SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON DC 20549



                                   FORM 10-KSB

(Mark One)

|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
         OF 1934.
For the fiscal year ended December 31, 2002
                          ------------------------------------------------------
OR

|_|      TRANSITION REPORT UNDER 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.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                 Nevada                                   95-4502724
----------------------------------------    ------------------------------------
     (State or other Jurisdiction           (I.R.S. Employer Identification No.)
           of Incorporation)


    41484 Christy Street, Fremont CA                        94538
----------------------------------------    ------------------------------------
(Address of Principal Executive Offices)                  (Zip Code)

                                 (510) 226-7696
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

                                                    Name of Each Exchange
          Title of Each Class                        on Which Registered
----------------------------------------    ------------------------------------
----------------------------------------    ------------------------------------

         Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
--------------------------------------------------------------------------------
                                (Title of Class)

--------------------------------------------------------------------------------
                                (Title of Class)


<PAGE>

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 past 90 days.

Yes        No   X
   -------   -------

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B 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-SKB. |X|

         State issuer's revenue for its most recent fiscal year  $49,644,417
                                                                 -----------

     State 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 as sold, or the average bid and asked price of such common equity,  as of
a specified  date within the past 60 days.  $2,344,476  based on the closing bid
price of $.17 per share on April 11, 2003.  ----------



                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest  practicable date. As of March 31, 2003 there
were 40,000,000 shares outstanding

         Transitional Small Business Disclosure Format (check one):
Yes        No   X
   -------   -------




<PAGE>

                                SOYO GROUP, INC.
                                   FORM 10-KSB
                                      INDEX

                                                                            Page
                                                                            ----

                                     PART I

Item 1.  Description of Business...............................................1

Item 2.  Description of Properties.............................................6

Item 3.  Legal Proceedings.....................................................6

Item 4.  Submission of Matters of a Vote of Security Holders...................6

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters...................................................7

Item 6.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations...................................8

Item 7.  Financial Statements.................................................16

Item 8.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure..................................16

                                    PART III

Item 9.  Directors and Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act....................18

Item 10. Executive Compensation...............................................19

Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stock Matters............................................20

Item 12. Certain Relationships and Related Transactions.......................20

Item 13. Exhibits, List and Reports on Form 8-K...............................21

Item 14  Control and Procedures...............................................21

Signatures....................................................................22

Financial Statements.........................................................F-1


<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         When used in this Form  10-KSB,  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  disclaims  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-KSB.

Company History

         Soyo  Group,  Inc.  formerly,  Vermont  Witch Hazel  Company,  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  representng  approximately 51% of the Company's
issued and outstanding shares of common stock. Simultaneously with the purchase,
the current  officers and  directors of the Company  resigned and the  following
three  pesons were elected to replace  them:  Kevin  Halter Jr.,  President  and
Director,  Kevin B. Halter,  Secretary,  Treasurer & Director and Pam Halter,  a
Director.  Deborah Duffy,  Rachel Braun and Peter C. Cullen the directors of the
Company resigned their respective positions and the following three persons were
elected to replace them: Kevin Halter Jr., Kevin B. Halter and Pam Halter.

         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")  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
         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.


<PAGE>

2.       The Company issued  1,000,000  shares of Class A Convertible  Preferred
         Stock par value $.001 with a $1.00 per share stated  liquidation  value
         to Soyo Taiwan in exchange for all of the  outstanding  equity interest
         in Soyo Nevada.

3.       The Company issued 28,182,750 shares of common stock par value of $.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

         The  consideration  for the  Acquisition  was  determined  through arms
length  negotiations  and a Form 8-K was filed on October 10, 2002 as amended by
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.

         Until  October  24,  2002 the  Company  had  only  nominal  assets  and
liabilities and no current business operations.  As a result of the Acquisition,
the  Company  will  continue  the  business  operations  of  Soyo  Nevada  which
operations are described below.

         Incorporated   in  Nevada  on  October  22,  1998,  Soyo  Nevada  is  a
distributor of computer parts a substantial portion of which are manufactured by
Soyo Taiwan.  Through Soyo Nevada the Company now 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  includes  motherboards  for end-user  consumers and
premium system integrators,  flash memory drives for corporate and mobile users,
internal multimedia reader/writer and wireless networking solutions for home and
virtual office (SOHO) users.

         Our  products  are sold  through an  extensive  network  of  authorized
distributors,  resellers,  system  integrators,  value-added  resellers  (VARs),
retailers,  mail-order  catalogs and  e-tailers.  Customers  include  individual
consumers,  small-to-medium  businesses and large corporations  throughout North
America and Latin America.

PRODUCTS

o        Motherboards
         ------------

         The  motherboard  has been an integral part of most personal  computers
for more than twenty years.  Actually,  a carryover from  architecture  used for
years in mainframe  computers,  a motherboard  is the physical  arrangement in a
computer that contains the computer's basic circuitry and components.  It is the
data and power infrastructure for the entire computer.


                                       2
<PAGE>

         The  original PC  motherboard  design  premiered in 1982 as part of the
original  IBM PC. In this design,  the  motherboard  itself was a large  printed
circuit card that contained the Intel 8080 microprocessor,  a basic input/output
system  (BIOS),  sockets  for the  CPU's  RAM and a  collection  of  slots  that
auxiliary  cards could plug into.  If one wanted to add a floppy disk drive or a
parallel port or a joystick,  one bought a separate card and plugged it into one
of the slots.  Apple  pioneered  this  approach in the mass  market  through its
introduction of the Apple II machine.  By making it easy to add cards, Apple and
IBM allowed  users to  personalize  their  computer  systems  depending on their
applications  and needs.  In  addition,  they  opened the  computer  to creative
opportunities for third-party vendors.

         Due to  improvements  in circuitry  and  packaging,  motherboards  have
essentially  stayed  the same size or  shrunk,  while  their  functionality  has
dramatically  increased.  Today,  the  circuitry  on a  typical  motherboard  is
imprinted  or  affixed to the  surface  of a firm  planar  surface  and  usually
manufactured  in a single  step.  The computer  components  included in the most
common  motherboard  designs are the  microprocessor,  coprocessors  (optional),
memory, BIOS, expansion slot and interconnecting circuitry.

         We market a wide range of designer  motherboards  to meet the  specific
needs of our diverse  customer base.  The  motherboards  we provide  include the
Intel Pentium 4, the Intel  Tualatin,  the Intel Pentium III, the AMD Athlon XP,
the AMD  Thunderbird,  the AMD  Duron  and the VIA C3.  We also  distribute  the
DRAGON(R) single-processor motherboard,  which is a multimedia and entertainment
product,  for the Intel(R) and AMD(R)  platforms.  The motherboards are marketed
and distributed to end-user consumers,  governments and enterprise  customers at
the wholesale and retail  level.

o        Flash Memory Drives and Internal Multimedia Reader/Writer
         ---------------------------------------------------------

         Flash memory is a specialized  type of memory  component  used to store
user data and program code. 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,  as well as industrial
products.

         Unlike  many  conventional  devices  that are  currently  flooding  the
market,  our Cig@r Pro Flash Memory  Drive is the first to introduce  1GB mobile
storage  capacity  that  allows  consumers  to  store  all  of  their  important
documents.  Along with an innovative  design and a convenient USB interface that
offers  advanced  e-mail and security  features,  this flash memory drive allows
consumers to Plug and Play without any driver  installation.  Because retrieving
files via an Internet  connection  can be a hassle,  the Cig@r Pro Flash  Memory
Drive is now the ideal  solution for our corporate  and mobile  clients who want
their files to stay secure with them no matter where they go.

         The BayOne(R) Flash Media Reader/Writer is a unique 6-in-1 breakout box
that can be installed in a 3.5" or 5.25" drive bay for easy front panel  access,
featuring  combination  reader/writer  for 6 flash media  standards  and two (2)
front  USB  2.0  ports.   The  BayOne(R)   internal   multimedia   reader/writer
conveniently  fits into the front of the PC. With the  BayOne(R),  our customers
can now connect multiple devices to their computers and download digital photos,
video,  MP3 music or hot sync their  handheld  devices all at the same time. The
multiple memory  reader/writer slots also can be used  simultaneously,  enabling
our customers to take full advantage of this compact  all-in-one  solution.  The
BayOne(R)  was  designed  to be  universally  compatible  with all  systems  and
external devices, making it easy to install and also very user-friendly.


                                       3
<PAGE>

o        USB Ports
         ---------

         Universal Serial Bus (USB) connectors let users attach  everything from
mice to  printers  to the  computer  quickly  and  easily.  USB gives the user a
single, standardized,  easy-to-use way to connect up to one hundred twenty-seven
(127)  devices to a  computer.  Each  device can  consume up to a maximum of six
megabits  per  second  (Mbps) of  bandwidth,  which is fast  enough for the vast
majority  of  peripheral  devices  that most  people  want to  connect  to their
machines.  Just  about  every  peripheral  made now  comes in a USB  version.  A
computer's  operating  system  supports USB as well, so the  installation of the
device drivers is also quick and easy.

         We offer a number of USB  devices to our  customers  at  wholesale  and
retail prices. These devices enable our customers to attach other products, such
as our flash memory  drives,  to their  computers with relative ease. o Wireless
Networking Solutions

         Wireless  networking is one of several ways to connect computers in the
home. In a wireless  network,  all of the computers in the home broadcast  their
information  to one another  using radio  signals.  Using radio signals can make
networking extremely easy, especially if one has computers all over the house.

         The Aerielink wireless networking products represent a breakthrough for
home and SOHO users by offering universal  compatibility and upgradeability that
enable users to share broadband Internet access,  network office peripherals and
enjoy  multimedia  entertainment  among  multiple  desktop  computers  and other
Internet-ready  devices.  These  products also deliver  strong  performance  and
security options to home and SOHO users through routers, access points, adapters
and switches. For example, the Aerielink Router Kit and Wireless LAN USB Adaptor
has a small desktop router that sits between one's local Ethernet  network and a
remote  network  (e.g.,  the  Internet or a remote  office).  In addition to the
wireless LAN feature,  the Wireless  Router contains a WAN port connecting to an
external  xDSL/Cable  modem and a four port  10/100  Mbps  Ethernet  switch  for
connection to PCs on the user's network.

         PRODUCTION

         We do not produce the  components we distribute.  Approximately  80% of
our products are supplied by Soyo Taiwan located in Taipei, Taiwan.

         TRANSPORTATION AND DISTRIBUTION

         We are an exclusive  distributor  for SOYO(R)  branded  products in the
United  States and Latin  America.  We have a network of national  and  regional
distribution  centers that  distribute our products.  The warehouse team members
play a key  role  in the  success  of our  distribution  system.  Through  their
efforts,  we are able to achieve a high level of efficiency and exceed  customer
expectations by maintaining a swift and reliable delivery system.

