UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-KSB





FOR
ANNUAL AND TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934


(Mark
One)


x
            Annual
      Report pursuant to Section 13 or 15(d) of the SecuritiesExchange
      Act of 1934.
              For
      the fiscal year ended December 31,
2007.




or




o
            Transition
      Report pursuant to Section 13 or 15(d) of the SecuritiesExchange
      Act of 1934.
              For the transition period from _____________ to
      _____________.







COMMISSION
FILE NO. 0-27996




WIRELESS
XCESSORIES GROUP, INC.


(Exact
name of registrant as specified in its charter)





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





1840
County Line Road, Huntingdon Valley, PA 19006


(Address
of principal executive offices) (Zip Code)





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





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





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





Common
Stock, Par Value $.001 per Share





Title of
Class


American
Stock Exchange





Indicate
by check mark whether the Registrant (1) has filed all reports to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No
o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-KSB is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. o





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





The
number of issued and outstanding shares of the Registrant’s Common Stock net of
Treasury Stock,
par value $.001 per share, on February 29, 2008 was 4,387,598.  The
aggregate market value of the voting stock held by non-affiliates of the
Registrant (computed by reference to the closing price of such stock on the
American Stock Exchange February 29, 2008 of $ 1.40 was approximately $
4,950,604.










PART
I





ITEM 1 –
BUSINESS:


ITEM 1 –
NARRATIVE:





OVERVIEW
& HISTORY:





Wireless
Xcessories Group is a leading provider of cell phone accessories to dealers,
distributors, retailers, agents and airtime carriers throughout the United
States and Canada. We have created a variety of product lines, totaling over
3,000 items designed to appeal to the widest possible spectrum of wholesale
buyers.





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





Our
corporation was formed in 1988 and we have been a public company since
1996.  We consider ourselves to be the largest distributor of
accessories to independent wireless dealers in the United States. Our corporate
website address is Wirexgroup.com.  Some of our other operating
websites are:


www.Wirexgroup.com


www.Oem.wirexgroup.com


www.Bluetooth.wirexgroup.com


www.Getaccessories.net


www.Industrialstrengthcellular.com




PRODUCTS &
SERVICES:


The
majority of our products are manufactured in China, Hong Kong and Taiwan. In
addition, we distribute brand name products such as Plantronics, Jabra, Body
Glove, Samsung, Motorola, BlueTrek, Nokia, Nextel, LG and Blue
Ant.  Our product lines are sold along with comprehensive sales and
marketing programs, and a series of value added services designed to separate
and distinguish us in the minds of wireless resellers.




THESE SERVICES ARE OFFERED
FREE OF CHARGE:


· Airtime
carrier phone and accessories compatible charts


· E-Mail
blast management programs


· Customized
retail packaging


· Sales
training materials


· In store
displays and posters


· Private
Label E-commerce websites that allow customers to offer our full product line
to their end users





We offer
an on-line ordering option to our customers which permits them to view our
current inventory along with our next receive date if an item is out of
stock.





CUSTOMERS:


Our
customer base consists of more than 2,500 independent dealers from a
one-location mall kiosk to multi-store retail franchisers covering 250 locations
and more. In addition, we sell to some of the largest distributors of cell
phones, computers, and infrastructure products. These distributors in turn
resell to airtime carriers, mass retailers, and prepaid phone distributors. In
2006 and 2007 one Customer accounted for 6.5% and 5.2% of net sales,
respectively.  No other customers in either 2006 or 2007 accounted for
more than 5% of net sales.





2


BUSINESS
MODEL:


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





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





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





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





MANAGEMENT
DISCUSSION OF FACTORS THAT HAVE AFFECTED OUR SALES GROWTH:


A) In the
third quarter of 2006, we partnered with two leading Point of Sale Software
companies to integrate our real time inventory with their accounting software
packages.  We are jointly promoting Wireless Xcessories Group to their
wireless dealers throughout the U.S.


B) In early
2007 we introduced our Limited Collection of high quality cases.


C) In March
2007, we introduced our largest ever accessory catalog; approximately 80 pages,
and featuring accessories for over 150 phones.


D) In 2007 we
introduced a line of PDA and SmartPone accessories for Blackberry, Motorola, and
Samsung.


E) In 2007 we
created a carrier direct marketing program, which promotes accessories that are
specific to each United States carrier and its carrier agents.





EMPLOYEES:


Wireless
Xcessories Group employs approximately 78 full time workers divided into
accounting, sales, customer services, graphic design, purchasing/product
development, MIS, quality control, and warehouse picking and packing. Our
5-person management team has been with the company from 2-15 years, with most
managers having 10+ years experience.





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





COMPETITION:


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





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





The
continual introduction of new phone models combined with popularity changes that
can be measured in weeks and months have caused some of the larger distributors
to seek out accessory specialists like Wireless Xcessories Group, Inc. to manage
the selection, packaging and sourcing of their accessory programs.




3


INTELLECTUAL
PROPERTY:


www.Wirexgroup.com


www.Oem.wirexgroup.com


www.Bluetooth.wirexgroup.com


www.Getaccessories.net


www.Industrialstrengthcellular.com




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





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





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





PROPERTIES AND
FACILITIES:


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





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





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





INDUSTRY RISK FACTORS THAT
COULD AFFECT OUR PERFORMANCE:


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


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





FACTORS AFFECTING FUTURE
OPERATING RESULTS:


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





We wish
to take advantage of the “safe harbor” provisions of the Act and are including
this section in our Annual Report on Form 10-KSB in order to do
so.  Forward-looking statements also appear in other sections of this
report.  Statements that are not historical facts, including
statements about management’s expectations for fiscal year 2008 and beyond, are
forward-looking statements and involve various risks and uncertainties. Factors
that could cause the actual results to differ materially from management’s
projections, forecasts, estimates and expectations include, but are not limited
to, the following:





WE MAY NOT SUCCESSFULLY
OFFER ATTRACTIVE MERCHANDISE TO OUR CUSTOMERS:


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





4


WE DEPEND ON OUR
VENDORS:


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





WE FACE CERTAIN RISKS
RELATING TO CUSTOMER SERVICE:


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





WE EXPERIENCE INTENSE
COMPETITION IN OUR MARKETS:


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





WE ARE DEPENDENT ON CERTAIN
KEY PERSONNEL:


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





ITEM 2–PROPERTIES:


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




APPROXIMATE
LEASE


AREA
EXPIRATION




OPERATION
            NATURE
            LOCATION
            (SQ.
      FT.)
            DATEMain
      Facility
            Warehouse
            Huntingdon
      Valley, PA
            52,000
            3/31/2009Main
      Facility
            Office
            Huntingdon
      Valley, PA
            13,100
            3/31/2009





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




5


ITEM 3–LEGAL
PROCEEDINGS:


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





ITEM 4–SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS:


Our
annual meeting of stockholders was held on June 6, 2007. 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
            WITHHOLDStephen
      Rade
            3,785,656
            113,507Christopher
      McConnell
            3,824,990
            77,573Bradley
      T. MacDonald
            3,821,590
            73,623Allan
      Kalish
            3,825,540
            66,323Christopher
      C. Cole
            3,832,840
            74,173





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


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





Proposal
No 2: Proposal to ratify the appointment by our Board of Directors of Bagell,
Josephs, Levine & Company, L.L.C the Company’s independent auditors for the
fiscal year ending December 31, 2007.





For:
3,836,286 / Against: 52,737 / Abstained 10,140





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


6


PART II:




ITEM 5 -
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS:


There
were 64 record holders of the Company’s Common Stock as of February 29, 2008. 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 trades its
Common Stock under the symbol “XWG” on the American Stock
Exchange.


