================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

        FOR ANNUAL AND TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

  (Mark One)

     [X]     Annual Report pursuant to Section 13 or 15(d) of the Securities
             Exchange Act of 1934.
             For the fiscal year ended December 31, 2005.

                                       or

     [_]     Transition Report pursuant to Section 13 or 15(d) of the Securities
             Exchange Act of 1934.
             For the transition period from _____________ to _____________.

                           COMMISSION FILE NO. 0-27996


                         WIRELESS XCESSORIES GROUP, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)


                DELAWARE                                 13-3835420
                --------                                 ----------
     State or other jurisdiction of                    I.R.S. Employer
     incorporation or organization                  Identification Number


               1840 County Line Road, Huntingdon Valley, PA 19006
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including Area Code: (215) 322-4600

        Securities registered pursuant to section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $.001 per Share

                                 Title of Class
                             American Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-KSB is not contained herein, and will not 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 or any amendment to
this Form 10-KSB. |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the act). Yes |_| No |X|

The number of issued and outstanding shares of the Registrant's Common Stock net
of Treasury Stock, par value $.001 per share, on February 1, 2006 was 4,481,795.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant (computed by reference to the closing price of such stock on the
American Stock Exchange January 31, 2006 of $ 6.30 was approximately
$28,235,309.
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<PAGE>
                                     PART I

ITEM 1. BUSINESS

ITEM 1 - NARRATIVE
------------------

OVERVIEW & HISTORY
------------------

Wireless Xcessories Group is a leading provider of accessories to dealers,
distributors, retailers, agents and airtime carriers throughout the United
States and Canada. We have created a variety of product lines, totaling over
4,000 items designed to appeal to the widest possible spectrum of wholesale
buyers.

In addition to our products, we support our customers with a wide assortment of
Value Added services, including customized retail packaging, displays, posters,
marketing, and sales training materials, and free e-commerce websites.

Our corporation was formed in 1988, as Advanced Fox Antenna, and our product
line increased steadily as handheld cell phones grew in popularity. As part of
an IPO in April 1996, Advanced Fox Antenna, along with two battery related
companies were acquired by the parent company Batteries Batteries, Inc. Between
1997 and 2001 we sold off or otherwise divested ourselves of the battery
companies' businesses, merged a similar cell phone accessory company into our
main operation and changed our name to Wireless Xcessories Group. We have, since
then, focused on our core strengths. We consider ourselves to be the largest
distributor of accessories to independent wireless dealers in the United States.
Our website address is Wirexgroup.com

PRODUCTS & SERVICES
-------------------

We source, design, create, market and sell a series of accessory product lines
that appeal to all categories of wireless resellers. The bulk of our lines are
aftermarket accessories that our customers offer in lieu of OEM accessories sold
by the cell phone manufacturers.

Our current product lines are called "Standard," "Platinum," and "Industrial
Strength(R)."

In 2004 we created a product design and development division and produced a
series of cases, vehicle power adapters, hands free headsets, and a line of
accessories for popular PDA'S such as Treo and Blackberry. Our current projects
involve a series of Blue Tooth hands free accessories. The mission of our
product development department is to design and create accessories with
exclusive styling and functionality. We offer these items to phone manufacturers
and major distributors under our name or as a private labeled product.

The close working relationship with our Chinese factories also allows us to
replicate the most popular accessories appearing on the world market at costs
30-40% below their current wholesale pricing.

In the fourth quarter of 2004 and in early 2005 we added new product lines such
as Apple-IPod Accessories, Entertainment Accessories such as headsets and
chargers for MP3 Players, and became a National Distributor for a new line of
phones manufactured by Hop-on MP3.

The majority of our products are manufactured in China, Hong Kong and Taiwan. In
addition, we also act as a master distributor for well-known brand name products
such as Plantronics, Body Glove, and Nextel.

Our product lines are sold along with comprehensive sales and marketing
programs, and a series of value added products designed to separate and
distinguish us in the minds of wireless resellers.

THESE SERVICES ARE OFFERED FREE OF CHARGE:
------------------------------------------

O   Airtime carrier phone and accessories compatible charts
O   E-Mail blast management programs
O   Customized retail packaging
O   Sales training materials
O   In store displays and posters
O   Private Label E-commerce websites that allow customers to offer our full
    product line to their end users

Also in 2004, we introduced an on-line ordering option to our customers which
permits them to view our current inventory along with our next receive date if
an item is out of stock.

CUSTOMERS
---------

Our customer base consists of more than 2,500 independent dealers from a
one-location mall kiosk to multi-store retail franchisers covering 250 locations
and more. In addition, we sell to some of the largest distributors of cell
phones, computers, and infrastructure products. These

                                                                               2
<PAGE>
distributors in turn resell to airtime carriers, mass retailers, and prepaid
phone distributors. One customer accounted for 8.6% and 18.4% of sales in 2005
and 2004 respectively, and a second customer 5.2% of sales in 2005 and no other
Customer accounted for greater than 5% of consolidated net sales during any of
the years presented.

BUSINESS MODEL
--------------

With our recent introduction of entertainment accessories, Blackberry and smart
phone accessories plus a new line of phones, we have the widest product line in
America and are truly a "One stop shopping source" for all types of wireless
resellers.

We believe we are virtually the only organization that offers resellers three
full product lines to provide a "good, better, best" choice for end users to
purchase.

The wireless phone industry is characterized by the continuous introduction of
new model handsets with design changes, new operating features, and enhancements
that limit the ability of all but a few of our competitors to compete with
aftermarket accessories, especially by having them available for purchase soon
after the phone manufacturers introduces their new models.

In addition to being quick to market on new accessories, it is necessary to have
inventory for some handsets for 1-2 years because of their continuing popularity
in certain parts of the country that do not follow the latest fashion trends.

Because of the rapid pace of new handset introductions, retail sales people find
it hard to keep current on which accessories are compatible among various brands
and models. We help solve this problem by publishing a monthly chart of phone
and accessory compatibilities for our customers who are agents of Verizon,
Cingular, Nextel, T-Mobile, AT&T, and Sprint.

MANAGEMENT DISCUSSION OF FACTORS THAT HAVE AFFECTED OUR SALES GROWTH:
---------------------------------------------------------------------

(A) During the fourth quarter of 2003 we introduced a new line of rugged
accessories, which we named Industrial Strength. This line has received an
enthusiastic reception and is an important factor in our sales growth.

(B) Early in 2004 we introduced a value-added catalog that shows our customers
and prospects all of the free services that are available to grow their
business. To our knowledge, we are the only organization that offers this
variety and depth of market and sales assistance.

(C) In the third quarter of 2004, we introduced The Platinum Collection of
accessories, which have features and benefits equal or superior to higher priced
OEM accessories.

(D) In 2005 we realigned our sales force and our sales compensation plan to
provide incentive to and reward the sales people who grow their business.

(E) In early, 2005 we have introduced handsets to supplement our numerous
product offerings. Also, in 2005, we introduced an extensive line of accessories
for Apple IPods, Mp3 players, as well as a 300-item line of OEM Accessories.

(F) We continue to introduce new products and product lines so that there is
always something new to offer customers and prospects. During this quarter we
introduced 360 items into our product line.

(G) In September 2005, we introduced to our retailers an E-Commerce Direct to
Consumer Accessory Fulfillment Program.

EMPLOYEES
---------

Wireless Xcessories Group employs approximately 83 full time workers divided
into accounting, sales, customer services, marketing, purchasing/product
development, MIS, quality control, and warehouse picking and packing. Our
8-person management team has been with the company from 2-15 years, with most
managers having 5-10 years experience.

No employee is covered by collective bargaining and we consider our employee
relations to be excellent.

COMPETITION
-----------

The aftermarket wireless accessory industry is both competitive and fragmented.
There are a number of local and regional distributors who import their products
from the Far East, and there are 10 or more national distributors.

Barriers to entry are low assuming one wants to market a limited product line.
We believe that it would require a large investment in inventory, quality
assurance, packaging capabilities, sales training, purchasing, and marketing to
duplicate the total program we have developed.

The continual introduction of new phone models combined with popularity changes
that can be measured in weeks and months have caused

                                                                               3
<PAGE>
some of the larger distributors to seek out accessory specialists like Wireless
Xcessories Group, Inc. to manage the selection, packaging and sourcing of their
accessory programs.

INTELLECTUAL PROPERTY
---------------------

We seek to protect our intellectual property through a combination of
trademarks, service marks, and confidentiality agreements, non-compete
agreements, and patent protection when appropriate.

We maintain a number of registered trade names and registered trademarks,
including Industrial Strength(R), IndustrialStrength.com(R),
Platinumaccessories.com and WirexGroup.com.

As our product development initiatives bear fruit we intend to seek protection
for the patentable technology we create.

PROPERTIES AND FACILITIES
-------------------------

We lease a total of close to 65,100 square feet of warehouse space in Huntingdon
Valley, Pa., which we have occupied since 2001.

Our facility is divided into 13,100 square feet of office and administrative
space and 52,000 square feet of warehouse pick, pack, and quality control
facilities.

In March 2004, we signed a new 5-year lease, expiring in 2009, with no increase
in costs. Our rent is approximately $450,000 annually.

LEGAL PROCEEDINGS
-----------------

Lawsuits and claims are filed against us from time to time in the ordinary
course of business. We do not believe that any lawsuits or claims currently
pending against our company are material or will have a material adverse affect
on our financial condition.

INDUSTRY RISK FACTORS THAT COULD AFFECT OUR PERFORMANCE
-------------------------------------------------------

A) General economic conditions deteriorate, thereby reducing the demand for
phones and accessories.

B) Manufacturers reduce the number of new phone introductions, thereby reducing
our competitive advantage of speed to market new accessories.

FACTORS AFFECTING FUTURE OPERATING RESULTS
------------------------------------------

The provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") provide companies with a "safe harbor" when making forward-looking
statements. This "safe harbor" encourages companies to provide prospective
information.

We wish to take advantage of the "safe harbor" provisions of the Act and are
including this section in our Annual Report on Form 10-KSB in order to do so.
Forward-looking statements also appear in other sections of this report.
Statements that are not historical facts, including statements about
management's expectations for fiscal year 2005 and beyond, are forward-looking
statements and involve various risks and uncertainties. Factors that could cause
the actual results to differ materially from management's projections,
forecasts, estimates and expectations include, but are not limited to, the
following:

WE MAY NOT SUCCESSFULLY OFFER ATTRACTIVE MERCHANDISE TO OUR CUSTOMERS.
----------------------------------------------------------------------

In order to meet our strategic goals, we must successfully locate and offer our
customers new, innovative and high quality products. Our product offerings must
be affordable, useful to the customer, well made, distinctive in design, and not
widely available from other sources. We cannot predict with certainty that we
will successfully offer products that meet these requirements in the future.