         MARKETING AND SALES

         We have a network of sales offices to service our customers needs, from
prompt order  processing to after-sales  customer care. Our primary  markets are
North America and Latin America.  We also sell products in other markets such as
the UK, Europe,  Cyprus,  Indonesia,  New Zealand,  Singapore,  Taiwan and South
Africa, through local preferred vendors.


                                       4
<PAGE>

         Our principal sales strategy targets three main channels:  (1) end-user
consumers;  (2) small business users; and (3) home/small office users or SOHO's.
To  reach  target  customers,  we  employ  a  hybrid  system.  We  use  national
distributors,  such  as  A.S.I.  and  D&H  Distributing,   along  with  regional
distributors that specialize in promoting our products to resellers,  e-tailers,
system  builders and retailers.  To reach end-user  consumers and small business
users,  we partner  with major  electronic  chain retail  stores and  mail-order
catalogs  throughout  the  continental  U.S.A.,  including  Best Buy Co.,  Inc.,
CompUSA,  Fry's  Electronics,  MicroCenter  and  TigerDirect  (a  subsidiary  of
Systemax, Inc.).

         For  the  Latin  American  market,   system  builders  and  value-added
resellers are the primary targets.  To reach these customers we use an extensive
network of international,  national and regional  distributors.  There are sales
offices in Sao Paolo,  Brazil,  which offer local  technical  support and return
authorization to better service customers in both Brazil and Argentina.

         CUSTOMERS

         The primary  customer  base is in North America where the products have
long been recognized for premium quality and competitive  prices. We also have a
solid customer base in Latin America.

         We also have an ancillary base of customers in the UK, Europe,  Cyprus,
Indonesia,  New Zealand,  Singapore,  Taiwan and South Africa which are serviced
through a preferred  relationships with independent  distributors local to these
markets.

         SUPPLIERS

         Approximately  80% of our  products  come from Soyo  Taiwan.  We have a
Supply  Commitment  Agreement  with Soyo Taiwan which  provides that Soyo Taiwan
will  continue to supply the Company at current  levels on an open account basis
through 2005. The general credit terms granted by Soyo Taiwan is net 90 days. We
believe that our relationship with Soyo Taiwan is good, however, a change in the
credit terms extended by Soyo Taiwan could  adversely  affect our business.  The
Company also purchases some computer peripheral products from other suppliers.

         REGULATION

         We are subject, to various laws and regulations administered by various
state,  local and  international  government bodies relating to the operation of
our  distribution  facilities.  We believe  that we are in  compliance  with all
governmental laws and regulations related to our products and facilities, and we
do not  expect  to make  any  material  expenditures  in 2003  with  respect  to
compliance with any such regulations.

         STRATEGY

         Our  strategy  is to  capitalize  on our market  position  as a leading
distributor of computer and networking  products by increasing our  penetrations
of existing markets through acquisitions and expanding into new markets.






                                       5
<PAGE>
<TABLE>
<CAPTION>

         COMPETITION

         The  computer  hardware  industry  is highly  competitive.  We  compete
against small companies as well as a well-established companies that produce and
distribute motherboards, in addition to certain related peripherals. Our primary
competitors are Abit, Aopen, Asus, Azza, MSI, Supermicro, Tyan and Intel.

         EMPLOYEES

     As of March 2003, we employed thirty seven (37) people at our  headquarters
in Fremont, California.

ITEM 2.       DESCRIPTION OF PROPERTIES.

     Our  corporate  headquarter  is located at 41484  Christy  Street,  Fremont
California.  The property is under a lease  agreement for 5 years with terms and
conditions as stipulated below :

                                              Rental       Rental       Monthly
        Facility           Address            Begin        Expire     Rental (US$)    Area (ft2)
        --------           -------            -----        ------     ------------    ----------
<S>                     <C>                <C>            <C>            <C>            <C>
Office and warehouse    41484 Christy      October 1,     September     $23,375         27,180
                        Street, Fremont       1998        30,  2003
                        California
</TABLE>

         We also maintain a sales office in Brazil,  located at Rua Andre Ampere
153 andar 17 sala 171/172, Brooklin Novo, Sao Paulo, SP, Brazil

ITEM 3.  LEGAL PROCEEDINGS.

         We are not a party to any pending or, to the best of our knowledge, any
threatened legal proceedings.  None of our directors, officers or affiliates, or
owner of  record or of more than five  percent  (5%) of our  securities,  or any
associate of any such director, officer or security holder is a party adverse to
ours  or has a  material  interest  adverse  to  ours in  reference  to  pending
litigation.

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

         During the third and fourth  quarters of the fiscal  year,  the matters
submitted to the shareholders for approval were:

         o        The merger with  Vermont  Witch Hazel  Company,  Inc, a Nevada
                  corporation.  The sole  purpose of the merger was is to change
                  the  domicile to the State of Nevada.  The merger was approved
                  by shareholders holding a majority of our issued shares.

         o        The acquisition of the interest in Soyo Nevada pursuant to the
                  Reorganization   Agreement.   The  matter  was   approved   by
                  shareholders holding a majority of our issued shares.


                                       6
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)      Market Prices of Common Stock

         Our 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, we have set forth the high and low bid closing prices of our
common  stock as  reported  on the OTCBB  from the  commencement  of  trading on
October 15, 2001.  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, 2002
         First Quarter                                        0.20          0.15
         Second Quarter                                       0.15          0.15
         Third Quarter                                        0.15          0.15
         Fourth Quarter                                       0.59          0.15

         Fiscal Year Ended December 31, 2001
         Fourth Quarter                                       0.25          0.20

(b)      Shareholders

         Our common shares are issued in registered  form.  Securities  Transfer
Corporation,  Dallas,  Texas, is the registrar and transfer agent for our common
stock. As of March 15, 2003,  there were  40,000,000  shares of our common stock
outstanding and we had approximately 86 shareholders of record.

(c)      Dividends

         We have never  declared or paid any cash  dividends on our common stock
and we do not anticipate paying any cash dividends in the foreseeable future. We
currently  intend to retain future earnings,  if any, to finance  operations and
the expansion of our business.  Any future  determination  to pay cash dividends
will be at the  discretion  of the board of directors and will be based upon our
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.

(d)      Penny Stock

         Until the Company's  shares qualify for inclusion in the NASDAQ system,
the public  trading,  if any, of the  Company's  common stock will be on the OTC
Bulletin Board.  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 "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


                                       7
<PAGE>

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 may  restrict  the
ability of  broker-dealer  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

Preferred Stock

         On October 24, 2002,  in  connection  with the  acquisition,  we issued
1,000,000  shares of Class A Convertible  Preferred  Stock to Soyo Taiwan.  This
offering  was made  pursuant to an  exemption  provided  by Section  4(2) of the
Securities Act.

Common Stock

         On October 24,  2002,  in  connection  with the  acquisition  we issued
28,182,750  shares of common stock to Management  of Soyo Nevada.  This offering
was made  pursuant to an exemption  provided by Section  4(2) of the  Securities
Act.

(f)      Equity Compensation Plan Information

         The Company does not have any Equity  Compensation  Plans. There are no
outstanding warrants.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The  following  discussion  should  be read  in  conjunction  with  the
Company's  consolidated  financial  statements  and the notes thereto  appearing
elsewhere in this Form 10-KSB.  Certain statements contained herein that are not
related  to  historical  results,  including,  without  limitation,   statements
regarding the  Company's  business  strategy and  objectives,  future  financial
position,  expectations about pending litigation and estimated cost savings, are
forward-looking  statements  within the meaning of Section 27A of the Securities
Act and Section 21E of the  Securities  Exchange  Act of 1934,  as amended  (the
"Securities  Exchange  Act") and involve risks and  uncertainties.  Although the
Company's   believes  that  the  assumptions  on  which  these   forward-looking
statements  are  based  are  reasonable,  there  can be no  assurance  that such
assumptions will prove to be accurate and actual results could differ materially
from those discussed in the forward looking statements. Factors that could cause
or contribute to such differences  include,  but are not limited to,  regulatory
policies,  competition  from other  similar  businesses,  and market and general
policies,  competition  from other  similar  businesses,  and market and general
economic factors.  All forward-looking  statements contained in this Form 10-KSB
are qualified in their entity by this statement.


                                       8
<PAGE>

Background and Overview:

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

Effective  October  24,  2002,  Vermont  Witch  Hazel  Company,  Inc.,  a Nevada
corporation ("VWHC"), acquired Soyo, Inc., a Nevada corporation ("Soyo Nevada"),
from Soyo Computer,  Inc., a Taiwan corporation ("Soyo Taiwan),  in exchange for
the issuance of 1,000,000  shares of convertible  preferred stock and 28,182,750
shares of common stock, and changed its name to Soyo Group, Inc.  ("Soyo").  The
1,000,000  shares  of  preferred  stock  were  issued  to  Soyo  Taiwan  and the
28,182,750 shares of common stock were issued to Soyo Nevada management.  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  VWHC  common  stock.
Accordingly,  Soyo Taiwan and Soyo Nevada  management  currently own  34,209,548
shares of the  40,000,000  shares of the Company's  common stock  outstanding at
December 31, 2002.

Subsequent to this  transaction,  Soyo Taiwan  maintained an equity  interest in
Soyo,  continues to be the primary  supplier of  inventory to Soyo,  and is owed
approximately $25,000,000 at December 31, 2002. In addition, there was no change
in the management of Soyo and no new capital invested, and there is a continuing
family relationship between the management of Soyo and Soyo Taiwan. As a result,
for  financial  reporting  purposes,  this  transaction  was  accounted for as a
recapitalization of Soyo Nevada,  pursuant to which the accounting basis of Soyo
Nevada continued unchanged subsequent to the transaction date. Accordingly,  the
pre-transaction  financial  statements  of Soyo  Nevada  are now the  historical
financial  statements  of the Company,  and pro forma  information  has not been
presented, as this transaction is not a business combination.

In conjunction with this  transaction,  Soyo Nevada  transferred  $12,000,000 of
accounts  payable to Soyo Taiwan to long-term  payable,  without  interest,  due
December 31, 2005.

Soyo Taiwan also agreed to continue to provide  computer parts and components to
Soyo on an open account basis at the  quantities  required and on a timely basis
to enable Soyo to continue to conduct its business  operations  at budgeted 2003
levels,  which is not less than a level  consistent  with the operations of Soyo
Nevada's  business in 2001 and 2000. This supply commitment is effective through
December 31, 2005.

