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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

        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, 2000.

                                       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)

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DELAWARE                                      13-3835420

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State or other jurisdiction of                I.R.S. Employer
 incorporation or organization                 Identification Number)

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

       Registrant's telephone number, including Area Code: (215) 494-0111

        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
                                Over the Counter

                                 Bulletin Board

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

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-K 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-K or any amendment to this
Form 10-K. [ ]

The number of outstanding shares of the Registrant's Common Stock, par value
$.001 per share, on March 8, 2001 was 5,222,080.

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 Over the
Counter Market on March 8, 2001 of $0.375) was approximately $1,408,775.

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                                     PART I

ITEM 1. BUSINESS

         Wireless Xcessories Group, Inc. ("Wireless Xcessories" or the
"Company") was founded in May 1995. The Company is engaged in the nationwide
sale and distribution of a wide range of products, accessories and components
for cellular phones, including batteries, chargers and antennae (collectively,
"Wireless Accessories"). The Company's products are generally sold through third
party retailers' stores or web sites and directly to customers on the Company's
Web site. As discussed more fully below, the Company has completed the
disposition of its remaining business in the Battery Segment and has accounted
for this segment as discontinued operations. The Battery Segment involved the
assembly and distribution of primarily specialty batteries as well as a small
percentage of cellular phone batteries. Prior to March 20, 2000, the Company's
name was Batteries Batteries, Inc.

         The business of Wireless Xcessories was created through the acquisition
of five existing businesses -- three of which were subsequently disposed of
--and the formation of a new subsidiary:

         o        In June 1995, the Company acquired Specific Energy Corporation
                  ("Specific Energy"), a retail distributor of specialty
                  batteries based in Phoenix, Arizona. The Company sold the
                  assets of Specific Energy in September 1998.

         o        In April 1996, the Company acquired both Advanced Fox Antenna,
                  Inc. ("Advanced Fox") based in Huntingdon Valley,
                  Pennsylvania, and Tauber Electronics, Inc. ("Tauber") based in
                  San Diego, California. Those acquisitions were part of a
                  "roll-up" transaction and also involved the initial public
                  offering of the Company's shares. The Company sold
                  substantially all of the assets of Tauber Electronics, Inc. on
                  January 27, 2000.

         o        In January 1997, the Company acquired Battery Network, Inc.
                  and affiliate companies ("Battery Network"), which has
                  operations in Escondido, California. The Company sold
                  substantially all of the assets of Battery Network, Inc. to
                  two separate buyers in November and December 2000.

         o        In May 1997, the Company acquired Cliffco of Tampa Bay, Inc.
                  ("Cliffco"), which is based in a suburb of Tampa Bay, Florida.

         o        On August 26, 1999, the Company formed a new, wholly owned
                  subsidiary named AccessorySolutions.Com, Inc.
                  ("AccessorySolutions"), which is now operating within Advanced
                  Fox's facility in Huntingdon Valley, Pennsylvania.

         o        On March 13, 2001, Advanced Fox, Cliffco and
                  AccessorySolutions (the "Wireless Products Segment") entered
                  into an agreement to combine and merge with Wireless
                  Xcessories, the surviving entity.

         The Company's operations were historically organized into the following
two business segments:

         o        The battery assembly and distribution segment was conducted by
                  the Company through Specific Energy, Tauber and Battery
                  Network prior to the disposition of substantially all of the
                  assets of each of these Companies (the "Battery Segment"); and

         o        the distribution and sale of products, accessories and
                  components for cellular phones, which is being conducted by
                  Wireless Xcessories through its three operating divisions;
                  Advanced Fox, Cliffco and AccessorySolutions.

                  o        Advanced Fox distributes over 3,000 Wireless
                           Accessories to customers throughout North and South
                           America;

                  o        Cliffco distributes Wireless Accessories to a variety
                           of customers including small to midsize communication
                           carriers; and

                  o        AccessorySolutions designs, develops and hosts Web
                           sites for client companies which desire to sell
                           wireless accessories on-line and provides ordering,
                           warehouse and distribution services to client
                           companies.

         On March 22, 2000, the Board of Directors authorized the Company's
management to dispose of Battery Network, its only remaining subsidiary within
the Battery Segment. As a result of this decision, the Battery Segment has been
accounted for as discontinued operations for all periods presented. The basis
for this decision is discussed below under the caption "Discontinued
Operations."

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         The Company's headquarters for all operations is located at 1840 County
Line Road, Huntingdon Valley, Pennsylvania 19006.

DISCONTINUED OPERATIONS

         With the sale of the assets of Specific Energy, Tauber and Battery
Network in September 1998, January 2000, and November-December, 2000,
respectively, the Company has effectively disposed of its Battery Segment. The
Company came to the conclusion to dispose of these operations as a result of a
shrinking sales base and continued losses in this segment. After assessing the
magnitude of the efforts that would be required to improve the profitability of
this segment, the Company determined that its limited managerial and financial
resources should be focused on continuing to enhance the business and
profitability of the Wireless Products Segment, which includes further
developing the Company's Internet retail business being conducted by
AccessorySolutions.

OPERATING STRATEGY

         The Wireless Accessories industry remains fragmented. The Company's
strategy is to effectively market one of the broadest and most complete lines of
wireless accessories products. The Company currently offers in excess of 3,000
different products. The Company strives to leverage its distribution channels
and relationships and provide high quality technical expertise and service to
its customers.

         The Company's business strategy involves the following components:

         o        Maintain Diversity of Products and Customers. The Company
                  distributes a complete line of wireless accessories. Through
                  its distribution divisions, Advanced Fox and Cliffco, the
                  Company sells its products to dealers, other distributors,
                  commercial and industrial businesses, communications carriers,
                  mass merchandisers and retail customers. Any of these customer
                  groups can also purchase the Company's products directly from
                  its web site.

         o        Obtain Advantageous Purchasing. All wireless accessory
                  purchasing for its distribution and internet retail business
                  is under the direct control of a corporate purchasing manager
                  who is responsible for assuring that the vendors chosen and
                  the pricing they offer are the most advantageous for the
                  Company.

         o        Continue the Expansion of the Wireless Products Segment.
                  Advanced Fox and AccessorySolutions conduct their operations
                  in the Company's headquarters, while Cliffco operates out of
                  the Tampa Bay, Florida facility. As part of the plan of merger
                  it is the Company's strategy to integrate and combine
                  functions to eliminate redundancy, improve communication and
                  facilitate the development and the full implementation of
                  common marketing and operating strategies. The successful
                  expansion of the Company is dependent in part on the degree to
                  which the Company is successful in its strategy to integrate
                  these divisions. In addition, the Company plans to enhance its
                  business through:

                  o        rapid expansion of the Company's internet retail
                           business through the accelerated solicitation of
                           partnerships, as discussed in the following
                           paragraphs and

                  o        strategic acquisitions in regional markets other than
                           the East Coast markets of the U.S. in which the
                           Company is already operating.

         The Company's internet retail business, which is conducted through its
AccessorySolutions division, is primarily directed at forming web site and/or
fulfillment partnerships with third parties for the sale of wireless
accessories. In a web site partnership, the Company creates a web site for a
third party on which the Company's wireless accessories are offered and sold.
This web site is presented solely as the third party's web site, and not as the
Company's site. Although from the viewpoint of the customer the third party is
operating the web site, the customer will in fact be purchasing the wireless
accessories directly from the Company by means of an unseen internet link
--known as a transparent link -- to the Company's internet order processing web
site. Thus, when a customer clicks on the third party web site to order a
wireless accessory, the order is immediately directed via the transparent link
to the Company's internet order processing web site. Upon receiving the order,
the Company processes the customer's credit card payment, fills the order and
ships the product. The Company also provides a help desk for use of the product
and handles all customer returns and disputes.

         A fulfillment partnership is identical to a web site partnership,
except that instead of creating a new web site for the third party, the Company
establishes a transparent link from its internet order processing web site to a
pre-existing web site operated by the third party.

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         The Company's current partners include traditional retailers (i.e.
operators of retail stores), established and start-up internet retailers,
dealers, distributors, wholesalers and communications carriers. As of March 8,
2001, the Company had entered into 190 partnership arrangements. In both a web
site fulfillment partnership, the partner is generally responsible for marketing
its web site and the Company pays a monthly fee based on the level of sales
generated from the site.

         The Company also offers its wireless accessories on its own web site.
Though the Company does not expect that sales from this site will be significant
in the near term, it intends to take advantage of additional distribution sales
opportunities expanding its web site and fulfillment partnership base.

         With respect to its internet and non-internet activities, the Company
believes that its size and broad product offerings provide certain competitive
advantages such as those arising from centralized volume purchasing and the
ability to simultaneously service several geographic and demographic markets.
The Company also plans to capitalize on the trend toward increasing colorization
and patterning of wireless accessories, which will continue the proliferation of
product offerings crossing various customer demographic lines.

OPERATIONS

         Products. As discussed previously, the Company currently markets in
excess of 3,000 wireless accessories. The product category offerings include
rechargeable batteries, personal and portable hands free kits, hands free
installation kits, portable and vehicle antennas, in-car and travel chargers,
fashionable accessory faceplates and colored housings for cellular phones, plain
and colored phone carrying cases and two-way and pager accessories. The Company
expects a major increase in cellular phone product offerings due to the trend
toward customized fashion accessories and color coordination of various related
products.

         Purchasing. The Company purchases over 80% of its wireless accessory
products from manufacturers located overseas, principally in the Far East. Three
Far East suppliers accounted for almost 36% of the Company's Wireless accessory
purchases accounting for 16%, 13% and 7% of such purchases. In early 1999, the
Company opened a buying office in Taiwan, which has helped to reduce costs and
improve the quality of items currently imported.

         Sales. The Company markets and sells the majority of its products to
dealers, other distributors, commercial and industrial businesses,
communications carriers, mass merchandisers and retail customers. Through August
1998, the Company operated a retail division in Phoenix, Arizona under the
tradename Batteries Batteries for Everything. The assets of the division were
sold and the Company no longer operates any retail outlets.

         Additionally, the Company produces two product line catalogs that are
circulated nationally and internationally. The Company intends to integrate the
catalogs on a Company-wide basis, and to enhance, as appropriate, private label
and proprietary item sales that generally provide higher margins.

         Concentration. During the twelve months ended December 31, 2000, the
Company effected sales to more than 7,000 commercial and industrial customers.
In that same period, the Company's two largest customers accounted for 5.0% and
4.6% of the Company's net sales. No customer of the Company accounted for 10% or
more of the Company's net sales. Export sales accounted for less than 3% of net
sales for the period.

EMPLOYEES

         As of March 8, 2001, the Company employed approximately 191 personnel.
These employees work in the following areas of the Company's business: three in
technical operations; 40 in telemarketing and commercial sales; 117 in
packaging; warehousing, inventory control, shipping and receiving; four in
purchasing; and 27 in management and administration. None of the employees is
represented by a labor union. The Company considers its relations with its
employees to be satisfactory.

ENVIRONMENTAL MATTERS

         The Company purchases and distributes batteries, which contain
chemicals such as alkaline, nickel-cadmium and lithium. The Company does not
manufacture the batteries but rather purchases the items in their finished
state. Company operations do not involve the alteration or penetration of the
batteries. Returns of its nickel-cadmium batteries are made to the manufacturer
and returns of its lead acid and mercury batteries are handled through a bonded
agency. The Company believes that it has operated its respective facilities in
compliance with applicable environmental laws and regulations. Accordingly, the
Company does not believe that it has any material risk of environmental
liability.

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         The Company currently is not aware of any environmental conditions
relating to present or past waste generation at or from any of its facilities or
operations, that would likely have a material adverse effect on the financial
condition or results of operations of the Company and does not anticipate any
material expenditures to comply with environmental laws, regulations or
ordinances. However, there can be no assurance that environmental liabilities in
the future will not be incurred and that they will not have a material adverse
effect on the financial condition or results of operations of the Company.

INTELLECTUAL PROPERTY

         The Company believes that it has all rights to trademarks and trade
names necessary for the conduct of its business. See discussion relating to the
Company facing patent infringement legal action in selected products.

SALE OF SUBSIDIARIES

         In September 1998, the Company sold all of the assets of Specific
Energy for $715,000 in cash to a retail franchise in Phoenix, Arizona. Specific
Energy was the Company's retail subsidiary, operating four retail stores in
Phoenix, Arizona under the trade name Batteries Batteries for Everything. Since
the sale of that subsidiary, the Company ceased all retail operations.

         On January 27, 2000, the Company consummated the sale of substantially
all of the assets of Tauber to Nexergy Tauber, Inc. ("NT"), a wholly owned
subsidiary of Nexergy Inc. ("Nexergy"). As consideration for the sale, Tauber
received a cash payment of $1,005,894 on February 1, 2000 and a note in the
amount of $519,708 due in 2005 with interest payments beginning upon the closing
of the transaction and principal payments commencing during the first quarter of
2002. The principal amount of this note was subsequently reduced to $483,573
effective on March 15, 2000 to reflect a final valuation of transferred assets.
The note is subject to upward adjustment during the first quarter of 2001 based
on the valuation of certain inventory reserves. In March 2001 it was determined
based on a full valuation provided by the purchaser to the Company, that no
adjustment is required. In addition, NT assumed $705,669 of Tauber's
liabilities. In a related transaction, NT entered into a sub-lease with the
Company to occupy approximately 19,000 square feet of Battery Network's leased
facility in Escondido, California, which terminated in August 2000.