WE DEPEND ON OUR VENDORS.
-------------------------

Our performance depends on our ability to purchase our products in sufficient
quantities at competitive prices and on our vendors' ability to make and deliver
high quality products in a cost effective, timely manner. Some of our smaller
vendors have limited resources, production capacities and limited operating
histories. We have no long-term purchase contracts or other contracts that
provide continued supply, pricing or access to new products and any vendor or
distributor could discontinue selling to us at any time. There can be no
assurance that we will be able to acquire the products that we desire in
sufficient quantities or on terms that are acceptable to us in the future. In
addition, there can be no assurance that our vendors will make and deliver high
quality products in a cost effective, timely manner. We may also be unable to
develop relationships with new vendors. Also, all products we purchase from
vendors in the Far East must be shipped to our warehouse by freight carriers and
there can be no assurance that we will be able to obtain sufficient capacity at
favorable rates. Our inability to acquire suitable products in a cost effective,
timely manner or the loss of one or more key vendors or freight carriers could
have a negative impact on our business.

                                                                               4
<PAGE>
WE FACE CERTAIN RISKS RELATING TO CUSTOMER SERVICE.
---------------------------------------------------

Any material disruption or slowdown in our order processing systems resulting
from labor disputes, telephone down times, electrical outages, mechanical
problems, human error or accidents, fire, natural disasters, or comparable
events could cause delays in our ability to receive and distribute orders and
may cause orders to be lost or to be shipped or delivered late. As a result,
customers may cancel orders or refuse to receive goods on account of late
shipments, which would result in a reduction of net sales and could mean
increased administrative and shipping costs.

WE EXPERIENCE INTENSE COMPETITION IN OUR MARKETS.
-------------------------------------------------

We operate in a highly competitive environment. We principally compete with a
variety of small distributors of cellular phone accessories that focus on a
particular segment of the market, as well as a few single large distributors
that offer a broad range of such products.

WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL.
------------------------------------------

Our success depends to a significant extent upon the abilities of our senior
management. The loss of the services of any of the members of our senior
management or of certain other key employees could have a significant adverse
effect on our business. In addition, our performance will depend upon our
ability to attract and retain qualified management, merchandising and sales
personnel. There can be no assurance that the members of our existing management
team will be able to manage the Company or our growth or that we will be able to
attract and hire additional qualified personnel as needed in the future.

WE FACE CERTAIN RISKS RELATED TO CASH ACCOUNTS, SHORT-TERM INVESTMENTS AND
--------------------------------------------------------------------------
CREDIT LOSSES.
--------------

The Company has not experienced any losses on its cash accounts or short-term
investments. The Company sells its products to commercial businesses. Through
its continuing relationships with these customers, the Company performs credit
evaluations and generally does not require collateral. The Company maintains a
reserve for potential credit losses.


ITEM 2. PROPERTIES

All of our real properties are held under leases. The following table provides
certain information concerning our leased properties:

                                                       APPROXIMATE      LEASE
                                                           AREA       EXPIRATION
OPERATION        NATURE          LOCATION                (SQ.FT.)        DATE
---------        ------          --------                --------        ----
Main Facility    Warehouse and   Huntingdon Valley, PA     52,000       3/31/09
                 Office                                    13,100       3/31/09


In March 2004 the above lease for both office and warehouse was extended to
March 31, 2009. As part of the lease extension the Company has the right to
relinquish approximately 15,000 feet of warehouse space without further
obligation to the Company upon giving the landlord six months prior notice of
its intention to vacate.


ITEM 3. LEGAL PROCEEDINGS

We, from time to time, are a party to other litigation arising in the normal
course of our business, most of which involves claims for amounts due from
merchandise or services purchased or merchandise sold to third parties We
believe that none of these actions will have a material adverse effect on our
financial condition or our results of operations.


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

Our annual meeting of stockholders was held on May 11, 2005. The following are
results of the voting on the proposals submitted to the stockholders at the
annual meeting:

Proposal No. 1: Election of Directors.
The following individuals were elected as directors:

         NAME                          FOR         AGAINST
         ----                          ---         -------
Stephen Rade                        3,973,633      297,993
Christopher McConnell               4,078,956      192,670
Bradley T. MacDonald                4,091,456      180,170
Allan Kalish                        4,091,656      179,970
Christopher C. Cole                 4,091,656      179,970

                                                                               5
<PAGE>
There were no broker non-votes or abstentions or votes withheld with respect to
this proposal.

Proposal No.2: Proposal to ratify the appointment by our Board of Directors of
Bagell, Josephs, Levine & Company LLC as the Company's independent auditors for
the fiscal year ending December 31, 2005.


                FOR:            4,091,056
                AGAINST:          180,570


The proposal passed by a majority of the vote's casts as dictated by our
by-laws. There were no broker non-votes or votes withheld with respect to this
proposal.



                                     PART II

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

The Company trades its Common Stock under the symbol "XWG" on the American Stock
Exchange.

The following tables set forth the range of high and low closing prices for the
quarters indicated for Common Stock from NMS for the period January 1, 2004
through April 2005 on the OTC and from April 2005 through December 31, 2005 on
the American Stock Exchange.

                                         COMMON STOCK
                                       ----------------
                                       High         Low
                                       ----         ---
            2004

            FIRST QUARTER              0.53         0.37
            SECOND QUARTER             0.65         0.35
            THIRD QUARTER              1.75         0.54
            FOURTH QUARTER             2.40         1.40


            2005

            FIRST QUARTER              3.15         1.90
            SECOND QUARTER             8.70         2.61
            THIRD QUARTER             15.05         6.30
            FOURTH QUARTER            10.90         4.36


The OTC prices reflect inter-dealer quotations, without retail mark-ups,
markdowns or other fees or commissions, and may not necessarily represent actual
transactions.

There were 61 record holders of the Company's Common Stock as of February 1,
2006. A substantially larger number of beneficial owners hold such shares of
Common Stock in depository or nominee form. No dividends have been paid on the
outstanding shares of Common Stock.


ITEM 6. SELECTED FINANCIAL DATA

INTRODUCTION

The following table sets forth the selected financial data for Wireless
Xcessories Group, Inc. This information should be read in conjunction with the
Consolidated Financial Statements and Notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that appear elsewhere
in this document.

The Selected Financial Data have been derived from the consolidated financial
results for the year ended December 31, 2005 and 2004 audited by Bagell,
Josephs, Levine & Company, L.L.C, respectively, appear only in this section.

                                                                               6
<PAGE>
                             SELECTED FINANCIAL DATA
                         FISCAL YEAR ENDED DECEMBER 31,


                                                  2005         2004
                                                --------     --------

                ($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

     INCOME STATEMENT DATA:

     NET SALES                                  $ 22,059     $ 15,307
     COST OF SALES                                13,663        8,479
                                                --------     --------

     GROSS PROFIT                                  8,396        6,828
                                                --------     --------

     SELLING, GENERAL &
     ADMINISTRATIVE EXPENSES                       6,254        5,920
     (OTHER INCOME) EXPENSE
     LOSS (GAIN) FROM DISPOSITION OF PROPERTY          9          (32)
     (GAIN) ON SALE OF INVESTMENTS                  (153)         (50)
     (INTEREST INCOME)                               (18)         (23)
     INTEREST EXPENSE                                --             5
                                                --------     --------
     NET INCOME BEFORE INCOME TAXES                2,304        1,008
     INCOME TAX EXPENSE                              271            0
                                                --------     --------
     NET INCOME                                    2,033        1,008
                                                ========     ========

     NET EARNINGS PER SHARE OF
     COMMON STOCK- BASIC                        $   0.45     $   0.21
                                                ========     ========

     NET EARNINGS PER SHARE OF
     COMMON STOCK- DILUTED                      $   0.44     $   0.21
                                                ========     ========


BALANCE SHEET DATA:

                               AS OF DECEMBER 31,
                               ------------------

                                              2005          2004
                                            --------      --------
     WORKING CAPITAL                        $  5,806      $  3,568
     TOTAL ASSETS                              7,326         5,299
     LONG TERM DEBT                              --            --
     STOCKHOLDERS' EQUITY                      6,173         4,052




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

Year Ended December 31, 2005 ("2005") Compared to Year Ended December 31, 2004
("2004")

Net sales increased by 44.1% or $6.8 million from $15.3 million in 2004 to $
22.1 million in 2005. The increase in sales is mainly attributable to the major
expansion of our products and product lines such as our IPOD MP3, PDA,
Bluetooth, and OEM accessories along with the distribution of phones, which
contributed approximately $ 5.5 million of extra volume and provided a vehicle
to not only open new markets, but supplement sales from our regular customer
base. Additionally, the Company has significantly improved its competitive
position due to the introduction of these product lines, expanded value added
services offered to customers bolstered by a 30 person Sales and Customer
Service department, expanded product selection, expanded marketing and overall
pricing/value relationship offered to Customers. We have made

                                                                               7
<PAGE>
significant progress in fostering the growth of new customers and in developing
the potential of some of our larger Customers, and highly compensate our sales
force for their success in booking new business, but were effected in the third
and fourth quarter of 2005 by the diminution and eventual loss of sales from our
largest customer who began to import directly from China.

Gross profit increased by $1,568,142 or 23.0% from $6,828,176 in 2004 to
$8,396,318 in 2005, but as a percentage of sales decreased from 44.6% to 38.1%
The fall off in gross profit percentage resulted from the major expansion of
lower priced third party product sales and favorable pricing given to new and
selected existing Customers to expand business. Offsetting this in part was
reductions in charges to earnings and as a percentage of sales to provide for
obsolete and slower moving inventory due primarily to enhanced controls over new
purchases, and faster identification and promotion of overstocked and slow
moving product and overall reduction of total freight costs as a percentage of
sales due to a greater proportion of our purchases being domestic offset in part
by higher freight costs.