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

Ming Tung Chok, the Company's  President,  Chief Executive  Officer and Director
and Nancy Chu, the Company's  Chief Financial  Officer,  Secretary and Director,
are husband  and wife,  and are the  primary  members of Soyo Nevada  management
referred to above. 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".

The Company sells to both distributors and retailers. Sales to distributors were
$7,376,500 (14.9%) in 2002, as compared to $13,035,994 (20.7%) in 2001. Sales to
retailers were $42,267,917  (85.1%) in 2002, as compared to $50,055,196  (79.3%)
in 2001.

During the year ended  December 31,  2002,  the Company had two  customers  that
accounted for revenues of $12,499,598  and  $5,965,324,  equivalent to 25.2% and
12.0% of net revenues,  respectively.  During the year ended  December 31, 2001,
the Company had two customers  that  accounted  for revenues of  $7,122,235  and
$7,319,665, equivalent to 11.3% and 11.6% of net revenues, respectively.


                                       9
<PAGE>

During the year ended December 31, 2002,  revenues from North  America,  Central
and South America, Taiwan and Other were $42,033,632 (84.7%), $3,816,747 (7.7%),
$3,140,696  (6.3%)  and  $653,342  (1.3%),  respectively.  During the year ended
December 31, 2001, revenues from North America,  Central and South America,  and
Other were  $54,041,229  (85.7%),  $7,886,606  (12.5%),  and $1,163,355  (1.8%),
respectively.

Financial Outlook:

During the years ended December 31, 2000 and 2001, the Company  generated  sales
in excess of $62,000,000 in each such year,  with gross margins  ranging from 5%
to 7%. The Company  incurred a net loss and a negative cash flow from operations
in each such year.

During the nine  months  ended  September  30,  2002,  the  Company had sales of
$39,924,692,  a net  margin  of  $1,452,619,  and a net  loss  of  $(2,636,079).
However, operations during the three months ended September 30, 2002 indicated a
developing  negative  trend,  with a 1% gross margin and an increased  net loss.
During the three months ended December 31, 2002, the Company experienced extreme
pressures  on its sales and gross  margin as a result of the  effect of the West
Coast dock  strike in  September  and  October  2002.  The impact of the initial
supply  interruption,  combined  with the  abrupt  release  of large  amounts of
inventory,  caused a short-term  price war in November and December  2002.  This
price war resulted in the Company  having to sell  inventory at below cost.  For
the three months ended December 31, 2002,  sales were  $9,719,725,  gross margin
was a  deficit  of  $(5,456,591)  and net loss was  $(8,097,380).  The price war
abated during January 2003, and the Company's  gross margin has returned to more
normal levels.

As of December  31,  2002,  the Company is reliant  upon the cash flows from its
operations. The Company does not have any external sources of liquidity.

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

- The Company has  reviewed  its product  mix, and has revised its sales plan to
focus on higher margin products.

Although  the  Company had a larger than  normal  amount of  currently  saleable
inventory at December 31, 2002 (based on the  Company's  recent sales trends and
industry turnover  standards),  the Company has developed a 2003 sales plan that
it believes  will allow it to sell such  inventory  and recover its costs in the
normal course of business.

- The  Company is  attempting  to expand  the  number and credit  quality of its
customer accounts.

- The Company is attempting to arrange  additional  supply sources and to reduce
its reliance on inventory purchases from Soyo Taiwan.

- The  Company is  reviewing  its  management  structure  and  expects to retain
additional executives with industry experience.

- The  Company is planning to move its office and  warehouse  operations  into a
larger, more efficient facility in late 2003.

- The Company has deferred  the payment of  $12,000,000  of accounts  payable to
Soyo Taiwan until December 31, 2005.

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


                                       10
<PAGE>

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

As a  result  of these  factors,  the  Company's  independent  accountants  have
expressed  substantial  doubt about the Company's ability to continue as a going
concern. The accompanying  consolidated  financial statements have been prepared
assuming that the Company will continue as a going concern,  which  contemplates
the  realization  of assets and the  satisfaction  of  liabilities in the normal
course of business.  The carrying amounts of assets and liabilities presented in
the consolidated financial statements do not purport to represent the realizable
or settlement  values, and do not include any adjustments that might result from
the outcome of this uncertainty.

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.  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.

                                       11
<PAGE>

Accounts Receivable:

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

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

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.
Inventories  consist  primarily of computer parts and components  purchased from
Soyo Taiwan.

Income Taxes:

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

Results of Operations:

Years Ended December 31, 2002 and 2001 -

Net Revenues.  Net revenues decreased by $13,446,773 or 21.3%, to $49,644,417 in
2002,  as compared to  $63,091,190  in 2001.  The  decrease in net  revenues was
primarily  attributable  to a change in product  mix, the West Coast dock strike
and a weakening economy.

During the years ended  December 31, 2002 and 2001,  the Company  offered  price
protection to certain customers under specific programs  aggregating  $1,054,735
and $316,424,  respectively,  which reduced net revenues and accounts receivable
accordingly.

Gross Margin  (Deficit).  Gross margin was  $(4,003,972)  or (8.1)% in 2002,  as
compared  to  $4,376,642  or 6.9% in 2001.  Gross  margin  decreased  in 2002 as
compared to 2001,  both on an absolute and  percentage  of revenue  basis,  as a
result of reduced sales and the price war during the fourth  quarter of 2002, as
described at "Financial  Outlook" above,  as well as an inventory  write-down of
$2,123,307  in 2002.  The Company did not record any  inventory  write-downs  in
2001.  The Company  expects that gross margins will return to more normal levels
in 2003.
                                       12
<PAGE>



Sales and  Marketing  Expenses.  Selling and  marketing  expenses  increased  by
$540,874  or 68.1%,  to  $1,335,070  in 2002,  as  compared to $794,196 in 2001,
primarily  as a result of  increased  co-operative  marketing  programs in North
America.  Co-operative  marketing  program  expense  was  $907,505  in 2002,  as
compared to $445,729 in 2001, an increase of $461,776.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased by $424,560 or 15.6%, to $3,141,338 in 2002, as compared to $2,716,778
in 2001, primarily as a result of an increase in personnel-related expenses.

Provision for Doubtful  Accounts.  The provision for doubtful accounts increased
to $2,009,218 in 2002, as compared to $781,791 in 2001, primarily as a result of
an increase in the customer  default rate, which the Company believes was caused
by intense  competitive  pressures and a weakening  economy.  As a percentage of
revenues,  the provision for doubtful  accounts was 4.0% in 2002, as compared to
1.2% in 2001.

Depreciation  and  Amortization.  Depreciation  and amortization of property and
equipment  was $13,669 in 2002, as compared to $8,844 in 2001.  Amortization  of
goodwill was $417,106 in 2001.

Impairment of Goodwill.  Goodwill  relates to the value of a company acquired in
1999, and was being amortized on a straight-line basis over a three year period.
At December 31, 2001, goodwill was $1,251,325,  less accumulated amortization of
$862,018.  At December 31, 2002,  goodwill was reviewed for  impairment  and the
remaining balance of $389,307 was charged to operations.

Loss from  Operations.  The loss from  operations was  $10,892,574  for the year
ended  December 31, 2002, as compared to a loss from  operations of $342,073 for
the year ended December 31, 2001.

Interest Expense.  Interest expense increased to $47,627 in 2002, as compared to
$25,190 in 2001, as a result of the revolving note payable being outstanding for
the full year in 2002 as compared to approximately one-half of the year in 2001.

Interest Income.  Interest income was $43,469 in 2002, as compared to $37,576 in
2001.

Other Income. Other income was $117,075 in 2002, as compared to $13,846 in 2001.

Provision  (Benefit) for Income Taxes. The provision  (benefit) for income taxes
was $(46,200) in 2002, as compared to $74,563 in 2001.

Net Loss. The net loss was $10,733,459 for the year ended December 31, 2002, as
compared to a net loss of $390,404 for the year ended December 31, 2001.

As of December 31, 2001,  the Company had Federal and state net  operating  loss
carryforwards  of  approximately   $11,650,000  and  $5,500,000,   respectively,
available  to offset  future  taxable  income.  The  unused net  operating  loss
carryforwards  expire in various amounts  through 2022. Due to the  restrictions
imposed by the Internal Revenue Code regarding  substantial changes in ownership
of  companies  with loss  carryforwards,  the  utilization  of a portion  of the
Company's Federal net operating loss carryforwards may be limited as a result of
changes in stock ownership during October 2002.


                                       13
<PAGE>

Net deferred tax assets of  $3,960,000 at December 31, 2002  resulting  from net
operating losses,  tax credits and other temporary  differences have been offset
by a 100% valuation  allowance since management  cannot determine  whether it is
more likely than not that such assets will be realized.

Liquidity and Capital Resources - December 31, 2002:

Transactions  with Soyo  Taiwan.  Since the  formation of Soyo Nevada in October
1998, it has relied on the financial  support from Soyo Taiwan for inventory and
capital to provide  the  resources  necessary  to  conduct  operations.  Through

October 24,  2002,  Soyo Nevada was a  wholly-owned  subsidiary  of Soyo Taiwan.
Subsequent to that date, Soyo Taiwan continues to provide inventory to Soyo, and
has  represented  that it will continue to provide  inventory to Soyo on an open
account basis through December 31, 2005.

In  conjunction  with  October  2002   transaction,   Soyo  Nevada   transferred
$12,000,000  of accounts  payable to Soyo Taiwan to long-term  payable,  without
interest,  due December 31, 2005. Soyo Taiwan also agreed to continue to provide
computer parts and components to Soyo on an open account basis at the quantities
required  and on a timely  basis to  enable  Soyo to  continue  to  conduct  its
business  operations  at budgeted  2003  levels,  which is not less than a level
consistent with the operations of Soyo Nevada's  business in 2001 and 2000. This
supply commitment is effective through December 31, 2005.

During  the years  ended  December  31,  2002 and 2001,  the  Company  purchased
inventory from Soyo Taiwan aggregating $42,219,164 and $41,633,352.  At December
31,  2002,  the  Company  had  short-term  accounts  payable  to Soyo  Taiwan of
$12,803,935 and a long-term payable to Soyo Taiwan of $12,000,000.

During the year ended December 31, 2002, the Company  received price  protection
from Soyo Taiwan aggregating  $394,071,  which reduced  inventories and accounts
payable  to Soyo  Taiwan  accordingly.  The  Company  did not  record  any price
protection  adjustments  from Soyo Taiwan in 2001. The Company does not have any
formal price  protection  agreement with Soyo Taiwan.  The Company  periodically
negotiates price protection adjustments with Soyo Taiwan based on current market
conditions.

