SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                  FORM 10-KSB/A


                                 AMENDMENT NO. 1



|X|      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
         OF 1934

         For the fiscal year ended December 31, 2002


[_]      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
     of Incorporation or Organization)           Identification Number)


41484 Christy Street, Fremont, California                   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:  None


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




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

         Check if  disclosure  of  delinquent  filers in response to Item 405 of
Regulation  S-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-KSB. [X]

         The  issuer's  revenues  for the year  ended  December  31,  2002  were
$49,644,417.

         The aggregate  market value of the voting and non-voting  common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
April 11, 2003 was $2,344,476, based on the closing bid price of $0.17 per share
on April 11, 2003.

         As of March 31,  2003,  there were  40,000,000  shares of common  stock
outstanding.

         Transitional Small Business Disclosure Format: Yes [ ] No [X]

<PAGE>

                                SOYO GROUP, INC.
                                   FORM 10-KSB
                                      INDEX

                                                                            Page
                                                                            ----

                                     PART I

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

Item 2.  Description of Property...............................................6

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

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

                                     PART II

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

Item 6.  Management's Discussion and Analysis or Plan of Operation.............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, 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.......20

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

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

Item 14. Controls and Procedures..............................................21

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

Certifications................................................................23

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

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

         On December  27, 2001,  pursuant to a stock  purchase  agreement  dated
December 27, 2001, Kevin Halter Jr. purchased  6,027,000 shares of the Company's
common stock from Deborah Duffy representing  approximately 51% of the Company's
issued and outstanding shares of common stock. Simultaneously with the purchase,
the current  officers and  directors of the Company  resigned and the  following
three  persons 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.




                                       1
<PAGE>

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

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

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

             Name                                        Title
             ----                                        -----

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

         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
a Form 8-K/A filed on December  20,  2002.  On November  15,  2002,  the Company
changed its name from Vermont Witch Hazel Company, Inc. to Soyo Group, Inc.

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

         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.

         Soyo  Nevada's  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.

         Soyo Nevada markets a wide range of designer  motherboards  to meet the
specific needs of its diverse customer base. The  motherboards  that Soyo Nevada
provides 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.  Soyo
Nevada also distributes 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, Soyo Nevada's 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 Soyo Nevada's  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),  Soyo Nevada's
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 Soyo Nevada's 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.

         Soyo  Nevada  offers  a  number  of USB  devices  to its  customers  at
wholesale and retail  prices.  These devices  enable Soyo Nevada's  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

         Soyo  Nevada  does not  produce  the  components  that it  distributes.
Approximately 80% of Soyo Nevada's  products are supplied by Soyo Taiwan,  which
is located in Taipei, Taiwan.

         TRANSPORTATION AND DISTRIBUTION

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

         MARKETING AND SALES

         Soyo  Nevada has a network of sales  offices to service  its  customers
needs, from prompt order processing to after-sales  customer care. Soyo Nevada's
primary  markets  are North  America  and Latin  America.  Soyo Nevada 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>

         Soyo Nevada's 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,  Soyo Nevada employs a hybrid system.  Soyo
Nevada uses 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,  Soyo Nevada  partners 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, Soyo Nevada uses 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.  Soyo Nevada
also has a solid customer base in Latin America.

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

         SUPPLIERS

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

         REGULATIONS

         Soyo Nevada is subject, to various laws and regulations administered by
various  state,  local  and  international  government  bodies  relating  to the
operation of its  distribution  facilities.  Soyo Nevada  believes that it is in
compliance with all  governmental  laws and regulations  related to its products
and facilities, and it does not expect to make any material expenditures in 2003
with respect to compliance with any such regulations.

         STRATEGY

         Soyo Nevada's  strategy is to  capitalize  on its market  position as a
leading  distributor  of computer  and  networking  products by  increasing  its
penetrations  of existing  markets through  acquisitions  and expanding into new
markets.

                                       5

<PAGE>

         COMPETITION

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

         EMPLOYEES

         As of March 31, 2003, the Company  employed thirty seven (37) people at
its headquarters in Fremont, California.

ITEM 2.       DESCRIPTION OF PROPERTY.

         The Company's 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 :
<TABLE>
<CAPTION>

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


         The Company  also  maintains 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.

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

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

         During the third and fourth  quarters of the fiscal year ended December
31, 2003, the matters submitted to the shareholders for approval were:

         -        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 the  Company's  issued
                  shares.

         -        The acquisition of the interest in Soyo Nevada pursuant to the
                  Reorganization   Agreement.   The  matter  was   approved   by
                  shareholders  holding  a  majority  of  the  Company's  issued
                  shares.


