Company has had  difficulty  in  financing  its
inventory  purchases.  If the  demand for the  Company's  products  continue  to
increase  at  current  levels,  the  Company  will  need to  expand  its  credit
facilities or may not be able to fund future growth.

Critical Accounting Policies:

The Company  prepared its 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  consolidated  financial
statements.

Vendor Programs:

Funds received from vendors for price protection, product rebates, marketing and
training,  product  returns and  promotion  programs are  generally  recorded as
adjustments to product costs,  revenue or sales and marketing expenses according
to the nature of the program.  In 2007,  the Company  booked  price  protection,
co-op marketing fees and sales incentives as expenses under these programs.



                                       24
<PAGE>

The Company records estimated reductions to revenues for incentive offerings and
promotions. Depending on market conditions, the Company may implement actions to
increase  customer  incentive  offerings,  which may  result  in an  incremental
reduction of revenue at the time the incentive is offered.

Accounts Receivable:

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

The Company records estimated  reductions to revenue for incentive offerings and
promotions. Depending on market conditions, the Company may implement actions to
increase  customer  incentive  offerings,  which may  result  in an  incremental
reduction of revenue at the time the incentive is offered.

In order to  determine  the  value of the  Company's  accounts  receivable,  the
Company  records a provision  for  doubtful  accounts to cover  probable  credit
losses.  Management  reviews and adjusts this  allowance  periodically  based on
historical  experience and its evaluation of the  collectibility  of outstanding
accounts receivable.


Inventories:

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

Income Taxes:

Through 2006, the Company recorded a valuation  allowance to reduce the carrying
amount of its deferred tax assets to zero. In 2007,  management  reevaluated the
policy of using a  valuation  allowance  to reduce  the  carrying  amount of its
deferred  tax  assets  to zero.  Based on a review of FASB  109,  the  Company's
profitability in 2007, the reduction of the Company's net loss carryforwards and
the  Company's  internal  estimates  of  revenues  and  profitability  in  2008,
management  believes that the benefit  contained in carrying deferred tax assets
on the  Company's  books  are more  likely  than not to be  realized  in  future
periods. As a result, the Company believes that a change in accounting policy is
warranted. For more information, see the footnotes to the financial statements.

Sales Incentives

The  Company  offers  sales  incentives  to our  customers  in the form of co-op
advertising,  price  protection and sales  discounts.  All costs associated with
sales incentives are classified as a reduction to net revenues. The following is
a summary of the different types of sales incentives:  Co-operative  advertising
allowances are offered to customers as a  reimbursement  towards their costs for
advertising in which our product is featured on its own or in  conjunction  with
other  companies'  products.  The amount  offered is either a fixed amount or is
based upon a fixed percentage of sales revenue during a specified time period.

Price  protection  is a concession  given by the Company to  compensate  for the
difference  between  the  price  of  the  product  paid  by the  customer  and a
subsequent price reduction of the product by the Company.



                                       25
<PAGE>

Sales  discounts are offered to customers at various times based on management's
discretion.  Discounts could be used to increase sales of a certain model,  move
stale  inventory out of the  warehouse,  introduce new products,  or for another
reason that management finds attractive.

Allowance for Doubtful Accounts

The Company regularly analyzes customer balances, and, when it becomes evident a
specific  customer  will be  unable  to meet its  financial  obligations  to the
Company,  such as in the case of the  deterioration in the customer's  operating
results or financial  position,  a specific  allowance  for doubtful  account is
recorded  to reduce  the  related  receivable  to the  amount  that is  believed
reasonably  collectible.  The  Company  also  records  allowances  for  doubtful
accounts for all other  customers  based on a variety of factors  including  the
length  of time the  receivables  are past  due,  the  financial  health  of the
customer  and  historical  experience.  If  circumstances  related  to  specific
customers  change,  estimates  of the  recoverability  of  receivables  could be
further adjusted.

Stock Based Compensation

Effective  January 1, 2006 the Company  adopted  SFAS 123(R)  using the modified
prospective  approach and  accordingly  prior  periods have not been restated to
reflect the impact of SFAS 123(R). Under SFAS 123(R), 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  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, 2007, the Company will amortize stock-based  compensation
expense on a straight-line  basis over the requisite  service  period,  which is
three years.

SFAS  123(R)  requires  forfeitures  to be  estimated  at the time of grant  and
revised,  if necessary,  in subsequent periods if actual forfeitures differ from
initial  estimates.  Stock-based  compensation  expense has been recorded net of
estimated  forfeitures for the year's ended December 31, 2007 and 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.

SFAS 123 requires the Company to provide  pro-forma  information  regarding  net
loss as if  compensation  cost for the stock  options  granted to the  Company's
employees had been  determined  in  accordance  with the fair value based method
prescribed in SFAS 123. Options granted to non-employees are recognized in these
financial  statements as compensation expense under SFAS 123 (See Note 11) using
the Black-Scholes option-pricing model.

Results of Operations:

Years Ended December 31, 2007 and 2006-

Net Revenues.  Net revenues increased by $54,164,121 or 95.4% to $110,922,809 in
2007 as compared to  $56,758,688 in 2006. The large increase in net revenues was
primarily  attributable to the strong sales of LCD TVs and LCD monitors, as well
as the success of our sales force in opening  new  markets  and  developing  new
business opportunities New customers that purchased products from the Company in
2007 that had never before  purchased  products from the Company included Office
Max, HH Gregg, Rex Radio and Appliance, and Fry's Electronics. Additionally, the



                                       26
<PAGE>

Company launched the Prive brand of consumer electronics in Canada in 2007, sold
exclusively through Wal Mart Canada. Sales of the Prive brand totaled $9,679,647
in 2007.

During the years ended  December 31, 2007 and 2006,  the Company  offered  price
protection to certain customers under specific programs aggregating $245,150 and
$70,119  respectively,  which  reduced  net  revenues  and  accounts  receivable
accordingly.

Gross  Margin.  Gross margin was  $14,421,335  or 13.0% in 2007,  as compared to
$9,224,439  or 16.3% in 2006.  Gross  margin  increased  in  dollar  terms,  but
decreased as a percentage of sales in 2007, as the Company's  sold more of lower
margin products than anticipated.  The Company has a broad product mix including
LCD televisions and monitors,  Bluetooth  devices,  furniture and other computer
parts. The lowest margin products are the LCD televisions and monitors. Although
the  Company  expects  to  always  sell  more of these  products  than any other
products,  the Company expects the blended margin of all products sold to be 15%
at the end of the year.  During  2007,  the  Company met its sales goals for the
ancillary products,  but oversold its forecasts for the televisions and monitors
by  approximately  40%. This was due to high demand for products from Office Max
and Wal Mart Canada. As a result, the Company's margin narrowed on the increased
volume above forecasted levels.

Sales and Marketing Expenses. Sales and marketing expenses increased by $400,567
or 35.0 %, to $1,544,042  in 2007, as compared to $1,143,475 in 2006.  There was
essentially  one reason for the  increase.  The Company  hired and paid  outside
sales  reps  during  the year to assist  the sales  department  in  opening  new
accounts.  The  program  was  successful,  as the  outside  reps were  primarily
responsible  for the Company  obtaining  several  different  new  customers  and
growing sales 95% year over year.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  by  $2,311,400  or 41.2 %, to  $7,922,210  in 2007,  as  compared  to
$5,610,810 in 2006. There were several reasons for the increase.

The Company adopted SFAS No. 123(R) effective January 1, 2006 using the modified
prospective method. As a result, the Company recognized stock-based compensation
of $506,222  for the  issuance of employee  stock  options in 2006.  The Company
issued additional stock options to employees in February 2007. As a result,  the
charge against earnings for employee stock options was $1,106,757,  and increase
of over $600,000 from the prior year. Additionally,  the Company recognized over
$1,100,000  of  expenses  from  share  based   compensation   to  directors  and
consultants.

During  2007,  the Company  incurred a non cash  expense of $421,555  related to
stock options issued to consultants. There was no such expense in 2006.

During the year,  the Company paid $383,000 to Honeywell  International  Inc. as
prepayments  for  royalties to be paid on sales of Honeywell  branded  products.
There were no payments to Honeywell International Inc. in 2006.

During  2007,  the Company  paid over  $200,000 for  sponsorship  and  marketing
relating to its MMA  advertising.  There were no payments  made for that type of
marketing in 2006.

Provision  for  Doubtful  Accounts.  The  provision  for  doubtful  accounts was
decreased to $385,387 in 2007, as compared to $907,065 in 2006. When the Company
was prepared to sign the agreement for the $12 million  finance line in 2006, it
reexamined  all  receivables  and wrote off all balances over 90 days, and wrote
down to  present  value  all  balances  over 90 days that  were  making  monthly
payments.  This  resulted  in a large  write off taken in the fourth  quarter of
2006. As a result,  any balances with even a small question  about  collectivity



                                       27
<PAGE>

were written off. Because of this aggressive stance in 2006, the Company entered
2007 with no bad debts or  questionable  accounts of any kind. Even though sales
were up almost 95% in 2007 over 2006,  the quality of the  customers the Company
extended credit to was significantly better, resulting in fewer delayed payments
and much smaller write offs.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $91,818 in 2007 as compared to $43,818 in 2006.

Income (Loss) from Operations. The income from operations was $4,477,878 for the
year  ended  December  31,  2007,  as  compared  to income  from  operations  of
$1,519,271 for the year ended December 31, 2006.

Interest Expense.  Interest expense increased to $1,364,059 in 2007, as compared
to $901,900 in 2006.  The increase is due to the Company's  increased  financing
costs from its asset based credit facility and purchase order  facility.  As the
Company's revenues  increased,  the Company was forced to keep more inventory on
hand as well as borrow more to finance larger  production  runs. Those facts led
to a corresponding increase in interest expense.

Interest Income. Interest income was $85,144 as compared to $10,561 in 2006. The
increase was due to the Company's  increased cash flow  throughout the year. Any
cash balances are swept daily into an interest bearing overnight account.

Other Income (Expense). Other income/miscellaneous  revenue (expense) was a loss
of $247,419 as compared to a loss of $106,262 in 2006.  This is primarily due to
a loss of $159,714 on the sale of the VoIP division.  The Company did not expect
to recognize a loss on the sale, but after marking the investment in 247MGI down
by 50% (see footnote 4 to the  accompanying  financial  statements),  a loss was
recognized.

Income Tax Expense.  The Company  calculated  its current  income tax expense at
$839,000,  as compared  to $53,000 for 2006.  The Company has used up all of its
state net operating loss  carryforwards  and most of its federal net income loss
carryforwards.  For more information see note 10 to the  accompanying  financial
statements.

Deferred  Income Tax  Benefit:  The  Company  recognized  a deferred  income tax
benefit  of  $1,203,000  in  2007  resulting  from  various   temporary   timing
differences in book vs. tax accounting. There was no deferred income tax benefit
(loss) in 2006.

Net  Income/Loss.  The net income before  preferred  dividends was $3,315,544 in
2007 as compared to $468,670 for the year ended  December 31, 2006.  The reasons
for the turnaround are discussed in detail in the above paragraphs.

Preferred Stock  Dividends.  Accreted and deemed  preferred stock dividends were
$268,191 in 2007 as compared to $216,488 in 2006.

Years Ended December 31, 2006 and 2005-

Net Revenues.  Net revenues  increased by $18,495,656 or 48.3% to $56,758,688 in
2006 as compared to  $38,263,032  in 2005.  The  increase  in net  revenues  was
primarily  attributable to the strong sales of LCD TVs and LCD monitors, as well
as the success of our sales force in opening  new  markets  and  developing  new
business opportunities New customers that purchased products from the Company in
2006 that had never before purchased products from the Company included Staples,
the Home Depot and Wal Mart Canada.



                                       28
<PAGE>

During the years ended  December 31, 2006 and 2005,  the Company  offered  price
protection to certain customers under specific programs  aggregating $70,119 and
$140,828  respectively,  which  reduced net  revenues  and  accounts  receivable
accordingly.

Gross  Margin.  Gross  margin was  $9,224,439  or 16.3% in 2006,  as compared to
$4,692,970  or 12.3 % in 2005.  Gross  margin  increased  in 2006 as compared to
2005,  both on an  absolute  and  percentage  of revenue  basis,  as the Company
completed  the  changed in its core sales  offerings  from  primarily  hardware,
motherboards and barebones systems to a greater emphasis on computer peripherals
and consumer  electronics.  The Company was able to earn high margins throughout
most of the year on LCD monitors, and LCD televisions.  Margins were also helped
by lower than expected RMA claims and returns of the Company's LCD monitors.

Sales and Marketing Expenses. Sales and marketing expenses increased by $232,436
or 25.5 %, to $1,143,475 in 2006, as compared to $911,039 in 2005.  The increase
was entirely due to payments to outside sales reps during the year.  The Company
began to employ outside sales reps to assist in obtaining new clients.
The program was successful,  as the outside reps were primarily  responsible for
the  Company  obtaining  Staples,  Home  Depot and other  big box  retailers  as
customers.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  by  $1,951,472  or 53.3 %, to  $5,610,810  in 2005,  as  compared  to
$3,659,338 in 2005. There were several reasons for the increase.

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
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 effect of the  adoption  was a non cash  charge  against  earnings of
approximately $506,222 over the twelve month period.