Operating  Activities.  The Company  generated  cash of  $489,898  in  operating
activities  during the year ended  December 31,  2002,  as compared to utilizing
cash of $290,678  during the year ended December 31, 2001.  This  improvement in
operating  cash flow in 2002 as  compared  to 2001 was  primarily  a result of a
reduction in cash utilized to support accounts  receivable and  inventories.  At
December 31, 2002,  the  Company's  cash and cash  equivalents  had increased by
$454,846, to $623,296, as compared to $168,450 at December 31, 2001.

The Company had working capital of $737,711 at December 31, 2002, as compared to
a working capital deficit of $955,755 at December 31, 2001, resulting in current
ratios of 1.04:1 and 0.96:1 at  December  31,  2002 and 2001,  respectively.  At
December  31,  2002,  current  liabilities  had been  reduced by the transfer of
$12,000,000 of accounts payable to long-term payable due December 31, 2005, as a
result of the October 2002 transaction whereby Soyo Nevada became a wholly-owned
subsidiary of VWHC (see "Financial Outlook" above).


                                       14
<PAGE>

Accounts receivable decreased to $7,346,030 at December 31, 2002, as compared to
$10,630,907  at December 31, 2001, a decrease of $3,284,877 or 30.9%,  primarily
as a result of a  decrease  in  revenues  in 2002 as  compared  to 2001,  and in
particular  the  decrease  in  revenues  in the  fourth  quarter  of  2002  (see
"Financial Outlook" above).

Inventories  decreased  to  $12,358,255  at December  31,  2002,  as compared to
$14,601,420  at December 31, 2001, a decrease of $2,243,165 or 15.4%,  primarily
as a result of the Company's  efforts to reduce  inventories  as a percentage of
sales. At December 31, 2002,  $9,359,190 of the $12,358,255 of inventories  were
purchased from Soyo Taiwan.

Accounts  payable - Soyo  Computer,  Inc.,  including  $12,000,000  of  accounts
payable for which payment has been deferred until  December 31, 2005,  increased
to  $24,803,935 at December 31, 2002, as compared to $21,191,294 at December 31,
2001, an increase of $3,612,640,  as a result of increased  purchases during the
fourth quarter of 2002 to support budgeted 2003 sales.

Accounts  payable - other  increased to  $4,554,820  at December  31,  2002,  as
compared to $4,204,343 at December 31, 2001, an increase of $350,477 or 8.3%.

Accrued liabilities increased to $1,508,224 at December 31, 2002, as compared to
$57,853  at  December  31,  2001,  an  increase  of  $1,449,571,  as a result of
increased  vendor support and price protection  programs  implemented to support
sales efforts.

Investing Activities.  The Company expended $35,052 and $1,740 in 2002 and 2001,
respectively, for the purchase of property and equipment.

Financing Activities. On June 4, 2001, the Company entered into a revolving loan
agreement with a financial  institution for $1,200,000.  This loan agreement was
renewed in June 2002. Borrowings under the loan agreement bear interest at 3.75%
per annum and are secured by a $1,000,000 certificate of deposit that matures in
June 2003.  Borrowings  under the loan  agreement  mature on June 4, 2003.  Soyo
Taiwan has  guaranteed  $200,000 of  borrowings  under the loan  agreement.  The
Company  has not  determined  whether it will  attempt to renew or replace  this
credit  facility when it matures in June 2003.  The Company does not expect that
the renewal or replacement of this credit  facility will have a material  effect
on the Company's liquidity and capital resources.

As of December  31,  2002,  the  Company  did not have any  capital  expenditure
commitments   outstanding.   However,  the  Company  expects  to  incur  as  yet
undetermined  costs with  respect to  relocation  to a new office and  warehouse
facility  in late 2003 upon the  expiration  of its current  operating  lease on
September 30, 2003.

New Accounting Pronouncements:

In August 2001, the FASB issued SFAS No. 143,  "Accounting for Asset  Retirement
Obligations".  This  statement  addresses the diverse  accounting  practices for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset  retirement  costs. The Company will be required to adopt this
statement  effective  January  1, 2003.  The  Company  does not expect  that the
adoption  of SFAS  No.  143 will  have any  effect  on the  Company's  financial
statement presentation or disclosures.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44 and 64,  Amendment of FASB  Statement No. 13, and Technical  Corrections."
This  statement  made  revisions to the accounting for gains and losses from the
extinguishment  of  debt,  rescinded  SFAS No.  44 and  required  certain  lease


                                       15
<PAGE>

modifications that have economic effects similar to sale-leaseback  transactions
be accounted for in the same manner as sale-leaseback transactions.  The Company
will be required to adopt SFAS No. 145 on January 1, 2003.  The adoption of SFAS
No. 145 is not expected to have a material impact on the Company's  consolidated
financial statement presentation or disclosures.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities,"  which requires companies to recognize costs
associated  with exit or disposal  activities when they are incurred rather than
at the date of a commitment to an exit or disposal  plan.  Such costs covered by
the standard  include lease  termination  costs and certain  employee  severance
costs that are associated with a restructuring,  discontinued  operation,  plant
closing, or other exit or disposal activity.  SFAS No. 146 replaces the previous
accounting  guidance  provided by the Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 is to be applied  prospectively to exit or disposal activities initiated
after December 31, 2002.  The Company does not  anticipate  that the adoption of
SFAS  No.  146  will  have  any  effect  on the  Company's  financial  statement
presentation or disclosures.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the existing disclosure
requirements  for most  guarantees,  including loan  guarantees  such as standby
letters  of  credit.  It also  clarifies  that at the  time a  company  issues a
guarantee,  the company must recognize an initial  liability for the fair market
value of the  obligations it assumes under that guarantee and must disclose that
information  in  its  interim  and  annual  financial  statements.  The  initial
recognition and measurement provisions of FIN 45 apply on a prospective basis to
guarantees  issued  or  modified  after  December  31,  2002.  The  Company  has
implemented  the  disclosure  provisions  of  FIN 45 in its  December  31,  2002
consolidated financial statements without significant impact.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities (and  Interpretation of ARB No. 51)" ("FIN 46"). FIN
46 addresses  consolidation by business enterprises of certain variable interest
entities,  commonly referred to as special purpose entities. The Company will be
required to implement the other  provisions of FIN 46 in 2003.  The Company does
not anticipate that the adoption of FIN 46 will have any effect on the Company's
financial statement presentation or disclosures.


ITEM 7.  FINANCIAL STATEMENTS.

(a)      Financial Statements

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

         1.       Report of Independent Auditors

         2.       Consolidated Balance Sheet as of December 31, 2002

         3.       Consolidated  Statements  of  Operations  for the years  ended
                  December 31, 2002 and  December  31, 2001

         4.       Consolidated  Statements of  Shareholders'  Deficiency for the
                  years ended December 31, 2002 and December 31, 2001.

         5.       Consolidated  Statements  of Cash  Flows for the  years  ended
                  December  31, 2002 and  December  31,  2001

         6.       Notes to Consolidated Financial Statements.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.

         Effective   February  10,  2003,  the  Company,   dismissed  Gerald  R.
Perlstein, CPA ("Perlstein"), as the Company's independent accountant. Effective
February  10,  2003,  the  Company  engaged  Grobstein,  Horwath & Company  LLP,
("GH&C")  as the  Company's  new  independent  accountants.  Perlstein  had been


                                       16
<PAGE>

retained by the Company as its  independent  accountant on January 31, 2000. The
dismissal of Perlstein and the engagement of GH&C were approved by the Company's
Board of Directors.

         Prior to GH&C  becoming the  independent  accountants  for the Company,
neither the Company,  nor anyone on its behalf,  consulted  with GH&C  regarding
either the  application  of  accounting  principles  to a specific  completed or
proposed transaction, or the type of audit opinion that might be rendered on the
Company's  financial  statements;  or any  matter  that  was  the  subject  of a
disagreement or event as defined at Item 304 (a) (1)(iv) of Regulation S-B.

         Perlstein  audited the Company's  financial  statements  for the fiscal
years ended July 31, 2001 and 2002. During his engagement,  Perlstein's  reports
for these periods did not contain an adverse opinion or a disclaimer of opinion,
nor were they  qualified as to audit scope or  accounting  principles,  however,
Perlstein's  report for these fiscal  years was modified to reflect  uncertainty
with respect to the Company's ability to continue as a going concern.

         During the fiscal  years  ended July 31,  2001 and 2002 and the interim
period  from  August  1,  2002  through   February  10,  2003,   there  were  no
disagreements  with  Perlstein  on  any  matter  of  accounting   principles  or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements,  if not resolved to the  satisfaction  of  Perlstein,  would have
caused such firm to make reference to the subject matter of the disagreements in
connection with its report on the Company's financial  statements.  In addition,
there were no such events as described under Item 304(a)(1)(iv)(B) of Regulation
S-B during the fiscal years ended July 31, 2001 and 2002 and the interim  period
from August 1, 2002 through February 10, 2003.

         Effective  February 13, 2003,  the Company,  dismissed  Malone & Bailey
PLLC ("M & B"), as the independent  accountants of its  wholly-owned  subsdiary,
Soyo  Nevada,  Inc.  The  dismissal  of M & B and the  engagement  of GH&C  were
approved by the Company's Board of Directors.

         Prior to GH&C  becoming the  independent  accountants  for the Company,
neither the Company,  nor anyone on its behalf,  consulted  with GH&C  regarding
either the  application of accounting  principles to a specific or  contemplated
transaction,  or the  type of  audit  opinion  that  might  be  rendered  on the
Company's  financial  statements;  or any  matter  that  was  the  subject  of a
disagreement or event as defined at Item 304 (a)(1)(iv) of Regulation S-B.

         M & B audited the Company's  financial  statements for the fiscal years
ended  December  31, 2000 and 2001.  M & B's  reports for these  periods did not
contain an adverse  opinion or a disclaimer of opinion,  nor were they qualified
as to audit scope or accounting principles.

         During  the  fiscal  years  ended  December  31,  2000 and 2001 and the
interim  period from  January 1, 2001 through  February 13, 2003,  there were no
disagreements  with M & B on any matter of  accounting  principles or practices,
financial  statement   disclosure,   or  auditing  scope  or  procedure,   which
disagreements,  if not resolved to the  satisfaction of M & B, would have caused
such  firm to make  reference  to the  subject  matter of the  disagreements  in
connection with its report on the Company's financial  statements.  In addition,
there were no such events as described under Item 304(a)(1)(IV)(B) of regulation
S-B during the fiscal  years  ended  December  31, 2000 and 2001 and the interim
period from January 1, 2001 through February 13, 2003.