         On November 6, 2000, effective October 31, 2000, the Battery Network
sold selective inventory and substantially all of its machinery and equipment,
trade names and customer lists to Ohlin Sales Corp. for a total of $200,000 in
cash and a note totaling $125,000. The note provides for twenty-four consecutive
equal monthly payments of $5,655, including interest at 8% and principal
starting on December 1, 2000 and ending on November 1, 2002. On December 16,
2000 the Company sold selected remaining inventory, and trade names related to
Absolute Battery (a division and trade name of Battery Network principally
involved in the laptop battery and accessories business) to Battery Universe for
cash of $40,000 and a $10,000 note. The note is due on June 1, 2001 and provides
for interest at 8% to be paid monthly along with equal monthly principal
payments commencing on January 1,2001 and ending on June 1, 2001. Battery
Network retained accounts receivables, inventory and all outstanding liabilities
as of October 31, 2000. Though Battery Network physically shut down the
remaining Battery Network operation in January, 2001, it is still winding down
any remaining administrative and financial affairs including, but not limited
to, collection of outstanding Accounts Receivable, liquidation of remaining
liabilities, and efforts to achieve an early termination of its existing lease
obligation which runs through January 31, 2002.

MANAGEMENT

         In November 1998 and December 1998, the Board elected Kenneth Rickel
and Christopher F. McConnell, respectively, to the Board of Directors to fill
two of the vacancies. On December 17, 1998, Mr. Meehan resigned as Chairman of
the Board of Directors and Mr. McConnell was elected as the new Chairman.

         On March 24, 1999, Messrs. Meehan and Sapp resigned from the Company's
Board of Directors and Barbara M. Henagan and Bradley T. MacDonald were elected
by the Board to fill the vacancies created by the resignations.

         In November 1999, Kenneth Rickel's term as a member of the Board of
Directors expired and Christopher C. Cole was subsequently elected by the Board
to fill the resulting vacancy in February 2000.

         In November 2000, Robert Tauber's term as a member of the Board of
Directors expired and remains vacant.

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. The


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Company wishes to take advantage of the "safe harbor" provisions of the Act and
is including this section in its Annual Report on Form 10-K 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 2001 and beyond, are forward-looking
statements and involve various risks and uncertainties. Factors that could cause
the Company's actual results to differ materially from management's projections,
forecasts, estimates and expectations include, but are not limited to, the
following:

THE COMPANY MAY NOT SUCCESSFULLY OFFER ATTRACTIVE MERCHANDISE TO ITS CUSTOMERS.

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

         If the Company's products become less popular with its customers or its
competitors offer the same or similar products as the Company offers at lower
prices, its sales may decline or the Company may decide to offer its products at
lower prices. If customers buy less of the Company's products or if the Company
has to reduce its prices, its revenues and profits will decline which will have
a material adverse effect on the Company's results of operations.

         In addition, the Company must offer its merchandise in sufficient
quantities to meet the demands of its customers and deliver this merchandise to
customers in a timely manner. The Company must be able to maintain sufficient
inventory levels, particularly during peak selling seasons. The Company's future
results may be affected if the Company is not successful in achieving these
goals.

THE COMPANY MAY NOT SUCCESSFULLY DESIGN AND DEVELOP PROPRIETARY PRODUCTS.

         The Company is dependent to a large extent on the success of the
proprietary products that the Company has designed and developed for its
customers. The Company must design products that meet the demands of its
customers and have these products manufactured cost-effectively. In addition,
the Company must rely on contracted manufacturing resources to produce these
products in sufficient quantities to meet customer demand and deliver these
products in a timely manner to its customers. The Company relies solely on its
contracted manufacturers to produce and timely deliver these proprietary
products. If the Company is unable to successfully design, develop, and timely
deliver its proprietary products, its operating results may be materially
adversely affected.

THE COMPANY FACES CERTAIN RISKS ASSOCIATED WITH EXPANSION.

         The Company plans to continue to increase the number of retail outlets
and Web sites operated by third parties in which its products are sold and to
increase the sales volume on the Company's own Web site in order to grow its
revenues. The Company's ability to expand will depend in part on the following
factors:

         o        its ability to persuade retail stores to carry its products in
                  their stores and Web sites;

         o        general economic conditions; and

         o        the availability of sufficient funds for expansion.

         In order to continue the Company's expansion, it will need to hire
additional management and staff for its corporate offices, warehouse and
distribution facilities. The Company must also expand its management information
systems and distribution systems to facilitate this expansion. If the Company is
unable to hire necessary personnel or grow its existing systems, its expansion
efforts may not succeed and its operations may suffer.

         Some of the Company's expenses will increase if additional retail
stores carry its products or if sales through its Web site or third party Web
sites increase. If sales are inadequate to support these new costs, the
Company's profitability will decrease. For example, inventory costs will
increase as the Company increases inventory levels to fulfill the orders of
additional stores. The Company may not be able to manage this increased
inventory without decreasing its profitability.

THE COMPANY'S WIRELESS ACCESSORIES BUSINESS LINE AND INTERNET RETAIL BUSINESS
STRATEGY MAY NOT SUCCEED.

         In the past, the Company has tested new lines of business that have not
always proven profitable, such as its Battery Segment. The Company continually
examines and evaluates all revenue channels for profitability. The Company may
decide to develop new


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business lines or to acquire additional businesses in the future, and the
Company cannot predict whether such efforts will be successful. The failure of
new business lines or acquisitions could hurt future results.

         The Company believes that it needs to reach its current customers and
generate new customers through methods other than sales through retail stores.
The Company is pursuing opportunities to sell its products over the Internet
through its own web site www.advfoxcell.com, Web sites operated by third parties
and other interactive shopping media. This is a new business and marketing
strategy for the Company and involves certain risks and uncertainties. The
Company may not succeed in achieving profitable operations in marketing its
products over the Internet. Further, consumer use of the Internet as a medium
for commerce is a recent phenomenon and is subject to a high level of
uncertainty. While the number of Internet users has been rising, the Internet
infrastructure may not expand fast enough to meet the increased levels of
demand. The increased use of the Internet as a medium for commerce raises
concerns regarding Internet security, reliability, pricing, accessibility and
quality of service. If use of the Internet does not continue to grow, or grows
at a slower rate than the Company anticipates, or if the necessary Internet
infrastructure or complementary services are not developed to support
effectively growth that may occur, the Company's Internet retail business would
be impaired.

         Additionally, technology in the Internet retail business market changes
rapidly. The Company may not be able to adapt quickly enough to changing
customer requirements and preferences and industry standards. These changes and
the emergence of new industry standards and practices could render the Company's
existing Web site obsolete. To succeed, the Company must enhance its Web site
responsiveness, functionality and features, enhance its existing services,
develop new services and technology and respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis.
The company depends on its vendors.

THE COMPANY DEPENDS ON ITS VENDORS.

         The Company's performance depends on its ability to purchase its
products in sufficient quantities at competitive prices and on its vendors'
ability to make and deliver high quality products in a cost effective, timely
manner. Some of the Company's smaller vendors have limited resources, production
capacities and limited operating histories. The Company has 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 the Company at any time. The Company cannot assure you that the Company will
be able to acquire the products the Company desires in sufficient quantities or
on terms that are acceptable to it in the future. In addition, the Company
cannot assure you that its vendors will make and deliver high quality products
in a cost effective, timely manner. The Company may also be unable to develop
relationships with new vendors. Also all products the Company purchases from
vendors in the Far East must be shipped to its warehouses by freight carriers
and the Company cannot assure you that the Company will be able to obtain
sufficient capacity at favorable rates. The Company's 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 its business.

THE COMPANY FACES CERTAIN RISKS RELATING TO CUSTOMER SERVICE.

         Any material disruption or slowdown in the Company's 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 the Company's 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.

THE COMPANY FACES RISKS ASSOCIATED WITH DISTRIBUTION.

         The Company conducts all of its distribution operations and Internet
order processing fulfillment functions from two facilities in Huntingdon Valley,
Pennsylvania and Tampa, Florida. Any disruption in the operations at the
distribution centers could have a negative impact on the Company's business. In
addition, the Company relies upon third party carriers for its product
shipments. As a result, the Company is subject to certain risks, including
employee strikes and inclement weather, associated with such carriers' ability
to provide delivery services to meet the Company's shipping needs.


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THE COMPANY FACES PATENT INFRINGEMENT LEGAL ACTIONS IN SELECTED PRODUCTS.

         The Company has been notified that certain of its products may infringe
the patents of another company. As a result, certain products sold by the
Company are expected to be returned over the next few months, the amount which
is not determinable at this time. The Company does not believe that any of its
products infringe on the patents of others and will vigorously contest any claim
in this regard. It is possible that the Company will receive future actions of
this nature, which may involve significant return of product and involve legal
expense. Management does not expect that the ultimate resolution of this matter
will have a material adverse effect on its consolidated financial condition or
results of operations if it is determined that the Company does infringe. The
Company would seek to develop alternative product that does not infringe, in
case the products are material to its sales.

THE COMPANY EXPERIENCES INTENSE COMPETITION IN ITS MARKETS.

         The Company operates in a highly competitive environment. The Company
principally competes with a variety of small distributors of cellular phone
accessories that focus on a particular segment of the market, as well as a
single large distributor that offers a broad range of such products.

         Competition in the industry is based on maintenance of product quality,
competitive pricing, delivery efficiency, customer service and satisfaction
levels, maintenance of satisfactory dealer relationships and training programs,
and the ability to anticipate technological changes and changes in customer
preferences. No assurance can be given that any of the Company's major suppliers
(mostly located in the Far East) whose products the Company distributes or major
cellular phone manufacturers will not acquire, startup, and or expand their own
distribution systems to sell directly to commercial and retail customers.

         Further, the Internet retail business market is new, rapidly evolving
and intensely competitive. The Company believes that the principal competitive
factors in this market include brand recognition, selection, personalized
services, convenience, price, accessibility, customer service, quality of search
tools, quality of Web site content, reliability and speed of fulfillment. The
Company expects to experience increased competition from online commerce sites
that provide goods and services at or near cost, relying on advertising revenues
to achieve profitability. As the online commerce market continues to grow, other
companies may enter into business combinations or alliances that strengthen
their competitive positions. Competition in the Internet retail business market
likely will intensify.

         As various Internet market segments obtain large, loyal customer bases,
participants in those segments may use their market power to expand into the
markets in which the Company operates. In addition, new and expanded Web
technologies may increase the competitive pressures on online retailers. The
nature of the Internet as an electronic marketplace may facilitate competitive
entry and comparison-shopping and render it inherently more competitive than
conventional retailing formats. For example, "shopping agent" technologies
permit customers to quickly compare the Company's prices with those of its
competitors. This increased competition may reduce the Company's operating
margins, diminish its market share or impair the value of its brand.

THE COMPANY MAY FAIL TO ANTICIPATE AND ADAPT TO CHANGING CONSUMER TRENDS.

         The Company's success depends on its ability to anticipate and respond
to changing product trends and consumer demands in a timely manner. The
Company's products must appeal to a broad range of consumers whose preferences
cannot always be predicted with certainty and may change between sales seasons.
If the Company misjudges either the market for its products or its customers'
purchasing habits, the Company's sales may decline or the Company may be
required to sell its products at lower prices. This would result in a negative
impact on the Company's business.

POOR ECONOMIC CONDITIONS MAY HURT THE COMPANY'S BUSINESS.

         Certain economic conditions affect the level of consumer spending on
the Company's products, including, among others, the following:

         o        general business conditions;

         o        interest rates;

         o        tax law changes;

         o        consumer confidence in future economic conditions.

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         The Company's business could be negatively impacted by a recession or
poor economic conditions and any related decline in consumer demand for
discretionary items such as the Company's products. Because the Company
purchases merchandise from foreign entities, the Company is subject to risks
resulting from fluctuations in the economic conditions in foreign countries. The
majority of the Company's foreign vendors and manufacturers are located in the
Far East, and as a result, its business may be particularly impacted by changes
in the political, social, legal, and economic conditions in the Far East.
Additionally, foreign weather and product transportation problems could affect
the Company's ability to maintain adequate inventory levels and adversely affect
its future results.

THE COMPANY IS DEPENDENT ON CERTAIN KEY PERSONNEL.

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

THE COMPANY'S COMMON STOCK PRICE IS VOLATILE.

         The Company's common stock was delisted from Nasdaq National Market in
2000 and currently trades on the Over the Counter Bulletin Board. The price of
the Company's common stock has experienced and is likely to experience in the
future significant price and volume fluctuations, which could reduce the market
price of the common stock without regard to the Company's operating performance.
In addition, the Company believes that among other factors, any of the following
factors could cause the price of the common stock to fluctuate substantially:

         o        quarterly fluctuations in the Company's sales;

         o        announcements by other cellular phone accessory distributors
                  or retailers;

         o        the trading volume of the Company's common stock in the public
                  market;

         o        general economic conditions;

         o        financial market conditions;

         o        the Company's ability to retain existing customers, attract
                  new customers and satisfy its customers' demands;

         o        the Company's ability to acquire merchandise, manage its
                  inventory and fulfill orders;

         o        changes in gross margins of the Company's current and future
                  products, services and markets;

         o        introductions of popular cellular phone accessories and new
                  types of cellular phones and the Company's ability to properly
                  anticipate demand;

         o        changes in usage of the Internet and online services and
                  consumer acceptance of the Internet and online commerce;

         o        timing of upgrades and developments in the Company's systems
                  and infrastructure;

         o        the level of traffic on the Company's Web site and on any
                  third party Web sites through which the Company sells its
                  products;

         o        the effects of acquisitions and other business combinations,
                  and related integration;

         o        technical difficulties, system downtime or Internet brownouts;
                  and

         o        the Company's level of merchandise and vendor returns.

                                       10
<PAGE>

THE COMPANY MUST SUCCESSFULLY RESPOND TO CHANGES IN THE RETAIL INDUSTRY.