The next  element  contributing  to the  increase in the S,G&A  expenses was the
Company's use of consultants during the year. The Company was actively searching
for new financing throughout the year,  culminating in the completion of the UCB
$12 million  revolving loan commitment  (see Form 8-K filed March 1, 2007).  The
Company  employed  several high cost  consultants to identify and negotiate with
potential financial partners.  All together,  the Company spent over $600,000 to
pay  consultants  during the year. The Company has  terminated the  consultants'
services in 2007.

The final  element  contributing  to the  increased  SG&A costs in 2006 were the
legal fees. The Company defended itself against several lawsuits during 2006 and
negotiated settlements with both the California Attorney General and the Federal



                                       29
<PAGE>

Trade  Commission  in regard to charges that the Company did not process and pay
customer  rebate  claims  properly  (see Item 3- Legal  Proceedings).  The costs
associated with the Company's  defense of the lawsuits  stemming from the rebate
issues, and the administrative penalty totaled almost $600,000.

Taken together, the costs of adapting SFAS No. 123(R) , the business consultants
and the increase in legal fees over 2005  totaled  approximately  $1.7  million,
which accounts for substantially all of the increased costs over 2005.

Provision  for  Doubtful  Accounts.  The  provision  for  doubtful  accounts was
increased to $907,065 in 2006, as compared to $34,513 in 2005.  Since 2004,  the
Company has used three  different  factors to increase  cash flow.  As a result,
credit policies and requirements have changed  frequently in the last few years.
When the Company was  negotiating the agreement for the $12 million finance line
(see Form 8-K file March 2, 2007),  it reexamined the  receivables and wrote off
all balances over 90 days,  and wrote down to present value all balances over 90
days that were making monthly payments. This resulted in a large write off taken
in the fourth  quarter.  As a result,  any balances  with even a small  question
about collectivity have been written off. Because of this aggressive stance, the
allowance  for bad debts has  decreased,  even though the  accounts  receivables
balance has increased by over $5 million.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment was $43,818 in 2006 as compared to $35,394 in 2005.

Income (Loss) from Operations. The income from operations was $1,519,271 for the
year ended December 31, 2006, as compared to income from  operations of $514,290
for the year ended December 31, 2005.

Interest Expense.  Interest expense increased substantially to $901,900 in 2006,
as compared to $129,567 in 2005.  The  increase is due to the Company  factoring
all receivables in 2006 to improve cash flow, and paying  penalties twice during
the year for failing to meet the  factor's  minimum  volume  requirements.  As a
result of these penalties,  the Company  terminated the contract with the factor
in February 2007.

Interest  Income.  Interest  income was $10,561 in 2006 as compared to $5,301 in
2005. The increase was due to the Company's  increased cash flow  throughout the
year.

Other Income (Expense). Other income/miscellaneous  revenue (expense) was a loss
of ($106,262) as compared to a profit of $150,456 in 2005.

Income Tax Expense. The Company calculated its income tax expense at $53,000 for
2006 after using net operating loss  carryforwards to offset most of its taxable
income. The provision for income taxes was $800 in 2005.

Net Income/Loss.  The net income before preferred dividends was $468,670 for the
year ended  December  31,  2006,  as  compared  to  $540,310  for the year ended
December 31, 2005.

Preferred Stock  Dividends.  Accreted and deemed  preferred stock dividends were
$216,488 in 2006,  as compared to accreted and declared  dividends of $1,173,753
in  2005.   The  accreted   dividends  were  actually   $174,753   during  2005.
Additionally,  the Company made a $999,000  adjustment to the carrying  value of
the Class A preferred stock during the year. From the Company's  inception,  the
Class A preferred  stock was carried on the books at its basis of $1,000.  Prior
to the conditional  redemption of the Class A preferred stock to common stock on
October  24,  2005,  the  carrying  value  was  adjusted  to the  face  value of
$1,000,000.  This resulted in an  adjustment  to the preferred  stock account of



                                       30
<PAGE>

$999,000,  and the offsetting  journal entry to preferred stock dividends raised
the amount  recorded  during the year to $1,173,753.  No such  adjustments  were
required in 2006.

Liquidity and Capital Resources - December 31, 2007: .
For the year ended December 31, 2007, the Company recorded  aggregate  dividends
of $268,191,  based on the  accretion of the discount on the Class B Convertible
Preferred Stock. The Company did not declare or accrue any additional  dividends
on the Class B cumulative Preferred Stock.

For the year ended December 31, 2006, the Company recorded  aggregate  dividends
of $216,488,  based on the  accretion of the discount on the Class B Convertible
Preferred Stock. The Company did not declare or accrue any additional  dividends
on the Class B cumulative Preferred Stock.

For the year ended December 31, 2005, the Company recorded  aggregate  dividends
of $1,173,753, based on the accretion of the discount on the Class B Convertible
Preferred  Stock of  $174,753,  and the  adjustment  of $999,000 to the carrying
value of the Class A preferred stock,  which is described above. The Company did
not  declare  or accrue  any  additional  dividends  on the  Class B  cumulative
Preferred Stock.

Through March 31, 2008, none of the Class B cumulative  Preferred stock had been
converted to common stock, and the Company had not repurchased any of the shares
of Class B cumulative Preferred stock.

Operating  Activities.  The Company  generated  cash of $3977,061 from operating
activities  during the year ended December 31, 2007,  compared to utilizing cash
of $2,941,820 from operating activities during the year ended December 31, 2006,
and utilizing cash of $178,088 from operating  activities  during the year ended
December 31, 2005.

At December 31, 2007 the Company's  cash and cash  equivalents  had increased by
$347,209 to $1,848,249, as compared to $1,501,040 at December 31, 2006.

The Company had working  capital of $6,894,614 at December 31, 2007, as compared
to working  capital of  $5,706,047  at December 31,  2006,  resulting in current
ratios of 1.16 to 1 and 1.28:1 at December 31, 2007 and 2006, respectively.

Accounts  receivable  increased to $27,123,985 at December 31, 2007, as compared
to $16,467,135 at December 31, 2006, an increase of $10,656,850,  or 64.7%.  The
large  increase was generally due to the increase in net revenues.  Net revenues
increased by $54,164,121 or 95.4% during the year. The Company had two customers
that  accounted  for  greater  than 10% of its  revenue  on 2007.  The  accounts
receivable  balance  due from  those two  customers  at  December  31,  2007 was
$8,652,953.

Inventories  increased  to  $12,221,265  at December  31,  2007,  as compared to
$7,792,621  at  December  31,  2006,  an increase of  $4,428,644  or 56.8%.  The
inventory balances included inventory in transit of $3,374,479 and $4,005,265 at
December 31, 2007 and December 31, 2006 respectively. The increased inventory is
now  necessary  for the Company to carry as its  revenues  have grown by 56% and
then 95% in the last two years.

Accounts payable  decreased by $1,737,421 to $14,336,196 at December 31, 2007 as
compared to $16,073,617 at December 31, 2006. The decrease is meaningless as the



                                       31
<PAGE>

2007  figures do not  include  the  $27,824,490  due to banks,  and do include a
portion of the long term debt which was not included in the 2006 figure.  A more
meaningful  comparison  would be to compare total  liabilities  between 2007 and
2006,  which have risen by  $19,655,840.  This  corresponds  to the increases in
accounts  receivable  and  inventory,  and is a natural  event  considering  the
increases in net revenues and profits.

Accrued  liabilities  increased to $789,526 at December 31, 2007, as compared to
$519,457 at December 31, 2006, an increase of $270,069 or 52%.

Investing  Activities

The  Company  expended  $50,272,  $48,894 and  $621,970  in 2007,  2006 and 2005
respectively for the purchase of property and equipment.  The large  expenditure
in 2005 is for the purchase of telephone lines and equipment in China to support
the VoIP division.  Those asserts were sold along with all other assets from the
VoIP division in December 2007.

Financing Activities

On March 28, 2005 Ever-Green Technology (Hong Kong) Co., Ltd., purchased 500,000
unregistered  shares of our  common  stock,  $0.001  par  value  per share  (the
"Shares") and common stock purchase  warrants to purchase  100,000 shares of our
common  stock  exercisable  at $1.50 per share at any time until  March 22, 2008
(the "Warrants"). The total offering price was $500,000, which was paid in cash.

In October 2005,  the Company  borrowed  $165,000 from an individual for working
capital  purposes.  The Company  repaid $65,000 of the loan during the year. The
balance at the end of 2006 was $100,000. The balance was paid off in 2007.

The Company  began  factoring  its  invoices in 2005 to improve  cash flow.  The
Company's  initial  factor was Wells Fargo PLC. In  February  2006,  the Company
signed a one year contract with Accord Financial  Services of North Carolina for
factoring services.  The agreement expired in February 2007 and was not renewed.
At December 31, 2006, $3,407,463 of the Company's receivables had been bought by
Accord  Financial  Services.  At December  31, 2005,  $580,363 of the  Company's
receivables had been factored and were owned by Wells Fargo.

Under the Accord agreement,  all of our receivables were sold with recourse.  As
such,  the Company  continues to evaluate each of these  receivables  monthly in
regard to its allowance for bad debts. The original factor,  Wells Fargo, bought
all accounts without  recourse.  When the switch over to Accord occurred,  those
transactions were "with recourse".

In 2006, the Company  entered into a Trade Finance Flow facility with GE Capital
to fund "Star" transactions.  The agreement provided for GE Capital to guarantee
payment,  on the  Company's  behalf,  for  merchandise  ordered  from GE Capital
approved  manufacturers in Asia. GE Capital  guarantees the payment subject to a
purchase order from one of our customers.  The Company  accepts  delivery of the
goods in the US,  then has the  option to  either  pay for the goods or sell the
receivable (from the customer) to our factor, who paid GE Capital. The agreement
was  discontinued in 2007 when the Company  entered into a banking  relationship
with UCB of  California.  As collateral for the loan, the Company agreed to give
UCB a first  lien on  Company  assets.  As a result,  GE  Capital  was no longer
willing to guarantee payments to vendors.  As of December 31, 2007, all payments
to vendors are made using the  Company's  cash flow,  or borrowed from UCB under
the asset based credit line.



                                       32
<PAGE>
<TABLE>
<CAPTION>

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

In April 2007, by mutual agreement of the parties,  the maximum loan balance was
increased  from $12  million  to $14  million.  The  maximum  loan  balance  was
increased  in December  2007 to $17 million.  All other terms of the  agreement,
including  the  interest  rate,  maturity  date and  method  of  evaluating  the
Company's  inventory and receivables to determine eligible  collateral were left
unchanged during both increases.  At December 31, 2007, the balance of the asset
based loan due to UCB was $16,661,807.

In June 2007, UCB offered to provide the Company with an  alternative  source of
financing- Purchase Order financing.  This line differed from all other forms of
financing in that the bank was offering to advance  funds  against our customers
specific purchase orders,  provided the customer met the bank's stringent credit
requirements.  The end result is that the  Company can use this credit line only
by  obtaining   purchase  orders  from  large  customers   before  ordering  the
merchandise.  The funds would then be advanced to the manufacturer after product
was shipped, and once the product was delivered to the customer,  and the status
of the order was changed from a purchase  order to a receivable,  the loan would
have to be paid back, or the balance transferred to the asset based credit line.
The Company began buying  merchandise under the Purchase Order financing line in
June 2007. As of December 30, 2007, the amount SOYO owed to UCB was $11,063,681.


Principal Commitments:

A summary of the Company's contractual cash obligations as of December 31, 2007,
is as follows:

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

Operating Leases                        $  194,970            N/A               N/A                N/A
Advances from Directors                      N/A              N/A               N/A                N/A
Notes Payable/ Short Term Loan               N/A              N/A               N/A                N/A
Purchase Commitments                    $3,374,479            N/A

Royalty Payments Due                    $  424,000        $1,178,000         $1,605,000         $448,000
Long Term Debt                                --                --                 --               --
                                       ---------------- ---------------- ------------------- ----------------
Total                                    $3,993,449       $1,178,000         $1,605,000         $448,000
                                       ================ ================ =================== ================
</TABLE>

At December 31, 2007, the Company did not have any long term purchase commitment
contracts to honor.  The only purchase  commitments  were for inventory  already
purchased and in transit of $3,374,479.

At December 31, 2006, the Company had trade  payables to Corion and Eastech.  By
prior agreement of the companies, the payment of those balances was stretched so
that the balances were to be paid in equal installments through October 2008. As
a result, balances totaling $3,735,198 were to be paid by the Company during the
time period from January 2008 through  October 2008, and were been classified as



                                       33
<PAGE>

long term debt as of December 31, 2006. As all further  amounts related to these
claims  are  scheduled  to be paid in  2008,  there is no long  term  debt as of
December 31, 2007.

At December 31,  2007,  the Company did not have any  material  commitments  for
capital expenditures or have any transactions, obligations or relationships that
could be considered off-balance sheet arrangements.

