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


                                    FORM 10-K


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

(Mark One)
   [X]   Annual Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended December 31, 2001.

                                       or

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

                           COMMISSION FILE NO. 0-27996


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


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


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


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

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

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

                     Common Stock, Par Value $.001 Per Share

                                 Title of Class
                                Over the Counter

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

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

The number of outstanding shares of the Registrant's Common Stock, par value
$.001 per share, on March 1, 2002 was 5,222,080.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant (computed by reference to the closing price of such stock on Over the
Counter Market on March 1, 2002 of $0.11) was approximately $574,428.
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<PAGE>
                                     PART I

ITEM 1. BUSINESS

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

     On March 13, 2001, Advanced Fox Antenna, Inc.( "Advanced Fox"), Cliffco of
Tampa Bay, Inc.("Cliffco")and AccessorySolutions.Com. ("AcessorySolutions")
formerly 100% wholly subsidiaries entered into an agreement to combine and merge
with Wireless Xcessories, the surviving entity. This merger has facilitated the
Company's ability to integrate and combine functions to eliminate redundancy,
improve communication and facilitate the development and implementation of
common marketing and operating strategies.

                                        3
<PAGE>
     Our headquarters for all operations are located at 1840 County Line Road,
Huntingdon Valley, Pennsylvania 19006.

     The Wireless Accessories industry remains fragmented. Our strategy is to
effectively market one of the broadest and most complete lines of wireless
accessories products. We currently offer in excess of 3,000 different products.
We strive to leverage our distribution channels and relationships and provide
high quality technical expertise and service to our customers.

     Our business strategy involves the following components:

     o    Maintain Diversity of Products and Customers. We distribute a complete
          line of wireless accessories. We sell our products to dealers, other
          distributors, commercial and industrial businesses, communications
          carriers, mass merchandisers and retail customers. Any of these
          customer groups can also purchase our products directly from our web
          site.

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

     o    We offer a full retail solution to our customers providing specialized
          private label retail packaging in both proprietary and custom
          packaging through our semi- automated warehouse and production
          facility. Provide and offer display and point of sale merchandising
          aids to an increasing proportion of our customers.

     o    We offer an e-commerce solution to our dealer agents for cellular
          phone accessories. The solution includes a full custom retail website
          help desk and order fulfillment facility. In addition the dealer
          agents receive a 30% commission check quarterly for all e-commerce
          sales.

     o    We offer a wholesale website where our dealer agents and retail stores
          order online to commit inventory. This has streamlined our internal
          order process and facilitates the customer reorder process.

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

                                        4
<PAGE>

     Products. We currently market over of 3,000 wireless accessories. The
product category offerings include rechargeable batteries, personal and portable
hands free kits, hands free installation kits, portable and vehicle antennas,
in-car and travel chargers, fashionable accessory faceplates and colored
housings for cellular phones, plain and colored phone carrying cases and two-way
and pager accessories.

     Purchasing. We purchase approximately 60% of our wireless accessory
products from manufacturers located overseas, principally in the Far East. Two
vendors, one far east supplier and one domestic supplier, accounted for
approximately 22% each of our total purchases. No other vendor accounted for 10%
or more of our purchases. In early 1999, the Company opened a buying office in
Taiwan, which has helped to reduce costs and improve the quality of items
currently imported.

     Sales. We market and sell the majority of our products to dealers, other
distributors, commercial and industrial businesses, communications carriers,
mass merchandisers and retail customers. Additionally, we produce one product
line catalog that is circulated nationally and internationally.

     Concentration. During the twelve months ended December 31, 2001, we
effected sales to more than 3,600 commercial, industrial, and retail customers.
In that same period, our two largest customers accounted for 6.9% and 5.1% of
our net sales, respectively. No customer of ours accounted for 10% or more of
our net sales. Export sales accounted for less than 3% of net sales for the
period.

EMPLOYEES

     As of March 1, 2002, we employed approximately 108 personnel. These
employees work in the following areas of our business: two in technical
operations; 27 in telemarketing and commercial sales; 57 in packaging,
warehousing, inventory control, shipping and receiving; two in purchasing, and
20 in management and administration. None of the employees are represented by a
labor union. We consider our relations with our employees to be satisfactory.

ENVIRONMENTAL MATTERS

     We purchase and distribute batteries, which contain chemicals such as
nickel-metal hydride and lithium ion. We do not manufacture the batteries but
rather purchase the items in their finished state. Our operations do not involve
the alteration or penetration of the batteries. Returns of our batteries are
made to a recycler for disposition. We believe that we have operated our present
and former respective facilities in compliance with applicable environmental
laws and regulations. Accordingly, we do not believe that it has any material
risk of environmental liability.

                                       5
<PAGE>
     We currently are not aware of any environmental conditions relating to
present or past waste generation at or from any of our present or former
facilities or operations, that would likely have a material adverse effect on
our financial condition or our results of operations and does not anticipate any
material expenditures to comply with environmental laws, regulations or
ordinances. However, there can be no assurance that environmental liabilities in
the future will not be incurred and that they will not have a material adverse
effect on our financial condition or our results of operations.

INTELLECTUAL PROPERTY

     We believe that we have all rights to trademarks and trade names necessary
to conduct our business. See discussion relating to the Company facing patent
infringement legal action in selected products in following section titled "We
Face Patent Infringement Lagal Actions in Selected Products".

Discontinued Operations

     Management, upon approval of the Board of Directors, disposed all of the
subsidiaries within our Battery Segment. As a result of this decision, the
Battery Segment has been accounted for as discontinued operations for all
periods presented.

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

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

     We came to the conclusion to dispose of these operations as a result of a
shrinking sales base and continued losses in this segment. After assessing the
magnitude of the efforts that would be required to improve the profitability of
this segment, we determined that our limited managerial and financial resources
should be focused on continuing to enhance the business and profitability of the
Wireless Products Segment.

MANAGEMENT

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

     On March 24, 1999, Messrs. Meehan and Sapp resigned from our Board of
Directors and Barbara M. Henagan and Bradley T. MacDonald were elected by the
Board to fill the vacancies created by the resignations.

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

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

     Effective February 26,2002 Barbara M. Henagan resigned from our Board of
Directors due to increased outside business commitments.

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.

                                       6
<PAGE>
     We wish to take advantage of the "safe harbor" provisions of the Act and
are including this section in its Annual Report on Form 10-K in order to do so.
Forward-looking statements also appear in other sections of this report.
Statements that are not historical facts, including statements about
management's expectations for fiscal year 2002 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.

     In addition, we must offer our merchandise in sufficient quantities to meet
the demands of our customers and deliver this merchandise to customers in a
timely manner. We must be able to maintain sufficient inventory levels,
particularly during peak selling seasons. Our future results may be affected if
we are not successful in achieving these goals.

WE FACE CERTAIN RISKS ASSOCIATED WITH EXPANSION.

     We plan to continue to increase the number of retail outlets and Web sites
operated by third parties in which our products are sold and to increase the
sales volume on our own Web site in order to grow our revenues. Our ability to
expand will depend in part on the following factors:

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

     o    general economic conditions; and

     o    the availability of sufficient funds for expansion.


     We need to expand our management information systems and distribution
systems to facilitate possible future expansion plans. If we are unable to grow
our existing system, it may hinder future expansion efforts.

OUR WIRELESS ACCESSORIES BUSINESS LINE AND INTERNET RETAIL BUSINESS
STRATEGY MAY NOT SUCCEED.

     In the past, we have tested new lines of business that have not always
proven profitable, such as our Battery Segment. We continually examine and
evaluate all revenue channels for profitability. We may decide to develop new

                                       7
<PAGE>
business lines or to acquire additional businesses in the future, and we cannot
predict whether such efforts will be successful. The failure of new business
lines or acquisitions could hurt future results.

     We have embarked on efforts to reach our current customers and generate new
customers through methods other than sales through retail stores. We are selling
our products over the Internet through our own web site www.wirexgroup.com, Web
sites operated by third parties and other interactive shopping media. Through
not a significant part of our current or expected business, this is relatively a
new business and marketing strategy for us and involves some risks and
uncertainties. We may not succeed in achieving profitable operations in
marketing our products over the Internet. Further, consumer use of the Internet
as a medium for commerce is a recent phenomenon and is subject to a high level
of uncertainty. The increased use of the Internet as a medium for commerce rises
concerns regarding Internet security, reliability, pricing, accessibility and
quality of service. If use of the Internet does not continue to grow, or grows
at a slower rate than we anticipate, or if the necessary Internet infrastructure
or complementary services are not developed to support effectively growth that
may occur, our modest Internet retail business would be affected.

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

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. We cannot assure you
that we will be able to acquire the products that we desires in sufficient
quantities or on terms that are acceptable to us in the future. In addition, we
cannot assure you 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 warehouses by freight carriers and we cannot
assure you 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 FACE RISKS ASSOCIATED WITH DISTRIBUTION.