The
following tables set forth the range of high and low closing prices for the
quarters indicated for the Common Stock for the period January 1, 2006 through
December 31, 2007 on the American Stock Exchange.





2007
            HIGH
            LOWFIRST
      QUARTER
            3.23
            2.45SECOND
      QUARTER
            4.15
            2.69THIRD
      QUARTER
            4.15
            2.24FOURTH
      QUARTER
            2.41
            1.492006FIRST
      QUARTER
            7.89
            4.60SECOND
      QUARTER
            6.75
            4.07THIRD
      QUARTER
            5.90
            2.95FOURTH
      QUARTER
            3.74
            2.69








ITEM 6 - SELECTED FINANCIAL
DATA:


INTRODUCTION:





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




The
Selected Financial Data have been derived from the consolidated financial
results for the year ended December 31, 2007 and 2006 audited by Bagell,
Josephs, Levine & Company, L.L.C, respectively, appear only in this
section.





7


SELECTED
FINANCIAL DATA


FISCAL
YEAR ENDED DECEMBER 31,


2007
            
            
            2006($IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) INCOME
      STATEMENT DATA:NET
      SALES
            
            $
            22,503
            
            
            $
            22,869COST
      OF SALES
            
            
            14,845
            
            
            
            15,479GROSS
      PROFIT
            
            
            7,658
            
            
            
            7,390SELLING,
      GENERAL &ADMINISTRATIVE
      EXPENSES
            
            
            6,751
            
            
            
            6,310(OTHER
      INCOME) EXPENSELOSS
      (GAIN) FROM DISPOSITION OF PROPERTY
            
            
            —
            
            
            
            —UNREALIZED
      (LOSS) GAINS ON TRADEABLE SECURITIES
            
            
            (
      222
            )
            
            
            122Dividend
      INCOME AND CAPITALGAINS
      DISTRIBUTION
            
            
            175
            
            
            
            106INTEREST
      INCOME
            
            
            7
            
            
            
            11—
            
            
            
            —INCOME
      BEFORE INCOME TAXES
            
            
            867
            
            
            
            1,319INCOME
      TAX EXPENSE
            
            
            382
            
            
            
            130NET
      INCOME
            
            $
            485
            
            
            $
            1,189NET
      EARNINGS PER SHARE OFCOMMON
      STOCK- BASIC
            
            $
            0.11
            
            
            $
            0.27NET
      EARNINGS PER SHARE OFCOMMON
      STOCK- DILUTED
            
            $
            0.11
            
            
            $
            0.26




BALANCE
SHEET DATA:




AS
      OF DECEMBER 31,2007
            
            
            2006WORKING
      CAPITAL
            
            $
            7,014
            
            
            $
            6,269TOTAL
      ASSETS
            
            
            8,478
            
            
            
            8,029LONG
      TERM DEBT
            
            
            —
            
            
            
            —STOCKHOLDERS’
      EQUITY
            
            
            7,547
            
            
            
            7,075








8


ITEM 7 -
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:





Year
Ended December 31, 2007 (“2007”) Compared to Year Ended December 31, 2006
(“2006”)





Net sales
decreased by 1.7% or $.4 million from $22.9 million in 2006 to $22.5 million in
2007. The decrease in sales is mainly attributable to the following
factors:




·
            Sales
      were impacted, particularly, in the last six months of 2007, by reduced
      volume from three of our largest customers due to a reevaluation of a
      product line directly imported for one of them, the sale of the customers
      business to a carrier, and financial difficulties,
      respectively.


·
            The
      merger of two major carriers (Sprint/Nextel) in late 2006 and its
      continued transitional problems throughout 2007 in the form of delayed and
      /or reduced payments for phone and activation sales, negatively affected
      the purchasing capacity of some of our Customers. This reduced purchasing
      from that portion of our business.


·
            The
      overall cell phone sales and related accessory market in 2007 was sluggish
      at best, resulting in less available funds for our customer base to
      purchase accessory products.


·
            Though,
      our Bluetooth and hands free sales increased from approximately 31% of
      sales in 2006 to 33% of sales in 2007, this growth, was not sufficient to
      offset an overall decrease in our core aftermarket product
      offerings.





Gross
profit increased by $ .3 million from $7,390,000 in 2006 to $ 7,658,000 in 2007,
but as a percentage of sales increased from 32.3% to 34.0%.  The
increase in gross profit percentage resulted from the following:




·
            The
      Company improved its overall margins on its non Bluetooth and hands free
      product lines as a result of high margin contributions on new product
      offerings such as cases, pouches and batteries. We limited the amount of
      special discounted pricing and maintained the overall integrity of our
      pricing in a competitive market.


·
            The
      company incurred much lower freight cost in 2007 compared to 2006 in
      relation to Far East Shipments as a result of improved logistics, timing
      of shipments and overall
efficiencies.


·
            An
      offsetting factor was the continued growth in the percentage of our total
      sales of lower margin Bluetooth products in 2007 as compared to
      2006.





Selling,
general and administrative (“SG&A”) expenses increased by 7.9% or $.5
million in 2007, from $6,310,000 in 2006 to $ 6,751,000 in 2007.  As a
result, total SG&A expenses as a percentage of sales increased from 27.6% in
2006 to 30.0% in 2007. A good portion of the increase in SG&A dollars and
percentage of sales was related to expenditures to bolster the sales effort
including the expansion and upgrade of our marketing and sales support staffs,
catalogs, mailings and marketing support materials. We also upgraded our
accounting and I/T departments capabilities to support our efforts to enhance
our internal control and support our Sarbanes-Oxley compliance efforts.
Additionally, we added a software programmer to improve our website and on-line
ordering capabilities.




The
Company also experienced higher costs in such areas as warehouse labor and
supplies expense as well as added customer credit card processing
costs.




The
Company gives full attention to cost cutting, particularly of non-revenue
generating General and Administrative expenses such as public relations and
corporate costs, and professional fees. Additionally, total depreciation charges
are down from approximately $213,000 in 2006 to $160,000
in 2007 as a result of limiting our capital expenditures over the past several
years.





Interest
income decreased from $11,000 in 2006 to $7,000 in 2007.  This is due
mainly to the drop in interest rates earned on interest bearing certificates in
2007.





The
Company’s effective income tax rate in calculating an expense on the net income
on 2007 would have been 44.0% or a total expense of $ 382,277.The 2007 income tax
expense includes a state tax audit adjustment net of the effect Federal income
tax of approximately $20,000.00.


As of
December 31, 2006, the Company applied a total of $401,946, consisting of tax
timing differences from its tax allowances against its 2006 income tax expense
resulting in an expense of $129,939 or 9.8% of taxable income. Our effective
income tax rate in 2007 and 2006 was 44% and 40%,
respectively.





9


NEW ACCOUNTING
STANDARDS:





SIGNIFICANT ACCOUNTING
POLICIES:





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





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





LIQUIDITY AND CAPITAL
RESOURCES:


Our
requirement for capital is to fund (i) sales growth and (ii) financing for
possible acquisitions (iii) Repurchase of the Company’s Common Stock, and (iv)
Capital Expenditures mainly related to business system upgrades. Our primary
source of financing during 2007 and 2006 were cash flow from
operations.





Our
working capital as of December 31, 2007 and 2006 was $ 7,014,317 and $
6,269,281, respectively. Net cash provided by operating activities for the years
ended December 31, 2007 and 2006 was $ 278,971 and $358,073, respectively. In
2007, we showed cash from operations of $ 983,349 from our net income of $
484,782 as adjusted for non-cash items of depreciation and amortization of $
160,124 bad debt provision of $ 74,400, an unrealized loss on investment of
$219,614 and Common Stock issued to Directors, Officers, employees and an
outside consultant of 48,365 offset in part by increases in deferred income
taxes of $ 161 and unrealized gains recognized on tradable securities of $
3,775.