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

The  agreement  is for a minimum  period of 6.5 (six point five) years and calls
for the payment of MINIMUM  royalties  by SOYO to Honeywell  International  Inc.
totaling  $3,840,000.  Sales  levels in excess of minimum  agreed  targets  will
result in  associated  increases in the royalty  payments due.  Minimum  royalty
payments  due under the  agreement  are  $424,000 in 2008.  Although the Company
signed the  agreement in 2007 and no sales of Honeywell  branded  products  were
made in 2007, $383,000 in royalties were paid to Honeywell International Inc. in
2007.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

The  Company's  debt  obligations  at December 31, 2007 and 2006 were  primarily
short-term  in nature.  As of December 31,  2007,  The Company does not have any
long term debt. However, the Company does have $27,824,490 of debt at a variable
interest  rate. As a result,  the Company does have some  financial risk from an
increase  in  interest  rates.  To the  extent  that the  Company  arranges  new
interest-bearing borrowings in the future, an increase in current interest rates
would cause a  commensurate  increase in the  interest  expense  related to such
borrowings.

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

(a) Financial Statements

The following financial statements are set forth at the end hereof.

     1.   Report of Independent Registered Public Accounting Firm



                                       34
<PAGE>

     2.   Consolidated Balance Sheets as of December 31, 2007 and 2006

     3.   Consolidated Statements of Operations for the years ended December 31,
          2007, 2006 and 2005

     4.   Consolidated  Statements  of  Shareholders'  Equity  (Deficit) for the
          years ended December 31, 2007, 2006 and 2005

     5.   Consolidated Statements of Cash Flows for the years ended December 31,
          2007, 2006 and 2005

     6.   Notes to Consolidated Financial Statements.


                         SOYO Group, Inc. and Subsidiary
                   Index to Consolidated Financial Statements

                                                                            Page
                                                                            ----
         Report of Independent Registered Public Accounting Firm -
               Vasquez & Company LLP                                         F-2
         Consolidated Balance Sheets - December 31, 2007 and 2006      F-3 - F-4
         Consolidated Statements of Operations -
               Years Ended  December  31, 2007,  2006 and 2005               F-5
         Consolidated Statements of Shareholders' Equity -
               Years Ended December 31, 2007, 2006 and 2005                  F-6
         Consolidated Statements of Cash Flows -
               Years Ended December 31, 2007, 2006 and 2005            F-7 - F-8
         Notes to Consolidated Financial Statements -
               Years Ended December 31, 2007, 2006 and 2005                  F-9









                                      F-1
<PAGE>

             Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders
Soyo Group, Inc. and Subsidiary
Ontario, California

We have audited the accompanying consolidated balance sheets of Soyo Group, Inc.
and Subsidiary as of December 31, 2007 and 2006,  and the related  statements of
operations,  shareholders'  equity  and cash  flows for each of the years in the
three-year  period ended December 31, 2007.  Soyo Group,  Inc. and  Subsidiary's
management is responsible for these financial statements.  Our responsibility is
to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audits included consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Soyo Group, Inc. and
Subsidiary as of December 31, 2007 and 2006,  and the results of its  operations
and its cash flows for each of the years in the three-year period ended December
31, 2007 in conformity  with  accounting  principles  generally  accepted in the
United States of America.



/s/ Vasquez & Company, LLP
Los Angeles, California
March 31, 2008





                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                         SOYO Group, Inc. and Subsidiary
                           Consolidated Balance Sheets

                                                                                    December 31,
                                                                           ----------------------------
                                                                               2007            2006
                                                                           ------------    ------------
                                                                                             restated
<S>                                                                        <C>             <C>
ASSETS
Current Assets
Cash and cash equivalents                                                 $  1,848,249    $  1,501,040
Accounts receivable, net of allowance for doubtful accounts of
  $783,573 and $388,958 at December 31, 2007 and 2006, respectively         27,123,985      16,467,135
Inventories, net of allowance for inventory obsolescence of $168,600 and
$88,114 as of December 31, 2007 and 2006, respectively                      12,221,265       7,792,621

Prepaid expenses                                                               187,749          36,633

Deferred income tax assets - current                                           544,688            --
Deposits                                                                     8,808,408         243,095
                                                                          ------------    ------------
   Total current assets                                                     50,734,344      26,040,524

Investment in 247MGI                                                           400,000            --


Property and equipment                                                         316,287         711,015
Less: accumulated depreciation and amortization                               (141,613)       (159,300)
                                                                          ------------    ------------
                                                                               174,674         551,715
                                                                          ------------    ------------

Deferred income tax - noncurrent                                               658,312            --
                                                                          ============    ============
Total Assets                                                              $ 51,967,330    $ 26,592,239
                                                                          ============    ============

LIABILITIES
Current Liabilities
Accounts payable                                                          $ 14,336,196    $ 16,073,617

Accrued liabilities                                                            789,526         519,457
Advances from officers, directors and major stockholders                          --           100,000
Receivables sold with recourse                                                    --         3,588,403
Commercial loans due to UCB                                                 27,824,490            --
Income tax payable                                                             889,518          53,000
                                                                          ------------    ------------
   Total current liabilities                                                43,839,730      20,334,477
                                                                          ------------    ------------


Long term payable                                                                 --         3,735,198
                                                                          ------------    ------------
Total liabilities                                                           43,839,730      24,069,675
                                                                          ------------    ------------

EQUITY
Class B cumulative  convertible Preferred stock, $0.001 par value,
  authorized -10,000,000 shares, issued
   and outstanding - 2,614,195 shares
                                                                             2,187,165       1,918,974
Preferred stock backup withholding                                            (230,402)       (149,945)



                                      F-3
<PAGE>

Common stock, $0.001 par value.
   Authorized - 75,000,000 shares, issued and
    outstanding - 52,004,656 shares (49,025,511 shares - 2006)                  52,005          49,026
Additional paid-in capital                                                  20,233,500      17,866,531
Accumulated deficit                                                        (14,114,668)    (17,162,022)
                                                                          ------------    ------------
   Total shareholders' equity                                                8,127,600       2,522,564
                                                                          ------------    ------------
Total Liabilities and Shareholders' Equity                                $ 51,967,330    $ 26,592,239
                                                                          ============    ============

           See accompanying notes to consolidated financial statements


</TABLE>




























                                      F-4
<PAGE>
<TABLE>
<CAPTION>

                         SOYO Group, Inc. and Subsidiary
                      Consolidated Statements of Operations

                                                                      Year Ended December 31
                                                         ----------------------------------------------
                                                             2007             2006             2005
                                                                            restated
                                                         -------------    -------------    -------------
<S>                                                      <C>              <C>              <C>
Net revenues                                             $ 110,922,809    $  56,758,688    $  38,263,032
                                                         -------------    -------------    -------------
Cost of sales                                               96,501,474       47,534,249       34,905,874
Prior years' purchase discounts and allowances settled
    in 2005                                                       --               --         (1,335,812)
                                                         -------------    -------------    -------------
      Cost of revenues - net                                96,501,474       47,534,249       33,570,062
                                                         -------------    -------------    -------------
Gross margin                                                14,421,335        9,224,439        4,692,970
                                                         -------------    -------------    -------------

Costs and expenses:
  Sales and marketing                                        1,544,042        1,143,475          911,039
  General and administrative                                 7,922,210        5,610,810        3,659,338
  Bad debts                                                    385,387          907,065           34,513
  Adjustment of allowance                                         --               --           (462,234)
  Depreciation and amortization                                 91,818           43,818           35,394
                                                         -------------    -------------    -------------
   Total cost and expenses                                   9,943,457        7,705,168        4,178,050
                                                         -------------    -------------    -------------
Income (loss) from operations                                4,477,878        1,519,271          514,290
                                                         -------------    -------------    -------------
Other income (expenses):
  Interest income                                               85,144           10,561            5,301
  Interest expense                                          (1,364,059)        (901,900)        (129,567)
  Other income (expenses)                                      (87,705)        (106,262)         150,456
   Loss on sale of VOIP division                              (159,714)            --               --
                                                         -------------    -------------    -------------
      Other income (expenses) - net                         (1,526,334)        (997,601)          26,190
                                                         -------------    -------------    -------------
Income before provision (benefit)
    for income taxes                                         2,951,544          521,670          541,110
Provision (benefit) for income taxes
  Current income tax                                          (839,000)         (53,000)            (800)
  Deferred income tax                                        1,203,000             --               --
                                                         -------------    -------------    -------------
Net income (loss)                                            3,315,544          468,670          540,310
Less:  Dividends on Convertible Preferred Stock               (268,191)        (216,488)      (1,173,753)
                                                         -------------    -------------    -------------
Net income (loss) attributable to
    common shareholders                                  $   3,047,353    $     252,182    $    (633,443)
                                                         =============    =============    =============

Net income (loss) per common share -
   basic and diluted                                       $0.06/$0.06      $0.01/$0.01    ($0.01)/$0.01)
                                                         -------------    -------------    -------------
Weighted average number of shares of                        49,354,963/      49,025,511/      48,511,681/
      common stock outstanding - basic and diluted          53,594,176       59,786,042       52,868,673
                                                         -------------    -------------    -------------
</TABLE>

          See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                         SOYO Group, Inc. and Subsidiary
            Consolidated Statements of Shareholders' Equity (Deficit)
                  Years Ended December 31, 2007, 2006 and 2005



                                                                   Preferred              pref stock    Additional     Total
                                                Common Stock        Stock                   backup       Paid In    Accumulated
                                             Shares     Par Value   Shares    Par Value     whldng       Capital      Deficit
                                           -----------  --------- ----------  ---------   -----------  -----------  -----------
Balance, December 31, 2001                  28,182,750     28,183  1,000,000      1,000                    470,817     (918,737)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========
<S>                                        <C>          <C>       <C>         <C>         <C>          <C>          <C>
Shares of common stock
  retained by
  shareholders
  in October 2002
  transaction                               11,817,250     11,817                                          (11,817)
Net loss for the year
  ended December 31, 2002                         --         --         --         --                               (10,733,458)
----------------------------------------   -----------  --------- ----------  ---------   -----------  -----------  -----------
Balance, December 31, 2002                  40,000,000     40,000  1,000,000      1,000                    459,000  (11,652,195)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========
Net loss for the year
  ended December 31, 2003                         --         --         --         --                                  (984,588)
----------------------------------------   -----------  --------- ----------  ---------   -----------  -----------  -----------
Balance, December 31, 2003                  40,000,000     40,000  1,000,000      1,000                    459,000  (12,636,783)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========
Issuance of Preferred
Stock for Long Term Debt                                           2,500,000  1,304,000                 10,696,000
Dividends                                                            114,195    114,195
Accretion of Discount                                                           109,538
Net loss for the year
  ended December 31, 2004                         --         --                                                      (4,143,978)
----------------------------------------   -----------  --------- ----------  ---------   -----------  -----------  -----------
Balance, December 31, 2004                  40,000,000     40,000  3,614,195  1,528,733                 11,155,000  (16,780,761)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========
Issuance of Common
Stock for Private Placement                    500,000        500                                          499,500
Issuance of Common
Stock for Payment of Services                   30,000         30
Issuance of Common
Stock for Payment of Accounts Payable        5,645,330      5,645                                        3,608,744
Issuance of Common
Stock for Payment of Loan                    1,286,669      1,287                                          963,714
Issuance of Common
Stock for Conversion of Preferred Stock      1,219,512      1,220 (1,000,000)    (1,000)                   998,780
Accretion of Discount                                                           174,753
Preferred Stock Backup Withholding                                                            (84,999)
Net Income                                                                                                              540,310
Preferred Stock Dividends                                                                                            (1,173,753)
----------------------------------------   -----------  --------- ----------  ---------   -----------  -----------  -----------
Balance, December 31, 2005                  48,681,511     48,682  2,614,195  1,702,486                 17,225,738  (17,414,204)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========
Issuance of Common Stock-BOD                    39,000         39                                           24,531
Issuance of Common Stock--interest pymt        267,000        267                                           80,100
Issuance of Common Stock-Paul Risberg           38,000         38                                           12,502
Accretion of Discount                                                           216,488
Preferred Stock Backup Withholding                                                            (64,946)
To book FAS 123 adjustment                                                                                 506,221
Misc. Adjustment                                                                                            17,439       35,694
Net Income                                                                                                              216,488
----------------------------------------   -----------  --------- ----------  ---------   -----------  -----------  -----------
  Balance 12/31/2006                        49,025,511     49,026  2,614,195  1,918,974      (149,945)  17,866,531  (17,162,022)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========