                                       17
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

         The  following  table and text sets forth the names and ages of all our
directors and executive  officers and the key  management  personnel as of March
31, 2003.  Our Board of  Directors  is  comprised of only one class.  All of the
directors  will 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           42      President, Chief Executive Officer and Director
Nancy Chu                46      Chief Financial Officer, Secretary and Director
Bruce Nien Fang Lin      36      Director


         Ming Tung Chok has served as the President, Chief Executive Officer and
Director of the Company  since the  October 25,  2002.  Prior to serving in this
capacity,  Mr. Chok was the Vice President of Engineering of Soyo Nevada for the
past 5 years.  Mr. Chok received his Bachelor  Degree in Electrical  Enginnering
from the  Californa  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 the  October 25,  2002.  Prior to serving in this
capacity,  Ms. Chu was the Vice  President of  Operations of Soyo Nevada 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.

         Bruce Nien Fang Lin has served as a Director of the  Company  since the
October 25, 2002.  Mr. Lin was the Vice President of Sales and Marketing of Soyo
Nevada for the past 4 years.  Prior to serving  in Soyo  Nevada,  Mr Lin was the
Vice  President  of  Operations  of Mach  Engineering  Inc. Mr. Lin received his
Master  Degree  in  Electrical  Engineering  from  the  University  of  Southern
California, Los Angeles.

         For the period ended December 31, 2002,  certain corporate actions were
conducted by unanimous written consent of the Board of Directors,  including the
Acquisition.

         Directors receive no compensation for serving on the Board of
Directors, but are reimbursed for any out-of-pocket expenses, if any, incurred
in attending board meetings.

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.


                                       18
<PAGE>
<TABLE>
<CAPTION>

Involvement in Legal Proceedings.

         To the best of our 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  any  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

         We do not have any shares registered under Section 12 of the Securities
Act and there the owners of our equity securities are not required to report
their beneficial ownership under Section 16(a) of the Exchange Act.

ITEM 10.      EXECUTIVE COMPENSATION

     The following  table sets forth the  compensation  paid during fiscal years
ended 2002 to our Chief Executive Officer and Chief Financial Officrr.

                           SUMMARY COMPENSATION TABLE

------------------------------------------------------------------------------ ----------------------------------------
                           Annual Compensation                                            Long-Term Compensation
------------------------------------------------------------------------------ ----------------------------------------
                                                                                   Awards      Payouts
--------------------- --------- --------- ---------- ------------ ------------ -------------- -------------------------
                                                        Other                    Securities
                                                        Annual     Restricted    Underlying                  All Other
                                                       Compen-      Stock        Options/        LTIP        Compen-
Name and Principal       Year     Salary     Bonus      sation      Award(s)        SARs        Payouts       sation
Position                           ($)        ($)         ($)         ($)           (#)           ($)           ($)
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- --------------
<S>                   <C>       <C>       <C>        <C>         <C>          <C>            <C>         <C>
Ming Tung Chok           2002    $138,000      0          0            0             0             0             0
President and CEO
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- --------------

Ming Tung Chok           2002    $116,500      0          *            0             0            0              0
President and CEO
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- --------------
</TABLE>

         We do not maintain,  nor have we  maintained in the past,  any employee
benefit plans. No executive officer has been granted any stock options.


                                       19
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table sets  forth the number of shares of common  stock
beneficially  owned as of March 31, 2003 by (i) those persons or groups known to
the  Company  who will  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, 2002;
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.

                                              Total Number           Percentage
        Name/ Title/Address(1)              of Shares Owned         Ownership(2)
        ----------------------              ---------------         ------------
Ming Tung Chok, President(3), CEO and
Director                                      12,000,000                30%

Nancy Chu, Chief Executive(3) Officer         14,209,548                35%
and Director

Bruce Nien Fang Lin                               -                      -

All officers and directors as a group
                                              26,209,548                65%

Soyo Computer, Inc. (4)                        5,882,352                15%
No. 21 Wu-kung 5 Road
Hsing Chuang City
Taipu Hsien
Taiwan, Roc
--------------------
         (1)Unless  otherwise  provided the  addresses of these holders is 41484
Christy Street, Fremont, California, 94538.

         (2)The percentage ownership is based upon 40,000,000 shares outstanding
on December 31, 2002.

         (3)Since  Ming Tung Chok and  Nancy Chu are  husband  and wife they are
considered  beneficial owners of one anothers common stock.  Collectively,  they
own 26,209,548 and are each considered beneficial owners of 26,209,548 shares.

         (4)Andy  Chu,  through  his  majority  ownership  of Soyo Taiwan is the
beneficial  holder of 1,000,000  shares of Series A Convertible  Preferred Stock
which has a floating rate  conversion  ratio which,  if the Preferred Stock were
converted  at the  closing bid price of $.17 per share on April 11,  2003,  Soyo
Taiwan would have received 5,882,352 shares of our common stock to Soyo Taiwan.

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Ming Tung Chok, the President and Chief Executive Officer of the
Company is married to Nancy Chu, the Chief Financial Officer of the Company.
Andy Chu, the President and majority shareholder of Soyo Taiwan is the brother
of Nancy Chu.


                                       20
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON 8K.

(a)      Exhibits.

         The following is a list of exhibits filed as part of this Annual Report
on Form 10-KSB.  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.

4.1      Agreement and Plan of Reorganization,  Incorporated herein by reference
         to the Form 8-K, File No. 333-42036, filed October 30, 2002.

10.1     Commitment Supply Agreement dated October 15, 2002*

10.2     Accounts Payable Deferral Agreement dated October 24,2002*

10.3     Exclusive Distribution Agreement dated October 24, 2002*

21.1     Subsidiaries of the Company*

99.1     Sarbanes-Oxley Act Section 906 Certification*

(b)      Reports on Form 8-K

         There was a report filed on Form 8-K on October 30, 2002, as amended by
Form 8-K/A filed on December  20, 2002,  regarding  the change in control of the
Registrant.

ITEM 14. CONTROLS AND PROCEDURES.

         Based on their  evaluation  of the  Company's  disclosure  controls and
procedures  as of a date within 90 days of the filing of this Report,  the Chief
Executive  Officer and Chief Financial Officer have concluded that such controls
and procedures are effective. There were no significant changes in the company's
internal  controls  or in other  factors  that could  significantly  affect such
controls subsequent to the date of their evaluation.










                                       21
<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:  April 14, 2003             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:  April 14, 2003             By  /s/ Ming Tung Chok
                                     -------------------------------------------
                                   Name: Ming Tung Chok
                                   Title: President, Chief Executive Officer and
                                   Director


Dated:  April 14, 2003             By /s/ Nancy Chu
                                     -------------------------------------------
                                   Name: Nancy Chu
                                   Title: Chief Financial Officer, Secretary and
                                   Director


Dated:  April 14, 2003             By /s/ Bruce Nien Fang Lin
                                     -------------------------------------------
                                   Name: Bruce Nien Fang Lin
                                   Title: Director





                                       22
<PAGE>

                                 CERTIFICATIONS

         I, Ming Tung Chok, certify that:

1.   I have reviewed this report on Form 10-KSB of Soyo Group, Inc.:

2.   Based on my knowledge, 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, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report.

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          (a)  designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               report is being prepared;

          (b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this report (the "Evaluation Date"); and

          (c)  presented in this report our conclusions  about the effectiveness
               of the disclosure controls and procedures based on our evaluation
               as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

          (a)  all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          (b)  any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     report whether or not there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.



April 14, 2003                              /s/ Ming Tung Chok
                                           -------------------------------------
                                           Ming Tung Chok
                                           President and Chief Executive Officer

<PAGE>

         I, Nancy Chu, certify that:

1.   I have reviewed this report on Form 10-KSB of Soyo Group, Inc.:

2.   Based on my knowledge, 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, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report.

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          (a)  designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               report is being prepared;

          (b)  evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this report (the "Evaluation Date"); and

          (c)  presented in this report our conclusions  about the effectiveness
               of the disclosure controls and procedures based on our evaluation
               as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

          (a)  all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          (b)  any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     report whether or not there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.



April 14, 2003                                            /s/ Nancy Chu
                                                         -----------------------
                                                         Nancy Chu
                                                         Chief Financial Officer



<PAGE>

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




                                                                            Page
                                                                            ----

Report of Independent Public Accountants
  - Grobstein, Horwath & Company LLP                                        F-2
  - Malone & Bailey, PLLC                                                   F-3

Consolidated Balance Sheet - December 31, 2002                              F-4

Consolidated Statements of Operations -
         Years Ended December 31, 2002 and 2001                             F-5

Consolidated Statements of Shareholders' Deficiency -
         Years Ended December 31, 2002 and 2001                             F-6

Consolidated Statements of Cash Flows -
         Years Ended December 31, 2002 and 2001                        F-7 - F-8

Notes to Consolidated Financial Statements -
         Years Ended December 31, 2002 and 2001                       F-9 - F-22




















                                      F-1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Board of Directors and Shareholders of
Soyo Group, Inc. and Subsidiary
Fremont, California

         We have audited the  accompanying  consolidated  balance  sheet of Soyo
Group,  Inc. and  Subsidiary  (the  "Company") as of December 31, 2002,  and the
related consolidated statements of operations, shareholders' deficiency and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

         We conducted our audit in accordance with auditing standards  generally
accepted in the 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audit provides a reasonable  basis
for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Soyo Group,  Inc. and Subsidiary as of December 31, 2002,  and the  consolidated
results of their  operations  and their cash flows for the year then  ended,  in
conformity with accounting principles generally accepted in the United States.

         The accompanying  consolidated  financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated  financial statements,  the Company has suffered recurring
operating  losses,   has  limited  operating  cash  flows  and  working  capital
resources,  and has a shareholders'  deficiency,  which raise  substantial doubt
about its ability to continue as a going concern.  Management's  plans in regard
to these  matters  are also  described  in Note 1.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

         As  discussed  in  Note 5 to  the  consolidated  financial  statements,
effective  January 1, 2002,  the Company  adopted the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."




Grobstein, Horwath & Company LLP

Sherman Oaks, California
April 14, 2003


                                      F-2
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Board of Directors and Shareholders of
Soyo Group, Inc.
Fremont, California

         We  have   audited   the   accompanying   statements   of   operations,
shareholders'   deficiency  and  cash  flows  of  Soyo  Group,  Inc.,  a  Nevada
corporation,  the successor to Soyo, Inc., a Nevada corporation (the "Company"),
for the year  ended  December  31,  2001.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

         We conducted our audit in accordance with auditing standards  generally
accepted in the 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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audit provides a reasonable  basis
for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all material  respects,  the results of operations and cash flows of
Soyo Group,  Inc.  for the year ended  December  31, 2001,  in  conformity  with
accounting principles generally accepted in the United States.