     We conduct all of our distribution and packaging operations and Internet
order processing fulfillment functions from one facility in Huntingdon Valley,
Pennsylvania. Any disruption in the operations at the distribution center could
have a negative impact on our business. In addition, we rely upon third party
carriers for our product shipments. As a result, we are subject to certain
risks, including employee strikes and inclement weather, associated with such
carriers' ability to provide delivery services to meet our shipping needs.

                                       8
<PAGE>
WE FACE PATENT INFRINGEMENT LEGAL ACTIONS IN SELECTED PRODUCTS.

     We were notified in the fall of 2000 that certain of our products might
have infringed the patents of an original equipment manufacturer (OEM). We have
discontinued the sale of such products in question, and in early 2001 developed
alternative products to meet our customer needs that we believe do not infringe.

     Several other distributors have either settled or are in the process of
litigating similar claims with the OEM. We have outside counsel to assist us in
resolving all financial issues relating to our sales prior to the discontinuance
of alleged patent infringement. At this point, we are involved in the
information discovery phase with the OEM, which hopefully will lead to a
reasonable settlement of any and all outstanding issues.

     The amount of any claim is unknown at this time and management cannot
reasonably assess our liability exposure. We believe that the possibility of an
unfavorable outcome will not have a material adverse effect on our financial
position.

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.

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

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

WE MAY FAIL TO ANTICIPATE AND ADAPT TO CHANGING CONSUMER TRENDS.

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

POOR ECONOMIC CONDITIONS MAY HURT OUR BUSINESS.

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

     o    general business conditions;

     o    interest rates;

     o    tax law changes;

     o    consumer confidence in future economic conditions.



                                        9
<PAGE>
     Our business could be negatively impacted by a protracted recession or poor
economic conditions and any related decline in consumer demand for discretionary
items such as our products. Because we purchase merchandise from foreign
entities, we are subject to risks resulting from fluctuations in the economic
conditions in foreign countries. The majority of our foreign vendors and
manufacturers are located in the Far East, and as a result, its business may be
particularly impacted by changes in the political, social, legal, and economic
conditions in the Far East. Additionally, foreign weather and product
transportation problems could affect our ability to maintain adequate inventory
levels and adversely affect its future results.

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 its business. In addition, our performance will depend upon our
ability to attract and retain qualified management, merchandising and sales
personnel. There can be no assurance that the members of our existing management
team will be able to manage the Company or our growth or that we will be able to
attract and hire additional qualified personnel as needed in the future.

WE MUST SUCCESSFULLY RESPOND TO CHANGES IN THE RETAIL INDUSTRY.

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

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

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

OUR COMMON STOCK PRICE IS VOLATILE.

     Our common stock was delisted from Nasdaq National Market in 2000 because
we did not meet their listing requirements and currently trades on the Over the
Counter Bulletin Board. The price of our common stock has experienced and is
likely to experience in the future significant price and volume fluctuations,
which could reduce the market price of the common stock without regard to our
operating performance. We believe that among other factors, any of the risk
factors outlined in the preceding paragraphs if realized, could cause the price
of the common stock to fluctuate substantially.




                                       10
<PAGE>

ITEM 2. PROPERTIES

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

<TABLE><CAPTION>
                                                                                   APPROXIMATE            LEASE
                                                                                       AREA            EXPIRATION
OPERATION                        NATURE                      LOCATION                (SQ.FT.)              DATE
---------                        ------                      --------                --------              ----
<S>                    <C>                             <C>                         <C>                 <C>
Main Facility                 Warehouse and               Huntingdon Valley, PA          52,000            5/31/05
                                 Office                                                  13,100            3/31/05
Cliffco                   Office and warehouse(1)               Tampa, FL                18,800            8/01/04
</TABLE>
(1)  We, ceased operating out of this facility in December, 2001 and are
     actively pursuing alternatives including, but not limited to, locating an
     acceptable replacement tenant, to effect an early termination of the lease
     with a commensurate reduction in our related rent obligation. We have
     provided an allowance for possible termination of our obligation in our
     financial statements.

ITEM 3. LEGAL PROCEEDINGS

     Pursuant to a Management Agreement with Founders Management Services, Inc.
("Founders")(See Item 13. Prior Management), we paid Founders, for its
origination and negotiating services in connection with the acquisitions of
Battery Network and a loan facility, the sum of $240,000. We also issued to
certain designees of Founders warrants to purchase 100,000 shares of our Common
Stock at a price of $4.125 per share. Since June 1998 when Messrs. Haber and
Teeger resigned as officers and directors of the Company, Founders has provided
no services to us and we have not paid any fees to Founders. Although neither we
nor Founders had formally terminated the Management Agreement, we believed that
both parties have conducted themselves as if the Management Agreement had been
terminated.

     In December 1999, Founders filed a lawsuit in the United States District
Court for the Southern District of New York against us alleging that we owed
Founders approximately $493,000 for a purportedly improper early termination of
the Management Agreement. We settled in full all matters relating to this case
with Founders in October, 2001 for a total of $228,000 of which $150,000 was
paid shortly after settlement and the balance on January 15, 2002, with mutual
releases issued and obtained by all concerned parties.




                                       11
<PAGE>

     We, from time to time, are a party to other litigation arising in the
normal course of its business, most of which involves claims for amounts due of
from merchandise or service 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 September 10, 2001. The
following are results of the voting on the proposals submitted to the
stockholders at the annual meeting:

Proposal No. 1: Election of Directors.

The following individuals were elected as directors:

          NAME                         FOR          AGAINST
          ----                         ---          -------
Christopher F. McConnell            3,961,321       370,713
Stephen Rade                        3,961,321       370,713
Bradley T. MacDonald                3,961,321       370,713
Barbara M. Henagan                  3,961,321       370,713
Allan Kalish                        3,961,321       370,713
Christopher C. Cole                 3,961,321       370,713

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

Proposal No. 2: Proposal to ratify the appointment by our Board of Directors of
BDO Seidman as the Company's independent auditors for the fiscal year ending
December 31, 2001.

FOR:               3,968,359
AGAINST:             362,505
ABSTAIN:               1,170

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


                                       12
<PAGE>
                                     PART II

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

     Our Common Stock and Redeemable Common Stock Purchase Warrants started
trading on the Nasdaq National Market (the "NMS") on April 8, 1996 under the
symbol "BATS" and "BATSW", respectively. On March 20, 2000, as a result of a
change of our name from Batteries Batteries, Inc. to Wireless Xcessories Group,
Inc., our Common Stock began trading under the symbol "WIRX" and the Warrants
under the symbol "WIRXW." The Warrants expired on April 8, 2000 in accordance
with the Warrant agreement and are no longer actively traded. Effective,
December 19, 2000, our Common Stock began trading on the Over The Counter
Bulletin Board ("OTC") resulting from a delisting action taken by Nasdaq
removing our securities from the NMS for failure to meet certain listing
requirements. The following tables set forth the range of high and low closing
prices for the quarters indicated for the Common Stock and Warrants on the NMS
as reported by NMS for calendar year 2000 though December 18, 2000, and
thereafter for the balance of calendar year 2000 and calendar year 2001 on the
OTC.

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

2001
----
FIRST QUARTER                   0.59        0.125      N/A        N/A
SECOND QUARTER                  0.52        0.34       N/A        N/A
THIRD QUARTER                   0.52        0.02       N/A        N/A
FOURTH QUARTER                  0.40        0.12       N/A        N/A

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

     There were 52 record holders of the Company's Common Stock as of March 1,
2002. 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. Our
Revolving Credit, Term Loan and Security Agreement prohibit the payment of
dividends on our Common Stock without the consent of the lender that is a party
to that agreement. A discussion of this agreement can be found in Item 7 below.

     On April 23, 1999, we offered and sold a total of 389,732 shares of its
Common Stock to Christopher McConnell, and Barbara Henagan, two directors of the
Company respectively, as well as to two other related parties. Ms Henagan
subsequently resigned her position as a Director as of February 26, 2002. The
aggregate offering price for these shares was $498,800. This offering was made
pursuant to an exemption from registration under Section 4(2) of the Securities
act of 1933, as amended.

     0n January 11, 2001, our Board approved a stock buyback plan whereby we
will repurchase a maximum of 500,000 shares of our Common Stock at a total cost
not to exceed $250,000 through July 22, 2002. As of March 1, 2002, we have
repurchased 86,000 shares at an average cost of $0.38 per share.


                                       13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

INTRODUCTION

     The following table sets forth the selected financial data for Wireless
Xcessories and its subsidiaries. The Income Statement Data includes the results
of operations for us and each of our subsidiaries since their dates of
acquisition (see Item 1 -- Business), except for Advanced Fox and Tauber, which
are included for all periods presented. The subsidiaries within the Battery
Segment (Tauber, Battery Network and Specific Energy) have been accounted for as
discontinued operations. This information should be read in conjunction with the
Consolidated Financial Statements and Notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that appear elsewhere
in this document.

     The Selected Financial Data have been derived from the consolidated
financial results for the years ended December 31, 1997 and 1998 audited by
Deloitte & Touche LLP, and appear only in this section, for the years ended
December 31, 1999 and 2000 audited by Arthur Andersen LLP, that appears
elsewhere in this Report except for the 1999 Balance Sheet data which appears
only in this section and 2001 audited by BDO Seidman, LLP, that appears
elsewhere in this report.