<PAGE>

Per books 12/31/2006
  preferred stock dividend 1st Q                                                 61,763       (18,529)
  preferred stock dividend 2nd Q                                                 65,160       (19,548)
  preferred stock dividend 3rd Q                                                 68,744       (20,623)
  preferred stock dividend 4th Q                                                 72,525       (21,757)
    Stock option on orig issue -1st Q                                                                      176,794
    Stock option on orig issue -2nd Qtr orig                                                               104,094
    Stock option on orig issue -2nd Qtr new                                                                109,049
    Stock option on orig issue -2nd Qtr adjst                                                              436,197
    Stock option on orig issue -2nd Qtr non emp                                                            133,096
    Stock option on orig issue -3rd Q adjust                                                              (210,433)
    Stock option on orig issue -3rd Qtr non emp -aje#2                                                     175,058
    Stock option on orig issue -3rd Nancy & ming aje#4                                                     346,462
    Stock option on orig issue -3rd aje#16                                                                (100,880)
   Stock option employees - for the 4th quarter                                                            144,594
   Stock option non-employees - for the 4th quarter                                                        113,401
1st Q Stock issued for
    services - consultant                       13,645      13.00                                            6,812
                                           -----------  --------- ----------  ---------   -----------  -----------  -----------
 Oct 07 employee stock exercise 03099           94,320      94.32                                           94,231
                                               188,180     188.68                                          (189.00)
                                                 7,000       7.00                                            6,993
                                           -----------  --------- ----------  ---------   -----------  -----------  -----------
 Nov 07 employee stock exercise 03142           97,000      97.00                                           96,853
                                               180,000     180.00                                          (180.00)
                                           -----------  --------- ----------  ---------   -----------  -----------  -----------
 Dec 07 employee stock exercise 3161             2,800        2.8                                            2,797
                                                 5,200        5.2                                            (5.00)
                                               100,000        100                                        34,900.00
                                           -----------  --------- ----------  ---------   -----------  -----------  -----------
  Stocks issued to consultants (Oct-Dec)       751,000        751                                       134,764.00
  Stocks issued to Directors  (oct-)            40,000         40                                        21,960.00
  Stocks issued to Asean team  (12/14/2007)  1,500,000      1,500                                       283,500.00
  Stock options issued to consultant                                                                    239,701.00
  Unvested stock exercised in advance                                                                       17,400
Net income for  2007 (as of 3.24.2008)                                                                                3,047,353
----------------------------------------   -----------  --------- ----------  ---------   -----------  -----------  -----------
Per books 12/31/2007                        52,004,656  52,004.51  2,614,195  2,187,165      (230,402)  20,233,500  (14,114,668)
========================================   ===========  ========= ==========  =========   ===========  ===========  ===========
</TABLE>



                                      F-6
<PAGE>
<TABLE>
<CAPTION>


                         SOYO Group, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows


                                                                     -------------------------------------------
                                                                                Years Ended December 31,
                                                                     -------------------------------------------
                                                                                         2006
                                                                         2007          restated          2005
                                                                     ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>
OPERATING ACTIVITIES

Net Income (loss)                                                    $  3,315,544         468,670    $    540,310
Adjustments to reconcile net
 income(loss) to net cash provided
 by (used in) operating activities:
    Depreciation                                                           91,818          43,818          35,394
    Provision for doubtful accounts and recovery of AR written off        394,615         907,065          34,513
    Provision for inventory obsolescence                                   80,486            --
    Conversion of accounts payable to long-term debt                         --         3,735,198            --
   Stock compensation for employees                                     1,124,157         506,222
   Stock compensation paid for professional services                      803,596         134,915
   Stock issued as compensation for directors and others                  307,000            --
   Forfeitures of non-qualified stock options                            (100,880)           --
   Loss on sale of VOIP equipment and inventories                         159,714            --
Changes in operating assets
and liabilities:
(Increase) decrease in:
Accounts receivable                                                   (11,051,465)    (10,095,680)     (5,236,151)
Inventories - net                                                      (4,733,348)        198,409      (4,128,119)
Prepaid expenses                                                         (151,116)        (15,649)         51,432
Deferred income tax assets - current & non-current                     (1,203,000)           --
Deposits                                                               (8,565,313)       (206,175)         (2,109)
Increase (decrease) in:

Accounts payable trade & others                                        (1,737,421)      2,096,038       8,017,326
Accrued liabilities                                                       270,069        (767,651)        509,316
Advances from Officers, Directors and Major Stockholders                 (100,000)           --
Receivables sold with recourse                                         (3,588,403)           --
Commercial loans due to UCB                                            27,824,490            --
Income tax payable                                                        836,518          53,000
Net cash provided by (used in) operating activities                     3,977,061      (2,941,820)       (178,088)
                                                                     ------------    ------------    ------------
INVESTING ACTIVITIES
Purchase of property and equipment                                        (50,272)        (48,891)       (621,970)
Disposal of Fixed Assets                                                     --           205,000
                                                                     ------------    ------------    ------------

Net cash Supplied (used) in investing activities                          (50,272)        156,109        (621,970)
                                                                     ------------    ------------    ------------


FINANCING ACTIVITIES
Advances from officer, directors and major shareholder                       --                           165,000

Proceeds from accounts receivable discounting                                --        15,611,928

Repayments of accounts receivable discounting                                --       (12,023,525)



                                      F-7
<PAGE>

Repayment of advances from officer, director
    and major shareholder                                                    --           (65,000)       (240,000)

 Repayment of long-term debt                                           (3,735,198)           --           500,000
Proceeds from employees' exercise of stock options                        236,075            --
Payment of backup withholding                                                --              --

taxes on accreted dividends on preferred stock                            (80,457)        (64,946)        (84,999)
                                                                     ------------    ------------    ------------

Net cash provided by financing activities                              (3,579,580)      3,458,457         340,001
                                                                     ------------    ------------    ------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease)                                                   347,209         672,746        (460,057)

At beginning of year                                                    1,501,040         828,294       1,288,351
                                                                     ------------    ------------    ------------

At end of year                                                       $  1,848,249    $  1,501,040    $    828,294
                                                                     ============    ============    ============


SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:


Cash paid for interest                                               $  1,364,059         901,900          97,783
                                                                     ------------    ------------    ------------

Cash paid for income taxes                                                 26,696          20,310             800
                                                                     ------------    ------------    ------------
NON-CASH INVESTING AND FINANCING
ACTIVITIES
 Disposal of VOIP equipment and inventory assets in exchange

     For investment in common stock of 247 MGI                            400,000
Settlement of business loan of                                       ------------
$913,750 and accrued interest of
$51,251 through issuance of common stock                                                                  965,001
                                                                                                     ------------
Settlement of accounts payable
   through issuance of common stock                                                                     3,614,419
Conversion of Class A preferred                                                                      ------------
stock to common stock                                                                                       1,000
                                                                                                     ------------

Accretion of discount on Class B                                          268,191         216,488         174,753
preferred stock                                                      ------------    ------------    ------------

Deemed dividend on Class A                                                                                999,000
preferred stock                                                                                      ------------

Noncash dividend on Class B
preferred stock

</TABLE>


          See accompanying notes to consolidated financial statements


                                      F-8
<PAGE>


                         SOYO Group, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2007, 2006 and 2005


1.   Organization and Business

a.   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 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 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,  and pro forma information has
not been presented, as this transaction is not a business combination.

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,  Secretary and Director.  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".

b.   Nature of Business

SOYO Group, Inc. is a distributor of consumer electronics, computer products and
communications  services and products.  The Company  radically  changed its core
offerings  for sale in 2004.  Through the consumer  electronics  division,  SOYO
offers a full line of LCD display televisions and monitors, as well as Bluetooth
wireless  devices.  Through the  communications  division,  SOYO offers discount
telephone  service through VoIP protocol.  The services can be purchased through
different  types of plans and rates,  making the service  very  flexible for the
user.  The hardware to create and run VoIP services is also  available for sale.
Lastly,  the  Company  offers a full line of designer  motherboards  and related
peripherals  for  intensive   multimedia   applications,   corporate  alliances,
telecommunications and specialty market requirements. The breadth of the product
line also includes  Bare Bone  systems,  flash memory as well as small hard disk
drives for corporate and mobile users,  internal  multimedia  reader/writer  and
wireless networking solutions products for any home and office (SOHO) users.



                                      F-9
<PAGE>

SOYO  Group's  products  are sold  through an  extensive  network of  authorized
distributors to resellers, system integrators, and value-added resellers (VARs).
These products are also sold through major  retailers,  mail-order  catalogs and
e-tailers to consumers throughout North America and Latin America.

During the years that the Company operated through October 24, 2002, SOYO Nevada
was a wholly-owned subsidiary of SOYO Taiwan.

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

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

In 2006,  the Company  changed  factors to a more  beneficial  arrangement,  and
entered  into a Trade  Finance  Flow  facility  with GE Capital  to fund  "Star"
transactions. The agreement provided for GE Capital to guarantee payment, on the
Company's behalf, for merchandise ordered from GE Capital approved manufacturers
in Asia. GE Capital  guarantees the payment subject to a purchase order from one
of our customers.  The Company accepts delivery of the goods in the US, then has
the  option  to  either  pay for the  goods or sell  the  receivable  (from  the
customer) to our factor, who pays GE Capital.  For more information,  please see
the contract, which is included as exhibit 10.4 to this report.

In March 2007,  the Company  announced  that it had secured a $12 MM Asset Based
Credit Facility from a California bank to provide funding for future growth. For
more information, please see the Form 8-K filed by the company on March 2,2007.

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

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

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



                                      F-10
<PAGE>

2. Basis of Presentation and Summary of Significant Accounting Policies

a.   Presentation

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

b.   Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America 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.

c.   Cash and Cash Equivalents

Cash and cash equivalents include all highly-liquid investments with an original
maturity of three months or less at the date of purchase.  The Company minimizes
its credit risk by investing its cash and cash  equivalents with major banks and
financial institutions located primarily in the United States.

d.   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
will  reduce the  computed  average  cost if it exceeds the  component's  market
value.

During the years ended December 31, 2007,  2006 and 2005, the Company wrote down
the  value  of  its  inventory  for  obsolesence  by  $168,800,  $88,114  and $0
respectively.

e.   Property and Equipment

Property and equipment are stated at cost.  Major renewals and  improvements are
capitalized;  minor  replacements  and  maintenance  and  repairs are charged to
operations.  Depreciation  is  provided  on the  straight-line  method  over the
estimated useful lives of the respective assets (three to seven years).

Leasehold  improvements are amortized over the shorter of the useful life of the
improvement or the life of the related lease.

f.   Impairment or Disposal of Long-Lived Assets

Effective  January 1, 2002, the Company  assesses  potential  impairments to its
long-lived  assets when  events or changes in  circumstances  indicate  that the
carrying amount of an asset may not be fully recoverable, in accordance with the
provisions of Statement of Financial  Accounting  Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets". If required, an impairment
loss is recognized  as the  difference  between the carrying  value and the fair
value  of the  assets.  No  impairment  losses  associated  with  the  Company's



                                      F-11
<PAGE>

long-lived  assets were recognized  during the years ended December 31, 2007 and
2006.

g.   Revenue Recognition

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

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

h.   Vendor Programs

Funds received from vendors for price protection, product rebates, marketing and
training,  product  returns and  promotion  programs are  generally  recorded as
adjustments to product costs,  revenue or sales and marketing expenses according
to the nature of the program.

The Company records estimated reductions to revenues for incentive offerings and
promotions. Depending on market conditions, the Company may implement actions to
increase  customer  incentive  offerings,  which may  result  in an  incremental
reduction of revenue at the time the incentive is offered.

i.   Warranties

The  Company's  suppliers  generally  warrant the  products  distributed  by the
Company and allow returns of defective products,  including those that have been
returned to the Company by its  customers.  The Company  does not  independently
warrant the products that it distributes,  but it does provide warranty services
on behalf of the supplier.

j.   Concentration of Cash and Credit Risk

The Company  maintains its cash in bank  accounts  which,  at times,  may exceed
federally  insured  limits.  The Company has not  experienced any losses in such
accounts  to date.  Management  believes  that the Company is not exposed to any
significant risk on the Company's cash balances.

Financial  instruments  that  potentially  subject  the  Company to  significant
concentrations  of credit risk consist  primarily of trade accounts  receivable.
The Company  performs  ongoing credit  evaluations with respect to the financial
condition of its debtors,  but does not require  collateral.  On some occasions,
the Company will require a personal  guarantee from the owner to offer credit to
a customer.  The Company maintains credit insurance for a portion of this credit
risk.

In order to  determine  the  value of the  Company's  accounts  receivable,  the
Company  records a provision  for  doubtful  accounts to cover  probable  credit
losses.  Management  reviews and adjusts this  allowance  periodically  based on
historical  experience and its evaluation of the  collectibility  of outstanding
accounts receivable.



                                      F-12
<PAGE>
<TABLE>
<CAPTION>

k.   Advertising

Advertising  costs are  charged to  expense as  incurred.  The  Company  has not
incurred  direct  advertising  costs.  However,  the Company may  participate in
cooperative  advertising  programs  with  certain of its  customers  by paying a
stipulated percentage of the sales invoice price.  Cooperative advertising costs
paid for the years  ended  December  31,  2007,  2006,  and 2005 were  $647,741,
$834,616 and $849,897, respectively, and are presented under sales and marketing
costs in the accompanying consolidated statements of operations.

l.   Income Taxes

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

m.   Income (Loss) Per Common Share

Statement of  Financial  Accounting  Standards  No. 128,  "Earnings  Per Share",
requires  presentation  of basic  earnings per share  ("Basic  EPS") and diluted
earnings per share ("Diluted EPS").