Changes
in assets and liabilities in 2007 resulted in a net use of $ 704,378 from
increases in tradable Securities, Inventory and by a decrease in Accounts
payable and accrued expenses of $719,113, 384,378, and $23,538 respectively,
offset in part by a decreases in Accounts Receivable and Prepaid expenses and
Other Assets of $118,198 and $ 304,453, respectively.




The bulk
of the decrease in prepaid expense in 2007 was attributable to the Company
collecting its advances to a foreign manufacturer under a distributor agreement
of $286,616 in 2007.





Net cash
used in investing activities in 2007 of $ 109,078 resulted from capital
expenditures of $141,137 principally for upgrades to our business system
including improvements to our website and on-line ordering capabilities and
expenditures to enhance I/T controls.


Net cash
used in investing activities for the 12 months ended December 31, 2006 was
$477,047, including approximately $165,000 for the implementation and
installation of an upgraded business system including software and hardware cost
during the last week of June, 2006 and $52,618 of assorted computer equipment
and peripherals. Additionally, the Company purchased 28,500 shares at a value of
$7.00 per share in Euro dollars of common stock of Anycom Technologies AG,
Monchengladbach (Germany) Inc., a German based manufacturer of Bluetooth with
sales operations in the United States, for a total investment of approximately
$259,000 in US dollars





10


Cash used
in financing activities in 2007 of $ 60,606 resulted from the repurchase of
39,927 shares of
its common stock at an average price of approximately $ 1.52 per
share.




Cash used
in financing activities in 2006 of $335,425 resulted from the repurchase of
100,000 shares of its common stock at an average price of approximately $3.35
per share.





Based
upon its present plans, management believes that operating cash flow, and
available cash will be adequate to finance the stock repurchase program, to meet
the working capital cash needs of the Company and to meet anticipated capital
expenditure needs during the 12 months ending December 31, 2008. Although we
would like to issue shares of Common Stock as our primary method of financing
acquisitions, we anticipate that additional funds may be required to
successfully implement any acquisition program, and will use various methods to
finance acquisitions, including raising new equity capital. There is no
guarantee that such equity or debt financing will be available to us in the
future.





COMMITMENT:


We lease
warehouse and administrative office space and copy machines with non-cancelable
operating lease agreements, which expire at various dates.  Certain
leases for warehouse and other space contain rental escalation clauses based on
the Consumer Price Index. Future minimum lease payments including base rent,
common area charges, and lease required real estate tax charges non-cancelable
operating leases for the year ending December 31, 2007 are as
follows:





2008
            
            $
            480,6182009
            
            $
            161,494Thereafter
            
            
            —Total
            
            $
            642,112





SEASONALITY
AND INFLATION:


In fiscal
years 2007 and 2006 the Company did approximately 46% and 51% respectively, of
its sales in the second half of the year. The 2006 results reflect the more
traditional pick up of additional business in the months preceding the December
Holiday season.





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




11


GRAPHS:


Total
Revenue – Quarterly


Dollars
in Millions





$5.485
            $5.857
            $5.670
            $5.857
            $6.073
            $6.080
            $5.021
            $5.329QTR
            1
            2
            3
            4
            1
            2
            3
            4FY
            06
            06
            06
            06
            07
            07
            07
            07





Gross
Profit - Quarterly


Dollars
in Millions




$2.096
            $1.972
            $1.582
            $1.740
            $2.118
            $1.947
            $1.809
            $1.784QTR
            1
            2
            3
            4
            1
            2
            3
            4FY
            06
            06
            06
            06
            07
            07
            07
            07





Operating
Cash Flow - Quarterly


Dollars
in Thousands




$(147)
            $(94)
            $(323)
            $110
            $344
            $(33)
            $438
            $(640)QTR
            1
            2
            3
            4
            1
            2
            3
            4FY
            06
            06
            06
            06
            07
            07
            07
            07





Earnings
per Share - Quarterly


Dollars




$0.10
            $0.09
            $0.03
            $0.05
            $0.06
            $0.04
            $0.00
            $0.00QTR
            1
            2
            3
            4
            1
            2
            3
            4FY
            06
            06
            06
            06
            07
            07
            07
            07





QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:





Interest
Rate Risk - The Company did not have any interest rate risk at December 31,
2007, as there was no outstanding debt owed by the Company other than fixed
interest capital lease obligations.





Foreign
Currency Risk - We do not use foreign currency forward exchange contracts or
purchased currency options to hedge local currency cash flows or for trading
purposes. All sales arrangements with international customers and suppliers are
denominated in U.S. dollars. We purchase approximately 50% of our products from
manufacturers located overseas, principally in the Far East. The deflation of
the U.S. dollar against the major Asian currencies could, therefore, cause an
increase in the cost of our products and adversely affect our results of
operations or financial condition.





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




As of
December 31, 2007 and 2006 there were no changes in or disagreements with Bagell,
Josephs, Levine & Company LLC on accounting or financial
disclosures.


12


PART
III:





ITEM 10 -
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY:


The
following table sets forth as of February 29, 2008, the name of each of our
directors and executive officers, his principal occupation and the nature of all
positions and offices with us held by him. Our directors will hold office until
the next Annual Meeting of Stockholders.





Name
            Age
            Office
            First
      Became DirectorStephen
      Rade
            70
            President,
      Chief Executive Officer and Chairman of the Board
            1996Christopher
      F. McConnell
            54
            Director
            1998Ronald
      E. Badke
            62
            Chief
      Financial Officer and Secretary
            1995Allan
      Kalish
            82
            Director
            1998Christopher
      C. Cole
            52
            Director
            2000Bradley
      T. MacDonald
            60
            Director
            1999Dawn
      Kenderdine
            38
            Vice
      President and Business Development Manager





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





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





Mr.
McConnell has been a director of the Company since December 1998 while holding
the title of Chairman of the Board through June 2002. In addition, he is
co-founder and President of Adondo Corporation, a company focused on Internet
telephony, and enhancing communications through artificial intelligence and
real-time streaming media. Adondo Phone Portals allow companies to
distribute their audio content, including live streams, broadly and efficiently
over any telephone. Mr. McConnell also co-founded CFM Technologies, Inc., a
semiconductor capital equipment company and until it merged into Matson
technologies in March 2001. He currently serves as a director of Point 5
Technologies. Mr. McConnell holds eighteen U.S patents in semiconductor
processing and wireless communications.





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





Mr.
Kalish has been a director since 1998. He is the owner of Kalish &
Associates, a consulting firm specializing in marketing, advertising and public
relations, which he founded in 1986. Kalish & Associates serves advertisers,
marketers and advertising agencies throughout the country, including three New
York Stock Exchange companies. Prior to founding Kalish & Associates, Mr.
Kalish managed Kalish & Rice, Inc., one of the largest advertising agencies
in Philadelphia. In 2002, he co-founded WorkZone, LLC, a software company which
markets collaboration, communication and project management tools
internationally. He serves as Chairman of WorkZone. 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.