Selling, general and administrative ("SG&A") expenses increased by 5.7% or $
334,666 from $ 5,919,663 in 2004 to $ 6,254,329 in 2005 and as a percentage of
sales decreased from 38.7% in 2004 to 28.4% in 2005. This is a result of the
Company's continuous cost cutting program and emphasis on improved employee
productivity particularly, a reduction in warehouse labor, which resulted in a
significant improvement in our sales per employee ratio, and in several other
general and administrative line items such as, telephone costs, major reduction
to bad debt expenses due to a tightened credit policy and stringent collection
procedures, depreciation expense and various other administrative expenses.

Interest income decreased from $22,803 in 2004 to a net interest income of
$18,320 in 2005 due primarily to less funds being invested in interest bearing
accounts and a larger amount and percentage of its cash in non-interest bearing
money market instruments.

The Company's effective income tax rate in calculating an expense on the net
income on 2005 would have been 39% or a total expense of $895,209. As of
December 31, 2005, the Company has applied a total of $619,990 consisting of
unapplied Federal and State tax loss carry forwards and tax timing differences
from its tax allowances against its 2005 income tax expense resulting in an
expense of $271,113 or 12% of taxable income. Our effective income tax rate in
2005 and 2004 was 39% and 38%, respectively.

NEW ACCOUNTING STANDARDS

In March 2005, the FASB issued Statement of Financial Accounting Standards
Interpretation Number 47 ("FIN 47"), "Accounting for Conditional Asset
Retirement Obligations." FIN 47 provides clarification regarding the meaning of
the term "conditional asset retirement obligation" as used in SFAS 143,
"Accounting for Asset Retirement Obligations." FIN 47 is effective for the year
ended December 31, 2005. The effect of FIN 47 on the Company's financial
position, results of operations and cash flows is immaterial.

In May 2005, the FASB issued SFAS 154, "Accounting for Changes and Error
Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS
154 changes the requirements with regard to the accounting for and reporting a
change in an accounting principle. The provisions of SFAS 154 require, unless
impracticable, retrospective application to prior periods presented in financial
statements for all voluntary changes in an accounting principle and changes
required by the adoption of a new accounting pronouncement in the unusual
instance that the new pronouncement does not indicate a specific transition
method. SFAS 154 also requires that a change in depreciation, amortization or
depletion method for long-lived, non-financial assets be accounted for as a
change in an accounting estimate, which requires prospective application of the
new method. SFAS 154 is effective for all changes in an accounting principle
made in fiscal years beginning after December 15, 2005. The Company plans to
adopt SFAS 154 beginning January 1, 2006. Because SAS 154 is directly dependent
upon future events, the Company cannot determine what effect, if any, the
expected adoption of SFAS 154 will have on its financial condition, results of
operations or cash flows.

SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Our significant accounting policies are described in Note
1 of the Notes to the Consolidated Financial Statements. The significant
accounting policies that we believe are most critical to aid in fully
understanding our reported financial results are the following:

Critical Accounting Estimates -- We have made a number of estimates and
assumptions related to the reporting of assets and liabilities in preparation of
the consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America. The most significant
estimates relate to the allowance for doubtful accounts, the reserve for
Inventory obsolescence and the deferred tax valuation allowance. In determining
the adequacy of the allowance for doubtful accounts, we consider a number of
factors including the aging of the receivable portfolio, customer payment
trends, and financial condition of the customer, industry conditions and overall
credibility of the customer. Actual amounts could differ significantly from our
estimates.

In determining the adequacy of the reserve for inventory obsolescence, we
consider a number of factors including the aging of the inventory, individual
product weeks on hand and reaction to promotions and markdowns, recent sales
trends, availability of the product in the market, industry market conditions
and overall economic conditions. Actual amounts could differ significantly from
our estimates. In assessing the realizability of deferred income tax assets, we
consider whether it is more likely than not that the deferred income assets will
be realized through the future generation of taxable income

                                                                               8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Our requirement for capital is to fund (i) sales growth and (ii) financing for
possible acquisitions (iii) Re purchase of the Company's Common Stock, and (iv)
Capital Expenditures mainly related to business system upgrades. Our primary
source of financing during 2005 and 2004 were cash flow from operations, and
principal payments of Notes Receivable in 2004.

Our working capital as of December 31, 2005 and 2004 was $ 5,805,890 and $
3,567,918, respectively. Net cash provided by operating activities for the years
ended December 31, 2005 and 2004 was $906,113 and $ 1,065,732, respectively. In
2005, we showed cash from operations of $ 2,281,149 from our net income of $
2,033,244 as adjusted for non-cash items of depreciation and amortization of $
258,313 bad debt provision of $ 2,920 and Common Stock issued to consultants of
$ 87,550 offset in part by increases in deferred income taxes of $100,878.

Changes in assets and liabilities in 2005 resulted in a net use of $ 1,375,036
from increases in Accounts Receivable, Inventory and Prepaid expenses and other
Assets of $605,169, $539,304 and $ 138,798, respectively, and by a decrease in
Accounts payable and accrued expenses of $91,765.

In 2004 we showed cash from operations of $ 1,516,328 from our net income of
$1,008,416 as adjusted for non-cash items of depreciation and amortization of
$336,914, bad debt provision of $110,368 and $60,631 of Common Stock issued to
directors, Changes in assets and liabilities in 2004 resulted in a net use of
$450,596 from increases in Accounts Receivable, Inventory and Prepaid expenses
and other Assets of $511,094, $121,459 and $85,082, respectively, offset in part
by a increase in Accounts Payable and Accrued expenses of $267,039.

Our Inventory turns have improved over both 2005 and 2004 reflected in the fact
that our overall sales has increased by approximately 92% over the two-year
period while our inventory level has increased by approximately 35% in comparing
December 31, 2005 to December 31, 2004. This is a result of tighter controls
instituted over new purchases, and faster identification and promotion of
overstocked and slower moving product.

Net cash used in investing activities in 2005 of $127,704 resulted from capital
expenditures of $141,137 offset in part by the collection of $13,433 of
principal payments related to the sale of discontinued operations. The bulk of
Capital Expenditures in 2005 were for upgrades to our business system including
continued improvements to our website and on-line ordering capabilities and
warehouse efficiency improvements and upgrades to selected user hardware
(Computers and printers).

Net cash used in investing activities in 2004 of $95,639 resulted from capital
expenditures net of disposals of $256,829 offset in part by principal payments
of $161,190 relating to the sale of discontinued operations. The bulk of Capital
Expenditures in 2005 were for the purchase and installation of a new business
system, upgrades to the Company website and on-line ordering capabilities,
introduction of Radio frequency technology in our warehousing operation, and
upgrades to selected user hardware (Computers and printers).

Cash used in financing activities in 2005 net payments of capital lease
obligations of $ 1,999.

Cash used in financing activities in 2004 of $379,327 was due to the cost of
re-acquiring Company stock of $375,053 and net payments of capital lease
obligations of $4,274.

Based upon its present plans, management believes that operating cash flow, and
available cash will be adequate to finance the stock repurchase program, to meet
the working capital cash needs of the Company and to meet anticipated capital
expenditure needs during the 12 months ending December 31, 2005. Although we
would like to issue shares of Common Stock as our primary method of financing
acquisitions, we anticipate that additional funds may be required to
successfully implement any acquisition program, and will use various methods to
finance acquisitions, including raising new equity capital. There is no
guarantee that such equity or debt financing will be available to us in the
future.

COMMITMENT:

We lease warehouse and administrative office space and copy machines with
non-cancelable operating lease agreements, which expire at various dates.
Certain leases for warehouse and other space contain rental escalation clauses
based on the Consumer Price Index. Future minimum lease payments including base
rent, common area charges, and lease required real estate tax charges
non-cancelable operating leases for the year ending December 31, 2005 are as
follows:

                       2006              $   436,411
                       2007                  444,062
                       2008                  480,618
                       2009                  161,494
                       thereafter                 --
                                         -----------
                       Total             $ 1,522,585
                                         ===========

                                                                               9
<PAGE>
SEASONALITY AND INFLATION:

In fiscal years 2005 and 2004 the Company did approximately 51% and 54%,
respectively, of its sales in the second half of the year. This reflected the
more traditional pick up of additional business in the months preceding the
December Holiday season.

The impact of inflation on our operations has not been significant to date.
However, there can be no assurance that a high rate of inflation in the future
would not have an adverse effect on our operating results.

GRAPHS

Total Revenue - Quarterly
Dollars in Millions


          3.151   3.905   4.075   4.176   4.955   5.835   5.293   5.976
         --------------------------------------------------------------
QTR         1       2       3       4       1       2       3       4
 FY        04      04      04      04      05      05      05      05



Gross Profit - Quarterly
Dollars in Millions


          1.461   1.765   1.746   1.846   2.066   2.157   2.022   2.151
         --------------------------------------------------------------
QTR         1       2       3       4       1       2       3       4
 FY        04      04      04      04      05      05      05      05


Operating Cash Flow - Quarterly
Dollars in Thousands


          263     473    619      -290     583     -423     244   502
         --------------------------------------------------------------
QTR         1       2       3       4       1       2       3       4
 FY        04      04      04      04      05      05      05      05


Earnings per Share - Quarterly
Dollars


         .01      .07     .06     .07     .13     .16     .07     .09
         --------------------------------------------------------------
QTR         1       2       3       4       1       2       3       4
 FY        04      04      04      04      05      05      05      05



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk - The Company did not have any interest rate risk at December
31, 2005, as there was no outstanding debt owed by the Company other fixed
interest capital lease obligations.

Foreign Currency Risk - We do not use foreign currency forward exchange
contracts or purchased currency options to hedge local currency cash flows or
for trading purposes. All sales arrangements with international customers and
suppliers are denominated in U.S. dollars. We purchase approximately 48% of our
products from manufacturers located overseas, principally in the Far East. The
depreciation of the U.S.

                                                                              10
<PAGE>
dollar against the major Asian currencies could, therefore, cause an increase in
the cost of our products and adversely affect our results of operations or
financial condition.


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

As of December 31, 2005 and 2004 there were no changes in or disagreements with
Bagell, Josephs, Levine & Company LLC on accounting or financial disclosures.



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth as of February 1, 2006, the name of each of our
directors and executive officers, his principal occupation and the nature of all
positions and offices with us held by him. Our directors will hold office until
the next Annual Meeting of Stockholders.