         The United States retail industry, and the specialty retail industry in
particular, are dynamic by nature and have undergone significant changes over
the past several years. The Company's ability to anticipate and successfully
respond to continuing challenges is critical to achieving its expectations.

THE COMPANY MAY BE SUBJECT TO STATE SALES AND USE TAX OR INTERNET REGULATION.

         The Company's developing Internet retail business may be affected by
the adoption of new regulations or rules governing the sale of its products,
particularly with regard to state sales and use taxes. Any unfavorable change in
the state sales and use taxes could adversely affect the Company's business and
results of operations. In addition, the Internet at present is largely
unregulated and the Company is unable to predict whether significant regulations
or taxes will be imposed on Internet commerce in the near future. Because the
Company's Internet business is still in its initial stages, the Company is
unable to predict how such regulations could affect the further development of
its Internet business.

THE COMPANY COULD BE LIABLE FOR BREACHES OF SECURITY ON ITS WEB SITE AND THE WEB
SITES OF ITS PARTNERS AND FRAUDULENT ACTIVITIES OF USERS OF ITS INTERNET PAYMENT
SYSTEM.

         A fundamental requirement for electronic commerce is the secure
transmission of confidential information over public networks. Although the
Company has developed systems and processes to prevent fraudulent credit card
transactions and other security breaches, failure to mitigate such fraud or
breaches may impact the Company's financial results. The law relating to the
liability of providers of online payment services is currently unsettled.

ITEM 2. PROPERTIES

         All of the Company's real properties are held under leases. The
following table provides certain information concerning the Company's leased
properties:

<TABLE>
<CAPTION>
                                                                                   APPROXIMATE            LEASE
                                                                                       AREA            EXPIRATION
OPERATION                        NATURE                      LOCATION                (SQ.FT.)              DATE
---------                        ------                      --------                --------              ----
<S>                    <C>                             <C>                         <C>                 <C>
Advanced Fox                  Warehouse and            Huntingdon Valley, PA          52,000            8/31/03
                                 assembly
Battery Network (1)    Vacant office, warehouse            Escondido, CA              34,820            1/31/02
                               and assembly
Cliffco                   Office and warehouse               Tampa, FL                18,800            8/01/04
</TABLE>

(1) The Company, except for temporary record storage, ceased operating out of
this facility in January, 2001 and is actively pursuing alternatives including,
but not limited to, locating an acceptable replacement tenant, to effect an
early termination of the lease with a commensurate reduction in its related rent
obligation.

ITEM 3. LEGAL PROCEEDINGS

                  Pursuant to the Management Agreement with Founders Management
Services, Inc. ("Founders"), the Company paid Founders, for its origination and
negotiating services in connection with the acquisitions of Battery Network and
a loan facility, the sum of $240,000. The Company also issued to certain
designees of Founders warrants to purchase 100,000 shares of the Company's
Common Stock at a price of $4.125 per share. Since June 1998 when Messrs. Haber
and Teeger resigned as officers and directors of the Company, Founders has
provided no services to the Company and the Company has not paid any fees to
Founders. Although neither the Company nor Founders has formally terminated the
Management Agreement, both parties have conducted themselves as if the
Management Agreement has been terminated.

         In December 1999, Founders filed a lawsuit in the United States
District Court for the Southern District of New York against the Company
alleging the Company owed Founders the amount of approximately $493,000 for a
purportedly improper early termination of the Management Agreement. The Company
believes its early termination of the agreement was proper and therefore


                                       11
<PAGE>

believes that the alleged amount claimed is not due to Founders. In addition,
the Company has asserted counterclaims related to Founders' services under the
Management Agreement.

         The Company is, from time to time, a party to other litigation arising
in the normal course of its business, most of which involves claims for personal
injury and property damage incurred in connection with its operations.
Management believes that none of these actions, including the Founders lawsuit,
will have a material adverse effect on the financial condition or results of
operations of the Company.

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

         The Company's annual meeting of stockholders was held on November 28,
2000. 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
          ----                         ---          -------
Christopher F. McConnell            4,754,408       260,744
Stephen Rade                        4,754,408       260,744
Bradley T. MacDonald                4,745,775       269,377
Barbara M. Henagan                  4,754,408       260,744
Allan Kalish                        4,754,408       260,744
Christopher C. Cole                 4,756,408       260,744

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

Proposal No. 2: Amend the Company's 1995 Stock Option Plan to increase to
1,000,000 the number of shares issueable upon exercise of options under the
plan.

FOR:               2,146,948
AGAINST:             761,600
ABSTAIN:               7,945

The proposal passed by a majority of the votes casts as dictated by the
Company's by-laws There were 2,098,659 broker non-votes on this proposal.

Proposal No. 3: Ratification of Arthur Andersen LLP as the Company's auditors
for fiscal year 2000.

FOR:               5,000,748
AGAINST:              13,484
ABSTAIN:                 920

There were no broker non-votes or votes withheld with respect to this proposal.


                                       12
<PAGE>

                                     PART II

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

         The Company's Common Stock and Redeemable Common Stock Purchase
Warrants started trading on the Nasdaq National Market (the "NMS") on April 8,
1996 under the symbol "BATS" and "BATSW", respectively. On March 20, 2000, as a
result of a change of the Company's name from Batteries Batteries, Inc. to
Wireless Xcessories Group, Inc., the Company's Common Stock began trading under
the symbol "WIRX" and the Warrants under the symbol "WIRXW." The Warrants
expired on April 8, 2000 in accordance with the Warrant agreement and are no
longer actively traded. Effective, December 19, 2000, the Company's Common Stock
began trading on the Over The Counter Bulletin Board ("OTC") resulting from a
delisting action taken by Nasdaq removing the Company's securities from the NMS
for failure to meet certain listing requirements. The following tables set forth
the range of high and low closing prices for the quarters indicated for the
Common Stock and Warrants on the NMS as reported by NMS for calendar year 1999
and calendar year 2000 though December 18, 2000, and thereafter for the balance
of calendar year 2000 on the OTC.

                                COMMON STOCK              WARRANTS

1999                           HIGH        LOW        HIGH    LOW
----                           ----        ---        ----    ---
FIRST QUARTER                 1 15/16     1 1/4        1/4        1/8
SECOND QUARTER                1 11/16     1 3/16       3/16       1/16
THIRD QUARTER                 2           1 5/16       3/16       1/16
FOURTH QUARTER                3 1/2       1 1/4        7/16       1/16
2000
----
FIRST QUARTER                  5.00       2 7/16       1/4        1/8
SECOND QUARTER                3 6/16      1 2/16       3/16       1/16
THIRD QUARTER                 1 8/16        14/16      N/A        N/A
FOURTH QUARTER                1 5/16       .03         N/A        N/A

         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 53 record holders of the Company's Common Stock as of March
8, 2001. 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.
The Company's Revolving Credit, Term Loan and Security Agreement prohibits the
payment of dividends on the Common Stock without the consent of the lender that
is a party to that agreement. A discussion of this agreement can be found in
Item 7 below.

         On April 23, 1999, the Company offered and sold a total of 389,732
shares of its Common Stock to Christopher McConnell and Barbara Henagan, two
directors of the Company, as well as to two other related parties. The aggregate
offering price for these shares was $498,800. This offering was made pursuant to
an exemption from registration under Section 4(2) of the Securities Act of 1933,
as amended.

         0n January 11, 2001, the Board approved a stock buyback plan whereby
the Company will repurchase a maximum of 500,000 shares of Common Stock of the
Company at a total cost not to exceed $250,000 through July 22, 2001. As of
March 8, 2001, the Company has repurchased 7,800 shares at an average cost of $
0.54 per share.


                                       13
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

INTRODUCTION

         The following table sets forth the selected financial data for Wireless
Xcessories and its subsidiaries. The Income Statement Data includes the results
of operations for the Company and each of its subsidiaries since their dates of
acquisition (see Item 1 -- Business), except for Advanced Fox and Tauber, which
are included for all periods presented. The subsidiaries within the Battery
Segment (Tauber, Battery Network and Specific Energy) have been accounted for as
discontinued operations. 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.

         For the year ended December 31, 1996, the Income Statement Data
includes the results of operations for Wireless Xcessories for the eleven months
ended and Advanced Fox for the full year.

         Prior to 1997, Advanced Fox was organized as a subchapter S corporation
under the Internal Revenue Code of 1986, as amended. As a result, Advanced Fox
was not subject to U.S. federal income taxes as the taxable income of the
Company was included in the personal return of the stockholder. Beginning in
1997, the Company filed as a consolidated group for Federal income tax purposes.
For purposes of the Unaudited Pro Forma Statements of Operations Data included
in this report, pro forma Federal and state income taxes have been provided as
if the Company had filed C corporation tax returns. The unaudited pro forma
results reflect an income tax provision at an effective tax rate of
approximately 41% calculated in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes".

         The Selected Financial Data has been derived from the consolidated
financial results for the years ended December 31, 1996, 1997, and 1998 audited
by Deloitte & Touche LLP and the years ended December 31, 1999 and 2000 audited
by Arthur Andersen LLP that appear elsewhere in this report.


                                       14
<PAGE>

                             SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                              FISCAL YEAR ENDED DECEMBER 31,

                                                              1996        1997          1998         1999            2000
                                                              ----        ----          ----         ----            ----
<S>                                                           <C>          <C>          <C>           <C>            <C>
                                                                      ($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
INCOME STATEMENT DATA:

NET SALES                                                     $13,679      $20,171      $24,852       $31,653        $30,128
COST OF SALES                                                   8,531       12,352       13,776        16,034         15,440
                                                                -----       ------       ------        ------         ------
GROSS PROFIT                                                    5,148        7,819       11,076        15,619         14,688
                                                                -----        -----       ------        ------         ------
SELLING, GENERAL & ADMINISTRATIVE EXPENSES                      4,374        6,674        8,906        11,558         13,010
INTEREST EXPENSE, NET                                              67          234          311           395            274
                                                                  ----        -----        -----         -----         -----
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES             707          911        1,859         3,666          1,404
INCOME TAX EXPENSE                                                306          397          880         1,323            579
                                                                  ---          ---         ----         -----            ---
NET INCOME FROM CONTINUING OPERATIONS                             401          514          979         2,343            825
DISCONTINUED OPERATIONS:
INCOME (LOSS) FROM OPERATIONS (NET OF TAX BENEFIT                  48           55       (2,483)       (1,504)          (293)
(PROVISION) OF ($31), ($167), $1,259, $847 and $188)
ESTIMATED LOSS ON SALE OF SUBSIDIARIES (NET OF TAX                  0            0         (558)       (4,277)          (286)
                                                                    -            -         -----       -------          -----
BENEFITS OF $0, $0, $0,  $225, AND $187)
NET INCOME (LOSS) FROM DISCOUNTED OPERATIONS                       48           55       (3,041)       (5,781)          (579)
                                                                   --           --       -------       -------          -----
NET INCOME (LOSS)                                                 449          569       (2,062)       (3,438)           246
PREFERRED STOCK DIVIDEND REQUIREMENTS                              60           15            0             0              0
                                                                   --           --            -             -              -
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS            $389         $554      $(2,062)      $(3,438)          $246
                                                                 ====         ====      ========      ========          ====
NET INCOME (LOSS) PER SHARE OF COMMON STOCK (BASIC)             $0.12        $0.12       $(0.43)       $(0.68)          $.05
                                                                =====        =====      =======       =======          ====

UNAUDITED PRO FORMA DATA:

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES                  $774
PROVISION FOR INCOME TAXES                                       317
                                                                ----
PRO FORMA NET INCOME FROM CONTINUING OPERATIONS                 $457
                                                                ====
PRO FORMA NET INCOME PER COMMON STOCK (BASIC & DILUTED)         $.14
PRO FORMA NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS        $397
                                                                ====
PRO FORMA NET INCOME PER SHARE                                  $.10
                                                                ====
PRO FORMA NUMBER OF SHARES OUTSTANDING                       4,100,000
                                                             ---------


BALANCE SHEET DATA:
                                                                  AS OF DECEMBER 31,
                                                                  ------------------
                                            1996        1997          1998         1999           2000
                                            ----        ----          ----         ----           ----
WORKING CAPITAL                           $  7,218    $  16,178     $  11,532      $  9,366  $  6,535
TOTAL ASSETS                                10,622       24,531        21,320        16,685    14,271
LONG TERM DEBT                                  --       10,742         8,865         5,505     2,859
MANDATORY REDEEMABLE PREFERRED STOCK           750           --            --            --        --
STOCKHOLDERS' EQUITY                         8,460       11,730         9,668         6,718     7,092
</TABLE>


                                       15
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

         Year Ended December 31, 2000 ("2000") Compared to Year Ended December
31, 1999 ("1999")

         Net sales decreased by 4.8.% or $1.5 million from $31.7 million in 1999
to $30.1 million in 2000. The decrease in sales dollars and percentage was
principally attributable to Cliffco which registered a decrease of $2.7 million
(31.1%), offset in part by an increase of 2% or $520,000 at Advanced Fox. In
addition, AccessorySolutions, which was formed in August 1999 but did not begin
selling until October, 1999, increased sales of $575,000, of which approximately
$467,000 is attributable to the first nine months of fiscal 2000. Cliffco
experienced a large drop in its carrier business resulting from the loss of key
sales personnel earlier in the year and aggressive competition for their
business. Advanced Fox who increased sales 27.4% in 1999 compared to 1998,
continued to generate new accounts through its strong telemarketing and good
price /value relationship, but was negatively impacted by the bankruptcy filings
of two of its largest customers in May, 2000 and November, 2000, and the overall
industry trend toward lower prices.