                                       14
<PAGE>
                             SELECTED FINANCIAL DATA

<TABLE><CAPTION>
                                                                              FISCAL YEAR ENDED DECEMBER 31,
                                                             ------------------------------------------------------------
                                                               1997         1998         1999         2000         2001
                                                             --------     --------     --------     --------     --------
<S>                                                           <C>          <C>          <C>           <C>            <C>
                                                                         ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:

NET SALES                                                    $ 20,171     $ 24,852     $ 31,653     $ 30,128     $ 20,890
COST OF SALES                                                  12,352       13,776       16,034       15,440       12,446
                                                             --------     --------     --------     --------     --------
GROSS PROFIT                                                    7,819       11,076       15,619       14,688        8,444
                                                             --------     --------     --------     --------     --------
SELLING, GENERAL & ADMINISTRATIVE EXPENSES (1)                  6,674        8,906       11,558       13,010       11,179
INTEREST EXPENSE, NET                                             234          311          395          274          117
                                                             --------     --------     --------     --------     --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES             911        1,859        3,666        1,404       (2,852)
INCOME TAX EXPENSE                                                397          880        1,323          579           71
                                                             --------     --------     --------     --------     --------
INCOME (Loss) FROM CONTINUING OPERATIONS                          514          979        2,343          825       (2,923)

DISCONTINUED OPERATIONS:

INCOME (LOSS) FROM OPERATIONS (NET OF TAX BENEFIT
(PROVISION) OF, ($167), $1,259, $847, $188 and $0)                 55       (2,483)      (1,504)        (293)           0

ESTIMATED LOSS ON SALE OF SUBSIDIARIES (NET OF TAX
BENEFITS OF $0, $0,  $225, $187 and $0)                             0         (558)      (4,277)        (286)           0
                                                             --------     --------     --------     --------     --------
INCOME (LOSS) FROM DISCOUNTED OPERATIONS                           55       (3,041)      (5,781)        (579)           0
                                                             --------     --------     --------     --------     --------
NET INCOME (LOSS)                                                 569       (2,062)      (3,438)         246       (2,923)
PREFERRED STOCK DIVIDEND REQUIREMENTS                              15            0            0            0            0
                                                             --------     --------     --------     --------     --------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS        $    554     $ (2,062)    $ (3,438)    $    246       (2,923)
                                                             ========     ========     ========     ========     ========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK (BASIC)
FROM CONTINUING OPERATIONS                                   $   0.11     $   0.21     $   0.47     $   0.16     $  (0.56)
                                                             ========     ========     ========     ========     ========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK (BASIC)
FROM DISCONTINUING OPERATIONS                                $   0.01     $  (0.64)    $  (1.15)    $  (0.11)    $   0.00
                                                             ========     ========     ========     ========     ========
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON
STOCK HOLDERS (BASIC)                                        $   0.12     $  (0.43)    $  (0.69)    $    .05     $  (0.56)
                                                             ========     ========     ========     ========     ========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK (DILUTED)
FROM CONTINUING OPERATIONS                                   $   0.11     $   0.21     $   0.46     $    .16     $  (0.56)
                                                             ========     ========     ========     ========     ========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK (DILUTED)
FROM DISCONTINUING OPERATIONS                                $   0.01     $  (0.64)    $  (1.15)    $  (0.11)    $   0.00
                                                             ========     ========     ========     ========     ========
NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO COMMON
STOCK HOLDERS (DILUTED)                                      $   0.12     $  (0.43)    $  (0.69)    $    .05     $  (0.56)
                                                             ========     ========     ========     ========     ========
</TABLE>







BALANCE SHEET DATA:
                                          AS OF DECEMBER 31,
                       --------------------------------------------------------
                         1997        1998        1999        2000        2001
                       --------    --------    --------    --------    --------
WORKING CAPITAL        $ 16,178    $ 11,532    $  9,366    $  6,535    $  3,613
TOTAL ASSETS             24,531      21,320      16,685      13,939       7,218
LONG TERM DEBT           10,742       8,865       5,505       2,859       1,155
STOCKHOLDERS' EQUITY     11,730       9,668       6,718       7,092       4,138


(1)  During the quarter ended September 30, 2001, the Company recognized an
     impairment of the remaining balance of its excess of cost over net assets
     acquired of $876,008. This impairment related to the significant
     deterioration of Cliffco of Tampa Bay, Inc.'s businness. What remained of
     Cliffco's operations were merged into Wireless Xcessories Group, Inc.

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

RESULTS OF OPERATIONS

     Year Ended December 31, 2001 ("2001") Compared to Year Ended December 31,
2000 ("2000")

     Net sales decreased by 30.7% or $9.2 million from $30.1 million in 2000 to
$20.9 million in 2001. Sales were negatively affected by sluggish market demand
for new cellular phones and its resultant effect on after market accessory
sales, coupled with a continuing industry trend toward significantly lower
pricing per accessory unit sold. These market factors, along with the loss of
two major customers who filed to bankruptcy in year 2000 and reduced sales to
other key customers, combined to more than offset our efforts to replace the
lost volume and expand our customer base through selling and marketing
strategies.

     Gross profit decreased by $6.3 million or 42.5% from $14.7 million in 2000
to $8.4 million in 2001 and as a percentage of sales from 48.8% to 40.4%. The
decrease in gross profit percentage was due to additional incentives given to
customers in the form of expanded volume allowances and discounts, changes in
customer mix, lost business, price reductions to improve turns on slower moving
inventory, partially offset by improved initial selling margins on selected new
product and outbound freight reductions. In the fourth quarter of 2001 we took
an additional $570,000 (2.7% of net 2001 sales) non-cash charge for a write down
of discontinued excess inventory. This resulted from our effort to focus on
targeted core products and the difficulties of moving older product in a
sluggish and continued lower price market.

     Selling, general and administrative ("SG&A") expenses decreased $1.8
million, from $13.0 million in 2000 to $11.2 million in 2001, and as a
percentage of sales increased from 43.2% in 2000 53.5% in 2001. A major part of
the rise in SG&A as a percentage of sales is attributable to our recording of an
impairment charge related to the excess of cost over assets acquired related to
the Cliffco operation during the third quarter of 2001 of approximately $876,000
or 4.2% of 2001 net sales. In factoring out the impairment loss, operating
expenses actually dropped by $2.7 million or 21% in comparing year 2000 to year
2001.The reduction in expenses was primarily a result of our continuous cost
cutting program, aided by the consolidation of our warehouse, selling,
accounting and most administrative functions (Cliffco consolidation and
shut-down).This resulted in substantial reductions in such areas as professional
fees, corporate expenses, office and warehouse supplies, telephone expense,
warehouse, accounting and administrative personnel and insurance expense. The
increase in the percentage of SG&A to net sales is a result of the one-time
impairment loss and our not being able to reduce certain of our more fixed
expenses, such as occupancy, to match the approximate 31% drop in sales
experienced by us in 2001. Additionally, though warehouse labor was saved
through consolidation, continued lower average prices per unit shipped and
increased customized packaging and labeling to accommodate changes in our
customer needs and product mix resulted in less overall average dollars shipped
per warehouse employee.

     Interest expense, net of interest income, decreased $157,000 from $273,000
in 2000 to $116,000 in 2001 due to reduced bank borrowings under our Loan
Facility resulting principally from, the downsizing of Battery Network's
operation during 2000, and subsequent sale of most of its assets in the
November-December period of 2000, interest income related to notes receivable
realized in the Tauber sale, cash provided by operations, and lower effective
interest rates. The weighted average interest rates in effect on average debt
outstanding decreased from 8.69% in 2000 to 6.73% in 2001.

     Our effective income tax rate decreased from 41.2% of taxable income in
2000 to 2.5% of the taxable loss in 2001. The decrease is primarily attributable
to a Company decision to set up a tax valuation allowance of $1,183,966 (41.5%)
of the pre-tax loss which covers the amount of the net deferred tax asset. The
tax expense relates primarily to the effects of state franchise taxes.

                                      16
<PAGE>
     Year Ended December 31, 2000 ("2000") Compared to Year Ended December 31,
1999 ("1999")

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

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

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

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

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

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

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

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

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

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

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

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

NEW ACCOUNTING STANDARDS

     In June 2001, the Financial Accounting Standards Board (FASB) finalized
FASB Statements No. 141, "Business Combinations" ("SFAS 141"), and No.142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires the use
of the purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets meet
certain criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after July
1, 2001. SFAS 142 address financial accounting for acquired goodwill and other
tangibles. It requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. SFAS 142
is required to be applied in fiscal years beginning after December 15, 2001.
Currently, the Company has no goodwill and will assess how the adoption of SFAS
141 and SFAS 142 will impact its financial position and results of operations on
future acquisitions.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This statement
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. The new guidance resolves significant implementation issues
related to SFAS 121, "Accounting for the impairment of long lived assets to be
disposed of." SFAS 144 is effected for fiscal years beginning after December 21,
2001. Currently, we are assessing but have not determined how the adoption of
SFAS 144 will impact our financial position and results of operations.