                                                                         FIRST
                                                                         BECAME
NAME                       AGE  OFFICE                                  DIRECTOR
-----                      ---  -------                                 --------
Stephen Rade               68   President, Chief Executive                1996
                                Officer and Chairman of the Board
Christopher F. McConnell   52   Director                                  1998
Ronald E. Badke            60   Chief Financial Officer and Secretary     1995
Allan Kalish               80   Director                                  1998
Christopher C. Cole        50   Director                                  2000
Bradley T. MacDonald       58   Director                                  1999
Dawn Kenderdine            36   Vice President and business development
                                Manager


Each executive officer serves at the discretion of the Board of Directors.

Mr. Rade has been our Chairman of the Board since June 2002 and President and
Chief Executive Officer since June 1998. From 1996 until June 1998, he was
Executive Vice President of the Company. He has been a director since April
1996. He has been the President, Chief Executive Officer and a director of
Advanced Fox Antenna, Inc. since he founded that company in 1990.

Mr. McConnell has been a director of the Company since December 1998 while
holding the title of Chairman of the Board through June 2002. In addition, he is
principal of The Founders Group, an organization dedicated to helping launch
new, technology-based companies. Mr. McConnell also co-founded CFM Technologies,
Inc., a semiconductor capital equipment company and until it merged into Matson
technologies in March 2001. He currently serves as a director of Mi8
Corporation, a leading application software provider (ASP), where he had
previously been Chairman of the Board.

Mr. Badke has been our Chief Financial Officer since November 1995 and Secretary
since March 1999. He was a Senior Vice President and the Chief Financial Officer
of Shoe Town Inc. from 1984 through September 1994, positions he later held
(September to November 1995) with Natures Elements. Mr. Badke, a certified
public accountant, had been a consultant from October 1994 through August 1995.

Mr. Kalish has been a director since 1998. He is the owner of Kalish &
Associates, a consulting firm specializing in marketing, advertising and public
relations, which he founded in 1986. Kalish & Associates serves advertisers,
marketers and advertising agencies throughout the country, including three New
York Stock Exchange companies. Prior to founding Kalish & Associates, Mr. Kalish
managed Kalish & Rice, Inc., one of the largest advertising agencies in
Philadelphia. Mr. Kalish served as a member of the Board of Directors of
Checkpoint Systems, Inc., a New York stock exchange company, from 1993 to 1997.

Mr. MacDonald was elected a director in March 1999. He is also Chairman of the
Board and Chief Executive Officer of Medifast, Inc (AMEX:MED), a position he has
held since January 1998. Prior thereto, he was appointed as Program Director of
the U.S. Olympic Coin Program of the Atlanta Centennial Olympic Games. From 1991
through 1994, Mr. MacDonald returned to active duty to be Deputy Director and
Chief Financial Officer of the Retail, Food and Hospitality and Recreation
Business for the United States Marine Corps. Prior thereto, Mr. MacDonald served
as Chief Operating Officer of the Bonnie Sunglass Company, President of
Pennsylvania Optical Co., Chairman and CEO of Mac Donald and Associates' which
had major financial interests in retail drug, consumer candy, and pilot sunglass
companies. Mr. Mac Donald was national president of the Marine Corps Reserve
Officer Association and retired from the United States Marine Corps as a Colonel
in 1997, after 27 years of service. Mr. MacDonald is a member of the Board of
Directors of Toys for Tots Foundation.

                                                                              11
<PAGE>
Mr. Cole was elected as a director in February 2000. He is currently the CEO of
Intelligrated, Inc., a position he has held since June of 2001. From April 2000
to June 2001 Mr. Cole served as President of Cole Consulting. Until the
acquisition of Pinnacle Automation by FKI, Plc. in early 2000, Mr. Cole was
employed by Pinnacle Automation as its Chief Operating Officer and served as a
director of Pinnacle Automation since June 1997 and as Executive Vice President
from March 1994 to June 1997. Mr. Cole served as Vice President of Cincinnati
Milacron, from 1987 through March of 1994.

Ms. Kenderdine has been with the Company since 1993, and holds the title of Vice
President a position she was promoted to in August, 2005. Prior thereto, she has
held the title of Business Development and Purchasing manager from 2001 and
Purchasing Manager from 1994 to 2001.


COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACTS OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers and persons who own more than ten
percent of its Common Stock to file with the Securities and Exchange Commission
and The NASDAQ Stock Market initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.

To the best of our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations with respect to the year
ended December 31, 2005, our officers, directors and greater than ten percent
shareholders were in compliance with all applicable Section 16(a) filing
requirements.


ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth for the years ended December 31, 2005, 2004, and
2003; the compensation for services rendered in all capacities to the Company
and subsidiaries by the Chief Executive Officer, the Company's other executive
officer and key management personnel for the year ended December 31, 2005.

                           SUMMARY COMPENSATION TABLE
                           --------------------------

        NAME AND PRINCIPAL POSITION                YEAR         SALARY
        ---------------------------                ----         ------
        Stephen Rade                               2005        $298,000
        Chief Executive Officer                    2004         240,692
        President and Chairman of the Board        2003         192,808

        Ronald E. Badke                            2005        $126,000
        Chief Financial Officer and                2004         128,308
        Secretary                                  2003         133,212

        Susan Rade                                 2005        $183,942
        Vice President                             2004         185,869
        Sales Account manager                      2003         192,657

        Dawn Kenderdine                            2005        $119,756
        New Business Development Manager           2004         123,023
        Purchasing Director                        2003         103,897


EMPLOYMENT AGREEMENTS

In August 2005, the Company entered into an employment agreement with its
Chairman of the Board and Chief Executive Officer, Stephen Rade commencing on
September 1, 2005 and expiring on August 31, 2008. The agreement calls for an
annual salary of $ 248,000 and an annual bonus of $ 50,000 predicated on Mr.
Rade achieving certain financial targets. The agreement also provides that Mr.
Rade can receive 5% of the value of any acquisitions under conditions stipulated
in the contract. Prior employment agreements with each of Messrs. Rade, and
Badke terminated on April 1998 and March 1999, respectively.

COMPENSATION OF DIRECTORS:

We instituted the payment of fees for attendance at Board and related committee
meetings in late 2003. Each director will be paid $1,000 for each regular Board
Meeting and $500 for each Committee meeting attended. We also reimburse those
directors who are not employees of the Company for their expenses incurred, if
any, in attending meetings.

In 2005, the Directors will be paid a flat $2,500 for attendance at Board
meetings and committee meetings for the year. In addition, in 2005,

                                                                              12
<PAGE>
each Director will receive a grant of shares of the Company's Common Stock
totaling a fair market value at grant date not to exceed $5,000.

The Company previously had approved the annual grant of stock options to
purchase the Company's common stock to certain directors in accordance with the
1995 Stock Option Plan. Specifically, the board approved the following grants:

o    to the chairperson of the board (if not also an employee of the Company):
     15,000 options to purchase shares of common Stock (the "Chairperson
     Options");

o    to every other director (if not also an employee of the Company): 8,000
     options to purchase shares of common stock (The "Director Options"); and

o    to each director who is a member of the board committee: 3,000 options to
     purchase shares of common stock multiplied by the number of committees on
     which the director sits ("Committee Options").

A director who receives Chairperson Options may not also receive Director
Options, unless the board determines otherwise.

Half of any options granted vest on the date they are granted, with the
remaining half vesting one year later; provided that these options will
terminate and never vest if the director receiving them does not attend at least
75% of the meetings of the board (or meetings of the applicable board committee,
in the case of Committee Options) held during the one year period following the
date the options are granted.

No option shares were granted to any Director under this plan in 2004.

In June 2002, the Board approved the issuance of 40,000 shares of the Company's
Common Stock to its non-employee directors for service on the Board and its
various committees. The stock was issued in late April 2003 and includes a total
of 10,000 shares each to Christopher McConnell, Christopher Cole, Bradley
MacDonald and Allan Kalish, respectively.

In June 2004, the Board approved the issuance of 40,000 shares of the Company's
Common Stock to its non-employee directors for service on the Board and its
various committees. The stock was issued in the third quarter of 2004 with a
total of 10,000 shares each going to Christopher McConnell, Christopher Cole,
Bradley MacDonald and Allan Kalish, respectively.

In December 2004, the Board approved an annual fee of $5,000 to each of its
non-employee directors for service on the Board and its various committees and
the issuance of stock options valued at $5,000 each based on the closing stock
price on the day of issuance, which was February 1, 2005.

STOCK OPTIONS

Under the Company's 1995 Stock Option Plan (the "Plan"), the Company's board of
directors or a stock option committee appointed by the board may grant stock
options to officers, key employees, directors, and independent consultants of
the Company. Currently, 672,624 shares of the Company's common stock are
reserved for issuance under the Plan.

The following table sets forth the details of the options held at the end of the
year December 31, 2005 by the executive officers set forth in the Summary
Compensation Table. Mr. Rade, Mr. Badke and Ms. Kenderdine were not granted
options under the Plan during the year 2005, but 10,000 option shares were
granted to Dan Kenderdine our facilities manager and husband of executive
officer Dawn Kenderdine and accordingly is listed below as part of Ms.
Kenderdine holdings.

                                FISCAL YEAR END OPTION VALUES

                                 NUMBER OF SHARES UNDERLYING
                                UNEXERCISED OPTIONS AT FISCAL
                                          YEAR END
                                -----------------------------
      NAME               Exercisable   Weighted   Option      Option
                            Shares     Exercise   Market    Underlying
                                        Price     Value       Value

      Ronald E. Badke       20,000      $1.44    $100,800     $72,000
      Dawn Kenderdine       40,000      $2.23    $201,600    $112,400



(1) The market value used in the above chart was $5.04, which represents the
closing price of the Company's Common Stock as of the close of business on
December 31, 2005.

                                                                              13
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of February 1, 2006, as
supplied to the Company, regarding the beneficial ownership of the Common Stock
by all persons known to the Company who own more than 5% of the outstanding
shares of the Company's Common Stock, each director of the Company, each
executive officer of the Company named in the Summary Compensation Table
included elsewhere in this report and all executive officers and directors as a
group. Unless otherwise indicated, based on information provided to the Company
by the directors, executive officers and principal shareholders, the persons
named in the table below have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.