         Gross profit decreased by $931,000 or 6.0% from $15.6 million in 1999
to $14.7 million in 2000 and as a percentage of sales from 49.3% to 48.8%. The
decrease in gross profit percentage was due to additional incentives given to
customers in the form of expanded volume allowances and discounts, changes in
customer mix, lost business, price reductions to improve turns on slower moving
inventory, partially offset by improved initial selling margins on selected new
product and outbound freight reductions.

         Selling, general and administrative ("SG&A") expenses increased $1.4
million, from $11.6 million in 1999 to $13.0 million in 2000, and as a
percentage of sales increased from 36.5% in 1999 to 43.2% in 2000. The increase
in SG&A expenses as a percentage of sales was attributable to:

         o        Increases in occupancy costs due to the continued expansion of
                  the Advanced Fox main distribution facility to handle
                  substantially higher volume. Shipping volume in terms of
                  units, invoices and packages rose at a much higher percentage
                  than the Company's overall sales rate due to lower average
                  sales dollars per unit, and changes in customer sales mix.

         o        Additional labor was utilized to handle increased customized
                  packaging and labeling to accommodate changes in the Company's
                  customer needs and product mix and the sharply increased unit
                  volume growth.

         o        Additional bad debt expense related to the bankruptcy filing
                  of a major customer (approximately $300,000)

         o        SG&A expenses incurred by AccessorySolutions of approximately
                  $500,000 for the first nine months of fiscal 2000. The Company
                  was formed in August, 1999, but did not begin to incur
                  meaningful expenses until October, 1999.

         o        SG&A expenses did not decrease at Cliffco in the same
                  proportion as its 31.1% reduction in its sales due in part to
                  efforts to rebuild the sales staff and increased per unit
                  packaging and shipping labor.

         o        Additional information systems and other professional costs to
                  plan and implement upgrades to our information technology
                  infrastructure.

         o        Additional accruals for pending litigation and related
                  professional fees offset by $100,000 settlement received in
                  January 2001 related to inappropriate actions performed by
                  a competitor. The settlement was recognized in 2000 since
                  the amount was known and related to 2000.

         Interest expense, net of the amounts allocated to discontinued
operations and interest income, decreased $121,000 from $395,000 in 1999 to
$273,000 in 2000 due to reduced bank borrowings under the Company's Loan
Facility resulting principally from the sale of substantially all of Tauber's
assets in January, 2000, the downsizing of Battery Network's operation during
the year, and subsequent sale of most of its assets in November-December,
interest income related to notes receivable realized in the Tauber sale, and
cash provided by operations, offset in part by increasing effective interest
rates. The weighted average interest rates in effect on average debt outstanding
increased from 7.30% in 1999 to 8.69% in 2000.

         The Company's effective income tax rate increased from 36.1% in 1999 to
41.2% in 2000. The increase is primarily attributable to the benefits obtained
from refunds as a result of filing amended state tax returns in 1999.

         Year Ended December 31, 1999 ("1999") Compared to Year Ended December
31, 1998 ("1998")


         Net sales increased by 27.4% or $6.8 million from $24.9 million in 1998
to $31.7 million in 1999. The increase in sales dollars and percentage are
attributable to Advanced Fox and Cliffco which experienced increases of $4.9
million (27.3%) and $1.8 million (26.8%), respectively. In addition,
AccessorySolutions, which was formed in August 1999, contributed $41,000 in net
sales. The net sales growth in both Advanced Fox and Cliffco are reflective of
the Company's broad product offerings and strong telemarketing efforts which
continue to generate new accounts, and a good price/value relationship
attributable to advantageous buying.

                                      16
<PAGE>

         Gross profit increased by $4.5 million or 41.0% from $11.1 million in
1998 to $15.6 million in 1999 and as a percentage of sales from 44.6% to 49.3%.
The increase in gross profit dollars attributable both to Advanced Fox and
Cliffco which experienced increases of $3.1 million (27.3%) and $1.0 million
(26.8%) respectively. The increase in gross profit percentage of 4.7% was due to
continued advantageous Far East purchasing bolstered by a consolidation of the
two cellular companies' purchasing efforts, which began in June 1998.

         Selling, general and administrative ("SG&A) expenses increased 29.8%,
from $8.9 million in 1998 to $11.6 million in 1999, and as a percentage of sales
increased from 35.8% in 1998 to 36.5% in 1999. The increase in SG&A expenses as
a percentage of sales was attributable to: (a) increases in occupancy and
distribution costs at Advanced Fox to support the current and anticipated sales
unit growth, including a major expansion of its main distribution facilities to
handle the substantial increases in unit sales volume, which tend to lower the
average sales price per unit, (b) increased purchasing and warehousing services
provided by Cliffco; (c) more customized packaging services to accommodate
changes in the Company's customer mix and needs; and (d) expenses attributable
to AccessorySolutions (mainly start up costs) from the date of its inception in
August 1999 to the end of the year of $134,000. In addition, added computer
costs were incurred at Advanced Fox to enhance the existing accounting and
warehousing systems to better accommodate the unit volume growth and for Y2K
compliance, as well as the new system implementation at Cliffco.

         Interest expense, net of the amounts allocated to discontinued
operations, increased $83,481 from $311,412 in 1998 to $394,893 in 1999 due
primarily to the growth in the continuing operations, offset by reduced
borrowings under the Company's Loan Facility resulting from the sale of Specific
Energy's retail assets on September 14, 1998, the proceeds from the sale of
389,732 shares of its common stock in April 1999 and cash provided by
operations. Additionally, the Company benefited from a drop in the weighted
average interest rates in effect on debt from 8.25% in 1998 to 7.30% in 1999.

         The Company's effective income tax rate decreased from 47.4% in 1998 to
36.1% in 1999. The decrease is primarily attributable to the benefits obtained
from refunds resulting from the filing of amended state tax returns in 1999.

         In accordance with the decision to exit the Battery Segment, the
Company has evaluated the net realizable value of net assets of the Battery
Network business. In connection with the evaluation, the Company has determined
that the unamortized excess of the costs over net assets acquired at December
31, 1999 will not be realizable and, therefore, has recognized a related
impairment of $3.9 million (with no tax benefit). In addition, the Company has
recorded a reserve for the estimated operating losses and costs to dispose of
the business of $152,242 (net of a tax benefit of $101,496). Such amounts, along
with the loss on the sale of Tauber of $185,466 (net of a tax benefit of
$123,644) are included in the 1999 estimated net loss from the disposal of the
Battery Segment within discontinued operations in the accompanying consolidated
statements of the operations.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's requirement for capital is to fund (i) sales growth and
(ii) financing for acquisitions. The Company's primary sources of financing
during 2000 and 1999 were cash flow from operations, equity issuances, the sale
of substantially all of the assets of Tauber and Battery Network in January,
2000 and November-December, 2000, respectively, and bank borrowings.

         The Company's working capital as of December 31, 2000 was $6,535,427.
Net cash provided by operating activities for the years ended December 31, 2000,
1999 and 1998 was $2,724,948, $3,663,331 and $1,580,295, respectively. In
2000, the Company was able to provide cash from operations of $1,880,524 from
its net income of $246,576 as adjusted for non-cash items of depreciation and
amortization of $765,545, bad debt provision of $669,565 and estimated loss on
sale of subsidiaries of $472,196, less increases in the deferred income taxes of
$26,782. Cash provided from changes in assets and liabilities totaled $597,848
consisting of reductions in accounts receivable and inventory of $979,422 and
$1,116,857 respectively, income tax refunds of $566,633 offset by a net decrease
in accounts payable and accrued expenses of $1,938,179 and an increase in
prepaid expenses of $126,885.

         The Company's reduction in accounts receivable was mostly attributable
to the decrease in sales during the fourth quarter of 2000 compared to the
fourth quarter of 1999, and improved collection procedures. The reductions in
inventory are primarily the result of reduced purchases in response to the
deteriorated sales base, aggressive markdowns to move older inventory and
improved inventory turns.

         Net cash used in investing activities in 2000 of $62,745 was primarily
for capital expenditures of $1,187,075 net of cash proceeds from the sale of
substantially all of the assets of Tauber in January, 2000 and Battery Network
in November and December, 2000 totaling $1,005,855 and $240,000, respectively.
Capital expenditures in 2000 were primarily for automated labor saving packaging
machines, automated shipping system, warehouse and office furniture, equipment,
and improvements


                                       17
<PAGE>

(the Company expanded warehouse capacity and relocated Advanced Fox headquarters
in 2000), telephone system upgrades and computer equipment. Net cash used by
investing activities in 1999 of $755,883 was for capital expenditures consisting
primarily of computer equipment and upgrades. Net cash provided by investing
activities in 1998 consisted of proceeds from the sale of Specific Energy's
retail assets for approximately $715,000, less $619,820 for the purchase of
property and equipment.

         Cash used in financing activities for the twelve months ended December
31, 2000 totaling $2,788,241 and was principally due to $2,986,707 net payments
in borrowings offset in part by net additions to capital lease debt of $24,714
and proceeds from the exercise of common stock options of $127,389. Cash used in
financing activities for the twelve months ended December 31, 1999 was $2.9
million and represents the net payments under the Revolver Loan and Term Loan of
$3,360,634, offset in part by the receipt of $488,366 representing the net
proceeds from the issuance of common stock under a private placement to two
directors of the Company and related parties. Net cash used in financing
activities in 1998 of $1,885,257 was to pay down the Revolver Loan and Term
Loan.

         The Company is party to a Revolving Credit, Term Loan and Security
Agreement, dated January 6, 1997, as subsequently amended (the "Loan Facility"),
between IBJ Whitehall-Financial Group (formerly known as IBJ Schroder Bank &
Trust Company), as Agent ("IBJ"), the Company and certain of the Company's
affiliates. The Loan Facility consists of a $3,000,000 Term Loan (the "Term
Loan") payable in 35 monthly installments of $50,000 each, with the balance to
be paid at maturity, and a Revolving Credit Facility (the "Revolver Loan") of up
to $10,000,000 to be advanced at the rate of 80% of eligible accounts receivable
and 50% of inventories. The Revolver Loan bears interest at the rate of 1/4 of
1% plus the higher of (i) the base commercial lending rate of IBJ or (ii) the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers plus 1/4
of 1%, or, at the option of the Company at the Eurodollar rate plus 2%. The
Eurodollar rate is defined as LIBOR for a designated period divided by one less
the aggregate reserve requirements. The interest on the Term Loan is 1/2% higher
than the interest rate on the Revolver Loan. The Loan Facility is secured by a
pledge of the assets of the Company and a pledge of the outstanding capital
stock of the subsidiaries of the Company. As of December 31, 2000, the principal
amount outstanding under the Term Loan was $289,218 and the principal amount
outstanding under the Revolver Loan was $2,788,597.

         The Loan Facility contains certain covenants that include maintenance
of certain financial ratios, maintenance of certain amounts of working capital
and net worth as well as other affirmative and negative covenants. At December
31, 2000, the Company was not in compliance with certain of these covenants. On
March 30, 2001, the Company entered into an amended credit agreement whereby the
non-compliance at December 31, 2000 was waived and new financial covenants were
negotiated through December 31, 2002, which reflect the Company's current
projections. The Loan Facility is due to expire on January 7, 2003.

         On January 11, 2001, the Board of Directors approved a stock buyback
program whereby the Company will repurchase a total of up to 500,000 shares of
common stock at a total cost not to exceed $250,000 through July 22, 2001. As of
March 8, 2001 the Company has repurchased 7,800 shares at an average price of
$0.54 per share.

         Based upon its present plans, management believes that operating cash
flow, available cash and available credit resources will be adequate to make the
repayments of indebtedness described herein, to finance the Company' 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, 2001. Although the Company would like to issue shares of common stock as its
primary method of financing acquisitions, it anticipates that additional funds
may be required to successfully implement its 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
the Company in the future.

SEASONALITY AND INFLATION

         The Company's net sales typically show little or no significant
seasonal variations.

         The impact of inflation on the Company's 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 the Company's
operating results.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Interest Rate Risk -- The Company's only financial instruments with
market risk exposure are revolving credit borrowings and variable rate term
loans, which totaled $3,077,815 at December 31, 2000. Based on this balance, a
change of


                                       18
<PAGE>

one percent in the interest rate would cause a change in interest expense of
approximately $30,778 or $0.01 per share (or $0.005) per share net of an income
tax benefit calculated using the Company's historical statutory rates, on an
annual basis.

         These instruments were not entered into for trading purposes and carry
interest at a pre-agreed upon percentage point spread from one of several
designated base rates. The Company's objective in maintaining these variable
rate borrowings is the flexibility obtained regarding early repayment without
penalties and lower overall cost as compared with fixed-rate borrowings.

         Foreign Currency Risk -- The Company does 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. The Wireless Products
Segment purchases over 90% of its products from manufacturers located overseas,
principally in the Far East. The depreciation of the U.S. dollar against the
major Asian currencies could, therefore, cause an increase in the cost of the
Company's products and adversely affect its results of operations or financial
condition.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The audited financial statements of the Company appear beginning on
page F-1 of this report.

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

         On October 25, 1999, the Company terminated the engagement of Deloitte
& Touche LLP as the Company's independent auditors and appointed Arthur Andersen
LLP to audit the Company's consolidated financial statements for the year ended
December 31, 1999, as more fully discussed in the Company's Current Report on
Form 8-K for October 25, 1999, as subsequently amended on November 12, 1999 and
December 22, 1999.

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The following table sets forth as of March 8, 2001, the name of each
Director and executive officer of the Company, his or her principal occupation
and the nature of all positions and offices with the Company held by him or her.
The directors of the Company will hold office until the next Annual Meeting of
Stockholders.