Malone & Bailey, PLLC
Houston, Texas
July 1, 2002













                                      F-3
<PAGE>

                         Soyo Group, Inc. and Subsidiary
                           Consolidated Balance Sheet
                                December 31, 2002

ASSETS

CURRENT
  Cash and cash equivalents                                        $    623,296
  Certificate of deposit, restricted                                  1,000,000
  Accounts receivable, net of allowance
    for doubtful accounts of $620,605                                 6,725,425
  Inventories                                                        12,358,255
  Prepaid expenses                                                       50,714
  Income tax refund receivable                                           47,000
                                                                   ------------
                                                                     20,804,690
                                                                   ------------
OTHER
  Property and equipment, net of
    accumulated depreciation and
    amortization of $31,300                                              60,094
  Deposits                                                               50,000
                                                                   ------------
                                                                        110,094
                                                                   ------------
                                                                   $ 20,914,784
                                                                   ============
LIABILITIES

CURRENT
  Accounts payable -
    Soyo Computer, Inc.                                            $ 12,803,935
    Other                                                             4,554,820
  Accrued liabilities                                                 1,508,224
  Revolving note payable                                              1,200,000
                                                                   ------------
                                                                     20,066,979
                                                                   ------------
NON-CURRENT
  Long-term payable - Soyo Computer, Inc.                            12,000,000
                                                                   ------------
SHAREHOLDERS' DEFICIENCY
  Preferred stock, $0.001 par value
    Authorized - 10,000,000 shares
    Issued and outstanding -
      1,000,000 shares of Class A Convertible
         Preferred Stock, $1.00 per share stated
         liquidation value($1,000,000 aggregate
         liquidation value)                                               1,000
  Common stock, $0.001 par value
    Authorized - 75,000,000 shares
    Issued and outstanding -
      40,000,000 shares                                                  40,000
  Additional paid-in capital                                            459,000
  Accumulated deficit                                               (11,652,195)
                                                                   ------------
                                                                    (11,152,195)
                                                                   ------------
                                                                   $ 20,914,784
                                                                   ============


            See accompanying report of independent public accountants
                 and notes to consolidated financial statements.

                                      F-4
<PAGE>

                         Soyo Group, Inc. and Subsidiary
                      Consolidated Statements of Operations


                                                     Years Ended December 31,
                                                   ----------------------------
                                                       2002            2001
                                                   ------------    ------------

Net revenues                                       $ 49,644,417    $ 63,091,190

Cost of revenues, including
  inventory purchased from
  Soyo Computer, Inc. of
  $42,219,164 and
  $41,633,352 in 2002 and
  2001, respectively                                 53,648,389      58,714,548
                                                   ------------    ------------
Gross margin (deficit)                               (4,003,972)      4,376,642
                                                   ------------    ------------

Costs and expenses:
  Sales and marketing                                 1,335,070         794,196
  General and administrative                          3,141,338       2,716,778
  Provision for doubtful accounts                     2,009,218         781,791
  Depreciation and amortization -
    Property and equipment                               13,669           8,844
    Goodwill                                               --           417,106
  Impairment of goodwill                                389,307            --
                                                   ------------    ------------
    Total costs and expenses                          6,888,602       4,718,715
                                                   ------------    ------------
Loss from operations                                (10,892,574)       (342,073)
                                                   ------------    ------------

Other income (expense):
  Interest income                                        43,469          37,576
  Other income                                          117,073          13,846
  Interest expense                                      (47,627)        (25,190)
                                                   ------------    ------------
Other income, net                                       112,915          26,232
                                                   ------------    ------------
Loss before income taxes                            (10,779,659)       (315,841)

Provision (benefit) for
  income taxes                                          (46,200)         74,563
                                                   ------------    ------------
Net loss                                           $(10,733,459)   $   (390,404)
                                                   ============    ============


Net loss per common share -
  basic and diluted                                $      (0.35)   $      (0.01)
                                                   ============    ============

Weighted average number of
  common shares outstanding -
  basic and diluted                                  30,384,320      28,182,750
                                                   ============    ============


            See accompanying report of independent public accountants
                 and notes to consolidated financial statements.

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

                         Soyo Group, Inc. and Subsidiary
               Consolidated Statements of Shareholders' Deficiency
                     Years Ended December 31, 2002 and 2001



                                                    Common Stock
                             ------------------------------------------------------------
                                       Soyo, Inc.                  Soyo Group, Inc.                  Preferred Stock
                             ----------------------------    ----------------------------    ----------------------------
                                Shares          Amount          Shares         Par Value        Shares         Par Value
                             ------------    ------------    ------------    ------------    ------------    ------------
<S>                          <C>             <C>             <C>             <C>             <C>             <C>
Balance, January 1, 2001          500,000    $    500,000            --      $       --              --      $       --

Net loss for the year
  ended December 31, 2001
                             ------------    ------------    ------------    ------------    ------------    ------------
Balance, December 31, 2001        500,000         500,000            --              --              --              --

Recapitalization in
  October 2002
  -Common stock issued           (500,000)       (500,000)     28,182,750          28,183
  -Preferred stock issued                                                                       1,000,000           1,000

Common stock arising
  from reverse merger                                          11,817,250          11,817

Net loss for the year
  ended December 31, 2002
                             ------------    ------------    ------------    ------------    ------------    ------------
Balance, December 31, 2002           --      $       --        40,000,000    $     40,000       1,000,000    $      1,000
                             ============    ============    ============    ============    ============    ============



                              Additional
                                Paid-in       Accumulated
                                Capital         Deficit          Total
                             ------------    ------------    ------------

Balance, January 1, 2001     $       --      $   (528,333)   $    (28,333)

Net loss for the year
  ended December 31, 2001                        (390,404)       (390,404)
                             ------------    ------------    ------------
Balance, December 31, 2001           --          (918,737)       (418,737)

Recapitalization in
  October 2002
  -Common stock issued            471,817                            --
  -Preferred stock issued          (1,000)                           --

Common stock arising
  from reverse merger             (11,817)                           --

Net loss for the year
  ended December 31, 2002                     (10,733,459)    (10,733,459)
                             ------------    ------------    ------------
Balance, December 31, 2002   $    459,000    $(11,652,196)   $(11,152,196)
                             ============    ============    ============
</TABLE>






            See accompanying report of independent public accountants
                and notes to consolidated financial statements.

                                      F-6

<PAGE>

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


                                                      Years Ended December 31,
                                                   ----------------------------
                                                       2002            2001
                                                   ------------    ------------

OPERATING ACTIVITIES
Net loss                                           $(10,733,459)   $   (390,404)
  Adjustments to reconcile
    net loss to net cash
    provided by (used in)
    operating activities:
      Depreciation and
        amortization                                     13,669           8,844
      Amortization of goodwill                             --           417,106
      Provision for doubtful
        accounts                                      2,009,218         781,791
      Impairment of goodwill                            389,307            --
      Changes in operating
        assets and liabilities:
        (Increase) decrease in:
          Accounts receivable                         1,243,005      (1,508,671)
          Inventories                                 2,243,166      (9,125,039)
          Prepaid expenses                              (25,453)           (816)
          Note receivable                                  --           734,911
          Income taxes receivable                       (47,000)         63,000
          Deposits                                       59,000         (18,878)
        Increase (decrease) in:
          Accounts payable -
            Soyo Computer, Inc.                       3,612,641       6,217,342
          Accounts payable -
            other                                       350,477       2,457,361
          Accrued liabilities                         1,450,371          (2,269)
          Income taxes payable                          (75,044)         75,044
                                                   ------------    ------------
  Net cash provided by (used in)
    operating activities                                489,898        (290,678)
                                                   ------------    ------------


INVESTING ACTIVITIES
  Purchase of property and
    equipment                                           (35,052)         (1,740)
                                                   ------------    ------------
  Net cash used in
    investing activities                                (35,052)         (1,740)
                                                   ------------    ------------







                                   (continued)

                                      F-7
<PAGE>

                         Soyo Group, Inc. and Subsidiary
                Consolidated Statements of Cash Flows (continued)


                                                     Years Ended December 31,
                                                   ----------------------------
                                                       2002             2001
                                                   ------------    ------------

FINANCING ACTIVITIES
  Net increase (decrease) in
    revolving note payable                                 --         1,200,000
  Increase in restricted cash                              --        (1,000,000)
                                                   ------------    ------------
  Net cash provided by
    financing activities                                   --           200,000
                                                   ------------    ------------

CASH AND CASH EQUIVALENTS:
  Net increase (decrease)                               454,846         (92,418)
  At beginning of year                                  168,450         260,868
                                                   ------------    ------------
  At end of year                                   $    623,296    $    168,450
                                                   ============    ============



SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION:

Cash paid for interest                             $     44,096    $     25,190
                                                   ============    ============

Cash paid for income taxes                         $       --      $       --
                                                   ============    ============





SUPPLEMENTAL DISCLOSURE OF
  NON-CASH INVESTING AND
  FINANCING ACTIVITIES:


Recapitalization in October 2002
  Issuance of common stock                         $     28,183
  Issuance of preferred stock to
  Soyo Computer, Inc.                              $      1,000

Shares of common stock
  arising from reverse merger                      $     11,817

Reclassification of accounts
  payable - Soyo Computer, Inc.
  to long-term
  payable - Soyo Computer, Inc.                    $ 12,000,000



            See accompanying report of independent public accountants
                 and notes to consolidated financial statements.

                                      F-8
<PAGE>

                         Soyo Group, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                     Years Ended December 31, 2002 and 2001


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,  continues to be the primary supplier of inventory to Soyo, and is
     owed approximately $25,000,000 at December 31, 2002. In addition, there was
     no change in the management of Soyo and no new capital invested,  and there
     is 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.

     In conjunction with this transaction,  Soyo Nevada transferred  $12,000,000
     of accounts payable to Soyo Taiwan to long-term payable,  without interest,
     due December 31, 2005.

     Soyo  Taiwan  also  agreed  to  continue  to  provide  computer  parts  and
     components to Soyo on an open account basis at the quantities  required and
     on a timely  basis to enable  Soyo to  continue  to  conduct  its  business
     operations  at  budgeted  2003  levels,  which  is not  less  than a  level
     consistent with the operations of Soyo Nevada's  business in 2001 and 2000.
     This supply commitment is effective through December 31, 2005.

     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
     year end.