NAME*                                   NUMBER OF SHARES
                                      BENEFICIALLY OWNED(1)       PERCENTAGE(2)
                                      ---------------------       -------------
Christopher F. McConnell (3)                  47,427                  1.1%
Stephen Rade                                 732,000                  16.3%
Ronald E. Badke (4)                           23,200                   -- **
Christopher C. Cole (5)                       67,427                  1.5%
Allan Kalish (6)                              51,427                  1.1%
Bradley T. MacDonald (7)                      35,427                  -- **
Dawn Kenderdine (8)                           49,500                  1.1%
Directors and Officers as a group          1,006,408                  22.5%
(7) persons)(8)


* The business address of each shareholder named in this table is Wireless
  Xcessories Group, Inc, 1840 County Line Road, Huntingdon Valley, PA 19006.
**Less than 1%.

(1) For purposes of this table, a person or group is deemed to have "beneficial
    ownership" of any shares, which such person has the right to acquire within
    60 days.

(2) Percentage ownership is based on 4,481,795 shares of Common Stock
    outstanding net of Treasury Stock on February 1, 2006. For purposes of
    computing the percentage of outstanding shares held by each such person or
    group of persons named above, any security which such person or group of
    persons has the right to acquire within 60 days is deemed to be
    outstanding, but is not deemed to be outstanding for the purpose of
    computing the percentage ownership of any other person.

(3) Includes exercisable options to purchase 47,427 shares.

(4) Includes exercisable options to purchase 20,000 shares and 3,200 vested
    common stock shares under the Company's restricted stock program.

(5) Includes exercisable options to purchase 44,427 shares.

(6) Includes exercisable options to purchase 41,427 shares.

(7) Includes exercisable options to purchase 2,427 shares

(8) Includes exercisable options to purchase 40,000 shares and 4,000 vested
    common stock shares under the Company's restricted stock program.

(9) Includes exercisable options to purchase 195,708 shares.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We employ Susan Rade, wife of Stephen Rade, current CEO, as a high volume and
senior sales person with certain administrative functions. In this role, Mrs.
Rade earns the bulk of her compensation as part of our sales incentive
commission programs earning $183,942 and $185,869 in the twelve months December
31, 2005 and 2004, respectively, including draws, commission and a $36,000
salary for administrative duties. We employ Dan Kenderdine, husband of Dawn
Kenderdine, as our Facilities Manager since mid 2004. Mr. Kenderdine earns the
bulk of his compensation from salary and bonuses earning $ 44,270 for the year
ended December 31, 2005 and $ 13,117 for the partial year ending December 31,
2004. Additionally, Mr. Kenderdine was awarded 10,000 stock options under the
Company's stock option plan in December 2005 at a price of $4.68 per share.

                                                                              14
<PAGE>
ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The term " disclosure controls and procedures " is defined in Rules 13(a)-15e
and 15(d) - 15(e) of the Securities Exchange Act of 1934, as amended (the
Exchange Act). Our principal executive officer and principal financial officer
have evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2005. They have concluded that, as of December 31, 2005 our
disclosures were effective to ensure that:

     (1)  That information required to be disclosed by the Company in reports
          that it files or submits under the act is recorded, processed,
          summarized and reported, within the time periods specified in the
          Commissions' rules and forms, and
     (2)  Controls and procedures are designed by the Company to ensure that
          information required to be disclosed by Wireless Xcessories Group, Inc
          in the reports it files or submits under the Act is accumulated and
          communicated to the issuer's management including the principal
          executive and principal financial officers or persons performing
          similar functions, as appropriate to allow timely decisions regarding
          financial disclosure.

This term refers to the controls and procedures of a Company that are designed
to ensure that information required to be disclosed by a Company in the reports
that it files under the Exchange Act is recorded, processed, summarized and
reported within the required time periods. Our principal executive officer and
principal financial officer have evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this quarterly
report. They have concluded that, as of December 31, 2005 our disclosure and
procedures were effective in ensuring that required information would be
disclosed on a timely basis in our reports filed under the exchange act.

CHANGES IN INTERNAL CONTROLS:

There have not been any significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-KSB

(a) The following documents are filed as a part of this Report.

SCHEDULE F- and 2. FINANCIAL STATEMENTS - The financial statements and schedules
required by this item begin on page F-1 of this report. The Reports of
Independent Certified Public Accountants appear on pages F-2, F-3 and F-4 of
this report.

3. EXHIBITS - The following is a list of exhibits. Where so indicated by
footnote, exhibits, which were previously filed, are incorporated by reference.


ITEM 16. PRINCIPAL ACCOUNTANT FEES AND SERVICES

                            AUDIT AND NON-AUDIT FEES:

For the years ended December 31, 2004 and 2005, fees billed for services
performed by Bagell, Josephs, Levine & Company, L.L.C., the Company's
independent auditor, charged to the Company for the annual certified audits, for
10Q filings for the quarters ended March 31, June 30 and September 30, 2004 and
2005 and miscellaneous services, were as follows:

                                      FISCAL          FISCAL
                                     YEAR 2004       YEAR 2005
                                     ---------       ---------
          Annual certified audit        31,500          33,500
          10QSB reviews                 15,000          15,000
          Other charges                  2,000             --
                                     ---------       ---------
              TOTAL                     48,500          48,500
                                     =========       =========

All above charges were included as an expense to the Company in the respective
years listed above.
                                                                              15
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS










                                                                            PAGE
                                                                            ----



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ..................   F-2


CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2005 AND 2004 .............   F-3


CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004 ...............................................   F-5


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS
ENDED DECEMBER 31, 2005 AND 2004 .........................................   F-6


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004 ...............................................   F-7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ...............................   F-9




























                                       F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders
Wireless Xcessories Group, Inc. Inc.
Huntingdon Valley, PA


We have audited the accompanying consolidated balance sheets of Wireless
Xcessories Group, Inc. and Subsidiaries as of December 31, 2005 and 2004, and
the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wireless Xcessories
Group, Inc. and Subsidiaries as of December 31, 2005 and 2004 and the
consolidated results of its operations and changes in stockholders' equity and
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.



BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.

Gibbsboro, New Jersey
February 17, 2006




















                                       F-2
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2005 AND 2004


                                     ASSETS



                                                          2005          2004
                                                      ------------  ------------
CURRENT ASSETS
   Cash and cash equivalents                          $  2,683,692     1,907,282
   Accounts receivable (net of allowance for doubtful
      accounts of $100,696 and $157,142, respectively)   1,732,817     1,130,568
   Inventories                                           2,098,367     1,559,063
   Prepaid expenses and other assets                       343,188       204,390
   Current portion of deferred income taxes                100,878
   Current maturities of notes receivable                       --        13,433
                                                      ------------  ------------

          Total current assets                           6,958,942     4,814,736

PROPERTY AND EQUIPMENT - Net                               331,378       448,555

OTHER ASSETS                                                35,751        35,751
                                                      ------------  ------------

Total assets                                          $  7,326,071  $  5,299,042
                                                      ============  ============






                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-3
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


                      LIABILITIES AND STOCKHOLDERS' EQUITY



                                                         2005          2004
                                                     ------------  ------------
CURRENT LIABILITIES
   Current portion of long-term debt                 $         --  $      1,999
   Accounts payable                                       862,974       972,581
   Income taxes payable                                   100,878            --
   Net liabilities of discontinued operations                  --        35,757
   Accrued payroll and related benefits                   140,997       191,607
   Other accrued expenses                                  48,203        44,874
                                                     ------------  ------------

          Total current liabilities                     1,153,052     1,246,818
                                                     ------------  ------------

STOCKHOLDERS' EQUITY
   Preferred stock, par value $.001, 1,000,000 shares
      authorized, no shares issued or outstanding              --            --
   Common stock, par value $.001, 10,000,000 shares
      authorized, 5,343,080 and 5,327,080 issued in
      2005 and 2004, respectively                           5,343         5,327
   Additional paid-in capital                          11,411,124    11,363,939
   Accumulated deficit                                 (4,830,376)   (6,863,620)
   Treasury stock, at cost, 861,385 and 868,885
      shares, respectively                               (413,072)     (453,422)
                                                     ------------  ------------

          Total stockholders' equity                    6,173,019     4,052,224
                                                     ------------  ------------

Total liabilities and stockholders' equity           $  7,326,071  $  5,299,042
                                                     ============  ============



                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-4
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004



                                                         2005          2004
                                                     ------------  ------------
Net sales                                            $ 22,059,179  $ 15,307,452
Cost of sales                                          13,662,861     8,479,276
                                                     ------------  ------------

Gross profit                                            8,396,318     6,828,176

Selling, general and administrative expenses           (6,254,329)   (5,919,663)
                                                     ------------  ------------

Income from operations                                  2,141,989       908,513

Other Income (Expense):
   (Loss) Gain from disposition of Property                (8,824)       31,500
   Gains on sale of Investments                           152,872        50,276
   Interest income                                         18,320        22,803
   (Interest expense)                                          --        (4,676)
                                                     ------------  ------------
Income before Income taxes                              2,304,357     1,008,416

Income tax expense                                        271,113            --
                                                     ------------  ------------

Net Income                                           $  2,033,244  $  1,008,416
                                                     ============  ============

Earnings per common share -
   Basic:
   Net Income                                        $       0.45  $       0.21
                                                     ============  ============
   Diluted:                                          $       0.44  $       0.21
   Net Income                                        ============  ============

Weighted average number of common
shares outstanding - Basic                              4,467,570     4,692,093
                                                     ============  ============

Weighted average number of common
shares outstanding - Diluted                            4,672,779     4,759,335
                                                     ============  ============




                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-5
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004





<TABLE><CAPTION>
                                   COMMON STOCK                                             TREASURY STOCK
                             -------------------------     PAID-IN     ACCUMULATED    --------------------------
                                SHARES        AMOUNT       CAPITAL       DEFICIT         SHARES         AMOUNT          TOTAL
                             -----------   -----------   -----------   -----------    -----------    -----------    -----------
<S>                          <C>           <C>           <C>           <C>            <C>            <C>            <C>
BALANCE, DECEMBER 31, 2003     5,262,080   $     5,262   $11,341,106   $(7,872,036)      (448,110)   $  (116,461)   $ 3,358,231
Stock Issued                      65,000            65        22,473                       73,000         38,092         60,630
Stock repurchased                     --            --            --            --       (493,775)      (375,053)      (375,053)
Net income                            --            --            --     1,008,416             --             --
                             -----------   -----------   -----------   -----------    -----------    -----------    -----------