<TABLE>
<CAPTION>
                                                                                               FIRST
                                                                                               BECAME
NAME                               AGE                         OFFICE                         DIRECTOR
----                               ---                         ------                         --------
<S>                                <C>         <C>                                            <C>
Christopher F. McConnell            47                 Chairman of the Board                    1998
Stephen Rade                        63               President, Chief Executive                 1996
                                                        Officer and Director
Ronald E. Badke                     55         Chief Financial Officer and Secretary            1995
Allan Kalish                        75                        Director                          1998
Christopher C. Cole                 45                        Director                          2000
Barbara M. Henagan                  42                        Director                          1999
Bradley T. MacDonald                53                        Director                          1999
</TABLE>

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

         Mr. McConnell has been Chairman of the Board of the Company since
December 1998. 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 serves as Chairman of the Board at Mi8 Corporation, a
leading application software provider (ASP).

                                       19
<PAGE>

         Mr. Rade has been President and Chief Executive Officer of the Company
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. Badke has been Chief Financial Officer of the Company since
November 1995 and Secretary of the Company 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.

         Ms. Henagan was elected to the Company's Board of Directors in March
1999. Since 1996, she has been a Senior Managing Director of Bradford Ventures,
Ltd. Since July 1999, she has served as Manager of Linx Partners. Ms. Henagan
also serves on the Board of Directors of General Bearing Corporation and Hampton
Industries.

         Mr. MacDonald was elected a director of the Company in March 1999. He
is the Chairman of the Board and Chief Executive Officer of HealthRite, 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. Mr. MacDonald previously was employed by HealthRite as its Chief
Executive Officer from September 1996 to August 1997. From 1991 through 1994,
Mr. MacDonald was Deputy Director and Chief Financial Officer of the Retail,
Food and Hospitality and Recreation Business for the United States Marine Corps.

         Mr. Cole was elected as a director of the Company in February, 2000. He
is currently a private investor and runs Cole Consulting in Cincinnati, OH.
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 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.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT 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 Company's knowledge, based solely on a review of the copies of
such reports furnished to it and written representations with respect to the
year ended December 31, 2000, the Company's officers, directors and greater than
ten percent shareholders were in compliance with all applicable Section 16(a)
filing requirements, except Stephen Rade, the Company's Chief Executive Officer,
President and a director, who inadvertently failed to file seven reports on
Forms 4 during the year ended December 31, 2000 in connection with thirty-nine
transactions. All transactions were accounted for as purchases and were reported
on a year end Form 5 filing.


                                       20
<PAGE>

ITEM 11.          EXECUTIVE COMPENSATION

         The following table sets forth for the years ended December 31, 2000,
1999, and 1998; the compensation for services rendered in all capacities to the
Company and subsidiaries by the Chief Executive Officer and the Company's other
executive officer for the year ended December 31, 2000.

                           SUMMARY COMPENSATION TABLE


                                             SUMMARY COMPENSATION TABLE
                                             --------------------------
     NAME AND PRINCIPAL POSITION            YEAR                 SALARY
     ---------------------------            ----                 ------
Stephen Rade                                2000                198,000
Chief Executive Officer                     1999                398,000 (1)
President and Director                      1998                350,000 (2)

Ronald E. Badke                             2000                135,000
Chief Financial Officer and                 1999                135,000
Secretary                                   1998                135,000

(1)      Includes a bonus of $200,000 earned in 1999 and paid in 2000.

(2)      Includes a bonus of $200,000 earned in 1998 and deferred pursuant to an
         agreement relating to the acquisition of Advanced Fox. See Item 12.

EMPLOYMENT AGREEMENTS

         The employment agreements between the Company and each of Messrs. Rade
and Badke terminated on April 1998, and March 1999, respectively.

 COMPENSATION OF DIRECTORS

         The Company does not pay a fee to its directors. It reimburses those
directors who are not employees of the Company for their expenses incurred in
attending meetings.

         In addition, the Company recently 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 these options 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.

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, 1,000,000 shares of the Company's common stock are
reserved for issuance under the Plan.

                                       21
<PAGE>

         The following table sets forth the details as the options granted
during and held at the end of the year December 31, 2000 by the executive
officers set forth in the Summary Compensation Table. Mr. Rade was not granted
options under the Plan during the year 2000.

                       Option Granted in Last Fiscal Year
<TABLE>
<CAPTION>
                                                                                                 Potential realizable value
                                                                                                       at assumed rate
                       Number of Shares        Percent of Total      Exercise                    of stock price appreciation
                      Underlying Options        Options Granted      Price per    Expiration         For Option Term (1)
Name                        Granted             in Fiscal Year         Share         Date                5%        10%
------------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                        <C>               <C>          <C>                <C>        <C>
Ronald E. Badke           20,000  (1)                14.4%             1.438        5/23/10            $46,847    $74,546
</TABLE>

(1)      Granted pursuant to Stock Option Plan

         The following table sets forth the number of shares, which underlie
unexercised options held at December 31, 2000 by the executive officers named in
the Summary Compensation Table. Neither of those officers exercised options
during 2000.

                          FISCAL YEAR END OPTION VALUES

                           NUMBER OF SHARES UNDERLYING
                         UNEXERCISEABLE OPTIONS AT FISCAL
                                   YEAR END (1)
                         ---------------------------------
NAME                     EXERCISABLE        Unexercisable
----                     -----------        --------------
Stephen Rade               25,000                 0
Ronald E. Badke            69,000              16,000

(1) The exercise price of all outstanding options at December 31, 2000 was
greater than the market value of the shares covered by those options.


                                       22
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of March 8, 2001,
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.

<TABLE>
<CAPTION>
NAME*                                   NUMBER OF SHARES            PERCENTAGE (2)
                                      BENEFICIALLY OWED (1)         --------------
                                      ---------------------
<S>                                       <C>                         <C>
Christopher F. McConnell (3)                 180,567                     3.5%
Stephen Rade (4)                           1,138,650                    21.8%
Ronald E. Badke (5)                           69,000                     1.3%
Christopher C. Cole (6)                       52,500                     1.0%
Allan Kalish (7)                              52,000                     1.0%
Barbara M. Henagan (8)                       178,131                     3.4%
Bradley T. MacDonald (9)                      16,500                      --
Directors and Officers as a group          1,687,348                    32.3%
(7 persons)(10)
</TABLE>

*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 5,222,080 shares of Common Stock
     outstanding on March 8, 2001. 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 24,500 shares.
 (4) Includes exercisable options to purchase 25,000 shares.
 (5) Includes exercisable options to purchase 69,000 shares.
 (6) Includes exercisable options to purchase 19,500 shares.
 (7) Includes exercisable options to purchase 44,500 shares.
 (8) Includes exercisable options to purchase 21,000 shares.
 (9) Includes exercisable options to purchase 16,500 shares.
(10) Includes exercisable options to purchase 220,000 shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In consideration for the acquisition of Tauber and Advanced Fox, the
Company in April 1996 issued to Robert W. Tauber, a former director of the
Company, 300,000 shares of Common Stock and a five-year option to purchase an
additional 50,000 shares at $5.00 per share. This option remains unexercised.

         Through April 30, 2000, the principal offices of Advanced Fox, which
comprised approximately 7,000 square feet in Huntingdon Valley, Pennsylvania,
were occupied under a lease, which expired on December 31, 1999 on a
month-to-month basis (same terms and conditions), with Rade Limited Partnership,
of which Mr. Rade and his wife are the partners. The lease, as amended with
respect to additions to the facility, provided for an annual rent of $70,000
with the tenant obligated to pay the applicable real estate taxes and
maintenance and insurance costs. The Company terminated this lease on April 30,
2000 and relocated its principal offices to space leased from a third party.

         Rental payments under the lease for the twelve months ended December
31, 2000, 1999 and 1998 were $25,704, $76,462 and $76,000, respectively.

                                       23
<PAGE>

Advanced Fox Antenna, Inc. employs Susan Rade, wife of Stephen Rade, as the
highest volume sales person with certain administrative functions. In this role,
Mrs. Rade earns the bulk of her compensation as part of the Company's sales
incentive commission programs earning $329,981.06, $439,062.98, and $249,297.20
in the twelve months December 31, 2000, 1999 and 1998, respectively, including
draws, commission and a $30,000 salary for administrative duties.

PRIOR MANAGEMENT

         Messrs. Warren H. Haber, the former Chairman of the Board, and John L.
Teeger, the former Vice President, Secretary and Director of the Company, were
the sole stockholders, officers and directors of Founders. Pursuant to the
Management Agreement between Founders and the Company dated as of June 6, 1995,
as subsequently amended, Founders was to provide advice and consultative
services regarding management, overall strategic planning, acquisition policy,
relations with commercial and investment banking institutions, and stockholder
matters to or on behalf of the Company. In addition to an annual base fee of
$150,000 and a fee based on the Company's profits, Founders was entitled to
receive originating fees with respect to acquisitions or financings for which it
performed originating services. This fee was to be calculated by reference to
the fee customarily charged by non-affiliated investment bankers or professional
originators for transactions of similar size and nature. To determine the fees
customarily charged, the Company was to review then current proxy statements and
investment publications and consult with nonaffiliated investment bankers for
the computation of originating fees in similar transactions as those in which
the Founders' originating services have been employed. The amount of the fee was
subject to the approval of a majority of the Directors not affiliated with
Founders. Founders received for its origination and consultation services in
connection with the combination with Advanced Fox and Tauber a fee of $150,000;
and in connection with the Battery Network acquisition and related financing of
$13,000,000, a fee of $240,000 and five year warrants to purchase 100,000 shares
of Common Stock at a price of $4.125 per share. These warrants were split
equally by Messrs. Haber and Teeger as designees of Founders.

         In February 1998, the Management Agreement was revised by mutual
consent to, among other things, eliminate the origination and incentive fee
provisions of the original agreement. The revised agreement thereby limited fees
that were payable to Founders to an annual fee of $150,000, payable monthly.

         Since May 1998, when Messrs. Haber and Teeger resigned as officers and
directors of the Company, Founders has provided no services to the Company and
the Company has not paid any fees to Founders. Although neither the Company nor
Founders has formally terminated the Management Agreement, both parties have
acted as if the Management Agreement has been terminated. Founders have
initiated a lawsuit against the Company with respect to this Management
Agreement, as discussed under Item 3 above.


                                       24
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

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

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

EXHIBIT
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*****

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

*        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.


                                       25
<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.

<TABLE>
<CAPTION>

            NAME                                      TITLE                            DATE
            ----                                      -----                            ----
<S>                                 <C>                                            <C>
/s/ Christopher F. McConnell        Chairman of the Board                          April 2, 2001
-----------------------------
    Christopher F. McConnell

/s/ Ronald E. Badke                 Chief Financial Officer and                    April 2, 2001
-----------------------------        Secretary (principal financial officer)
     Ronald E. Badke

/s/ Stephen Rade                    Chief Executive Officer,                       April 2, 2001
-----------------------------        President and Director
     Stephen Rade                    (principal executive officer)

/s/ Allan Kalish                    Director                                       April 2, 2001
-----------------------------
    Allan Kalish

/s/ Christopher C. Cole             Director                                       April 2, 2001
-----------------------------
    Christopher C. Cole

/s/ Barbara M. Henagan              Director                                       April 2, 2001
-----------------------------
    Barbara M. Henagan

/s/ Bradley T. MacDonald            Director                                       April 2, 2001
-----------------------------
    Bradley T. MacDonald
</TABLE>

                                       26
<PAGE>

                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

                                                                    PAGE
                                                                    ----
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS                           F-2
CONSOLIDATED BALANCE SHEETS                                         F-4
CONSOLIDATED STATEMENTS OF OPERATIONS                               F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                     F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS                               F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                          F-9
CONSOLIDATED SUPPORTING SCHEDULE FILED:                             S-1

         All other schedules are omitted because they are not applicable, not
required, or the information required to be set forth therein is included in the
Consolidated Financial Statements or in the Notes thereto.

                                       F-1
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Wireless Xcessories Group, Inc.:

         We have audited the accompanying consolidated balance sheets of
Wireless Xcessories Group, Inc. (formerly, Batteries Batteries, Inc.) (a
Delaware corporation) and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders equity and cash
flows for the years then ended. These financial statements and schedule referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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, 2000 and December 31,
1999, and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States.

         Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statement taken as a whole.


ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
March 30, 2001


                                       F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Wireless Xcessories Group, Inc.
(formerly, Batteries Batteries, Inc.) and subsidiaries for the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Wireless
Xcessories Group, Inc. and subsidiaries for the year ended December 31, 1998 in
conformity with accounting principles generally accepted in the United States of
America.