13


Mr.
MacDonald is currently the Chairman of the Board of Medifast, Inc.  Mr.
MacDonald has been Chairman of the Board of Medifast, Inc. since January 1998
and was also Chief Executive officer until March of 2007.  He was the
principal architect of the turnaround of Medifast and formulated the “Direct to
Consumer” business models that are the primary drivers of Revenue to this day.
He also was theco-founder of Take Shape for Life and acquired the Clinic operations in 2002.
During his time as CEO, he managed the company to 29 consecutive quarters of
profits and improved shareholders equity from negative $4 million to over $27
million in less than seven years. He also increased the Company’s market
cap from less than $1 million to over $100 million and listed the company on the
NYSE. In 2006, Mr. MacDonald received the prestigious and audited Ernst and
Young award of “Entrepreneur of the Year” for the state of Maryland in the
consumer products category.  Also, he helped lead the Company to national
recognition in Forbes Magazine ranking Medifast 28thof the top 200 small
companies in America. From 1991 through 1994, Colonel MacDonald returned to
active duty to be Deputy Director and Chief Financial Officer of the
Retail, Food, Hospitality and Recreation Businesses for the United States Marine
Corps.  Prior thereto, Mr. MacDonald served as Chief Operating Officer of
the Bonneau Sunglass Company, President of Pennsylvania Optical Co., Chairman
and CEO of MacDonald and Associates, which had major financial interests in a
retail drug, consumer candy, and pilot sunglass companies.  Mr. MacDonald
was national president of the Marine Corps Reserve Officers Association and
retired from the United States Marine Corps Reserve as a Colonel in 1997, after
27 years of service.  He has been appointed to the Defense Advisory Board
for Employer Support of the Guard and Reserve (ESGR) He also serves on the
Board of Directors of the Marine Corps Reserve Toys for Tots Foundation and is
on the Board of Trustees of Villa Julie College of Stevenson, Maryland and
the Institute of Notre Dame, the oldest Catholic girl’s urban high school in
Maryland, located in Baltimore.





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





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





COMPLIANCE
WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACTS OF 1934


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





To the
best of our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations with respect to the year ended
December 31, 2007, our officers, directors and greater than ten percent
shareholders were in compliance with all applicable Section 16(a) filing
requirements.





ITEM 11 –
EXECUTIVE COMPENSATION:


The
following table sets forth for the years ended December 31, 2007, 2006, and
2005; the compensation for services rendered in all capacities to the Company
and subsidiaries by the Chief Executive Officer, the Company’s other executive
officer and key management personnel.





14


SUMMARY
COMPENSATION TABLE:





NAME AND PRINCIPAL
      POSITION
            YEAR
            SALARYStephen
      Rade
            2007
            $300,000Chief
      Executive Officer
            2006
            $300,000President
      and Chairman of the Board
            2005
            $298,000Ronald
      E. Badke
            2007
            $130,803Chief
      Financial Officer and
            2006
            $128,308Secretary
            2005
            $126,000Susan
      Rade
            2007
            $183,042Vice
      President
            2006
            $183,042Sales
      Account Manager
            2005
            $183,942Dawn
      Kenderdine
            2007
            $146,443New
      Business Development Manager
            2006
            $130,190Purchasing
      Director
            2005
            $119,756





EMPLOYMENT
AGREEMENTS





In August
2005, the Company entered into an employment agreement with its Chairman of the
Board and Chief Executive Officer, Stephen Rade commencing on September 1, 2005
and expiring on August 31, 2008. The agreement calls for an annual salary of $
250,000 and an annual bonus of $ 50,000 predicated on Mr. Rade achieving
certain financial targets. The agreement also provides that Mr. Rade can receive
5% of the value of any acquisitions under conditions stipulated in the
contract





COMPENSATION
OF DIRECTORS:





In 2007,
the Directors were paid a flat $2,500 for attendance at Board meetings and
committee meetings for the year. In addition, in 2007, each Director received a
grant of 2,427 shares of the Company’s Common Stock totaling a fair market value
at the grant date of December 4, 2007 of approximately $5,000.




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 could grant stock options to
officers, key employees, directors, and independent consultants of the Company.
The plan expired in late 2005 so no further open shares may be issued under the
plan.





The
following table sets forth the details of the options held at the end of the
year December 31, 2007 by the executive officers set forth in the Summary
Compensation Table. Mr. Rade, Mr. Badke and Ms. Kenderdine were not granted
options under the Plan during the year 2006 or 2007 , but 10,000 option shares
were granted to Dan Kenderdine our facilities manager and husband of executive
officer Dawn Kenderdine prior to 2006 and accordingly is listed below as part of
Ms. Kenderdine holdings.




FISCAL
YEAR END OPTION VALUES
 NUMBER OF
SHARES UNDERLYING
 UNEXERCISED
OPTIONS AT FISCAL
 YEAR
END
  Name
              Exercisable
      Shares
              Weighted
      Exercise Price
              Option
      Market Value
              Option
      Underlying ValueRonald
      E. Badke
              20,000
              $1.44
              $31,000
              $
      2,200Dawn
      Kenderdine
              10,000
              $4.68
              $15,500
              $0
 
 (1) The
market value used in the above chart was $1.67, which represents the closing
price of the Company’s Common Stock as of the close of business on December 31,
2007.
   
 On March
25, 2008, The Board of Directors accepted the resignation of Mr. Bradley Mac
Donald as a member of the Board of Directors of Wireless Xcessories Group, Inc
and Chairman of its Audit committee effective March 12, 2008. Mr. Mac Donald
cited his desire to reduce his work load, and in particular, his numerous
outside business commitments as the reason for his resignation. At this time,
though there is no immediate replacement in mind, the Company’s Board of Directors
are exploring a number of options.


15


ITEM 12 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The
following table sets forth certain information as of February 29, 2008, as
supplied to the Company, regarding the beneficial ownership of the Common Stock
by all persons known to the Company who own more than 5% of the outstanding
shares of the Company’s Common Stock, each director of the Company, each
executive officer of the Company named in the Summary Compensation Table
included elsewhere in this report and all executive officers and directors as a
group. Unless otherwise indicated, based on information provided to the Company
by the directors, executive officers and principal shareholders, the persons
named in the table below have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by
them.





NAME*
            NUMBER
      OF SHARES
              BENEFICIALLY OWNED
      (1)
            PERCENTAGE
      (2)Christopher
      F. McConnell (3)
            50,421
            1.1%Stephen
      Rade
            763,349
            17.4%Ronald
      E. Badke (4)
            31,200
            —**Christopher
      C. Cole (5)
            73,421
            1.7%Allan
      Kalish (6)
            54,421
            1.2%Bradley
      T. MacDonald
            13,421
            —**Dawn
      Kenderdine (7)
            61,500
            1.4%Directors
      and Officers as a group ((7) Persons) (8)
            1,047,733
            23.9%




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


**Less
than 1%.


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


(2) Percentage
ownership is based on 4,387,598 shares of Common Stock outstanding net of
Treasury Stock on February 29, 2008. For purposes of computing the percentage of
outstanding shares held by each such person or group of persons named above, any
security which such person or group of persons has the right to acquire within
60 days is deemed to be outstanding, but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.


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


(4) Includes
exercisable options to purchase 20,000 shares.


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


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


(7) Includes
options to purchase 10,000 shares.


(8) Includes
exercisable options to purchase 163,281 shares.




ITEM 13 -
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


We employ
Susan Rade, wife of Stephen Rade, current CEO, as a high volume and senior sales
person with certain administrative functions. In this role, Mrs. Rade earns the
bulk of her compensation as part of our sales incentive commission programs
earning $­­183,042 and $183,942  in the twelve months December
31, 2007 and 2006, respectively, including draws, commission and a $36,000
salary for administrative duties. We employ Dan Kenderdine, husband of Dawn
Kenderdine, as our Facilities Manager since mid 2004. Mr. Kenderdine earns the
bulk of his compensation from salary and bonuses earning $64,895 for the year
ended December 31, 2007 and $ 52,273 for the year ending December 31,
2006.