BALANCE, DECEMBER 31, 2004     5,327,080         5,327    11,363,939    (6,863,620)      (868,885)      (453,422)     4,052,224
Stock Issued                      16,000            16        47,185                        7,500         40,350         87,551
Net Income                            --            --            --     2,033,244             --             --      2,033,244
                             -----------   -----------   -----------   -----------    -----------    -----------    -----------

BALANCE, DECEMBER 31, 2005     5,343,080   $     5,343   $11,411,124   $(4,830,376)      (861,385)   $  (413,072)   $ 6,173,019
                             ===========   ===========   ===========   ===========    ===========    ===========    ===========
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-6
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004




<TABLE><CAPTION>
                                                                    2005            2004
                                                                ------------    ------------
<S>                                                             <C>             <C>
OPERATING ACTIVITIES:
   Net Income                                                   $  2,033,244    $  1,008,416

Adjustments to reconcile net income to net cash provided
by operating activities:
   Depreciation and amortization                                     258,313         336,914
   Provision for doubtful accounts                                     2,920         110,368
   Common Stock issued to Directors, Officer and employees                --          60,630
   Common Stock issued to Consultants                                 87,550              --
   Deferred Income taxes                                            (100,878)             --
Changes in assets and liabilities, net of effects from
dispositions:
   Accounts receivable                                              (605,169)       (511,094)
   Inventories                                                      (539,304)       (121,459)
   Prepaid expenses and other assets                                (138,798)        (85,082)
   Accounts payable and accrued expenses                             (91,765)        267,039
                                                                ------------    ------------

          Net cash provided by operating activities                  906,113       1,065,732
                                                                ------------    ------------

INVESTING ACTIVITIES:
   Purchases of property and equipment, net                         (141,137)       (256,829)
   Principal payment received on note receivables from
      sale of subsidiaries                                            13,433         161,190
                                                                ------------    ------------

          Net cash (used in) investing activities                   (127,704)        (95,639)
                                                                ------------    ------------
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-7
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004



<TABLE><CAPTION>
                                                                    2005            2004
                                                                ------------    ------------
<S>                                                             <C>             <C>
FINANCING ACTIVITIES:
   Payments on capital lease obligation                         $     (1,999)   $     (4,274)
   Repurchase of common stock                                             --        (375,053)
                                                                ------------    ------------

          Net cash (used) in financing activities                     (1,999)       (379,327)
                                                                ------------    ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                            776,410         590,767

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                      1,907,282       1,316,515
                                                                ------------    ------------

CASH AND CASH EQUIVALENTS - END OF YEAR                         $  2,683,692    $  1,907,282
                                                                ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid during year for:

       Interest                                                 $         --    $      4,676
                                                                ============    ============

       Income taxes                                                  270,000              --
                                                                ============    ============


Supplemental Disclosure of Non-Cash Activity:
       Common Stock issued to Directors, Officer and Employee   $         --    $     60,630
                                                                ============    ============
       Common Stock issued to Consultants                       $     87,550    $         --
                                                                ============    ============
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-8
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2005 AND 2004


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. The significant accounting policies that we believe are
most critical to aid in fully understanding our reported financial results are
the following:

Business description- Wireless Xcessories Group, Inc. and subsidiaries
(collectively, the "Company") are engaged in the distribution of cellular
accessories and components principally in the United States.

Principles of Consolidation- The consolidated financial statements include the
accounts of the Wireless Xcessories Group, Inc. and its wholly owned
subsidiaries. All material intercompany transactions have been eliminated.

Significant Estimates--we have made a number of estimates and assumptions
related to the reporting of assets and liabilities in preparation of the
consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America. The most significant
estimates relate to the allowance for doubtful accounts, the reserve for
inventory obsolescence and the deferred tax value allowance.

In determining the adequacy of the allowance for doubtful accounts, we consider
a number of factors including the aging of the receivable portfolio, customer
payment trends, and financial condition of the customer, industry conditions and
overall credibility of the customer. Actual amounts could differ significantly
from our estimates.

In determining the adequacy of the reserve for inventory obsolescence, we
consider a number of factors including the aging of the inventory, recent sales
trends, availability of the product in the market, industry market conditions
and overall economic conditions. Actual amounts could differ significantly from
our estimates.

In assessing the reliability of deferred income tax assets, we consider whether
it is more likely than not that the deferred income assets will be realized
through the future generation of taxable income.

Cash equivalents- The Company considers all highly liquid investments with a
maturity date of three months or less from the date of purchase or high-grade
money market funds to be cash equivalents.

Concentration of Risk- the Company has not experienced any losses on its cash
accounts or short-term investments. The Company sells its products to commercial
businesses. Through its continuing relationships with these customers, the
Company performs credit evaluations and generally does not require collateral.
The Company maintains a reserve for potential credit losses. One customer
accounted for 18.4% and 8.6% of sales in 2004 and 2005 respectively, and a
second customer 5.2% of sales in 2005 and no other Customer accounted for
greater than 5% of consolidated net sales during any of the years presented.

In 2005, the Company purchased approximately 23.5% of its products from two Far
East suppliers accounting for approximately 12.7% and 10.8% respectively, of
total purchases. No other vendor accounted for 10% or more of our purchases. In
2004, the Company purchased approximately 61% of its products from two Far East
and one Domestic supplier accounting for approximately 32%, 19% and 10%
respectively, of total purchases. No other vendor accounted for 10% or more of
our purchases No other vendor accounted for 10% or more of our purchases.

Inventories- Inventories, which consist solely of finished goods, are carried at
the lower of cost, determined on a first-in, first-out basis (FIFO), or market
value.

Property and Equipment- Property and equipment are stated at cost. Additions and
improvements are capitalized. Maintenance and repairs are expensed as incurred.
Depreciation and amortization of property and equipment is calculated under the
straight-line method over the estimated useful lives of the respective assets.
Estimated useful lives are five to seven years for furniture and fixtures and
three to ten years for machinery and equipment. Leasehold improvements are
amortized over the shorter of their estimated useful lives or the terms of their
leases. Depreciation and amortization expense was $258,313 and $336,914 in 2005
and 2004, respectively, and is included in selling, general and administrative
expense in the consolidated statements of operations.

Revenue Recognition -- Revenue is recognized at the point of shipment in
accordance with our standard shipping terms which is FOB shipping point, which
includes all groups of products and services we provide to our Customers. Any
shipment not in accordance with our standard shipping terms would recognize
revenue at the point of destination.

                                       F-9
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

We uniformly warrant most of our products from defectives and provide limited
stock rotation rights on selected product within 60 days of purchase from our
Customers. The Company total percentage of Customer returns is less than 3.5% of
its net sales and the Company provides reserves and allowances to provide for
this exposure, which are applied against net sales.

Shipping and Handling Fees- the Company records revenues derived from shipping
and handling in net sales and the costs associated with shipping and handling in
cost of sales.

Income Taxes- The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under the liability method specified by SFAS No. 109, a deferred tax
asset or liability is determined based on the difference between the financial
reporting basis and tax basis of assets and liabilities, measured using enacted
tax rates. The impact of changes in tax rates is reflected in income in the
period in which the change is enacted.

Earnings per share- Basic earning per share (EPS) is computed using the weighted
average number of common shares outstanding for the period while diluted EPS is
computed assuming conversion of all dilutive securities such as options.
Included below is a reconciliation of shares for the basic and diluted EPS
computations.
                                                    2005           2004
                                                 ----------     ----------
           Basic EPS Shares                       4,467,570      4,692,093
           Dilutive effect of stock options
             and warrants                           205,209         67,242
                                                 ----------     ----------
           Diluted EPS shares                     4,672,779      4,759,335
                                                 ==========     ==========

Options to purchase 205,209 and 183,500 and shares with exercise prices ranging
from $.28 to $4.68 and $.28 to $4.438 respectively, were outstanding at December
31, 2005 and 2004 respectively, which shares were included in the computation of
diluted EPS.

Disclosures about Fair Value of Financial Instruments- the carrying values of
cash, and cash equivalents, and long-term debt approximate their respective fair
values.

Employee Stock Options-The Company applies Accounting Principles Board Opinion
No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees," which
recognizes compensation costs based on the intrinsic value of an equity
instrument. The Company has applied APB No. 25 to its stock compensation awards
to employees and has disclosed the required pro forma effect on net income
(loss) income per share in accordance with the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" and has adopted the enhanced
disclosure provisions of

SFAS No. 148 "Accounting for Stock-Based Compensation- Transition and
Disclosure, an amendment of SFAS No. 123" (See Note 5).

Reclassifications- certain prior year amounts may have been reclassified to
conform to current year presentation.

Use of Estimates in the Preparation of Financial Statements- The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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. Actual results could differ from those estimates.

                        RECENT ACCOUNTING PRONOUNCEMENTS-

In March 2005, the FASB issued Statement of Financial Accounting Standards
Interpretation Number 47 ("FIN 47"), "Accounting for

                                      F-10
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Conditional Asset Retirement Obligations." FIN 47 provides clarification
regarding the meaning of the term "conditional asset retirement obligation" as
used in SFAS 143, "Accounting for Asset Retirement Obligations." FIN 47 is
effective for the year ended December 31, 2005. The effect of FIN 47 on the
Company's financial position, results of operations and cash flows is
immaterial.

In May 2005, the FASB issued SFAS 154, "Accounting for Changes and Error
Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS
154 changes the requirements with regard to the accounting for and reporting a
change in an accounting principle. The provisions of SFAS 154 require, unless
impracticable, retrospective application to prior periods presented in financial
statements for all voluntary changes in an accounting principle and changes
required by the adoption of a new accounting pronouncement in the unusual
instance that the new pronouncement does not indicate a specific transition
method. SFAS 154 also requires that a change in depreciation, amortization or
depletion method for long-lived, non-financial assets be accounted for as a
change in an accounting estimate, which requires prospective application of the
new method. SFAS 154 is effective for all changes in an accounting principle
made in fiscal years beginning after December 15, 2005. The Company plans to
adopt SFAS 154 beginning January 1, 2006. Because SAS 154 is directly dependent
upon future events, the Company cannot determine what effect, if any, the
expected adoption of SFAS 154 will have on its financial condition, results of
operations or cash flows.