CRITICAL ACCOUNTING POLICIES

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

     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. We periodically review our inventory for discontinued excess
inventory as part of our effort to focus on targeted core products and the
difficulties of moving older product in a sluggish and continued lower price
market. We appropriately take non-cash charges for write-downs of discontinued
or excess inventory to reflect its proper value.

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

LIQUIDITY AND CAPITAL RESOURCES

     Our requirement for capital is to fund (i) sales growth and (ii) financing
for acquisitions. Our primary sources of financing during 2001 and 2000 were
cash flow from operations, equity issuances, the sale of substantially all of
the assets of Tauber and Battery Network in January, 2000 and November-December,
2000, respectively, and bank borrowings.

     Our working capital as of December 31, 2001 was $3,612,920. Net cash
provided by operating activities for the years ended December 31, 2001, 2000 and
1999 was $2,226,006, $2,724,948, and $3,663,331, respectively. In 2001, we
showed a loss of cash from operations of $260,508 from our net loss of
$2,922,686 as adjusted for non-cash items of depreciation and amortization of
$589,874, net increase in deferred income tax of $701,974, bad debt provision of
$401,196, write off of excess of cost over net assets acquired relating to the
Cliffco operation of $876,008 and losses on disposition of property and
equipment of $93,126.Cash provided from changes in assets and liabilities
totaled $2,486,514 consisting of reductions in accounts receivable, inventory
and prepaid expenses of $1,525,470, $3,088,666 and 280,938 respectively, offset
by a federal income tax refund receivable of $582,751 and a net decrease in
accounts payable and accrued expenses of $1,825,809.

     Our reduction in accounts receivable was mostly attributable to a
decrease in sales during the fourth quarter of 2001 compared to the fourth
quarter of 2000, and improved collection procedures. The reductions in inventory
are primarily the result of reduced purchases in response to the deteriorated
sales base, aggressive markdowns to move older inventory, write off of obsolete
inventory and improved inventory turns.

     Net cash used in investing activities in 2001 of $70,804 was for capital
expenditures of $ 141,212 net of principal payments related to the sale of
Battery Network of $70,408. Net cash used in investing activities in 2000 of
$62,745 was primarily for capital expenditures of $1,187,075 net of cash
proceeds from the sale of substantially all of the assets of Tauber in January,
2000 and Battery Network in November and December, 2000 totaling $1,005,855 and
$240,000, respectively. Capital expenditures in 2000 were primarily for
automated labor saving packaging machines, automated shipping system, warehouse
and office furniture, equipment, and improvements (We expanded warehouse
capacity and relocated Advanced Fox headquarters in 2000). Net cash used by
investing activities in 1999 of $755,883 was for capital expenditure consisting
primarily of computer equipment and upgrades.

                                       17
<PAGE>
     Cash used in financing activities for the twelve months ended December 31,
2001 totaling $2,008,776 and was due to net debt repayments of $ 1,962,951, net
payments of capital Lease debt of $14,202 and the cost of reacquiring company
stock of $31,623. Cash used in financing activities for the twelve months ended
December 31, 2000 totaling $2,652,451 and was principally due to $2,755,128 net
payments in borrowings offset in part by net additions to capital lease debt of
$24,714 and proceeds from the exercise of common stock options of $127,389. Cash
used in financing activities for the twelve months ended December 31, 1999 was
$2.9 million and represents the net payments under the Revolver Loan and Term
Loan of $3,360,634, offset in part, by the receipt of $488,366 representing the
net proceeds from the issuance of common stock under a private placement to two
of our directors and related parties.

     We are party to a Revolving Credit, Term Loan and Security Agreement, dated
January 6, 1997, as subsequently amended (the "Loan Facility"), between IBJ
Whitehall-Financial Group (formerly known as IBJ Schroder Bank & Trust Company),
as Agent ("IBJ"), us and subsidiaries. The Loan Facility consists of a
$3,000,000 Term Loan (the "Term Loan") payable in 35 monthly installments of
$50,000 each, with the balance to be paid at maturity, and a Revolving Credit
Facility (the "Revolver Loan") of up to $10,000,000 to be advanced at the rate
of 80% of eligible accounts receivable and 50% of inventories. The Loan Facility
is secured by a pledge of the assets of the Company and a pledge of the
outstanding capital stock of our subsidiaries. On August 14, 2001 we entered
into an amended credit agreement and at management's request , to reduce the
revolving credit facility to $5,000,000 (less an undrawn availability of
$800,000 to be maintained at all times) At the same time, the interest rate we
pay to IBJ on its borrowings was increased to the sum of the alternate base rate
(as defined) plus .75% with respect to domestic rate loans or the sum of the
Eurodollar rate plus 2-1/2% with respect to Eurodollar rate loans. The term loan
was paid in full effective with a final payment of $39,218 during June 2001. As
of December 31, 2001, the principal amount outstanding of the Revolver Loan is
$1,114,864.

     The Loan Facility, as amended, contains certain covenants that include
maintenance of certain financial ratios, maintenance of minimum levels of EBITA
(earnings before interest, taxes and depreciation), maximum levels of capital
expenditures, minimum levels of borrowing availability as well as other
affirmative and negative covenants. At December 31, 2001, we were not in
compliance with one of these covenants. On March 21, 2002, we entered into an
amended credit agreement whereby the non-compliance at December 31, 2001 was
waived and new financial covenants were negotiated through December 31, 2002,
which reflect our current projections. As part of the agreement our advance rate
for borrowing on eligible inventory was lowered from 50% to 40%. Additionally,
the Loan Facility was extended for an additional one year period through January
7, 2004 and new financial covenants were negotiated through December 31, 2003,
which reflect our current projections.

     Based upon its present plans, management believes that operating cash flow,
available cash and available credit resources will be adequate to make the
repayments of indebtedness described herein, to finance the 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,
2002. 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 alternative financing will be available to us
in the future. 18
<PAGE>

COMMITMENTS:

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

     2002                              $   537,196
     2003                                  541,524
     2004                                  322,542
     2005 and thereafter                    32,370
                                       -----------
     Total                             $ 1,433,632
                                       ===========

     During 2000, we entered into certain capital leases for equipment and
office furniture. Total future lease payments under these lease obligations are
$64,129, and $33,603 and $7,014 in 2002, 2003 and 2004 respectively.

SEASONALITY AND INFLATION

     Traditionally our net sales typically rise by a couple of percentage points
of sales in each calendar quarter, starting with the quarter ending June 30.

     The impact of inflation on the 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 the our operating results.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest Rate Risk -- Our only financial instruments with market risk
exposure are revolving credit borrowings and variable rate term loans, which
totaled $1,114,864 at December 31, 2001. Based on this balance, a change of one
percent in the interest rate would cause a change in interest expense of
approximately $11,149 or $0.02 per share.

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

     Foreign Currency Risk - 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 over 60% of our products
from manufacturers located overseas, principally in the Far East. The
depreciation of the U.S. dollar against the major Asian currencies could,
therefore, cause an increase in the cost of our products and adversely affect
our results of operations or financial condition.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our  audited  financial  statements  appear  beginning  on page F-1 of this
report.

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

     On April 17, 2001, the Company engaged the accounting firm of BDO Seidman,
LLP as independent public accountants for the fiscal year ended December 31,
2001 replacing Arthur Andersen LLP, as the current auditors. As of December 31,
2001, there are changes in and disagreements with BDO Seidman, LLP nor Arthur
Anderson, LLP on accounting and financial disclosure.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The following table sets forth as of March 1, 2002, the name of each of our
directors and executive officers, his or her principal occupation and the nature
of all positions and offices with us held by him or her. Our directors will hold
office until the next Annual Meeting of Stockholders.

                                                                         FIRST
                                                                         BECAME
NAME                          AGE                 OFFICE                DIRECTOR
----                          ---                 ------                --------
Christopher F. McConnell       48         Chairman of the Board           1998
Stephen Rade                   64       President, Chief Executive        1996
                                           Officer and Director
Ronald E. Badke                56        Chief Financial Officer          1995
                                              and Secretary
Allan Kalish                   76                Director                 1998
Christopher C. Cole            46                Director                 2000
Bradley T. MacDonald           54                Director                 1999


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

     Mr. McConnell has been Chairman of the Board of the Company since December
1998. In addition, he is principal of the Founders Group, an organization
dedicated to helping launch new, technology-based companies. Mr. McConnell also
co-founded CFM Technologies, Inc., a semiconductor capital equipment company and
serves as Chairman of the Board at Mi8 Corporation, a leading application
software provider (ASP).

                                       19
<PAGE>
     Mr. Rade has been our 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. Badke has been our Chief Financial Officer since November 1995 and
Secretary since March 1999. He was a Senior Vice President and the Chief
Financial Officer of Shoe Town Inc. from 1984 through September 1994, positions
he later held (September to November 1995) with Natures Elements. Mr. Badke, a
certified public accountant, had been a consultant from October 1994 through
August 1995.