Basic  income  (loss)  per share is  computed  by  dividing  net  income  (loss)
available to common shareholders by the weighted average number of common shares
outstanding during the period less undeclared cumulative preferred dividends for
the years.
                                                            2007            2006               2005
                                                            ----            ----               ----
<S>                                                    <C>               <C>               <C>

Net income attributable to common stock                $ 3,047,353       $ 252,182         $ (633,433)
Deduct: 6% cumulative preferred dividends                  150,000         150,000            150,000
                                                    --------------------------------------------------
   Net income for Basic EPS calculation                  2,897,353         102,182           (783,433)
                                                    --------------------------------------------------
Weighted average common shares
   outstanding                                          49,354,963      49,025,511         48,511,681

 Earnings per share - Basic                                 $ 0.06          $ 0.00            $ (0.02)

</TABLE>
Diluted  income per share gives effect to all dilutive  potential  common shares
outstanding during the period.  Potentially  dilutive  securities consist of the
outstanding shares of preferred stock, and stock options granted to employees in
2005 and 2007.  The stock options were not included in the  calculation of fully
diluted EPS for the year ended December 31, 2006,  since the strike price of the
outstanding  options was below the market price of the  Company's  common stock.
None of the potentially  dilutive securities were included in the calculation of
loss per share  for the year  ended  December  31,  2005,  because  the  Company
incurred a loss  attributable  to common  shareholders  during such  periods and
their  effect  would  have been  anti-dilutive.  Based on the  above,  the fully
diluted shares can be calculated as follows:

         Weighted average Shares outstanding at 12/31/2007         49,354,963
         Add: Conversion of Preferred Stock
            (2,614,195 divide by $1.15 per share)                   2,273,213
              Vested in the out of the money options
              Stock warrants issued to  Evergreen                   1,966,000
                                                                        --
                                                                   ----------
         Total fully diluted shares at 12/31/2007                  53,594,176
                                                                   ==========

 n.   Comprehensive Income

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 or loss for the years ended  December  31, 2007,
2006 and 2005.

                                      F-13
<PAGE>

o.   Fair Value of Financial Instruments

The Company  believes that the carrying value of its cash and cash  equivalents,
accounts receivable, accounts payable and accrued liabilities as of December 31,
2007 and 2006  approximate  their  respective  fair values due to the short-term
nature of those instruments.

p.  Stock Based Compensation

Effective  January 1, 2006 the Company  adopted  SFAS 123(R)  using the modified
prospective  approach and  accordingly  prior  periods have not been restated to
reflect the impact of SFAS 123(R). Under SFAS 123(R), 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  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
three years.

SFAS  123(R)  requires  forfeitures  to be  estimated  at the time of grant  and
revised,  if necessary,  in subsequent periods if actual forfeitures differ from
initial  estimates.  Stock-based  compensation  expense has been recorded net of
estimated  forfeitures  for the year ended  December 31, 2007 and 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.

SFAS 123 requires the Company to provide  pro-forma  information  regarding  net
loss as if  compensation  cost for the stock  options  granted to the  Company's
employees had been  determined  in  accordance  with the fair value based method
prescribed in SFAS 123. Options granted to non-employees are recognized in these
financial  statements as compensation  expense under SFAS 123 (See Note 9) using
the Black-Scholes option-pricing model.


q.   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.

r.   Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,  which
defines  fair  value,  establishes  a  framework  for  measuring  fair  value in
generally accepted  accounting  principles,  and expands  disclosures about fair
value  measurements.   SFAS  No.  157  does  not  require  any  new  fair  value
measurements,  but provides guidance on how to measure fair value by providing a



                                      F-14
<PAGE>

fair  value  hierarchy  used to  classify  the source of the  information.  This
statement  is  effective  for us  beginning  January 1, 2008.  We are  currently
assessing  the  potential  impact that adoption of SFAS No. 157 will have on our
consolidated financial statements.  In September 2006, the FASB issued Statement
No.  158,   "Employer's   Accounting  for  Defined  Benefit  Pension  and  Other
Postretirement  Plans - an  amendment  of FASB  Statements  No. 87, 88, 106, and
132(R)  ("FASB  158").  FASB 158 requires the full  recognition,  as an asset or
liability,  of the  overfunded  or  underfunded  status  of a  company-sponsored
postretirement  benefit plan. Adoption of FASB 158 is required effective for the
Company's fiscal year ending December 31, 2007. We assessed the potential impact
that adoption of FASB 158 would have on our  consolidated  financial  statements
and have concluded that there is no material  impact as of December 31, 2007. In
February  2007,  the FASB  issued  SFAS No.  159,  "The Fair  Value  Option  for
Financial Assets and Financial  Liabilities" (SFAS 159). Under the provisions of
SFAS 159,  companies may choose to account for eligible  financial  instruments,
warranties  and  insurance  contracts  at fair  value on a  contract-by-contract
basis.  Changes in fair value will be  recognized  in  earnings  each  reporting
period.  SFAS 159 is effective for financial  statements issued for fiscal years
beginning  after  November 15,  2007,  and interim  periods  within those fiscal
years.  The Company is required to and plans to adopt the provisions of SFAS 159
beginning in the first quarter of 2008.  The Company is currently  assessing the
impact of the adoption of SFAS 159 and its impact,  if any, on its  consolidated
financial statements.

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

In December, 2007, the FASB issued Statement No. 160, "Noncontrolling  Interests
in  Consolidated  Financial  Statements--an  amendment  of  ARB  No.  51."  This
statement establishes  accounting and reporting standards for the noncontrolling
interest in a  subsidiary  and for the  deconsolidation  of a  subsidiary.  This
statement  is  effective   prospectively,   except  for  certain   retrospective
disclosure requirements,  for fiscal years beginning after December 15, 2008. We
are  currently  analyzing  the  effects of the new  standard  and its  potential
impact, if any, on our consolidated financial statements.


3.   Accounts Receivable

The Company's  accounts  receivable at December 31, 2007 and 2006 are summarized
as follows:

                                             2007            2006
                                         ------------    ------------
Accounts receivable                      $ 27,907,558    $ 16,856,093
Less:  Allowance for doubtful accounts       (783,573)       (388,958)
                                         ------------    ------------
Balance, end of year                     $ 27,123,985    $ 16,467,135
                                         ============    ============

Changes in the allowance for doubtful  accounts for the years ended December 31,
2007 and 2006 are summarized as follows:



                                      F-15
<PAGE>
                                                2007        2006
                                             ---------   ---------
Balance, beginning of year                   $ 388,958   $ 589,224
Add:  Amounts provided during the year         394,615     235,939
Less:  Amounts written off during the year           0    (436,205)
Add: Recovery of  written off account           25,685
                                             ---------   ---------
Balance, end of year                         $ 783,573   $ 388,958
                                             =========   =========

In 2007, $16,458 of receivables were directly written off as uncollectible,  not
affecting the provision.

In February  2007,  the Company  entered into a financing  agreement with United
Commercial Bank (UCB) of City of Westminster,  CA. The agreement stated that UCB
would provide SOYO with a revolving  financing  facility of up to $12 million to
finance working  capital,  letters of credit or other capital needs. The maximum
amount  of the  facility  to be  extended  at any  point  in time  based  on the
Company's accounts receivable and inventory, which would serve as collateral for
the loan.  During the year, the facility was increased to $17 million,  with the
Company  accounts  receivable and inventory  still serving as collateral for the
loan.  At December  31,  2007,  the balance of the loan  secured by the accounts
receivable and due to UCB was $16,661,807.

At December 31, 2006, $3,407,463 of the Company's receivables had been bought by
Accord Financial Services.

The Company  began  factoring  its  invoices in 2005 to improve  cash flow.  The
Company's  initial  factor was Wells Fargo PLC. In  February  2006,  the Company
signed a one year contract with Accord Financial  Services of North Carolina for
factoring services. The agreement expired in February 2007 and was not renewed.

Under the Accord agreement,  all of our receivables were sold with recourse.  As
such,  the Company  continues to evaluate each of these  receivables  monthly in
regard to its allowance for bad debts. The original factor,  Wells Fargo, bought
all accounts without  recourse.  When the switch over to Accord occurred,  those
transactions were "with recourse".

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

4.   Investment in 247MGI

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



                                      F-16
<PAGE>

Since the Company's  shares are  unregistered  and illiquid,  the net realizable
value of the Company's  investment  is difficult to  calculate.  The Company has
written the  investment  down to  $400,000,  after  considering  a discount  for
liquidity.

5.   Property and Equipment

At  December  31,  2007  and  2006,  property  and  equipment  consisted  of the
following:


                                                       December 31,
---------------------------------------- ------------------- ----------------
                                                2007              2006
---------------------------------------- ------------------- ----------------
Computer and Equipment                        $145,111          $567,642
---------------------------------------- ------------------- ----------------
Furniture and Fixtures                          62,206            40,357
---------------------------------------- ------------------- ----------------
Leasehold Improvements                          91,941            91,941
---------------------------------------- ------------------- ----------------
Automobiles                                     11,075            11,075
---------------------------------------- ------------------- ----------------
Warehouse Equipment                              5,954
---------------------------------------- ------------------- ----------------
Less: Accumulated Depreciation                (141,613)         (159,300)
---------------------------------------- ------------------- ----------------
Total                                         $174,674          $551,715
---------------------------------------- ------------------- ----------------


For the  years  ended  December  31,  2007,  2006  and  2005,  depreciation  and
amortization expense related to property and equipment was $91,818,  $43,818 and
$35,394 respectively.

5.   Advances from Officer, Director and Major Shareholder

In October 2005,  the Company  borrowed  $165,000 from an individual for working
capital purposes.  During 2006,  $65,000 of the loan was repaid. At December 31,
2006, the loan balance was $100,000.  The balance was repaid in 2007. There were
no advances from officers, directors or shareholders as of December 31, 2007.

6. Receivables Sold with Recourse

During 2006,  the Company  utilized the factoring  services of Accord  Financial
Services  to  improve  its cash  flow.  All  invoices  sold by the  Company  and
purchased  by Accord were sold with  recourse.  As of  December  31,  2006,  the
balance due to Accord for advances  received was  $3,588,403.  During 2007,  all
amounts due to Accord were repaid with  interest.  As of December 31, 2007,  the
amount of Receivables sold with recourse was $0.

7. Commercial Loans Due to UCB

At December 31, 2007, Commercial loans due to UCB consisted of:

            Receivable financing                        $ 16,863,909
            Purchasing financing                          10,960,581
                 Total                                  $ 27,824,490
                                                        ============


In March 2007,  the Company  announced  that it had secured a $12 MM Asset Based
Credit Facility from a California bank to provide funding for future growth. The
agreement stated that UCB would provide SOYO with a revolving financing facility
of up to $12  million to  finance  working  capital,  letters of credit or other
capital needs. The maximum amount of the facility to be extended at any point in



                                      F-17
<PAGE>

time based on the Company's accounts receivable and inventory, which would serve
as collateral for the loan.

In April 2007, by mutual agreement of the parties,  the maximum loan balance was
increased  from $12  million  to $14  million.  The  maximum  loan  balance  was
increased  in December  2007 to $17 million.  All other terms of the  agreement,
including  the  interest  rate,  maturity  date and  method  of  evaluating  the
Company's  inventory and receivables to determine eligible  collateral were left
unchanged  during both  increases..  For reporting  purposes,  the loan has been
segregated from other payables and reported as a separate line item. At December
31, 2007, the balance of the loan due to UCB was $16,863,909.

In June 2007, UCB offered to provide the Company with an  alternative  source of
financing- Purchase Order financing.  This line differed from all other forms of
financing in that the bank was offering to advance  funds  against our customers
specific purchase orders,  provided the customer met the bank's stringent credit
requirements.  The end result is that the  Company can use this credit line only
by  obtaining   purchase  orders  from  large  customers   before  ordering  the
merchandise.  The funds would then be advanced to the manufacturer after product
was shipped, and once the product was delivered to the customer,  and the status
of the order was changed from a purchase  order to a receivable,  the loan would
have to be paid back, or the balance transferred to the asset based credit line.
The Company began buying  merchandise under the Purchase Order financing line in
June 2007. As of December 30, 2007, the amount SOYO owed to UCB was $10,960,581.

8. Long Term Debt

Soyo has been indebted to Corion for products purchased between January 2006 and
March 2006.

On October  19,  2006,  the  Parties  reached a mutually  beneficial  settlement
relating to the  outstanding  balance as of that date  amounting to  $4,252,682,
whereby Soyo agrees to pay Corion the sum of Fifty  Thousand  dollars  ($50,000)
each week until fully paid.  Notwithstanding the foregoing,  Soyo shall have the
right, at its sole  discretion,  to defer four (4) payments during each calendar
quarter.  Two (2) of these payments shall be deferred until the calendar quarter
following  their  deferral on a date selected by Soyo, and the remaining two (2)
payments shall be paid in weekly installments  following all regularly scheduled
payments, but in any event not later than October 1, 2008.

No interest shall be charged on the Debt.  Soyo shall pay the Debt in full by no
later than October 1, 2008.

Until the Debt is paid in full,  Soyo  agrees  not to give any other  supplier a
consensual  lien with priority  senior than that of Corion,  except for purchase
money liens and other similar interests.  As the debt is scheduled to be paid in
full during  2007,  the amount  reported as long term debt is $0 on December 31,
2007.  The balance due to Corion at December 31, 2007, was reported as a current
liability under the caption "Accounts Payable".