                                       6
<PAGE>

                                     PART II

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

(a)      Market Prices of Common Stock

         The Company's  common stock is traded on the Over the Counter  Bulletin
Board  under the symbol  "SOYO."  The high and low bid  intra-day  prices of the
common stock were not  reported on the OTCBB for the time  periods  indicated on
the table  below.  Accordingly,  the  Company has set forth the high and low 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

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

(c)      Dividends

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

(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  a "penny  stock"  to be any  equity
security  that has a market price less than $5.00 per share,  subject to certain
exceptions. If the Company's common stock is deemed to be a penny stock, trading
in the shares  will be subject to  additional  sales  practice  requirements  on
broker-dealers who sell penny stock to persons other than established  customers
and  accredited  investors.  "Accredited  investors"  are persons with assets in
excess of $1,000,000 or annual income  exceeding  $200,000 or $300,000  together
with their spouse. For transactions covered by these rules,  broker-dealers must



                                       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-dealers  to trade and/or  maintain a market in the  Company's
common stock and may affect the ability of the  Company's  shareholders  to sell
their shares.

(e)      Recent Sales of Unregistered Securities

Preferred Stock

         On October 24, 2002, in connection  with the  Acquisition,  the Company
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,  the Company
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 early 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).

During  the three  months  ended  March  31,  2003,  as a result of the  Company
changing its product mix to focus on the sales of higher margin products and the
decrease in market  pressures on the Company's  gross margin  resulting from the
West Coast dock strike in September and early October 2002, the Company's  gross
margin 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>


At December 31, 2002, the Company  reviewed the  realizability of its inventory,
and  reduced  the  carrying  amount  by  $2,123,307,  of  which  $1,700,001  was
applicable  to the nine months  ended  September  30,  2002,  and  $423,306  was
applicable to the three months ended December 31, 2002.

On February  14, 2001,  Littlefuse,  Inc.  filed suit  against  CompUSA Inc. for
patent  infringement,  asserting  that it had a patent  on a PTC  Surface  Mount
Device  manufactured  by  Polytronics  (the  "Component")  that was  included in
motherboards   manufactured  by  Soyo  Taiwan.   The  Company   purchased  these
motherboards  containing the Component from Soyo Taiwan and sold them to CompUSA
Inc. In response to the lawsuit,  Soyo Taiwan  ceased  purchasing  the Component
from Polytronics and began purchasing the Component from Littlefuse,  Inc., as a
result of which the  litigation  between  Littlefuse,  Inc. and CompUSA Inc. was
settled in May 2001.  As a result of a provision  of the legal  settlement  that
allowed all existing  motherboards  to be sold,  the Company was not required to
record any inventory write-downs, returns, credits or other adjustments relating
to this matter.  Accordingly,  the  settlement of the  litigation did not have a
material effect on the Company.


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.


At December 31, 2002, the Company  reviewed the  collectibility  of its accounts
receivable,   particularly  in  light  of  the  deterioration  in  its  business
operations  during the three months ended  December 31, 2002,  and increased the
provision for doubtful accounts by $1,939,694,  to $2,009,218 for the year ended
December 31, 2002,  as compared to $69,524 as  originally  reported for the nine
months ended  September 30, 2002.  With respect to the  $2,009,218,  the Company
determined that $1,225,001 was applicable to the nine months ended September 30,
2002, and $784,217 was applicable to the three months ended December 31, 2002.


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 the
Company's  directors and executive officers and the key management  personnel as
of March 31,  2003.  The  Company's  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>

Involvement in Legal Proceedings.

         To the best of the  Company's  knowledge,  during the past five  years,
none of the following  occurred with respect to a present or former  director or
executive  officer  of the  Company:  (1) any  bankruptcy  petition  filed by or
against any  business of which such  person was a general  partner or  executive
officer  either at the time of the  bankruptcy or within two years prior to that
time; (2) any conviction in a criminal  proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses); (3)
being  subject to any order,  judgment  or decree,  not  subsequently  reversed,
suspended or vacated, of any court of 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.

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

ITEM 10.      EXECUTIVE COMPENSATION

         The following table sets forth the compensation paid during fiscal year
ended  December  31, 2002 to the  Company's  Chief  Executive  Officer and Chief
Financial Officer.
<TABLE>
<CAPTION>

                                                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
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- -----------
Nancy Chu                2002    $116,500      0          0            0             0             0          0
Chief Financial
Officer
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- -----------
</TABLE>



         The Company  does  maintain,  nor has it  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  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, CEO and
Director (3)                                  12,000,000                30.0%

Nancy Chu, Chief Financial Officer,
and Director (3)                              14,209,548                35.5%


Bruce Nien Fang Lin                               -                       -

All officers and directors as a group         26,209,548                65.5%

Soyo Computer, Inc. (4)                        5,882,353                12.8%
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 March 31, 2003.