DELOITTE & TOUCHE LLP

San Diego, California
 March 30, 1999


                                       F-3
<PAGE>




                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                            DECEMBER 31

                                                                                                      2000               1999
                                                                                                      ----
<S>                                                                                                   <C>                <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                                                        $      501,069      $     365,827
Accounts receivable (net of allowance for doubtful accounts                                           4,354,597          5,119,283
  of $263,276 and $120,467, respectively)
Inventories                                                                                           4,896,125          5,204,220
Prepaid expenses and other current assets                                                               401,789            187,651
Income tax refund receivable                                                                            --                 586,746
Current deferred income taxes                                                                           701,974            379,227
Net current assets held for sale                                                                        --               1,984,817
                                                                                                 --------------      -------------
Total current assets                                                                                 10,855,554         13,827,771
 ROPERTY AND EQUIPMENT--Net                                                                           1,720,963            999,223
EXCESS OF COST OVER NET ASSETS ACQUIRED (net of accumulated amortization of                             907,508            949,508
   $153,814 and $111,814, respectively)
NET NONCURRENT ASSETS HELD FOR SALE                                                                     --                 737,090
OTHER ASSETS                                                                                            787,271            171,736
                                                                                                 --------------      -------------
Total assets                                                                                     $   14,271,296      $  16,685,328
                                                                                                 ==============      =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt                                                                $      329,896      $     600,000
Bank overdraft                                                                                          397,996            344,654
Accounts payable                                                                                      1,107,469            999,839
Net liabilities on disposal of discontinued operations                                                  463,713             --
Accrued payroll and related benefits                                                                    794,621          1,013,962
Other accrued expenses                                                                                1,226,432          1,504,143
                                                                                                 --------------      -------------
Total current liabilities                                                                             4,320,127          4,462,598
                                                                                                 --------------      -------------

LONG-TERM DEBT                                                                                        2,858,996          5,504,522
                                                                                                 --------------      -------------
COMMITMENTS AND CONTINGENCIES (Note 7)
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, 5,222,080 and
5,132,732 shares, respectively, issued and outstanding                                                    5,222              5,133
Additional paid-in capital                                                                           11,331,106         11,203,806
Accumulated deficit                                                                                  (4,244,155)        (4,490,731)
                                                                                                 --------------      -------------
Total stockholders' equity                                                                            7,092,173          6,718,208
                                                                                                 --------------      -------------
Total liabilities and stockholders' equity                                                       $   14,271,296      $  16,685,328
                                                                                                 ==============      =============
</TABLE>


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


                                       F-4
<PAGE>



                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                FOR THE YEARS ENDED DECEMBER 31

                                                                        2000                 1999                 1998
                                                                        ----                 ----                 ----

<S>                                                                <C>                   <C>                  <C>
    Net Sales                                                      $  30,128,028         $  31,652,681        $  24,852,022
    Cost of sales                                                     15,440,512            16,034,150           13,775,932
                                                                   -------------         -------------        -------------

    Gross profit                                                      14,687,516            15,618,531           11,076,090
                                                                   -------------         -------------        -------------

    Selling, general and administrative expenses                      13,009,812            11,557,821            8,905,593
                                                                   -------------         -------------        -------------

    Interest expense, net                                                273,452               394,893              311,412
                                                                   -------------         -------------        -------------

    Income from continuing operations before income taxes              1,404,252             3,665,817            1,859,085
    Income tax expense                                                   579,036             1,322,917              880,333
                                                                   -------------         -------------        -------------

    Net income from continuing operations                                825,216             2,342,900              978,752
                                                                   -------------         -------------        -------------

    DISCONTINUED OPERATIONS:
    Loss from operations (net of tax benefit of $187,548,
    $847,186 and $1,259,405, respective                                 (293,344)           (1,504,077)          (2,482,345)
    Estimated loss on sale of subsidiaries (net of tax benefit
    of $186,900, $225,140 and $0, respectively)                         (285,296)           (4,277,178)            (558,112)
                                                                   -------------         -------------        -------------
    Net loss from discontinued operations                               (578,640)           (5,781,255)          (3,040,457)
                                                                   -------------         -------------        -------------
    Net income (loss)                                              $     246,576         $  (3,438,355)       $  (2,061,705)
                                                                   =============         =============        =============
    Earnings (loss) per common share--Basic:
    Income from continuing operations                              $        0.16         $        0.47        $        0.21
      Loss from discontinued operations                                    (0.11)                (1.15)               (0.64)
                                                                   -------------         -------------        -------------
      Net income (loss) per common share                           $        0.05         $       (0.68)       $       (0.43)
                                                                   =============         =============        =============

      Earnings (loss) per common share--Diluted:
      Income from continuing operations                            $        0.16         $        0.46        $        0.21
      Loss from discontinued operations                                    (0.11)                (1.15)               (0.64)
                                                                   -------------         -------------        -------------
      Net income (loss) per common share                           $        0.05         $       (0.69)       $       (0.43)
                                                                   =============         =============        =============
</TABLE>



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
<TABLE>
<CAPTION>

                                                                                        ADDITIONAL       RETAINED
                                  PREFERRED STOCK               COMMON STOCK              PAID-IN         EARNINGS
                                SHARES        AMOUNT        SHARES         AMOUNT         CAPITAL        (DEFICIT)         TOTAL
                                ------        ------        ------         ------       ------------    ------------    -----------
<S>                             <C>          <C>            <C>           <C>           <C>             <C>

Balance, January 1, 1998            --       $   --         4,743,000     $    4,743    $ 10,715,830    $  1,009,329    $11,279,902
Net loss                            --           --             --             --             --          (2,061,705)    (2,661,705)
                                --------     --------      ----------     ----------    ------------    ------------    -----------

Balance, December 31, 1998          --           --         4,743,000          4,743      10,715,830      (1,052,376)     9,668,197
Issuance of common stock            --           --           389,732            390         487,976          --            488,366
Net loss                            --           --             --             --             --          (3,438,355)    (3,438,355)
                                --------     --------      ----------     ----------    ------------    -------------   -----------

Balance, December 31, 1999          --           --         5,132,732          5,133      11,203,806      (4,490,731)     6,718,208
Option exercises                    --           --            89,348             89         127,300          --            127,389
Net income                          --           --             --             --             --             246,576        246,576
                                --------     --------      ----------     ----------    ------------    ------------    -----------

Balance, December 31, 2000          --       $   --         5,222,080     $    5,222    $ 11,331,106    $ (4,244,155)   $ 7,092,173
                                ========      =======       =========     ==========    ============    =============   ===========
</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

<TABLE>
<CAPTION>
                                                                     FOR THE YEARS ENDED DECEMBER 31
                                                         2000              1999                 1998
                                                         ----              ----                 ----
<S>                                                  <C>               <C>                  <C>
OPERATING ACTIVITIES:
Net income (loss)                                    $    246,576      $ (3,438,355)        $ (2,061,705)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
   Depreciation and amortization                          765,545           888,271              749,402
   Provision for doubtful accounts                        669,565           402,153              326,915
   Deferred income tax (benefit) provision                (26,782)         (165,183)               8,405
   Estimated loss on sale of subsidiaries                 472,196           562,848              --
   Impairment of excess cost over net assets               --             3,939,470              558,112
   acquired
Changes in assets and liabilities, net of
effects from dispositions:
   Accounts receivable                                    979,422            98,586              160,137
   Inventories                                          1,116,857         1,556,752            2,040,204
   Income tax refund                                      566,633           --
   Prepaid expenses and other assets                     (126,885)         (375,415)             (95,227)
   Accounts payable and accrued expenses               (1,938,179)          194,204             (105,948)
                                                     -------------     -------------        -------------
Net cash provided by operating activities               2,724,948         3,663,331            1,580,295
                                                     ------------      ------------         ------------
INVESTING ACTIVITIES:
Purchase of property and equipment, net                (1,187,075)         (755,883)            (619,820)
Proceeds from sale of subsidiaries                      1,245,000           --                   715,000
Principal payment received on note receivables              4,820           --                   --
                                                     ------------      ------------         ------------
Net cash (used in) provided by investing activities        62,745          (755,883)              95,180
                                                    -------------     -------------        -------------
FINANCING ACTIVITIES:
Payments on capital lease obligation                      (24,714)          --                   --
Issuance of common stock                                  127,389           488,366              --
Net payments on borrowings                             (2,755,126)       (3,360,634)          (1,885,257)
                                                     -------------     -------------        -------------
Net cash used in financing activities                  (2,652,451)       (2,872,268)          (1,885,257)
                                                     -------------     -------------        -------------
NET INCREASE (DECREASE) IN CASH AND CASH                  135,242            35,180             (209,782)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR              365,827           330,647              540,429
                                                     ------------      ------------         ------------
CASH AND CASH EQUIVALENTS, END OF YEAR               $    501,069      $    365,827         $    330,647
                                                     ============      ============         ============



                                      F-7


<PAGE>
                                                                     FOR THE YEARS ENDED DECEMBER 31
                                                         2000              1999                 1998
                                                         ----              ----                 ----
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during year for:
Interest                                             $    353,924      $    606,500         $    863,337
Income taxes                                              590,758           378,843              412,341
</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

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Name Change -- In March 2000, Batteries Batteries, Inc. changed its
name to Wireless Xcessories Group, Inc.

         Business Description -- Wireless Xcessories Group, Inc. and its
subsidiaries (collectively, the "Company") are engaged in the distribution of
batteries, battery accessories, cellular accessories, and components in the
United States. During the fourth quarter of 1999, the Company began selling
products via the newly created e-commerce subsidiary, AccessorySolutions.com,
Inc. On March 13, 2001, former subsidiaries of Wireless Xcessories Group, Inc,
Advanced Fox Antenna, Inc., Cliffco of Tampa Bay, Inc. and
AccessorySolutions.com, Inc. entered into an Agreement to combine and merge with
Wireless Xcessories Group, Inc., the surviving Company.

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

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

         Concentration of Risk -- The Company utilizes its excess cash to reduce
its bank borrowings. The Company has not experienced any losses on its cash
accounts or short-term investments. The Company sells its products to commercial
businesses and retail consumers primarily in the United States. 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, and such losses were minimal except for the
write off of approximately $300,000 resulting from a large customer filing
Chapter 7 bankruptcy in 2000. No single customer accounted for greater than 10%
of consolidated net sales during any of the years presented.

         In 2000, the Company purchased approximately 36% of its products from
three Far East suppliers, accounting for 16%, 13% and 7% of all 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 expense was $561,953, $368,505 and
$267,815 in 2000, 1999 and 1998, respectively, and is included in selling,
general and administrative expense in the consolidated statements of operations.

         Other Assets - Other assets in 2000 consists of notes receivable,
received in the disposition of the Battery Segment companies, as well as
purchased software and refundable deposits, which were the primary components of
other assets in 1999. Other assets in 1998 consist primarily of deferred bank
financing fees, which were fully amortized at the end of 1999. Amortization
expense related to financing fees was $95,000 and $90,000 in 1999 and 1998,
respectively.

         Excess of Cost Over Net Assets Acquired -- The excess of cost over net
assets acquired is being amortized on a straight-line basis over twenty-five
years. The carrying value of the excess cost over net assets acquired is
periodically reviewed to determine whether impairment exists. The review is
based on comparing the carrying amounts to the undiscounted estimated cash flows
before interest charges from operations over the remaining amortization period.
In connection with this review, the Company recognized an impairment of
$3,939,470 in 1999 related to Battery Network, Inc. as a result of the decision
to exit the Battery Segment (see Note 2) and $558,112 in 1998 related to
Specific Energy Corporation.

         Revenue Recognition -- Revenue is recognized at the time of shipment.
Revenue related to the web site vendor agreements at AccessorySolutions.com,
Inc. is recognized ratably over the related contract period.

                                       F-9
<PAGE>

         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.

         Discontinued Operations -- During the first quarter of 2000, the
Company sold most of the assets and transferred certain liabilities of Tauber
Electronics, Inc. (see Note 2) and developed a plan, which was approved by the
Board of Directors of the Company, to dispose of Battery Network, Inc. During
the fourth quarter of 2000 the Company sold the remaining assets of Battery
Network, Inc. (see Note 2). As these two companies represented all of the
Company's remaining businesses within its Battery Segment, the Company accounted
for this segment as discontinued operations in 1999.

         The results of operations for the Battery Segment have been classified
as discontinued operations for all periods presented in the consolidated
statements of operations and balance sheets. The assets and liabilities of the
discontinued operations have been classified in the accompanying consolidated
balance sheets as "Net assets held for sale", "Net noncurrent assets held for
sale" and "Net liabilities attributable to discontinued operations."
Discontinued operations have not been segregated in the accompanying
consolidated statements of cash flows, and, therefore, amounts of certain
captions will not agree with the respective consolidated statements of
operations. Net sales for the Battery Segment were $3,397,208, $16,137,635 and
$26,601,820 for the years ended December 31, 2000, 1999 and 1998, respectively.

         The Company allocated interest not specifically associated with any
segment based upon a ratio of net tangible assets. Interest expense allocated to
discontinued operations was $55,000, $256,000 and $479,000 in 2000, 1999 and
1998, respectively.

         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.

<TABLE>
<CAPTION>
                                                     2000            1999           1998
                                                     ----            ----           ----

<S>                                                 <C>            <C>             <C>
Basic EPS Shares                                    5,193,731      5,013,537       4,743,000

Dilutive effect of stock options and warrants          60,598         38,213          16,677
                                                  -----------     ----------     -----------

Diluted EPS Shares                                  5,254,329      5,051,750       4,759,677
                                                  ===========     ==========     ===========
</TABLE>

         There is no difference between net income (loss) per common share on a
basic and diluted EPS basis.

         Options to purchase 112,960, 130,532 and 108,865 shares with exercise
prices ranging from $1.875 to $5.00 and warrants to purchase 100,000, 2,400,000
and 2,400,000 shares with exercise prices ranging from $4.13 to $5.00 were
outstanding at December 31, 2000, 1999 and 1998, respectively, but were not
included in the computation of diluted EPS because the option's exercise price
was greater than the average market price of the common shares.

         Disclosures About Fair Value of Financial Instruments -- The carrying
value at December 31, 2000 of the Company's financial instruments approximated
their fair value primarily due to the short maturities of these instruments.

         New Accounting Pronouncements -- In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Costs." The Company is required to adopt this statement beginning with
the first quarter of 2001. The Company has determined that the adoption of the
statement will not have a material impact on the Company's financial position
or results of operations.

         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.


                                      F-10
<PAGE>

The Company has applied APB No. 25 to its stockholder compensation awards to
employees and has disclosed the required pro forma effect on net income (loss)
per share in accordance with the provisions of SFAS No.123, "Accounting for
Stock-Based Compensation" (See Note 5).