9.  Shareholders' Equity

a.   Common Stock

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

Effective October 24, 2002, the Company issued 28,182,750 shares of common stock
to Ming Tung Chok and Nancy Chu, who are members of SOYO Nevada  management (see
Note 1).  The  shares of  common  stock  were  valued  at par  value,  since the



                                      F-18
<PAGE>

transaction was deemed to be a recapitalization  of SOYO Nevada.  During October
2002, the management of SOYO Nevada also separately  purchased  6,026,798 shares
of the  11,817,250  shares of common stock of VWHC  outstanding  prior to VWHC's
acquisition of SOYO Nevada, for $300,000 in personal funds. The 6,026,798 shares
represented 51% of the outstanding  shares of common stock. When the transaction
was complete, and control of the Company was transferred, SOYO Nevada management
owned 34,209,548  shares of the 40,000,000  outstanding  shares of the Company's
common stock.  Subsequent to the transaction,  management  distributed 8,000,000
shares of common stock to various  brokers,  bankers and other  individuals that
assisted with the transaction. In 2007, Mr. Chok gave a gift of 1,000,000 shares
to an individual.  No one  individual or  corporation  other than those named in
Item 12 of this report ever owned more than 5% of the common shares outstanding.
SOYO  Group  management  currently  owns  25,209,548  of the  52,004,656  shares
outstanding as of December 31, 2007.

b.   Preferred Stock

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

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

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

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

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

For the year ended December 31, 2007, the Company recorded accreted dividends of
$268,191.  For the year ended December 31, 2006, the Company  recorded  accreted
dividends of $216,488.



                                      F-19
<PAGE>

c.   Stock Options and Warrants

As of December 31, 2007, the Company had both warrants and options  outstanding.
The  outstanding  warrants were those issued to Evergreen  Technology as part of
the private placement completed in March 2005.

On July 22, 2005, the Company issued  2,889,000  option grants to employees at a
strike price of $0.75.  One third of those options vested and were available for
purchase on July 22, 2006,  one third will vest on July 22, 2007,  and one third
will vest on July 22, 2008. The grants will expire if unused on July 22, 2010.

The Company did not grant any stock options to employees,  officers or directors
in 2006.  On February 2, 2007,  the Company  issued  4,805,000  option grants to
employees  at a  strike  price  of  $0.35.  One  third  of  those  options  were
immediately  vested and  available  for purchase on February 2, 2007,  one third
will vest on  February 2, 2008,  and one third on  February 2, 2009.  The grants
will expire if unused on February 2, 2012.

During 2007, 674,500 of the options granted in 2007 were exercised.  None of the
options  granted  in 2005 have been  exercised.  As of  December  31,  2007,  17
individuals who had been granted options in 2005 had left the Company, resulting
in the forfeiture of 552,000 of the 2005 options.  Furthermore,  six individuals
who were granted options in 2007 had left the Company. Those six individuals had
exercised  58,000  options,  but forfeited  30,000 options  granted in 2005, and
262,000  options  granted in 2007 upon leaving the  Company.  As of December 31,
2007,  646,000  options  issued  in 2005  were  vested  but not  exercised,  and
1,320,000 options issued in 2007 were vested but not exercised.

During the fourth  quarter of 2007,  674,500  options  granted to employees at a
price of $.35 were exercised.

For the  twelve  months  ended  December  2007 and 2006,  the  Company  recorded
$1,220,158 and $959,230  respectively,  in compensation  costs relating to stock
options  granted to  employees.  In 2007,  the  Company  recognized  $135,515 in
expenses for stock options issued to  consultants.  There was no expense related
to stock options issued to consultants in 2006. The amounts  recorded  represent
equity-based  compensation  expense  related to options that were issued in 2005
and 2007. The compensation costs are based on the fair value at the grant date.

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

10. Income Taxes

The  components of the provision  (benefit) for income taxes for the years ended
December 31, 2007, 2006 and 2005 are as follows:

                         2007             2006            2005
                     -----------      -----------     -----------
Current:
    U.S. federal     $   515,000      $     1,000     $
    State                324,000           52,000             800
                     -----------      -----------     -----------
    Total                839,000           53,000             800
                     -----------      -----------     -----------
Deferred:
    U.S. federal      (1,038,000)            --
    State               (165,000)            --
                     -----------      -----------     -----------
    Total             (1,203,000)            --
                     -----------      -----------     -----------
Total                $  (364,000)     $    53,000     $       800
                     ===========      ===========     ===========



                                      F-20
<PAGE>

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's  deferred tax assets as of December 31, 2007, 2006 and 2005 are as
follows:

                                          2007         2006           2005
                                     -----------   -----------    -----------
Net operating loss carryforwards     $      --     $ 1,310,000    $ 1,576,000
Depreciation                             214,000       288,000        344,000
Reserves and allowances                  442,000       214,000        304,000
Share-based compensation                 444,000          --             --
State income taxes                       103,000        69,000         52,000
                                     -----------   -----------    -----------

Total deferred tax assets              1,203,000     1,881,000      2,576,000
Valuation allowance                         --      (1,881,000)    (2,576,000)
                                     -----------   -----------    -----------

Net deferred tax assets              $ 1,203,000   $      --      $      --
                                     ===========   ===========    ===========

The  reconciliation  between the income tax rate  computed by applying  the U.S.
federal  statutory  rate and the effective rate for the years ended December 31,
2007, 2006 and 2005 is as follows:





                                          2007         2006           2005
                                     -----------   -----------    -----------
U.S. federal statutory tax rate           34.0%         34.0%          34.0%
Stock-based compensation                   9.5%         33.0%           --
State income taxes                         3.6%          6.5%           9.0%
Non-deductible expenses                    0.6%          2.9%           --
Change in valuation allowance            (60.0%)       (67.2%)          --
Other                                         --         0.8%         (43.0%)
                                     -----------   -----------    -----------
Effective tax rate                       (12.3%)        10.0%           --
                                     ===========   ===========    ===========



     The Company adopted the provisions of Financial Standards  Accounting Board
Interpretation  No. 48 Accounting for  Uncertainty in Income Taxes ("FIN 48") an
interpretation  of FASB  Statement No. 109 ("SFAS 109") on January 1, 2007. As a
result of the implementation of FIN 48, the Company did not record an adjustment
for unrecognized income tax benefits. At the adoption date of FIN 48, January 1,
2007  and also at  December  31,  2007,  the  Company  had no  unrecognized  tax
benefits.
        The Company  recognizes  interest and penalties related to uncertain tax
positions  in income tax expense.  As of December  31,  2007,  it had no accrued
interest or penalties related to uncertain tax positions.

11.  Commitments and Contingencies

a.   Operating Lease

The  Company  leases  its  office  and  warehouse  premises  under  a  five-year
non-cancelable  operating  lease that expires on November 30, 2008,  with a five
year renewal option. The lease provides for monthly payments of base rent and an
unallocated  portion of  building  operating  costs.  The minimum  future  lease
payments are as follows:

     Years Ending December 31,
     -------------------------

         2008              194,970



                                      F-21
<PAGE>
<TABLE>
<CAPTION>

Rent expense for the years ended December 31, 2007,  2006 and 2005 was $278,760,
$229,540  and  $238,836  and  respectively.  The Company must inform the current
landlord in writing no later than April 2008  whether or not it intends to renew
the lease or relocate.


12.  Significant Concentrations

a.   Customers

The Company sells to distributors, retailers and directly to consumers. Revenues
through such  distribution  channels for each of the three years ended  December
31, 2007, 2006 and 2005 are summarized as follows:

                                                    Year Ended December 31
                                                    ----------------------

                            2007            %           2006            %            2005            %
                            ----            -           ----            -            ----            -
<S>                     <C>              <C>        <C>               <C>        <C>              <C>

Revenues
  Distributors          55,609,498        50.1      $35,510,804        62.6      $22,312,488       58.3
  Retailers             46,706,227        42.1       15,187,152        26.8       15,742,332       41.2
  Others                 8,607,085         7.8        6,060,732        10.6          208,212        0.5
Total                  110,922,809       100.0      $56,758,688       100.0      $38,263,032      100.0

During the year ended December 31, 2007,  two customers  accounted for more than
10 % of sales. Wal Mart Canada purchased  $15,752,660 of goods from the Company,
equal to 14.2% of total revenues, and Office Max purchased $13,560,291 of goods,
equal to 12.3 of total revenues.

During the year ended  December  31,  2006,  the Company had no  customers  that
accounted for more than 10% of revenues.

During the year ended December 31, 2005, the Company had one customer (E23) that
accounted for revenues of $13,552,324, equivalent to 35% of net revenues.


Revenues by product line are summarized as follows:


                                                             Year Ended December 31
                                                             ----------------------
                                         2007          %         2006          %         2005          %
                                         ----          -         ----          -         ----          -
Revenues
  Consumer electronics                 53,786,883    48.5    $27,543,873     48.5    $18,739,719     49.0
  Computer parts and
       peripherals                     56,830,322    51.3     29,204,792     51.5     18,906,367     49.4
  Furniture                               249,803     0.2

  Voice and communication                 55,801                  10,023      --         616,946       1.6
Total                                110,922,809     100.0   $56,758,688     100.0   $38,263,032     100.0

b. Geographic Segments

Revenues by geographic segment are summarized as follows:
                                                             Year Ended December 31
                                                             ----------------------
                                         2007          %         2006          %         2005          %
                                         ----          -         ----          -         ----          -
Revenues
  United States                        79,412,207    71.5    $42,628,547     75.2    $20,686,944     54.1
  Other N. America                     17,297,999    15.6      2,472,209      4.4        983,606      2.6



                                      F-22
<PAGE>

  Central and South America            10,054,602     9.1      10,253,665    18.0      2,993,532      7.8
  Hong Kong                             2,862,564     2.6         139,490     0.2     13,598,950     35.4
  Other locations                       1,295,437     1.2       1,264,777     2.2            N/A      N/A
Total                                 110,922,809   100.0     $56,758,688   100.0    $38,263,032    100.0
</TABLE>
<TABLE>
<CAPTION>
During the first part of 2005,  the  Company  had made a  commitment  to its new
product lines,  but did not have much  inventory to sell.  While waiting for the
initial inventory shipments,  the Company entered into a short term agreement to
make sales of computer  components to a vendor in Hong Kong (E23). The sales had
relatively low margin, and not a business that the Company planned to be in long
term. Nevertheless, the sales of such products in 2005 represented a significant
portion of the Company's business.


c.   Suppliers

SOYO Group does not produce the components  that it  distributes.  Approximately
95% of SOYO Group,  Inc.'s products are supplied by companies  located in Taiwan
and China. As of December 31, 2007, the Company purchased 63% of the products it
sells from its top 3  suppliers.  No one supplier  produced  more than 31%of the
products distributed and sold by the Company.

In  continuing  efforts to work with and leverage its supply base,  SOYO entered
into an agreement  with GE Capital in 2006 whereby GE  guarantees  payment to GE
approved  vendors  thereby  facilitating  larger  orders,  decreasing  risk  and
allowing  SOYO to  seamlessly  finance these  transactions.  That  agreement was
discontinued in 2007 when the Company entered into a banking  relationship  with
UCB of California.  As collateral for the loan, the Company agreed to give UCB a
first lien on Company assets.  As a result,  GE Capital was no longer willing to
guarantee payments to vendors.  As of December 31, 2007, all payments to vendors
are made using the  Company's  cash flow,  or borrowed  from UCB under the asset
based credit line.

13. Quarterly Results (Unaudited)

Presented  below is a summary of the  quarterly  results of  operations  for the
years ended December 31, 2007 and 2006.

                               Three months ended:
-------------------------------------------------------------------------------------------------------
                      March 31,2007    June 30, 2007    Sept.30, 2007    Dec. 31, 2007       Total
-------------------   -------------    -------------    -------------    -------------    -------------
<S>                   <C>              <C>              <C>              <C>              <C>
Net Revenues          $  14,691,110    $  24,202,395    $  33,435,184    $  38,594,120    $ 110,922,809
-------------------   -------------    -------------    -------------    -------------    -------------
Gross Margin              2,608,196        3,803,092        3,630,362        4,379,685       14,421,335
-------------------   -------------    -------------    -------------    -------------    -------------
Income  (Loss)              414,437          362,540        2,021,233        1,679,668        4,477,878
from Operations
-------------------   -------------    -------------    -------------    -------------    -------------
Other  Income              (116,020)        (321,633)        (177,786)        (910,895)      (1,526,334)
(Expense) Net
-------------------   -------------    -------------    -------------    -------------    -------------
Income  (Loss)              298,417           40,907        1,843,447          768,773        2,951,544
before taxes
-------------------   -------------    -------------    -------------    -------------    -------------
Income Taxes                (63,085)        (129,775)         (78,379)        (567,761)        (839,000)
(Current)
-------------------   -------------    -------------    -------------    -------------    -------------
Deferred Taxes              286,858          439,802                           476,340        1,203,000
-------------------   -------------    -------------    -------------    -------------    -------------
Net Income                  522,190          350,934        2,509,857          (67,437)       3,315,544
-------------------   -------------    -------------    -------------    -------------    -------------
Preferred                   (61,763)         (65,160)         (68,744)         (72,525)        (268,191)
Dividends
-------------------   -------------    -------------    -------------    -------------    -------------
Net Income                  460,427          285,774        2,441,113         (139,962)       3,047,353
Attributable to
Common
Shareholders
-------------------   -------------    -------------    -------------    -------------    -------------
Net Income (Loss)
per share
Basic                           .01              .01              .05             (.00)             .07
Diluted                         .01              .01              .05             (.00)             .06
-------------------   -------------    -------------    -------------    -------------    -------------



