Edgar Filing: SOYO GROUP INC

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]

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

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.

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.

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.

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.

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.

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 :

Rental Rental Monthly
Facility Address Begin Expire Rental (US$) Area (ft2)
-------- ------- ----- ------ ------------ ----------

Office and warehouse 41484 Christy October 1, September $23,375 27,180
Street, Fremont 1998 30, 2003
California

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.

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.

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

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.

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.

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.

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.

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.

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.

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).

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

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

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.

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.

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.

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 ($) ($) ($) ($) (#) ($) ($)
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- -----------

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
--------------------- --------- --------- ---------- ----------- ------------ -------------- ----------- -----------

The Company does maintain, nor has it maintained in the past, any
employee benefit plans. No executive officer has been granted any stock options.

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.

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.

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

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

I, Nancy Chu, certify that:

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

(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;

(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

June 24, 2003 /s/ Nancy Chu
-----------------------
Nancy Chu
Chief Financial Officer

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

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

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.

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

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

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

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
------------ ------------ ------------ ------------ ------------ ------------ ------------

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)
============ ============ ============ ============ ============ ============ ============

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

F-6

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

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

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

1. Organization and Business

a. Organization

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

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

- 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

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

F-12

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

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

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

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

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

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

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

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

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

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