ITEM 14 -
CONTROLS AND PROCEDURES


EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES


Our
principal executive officer and principal financial officer have evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13(a)-15e and 15(d) - 15(e) of the Securities Exchange Act of 1934) as of
December 31, 2007, including controls and procedures to timely alert management
to material information relating to the Company and its subsidiaries required to
be included in our periodic SEC filings. Based on such evaluation, they have
concluded that, as of such date, our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in our
Exchange Act reports is recorded, processed, summarized and reported within the
time frames specified in applicable SEC rules and forms.




INTERNAL
CONTROL over Financial Reporting


(a)
Management’s Annual Report on Internal Control over FinancialReporting


Internal
control over financial reporting (as defined in Rules 13(a)-15e and 15(d) -
15(e) of the Securities Exchange Act of 1934) refers to the process designed by,
or under the supervision of, our Chief Executive Officer and Chief Financial
Officer, and effected by our board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Management is responsible for
establishing and maintaining adequate internal control over our financial
reporting.


We have
evaluated the effectiveness of our internal control over financial reporting as
of December 31, 2007. The evaluation was performed using the internal control
evaluation framework developed by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on such evaluation, management concluded that, as
of such date, our internal control over financial reporting was
effective.





CHANGES
IN INTERNAL CONTROLS:


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




16


PART
IV








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








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





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





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





ITEM 16 -
PRINCIPAL ACCOUNTANT FEES AND SERVICES





AUDIT AND
NON-AUDIT FEES:





For the
years ended December 31, 2006 and 2007, fees billed for services performed by
Bagell, Josephs, Levine & Company, L.L.C., the Company’s independent
auditor, charged to the Company for the annual certified audits, for 10Q filings
for the quarters ended March 31, June 30 and September 30, 2006 and 2007 and
miscellaneous services, were as follows:





FISCALYEAR 2006
            
            
            FISCAL
      YEAR 2007Annual
      certified audit
            
            $
            38,000
            
            
            $
            45,00010QSB
      reviews
            
            $
            22,000
            
            
            $
            22,000Other
      charges
            
            
            —
            
            
            
            —TOTAL
            
            $
            60,000
            
            
            $
            67,000





All above
charges were included as an expense to the Company in the respective years
listed above.


17


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS





PAGEREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2CONSOLIDATED
      BALANCE SHEETS AS OF DECEMBER 31, 2007 AND 2006
            F-3CONSOLIDATED
      STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2007 AND
      2006
            F-5CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007
      AND 2006
            F-6CONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2007 AND
      2006
            F-7,
      F-8NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
            F-9



















F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board of
Directors and Stockholders


Wireless
Xcessories Group, Inc.


1840
County Line Road


Huntingdon
Valley, PA 19006





We have
audited the accompanying consolidated balance sheets of Wireless Xcessories
Group, Inc. as of December 31, 2007 and 2006, and the related consolidated
statements of income, stockholders’ equity and cash flows for each of the years
in the two-year period ended December 31, 2007.  Wireless Xcessories
Group Inc.’s management is responsible for these financial
statements.  Our responsibility is to express an opinion on these
financial statements based on our
audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, 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. as of December 31, 2007 and 2006, and the results of its operations and its
cash flows for each of the years in the two-year period ended December 31, 2007
in conformity with accounting principles generally accepted in the United States
of America.





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


Bagell,
Josephs, Levine & Company, L.L.C.


Marlton,
NJ 08053





February
29, 2008




F-2


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31, 2007 AND 2006


ASSETS





2007
            
            
            2006CURRENT
      ASSETSCash
      and cash equivalents
            
            $
            428,209
            
            
            $
            318,922Investment
      in Tradable Securities
            
            
            2,857,880
            
            
            
            2,134,992Accounts
      receivable (net of allowance for doubtful accounts of $ 90,280 and
      $89,205, respectively
            
            
            1,679,984
            
            
            
            1,872,582Inventories
            
            
            2,472,724
            
            
            
            2,088,346Prepaid
      expenses and other assets
            
            
            255,058
            
            
            
            260,220Current
      portion of deferred income taxes
            
            
            129,531
            
            
            
            127,535Advances
      to foreign manufacturer under distributor agreement
            
            
            —
            
            
            
            286,616Federal
      and State prepaid taxes
            
            
            121,990
            
            
            
            134,665Total
      current assets
            
            
            7,945,376
            
            
            
            7,223,878PROPERTY
      AND EQUIPMENT – Net
            
            
            288,692
            
            
            
            339,738INVESTMENTS
            
            
            39,815
            
            
            
            259,429LONG-TERM
      PORTION OF DEFERREDINCOME
      TAXES
            
            
            167,095
            
            
            
            168,930OTHER
      ASSETS
            
            
            37,230
            
            
            
            37,230Total
      assets
            
            $
            8,478,208
            
            
            $
            8,029,205














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


F-3


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS (CONTINUED)


DECEMBER
31, 2007 AND 2006





LIABILITIES
AND STOCKHOLDERS’ EQUITY


2007
            
            
            2006CURRENT
      LIABILITIESAccounts
      payable
            
            $
            677,314
            
            
            $
            792,141Accrued
      payroll and related benefits
            
            
            147,694
            
            
            
            133,921Other
      accrued expenses
            
            
            106,051
            
            
            
            28,535Total
      current liabilities
            
            
            931,059
            
            
            
            954,597STOCKHOLDERS’
      EQUITYPreferred
      stock, par value $.001, 1,000,000 shares authorized, no shares issued or
      outstandingCommon
      stock, par value $.001, 10,000,000 shares authorized, 5,373,080 issued in
      both 2007 and 2006
            
            
            5,373
            
            
            
            5,373Additional
      paid-in capital
            
            
            11,477,844
            
            
            
            11,453,604Accumulated
      deficit
            
            
            (3,156,090
            )
            
            
            (3,640,872
            )Treasury
      stock, at cost, 985,409 and 958,958 shares, respectively
            
            
            (779,978
            )
            
            
            (743,497
            )Total
      stockholders’ equity
            
            
            7,547,149
            
            
            
            7,074,608Total
      liabilities and stockholders’ equity
            
            $
            8,478,208
            
            
            $
            8,029,205




















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


F-4


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


FOR THE
YEARS ENDED DECEMBER 31, 2007 AND 2006




2007
            
            
            2006Net
      sales
            
            $
            22,503,288
            
            
            $
            22,869,199Cost
      of sales
            
            
            14,845,538
            
            
            
            15,479,073Gross
      profit
            
            
            7,657,750
            
            
            
            7,390,126Selling,
      general and administrative expenses
            
            
            (6,751,031
            )
            
            
            (6,310,499
            )Income
      from operations
            
            
            906,719
            
            
            
            1,079,627Other
      Income (Expense):Unrealized
      (Loss) gains on Tradable Securities
            
            
            (221,720
            )
            
            
            122,550Dividend
      income and Capital Gains Distributions
            
            
            175,194
            
            
            
            106,187Interest
      income
            
            
            6,866
            
            
            
            11,079Income
      before Income taxes
            
            
            867,059
            
            
            
            1,319,443Income
      tax expense
            
            
            382,277
            
            
            
            129,939Net
      Income
            
            $
            484,782
            
            
            $
            1,189,504Earnings
      per common share –Basic:  Net
      Income
            
            $
            0.11
            
            
            $
            0.
      27Diluted:  Net
      Income
            
            $
            0.11
            
            
            $
            0.
      26Weighted
      average number of common shares outstanding – Basic
            