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

     Mr. MacDonald was elected a director in March 1999. He is the Chairman of
the Board and Chief Executive Officer of HealthRite, a position he has held
since January 1998. Prior thereto, he was appointed as Program Director of the
U.S. Olympic Coin Program of the Atlanta Centennial Olympic Games. Mr. MacDonald
previously was employed by HealthRite as its Chief Executive Officer from
September 1996 to August 1997. From 1991 through 1994, Mr. MacDonald was Deputy
Director and Chief Financial Officer of the Retail, Food and Hospitality and
Recreation Business for the United States Marine Corps.

     Mr. Cole was elected as a director in February 2000. He is currently the
CEO of Intelligrated, Inc. 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 as its Chief Operating Officer and served as a director of Pinnacle
Automation since June 1997 and as Executive Vice President from March 1994 to
June 1997. Mr. Cole served as Vice President of Cincinnati Milacron, from 1987
through March of 1994.

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

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

     To the 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, 2001, our officers, directors and greater than ten
percent shareholders were in compliance with all applicable Section 16(a) filing
requirements, except Stephen Rade, our Chief Executive Officer, President and a
director, who inadvertently failed to file reports on Forms 4 during the year
ended December 31, 2001 in connection with thirty-nine transactions. All
transactions were accounted for as purchases and were reported on a year end
Form 5 filing.



                                       20
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth for the years ended December 31, 2001, 2000,
and 1999; the compensation for services rendered in all capacities to the
Company and subsidiaries by the Chief Executive Officer and the Company's other
executive officer for the year ended December 31, 2001.

                           SUMMARY COMPENSATION TABLE

                                            SUMMARY COMPENSATION TABLE
                                            --------------------------
NAME AND PRINCIPAL POSITION                 YEAR               SALARY
---------------------------                 ----               -------
Stephen Rade                                2001               198,000
Chief Executive Officer                     2000               198,000
President and Director                      1999               398,000 (1)

Ronald E. Badke                             2001               135,000
Chief Financial Officer and                 2000               135,000
Secretary                                   1999               135,000

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

EMPLOYMENT AGREEMENTS

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

 COMPENSATION OF DIRECTORS

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

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

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

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

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

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

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

                                       21
<PAGE>
STOCK OPTIONS

     Under the Company's 1995 Stock Option Plan (the "Plan"), the Company's
board of directors or a stock option committee appointed by the board may grant
stock options to officers, key employees, directors, and independent consultants
of the Company. Currently, 1,000,000 shares of the Company's common stock are
reserved for issuance under the Plan.

     The following table sets forth the details as the options held at the end
of the year December 31, 2001 by the executive officers set forth in the Summary
Compensation Table. Mr. Rade and Mr. Badke were not granted options under the
Plan during the year 2001.

                          FISCAL YEAR END OPTION VALUES

                           NUMBER OF SHARES UNDERLYING
                         UNEXERCISED OPTIONS AT FISCAL
                                   YEAR END (1)
                         ---------------------------------
NAME                     EXERCISABLE         UNEXERCISABLE
----                     -----------         -------------
Stephen Rade               25,000                  0
Ronald E. Badke            45,000               12,000

(1) The exercise price of all outstanding options at December 31, 2001 was
greater than the market value of the shares covered by those options.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information as of March 1, 2002, as
supplied to the Company, regarding the beneficial ownership of the Common Stock
by all persons known to the Company who own more than 5% of the outstanding
shares of the Company's Common Stock, each director of the Company, each
executive officer of the Company named in the Summary Compensation Table
included elsewhere in this report and all executive officers and directors as a
group. Unless otherwise indicated, based on information provided to the Company
by the directors, executive officers and principal shareholders, the persons
named in the table below have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
<TABLE><CAPTION>
                                        NUMBER OF SHARES
NAME*                                 BENEFICIALLY OWED (1)       PERCENTAGE (2)
-----                                 ---------------------       --------------
<S>                                       <C>                         <C>
Christopher F. McConnell (3)                 186,067                    3.6%
Stephen Rade (4)                           1,050,000                   20.1%
Ronald E. Badke (5)                           33,000                     -- **
Christopher C. Cole (6)                       55,312                    1.1%**
Allan Kalish (7)                              60,500                    1.2%**
Bradley T. MacDonald (9)                      22,000                     --**
Directors and Officers as a group          1,406,879                   26.9%
(6) persons)(9)
</TABLE>
*    The business address of each shareholder named in this table, is Wireless
     Xcessories Group, Inc., 1840 County Line Road, Huntingdon Valley, PA 19006.
**   Less than 1%.
(1)  For purposes of this table, a person or group is deemed to have "beneficial
     ownership" of any shares which such person has the right to acquire within
     60 days.

                                       22
<PAGE>
(2)  Percentage ownership is based on 5,222,080 shares of Common Stock
     outstanding on March 1, 2002. 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 30,000 shares.
 (4) Includes exercisable options to purchase 25,000 shares.
 (5) Includes exercisable options to purchase 33,000 shares.
 (6) Includes exercisable options to purchase 28,000 shares.
 (7) Includes exercisable options to purchase 53,000 shares.
 (8) Includes exercisable options to purchase 22,000 shares.
 (9) Includes exercisable options to purchase 191,000 shares.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     We lease certain office space in Pennsylvania from an affiliate of our
current Chief Executive Officer Stephen Rade. The lease expired on December 31,
1999 and was on a month-to-month basis until the mutually agreed termination
date of April 30, 2000. Rent, expense related to this lease was $0, $76,000 and
$76,000 in 2001, 2000 and 1999, respectively.

     Rental payments under the lease for the twelve months ended December 31,
2001, 2000 and 1999 were $0, $25,704 and $76,462, respectively.

     We employ Susan Rade, wife of Stephen Rade, current CEO, as the highest
volume 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 $253,760.14, $329,981.06, and $439,062.98 in the
twelve months December 31, 2001, 2000 and 1999, respectively, including draws,
commission and a $30,000 salary for administrative duties.

PRIOR MANAGEMENT

     Messrs. Warren H. Haber, the former Chairman of the Board, and John L.
Teeger, the former Vice President, Secretary and Director of the Company, were
the sole stockholders, officers and directors of Founders. Pursuant to the
Management Agreement between Founders and us dated as of June 6, 1995, as
subsequently amended, Founders was to provide advice and consultative services
regarding management, overall strategic planning, acquisition policy, relations
with commercial and investment banking institutions, and stockholder matters to
or on behalf us. In addition to an annual base fee of $150,000 and a fee based
on our profits, Founders was entitled to receive originating fees with respect
to acquisitions or financings for which it performed originating services.

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

     In addition to an annual fee, Founders was issued five year warrants to
purchase 100,000 shares of our Common Stock, at a price of $4.125 per share.
These warrants expired on January 7, 2002.

     Since May 1998, when Messrs. Haber and Teeger resigned as officers and
directors of the Company, Founders has provided no services to the Company and
the Company has not paid any fees to Founders. Although neither us nor Founders
has formally terminated the Management Agreement, both parties have acted as if
the Management Agreement has been terminated. Founders have initiated a lawsuit
against us with respect to this Management Agreement. In a lawsuit filed in
November 1999, Founders alleged that we improperly repudiated this Management
Agreement and is sought damages. In March 2000, we filed an answer to the
lawsuit and asserted counterclaims against Founders related to the Management
Agreement. In October 2001 we settled in full all matters relating to this
lawsuit, effectively ending any Founders current or future claims relating to
the Management Agreement.
                                       23
<PAGE>
                                     PART IV

ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

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

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

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

 3.2      By-Laws*

 4.1      Form of Common Stock Certificate*

 4.2      Form of Warrant*

 10.1     Warrant Agreement related to Redeemable Stock Purchase Warrants*

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

 10.3     Form of Preferred Stock, Series A Certificate*

 10.4     1995 Stock Option Plan of Company*

 10.5     Forms of Option Agreement under the Plan

 10.6     Option issued to Mr. Robert W. Tauber*

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

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

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

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

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

 10.12    Waiver and Amendment to Revolving Credit, Term Loan and Security
          Agreement dated March 30, 2001 by and among the Company, certain of
          its affiliates and IbJ Schroder Bank & Trust Company (Incorporated
          herein by reference to exhibit 10.16 to the Company's Annual Report on
          Form 10-K for the year ended December 31, 2000)

 10.13    Waiver and Amendment to Revolving Credit, Term Loan and Security
          Agreement dated August 14, 2001 by and among the Company, certain of
          its affiliates and IbJ Schroder Bank & Trust Company (Incorporated
          herein by reference to exhibit 10.1 to the Company's Quarterly Report
          on Form 10-Q for the quarter ended June 30, 2001)

                                       24
<PAGE>

 10.14    Waiver and Amendment to Revolving Credit, Term Loan and Security
          Agreement dated November 14, 2001 by and among the Company, certain of
          its affiliates and IbJ Schroder Bank & Trust Company (Incorporated
          herein by reference to exhibit 10.1 to the Company's Quarterly Report
          on Form 10-Q for the quarter ended September 30, 2001)

 10.15    Waiver and Amendment to Revolving Credit, Term Loan and Security
          Agreement dated March 21, 2002 by and among the Company, certain of
          its affiliates and IbJ Schroder Bank & Trust Company

 10.16    Asset Purchase Agreement dated Jan 26, 2000 with respect to the sale
          of substantially all of the assets of Tauber Electronics, Inc.******

 10.17    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.

