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Press Release Source: SOYO Group Inc.


SOYO Announces Second Consecutive Profitable Quarter as New Product Line Improves Profit Margin
Tuesday August 16, 9:00 am ET
Company Posts Net Income of $412,080 or $0.01 EPS for the First Six Months of 2005 vs. a Loss of 834,076 in 2004


ONTARIO, Calif.--(BUSINESS WIRE)--Aug. 16, 2005-- SOYO® Group Inc. (OTCBB: SOYO - News), a leading global provider of computer, consumer electronics and broadband telecommunications products, today reported financial results for the second quarter ended June 30, 2005.
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Second Quarter 2005 Highlights

Net revenues for the second quarter were $8.5 million compared to $10.2 million in the year ago period. The decrease in net revenues was due to the company's shift in product focus from its traditional motherboard business to a more diverse product base that includes broadband VoIP, computer peripherals, and consumer electronics.

Quarterly net income was $102,119 compared to a loss of $928,781 from Q2 2004. This is the second consecutive quarter in which the company achieved profitability.

Quarterly gross margin was $754,870 or 8.9%, and represented a 128% improvement over the gross margin of $398,972 or 3.9% in Q2 2004. The increase in the gross margin as a percentage of sales can be attributed entirely to the new product lines.

Quarterly SG&A expense was $1,005,384, a 22% decrease from $1,289,334 in Q2 2004 as the company continues to reduce operating costs. During the quarter, the company also eliminated about $3.1 million of debts by reaching a final agreement with two former suppliers over unpaid debts.

Ming Chok, chief executive officer of SOYO, commented, "We are very pleased as we achieved our second consecutive profitable quarter. Over the past year we have successfully transitioned our business into faster growth areas while at the same time significantly improving the company's profitability. The decrease in net revenues reflects this transition in our product focus from the traditional motherboard business to a more diverse product base that includes broadband VoIP, computer peripherals, and consumer electronics. We expect sales of these new products to increase in the second half of 2005."

Six Months 2005 Highlights

Net revenues for the first six months of 2005 were $12.5 million compared to $18.8 million in the comparable year ago period. Gross margin was 10.2% for the period of 2005, as compared to 8.0% in the comparable year ago period. Net income was $412,081, or $.01 per share for the six months ended June 30, 2005, as compared to a net loss of $834,076, or $.02 net loss per share for the comparable year ago period.

Nancy Chu, chief financial officer of SOYO, commented, "Our improved financial results reflect the execution of our business strategy. In addition, we have implemented a series of aggressive cost control initiatives. We saw benefits of our actions already in the company's increased profitability. Our goal is to remain diligent in our cost controls while continuing to increase the profitability by leveraging our established channels to grow revenues in our new target markets, consumer electronics, computer products and broadband communications."

"We are excited about our prospects for the second half of 2005," continued Chok. "We have an excellent product line-up, such as our Dymond Series Flat Screen LCD TVs and monitors. We also have the improved financial position and credit lines necessary to support higher inventory levels required in the critical back-to-school and Christmas seasons. Retailers know the SOYO brand name, and equate it with quality and good value. We expect SOYO will continue to grow its revenue and improve our profitability as we introduce new lines of consumer electronics, broadband communications and computer products."

About SOYO Group Inc.

SOYO Group Inc. is a leading global provider of computer, consumer electronics, and broadband telecommunications products and services. Headquartered in Ontario, Calif., with sales offices in South America, SOYO Group sells its products through an extensive network of authorized distributors, resellers, system integrators, VARs, retailers, mail-order catalogs and e-tailers, including Walmart.com, eCost.com, Fry's, PC Mall and Tiger Direct, among others. For more information about the company and its products, please call 909-292-2500 or visit our Web site at http://www.soyogroup.com.

Safe Harbor Act Notice

This information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "plan," "confident that," "believe," "scheduled," "expect," or "intend to," and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act. Such statements are subject to certain risks and uncertainties, and actual results could differ materially from those expressed in any of the forward-looking statements. Such risks and uncertainties include, but are not limited to, market conditions, the availability of components and successful production of the company's products, general acceptance of the company's products and technologies, competitive factors, timing, and other risks described in the company's SEC reports and filings. Third-party statements contained herein and information contained on any third-party Web site are not endorsed by or adopted by SOYO, nor has their accuracy been verified by SOYO.

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

Three Months Ended June 30,
------------------------------
2005 2004
---- ----
Net revenues $ 8,494,311 $10,194,388
Cost of revenues, including
inventories purchased from SOYO
Computer Inc. of $0
and $4,237,613 in 2005 and
2004, respectively 7,739,439 9,795,416
---------- ----------
Gross margin 754,872 398,972
---------- ----------

Costs and expenses:
Sales and marketing 124,029 262,136
General and administrative 881,355 1,027,198
Provision for doubtful accounts 3,390 29,462
Depreciation and amortization 9,338 4,212
---------- ----------
Total costs and expenses 1,018,112 1,323,008
---------- ----------
Income from operations (263,240) (924,036)
---------- ----------

Other income (expense):
Interest income - -
Interest expense 12,157 (4,745)
Miscellaneous revenue (377,516)
---------- ----------
Other expense, net 365,359 (4,745)
---------- ----------
Income before provision for
income taxes 102,119 (928,781)

Provision for income taxes - -
---------- ----------
Net income $ 102,119 $ (928,781)
========== ==========

Less: Dividends on Class B
Convertible Preferred Stock (37,500) (71,773)

Net Income attributable to
Common Shareholders $ 64,619 $(1,000,554)

Net income per common share -
Basic $ 0.00 $ (0.03)
Diluted $ 0.00 $ (0.03)


Weighted average number of
common shares outstanding -
Basic 44,408,200 40,000,000
Diluted 49,279,410 46,666,667



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

Six Months Ended June 30,
----------------------------
2005 2004
---- ----
Net revenues $12,456,830 $18,788,690
Cost of revenues, including
inventories purchased from SOYO
Computer Inc. of $0
and $9,953,689 in 2005 and
2004, respectively 11,179,925 17,276,550
---------- ----------
Gross margin 1,276,905 1,512,140
---------- ----------

Costs and expenses:
Sales and marketing 363,494 299,288
General and administrative 1,815,328 1,837,581
Provision for doubtful accounts 34,513 196,335
Depreciation and amortization 18,087 8,267
---------- ----------
Total costs and expenses 2,231,422 2,341,471
---------- ----------
Income from operations (954,517) (829,331)
---------- ----------

Other income (expense):
Interest income - -
Interest expense (23,378) (4,745)
Miscellaneous revenue 1,466,688 -
---------- ----------
Other expense, net 1,443,310 4,745
---------- ----------
Income before provision for
income taxes 488,793 (834,076)

Provision for income taxes - -
---------- ----------
Net income $ 488,793 $ (834,076)
========== ==========

Less: Dividends on Class B
Convertible Preferred Stock 76,713 -

Net Income attributable to
Common Shareholders $ 412,080 $ (834,076)

Net income per common share -
Basic $ 0.01 $ (0.02)
Diluted $ 0.01 $ (0.02)


Weighted average number of
common shares outstanding -
Basic 44,408,200 40,000,000
Diluted 49,279,410 46,666,667



--------------------------------------------------------------------------------
Contact:
The Ruth Group
David Pasquale, 646-536-7006 (Investor Relations)
[e-mail]
or
Sierra Tech Public Relations
Len Fernandes, 530-832-1613 (Technical Media Relations)
[e-mail]



--------------------------------------------------------------------------------
Source: SOYO Group Inc.


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