     Ming Tung Chok,  the  Company's  President,  Chief  Executive  Officer  and
     Director and Nancy Chu, the Company's  Chief Financial  Officer,  Secretary
     and  Director,  are husband and wife,  and are the primary  members of Soyo
     Nevada  management  referred to above.  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".

                                      F-9
<PAGE>

     b.   Business and Outlook

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

     During the years  ended  December  31,  2000 and 2001,  and the period from
     January 1, 2002 through  October 24, 2002,  Soyo Nevada was a  wholly-owned
     subsidiary of Soyo Taiwan.

     During the years ended  December 31, 2000 and 2001,  the Company  generated
     sales in excess  of  $62,000,000  in each such  year,  with  gross  margins
     ranging from 5% to 7%. The Company  incurred a net loss and a negative cash
     flow from operations in each such year.

     During the nine months ended  September 30, 2002,  the Company had sales of
     $39,924,692,  a net margin of $1,452,619,  and a net loss of  $(2,636,079).
     However,  operations  during the three  months  ended  September  30,  2002
     indicated  a  developing  negative  trend,  with a 1% gross  margin  and an
     increased net loss.  During the three months ended  December 31, 2002,  the
     Company  experienced  extreme  pressures on its sales and gross margin as a
     result of the effect of the West Coast dock strike in September and October
     2002.  The impact of the initial  supply  interruption,  combined  with the
     abrupt release of large amounts of inventory  caused a short-term price war
     in  November  and  December  2002.  This price war  resulted in the Company
     having to sell inventory at below cost. For the three months ended December
     31, 2002, sales were $9,719,725, gross margin was a deficit of $(5,456,591)
     and net loss was  $(8,097,380).  The price war abated during  January 2003,
     and the Company's gross margin has returned to more normal levels.

     As of December  31,  2002,  the Company is reliant upon the cash flows from
     its  operations.  The  Company  does  not  have  any  external  sources  of
     liquidity.

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

     - The Company has  reviewed its product mix, and has revised its sales plan
     to focus on higher margin products.

     - The Company is attempting to expand the number and credit  quality of its
     customer accounts.

     - The Company is attempting  to arrange  additional  supply  sources and to
     reduce its reliance on inventory purchases from Soyo Taiwan.

     - The Company is reviewing its  management  structure and expects to retain
     additional executives with industry experience.


                                      F-10
<PAGE>

     - The Company is planning to move its office and warehouse  operations into
     a larger, more efficient facility in late 2003.

     - The Company has deferred the payment of $12,000,000  of accounts  payable
     to Soyo Taiwan until December 31, 2005.

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

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

     As a result of these factors,  the Company's  independent  accountants have
     expressed  substantial  doubt about the Company's  ability to continue as a
     going concern. The accompanying consolidated financial statements have been
     prepared assuming that the Company will continue as a going concern,  which
     contemplates  the realization of assets and the satisfaction of liabilities
     in the  normal  course of  business.  The  carrying  amounts  of assets and
     liabilities  presented  in the  consolidated  financial  statements  do not
     purport to  represent  the  realizable  or  settlement  values,  and do not
     include  any  adjustments  that  might  result  from  the  outcome  of this
     uncertainty.


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.

     b.   Use of Estimates

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


                                      F-11
<PAGE>

     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.  Inventories  consist primarily of
     computer parts and components purchased from Soyo Taiwan.

     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 has adopted the provisions of
     Statement of Financial  Accounting  Standards No. 144,  "Accounting for the
     Impairment  or  Disposal  of  Long-Lived   Assets."  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.  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   long-lived  assets
     (excluding  goodwill)  were  recognized  during the year ended December 31,
     2002.

     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.  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.


                                      F-12
<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.

     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.

          The Company  provides for the estimated cost of product  warranties at
     the time  revenue is  recognized.  The  Company's  warranty  obligation  is
     affected by product  failure rates and material usage and service  delivery
     costs  incurred in  correcting a product  failure.  Should  actual  product
     failure  rates,  material  usage or service  delivery costs differ from the
     Company's  estimates,  the Company may be required to revise its  estimated
     product warranty liability.

     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. The Company's management believes they are not exposed to
     any significant risk on their 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 creditors,  but does not require
     collateral.  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.

     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, 2002 and 2001 were
     $907,505 and  $445,729,  respectively,  and are  presented  under sales and
     marketing costs in the accompanying consolidated statements of operations.


                                      F-13
<PAGE>

     l.   Income Taxes

          The  Company  accounts  for income  taxes using the  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.  A  valuation  allowance  is  provided  for the amount of
     deferred tax assets that, based on available evidence,  are not expected to
     be realized.

     m.   Loss Per Common Share

          Basic  loss  per  share  is  calculated  by  dividing  net loss by the
     weighted  average  number of common shares  outstanding  during the period.
     Diluted  loss per  share is  calculated  assuming  the  issuance  of common
     shares,  if dilutive,  resulting  from the  conversion of preferred  stock.
     These potentially  dilutive securities were not included in the calculation
     of loss per share for year ended  December  31,  2002  because  the Company
     incurred a loss during such  period and thus their  effect  would have been
     anti-dilutive.  Accordingly,  basic and diluted loss per share are the same
     for the years  ended  December  31,  2002 and 2001.  Loss per common  share
     calculations  for the year ended December 31, 2001 reflects the retroactive
     restatement of the shareholders' equity section to reflect the October 2002
     recapitalization.  As of December 31, 2002, potentially dilutive securities
     consisted of 1,000,000 shares of convertible  preferred stock with a stated
     liquidation value of $1.00 per share that are convertible into common stock
     at the fair market value of the underlying common stock.

     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, including
     adjustments to minimum pension  liabilities,  accumulated  foreign currency
     translation,  and unrealized gains or losses on marketable securities.  The
     Company  did not have any  items of  comprehensive  income  or loss for the
     years ended December 31, 2002 and 2001.

     o.   Fair Value of Financial Instruments

          The Company  believes that the carrying value of the its cash and cash
     equivalents,  accounts receivable, accounts payable and accrued liabilities
     as of December 31, 2002 approximate their respective fair values due to the
     short-term nature of those instruments.

     p.   Stock-Based Compensation

          The Company has adopted  Statement of Financial  Accounting  Standards
     No. 123, "Accounting for Stock-Based  Compensation" ("SFAS No. 123"), which


                                      F-14
<PAGE>

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

          The  provisions of SFAS No. 123 allow  companies to either expense the
     estimated  fair  value  of stock  options  or to  continue  to  follow  the
     intrinsic value method set forth in Accounting Principles Board Opinion No.
     25,  "Accounting  for Stock Issued to  Employees",  but to disclose the pro
     forma  effect on net loss and net loss per share had the fair  value of the
     stock  options  been  exercised.  The  Company  has  elected to continue to
     account for  stock-based  compensation  plans utilizing the intrinsic value
     method.  Accordingly,  compensation cost for stock options will be measured
     as the excess,  if any, of the fair market  price of the  Company's  common
     stock at the date of grant above the amount an employee must pay to acquire
     the common stock.

          In  accordance  with SFAS No.  123,  as amended by SFAS No.  148,  the
     Company  will  provide  prominent  footnote   disclosure  with  respect  to
     stock-based  employee  compensation,  and the effect of the method  used on
     reported results. The value of a stock-based award will be determined using
     the Black-Scholes  option pricing model,  whereby  compensation cost is the
     fair value of the award as  determined  by the  pricing  model at the grant
     date or other  measurement  date.  The resulting  amount will be charged to
     expense on the  straight-line  basis  over the period in which the  Company
     expects to receive  benefit,  which is generally the vesting period.  Stock
     options  issued to  non-employee  directors  at fair  market  value will be
     accounted for under the intrinsic value method.

     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.   Recently Issued Accounting Pronouncements

          In August 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset
     Retirement  Obligations".  This statement  addresses the diverse accounting
     practices  for  obligations  associated  with the  retirement  of  tangible
     long-lived  assets and the associated asset  retirement  costs. The Company
     will be required to adopt this  statement  effective  January 1, 2003.  The
     Company  does not expect  that the  adoption  of SFAS No. 143 will have any
     effect on the Company's financial statement presentation or disclosures.



                                      F-15
<PAGE>

          In April  2002,  the FASB issued  SFAS No.  145,  "Rescission  of FASB
     Statements  No. 4, 44 and 64,  Amendment  of FASB  Statement  No.  13,  and
     Technical  Corrections."  This SFAS made  revisions to the  accounting  for
     gains and losses from the extinguishment of debt, rescinded SFAS No. 44 and
     required certain lease  modifications that have economic effects similar to
     sale-leaseback  transactions  be  accounted  for  in  the  same  manner  as
     sale-leaseback transactions. The Company will be required to adopt SFAS No.
     145 on January 1, 2003.  The  adoption  of SFAS No. 145 is not  expected to
     have a material impact on the Company's consolidated financial statements.

          In June 2002,  the FASB  issued SFAS No.  146,  "Accounting  for Costs
     Associated with Exit or Disposal  Activities,"  which requires companies to
     recognize costs  associated with exit or disposal  activities when they are
     incurred  rather  than at the date of a  commitment  to an exit or disposal
     plan. Such costs covered by the standard  include lease  termination  costs
     and  certain   employee   severance   costs  that  are  associated  with  a
     restructuring,  discontinued  operation,  plant  closing,  or other exit or
     disposal activity.  SFAS No. 146 replaces the previous  accounting guidance
     provided  by the  Emerging  Issues Task Force  Issue No.  94-3,  "Liability
     Recognition for Certain  Employee  Termination  Benefits and Other Costs to
     Exit an Activity  (including  Certain Costs Incurred in a  Restructuring)."
     SFAS No. 146 is to be applied  prospectively to exit or disposal activities
     initiated after December 31, 2002. The Company does not anticipate that the
     adoption  of SFAS No. 146 will have any effect on the  Company's  financial
     statement presentation or disclosures.

          In November 2002, the FASB issued  Interpretation No. 45, "Guarantor's
     Accounting and Disclosure  Requirements for Guarantees,  Including Indirect
     Guarantees of Indebtedness of Others"  ("FIN45").  FIN45  elaborates on the
     existing  disclosure  requirements  for  most  guarantees,  including  loan
     guarantees such as standby letters of credit. It also clarifies that at the
     time a company  issues a guarantee,  the company must  recognize an initial
     liability  for the fair market value of the  obligations  it assumes  under
     that guarantee and must disclose that information in its interim and annual
     financial statements. The initial recognition and measurement provisions of
     FIN 45 apply on a prospective  basis to guarantees issued or modified after
     December 31, 2002. The Company has implemented the disclosure provisions of
     FIN45 in its December 31, 2002 consolidated  financial statements,  without
     significant impact.