            $
            4,415,727
            
            
            $
            4,464,710Weighted
      average number of common shares outstanding – Diluted
            
            $
            4,565,508
            
            
            $
            4,627,940








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


F-5


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR THE
YEARS ENDED DECEMBER 31, 2007 AND 2006




Common
      Stock
            
            
            Paid-in
            
            
            Accumulated
            
            
            Treasury
      Stock
            
            
            TotalShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            Shares
            
            
            Amount
            
            
            equityBalance
      December 31, 2005
            
            
            5,343,080
            
            
            $
            5,343
            
            
            $
            11,411,124
            
            
            $
            (4,830,376
            )
            
            
            (861,385
            )
            
            $
            (413,072
            )
            
            $
            6,173,019Stock
      Issued
            
            
            30,000
            
            
            
            30
            
            
            
            42,480
            
            
            
            
            
            
            
            2,427
            
            
            
            5,000
            
            
            
            47,510Net
      Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,189,504
            
            
            
            
            
            
            
            
            
            
            
            1,189,504Stock  repurchased
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (100,000
            )
            
            
            (335,425
            )
            
            
            (335,425
            )Balance
      December 31, 2006
            
            
            5,373,080
            
            
            $
            5,373
            
            
            $
            11,453,604
            
            
            $
            (3,640,872
            )
            
            
            (958,958
            )
            
            $
            (743,497
            )
            
            $
            7,074,608Net
      Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            484,782
            
            
            
            
            
            
            
            
            
            
            
            484,782Stock
      issued
            
            
            
            
            
            
            
            
            
            
            24,240
            
            
            
            
            
            
            
            13,476
            
            
            
            24,125
            
            
            
            48,365Stock
      repurchased
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (39,927
            )
            
            
            (60,606
            )
            
            
            (60,606
            )Balance
      December 31, 2007
            
            
            5,373,080
            
            
            $
            5,373
            
            
            $
            11,477,844
            
            
            $
            (3,156,090
            )
            
            
            (985,409
            )
            
            $
            (779,978
            )
            
            $
            7,547,149





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


F-6


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR THE
YEARS ENDED DECEMBER 31, 2007 AND 2006





2007
            
            
            2006OPERATING
      ACTIVITIES:Net
      Income
            
            $
            484,782
            
            
            $
            1,189,504Adjustments
      to reconcile net income to net cash provided by operating
      activities:Unrealized
      Losses on Investments
            
            
            219,614
            
            
            
            —Unrealized
      Gains on Tradable Securities
            
            
            (3,775
            )
            
            
            (122,550
            )Depreciation
      and amortization
            
            
            160,124
            
            
            
            209,259Provision
      for doubtful accounts
            
            
            74,400
            
            
            
            90,677Common
      Stock issued to Directors, Officer and employees
            
            
            44,240
            
            
            
            47,510Common
      Stock issued to Consultants
            
            
            4,125
            
            
            
            —Deferred
      Income taxes
            
            
            (161
            )
            
            
            (195,587
            )Changes
      in assets and liabilities:Tradable
      Securities
            
            
            (719,113
            )
            
            
            (102,071
            )Accounts
      Receivable
            
            
            118,198
            
            
            
            (230,442
            )Inventories
            
            
            (384,378
            )
            
            
            10,021Prepaid
      expenses and other assets
            
            
            304,453
            
            
            
            (339,792
            )Accounts
      payable and accrued expenses
            
            
            (23,538
            )
            
            
            (198,456
            )Net
      cash provided by operating activities
            
            
            278,971
            
            
            
            358,073INVESTING
      ACTIVITIES:Purchases
      of property and equipment, net
            
            
            (109,078
            )
            
            
            (217,618
            )Investment
      in common stock of foreign distributor
            
            
            —
            
            
            
            (259,429
            )Net
      cash (used in) investing activities
            
            
            (109,078
            )
            
            
            (477,047
            )








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











F-7


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)


FOR THE
YEARS ENDED DECEMBER 31, 2007 AND 2006





2007
            
            
            2006FINANCING
      ACTIVITIES:Repurchase
      of common stock
            
            $
            (60,606
            )
            
            $
            (335,425
            )Net
      cash (used) in financing activities
            
            
            (60,606
            )
            
            
            (335,425
            )NET
      INCREASE DECREASE) IN CASH ANDCASH
      EQUIVALENTS
            
            
            109,287
            
            
            
            (454,399
            )CASH
      & CASH EQUIVALENTS - BEGINNING OF YEAR
            
            
            318,922
            
            
            
            773,321CASH
      AND CASH EQUIVALENTS - END OF YEAR
            
            $
            428,209
            
            
            $
            318,922SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during year for:Income
      taxes
            
            $
            363,000
            
            
            $
            562,182Supplemental
      Disclosure of Non-Cash Activity:Common
      Stock issued to Directors, Officer and Employee
            
            $
            44,240
            
            
            $
            47,510Common
      Stock issued to Consultants
            
            $
            4,125
            
            
            $
            —

















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


F-8


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006








NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





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





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





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





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





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











F-9


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





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





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





The
Company maintains a reserve for potential credit losses. In 2006 and 2007 the
Company had one Customer accounted for 6.5% and 5.2% of sales, respectively. No
other customers in either 2006 or 2007 accounted for more than 5% of net
sales.





In 2007,
the Company purchased approximately 55% of its products from foreign sources,
principally the Far East and 45% from domestic sources. One Foreign vendor
accounted for approximately 22% of total purchases in 2007. No other vendor
accounted for 10% or more of our purchases in 2007.





A Far
East supplier accounted for approximately 26.7% of total purchases in 2006. No
other vendor accounted for 10% or more of our purchases in 2006.





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


F-10


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





improvements
are amortized over the shorter of their estimated useful lives or the terms of
their leases. Depreciation and amortization expense was $ 160,124 and $209,259
in 2007 and 2006 respectively, and is included in selling, general and
administrative expense in the consolidated statements of
operations.





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





We
uniformly warrant most of our products from defectives and provide limited stock
rotation rights on selected product within 60 days of purchase from our
Customers. The Company total percentage of Customer returns is less than 3.0% of
its net sales and the Company provides reserves and allowances to provide for
this exposure, which are applied against net sales.





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





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





Earnings
per share- Basic earning per share (EPS) is computed using the weighted average
number of common shares outstanding for the period while diluted EPS is computed
assuming conversion of all dilutive securities such as options.




F-11


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Included
below is a reconciliation of shares for the basic and diluted EPS
computations.




2007
            
            
            2006Basic
      EPS Shares
            
            
            4,415,727
            
            
            
            4,464,710Dilutive
      effect of stock options
            
            
            149,781
            
            
            
            163,230Diluted
      EPS shares
            
            
            4,565,508
            
            
            
            4,627,940





Options
to purchase 170,781 and 172,781 shares with exercise prices ranging from $.28 to
$4.68 respectively were outstanding at December 31, 2007 and 2006 respectively,
which shares were included in the computation of diluted EPS.





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





Employee
Stock Options-The Company applies Accounting Principles Board Opinion No. 25
(“APB No. 25”), “Accounting for Stock Issued to Employees,” which recognizes
compensation costs based on the intrinsic value of an equity instrument. The
Company has applied APB No. 25 to its stock compensation awards to employees and
has disclosed the required pro forma effect on net income (loss) income per
share in accordance with the provisions of SFAS No. 123, “Accounting for
Stock-Based Compensation” and has adopted the enhanced disclosure provisions of
SFAS No. 148 “Accounting for Stock-Based Compensation- Transition and
Disclosure, an amendment of SFAS No. 123” (See Note 5).