         Use of Estimates in the Preparation of Financial Statements --The
preparation of financial statements in conformity with generally accepted
accounting principles 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.

2.       ACQUISITIONS AND DIVESTITURES:

         Effective January 1, 1997, the Company acquired the business and
related assets of Battery Network, Inc. and affiliated companies ("Battery
Network"), which operated principally in California and had revenues of
approximately $23.0 million for the year ended December 31, 1996. The purchase
price of approximately $11.2 million consisted of (i) approximately $8.3 million
in cash; (ii) 550,000 shares of common stock valued at $4.125 per share and five
year options to purchase an additional 225,000 shares at an exercise price of
$4.50 per share, and (iii) approximately $590,000 in transaction costs. The
Battery Network agreement also provided the sellers the contingent right to
receive additional consideration of up to $1.0 million in cash, 350,000 shares
of common stock and five-year options to acquire 250,000 shares of common stock.
Payment of the additional consideration was based on the excess amount by which
the combined "pre-tax income" as defined, of Battery Network and Tauber exceeded
certain levels for the following three years. The sellers also entered into
employment agreements and were granted options under the Company's Stock Option
Plan to purchase an aggregate of 50,000 shares of common stock. During this
period, there was no additional consideration earned or paid by the Company to
the sellers of Battery Network.

         In accordance with the decision to exit the Battery Segment (see Note 1
-- Discontinued Operations), the Company evaluated the net realizable value of
net assets of the Battery Network business. In connection with this evaluation,
the Company determined that the unamortized excess of cost over net assets
acquired at December 31, 1999 is not realizable and, therefore, recognized a
related impairment of $3,939,470. In addition, the Company recorded a reserve
for the estimated operating losses and costs to dispose of the business of
$152,242 (net of $101,496 tax benefit). Such amounts are included in the 1999
net loss from discontinued operations in the accompanying consolidated
statements of operations.

         In May 1997, the Company acquired the business and related assets of
Cliffco of Tampa Bay, Inc. ("CTB"). The purchase price of approximately $615,000
consisted of (i) cash of approximately $75,000, (ii) 193,000 shares of common
stock valued at $2.35 per share or $446,985 and (iii) approximately $93,000 in
transaction costs. In addition, the Company assumed liabilities of $1,162,000.
As part of its assumption of liabilities, the Company paid at the closing
indebtedness of CTB of approximately $560,000. The CTB agreement provided the
president and sole stockholder of the seller with a three-year employment
agreement. This employment agreement has been terminated. The cash portion of
the purchase price of each transaction, as well as the repayment of CTB debt of
$560,000 to its collateralized lender was funded with a portion of the proceeds
of a borrowing pursuant to a Revolving Credit, Term Loan and Security Agreement
(see Note 4).

                                      F-11
<PAGE>

         The Battery Network acquisition and CTB acquisition were accounted for
as purchases in accordance with Accounting Principles Board Opinion No. 16. The
total purchase price, net of cash acquired, was allocated to the assets acquired
and liabilities assumed based on their estimated fair values, as follows:

                                                      (IN THOUSANDS)
                                                      --------------
                                               BATTERY NETWORK        CTB
                                               ---------------        ---
 Accounts receivable                              $     2,522       $     648
 Inventories                                            4,679             347
 Property and equipment                                   185              79
 Other assets                                             177              32
 Accounts payable, accrued expenses and debt           (1,307)         (1,321)
 Excess of cost over net assets acquired                4,458           1,061
                                                  -----------       ---------
 Total                                            $    10,714       $     846
                                                  ===========       =========

         The excess of the cost over the net assets acquired is being amortized
over a period of 25 years. The results of operations of CTB are included with
those of the Company for the periods subsequent to the date of acquisition. The
results of Battery Network are included in loss from discontinued operations for
each of the years presented.

         During the second quarter of 1998, the Company made the decision to
exit the retail battery business and explore the sale of Specific Energy
Corporation ("Specific Energy") in Phoenix, Arizona (which is the Company's sole
retail facility). Consistent with SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and Assets to be Disposed Of," management determined that a
portion of the carrying value of the Company's excess of cost over net assets
acquired was impaired. Accordingly, the Company recorded a charge of $558,112,
which principally represented the remaining unamortized excess of cost over net
assets acquired that resulted from the Company's acquisition of Specific Energy
in 1995. On September 14, 1998, the Company sold the retail assets of Specific
Energy for cash proceeds of approximately $715,000, which represented the
approximate carrying value of the net assets sold and applicable transaction
costs.

         On January 27, 2000, the Company sold substantially all of the assets
and certain liabilities of Tauber Electronics, Inc. for $1,489,427, consisting
of cash of $1,005,854 and a note receivable of $519,708 bearing interest at 1%
above prime, as defined and payable over 5 years. Any outstanding principal or
accrued interest is due in full on January 26, 2005. The principal amount of
this note was subsequently reduced to $483,573, effective on March 15, 2000, to
reflect the final valuation of transferred assets. The note was subject to
further adjustment (only upward) during the first quarter of 2001 based on the
valuation of certain inventory reserves. In March, 2001 it was determined based
on a full valuation supplied by the purchaser to the Company, that no adjustment
is required. The related loss on the sale of $185,466 (net of $123,644 tax
benefit) has been reflected in the estimated loss on sale of subsidiaries within
the net loss from discontinued operations in the 1999 consolidated statement of
operations.

         On November 6, 2000, the Company sold selective inventory and
substantially all of its machinery and equipment, trade names and customer lists
of Battery Network, Inc. to Ohlin Sales Corp. for $200,000 in cash and a
$125,000 note. The note provides for twenty-four consecutive equal monthly
payments of $5,655 including interest at 8% and principal starting on December
1, 2000 and ending on November 1, 2002. On December 16, 2000, the Company sold
selected remaining inventory, and trade names related to Absolute Battery (a
division and trade name of Battery Network principally involved in the laptop
battery and accessories business) to Battery Universe for cash of $40,000 and a
$10,000 note. The note is due on June 1, 2001 and provides for interest at 8% to
be paid monthly along with equal monthly principal payments commencing on
January 1, 2001 and ending on June 1, 2001. The Company retained accounts
receivable, inventory and all outstanding liabilities as of October 31, 2000.
Though the Company physically shut down the remaining Battery Network operation
in January, 2001, it is still winding down any remaining administrative and
financial affairs including, but not limited to, collection of outstanding
accounts receivable, liquidation of remaining liabilities, and efforts to
achieve an early termination of its existing lease obligation which runs through
January 31, 2002.

         The related loss on the sale and disposition of Battery Network of
($285,296, net of $186,900 tax benefit) has been reflected in the estimated loss
on sale of subsidiaries within the net loss from discontinued operations in the
2000 consolidated statement of operations.

                                      F-12
<PAGE>

3.        PROPERTY AND EQUIPMENT:

         Property and equipment consists of the following:

                                                    DECEMBER 31,
                                                    ------------
                                                2000             1999
                                                ----             ----
Machinery and equipment                     $  2,469,756    $    1,496,197
Furniture and fixtures                           482,498           242,617
Vehicles                                          49,265            49,265
Leasehold improvements                           255,227           195,085
                                            ------------   ---------------

                                               3,256,746         1,983,164

Less accumulated depreciation                 (1,535,783)         (983,941)
                                            -------------   ---------------

Property and equipment, net                 $  1,720,963    $      999,223
                                            ============    ==============

4. LONG-TERM DEBT:

         Long-term debt consists of the following:

                                                       DECEMBER 31,
                                                       ------------
                                                  2000             1999
                                                  ----             ----
Revolving Loan Facility                     $    3,077,815   $    6,104,522
Capital Lease                                      111,077                -
                                            --------------   --------------
                                                 3,188,892        6,104,522

Less current portion                              (329,896)        (600,000)
                                            --------------   --------------
Long-term debt, net of current portion      $    2,858,996   $    5,504,522
                                            ==============   ==============

         The weighted average interest rates in effect on debt for the years
ended December 31, 2000, 1999, and 1998 was 8.69%, 7.30% and 8.25%,
respectively.

         The Company entered into a Revolving Credit, Term Loan and Security
Agreement, dated January 6, 1997, as subsequently amended (the "Loan Facility"),
with IBJ Whitehall-Financial Group (formerly known as IBJ Schroder Bank and
Trust Company), as Agent ("IBJ"). The Loan Facility consists of a $3,000,000
Term Loan (the "Term Loan") payable in 35 monthly installments of $50,000 each
with the balance to be paid at maturity and a Revolving Credit Facility (the
"Revolver Loan") of up to $10,000,000 to be advanced at the rate of 80% of
eligible accounts receivable and 40% of inventories. The Revolver Loan bears
interest at the rate of 1/4 of 1% plus the higher of i) the base commercial
lending rate of IBJ or ii) the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers plus 1/4 of 1%, or, at the option of the Company at the
Eurodollar rate plus 2%. The Eurodollar rate is defined as LIBOR for a
designated period divided by one less the aggregate reserve requirements. The
interest on the Term Loan is 1/2% higher than the interest rate on the Revolver
Loan. The Loan Facility is secured by a pledge of the assets of the borrowers
and pledge of the outstanding capital stock of the subsidiaries of the Company.
As of December 31, 2000, the principal amount outstanding of the Term Loan is
$289,218 and the Revolver Loan is $2,788,597.

         The Loan Facility contains certain covenants which include maintenance
of certain financial ratios, maintenance of certain amounts of working capital
and net worth as well as other affirmative and negative covenants. It also
prohibits the payment of dividends of common stock without consent. At December
31, 2000, the Company was not in compliance with certain of these covenants. On
March 30, 2001, the Company entered into an amendment to the Loan Facility,
whereby the non-compliance at December 31, 2000 was waived, and the financial
covenants through December 31, 2000 were amended to reflect the Company's
current projections. The Loan Facility is due to expire on January 7, 2003.

                                      F-13
<PAGE>

5. 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 a series with
rights more favorable with respect to dividends, liquidation and voting than
those held by the holders of any class of Common Stock. In 1995, the Company
issued 1,000,000 shares of Preferred Stock, Series A in connection with a
private placement. The Preferred Stock, Series A shares were nonvoting and were
redeemed in accordance with their terms one year following consummation of the
initial public offering at the redemption price of $1.00 per share plus accrued
dividends from the date of issuance at the rate of 8% per annum of the
redemption price. In May 1996, the Company redeemed 250,000 shares of Preferred
Stock. In April 1997, the Company redeemed the remaining 750,000 shares of the
Preferred 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.

         On April 23, 1999, the Company raised $488,366 (net of costs of
$10,434) through a private placement of 389,732 shares of its common stock to
two of its Board members (Christopher F. McConnell, Board Chairman, and Barbara
M. Henagan) and to two other related parties.

         On January 11, 2001, the Board of Directors approved a stock buyback
program whereby the Company will repurchase a total of up to 500,000 shares of
common stock at a total cost not to exceed $250,000 through July 22, 2001. As of
March 8, 2001 the Company has repurchased 7,800 shares at an average price of
$0.54 per share.

         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 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 for directors and employees of the
Company. The options are exercisable at prices ranging from $1.06 to $4.43 per
share. At December 31, 2000 and 1999, there were a total of 566,540 and 244,468,
respectively, shares available for grant.


                                      F-14
<PAGE>



         The following information pertains to the stock options outstanding for
the three years ending December 31, 2000:

                                                                   Weighted
                                                     Number         Average
                                                   of Shares      Share Price
                                                   ---------      -----------
Options outstanding at January 1, 1998              185,720          4.33
     Granted                                        455,000          2.17
     Forfeited                                     (336,855)        (3.12)
                                                   --------         -----
Options outstanding at December 31, 1998            303,865          2.47
     Granted                                        180,000          1.40
     Forfeited                                     (128,333)        (1.59)
                                                   --------         -----
Options outstanding at December 31, 1999            355,532          2.23
     Granted                                        138,500          1.54
     Exercised                                      (89,348)         (1.43)
     Forfeited                                      (60,572)         (2.23)
                                                   --------         -----
Options outstanding at December 31, 2000            344,112          2.16
                                                   ========         =====
Options exercisable at December 31, 2000            244,112          2.44
                                                   ========         =====


         The following table summarizes information as of December 31, 2000
concerning currently outstanding and exercisable options:
<TABLE>
<CAPTION>

                                         OPTION OUTSTANDING                                   OPTIONS EXERCISABLE
   ---------------------------------------------------------------------------        ----------------------------------
                                               WEIGHTED
                                               AVERAGE
                                              REMAINING
                                             CONTRACTUAL           WEIGHTED                                  WEIGHTED
      RANGE OF              NUMBER               LIFE               AVERAGE              NUMBER              AVERAGE
   EXERCISE PRICE        OUTSTANDING           (YEARS)          EXERCISE PRICE        EXERCISABLE        EXERCISE PRICE
   --------------        -----------           -------          --------------        -----------        ---------------
<S>                         <C>                   <C>               <C>                <C>                     <C>
$1.06 -$5.00                344,112               5                 $2.16              244,112                 $2.44
</TABLE>

         The outstanding stock options as of December 31, 2000 vest as follows:
(a) half of the option shares are vested on the date of grant with an additional
one-half vesting in the first anniversary therefrom (129,652 options
outstanding at December 31, 2000); or (b) one-third of the option shares are
vested on the date of the grant with an additional one-third vesting on the
first and second anniversaries therefrom, respectively (85,000 options
outstanding at December 31, 2000); or (c) one hundred percent of the option
shares are vested on the date of grant (16,960 options outstanding at December
31, 2000) or (d) 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 fourth
anniversaries there from, respectively (112,500 shares outstanding at December
31, 2000).