NOTE 2 - PROPERTY AND EQUIPMENT - NET

Property and equipment consists of the following:

                                  DECEMBER 31,
                                                    2005           2004
                                                 ----------     ----------
           Machinery and equipment               $2,034,293     $2,919,515
           Furniture and fixtures                   419,979        416,153
           Vehicles                                   4,000         38,463
           Leasehold improvements                   253,482        253,482
                                                 ----------     ----------
                                                  2,711,754      3,627,613

           Less accumulated depreciation
             and amortization                    (2,380,376)    (3,179,058)
                                                 ----------     ----------
           Property and equipment, net           $  331,378     $  448,555
                                                 ==========     ==========



NOTE 3 - LONG-TERM DEBT

Long-term debt consists of the following:

                                  DECEMBER 31,
                                                    2005           2004
                                                 ----------     ----------
           Revolving Credit Facility             $       --     $       --
           Capital Leases                                --         (1,999)
                                                 ----------     ----------
                                                         --          1,999
           Less current portion                          --         (1,999)
                                                 ----------     ----------
           Long-term debt, net of
             current portion                     $       --     $       --
                                                 ==========     ==========


                                      F-11
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 4 - STOCKHOLDERS' EQUITY

PREFERRED STOCK- The Board of Directors of the Company, without action by the
stockholders, is authorized to issue shares of Preferred Stock in one or more
series and, within certain limitations, to determine the voting rights
(including the right to vote as a series on particular matters), preferences as
to dividends and in liquidation, conversion, redemption, and other rights of
each such series. The Board of Directors could issue series with rights more
favorable with respect to dividends, liquidation and voting than those held by
the holders of any class of Common Stock.

COMMON STOCK- the shares of Common Stock have one vote per share. None of the
shares have preemptive or cumulative voting rights, redemption rights, are or
will be liable for assessment or further calls. The holders of the Common Stock
are entitled to dividends when declared from funds legally available therefore.

The Board of Directors have approved a stock buyback program and have authorized
management to repurchase a total of up to 1,250,000 shares of Common Stock at a
total cost not to exceed $1,000,000 through July 5, 2005. As of December 31,
2005 and 2004, the Company has repurchased cumulatively 981,775 (and
subsequently reissued approximately 120,390 shares at an average price of $0.51
per share.

In August 2004, the Company issued 10,000 shares of the Company's Common Stock
to each of the four non-employee directors of the Company for a total of 40,000
shares. Compensation expense of $24,000 has been charged to the financial
statements as of December 31, 2004 to recognize the fair value of the shares as
of the date of grant.

On December 7, 2005, the Board authorized a Company Stock buy back program for a
one year period expiring on December 7, 2005 whereby management may make
purchases from time to time on the open market at prevailing prices or in
privately negotiated transactions of a total of up to 250,000 shares of its
Common Stock at a cost not to exceed $1,000,000.

In August of 2003, the Board approved the adoption by the Company of a
restricted employee stock plan authorizing the Company to issue up to 250,000
shares of its Common Stock to two current officers and key managers and
employees of the Company.

In August 2004 the Company under this plan issued 10,000 shares of Common Stock
to one senior manager of the Company with 2,000 shares being immediately vested.

In October 2004 the Company under this plan issued 8,000 shares of Common Stock
to an officer, 10,000 shares to a senior manager and 37,000 to six other key
managers.

Compensation expense of $14,300 has been charged to the financial statements as
of December 31, 2004 to recognize the fair value of the shares as of the date of
the plan that was issued in 2004.

STOCK OPTIONS- The Company, on June 6, 1995, adopted the Company's Stock Option
Plan (the "Plan"), which as amended in December 1995, authorizes the Board of
Directors or a Stock Option Committee appointed by the Board to grant up to
250,000 qualified stock options and non-qualified stock options to officers and
key employees, directors, and independent consultants. Directors who are not
employees and consultants are eligible only to receive non-qualified stock
options. The Board of Directors in 1995 granted under the Plan options to
purchase 20,720 shares of Common Stock to two directors at a price of $2.89 per
share. In 1996, the Company granted under the Plan five-year options to purchase
an aggregate of 195,000 shares of Common Stock to employees. The options are
exercisable at the initial offering price per share of $5.00. In 1997, the
Company granted, under the Plan, five-year options to Purchase an aggregate of
75,000 shares of Common Stock to employees of the Company. The options are
exercisable at prices ranging from $2.80 to $4.50 per share. In 1998, the
shareholders of the Company approved an amendment to the Plan increasing the
number of shares granted by 350,000 to an aggregate total of 600,000 for the
Plan. In addition in 1998, the Company granted, under the Plan, five-year
options to purchase an aggregate of 455,000 shares of Common Stock to directors
and employees of the Company. The options are exercisable at prices ranging from
$1.38 to $2.69 per share. In 1999, the Company granted, under the Plan, one-year
options to purchase 85,000 shares of Common Stock to a director of the Company.
The options are exercisable at prices ranging from $1.38 to $1.88 per share. The
Company also granted, under the Plan, ten-year options to purchase 95,000 shares
of Common Stock to directors and employees of the Company. The options are
exercisable at $1.38 per share.

In 2000, the stockholders of the Company approved an amendment to the Plan
increasing the number of shares reserved for issuance by

                                      F-12
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


400,000 to an aggregate of 1,000,000 under the Plan. In addition in 2000, the
Company granted, under the Plan, ten-year options to purchase an aggregate of
138,500 shares of Common Stock to directors and employees of the Company. In
2001, the Company granted, under the Plan, ten-year options to purchase a total
of 65,000 shares of Common Stock at $.375 per share to the directors of the
Company. In 2002, the Company granted, under the plan, ten-year options to
purchase a total of 51,000 shares of Common Stock at $0.28 per share to the
directors of the Company. In 2003, the Company did not grant any options under
the plan. In December, 2004, a Director of the Company exercised a total of
33,000 options from three different issuances at their respective fair market
value's at their respective date of issuance totaling at an average price of
$.67 per share.

In 2005, the Company granted, under the plan, 10-year options totaling 2,427
shares to each of its four non-employee directors at $2.06 per share and 10,000
shares at $4.68 to Dan Kenderdine, the Company's Facility Director and warehouse
manager and husband of Company Officer Dawn Kenderdine and 2,000 shares to
another non officer employee.

At December 31, 2005 and 2004, there were a total of 672,624 and 694,152 shares
available for grant.

The following information pertains to the stock options outstanding for the
years ending December 31, 2005:

                                  Options outstanding     Options exercisable
                                 --------------------    --------------------
                                             Weighted              Exercisable
                                  Number     Average                 Wtd. Avg.
                                    of         Share      Options    Exercise
                                  Shares       Price      Shares      Price
                                 --------    --------    --------    --------
Options outstanding at
  December 31, 2003               216,500    $   1.05     207,000    $   1.04

     Granted ..................        --          --
     Vesting from prior year
       grants..................                             9,500    $   1.44

     Exercised ................   (33,000)       (.67)    (33,000)       (.67)
                                 --------    --------    --------    --------
Options outstanding at
  December 31, 2004               183,500    $   1.12     183,500    $   1.12


     Granted ..................    21,528        3.51      21,528        3.51
                                 --------    --------    --------    --------
Options outstanding at
  December 31, 2005               205,028    $   1.37     205,028    $   1.37
                                 ========    ========    ========    ========









                                      F-13
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)

The following table summarizes information as of December 31, 2005 concerning
currently outstanding and exercisable options:

Options outstanding and exercisable


                 Options outstanding and exercisable
                              Weighted
                              Average
                             Remaining
                          Contractual Life

                                         Weighted
                                         Average                     Weighted
   Range of        Number       Life     Exercise     Number         Average
Exercise Price   Outstanding  (Years)     Price     Exercisable   Exercise Price
--------------------------------------------------------------------------------
 $0.28-$0.375      80,000       6.7      $ 0.33       80,000         $ 0.33
 $1.01-$2.00       92,500       4.3      $ 1.42       92,500         $ 1.42
 $2.06-$2.06        9,708       9.1      $ 2.06        9,708         $ 2.06
 $4.01-$5.00       23,000       7.1      $ 4.57       23,000         $ 4.57



The outstanding stock options as of December 31, 2005 vest as follows:
(a) All of the option shares are vested on the date of the grant (21,708 options
outstanding at December 31, 2005)
(a) Half of the options shares are vested on the date of the grant with an
additional one-half vesting in the first anniversary there from (136,000 options
outstanding at December 31, 2005) or (b) one-fifth of the options shares are
vested on the date of grant with an additional one-fifth vesting on the first,
second, third, and forth anniversaries there from, respectively (47,500 shares
outstanding at December 31, 2005).

As provided for in SFAS No. 123, "According for Stock-Based Compensation," The
Company utilizes the intrinsic value method of expense recognition under APB No.
25. Accordingly, no compensation cost has been recognized for the stock option
plans as all options have been issued with exercise prices equal to fair market
value. Had compensation expense for the stock option plans been determined
consistent with the provisions of SFAS No. 123 and SFAS No. 148, the Company's
net income and net income per share would have been the pro forma amounts
indicated below:


                                      F-14
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)

                                                        2005          2004
                                                     ----------    ----------
       As reported net income:                       $2,033,244    $1,008,416
       Add: Stock-based compensation expense
            included in reported net income
            net of related tax effects                       --            --
       Deduct: Total stock-based
            employee compensation expense
            determined under fair value
            based method for all awards,
            net of related tax effects                  (69,143)       (1,164)
                                                     ----------    ----------
       Pro forma net income                          $1,964,101    $1,007,252
                                                     ==========    ==========
       Basic net income per common share:
       As reported                                   $     0.45    $     0.21
       Pro forma                                     $     0.44    $     0.21

       Diluted income net income per
       common share:
       As reported                                   $     0.44    $     0.21
       Pro forma                                     $     0.42    $     0.21



There were 21,708 and 0 options granted during the years ended December 31 2005
and 2004, respectively. The fair value of each outstanding option grant was
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest rate of 5.7%, for
both 2005 and 2004; expected dividend yield of 0%; expected life of 10.0 years;
and expected volatility of 100% for 2005 and 2004, respectively.