F-12


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





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





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







RECENTLY
ISSUED AND PROPOSED ACCOUNTING STANDARDS




The
following are accounting standards adopted or issued in 2007 that could have an
impact to our Company.




In July 2006, the FASB
issued FASB Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes—an interpretation of FASB
Statement No. 109”(“FIN 48”), which became effective
for the Company on January 1, 2007. The Interpretation prescribes a recognition
threshold and a measurement attribute for the financial statement recognition
and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be
recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. The amount recognized is measured as the
largest amount of benefit that is greater than 50 percent likely of being
realized upon ultimate settlement. For 2007, there were no tax positions taken
or expected to be taken in a tax return by the company that would require a
recognition threshold and a measurement as outlined in this FASB
Interpretation No 48.




F-13


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




In
September 2006, the
FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements,”which defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. SFAS No. 157 appliesunder other
accounting pronouncements that require or permit fair value measurements, but it
does not require any new fair value measurements. SFAS No. 157 is effective for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. SFAS No. 157 could impact fair values assigned to assets and
liabilities in any future acquisition.


Assets and Financial
Liabilities-including an amendment of SFAS No. 115,”which permits an entity
to measure certain financial assets and financial liabilities at fair
value. Entities that elect the fair value option will report unrealized gains
and losses in earnings at each subsequent reporting date. SFAS No. 159 is
effective as of the first fiscal year beginning after November 15, 2007. At this
time, we do not expect to adopt the fair value option for assets and
liabilities; however, future events and circumstances may impact that
decision.




In December 2007, the FASB
issued SFAS No. 141 (Revised 2007), “Business
Combinations.”SFAS No. 141(R)
will significantly change the accounting for business combinations. Under
SFAS No. 141(R), an acquiring entity will be required to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value with limited exceptions. SFAS No. 141(R) will change the accounting
treatment for certain specific items, including:




·
            Acquisition
      costs will be generally expensed as
incurred;


·
            Assets
      that an acquirer does not intend to use will be recorded at fair value
      reflecting the assets’highest and best
      use.


·
            Noncontrolling
      interests (formerly known as “minority interests” — see Statement 160
      discussion below) will be valued at fair value at the acquisition
      date;


·
            Acquired
      contingent liabilities will be recorded at fair value at the acquisition
      date and subsequently measured at either the higher of such amount or the
      amount determined under existing guidance for non-acquired
      contingencies;


·
            In-process
      research and development will be recorded at fair value as an
      indefinite-lived intangible asset at the acquisition
  date;







F-14


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




·
            Restructuring
      costs associated with a business combination will be generally expensed
      subsequent to the acquisition date;
and


·
            Changes
      in deferred tax asset valuation allowances and income tax uncertainties
      after the acquisition date generally will affect income tax
      expense.




SFAS No.
141(R) also includes a substantial number of new disclosure requirements. SFAS
No. 141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Earlier adoption is prohibited.
We are currently evaluating the impact of this statement on our financial
statements.




In
December 2007, the FASB also issued SFAS No. 160, “Noncontrolling Interests
In Consolidated Financial Statements – An Amendment of Accounting Research
Bulletin No. 51,” the provisions of which are effective for periods beginning
after December 15, 2008. This statement requires an entity to classify
noncontrolling interests in subsidiaries as a separate component of
equity. Additionally, transactions between an entity and noncontrolling
interests are required to be treated as equity transactions. We are currently
evaluating the impact of this statement on our financial
statements.





NOTE 2 -
PROPERTY AND EQUIPMENT - NET




Property
and equipment consists of the following:




DECEMBER 31,2007
            
            
            2006Machinery
      and equipment
            
            $
            511,882
            
            
            $
            2,255,911Furniture
      and fixtures
            
            
            396,993
            
            
            
            419,979Leasehold
      improvements
            
            $
            253,482
            
            
            
            253,482$
            1,162,357
            
            
            $
            2,929,372Less
      accumulated depreciationand
      amortization
            
            $
            (873,665
            )
            
            $
            (2,589,634
            )Property
      and equipment, net
            
            $
            288,692
            
            
            $
            339,738






F-15


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006





NOTE
2-  PROPERTY AND EQUIPMENT – NET CONTINUED




During
the 2007 year the Company retired $1,876,094 of Assets with accumulated
depreciation of $ 1,876,094, a net book value of $ 0.





NOTE 3 -
INVESTMENTS





In August 2006, the
Company purchased 28,500 shares of stock in Anycom Technologies A.G.
“Anycom”Monchengladbach, Germany,
at 7 Euros per share for a total investment of approximately $259,000 in
US dollars.  The approximate market value of the investment in U.S
dollars on February 29, 2008 was $ 43,690 based on the closing price of the
stock on February 29, 2008.





NOTE 4 -
STOCKHOLDERS’ EQUITY





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





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










F-16


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006





NOTE 4 -
STOCKHOLDERS’ EQUITY (CONTINUED)





On
December 5, 2007, the Board authorized a Company Stock buy back program for a
one year period
which expires on December 4, 2008 whereby management may make purchases from
time to time on the open market at prevailing prices or in privately negotiated
transactions of a total of up to 200,000 shares of its Common Stock. Under this
program the Company purchased 39,927 shares at an average of $ 1.52 per share or
a total cost of approximately $ 60,606 under this program.





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.




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





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





F-17


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006





NOTE 4 -
STOCKHOLDERS’ EQUITY (CONTINUED)




At
December 31, 2007 and 2006, there were no shares available for
grant.





The
following information pertains to the stock options outstanding for the years
ending December 31, 2007:





Options outstanding
            
            
            Options exercisableWeighted
      Number Of Shares
            
            
            Exercisable
      Average Share Price
            
            
            Wtd.
      Avg.Options Shares
            
            
            Exercise
      PriceOptions
      outstanding at December 31, 2005
            
            
            205,208
            
            
            $
            1.37
            
            
            
            205,208
            
            
            $
            1.37Exercised
            
            
            (32,427
            )
            
            $
            1.46
            
            
            
            (32,427
            )
            
            $
            1.46Options
      outstanding at December 31, 2006
            
            
            172,781
            
            
            $
            1.30
            
            
            
            172,781
            
            
            $
            1.30Cancelled
            
            
            (2,000
            )
            
            $
            4.68
            
            
            
            (2,000
            )
            
            $
            4.68Options
      outstanding at December 31, 2007
            
            
            170,781
            
            
            $
            1.31
            
            
            
            170,781
            
            
            $
            1.31
















F-18


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006





NOTE 4 -
STOCKHOLDERS’ EQUITY (CONTINUED)





The
following table summarizes information as of December 31, 2007 concerning
currently outstanding and exercisable options:





Options
outstanding and exercisable


Weighted
Average Remaining Contractual Life





Range
      of Exercise Price
            Number
      Outstanding
            Weighted
      Average Life (Years)
            Exercise
      Price
            Number
      Exercisable
            Weighted
      Average Exercise Price$0.28-$3.75
            80,000
            3.7
            $0.33
            80,000
            $0.33$1.01-$200
            62,500
            2.2
            $1.41
            62,500
            $1.42$2.06-$2.06
            7,281
            7.1
            $2.06
            7,281
            $2.06$4.01-$5.00
            21,000
            4.9
            $4.57
            21,000
            $4.55





The
outstanding stock options as of December 31, 2007 vest as follows:




(a) All
of the option shares are vested on the date of the grant (10,000 options
outstanding at December 31, 2007)




(a) Half
of the options shares are vested on the date of the grant with an additional
one-half vesting in the first anniversary there from (133,281 options
outstanding at December 31, 2007) or (b) one-fifth of the options shares are
vested on the date of grant with an additional one-fifth vesting on the first,
second, third, and forth anniversaries there from, respectively (27,500 shares
outstanding at December 31, 2007).