 10.18    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

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

 21       List of Subsidiaries

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

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

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

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

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

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








                                       25
<PAGE>

                                   SIGNATURES

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

                                       WIRELESS XCESSORIES GROUP, INC.

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

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

<TABLE><CAPTION>

            NAME                                      TITLE                            DATE
            ----                                      -----                            ----
<S>                                 <C>                                            <C>
/s/ Christopher F. McConnell        Chairman of the Board                          April 1, 2002
-----------------------------
    Christopher F. McConnell

/s/ Ronald E. Badke                 Chief Financial Officer and                    April 1, 2002
-----------------------------       Secretary (principal financial officer)
     Ronald E. Badke

/s/ Stephen Rade                    Chief Executive Officer,                       April 1, 2002
-----------------------------       President and Director
     Stephen Rade                   (principal executive officer)

/s/ Allan Kalish                    Director                                       April 1, 2002
-----------------------------
    Allan Kalish

/s/ Christopher C. Cole             Director                                       April 1, 2002
-----------------------------
    Christopher C. Cole

/s/ Bradley T. MacDonald            Director                                       April 1, 2002
-----------------------------
    Bradley T. MacDonald
</TABLE>






                                       26
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE



                                                                    PAGE
                                                                    ----
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                 F-2

CONSOLIDATED BALANCED SHEETS                                        F-4

CONSOLIDATED STATEMENTS OF OPERATIONS                               F-5

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                     F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS                               F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                          F-9


CONSOLIDATED SUPPORTING SCHEDULE FILED:

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES        S-1

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

                                       F-1
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



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

     We have audited the accompanying consolidated balance sheet of Wireless
Xcessories Group, Inc. and subsidiaries as of December 31, 2001, and the related
consolidated statements of operations, stockholders equity and cash flows for
the year then ended. We have also audited the schedule listed in the index on
page F-1 of this form 10-K. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wireless
Xcessories Group, Inc. and subsidiaries as of December 31, 2001 and the results
of their operations and their cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion the schedule presents fairly, in all material respects, the
information set forth therein.

BDO SEIDMAN, LLP

Philadelphia, Pennsylvania
March 21, 2002

                                       F-2
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheet of Wireless
Xcessories Group, Inc. (a Delaware Corporation) and subsidiaries as of December
31, 2000 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two years in the period ended December 31,
2000. These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wireless Xcessories
Group, Inc. and subsidiaries as of December 31, 2000 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.

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

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
March 30, 2001


                                       F-3
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
                                                                          DECEMBER 31
                                                                 ------------------------------
                                                                     2001              2000
                                                                 ------------      ------------
<S>                                                              <C>               <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents                                        $    647,495      $    501,069
Accounts receivable (net of allowance for doubtful
  accounts of $431,577 and $263,276, respectively)                  2,132,208         4,022,533
Inventories                                                         1,807,459         4,896,125
Prepaid expenses and other current assets                             160,972           401,789
Income tax refund receivable                                          582,751                --
Current deferred income taxes                                              --           701,974
Current maturities of Notes Receivable                                207,529                --
                                                                 ------------      ------------
Total current assets                                                5,538,414        10,523,490
PROPERTY AND EQUIPMENT--Net                                         1,219,990         1,720,963
EXCESS OF COST OVER NET ASSETS ACQUIRED
   (net of accumulated amortization of
    $0 and $153,814, respectively)                                         --           907,508
OTHER ASSETS                                                          459,898           787,271
                                                                 ------------      ------------
Total assets                                                     $  7,218,302      $ 13,939,232
                                                                 ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt                                $     56,796      $    329,896
Bank overdraft                                                        185,965           397,996
Accounts payable                                                      418,917         1,107,469
Net liabilities of discontinued operations                            103,000           463,713
Accrued payroll and related benefits                                  139,213           446,810
Amounts due to officer                                                273,897           347,811
Rent and related obligations                                          163,885                --
Other accrued expenses                                                583,821           894,368
                                                                 ------------      ------------
Total current liabilities                                           1,925,494         3,988,063
                                                                 ------------      ------------

LONG-TERM DEBT                                                      1,154,944         2,858,996
                                                                 ------------      ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred Stock, par value $.001, 1,000,000 shares authorized,
   no shares issued or outstanding                                         --                --
Common stock, par value $.001, 10,000,000 shares authorized,
   5,222,080, issued                                                    5,222             5,222
Additional paid-in capital                                         11,331,106        11,331,106
Accumulated deficit                                                (7,166,841)       (4,244,155)
Treasury stock at cost 78,000 shares as of December 31, 2001          (31,623)               --
                                                                 ------------      ------------
Total stockholders' equity                                          4,137,864         7,092,173
                                                                 ------------      ------------
Total liabilities and stockholders' equity                       $  7,218,302      $ 13,939,232
                                                                 ============      ============
</TABLE>

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

                                       F-4
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE><CAPTION>
                                                                          FOR THE YEARS ENDED DECEMBER 31
                                                                 ------------------------------------------------
                                                                     2001              2000              1999
                                                                 ------------      ------------      ------------

<S>                                                                <C>                   <C>                  <C>
Net Sales                                                        $ 20,890,284      $ 30,128,028      $ 31,652,681
Cost of sales                                                      12,446,317        15,440,512        16,034,150
                                                                 ------------      ------------      ------------

Gross profit                                                        8,443,967        14,687,516        15,618,531


Selling, general and administrative expenses                       11,179,715        13,009,812        11,557,821

Interest expense, net                                                 116,172           273,452           394,893
                                                                 ------------      ------------      ------------

(Loss) income from continuing operations before income taxes       (2,851,920)        1,404,252         3,665,817
Income tax expense                                                     70,766           579,036         1,322,917
                                                                 ------------      ------------      ------------

(Loss) income from continuing operations                           (2,922,686)          825,216         2,342,900
                                                                 ------------      ------------      ------------

DISCONTINUED OPERATIONS:
Loss from operations (net of tax benefit of $0, $187,548,
And $847,186 , respectively                                                --          (293,344)       (1,504,077)
Estimated loss on sale of subsidiaries (net of tax benefit
of $0, 186,900, and $225,140, respectively)                                --          (285,296)       (4,277,178)
                                                                 ------------      ------------      ------------
(Loss) from discontinued operations                                        --          (578,640)       (5,781,255)
                                                                 ------------      ------------      ------------
Net (loss) income                                                $ (2,922,686)     $    246,576      $ (3,438,355)
                                                                 ============      ============      ============
(Loss) earnings per common share--Basic:
   (Loss) income from continuing operations                      $      (0.56)     $       0.16      $       0.47
   Loss from discontinued operations                                       --             (0.11)            (1.15)
                                                                 ------------      ------------      ------------
   Net (loss) income                                             $      (0.56)     $       0.05      $      (0.68)
                                                                 ============      ============      ============

   (Loss) earnings per common share--Diluted:
   (Loss) income from continuing operations                      $      (0.56)     $       0.16      $       0.46
   Loss from discontinued operations                                       --             (0.11)            (1.15)
                                                                 ------------      ------------      ------------
   Net (loss) income                                             $      (0.56)     $       0.05      $      (0.69)
                                                                 ============      ============      ============
</TABLE>





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

                                       F-5
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE><CAPTION>
                                                                                               RETAINED
                                    COMMON STOCK          ADDITIONAL      EARNINGS          TREASURY STOCK
                                --------------------       PAID-IN      (ACCUMULATED     --------------------
                                 SHARES      AMOUNT        CAPITAL         DEFICIT)        SHARES     AMOUNT         TOTAL
                                ---------   --------     -----------     -----------     ---------   --------     -----------
<S>                             <C>         <C>          <C>              <C>            <C>         <C>          <C>
BALANCE, JANUARY 1, 1999        4,743,000   $  4,743     $10,715,830     $(1,052,376)           --   $     --     $ 9,668,197
Issuance of Common stock          389,732        390         487,976              --            --         --         488,366
Net loss                               --         --              --      (3,438,355)           --         --      (3,438,355)
                                ---------   --------     -----------     -----------     ---------   --------     -----------
BALANCE, DECEMBER 31, 1999      5,132,732      5,133      11,203,806      (4,490,731)           --         --       6,718,208
Option exercises                   89,348         89         127,300              --            --         --         127,389
Net Income                             --         --              --         246,576            --         --         246,576
                                ---------   --------     -----------     -----------     ---------   --------     -----------
BALANCE, DECEMBER 31, 2000      5,222,080      5,222      11,331,106      (4,244,155)           --         --       7,092,173
Stock repurchased                      --         --              --              --        78,000    (31,623)        (31,623)
Net (loss)                             --         --              --      (2,922,686)           --         --      (2,922,686)
                                ---------   --------     -----------     -----------     ---------   --------     -----------
BALANCE, DECEMBER 31, 2001      5,222,080   $  5,222     $11,331,106     $(7,166,841)       78,000   $(31,623)    $ 4,137,864
                                =========   ========     ===========     ===========     =========   ========     ===========
</TABLE>