                                      F-15
<PAGE>


         As provided for in SFAS No. 123, "Accounting 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, the Company's net income and net income per share would have been the
pro forma amounts indicated below:

                                             2000          1999         1998
                                             ----          ----          ----
Net income from continuing operations:
As reported                                $825,216     $2,342,900    $978,752
Pro forma                                   743,162      2,295,818     943,314
Basic net income from
continuing operations
per common share:

As reported                                $  0.16      $   0.47      $  0.21
Pro forma                                     0.14          0.46         0.20
Diluted net income from
continuing operations per
common share:

As reported                                $  0.16      $   0.46      $  0.21
Pro forma                                     0.14          0.45         0.20

         The fair value of each 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 6.6%, 6.2% and 5.5% for 2000, 1999 and
1998, respectively; expected dividend yield of 0%; expected life of 5 years; and
expected volatility of 119%, 95% and 117% for 2000, 1999 and 1998, respectively.

         Additionally, in connection with the Battery Network acquisition in
1997, the Company issued options to purchase 225,000 shares of common stock at
an exercise price of $4.50 per share and, in connection with the Tauber
acquisition in 1996, issued options to purchase 50,000 at an exercise price of
$5.00 per share.

         WARRANTS -- In connection with the initial public offering, the Company
sold 2,300,000 redeemable warrants to purchase the Company's Common Stock.

         Each warrant was exercisable at a price of $5.00 per share after April
8, 1997 and is redeemable by the Company thereafter at a price of $0.01 per
warrant upon not less than 30 days' prior written notice if the last sale price
of the Common Stock has been at least $7.50 per share on the 20 consecutive
trading days ending on the third day prior to the date on which the notice of
redemption is given. On April 8, 2000, the warrants expired at the close of
trading in accordance with the terms of the warrant agreement.

         Also, in connection with the acquisition of Battery Network, on January
7, 1997 the Company issued five-year warrants to purchase 100,000 shares of
common stock at a price of $4.125 per share. No such warrants have been
exercised.

                                      F-16
<PAGE>


6. INCOME TAXES:

         The provision (benefit) for income taxes consists of:

                               2000               1999               1998
                               ----               ----               ----
Current:
Federal                 $       718,124     $       1,277,187  $        662,916
State                           183,659               127,734           338,228
                        ---------------     -----------------  ----------------
                                901,783             1,404,921         1,001,144
                        ---------------     -----------------  ----------------
Deferred:
Federal                        (257,015)             (139,776)          (91,740)
State                           (65,732)               57,772           (29,071)
                        ---------------     -----------------  ----------------
                               (322,747)              (82,004)         (120,811)
                        ---------------     -----------------  ----------------
Total provision for
income taxes            $       579,036     $       1,322,917  $        880,333
                        ===============     =================  ================

         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,
                                                    ------------
                                                2000           1999
                                                ----           ----
Deferred income tax assets:
Accrued compensation                        $  146,081      $  238,000
Inventory reserve                              298,280          97,609
Bad debts reserve                              108,470          50,596
Sales returns and allowances                   103,790          46,200
Other                                          104,462          15,260
                                            ----------       ----------
                                               761,083         447,665
                                            ----------       ----------
Deferred income tax liabilities:

State taxes                                     48,609          26,260
Other                                           10,500          42,178
                                            ----------       ----------
                                                59,109          68,438
                                            ----------       ----------
Net deferred tax asset                      $  701,974       $  379,227
                                            ==========       ==========


                                      F-17
<PAGE>



         The Company has determined that no valuation allowance for the net
deferred tax asset is required as of December 31, 2000 and 1999, as the future
realization of such tax benefits is considered to be more likely than not
through the combination of carryback availability, certain tax planning
strategies that would allow for acceleration of deductible temporary differences
to utilize the remaining carryback availability and through expected future
taxable income. The effective income tax rate varied from the U.S. Federal
statutory tax rate as follows:

                                                   2000        1999       1998
                                                   ----        ----       ----

Statutory income tax rate                          34.0%       34.0%      34.0%
State income taxes, net of federal tax benefit      5.5         3.4       11.0
Goodwill                                            1.0         0.4        0.7
Meals and entertainment                             0.7         0.2        0.5
Other                                               --         (1.9)       1.2
                                                  ------      ------     -----
Effective tax rate                                 41.2%       36.1%      47.4%
                                                  =====       =====      =====


         During 1999, the Company amended certain prior period state tax returns
resulting in certain refunds received in 1999 and 2000.

         At December 31, 1998, the Company generated a federal net operating
loss of approximately $1,549,088. During 1999, the Company carried back the
entire federal net operating loss resulting in a refund of $518,609. As this
refund was not received until January 2000, it is classified as a tax refund
receivable in the accompanying consolidated December 31, 1999 balance sheet.

7.       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 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 noncancellable 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 noncancellable operating leases for the
years ending December 31 are as follows:

2001                              $     522,985
2002                                    526,743
2003                                    530,652
2004                                    315,947
2005 and thereafter                      32,370
                                  -------------

Total                             $   1,928,697
                                  =============

         Rent expense for all operating leases for the years ended December 31,
2000, 1999 and 1998 was $452,707, $429,625 and $291,123, respectively.

         During 2000, the Company entered into certain capital leases for
equipment and office furniture. Total future lease payments under these lease
obligations are $52,596, $53,196 and $18,234 in 2001, 2002 and 2003,
respectively. Included in future lease payments is $12,949 representing
interest.

8.       RELATED PARTY TRANSACTIONS:

         Messrs. Warren H. Haber, former Chairman of the Board and Chief
Executive Officer and John L. Teeger, Vice President, Secretary and Director of
the Company are the sole stockholders, officers and directors of Founders
Management Services, Inc. ("Founders"). Founders had agreed, pursuant to an
agreement (the "Management Agreement") dated as of June 6, 1995, as subsequently
amended, to provide advice and consultative services regarding management,
overall strategic planning, acquisition policy, relations with commercial and
investment banking institutions, and stockholder matters to or on behalf of the
Company.


                                       F-18
<PAGE>

The Management Agreement, which was for a term expiring in April 1999, subject
to five one-year renewal options, provided for Founders to receive a base fee of
$150,000 per annum. Founders was also to receive an additional fee of 5% of the
Company's annual pre-tax income in excess of $750,000. Under the Management
Agreement, Founders was also entitled to originating fees with respect to
acquisitions or financing for which it performed originating services, the fee
to be that customarily charged by nonaffiliated investment bankers or
professional originators for transactions of similar size and nature. Founders
received a fee of $150,000 for its origination and consulting services in
connection with the acquisitions of Advanced Fox Antenna, Inc. and Tauber in
1996. Founders also received a fee of $240,000 for originating and negotiating
services in connection with the acquisition of Battery Network and the Loan
Facility, and was issued five-year warrants to purchase 100,000 shares of the
Company's common stock at a price of $4.125 per share. In connection with the
Management Agreement, the Company paid Founders $56,115 during the year ended
December 31, 1998. In February 1998, the Management Agreement was revised to
eliminate the origination and incentive fee provisions of the original
Management Agreement, and to establish April 30, 1999 as the expiration date.
The revised Management Agreement thereby limited fees paid to Founders to an
annual fee of $150,000. On May 5, 1998, both active principals of Founders
resigned as officers and directors of the Company. As a result, the Company
ceased making payments under the Management Agreement. In a lawsuit filed in
November 1999, Founders alleges that the Company improperly repudiated this
Management Agreement and is seeking damages. In March 2000, the Company filed an
answer to the lawsuit and asserted counterclaims against Founders related to the
Management Agreement. Based on consultation with legal counsel, management does
not believe that this lawsuit will have a material adverse effect on the
financial position or results of operations of the Company.

         The Company leased certain office space in Pennsylvania from an
affiliate of the current Chief Executive Officer of the Company. The lease
expired on December 31, 1999 and was rented on a month-to-month basis until the
mutually agreed termination date of April 30, 2000. Rent expense related to this
lease was $25,704, $76,000 and $76,000 in 2000, 1999 and 1998, respectively.

         The Company also leased certain office and warehouse space at branch
locations in Illinois and New Jersey from an affiliate of the sellers of Battery
Network. During June, 1998 and July, 1999, these leases were terminated by
mutual consent with no further obligation of the Company. Rent expense related
to these leases were $46,901 and $138,734 in 1999 and 1998 respectively.

9.       SEGMENT DISCLOSURE:

         As a result of the decision to exit the Battery Segment, 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 and South America. The Wireless Products
Segment is headquartered in Huntingdon Valley, Pennsylvania and consists of
Advanced Fox Antenna, Cliffco of Tampa Bay, Inc. and AccessorySolutions.com,
Inc. 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, 2000,
1999, and 1998.

         Export sales for the years ended December 31, 2000, 1999 and 1998 were
as follows:

                                       2000             1999            1998
                                       ----             ----            ----
Europe, Middle East & Africa        $ 111,677         $  45,472      $    31,139
Asia & Pacific                          7,387             8,345            8,479
Americas excluding United States      452,857           712,723        1,168,274
                                    ---------         ---------      -----------
Total                               $ 571,921         $ 766,540      $ 1,207,892
                                    =========         =========      ===========

         Receivables from export sales at December 31, 2000, 1999 and 1998, were
approximately $113,802, $313,680, and $224,311 respectively, for the Wireless
Products Segment.


                                      F-19
<PAGE>


10.      QUARTERLY RESULTS (UNAUDITED):

         The following table summarizes quarterly financial data for 2000 and
1999:

(Dollars in thousands)
<TABLE>
<CAPTION>

                                             March 31      June 30    September 30  December 31
                                             --------      -------    ------------  -----------
<S>                                          <C>           <C>        <C>           <C>
2000
----
Net sales ................................   $   7,137    $   7,020    $   7,692    $   8,279
                                             ---------    ---------    ---------    ---------
Gross profit .............................       3,577        3,536        3,734        3,840
                                             ---------    ---------    ---------    ---------
Income from continuing operations ........         174           85          247          320
Income (loss) from discontinued operations        --            (82)        (373)        (124)
                                             ---------    ---------    ---------    ---------
Net income (loss) ........................   $     174    $       3    $    (126)   $     196
                                             =========    =========    =========    =========

Basic income per common share

Income from continuing operations ........   $    0.03    $    0.02    $    0.05    $    0.06
Income (loss) from discontinued operations        0.00        (0.02)       (0.07)       (0.02)
                                             ---------    ---------    ---------    ---------
Net income (loss) ........................   $    0.03    $    0.00    $   (0.02)   $    0.04
                                             =========    =========    =========    =========

Diluted income per common share
Income from continuing operations ........   $    0.03    $    0.02    $    0.05    $    0.06
Income (loss) from discontinued operations        0.00        (0.02)       (0.07)       (0.02)
                                             ---------    ---------    ---------    ---------
Net income (loss) ........................   $    0.03    $    0.00    $   (0.02)   $    0.04
                                             =========    =========    =========    =========

1999
----
Net sales ................................   $   6,146    $   7,159    $   8,405    $   9,943
                                             ---------    ---------    ---------    ---------
Gross profit .............................       3,206        3,489        4,340        4,584
                                             ---------    ---------    ---------    ---------
Income from continuing operations ........         410          484          684          765
Income (loss) from discontinued operations        (260)        (331)        (439)      (4,751)
                                             ---------    ---------    ---------    ---------
Net Income (loss) ........................   $     150    $     153    $     245    $  (3,986)
                                             =========    =========    =========    =========

Basic net income per common share:
Income from continuing operations ........   $    0.09    $    0.10    $    0.14    $    0.15
Income (loss) from discontinued operations       (0.06)       (0.06)       (0.09)       (0.93)
                                             ---------    ---------    ---------    ---------
Net income (loss) ........................   $    0.03    $    0.04    $    0.05    $   (0.78)
                                             =========    =========    =========    =========

Diluted net income per common share:
Income from continuing operations ........   $    0.09    $    0.10    $    0.13    $    0.15
Income (loss) from discontinued operations       (0.06)       (0.06)       (0.08)       (0.91)
                                             ---------    ---------    ---------    ---------
Net income (loss) ........................   $    0.03    $    0.04    $    0.05    $   (0.76)
                                             =========    =========    =========    =========
</TABLE>


                                      F-20
<PAGE>


             INDEPENDENT AUDITORS' REPORT ON ADDITIONAL INFORMATION

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

Our audit at December 31, 1998 and for the year then ended was conducted for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The additional information included on Schedule II on page S-1
is presented for the purpose of additional analysis and is not a required part
of the basic consolidated financial statements. This additional information is
the responsibility of the Company's management. Such information has been
subjected to the auditing procedures applied in our audit of the basic
consolidated financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic consolidated
financial statements taken as a whole.

DELOITTE & TOUCHE LLP
San Diego, California
March 30, 1999


                                      F-21
<PAGE>


                                   SCHEDULE II

                         WIRELESS XCESSORIES GROUP, INC.

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
Description                                  Beginning Balance                 Additions      Deductions      Ending Balance
-----------                            --------------------------------        ---------      ----------      --------------
<S>                                      <C>                  <C>             <C>              <C>               <C>
Inventory reserves                       January 1, 1998       $151,973        $400,097        $458,575          $ 93,495
                                         January 1, 1999         93,495         221,701          32,704           282,492
                                         January 1, 2000        282,492         615,046         373,258           524,280

Allowance for doubtful accounts          January 1, 1998        108,586         191,760         130,029           170,317
                                         January 1, 1999        170,317         182,993         232,843           120,467
                                         January 1, 2000        120,467         647,758         504,949           263,276
</TABLE>


                                       S-1