As
provided for in SFAS No. 123, “According for Stock-Based Compensation,”
The Company
utilizes the intrinsic value method of expense recognition under APB
No.










F-19


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006





NOTE 4 -
STOCKHOLDERS’ EQUITY (CONTINUED)





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.


There
were no options granted during the years ended December 31 2007 and 2006,
respectively.





NOTE 5 -
INCOME TAXES




The
provision for income taxes on continuing operations consists of:




2007
            
            
            2006Current:Federal
            
            $
            285,047
            
            
            $
            454,411State
            
            
            99,078
            
            
            
            77,474$
            384,125
            
            
            $
            531,885Deferred:Federal
            
            
            744
            
            
            
            (365,771
            )State
            
            
            (2,592
            )
            
            
            (36,175
            )$
            (1,848
            )
            
            $
            (401,946
            )Total
      provisionFor
      income taxes
            
            $
            382,277
            
            
            $
            129,939








F-20


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006





NOTE 5 -
INCOME TAXES (CONTINUED)





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





DECEMBER 31,2007
            
            
            2006Deferred
      income tax assets:Accrued
      compensation
            
            $
            19,000
            
            
            $
            19,000Unrealized
      Losses on Investments
            
            
            83,550
            
            
            _Inventory
      reserve
            
            
            62,448
            
            
            
            101,590Bad
      debts reserve
            
            
            34,306
            
            
            
            29,767Sales
      returns and allowances
            
            
            34,262
            
            
            
            57,000Goodwill
            
            
            170,130
            
            
            
            197,430$
            403,696
            
            
            $
            404,787Deduct:  Deferred
      income tax liabilities:State
      taxes
            
            $
            11,585
            
            
            $
            12,262Deferred
      Revenue
            
            $
            47,985
            
            
            $
            46,569Depreciation
            
            $
            47,500
            
            
            $
            28,500$
            296,626
            
            
            $
            317,456Deduct:
      Valuation allowance
            
            
            —
            
            
            $
            20,991Net
      deferred tax asset
            
            $
            296,626
            
            
            $
            296,465





F-21
 WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006




NOTE 5 -
INCOME TAXES (CONTINUED)





The
effective income tax rate varied from the U.S. Federal statutory tax rate as
follows:


2007
              
              
              2006Statutory
      income tax rate
              
              
              34.0
              %
              
              
              34.0
              %State
      income taxes, net ofFederal
      tax benefit
              
              
              5.3
              
              
              
              4.7Meals
      and entertainment
              
              
              0.1
              
              
              
              0.1Prior
      years state tax audit net of federal tax benefit.
              
              
              2.2
              
              
              
              —Other
              
              
              2.4
              
              
              
              1.5Valuation
      allowance
              
              
              —
              
              
              
              (30.5
              )Effective
      tax rate
              
              
              44.0
              %
              
              
              9.8
              %
  As of
December 31, 2007 the Company has fully utilized all its federal and state net
operating loss carry forwards. SFAS No. 109 requires the establishment of a
deferred tax asset for all deductible temporary difference, which has included
operating loss carry forwards. In 2006, The Company provided a valuation
allowance of $20,991, which it applied against its deferred tax asset balance of
$317,456, leaving a balance of $296,465, which is classified as a current asset
for financial presentation purposes.




In 2006,
The Company based on the past two years profitable operation ( 2006 and 2005)
reduced the valuation allowance by $195,583 which represents the reduction in
the Deferred tax assets from December 31, 2006 to December 31,
2005.




In 2007,
The Company did not feel a valuation allowance was required to offset any of the
balance in its Deferred tax Asset totaling $296,626.





NOTE 6 -
COMMITMENTS AND CONTINGENCIES




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




F-22


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


DECEMBER
31, 2007 AND 2006




NOTE 5-
CONTINGENCIES (CONTINUED)




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





2008
            
            $
            480,6182009
            
            $
            161,494Thereafter
            
            
            —Total:
            
            $
            642,112




Rent
expense all operating leases for the years ended December 31, 2007 and 2006 was
$380,247 and 364,367, respectively.





NOTE 7 -
RELATED PARTY TRANSACTIONS


We employ
Susan Rade, wife of Stephen Rade, current CEO, as a high volume and senior sales
person with certain administrative functions. In this role, Mrs. Rade earns the
bulk of her compensation as part of our sales incentive commission programs
earning $183,042 in both the twelve months December 31, 2007 and 2006
respectively, including draws, commission and a $36,000 salary for
administrative duties.





We employ
Dan Kenderdine, husband of Dawn Kenderdine our Vice President, as our Facilities
Manager since mid 2004. Mr. Kenderdine earns the bulk of his compensation from
salary and bonuses earning $64,895 for the year ended December 31, 2007 and $
52,273 for the year ending December 31, 2006.




F-23


WIRELESS
XCESSORIES GROUP, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006





NOTE 8 -
SEGMENT DISCLOSURE




The
Company effectively operates in one business segment, the Wireless Products
Segment, which distributes cellular telephone accessory products including
batteries, chargers, and antennas throughout North America. The Wireless
Products Segment is headquartered in Huntingdon Valley, Pennsylvania. All
revenue and essentially all long-lived assets were related to operations in the
United States as of and for the years ended December 31, 2007, and
2006.






























































F-24


PART
IV





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




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




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




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





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





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





(d) On
DECEMBER 5, 2007, THE Board of Directors of the registrant has authorized the
repurchase of up to 200,000 sharers of its Company stock effective December 5,
2007. The stock repurchase program will expire on December 4, 2008.





(e) On
March 25, 2008, The Company filed an 8k, announcing the Resignation of Mr.
Bradley Mac Donald as a member of the Board of Directors of Wireless Xcessories
Group, Inc and Chairman of its Audit committee effective March 12, 2008. Mr. Mac
Donald cited his desire to reduce his work load, and in particular, his numerous
outside business commitments as the reason for his resignation.




F-25


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 ManagementServices,
      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 andRade*


10.10
            Revolving
      Credit, Term Loan and Security Agreement, dated January 6, 1997among 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** List of
      Subsidiaries


31.1
              Certification
      Pursuant to Rule 13a-14 and 15d-14 of The
      Securities and Exchange Act of
1934
 31.2
              Certification
      Pursuant to Rule 13a-14 and 15d-14 of The
      Securities and Exchange Act of
1934
 32.1
              Certification
      Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
      Sarbanes-Oxley Act of 2002 32.2
                Certification
      Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
      Sarbanes-Oxley Act of 2002


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


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


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


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


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


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























F-26


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.Date:
      March 28, 2008
              By:
              /s/ Stephen
      RadeStephen
      RadeChief
      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.




Signature
              
              Title
              
              Date/s/
      Stephen
      Rade
              
              Chairman
      of the Board, Chief Executive Officer, President and Director (Principal
      Executive Officer)
              
              March
      28, 2008Stephen
      Rade/s/
      Ronald
      E. Badke
              
              Chief
      Financial Officer and Secretary (Principal Financial
      Officer)
              
              March
      28, 2008Ronald
      E. Badke/s/
      Christopher
      F. McConnell
              
              Director
              
              March
      28, 2008Christopher
      F. McConnell
 /s/
      Allan
      Kalish
              
              Director
              
              March
      28, 2008Allan
      Kalish/s/
      Christopher
      C. Cole
              
              Director
              
              March
      28, 2008Christopher
      C. Cole