NOTE 5 - INCOME TAXES

The provision for income taxes on continuing operations consists of:

                                                        2005          2004
                                                     ----------    ----------
       Current:
       Federal                                       $  345,368    $  252,420
       State                                             25,510        28,364
                                                     ----------    ----------
                                                        370,878       280,784
                                                     ----------    ----------
       Deferred:
       Federal                                       $  (84,970)   $  252,420
       State                                            (14,795)       28,364
                                                     ----------    ----------
                                                        (99,765)      280,784
                                                     ----------    ----------
       Total provision
       For income taxes                              $  271,113            --
                                                     ==========    ==========

                                      F-15
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 5 - INCOME TAXES (CONTINUED)

In conformity with SFAS No. 109, deferred tax assets and liabilities are
classified based on the financial reporting classification of the related assets
and liabilities, which give rise to temporary book/tax differences. Deferred
taxes related to the following temporary differences:

                                  DECEMBER 31,
                                                        2005          2004
                                                     ----------    ----------
       Deferred income tax assets:
       Benefit of net operating loss carry forward   $       --    $  644,006
       Accrued compensation                                  --        19,000
       Inventory reserve                                 83,834       118,268
       Bad debts reserve                                 42,065        59,714
       Sales returns and allowances                      45,015        45,957
       Goodwill                                         224,520       251,610
       Other                                              9,500        28,500
                                                     ----------    ----------
                                                        404,934     1,167,055
       Deduct:  Deferred income tax liabilities:
       State taxes                                       14,862        18,997
                                                     ----------    ----------
                                                        390,072     1,148,058

       Deduct: Valuation allowance                      289,194     1,148,058
                                                     ----------    ----------
       Net deferred tax asset                        $  100,878    $       --
                                                     ==========    ==========


The effective income tax rate varied from the U.S. Federal statutory tax rate as
follows:
                                                        2005          2004
                                                     ----------    ----------
       Statutory income tax rate                           34.0%         34.0%
       State income taxes, net of
       federal tax benefit                                  5.2           2.7
       Meals and entertainment                              0.1           0.4
       Other                                               (0.0)         (0.1)
       Valuation allowance                                (27.3)        (37.0)
                                                     ----------    ----------
       Effective tax rate                                  12.0%          0.0%
                                                     ==========    ==========


As of December 31, 2005 the Company has fully utilized all its federal and state
net operating loss carry forwards. SFAS No. 109 requires the establishment of a
deferred tax asset for all deductible temporary difference, which has included
operating loss carry forwards. The Company in has provided a valuation allowance
for all of its deferred tax asset balance of $1,148,058 at December 31, 2004. In
2005, The Company provided a valuation allowance of $289,194, which it applied
against its deferred tax asset balance of $390,072, leaving a balance of
$100,878, which is classified as a current asset for financial presentation
purposes.

The Company based on the past two years profitable operation reduced the
valuation allowance by $100,808 which represents the reduction in the Deferred
tax assets from December 31, 2004 to December 31, 2005, net of the tax value of
tax operating losses carry forwards of approximately $644,000 at December 31,
2004.

                                      F-16
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2005 AND 2004


NOTE 6 - COMMITMENTS AND CONTINGENCIES

The Company is, from time to time, party to litigation arising in the normal
course of its business. Based on consultation with legal counsel, management of
the Company does not believe that any such claims or litigation will have a
material adverse effect on the financial position or results of operations of
the Company.

The Company leases various types of warehouse and other space and equipment,
furniture, and fixtures under non-cancelable operating lease agreements, which
expire at various dates. Certain leases for warehouse and other space contain
rental escalation clauses based on the Consumer Price Index. Future minimum
lease payments under non-cancelable operating leases for the years ending
December 31 are as follows:

            2006                                     $  436,411
            2007                                        444,062
            2008                                        480,618
            2009                                        161,494
            thereafter                                       --
                                                     ----------
            Total:                                   $1,522,585
                                                     ==========

Rent expense exclusive of common area maintenance and real estate taxes, where
applicable for all operating leases for both the years ended December 31, 2005
and 2004 was $353,919.


NOTE 7 - RELATED PARTY TRANSACTIONS

We employ Susan Rade, wife of Stephen Rade, current CEO, as a high volume and
senior sales person with certain administrative functions. In this role, Mrs.
Rade earns the bulk of her compensation as part of our sales incentive
commission programs earning $183,942 and $185,869 in the twelve months December
31, 2005 and 2004, respectively, including draws, commission and a $36,000
salary for administrative duties.

We employ Dan Kenderdine, husband of Dawn Kenderdine our Vice President, as our
Facilities Manager since mid 2004. Mr. Kenderdine earns the bulk of his
compensation from salary and bonuses earning $ 44,270 for the year ended
December 31, 2005 and $ 13,117 for the partial year ending December 31, 2004.
Additionally, Mr. Kenderdine was awarded 10,000 stock options under the
Company's stock option plan in December 2005 at a price of $4.68 per share.


NOTE 8 - SEGMENT DISCLOSURE

The Company effectively operates in one business segment, the Wireless Products
Segment, which distributes cellular telephone accessory products including
batteries, chargers, and antennas throughout North America. The Wireless
Products Segment is headquartered in Huntingdon Valley, Pennsylvania. All
revenue and essentially all long-lived assets were related to operations in the
United States as of and for the years ended December 31, 2005, and 2004.

Export sales which are limited to the Americas excluding the United States were
$205,721and $103,128, respectively, for the years ended December 31, 2005 and
2004. Receivables from export sales at December 31, 2005 and 2004 were $15,166
and $19,162, respectively.

                                      F-17
<PAGE>
                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this Report.

1. And 2. FINANCIAL STATEMENTS -- The financial statements and schedules
required by this item begin on page F-1 of this report. The Reports of
Independent Certified Public Accountants appear on pages F-2, F-3 and F-4 of
this report.

3. EXHIBITS -- The following is a list of exhibits. Where so indicated by
footnote, exhibits, which were previously filed, are incorporated by reference.

(b) On Sept. 1, 2004 we filed a Form 8-K relating to the Board of Director
approval of an increase in the amount of shares authorized to be repurchased
under the Company's stock Buy Back program to 1,250,000 shares at a cost not to
exceed $500,000.

(C) On December 7, 2005, the Board of Directors of the Registrant has authorized
the repurchase of up to 250,000 shares of the Registrant's common stock at a
total cost not to exceed $1,000,000. The stock repurchase program will expire on
December 7, 2006.

NUMBER
------
3.1    Certificate of Incorporation of Company and amendments thereto*

3.2    By-Laws*

4.1    Form of Common Stock Certificate*

4.2    Form of Warrant*

10.1   Warrant Agreement related to Redeemable Stock Purchase Warrants*

10.2   Form of Purchase Option issued to underwriter of initial public offering*

10.3   Form of Preferred Stock, Series A Certificate*

10.4   1995 Stock Option Plan of Company*

10.5   Forms of Option Agreement under the Plan

10.6   Option issued to Mr. Robert W. Tauber*

10.7   Management Services Agreement between the Company and Founders Management
       Services, Inc., as amended*

10.8   Lease between Advanced Fox Antenna, Inc. and Rade Limited Partners*

10.9   Registration Rights Agreement between the Company and Messrs. Tauber and
       Rade*

10.10  Revolving Credit, Term Loan and Security Agreement, dated January 6, 1997
       among IBJ Schroder Bank & Trust Company as Agent and the Company,
       Advanced Fox Antenna, Inc., Tauber Electronics Inc., Battery Acquisition
       Corp., Specific Energy Corporation, Battery Network, Inc. and W.S.
       Battery & Sales Company, Inc.**

10.11  Amendment No. 1 and Joinder Agreement dated __________ among the Company,
       certain of its affiliates and IBJ Schroder Bank & Trust Company***

10.12  Waiver and Amendment to Revolving Credit, Term Loan and Security
       Agreement dated __________ by and among the Company, certain of its
       affiliates and IBJ Schroder Bank & Trust Company****

10.13  Waiver and Amendment to Revolving Credit, Term Loan and Security
       Agreement dated __________ by and among the Company, certain of its
       affiliates and IBJ Schroder Bank & Trust Company*****


                                       16
<PAGE>
10.14  Asset Purchase Agreement dated Jan 26, 2000 with respect to the sale of
       substantially all of the assets of Tauber Electronics, Inc.******

10.15  Agreement and Plan of Merger dated February 28, 2001, by and among
       Wireless Xcessories Group, Inc., Accessory Solutions.com Inc., Advanced
       Fox Antenna, Inc. and Cliffco of Tampa Bay.

10.16  Waiver and Amendment to Revolving Credit, Term Loan and Security
       Agreement dated March 30, 2001 by and among the Company, certain of its
       affiliates and IBJ Schroder Bank & Trust Company

10.17  Form of Warrant issued to each of Warren H. Haber and John L. Teeger**

21     List of Subsidiaries

99.1   Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
       Section 906 of Sarbanes-Oxley Act of 2002

99.2   Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
       Section 906 of Sarabanes-Oxley Act of 2002





*      Filed as an exhibit to the Company's Registration Statement on Form S-1
       (File No. 33-80939) and incorporated by reference thereto.

**     Filed as an exhibit to the Company's Current Report on Form 8-K for
       January 7, 1997 and incorporated by reference thereto.

***    Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
       the three months ended June 30, 1997 and incorporated by reference
       thereto.

****   Filed as an exhibit to the Company's Annual Report on Form 10-K for the
       year ended December 31, 1997 and incorporated by reference hereto.

*****  Filed as an exhibit to the Company's Quarterly Report for the three
       months ended June 30, 1998 and incorporated by reference thereto.

****** Filed as an exhibit to the Company's Current Report on Form 8-K for
       January 27, 2000 and incorporated by reference thereto.














                                       17
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


WIRELESS XCESSORIES GROUP, INC.


By: /s/ Stephen Rade
    ---------------------
    Stephen Rade
    Chief Executive Officer and President




Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the date indicated.


            NAME                          TITLE                      DATE
----------------------------    ----------------------------   -----------------


/s/ Stephen Rade                Chairman of the Board, Chief   February 28, 2006
----------------------------    Executive Officer, President
Stephen Rade                    and Director (principal
                                Executive officer)


/s/ Ronald E. Badke             Chief Financial Officer        February 28, 2006
----------------------------    and Secretary (principal
Ronald E. Badke                 financial officer)


/s/ Christopher F. McConnell    Director                       February 28, 2006
----------------------------
Christopher F. McConnell


/s/ Allan Kalish                Director                       February 28, 2006
----------------------------
Allan Kalish


/s/ Christopher C. Cole         Director                       February 28, 2006
----------------------------
Christopher C. Cole


/s/ Bradley T. MacDonald        Director                       February 28, 2006
----------------------------
Bradley T. MacDonald





                                       18