                                      F-23
<PAGE>

                              Three months ended:
--------------------------------------------------------------------------------------------------
                      March 31,2006   June 30, 2006   Sept. 30,2006   Dec. 31, 2006      Total
-------------------   ------------    ------------    ------------    ------------    ------------
Net Revenues          $ 11,548,187    $ 10,787,515    $ 10,005,084    $ 24,417,902    $ 56,758,688
-------------------   ------------    ------------    ------------    ------------    ------------
Gross Margin             1,651,088       2,306,753       2,233,361       3,033,237       9,224,439
-------------------   ------------    ------------    ------------    ------------    ------------
Income (Loss)             (209,526)        635,182         526,909         566,706       1,519,271
from Operations
-------------------   ------------    ------------    ------------    ------------    ------------
Other Income               (64,609)        (73,698)       (207,338)       (651,686)       (997,601)
(Expense) Net
-------------------   ------------    ------------    ------------    ------------    ------------
Income (Loss)             (274,135)        561,214         319,658         (84,977)        521,670
before taxes
-------------------   ------------    ------------    ------------    ------------    ------------
Income Taxes                                                               (53,000)        (53,000)
-------------------   ------------    ------------    ------------    ------------    ------------
Net Income                (274,135)        561,214         319,658        (137,977)        468,670
-------------------   ------------    ------------    ------------    ------------    ------------
Preferred                  (49,856)        (52,598)        (55,491)        (58,543)       (216,488)
Dividends
-------------------   ------------    ------------    ------------    ------------    ------------
Net Income                (323,991)        508,616         264,077        (196,520)        252,182
Attributable to
Common
Shareholders
-------------------   ------------    ------------    ------------    ------------    ------------
Net Income (Loss)
per share
Basic                         (.01)            .01             .01               0             .01
Diluted                       (.01)            .01             .01               0             .01
-------------------   ------------    ------------    ------------    ------------    ------------
</TABLE>


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
     FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures:

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) of the  Exchange  Act.  Our  internal  control  system was designed to
provide reasonable  assurance  regarding the reliability of financial  reporting



                                       59
<PAGE>

and the preparation of financial statements for external purposes, in accordance
with United States generally accepted accounting principles. Because of inherent
limitations,  a system of internal  control  over  financial  reporting  may not
prevent  or  detect  misstatements.  Also,  projections  of  any  evaluation  of
effectiveness to future periods are subject to the risk that controls may become
inadequate  due to change in conditions,  or that the degree of compliance  with
the policies or procedures may deteriorate.

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

Our  management,   including  our  principal  executive  officer  and  principal
accounting officer, conducted an evaluation of the effectiveness of our internal
controls  as of December  31,  2007,  and this  assessment  identified  material
weaknesses in our internal  control over the  financial  reporting  process.  In
particular,  our  accounting  system can not be relied  upon to  properly  value
inventory, or to generate timely and accurate financial information to allow for
the preparation of timely and complete  financial  statements.  In light of this
conclusion,  and as part of the  preparation  of this  report,  we have  applied
compensating  procedures and processes as necessary to ensure the reliability of
our  financial  reporting.  Accordingly,   management  believes,  based  on  its
knowledge,  that (1) this  report does not  contain  any untrue  statement  of a
material fact or omit to state a material fact  necessary to make the statements
made not misleading  with respect to the period covered by this report,  and (2)
the  financial  statements,  and other  financial  information  included in this
report,  fairly  present in all  material  respects,  our  financial  condition,
results of operations, and cash flows for the years and periods then ended.

In making the assessment of internal control over financial reporting management
used the criteria set forth by the Committee of Sponsoring  Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated  Framework. Because of
the material  weakness  described in the  preceding  paragraph,  our  management
concluded that our internal  control over financial  reporting was not effective
as of December 31, 2007.

We are actively engaged in the implementation of remediation  efforts to address
the  material  weakness in internal  control  over  financial  reporting.  These
remediation  efforts include  devising and  implementing  effective  controls to
review and monitor  the system  output,  and to replace  our current  accounting
software with new software. Management hired experts to assist in the evaluation
and implementation of new accounting software. The evaluation was completed, the
software has been paid for, and significant  customization has been performed to
adapt the software to the Company's business. All employees,  managers and other
system  users have been trained and tested on the use of the new  software.  The
Company will begin parallel testing in the next few weeks, and the software will
be "live" during the second quarter of fiscal year 2007.

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

This report does not contain an attestation report of our independent registered
certified  public  accounting  firm  regarding  internal  control over financial
reporting. Management's report was not subject to attestation by our independent
registered  certified public  accounting firm pursuant to the temporary rules of
the  Securities  and  Exchange   Commission  that  permit  us  to  provide  only
management's report in this report.

Changes  in  our  internal  control  over  financial  reporting   identified  in
connection  with the evaluation  required by paragraph (d) of Exchange Act Rules
13a-15 or 15d-15 that occurred  during the three months ended  December 31, 2007
that have materially  affected,  or are reasonably likely to materially  affect,
our internal control over financial reporting have been described above.

ITEM 9B. OTHER INFORMATION- NONE


                                       60
<PAGE>
                                    PART III



ITEM 10. DIRECTORS,  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following  table and text sets forth the names and ages of all the Company's
directors and executive  officers and the key  management  personnel as of March
31, 2007. The Company's  Board of Directors is comprised of only one class.  All
of the directors serve until the next annual meeting of  stockholders  and until
their  successors  are elected and  qualified,  or until  their  earlier  death,
retirement,  resignation or removal.  Executive officers serve at the discretion
of the Board of  Directors,  and are appointed to serve until the first Board of
Directors meeting following the annual meeting of stockholders. Also provided is
a brief  description  of the business  experience of each director and executive
officer  and the key  management  personnel  during  the past five  years and an
indication of directorships  held by each director in other companies subject to
the reporting requirements under the Federal securities laws.


---------------------- ------- -------------------------------------------------
Name                   Age     Position Held
---------------------- ------- -------------------------------------------------
Ming Tung Chok         47      Chief Executive Officer and Director
---------------------- ------- -------------------------------------------------
Nancy Chu              51      Chief Financial Officer, Secretary and Director
---------------------- ------- -------------------------------------------------
Jay Schrankler         50      Director
---------------------- ------- -------------------------------------------------
Chung Chin Keung       42      Director
---------------------- ------- -------------------------------------------------
Henry Song             49      Director
---------------------- ------- -------------------------------------------------

Ming Tung Chok has served as the President, Chief Executive Officer and Director
of the Company since October 25, 2002.  Prior to serving in this  capacity,  Mr.
Chok was the Vice President of Engineering of SOYO Group, Inc. for the past five
years. Mr. Chok received his Bachelor Degree in Electrical  Engineering from the
California  State  University,  Long Beach. Mr. Chok is married to Ms. Nancy Chu
who is a Director, the Chief Financial Officer and the Secretary of the Company.

Nancy Chu has served as the Chief Financial Officer,  the Secretary and Director
of the Company since October 25, 2002.  Prior to serving in this  capacity,  Ms.
Chu was the Vice  President  of  Operations  of SOYO Group,  Inc. for the past 5
years.  Ms. Chu holds a Bachelor  Degree in Accounting & Statistics from the Sji
Jiang  College,  Taiwan  R.O.C.  Ms.  Chu  is  married  to Mr.  Chok  who is the
President, Chief Executive Officer and a Director of the Company.

Chung Chin Keung was appointed in October 2005 as an  independent  non-executive
director, audit committee member and compensation committee member. In 2007, Mr.
Chung was named  Chairman  of the Audit  committee.  Mr.  Chung has more than 14
years  commercial  experience,  including  more than 10 years in accounting  and
finance  for  publicly  listed  companies  in various  countries.  Mr.  Chung is
currently  the chief  finance  officer of KPI Co.  Ltd.  (0605,  Hong Kong Stock
Exchange),  a listed  company in Hong Kong. Mr. Chung holds a Master of Business
Administration from the University of Manchester, England.

Jay Shrankler was appointed in September  2007 as an  independent  non-executive
director and compensation  committee member.  Mr. Shrankler was a Vice President
of Licensing and Marketing for Honeywell  International  Inc.'s  Automation  and
Control  Solutions  Group from 2003 to 2007. From 2001 to 2003, he served as the
Vice  President of  Environmental  Controls for Honeywell  International  Inc.'s



                                       61
<PAGE>

Automation and Control  Solutions.  He was Vice President and General Manager of
the Honeywell  International  Inc. Home and Building  Control from 1999 to 2001.
Currently,  he works at the University of Minnesota as an Executive  Director in
the Office for Tech Communications.

Henry Song was  appointed  in  September  2007 as an  independent  non-executive
director, audit committee member and compensation committee member. Mr. Song has
worked as the Chief  Executive  Officer and  Chairman of the Board for  Shenzhen
DiGuang  Electronics  since  1996.  He has also  served as the  Chief  Executive
Officer and Chairman of the Board for  Shenzhen  DiGuang  Electronics  Equipment
since 1994.  Mr. Song and his companies are known for leading edge LED displays.
SOYO views LED as the future of the flat panel market.  With LED  technology you
get brighter pictures and more vivid images while using far less electricity.

Each Director received 10,000  unregistered shares of the Company's common stock
in 2005. The two directors who joined the Company in 2007 received 20,000 shares
each upon  joining  the  Board of  Directors.  The  Directors  receive  no other
compensation  for serving on the Board of Directors,  but are reimbursed for any
out-of-pocket  expenses  incurred  in  attending  board  meetings,  and  may  be
compensated for other work done on the Company's behalf.

Family Relationships.

Ming Tung Chok, President and CEO, and Nancy Chu, CFO and Secretary, are husband
and wife.  Andy Chu, the President and majority  shareholder of SOYO Taiwan,  is
the brother of Nancy Chu.

Involvement in Legal Proceedings.

To the best of the Company's knowledge,  during the past five years, none of the
following  occurred  with  respect to a present or former  director or executive
officer of the  Company:  (1) any  bankruptcy  petition  filed by or against any
business of which such person was a general partner or executive  officer either
at the time of the  bankruptcy  or within two years prior to that time;  (2) any
conviction  in a criminal  proceeding  or being  subject  to a pending  criminal
proceeding  (excluding traffic  violations and other minor offenses);  (3) being
subject to any order, judgment or decree, not subsequently  reversed,  suspended
or vacated, of any court of competent  jurisdiction,  permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; and (4) being found by a court of
competent  jurisdiction (in a civil action),  the SEC or the Commodities Futures
Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended or vacated.

Section 16(a) Beneficial Ownership Compliance.

The  Company  does  not have  any  shares  registered  under  Section  12 of the
Securities Act and therefore the owners of the Company's  equity  securities are
not required to report their  beneficial  ownership  under  Section 16(a) of the
Exchange Act.

Audit Committee

The Audit  Committee of the Board of Directors is comprised of Mr. Chung and Mr.
Song.  The first Audit  Committee  meeting is  scheduled  to  coincide  with the
Company's 2007 Annual  meeting,  the date of which has not yet been set. None of
the directors is an Audit Committee Financial Expert.

Communications with the Board



                                       62
<PAGE>

Any shareholder may communicate directly with the Board of Directors.  The Board
of Directors has established the following system to receive,  track and respond
to  communications  from  shareholders  addressed  to  the  Company's  Board  of
Directors and its committees and members. Any shareholder may address his or her
communication to the Board of Directors,  or an individual Board member and send
the communication  addressed to the recipient group or individual,  care of SOYO
Group, Inc.,  Corporate  Secretary,  1420 South Vintage Ave., Ontario, CA 91761.
The  Corporate   Secretary  will  review  all  communications  and  deliver  the
communications to the appropriate party in the Corporate Secretary's discretion.
The Corporate  Secretary may take additional action or respond to communications
in accordance with instructions from the recipient of the communication.

Code of Ethics

We believe that good corporate  governance  practices  promote the principles of
fairness,  transparency,  accountability and responsibility and will ensure that
our Company is managed for the long-term benefit of its shareholders. During the
past year,  we have  continued to review our corporate  governance  policies and
practices  and to compare  them to those  suggested  by various  authorities  in
corporate  governance and the practices of other public companies.  Accordingly,
in March 2004, the Board adopted a Code of Ethics and Conduct.  You may obtain a
copy of the Code of Ethics  and  Conduct  and other  information  regarding  our
corporate governance practices by writing to the Corporate Secretary, 1420 South
Vintage Ave., Ontario, CA 91761.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The  Compensation  Committee of our board of directors and our CEO, CFO and head
of  Human  Resources  are   collectively   responsible  for   implementing   and
administering all aspects of our benefit and compensation plans and programs, as
well as developing  specific  policies  regarding  compensation of our executive
officers.  Both of the members of our Compensation  Committee,  Chung Chin Keung
and Jay Schrankler are independent directors.

Compensation Objectives

The  stated  goal  of our  compensation  committee  with  respect  to  executive
compensation  has been to set compensation at levels that attract and retain the
most talented and dedicated  executives  possible.  We attempt to set individual
executive  compensation  levels comparable with executives in other companies of
similar size and stage of development. We attempt to reward employees for strong
Company  performance  through the use of stock options.  Our Executive Officers,
Ming Tung Chok and Nancy Chu,  are husband and wife,  and are also our  founders
and largest shareholders.