          In January 2003, the FASB issued Interpretation No. 46, "Consolidation
     of  Variable  Interest  Entities  (and   Interpretation  of  ARB  No.  51)"
     ("FIN46"). FIN46 addresses consolidation by business enterprises of certain
     variable  interest  entities,  commonly  referred  to  as  special  purpose
     entities. The Company will be required to implement the other provisions of
     FIN46 in 2003. The Company does not  anticipate  that the adoption of FIN46
     will have any effect on the Company's financial  statement  presentation or
     disclosure.

     s.   Reclassifications

          Certain  amounts in the fiscal  2001  financial  statements  have been
     reclassified to confirm to the fiscal 2002 presentation.


                                      F-16
<PAGE>

3.   Accounts Receivable

     Changes in the allowance for doubtful  accounts for the year ended December
31, 2002 are summarized as follows:

Balance - December 31, 2001                                         $   653,259

Additions                                                             2,009,218

Less:  Accounts charged off                                          (2,041,872)
                                                                    -----------
Balance - December 31, 2002                                         $   620,605
                                                                    ===========

     The Company's management believes the balance of the allowance for doubtful
     accounts is sufficient to cover any past due accounts  whose  collection is
     considered doubtful.


4.   Property and Equipment

     At December 31, 2002, property and equipment consisted of the following:

     Computer and equipment                                            $ 56,378
     Furniture and fixtures                                              16,841
     Leasehold improvements                                               9,500
     Automobile                                                           8,675
                                                                       --------
                                                                         91,394
     Less:  accumulated
       depreciation and
       amortization                                                     (31,300)
                                                                       --------
                                                                       $ 60,094
                                                                       ========

     For  the  years  ended  December  31,  2002  and  2001,   depreciation  and
amortization expense was $13,669 and $8,844, respectively.


5.   Goodwill

     Goodwill represents the excess of the purchase price over the fair value of
the  identifiable  net assets acquired in an acquisition in 1999,  accounted for
using the purchase  method.  Goodwill was being  amortized on the  straight-line
basis over a three year period.

     Effective  January 1, 2002, the Company adopted the provisions of Statement
of  Financial  Accounting  Standards  No. 142,  "Goodwill  and Other  Intangible
Assets,"  which  eliminated  the  amortization  of goodwill.  No impairment  was
recorded  upon the  adoption of this  accounting  standard.  At January 1, 2002,
goodwill was $1,251,325,  less accumulated amortization of $862,018. At December
31, 2002,  goodwill was reviewed for  impairment  and the  remaining  balance of
$389,307 was charged to operations.


                                      F-17
<PAGE>

6.   Revolving Note Payable

     On June 4, 2002, the Company entered into a revolving loan agreement with a
financial  institution for $1,200,000.  Borrowings under the loan agreement bear
interest  at 3.75% per annum and are  secured  by a  $1,000,000  certificate  of
deposit that matures in June 2003. Borrowings under the loan agreement mature on
June 4, 2003. Soyo Taiwan has guaranteed  $200,000 of borrowings  under the loan
agreement.


7.   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 September  30, 2003.  The
     lease provides for monthly payments of base rent and an unallocated portion
     of building  operating  costs. The minimum future lease payments during the
     year ending December 31, 2003 are $210,375.

          Related  rent  expense for the years ended  December 31, 2002 and 2001
     was $361,140 and $308,422, respectively.

     b.   Legal Proceedings

          The  Company is not  currently  a party to any  threatened  or pending
     legal proceedings, other than incidental litigation arising in the ordinary
     course of business. In the opinion of management,  the ultimate disposition
     of these matters will not have a material  adverse  effect on the Company's
     consolidated financial position, results of operations or cash flows.


8.   Income Taxes

     Prior to 2002, Soyo Taiwan and Soyo Nevada have not filed  consolidated tax
returns.  For the years ended December 31, 2002 and 2001,  the Company  incurred
net losses and accordingly,  had no tax liability.  As of December 31, 2002, the
Company had federal and state net operating loss  carryforwards of approximately
$11,650,000  and  $5,500,000,  respectively,  expiring in various  years through
2022,  which can be used to offset  future  taxable  income,  if any. Due to the
restrictions imposed by the Internal Revenue Code regarding  substantial changes
in ownership of companies with loss carryforwards,  the utilization of a portion
of the  Company's  federal and state net  operating  loss  carryforwards  may be
limited  as a result of changes  in stock  ownership  during  October  2002.  No
deferred  tax  benefit for these  operating  losses has been  recognized  in the
consolidated   financial   statements  due  to  the   uncertainty  as  to  their
realizability in future periods.


                                      F-18
<PAGE>

     Deferred income taxes consisted of the following at December 31, 2002:

     Long-Term
       Deferred tax assets                                         $ 3,960,000
       Less: Valuation allowance                                    (3,960,000)
                                                                   -----------
                                                                   $      --
                                                                   ===========


     The provision  (benefit) for federal income taxes consists of the following
for the years ended December 31, 2002 and 2001:

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2002          2001
                                                       ----------    ----------

     Current provision                                 $      800    $   74,563
     Recognition of income tax refund
     receivable resulting from net
     operating loss carryback                             (47,000)         --
                                                       ----------    ----------
                                                       $  (46,200)   $   74,563
                                                       ==========    ==========


     The provision (benefit) for income taxes using the statutory federal income
tax rate as  compared  to the  Company's  effective  tax rate is  summarized  as
follows:

                                                       Years Ended December 31,
                                                       ------------------------
                                                          2002          2001
                                                       ----------    ----------

     Provision (benefit) for income
       taxes at federal statutory rate                       (34)%         (34)%
     Depreciation recorded in excess
       of tax depreciation                                  --              24
        Effect of IRS Section 263a                          --              16
     Effect of utilization of net
       operating loss                                       --              20
     Other items, net                                       --              (2)
        Valuation allowance                                   34           --
                                                       ----------    ----------
     Income tax provision (benefit)                         --   %           24%
                                                       ==========   ===========





                                      F-19
<PAGE>

9.   Significant Concentrations

     a.   Customers

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

                                                        Years Ended December 31,
                                                       -------------------------
                                                           2002          2001
                                                       -----------   -----------
     Revenues
       Distributors                                    $ 7,376,500   $13,035,994
       Retailers                                        42,267,917    50,055,196
                                                       -----------   -----------
                                                       $49,644,417   $63,091,190
                                                       ===========   ===========

          During the years ended December 31, 2002 and 2001, the Company offered
     price protection to certain customers under specific  programs  aggregating
     $1,054,735  and  $316,424,  respectively,  which  reduced net  revenues and
     accounts receivable accordingly.

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

          During the year ended December 31, 2002, the Company had two customers
     that accounted for revenues of $12,499,598  and  $5,965,324,  equivalent to
     25.2% and 12.0% of net revenues, respectively.

          During the year ended December 31, 2001, the Company had two customers
     that  accounted for revenues of $7,122,235  and  $7,319,665,  equivalent to
     11.3% and 11.6% of net revenues, respectively.

     b.   Geographic Segments

          Financial information by geographic segments is summarized as follows:

                                                      Years Ended December 31,
                                                    ----------------------------
                                                           2002          2001
                                                       -----------   -----------

      Revenues
        North America                                  $42,033,632   $54,041,229
        Central and South America                        3,816,747     7,886,606
        Taiwan                                           3,140,696          --
        Other locations                                    653,342     1,163,355
                                                       -----------   -----------
                                                       $49,644,417   $63,091,190
                                                       ===========   ===========

                                      F-20
<PAGE>

     c.   Suppliers

          A substantial  majority of the Company's  inventories are manufactured
     by Soyo Taiwan and are  purchased  from Soyo Taiwan or an affiliate of Soyo
     Taiwan on an open account basis.

          Through October 24, 2002, Soyo Nevada was a wholly-owned subsidiary of
     Soyo Taiwan (Note 1).  Subsequent  to that date,  Soyo Taiwan  continues to
     provide  inventory to Soyo,  and has  represented  that it will continue to
     provide  inventory to Soyo on an open account  basis  through  December 31,
     2005.

          The following is a summary of the Company's  transactions and balances
     with Soyo Taiwan as of and for the years ended December 31, 2002 and 2001:

                                                                    December 31,
                                                                       2002
                                                                    -----------

          Accounts payable to Soyo Taiwan                           $12,803,935
          Long-term payable to Soyo Taiwan                           12,000,000


                                                        Years Ended December 31,
                                                       -------------------------
                                                          2002          2001
                                                       -----------   -----------

          Purchases from Soyo Taiwan                   $42,219,164   $41,633,352
          Payments to Soyo Taiwan                       35,946,037    35,416,010



          During  the  years  ended  December  31,  2002 and 2001,  the  Company
     received   price   protection   from  Soyo  Taiwan  of  $394,071   and  $0,
     respectively, which reduced inventory and accounts payable accordingly.


10.  Shareholders' Deficiency

     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,  members  of Soyo  Nevada
     management  (Note 1). The shares of common  stock were valued at par value,
     since the transaction was deemed to be a  recapitalization  of Soyo Nevada.
     During  October  2002,  the  management  of  Soyo  Nevada  also  separately
     purchased 6,026,798 shares of the 11,817,250 shares of common stock of VWHC
     outstanding  prior to VWHC's  acquisition  of Soyo Nevada,  for $300,000 in
     personal  funds.  The 6,026,798  shares  represented 51% of the outstanding
     shares of common stock.  Accordingly,  management currently owns 26,209,548
     shares of the 40,000,000 shares of common stock outstanding at December 31,
     2002.


                                      F-21
<PAGE>

     b.   Preferred Stock

          As of December 31, 2002, the Company had 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.

          Effective  October 24, 2002,  the Company issued  1,000,000  shares of
     Class A convertible  preferred  stock to Soyo Taiwan (Note 1) with a stated
     liquidation  value of $1.00 per share.  The shares of preferred  stock were
     valued  at  par  value,   since  the   transaction   was  deemed  to  be  a
     recapitalization of Soyo Nevada. Each share of preferred stock has one vote
     per share.  The preferred  stock has no stated dividend rate. The shares of
     preferred  stock are  convertible,  in whole or in part,  into common stock
     based on the $1.00 stated  value,  at any time during the three year period
     subsequent to their issuance, based on the average closing bid price of the
     common stock for a period of five  business  days prior to  conversion.  On
     October 24, 2005, any unconverted  shares of preferred stock  automatically
     convert into shares of common stock on the same conversion terms.

     c.   Stock Options and Warrants

     As of December  31,  2002,  the  Company did not have any stock  options or
     warrants outstanding, and had not adopted a stock option plan.















                                      F-22