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

                                       F-6
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
                                                                   FOR THE YEARS ENDED DECEMBER 31
                                                          ------------------------------------------------
                                                              2001              2000              1999
                                                          ------------      ------------      ------------
<S>                                                       <C>               <C>               <C>
OPERATING ACTIVITIES:

Net income (loss)                                         $ (2,922,686)     $    246,576      $ (3,438,355)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
   Depreciation and amortization                               589,874           765,545           888,271
   Provision for doubtful accounts                             401,196           669,565           402,153
   Deferred income taxes (benefit)                             701,974           (26,782)         (165,183)
   Estimated loss on sale of subsidiaries                           --           472,196           562,848
   Impairment of excess cost over net assets acquired          876,008                --         3,939,470
   Loss on disposition of equipment                             93,126                --                --

Changes in assets and liabilities,
net of effects from dispositions:

   Accounts receivable                                       1,525,470         1,311,486            98,586
   Inventories                                               3,088,666         1,116,857         1,556,752
   Income tax refund                                          (582,751)          566,633                --
   Prepaid expenses and other assets                           280,938          (126,885)         (375,415)
   Accounts payable and accrued expenses                    (1,825,809)       (2,270,243)          194,204
                                                          ------------      ------------      ------------
Net cash provided by operating activities                    2,226,006         2,724,948         3,663,331
                                                          ------------      ------------      ------------

INVESTING ACTIVITIES:

Purchases of property and equipment, net                      (141,212)       (1,187,075)         (755,883)
Proceeds from sale of subsidiaries                                  --         1,245,000                --
Principal payment received on note receivables                  70,408             4,820                --
                                                          ------------      ------------      ------------
Net cash (used in) provided by investing activities            (70,804)           62,745          (755,883)
                                                          ------------      ------------      ------------
FINANCING ACTIVITIES:

Payments on capital lease obligation                           (14,202)          (24,714)               --
Repurchase of common stock                                     (31,623)               --                --
Issuance of common stock                                            --           127,389           488,366
Net payments on borrowings                                  (1,962,951)       (2,755,126)       (3,360,634)
                                                          ------------      ------------      ------------
Net cash used in financing activities                       (2,008,776)       (2,652,451)       (2,872,268)
                                                          ------------      ------------      ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                      146,426           135,242            35,180

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                   501,069           365,827           330,647
                                                          ------------      ------------      ------------
CASH AND CASH EQUIVALENTS, END OF YEAR                    $    647,495           501,069           365,827
                                                          ============      ============      ============




                                                                    FOR THE YEARS ENDED DECEMBER 31
                                                          ------------------------------------------------
                                                              2001              2000              1999
                                                          ------------      ------------      ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during year for:
Interest                                                  $    179,680      $    353,924      $    606,500
Income taxes                                                   142,854           590,758           378,843
                                                          ------------      ------------      ------------
</TABLE>
                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-7
<PAGE>
                WIRELESS XCESSORIES GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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

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

     Reclassification -- Certain prior year amounts have been reclassified to
conform to current year presentation.

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

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

     In 2001, the Company purchased approximately 44% of its products from one
Far East supplier and one domestic supplier with each vendor accounting for 22%.

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

     Property and Equipment -- Property and equipment are stated at cost.
Additions and improvements are capitalized. Maintenance and repairs are expensed
as incurred. Depreciation and amortization of property and equipment is
calculated under the straight-line method over the estimated useful lives of the
respective assets. Estimated useful lives are five to seven years for furniture
and fixtures and three to ten years for machinery and equipment. Leasehold
improvements are amortized over the shorter of their estimated useful lives or
the terms of their leases. Depreciation and amortization expense was $549,059,
$561,953 and $368,505 in 2001, 2000 and 1999, respectively, and is included in
selling, general and administrative expense in the consolidated statements of
operations.


                                       F-8
<PAGE>
     Other Assets - Other assets consist of the Long-term portion of Notes
Receivable received in connection with the disposition of the Battery Segment
Companies (See Note 2), as well as, purchased software and refundable deposits.

     Excess of Cost Over Net Assets Acquired -- The excess of cost over net
assets acquired prior to September 30, 2001, was amortized on a straight-line
basis over twenty-five years. The carrying value of the excess cost over net
assets acquired is periodically reviewed to determine whether an impairment
existed. This review was based on comparing the carrying amounts to the
undiscounted estimated cash flows before interest charges from operations over
the remaining amortization period. During the quarter ended September 30, 2001,
the Company recognized an impairment loss of the remaining balance of its excess
of cost over net assets acquired of $876,008. This impairment related to the
significant deterioration of Cliffco of Tampa Bay, Inc's business. What remained
of Cliffco's operations were merged into the Wireless Xcessories Group.
Previously in 1999 the Company had recognized impairment loss of $3,939,470
related to Battery Network, Inc. as a result of the decision to exit the Battery
Segment(see Note 2).

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






                                       F-9
<PAGE>
     Shipping and Handling Fees - The Company records revenues derived from
shipping and handling in net sales and the costs associated with shipping and
handling in cost of sales.

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

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

     The results of operations for the Battery Segment have been classified as
discontinued operations for all periods presented in the consolidated statements
of operations and balance sheets. Discontinued operations have not been
segregated in the accompanying consolidated statements of cash flows, and,
therefore, amounts of certain captions will not agree with the respective
consolidated statements of operations. Net sales for the Battery Segment were
$0, $3,397,208 and $16,137,635 for the years ended December 31, 2001, 2000 and
1999, respectively.

     The Company allocated interest not specifically associated with any segment
based upon a ratio of net tangible assets. Interest expense allocated to
discontinued operations was $0, $50,000 and $256,000 in 2001, 2000 and 1999,
respectively.

     Earnings Per Share -- Basic earning per share (EPS) is computed using the
weighted average number of common shares outstanding for the period while
diluted EPS is computed assuming conversion of all dilutive securities such as
options. Included below is a reconciliation of shares for the basic and diluted
EPS computations.

<TABLE><CAPTION>
                                                     2001           2000           1999
                                                  ----------     ----------     ----------
<S>                                                 <C>            <C>             <C>
Basic EPS Shares                                   5,185,089      5,193,731      5,013,537

Dilutive effect of stock options and warrants             --         60,598         38,213
                                                  ----------     ----------     ----------
Diluted EPS Shares                                 5,185,089      5,254,329      5,051,750
                                                  ==========     ==========     ==========
</TABLE>

     Options to purchase 315,612, 112,960 and 130,532 shares with exercise
prices ranging from $.37 to $5.00 and warrants to purchase 100,000, 100,000 and
2,400,000 shares with exercise prices ranging from $4.13 to $5.00 were
outstanding at December 31, 2001, 2000 and 1999, respectively, but were not
included in the computation of diluted EPS because the option's exercise price
was greater than the average market price of the common shares.

     Disclosures About Fair Value of Financial Instruments -- The carrying value
of cash, cash equivalents, investments, and long-term debt approximates 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.

                                      F-10
<PAGE>
     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)
per share in accordance with the provisions of SFAS No.123, "Accounting for
Stock-Based Compensation" (See Note 5).

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

NEW ACCOUNTING STANDARDS

     In June 2001, the Financial Accounting Standards Board (FASB) finalized
FASB Statements No. 141, "Business Combinations" ("SFAS 141"), and No.142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires the use
of the purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets meet
certain criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after July
1, 2001. SFAS 142 address financial accounting for acquired goodwill and other
tangibles. It requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. SFAS 142
is required to be applied in fiscal years beginning after December 15, 2001.
Currently, the Company has no goodwill and will assess how the adoption of SFAS
141 and SFAS 142 will impact its financial position and results of operations on
future acquisitions.

     In August 2001, the FASB issued SFAS No.144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS 144"). This statement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. The new guidance resolves significant implementation issues related to
SFAS 121. "Accounting for the impairment of long lived assets to be disposed
of." SFAS 144 is effected for fiscal years beginning after December 21, 2001.
Currently, the Company is assessing but has not determined how the adoption of
SFAS 144 will impact its finanicial position and results of opearation.

2.   ACQUISITIONS AND DIVESTITURES:

     Effective January 1, 1997, the Company acquired the business and related
assets of Battery Network, Inc. and affiliated companies ("Battery Network"),
which operated principally in California. The purchase price was approximately
$11.2 million including transaction cost. The Battery Network acquisition
agreement also provided the sellers with contingent consideration through a
certain subsequent period. Such additional consideration was not earned.