         (3)Since  Ming Tung Chok and Nancy Chu are husband  and wife,  they are
considered beneficial owners of each others common stock. Collectively, they own
26,209,548  shares  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 $0.17 per share on April 11,  2003,  Soyo
Taiwan would have received 5,882,353 shares of the Company's common stock.

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 FORM 8-K.

(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 on 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*

*Filed herein


(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:  June 24, 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:  June 24, 2003              By  /s/ Ming Tung Chok
                                     -------------------------------------------
                                   Name: Ming Tung Chok
                                   Title: President, Chief Executive Officer and
                                   Director


Dated:  June 24, 2003              By /s/ Nancy Chu
                                     -------------------------------------------
                                   Name: Nancy Chu
                                   Title: Chief Financial Officer, Secretary and
                                   Director


Dated:  June 24, 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.



June 24, 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.



June 24, 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
October 24, 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, including $9,359,190
    purchased from Soyo Computer, Inc.                               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                 Preferred Stock         Additional
                             ---------------------------   ---------------------------     Paid-in    Accumulated
                                Shares       Par Value        Shares       Par Value       Capital       Deficit         Total
                             ------------   ------------   ------------   ------------  ------------  ------------   ------------
<S>                          <C>            <C>            <C>            <C>           <C>           <C>            <C>
Balance, January 1, 2001       28,182,750   $     28,183      1,000,000   $      1,000  $    470,817  $   (528,333)  $    (28,333)

Net loss for the year
  ended December 31, 2001                                                                                 (390,404)      (390,404)
                             ------------   ------------   ------------   ------------  ------------  ------------   ------------
Balance, December 31, 2001     28,182,750         28,183      1,000,000          1,000       470,817      (918,737)      (418,737)

Shares of common stock
  retained by
  shareholders
  in October 2002
  transaction                  11,817,250         11,817                                     (11,817)                        --


Net loss for the year
  ended December 31, 2002                                                                              (10,733,459)   (10,733,459)
                             ------------   ------------   ------------   ------------  ------------  ------------   ------------
Balance, December 31, 2002     40,000,000   $     40,000      1,000,000   $      1,000  $    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:


Shares of common stock
  retained by shareholders
  in October 2002 transaction                      $     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 early
     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).

     At December  31,  2002,  the Company  reviewed  the  collectibility  of its
     accounts  receivable,  particularly  in light of the  deterioration  in its
     business  operations  during the three months ended  December 31, 2002, and
     increased the provision for doubtful accounts by $1,939,694,  to $2,009,218
     for the year ended  December 31, 2002, as compared to $69,524 as originally
     reported for the nine months ended  September 30, 2002. With respect to the
     $2,009,218,  the Company  determined  that $1,225,001 was applicable to the
     nine months ended  September 30, 2002,  and $784,217 was  applicable to the
     three months ended December 31, 2002.

     At December 31, 2002,  the Company also reviewed the  realizability  of its
     inventory,  and  reduced  the  carrying  amount  by  $2,123,307,  of  which
     $1,700,001 was applicable to the nine months ended  September 30, 2002, and
     $423,306 was applicable to the three months ended December 31, 2002.

     During the three months  ended March 31,  2003,  as a result of the Company
     changing  its product mix to focus on the sales of higher  margin  products
     and  the  decrease  in  market  pressures  on the  Company's  gross  margin
     resulting  from the West Coast dock strike in September  and early  October
     2002, the Company's gross margin 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 conform to the fiscal 2002 presentation.


                                      F-16
<PAGE>

3.   Accounts Receivable

     Changes in the allowance for doubtful accounts for the years ended December
31, 2002 and 2001 are summarized as follows:


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


Balance, beginning of year                           $   653,259    $   364,199

Add:  Amounts charged to operations                    2,009,218        472,881

Less:  Amounts charged off                            (2,041,872)      (183,821)
                                                     -----------    -----------
Balance, end of year                                 $   620,605    $   653,259
                                                     ===========    ===========

     During  the year ended  December  31,  2001,  the total  amount  charged to
operations  with  respect  to  uncollectible   accounts  receivable   aggregated
$781,791,  consisting  of additions to the  allowance  for doubtful  accounts of
$472,881 and accounts receivable charged off directly to operations of $308,910.

     The  Company's  management  believes  that the balance of the allowance for
doubtful  accounts at December 31, 2002 and 2001 is sufficient to cover any past
due accounts whose collection is considered doubtful at such dates.



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