Elements of Compensation

Base Salary.  All full time executives are paid a base salary. In all cases, the
Committee  establishes  a minimum base salary for our executive  officers.  Base
salaries  for our  executives  are  established  based  on the  scope  of  their
responsibilities and the current financial situation of the Company. We also try
to take into account  competitive market compensation paid by other companies in
our  industry  for  similar  positions,  professional  qualifications,  academic
background,  and the other  elements  of the  executive's  compensation,  namely
stock-based compensation.



                                       63
<PAGE>

Equity Compensation.  We believe that long-term  performance is achieved through
an ownership culture  participated in by our executive  officers through the use
of stock-based awards.  Currently, we do not maintain any incentive compensation
plans based on pre-defined  performance criteria. The Compensation Committee has
the general authority,  however,  to award equity incentive  compensation,  i.e.
stock  options,  to our executive  officers in such amounts and on such terms as
the committee  determines in its sole discretion.  The Committee does not have a
determined  formula  for  determining  the  number of  options  available  to be
granted,  subject to the number of options  available through our Employee Stock
Ownership Program. Incentive compensation is intended to compensate officers for
accomplishing   strategic   goals  such  as  meeting   defined   revenue  goals,
profitability,  and fund  raising in  accordance  with the  Company's  needs for
future growth.  The  Compensation  Committee  awarded stock options to executive
officers,  employees  and  consultants  upon the  filing of our  Employee  Stock
Ownership Program in 2005, and awarded additional stock options to employees and
consultants  in 2007.  No stock options were granted in 2006.  Our  Compensation
Committee grants equity  compensation only at times when we do not have material
non-public  information  to avoid  timing  issues and the  appearance  that such
awards are made based on any such information.

Determination of Compensation

Our  CEO,  CFO and  head of Human  Resources  meet  annually  to  evaluate  each
non-executive  employee's performance.  A meeting is held towards the end of the
fiscal year to determine each employee's compensation for the following year. In
the  case  of our  executive  officers,  the  Compensation  Committee  similarly
evaluates the  executive's  performance and the objectives set forth above at or
about the end of our fiscal year to determine executive compensation.

The  following  table sets forth the cash and other  compensation  paid by us in
2007, 2006 and 2005 to the individuals who served as our chief executive officer
and chief financial officer, and all other executive officers who received total
compensation greater than $100,000 in 2007.

Summary Compensation Table
---------------------------------- -------- ----------- -------------------
            Name                    Year    Salary      Options Granted
--------------------------------- -------- ----------- -------------------
Ming Tung Chok (i)                  2007    $144,000            0
President, Chief Executive          2006    $144,000            0
Officer                             2005    $144,000      600,000 (a)
and Director
--------------------------------- -------- ----------- -------------------
Nancy Chu  (ii)                     2007    $120,000            0
Chief Financial Officer and         2006    $120,000            0
Secretary                           2005    $120,000      600,000 (a)
--------------------------------- -------- ----------- -------------------
Harvey Schneider                    2007    $116,533      250,000
Director of Sales
--------------------------------- -------- ----------- -------------------
(a) Both Mr. Chok and Ms. Chu  forfeited  and returned the stock  options to the
Company in 2007.

(i) Ming Tung Chok has served as the  President,  Chief  Executive  Officer  and
Director  of the  Company  since  October  25,  2002.  Prior to  serving in this
capacity, Mr. Chok was the Vice President of Engineering of SOYO Group, Inc. for
the past five  years.  Mr.  Chok  received  his  Bachelor  Degree in  Electrical



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<PAGE>

Engineering  from the  California  State  University,  Long  Beach.  Mr. Chok is
married to Ms. Nancy Chu who is a Director,  the Chief Financial Officer and the
Secretary of the Company.

(ii) Nancy Chu has served as the Chief  Financial  Officer,  the  Secretary  and
Director  of the  Company  since  October  25,  2002.  Prior to  serving in this
capacity,  Ms. Chu was the Vice President of Operations of SOYO Group,  Inc. for
the past 5 years.  Ms. Chu holds a Bachelor  Degree in  Accounting  & Statistics
from the Sji Jiang College,  Taiwan R.O.C. Ms. Chu is married to Mr. Chok who is
the President, Chief Executive Officer and a Director of the Company.

Outstanding Stock Options At December 31, 2007
------------------------------------------------------------------------------
Name              Number of                                     Option
                 Exercisable                                  Expiration
                   Options   Exercise Price   Vesting Date       Date
--------------- ------------ --------------- -------------- ------------------
Ming Tung Chok     NONE
--------------- ------------ --------------- -------------- ------------------
Nancy Chu          NONE
--------------- ------------ --------------- -------------- ------------------
Harvey Schneider   83,000        .35        February 2, 2007   February 2, 2012
                   83,000        .35        February 2, 2008   February 2, 2012
                   84,000        .35        February 2, 2009   February 2, 2012


Pension Benefits

We do not sponsor any qualified or non-qualified defined benefit plans.

Nonqualified Deferred Compensation

We  do  not  maintain  any  non-qualified   defined   contribution  or  deferred
compensation  plans.  Our Compensation  Committee,  which is comprised solely of
"outside  directors" as defined for purposes of Section  162(m) of the Code, may
elect to provide our officers and other  employees  with  non-qualified  defined
contribution or deferred  compensation  benefits if the  Compensation  Committee
determines that doing so is in our best interests.

Compensation of Directors

Each Director received 10,000  unregistered shares of the Company's common stock
in 2005.  The two directors who joined the Company in 2007 each received  20,000
shares upon joining the Company's Board of Directors.  The Directors  receive no
other compensation for serving on the Board of Directors, but are reimbursed for
any  out-of-pocket  expenses  incurred in attending board  meetings,  and may be
compensated for other work done on the Company's behalf.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation Committee have any relationship with the
Company or any of its officers or employees  other than in connection with their
role as a  director.  None of the  members of the  Compensation  Committee  have
participated  in any  related  party  transactions  with the  Company  since the
beginning of the Company's last fiscal year.



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<PAGE>

EMPLOYMENT CONTRACTS

During  2007 we  entered  into  employment  contracts  with our Chief  Executive
Officer,  our Chief Financial Officer, our Director of Sales and our Director of
Marketing.  We do  not  currently  have  employment  contracts  with  any  other
executive  officers,  employees or  consultants.  . We may enter into employment
contracts with our executive  officers,  employees or consultants at any time if
we deem it to be in the best interests of the company.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
     RELATED STOCKHOLDER MATTERS

The following table sets forth the number of shares of common stock beneficially
owned as of March 31, 2008 by (i) those  persons or groups  known to the Company
who  beneficially  own more than 5% of the  Company's  common  stock;  (ii) each
director and director nominee;  (iii) each executive officer whose  compensation
exceeded  $100,000 in the fiscal year ended  December  31, 2007;  and,  (iv) all
directors and executive  officers as a group.  The  information is determined in
accordance  with Rule  13(d)-3  promulgated  under the  Exchange  Act based upon
information  furnished  by persons  listed or  contained in filings made by them
with the  Securities  and Exchange  Commission by  information  provided by such
persons  directly to the Company.  Except as indicated  below,  the stockholders
listed possess sole voting and investment power with respect to their shares.

------------------------------- --------------------- --------------------------
Name/Title/Address(1)                Total Share        Percentage Ownership(2)
------------------------------- --------------------- --------------------------
Ming Tung Chok                      11,000,000                   21.15%
------------------------------- --------------------- --------------------------
Nancy Chu                           14,209,548                   27.32%
------------------------------- --------------------- --------------------------
Chung Chin Keung                        10,000                     .02%
------------------------------- --------------------- --------------------------
Jay Schrankler                          20,000                     .04%
------------------------------- --------------------- --------------------------
Henry Song                              20,000                     .04%
------------------------------- --------------------- --------------------------
All officers and                    26,248,548                   48.55%
directors as a
group (3)
------------------------------- --------------------- --------------------------
Urmston Capital (4)                  2,495,881                    4.80%
------------------------------- --------------------- --------------------------

(1) Unless otherwise provided, the addresses of these holders is 1420 S. Vintage
Ave. Ontario California 91761.

(2) The  percentage  ownership is based upon  52,004,656  shares  outstanding on
March 30, 2008.

(3) Since Ming Tung Chok and Nancy Chu are husband and wife, they are considered
beneficial owners of each others common stock. Collectively, they own 25,209,548
shares and are each considered beneficial owners of 25,209,548 shares.

(4) The  address for  Urmston  Capital is 148  Xinglung  Road,  Sec. 3,  WenShan
District, Taipei, Taiwan R.O.C.

As the result of an agreement  between SOYO Taiwan and an unrelated  third party
in 2004 2,500,000  shares of Class B cumulative  Preferred  stock were issued by
the Company to the unrelated  third party in exchange for the  forgiveness  of a
$12,000,000 long term payable.



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<PAGE>

The Class B cumulative  Preferred stock has a stated  liquidation value of $1.00
per share and a 6% dividend,  payable quarterly in arrears, in the form of cash,
additional  shares of preferred  stock,  or common  stock,  at the option of the
Company. The Class B cumulative Preferred stock has no voting rights. The shares
of Class B cumulative Preferred stock are convertible,  in increments of 100,000
shares, into shares of common stock at any time through December 31, 2008, based
on the fair market value of the common  stock,  subject,  however,  to a minimum
conversion  price of $0.25 per share. If the Class B cumulative  Preferred Stock
were converted at the closing bid price of $1.15 per share on December 31, 2007,
the holder would have 2,495,881shares of the Company's common stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

NONE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Accountant Fees

The following table sets forth the fees for professional audit services rendered
by  Vasquez  &  Company  LLP for the  audit of the  Company's  annual  financial
statements for the fiscal years 2007 and 2006.


                                                  2007       2006
--------------------------------------------    --------   --------
Audit Fees                                      $199,000   $158,500
---------------------------------------------   --------   --------
Audit-related Fees*                               58,500       --
---------------------------------------------   --------   --------
Tax Fees                                          20,000     20,000
---------------------------------------------   --------   --------
All other Fees                                      --         --
---------------------------------------------   --------   --------
Total Fees                                      $277,500   $178,500
---------------------------------------------   --------   --------
            *Assisting client in replying to SEC comments,  educational guidance
             for SOX 404  implementation,  explanation of audit work to internal
             auditor of prospective lender.



(1)  Includes  annual  audit fees and fees for  preissuance  review of quarterly
filings.
In 2006,  Grobstein,  Horwath & Company,  the  Company's  predecessor  auditors,
charged $6,000 for a review and reissuance of the Company's 2003 audit report.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

The following is a list of exhibits  filed as part of this Annual Report on Form
10-K.  Where so indicated by footnote,  exhibits which were previously filed are
incorporated by reference.

Exhibit                              Description
Number

3.1       Articles of  Incorporation,  Incorporated  herein by  reference to the
          Definitive  Schedule 14A File No.  333-42036,  filed on September  27,
          2002.

3.2       Bylaws,  Incorporated  herein by reference to the Definitive  Schedule
          14A File No. 333-42036, filed on September 27, 2002.



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<PAGE>

10.1      SOYO  Group  Agreement  with  China  Unicom  dated  February  1, 2004,
          Incorporated  herein by reference to the Form 10-K for the fiscal year
          ended December 31, 2004, File No. 333-42036, filed on March 31, 2005

10.2      Office  Lease at 140 S.  Vintage  Ave.,  Ontario,  CA dated August 21,
          2003, Incorporated herein by reference to the Form 10-K for the fiscal
          year ended December 31, 2004, File No.  333-42036,  filed on March 31,
          2005

10.3      SOYO Group Agreement with Accord Financial Services, dated February 6,
          2006

10.4      SOYO Group Agreement with GE Capital, dated August 3, 2006

10.5      SOYO Group Agreement with UCB, dated February 7, 2007

21.1      Subsidiaries of the Company,  Incorporated  herein by reference to the
          Form 10-K, File No. 333-42036, filed on April 15, 2003

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


31.1      CERTIFICATION  REQUIRED BY RULE  13a-14(a) OR RULE 15d-14(d) AND UNDER
          SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002*

31.2      CERTIFICATION  REQUIRED BY RULE  13a-14(a) OR RULE 15d-14(d) AND UNDER
          SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

32.1      CERTIFICATION  PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
          TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

32.2      CERTIFICATION  PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
          TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


-------------
*Filed herein



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<PAGE>



                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                SOYO GROUP, INC.


Dated:  March 31, 2008             By  /s/ Ming Tung Chok
                                   ---------------------------------------------
                                   Name: Ming Tung Chok
                                   Title:  President and Chief Executive Officer

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities and on the dates indicated.

Dated:  March 31, 2008            By  /s/ Ming Tung Chok
                                   ---------------------------------------------
                                   Name: Ming Tung Chok
                                   Title: President, Chief Executive Officer and
                                   Director


Dated:  March 31, 2008            By  /s/ Nancy Chu
                                   ---------------------------------------------
                                   Name: Nancy Chu
                                   Title: Chief Financial Officer, Secretary and

Dated:  March 31, 2008           By  /s/ Henry Song
                                   ---------------------------------------------
                                   Name: Henry Song
                                   Title: Director

Dated March 31, 2008             By  /s/ Chung Chin Keung
                                   ---------------------------------------------
                                   Name: Chung Chin Keung
                                   Title: Director

Dated:  March 31, 2008            By  /s/ Jay Schrankler
                                   ---------------------------------------------
                                   Name: Jay Schrankler
                                   Title: Director




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<PAGE>