     In accordance with the decision to exit the Battery Segment (see Note 1 --
Discontinued Operations), the Company evaluated the net realizable value of net
assets of the Battery Network business. In connection with this evaluation, the
Company determined that the unamortized excess of cost over net assets acquired
at December 31, 1999 was not realizable and, therefore, recognized a related
impairment of $3,939,470. In addition, the Company recorded a reserve for the
estimated operating losses and costs to dispose of the business of $152,242 (net
of $101,496 tax benefit). Such amounts are included in the 1999 loss from
discontinued operations in the accompanying consolidated statements of
operations.
                                      F-11
<PAGE>
     On January 27, 2000, the Company sold substantially all of the assets and
certain liabilities of Tauber Electronics, Inc. for $1,489,427, consisting of
cash of $1,005,854 and a note receivable of $519,708 bearing interest at 1%
above prime, as defined and payable over 5 years. Any outstanding principal or
accrued interest is due in full on January 26, 2005. The principal amount of
this note was subsequently reduced to $483,573, effective on March 15, 2000, to
reflect the final valuation of transferred assets. The related loss on the sale
of $185,466 (net of $123,644 tax benefit) has been reflected in the estimated
loss on sale of subsidiaries within the loss from discontinued operations in the
1999 consolidated statement of operations.

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

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

                                      F-12
<PAGE>

3.   PROPERTY AND EQUIPMENT:

     Property and equipment consists of the following:

                                                DECEMBER 31,
                                      ------------------------------
                                          2001              2000
                                      ------------      ------------
Machinery and equipment               $  2,335,055      $  2,469,756
Furniture and fixtures                     416,153           482,498
Vehicles                                    38,463            49,265
Leasehold improvements                     246,926           255,227
                                      ------------      ------------
                                         3,036,597         3,256,746
Less accumulated depreciation
and amortization                        (1,816,607)       (1,535,783)
                                      ------------      ------------
Property and equipment, net           $  1,219,990      $  1,720,963
                                      ============      ============

4.   LONG-TERM DEBT:

     Long-term debt consists of the following:

                                                    DECEMBER 31,
                                           ------------------------------
                                               2001              2000
                                           ------------      ------------
Revolving Credit Facility                  $  1,114,864      $  3,077,815
Capital Leases                                   96,876           111,077
                                           ------------      ------------
                                              1,211,740         3,188,892

Less current portion                            (56,796)         (329,896)
                                           ------------      ------------
Long-term debt, net of current portion     $  1,154,944      $  2,858,996
                                           ============      ============

     The weighted average interest rates in effect on debt for the years ended
December 31, 2001, 2000, and 1999 was 6.73%, 8.69% and 7.3%, respectively.

     The Company entered into a Revolving Credit, Term Loan and Security
Agreement, dated January 6, 1997, as subsequently amended (the "Loan Facility"),
with IBJ Whitehall-Financial Group (formerly known as IBJ Schroder Bank and
Trust Company), as Agent ("IBJ"). The Loan Facility consisted of a $3,000,000
Term Loan (the "Term Loan") payable in 35 monthly installments of $50,000 each
with the balance to be paid at maturity and a Revolving Credit Facility (the
"Revolver Loan") of up to $10,000,000 to be advanced at the rate of 80% of
eligible accounts receivable and 50% of inventories. The Loan Facility is
secured by a pledge of the assets of the borrowers and pledge of the outstanding
capital stock of the subsidiaries of the Company. On August 14, 2001 The Company
entered into an amended credit agreement and at management's request , to reduce
the revolving credit facility to $5,000,000 (less an undrawn availability of
$800,000 to be maintained at all times) At the same time, the interest rate the
Company pays to IBJ on its borrowings was increased to the sum of the alternate
base rate (as defined)Plus .75% with respect to domestic rate loans or the sum
of the Eurodollar rate plus 2-1/2% with respect to Eurodollar rate loans. The
term loan was paid in full effective with a final payment of $39,218 in June
2001. As of December 31, 2001, the principal amount outstanding of the Revolver
Loan was $1,114,864.

     The Loan Facility contains certain covenants, which include maintenance of
certain financial ratios, maintenance of certain amounts of EBITA (earnings
before interest and taxes), minimum amounts of funds available for borrowing
under its loan facility and limits of capital expenditures as well as other
affirmative and negative covenants. It also prohibits the payment of dividends
of common stock without consent. At December 31, 2001, the Company was not in
compliance with one of these covenants. On March 21, 2002, the Company entered
into an amended credit agreement whereby the non-compliance at December 31, 2001
was waived and new financial covenants were negotiated through December 31,
2003, which reflect the Company's current operating projections. As part of the
agreement the advance rate for borrowing on eligible inventory was lowered from
50% to 40%. Additionally, the Loan Facility was extended for an additional one
year period and is now due to expire on January 7, 2004.

                                      F-13
<PAGE>
5.   STOCKHOLDERS' EQUITY:

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

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

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

     On January 11, 2001, the Board of Directors approved a stock buyback
program whereby the Company will repurchase a total of up to 500,000 shares of
common stock at a total cost not to exceed $250,000 through July 22, 2002. As of
December 31,2001 the Company has repurchased 78,000 shares at an average price
of $0.41 per share.

     STOCK OPTIONS -- The Company, on June 6, 1995, adopted the Company's Stock
Option Plan (the "Plan"), which as amended in December 1995, authorizes the
Board of Directors or a Stock Option Committee appointed by the Board to grant
up to 250,000 qualified stock options and non-qualified stock options to
officers and key employees, directors and independent consultants. Directors who
are not employees and consultants are eligible only to receive non-qualified
stock options. The Board of Directors in 1995 granted under the Plan options to
purchase 20,720 shares of common stock to two directors at a price of $2.89 per
share. In 1996, the Company granted under the Plan five-year options to purchase
an aggregate of 195,000 shares of Common Stock to employees. The options are
exercisable at the initial offering price per share of $5.00. In 1997, the
Company granted, under the Plan, five-year options to purchase an aggregate of
75,000 shares of Common Stock to employees of the Company. The options are
exercisable at prices ranging from $2.80 to $4.50 per share. In 1998, the
shareholders of the Company approved an amendment to the Plan increasing the
number of shares granted by 350,000 to an aggregate total of 600,000 for the
plan. In addition in 1998, the Company granted, under the Plan, five-year
options to purchase an aggregate of 455,000 shares of common stock to directors
and employees of the Company. The options are exercisable at prices ranging from
$1.38 to $2.69 per share. In 1999, the Company granted, under the Plan, one-year
options to purchase 85,000 shares of common stock to a director of the Company.
The options are exercisable at prices ranging from $1.38 to $1.88 per share. The
Company also granted, under the Plan, ten-year options to purchase 95,000 shares
of common stock to directors and employees of the Company. The options are
exercisable at $1.38 per share. In 2000, the stockholders of the Company
approved an amendment to the Plan increasing the number of shares reserved for
issuance by 400,000 to an aggregate of 1,000,000 under the Plan. In addition in
2000, the Company granted, under the plan, ten-year options to purchase an
aggregate of 138,500 shares of Common Stock to directors and employees of the
Company. In 2001, the Company granted, under the plan, ten-year options to
purchases a total of 65,000 shares of Common stock at $.375 per share to the
directors of the Company. At December 31, 2001 and 2000, there were a total of
595,040 and 566,540, respectively, shares available for grant.

                                      F-14
<PAGE>
     The following information pertains to the stock options outstanding for the
three years ending December 31, 2001:
<TABLE><CAPTION>
                                                                                                  EXERCISABLE
                                                                   WEIGHTED                        WTD. AVG.
                                                     NUMBER         AVERAGE        OPTIONS         EXERCISE
                                                   OF SHARES      SHARE PRICE       SHARES           PRICE
                                                   ---------      -----------      ---------      -----------
<S>                                                <C>            <C>              <C>            <C>
Options outstanding at January 1, 1999              303,865          $2.47
     Granted                                        180,000           1.40
     Forfeited                                     (128,333)         (1.59)
                                                   --------          -----          --------          -----
Options outstanding at December 31, 1999            355,532           2.23           301,365          $2.37
     Granted                                        138,500           1.54
     Exercised                                      (89,348)         (1.43)
     Forfeited                                      (60,572)         (2.23)
                                                   --------          -----          --------          -----
Options outstanding at December 31, 2000            344,112           2.16           244,112           2.44
     Granted                                         65,000            .37
     Forfeited                                      (93,500)         (2.86)
                                                   --------          -----          --------          -----
Options outstanding at December 31, 2001            315,612           1.58           241,112          $1.78
                                                   ========          =====          ========          =====
</TABLE>

     The following table summarizes information as of December 31, 2001
concerning currently outstanding and exercisable options:
<TABLE><CAPTION>
                  OPTION OUTSTANDING                                       OPTIONS EXERCISABLE
--------------------------------------------------------------------------------------------------------------------
                                            WEIGHTED
                                            AVERAGE
                                           REMAINING
                                          CONTRACTUAL           WEIGHTED                                  WEIGHTED
   RANGE OF              NUMBER               LIFE               AVERAGE              NUMBER              AVERAGE
EXERCISE PRICE        OUTSTANDING           (YEARS)          EXERCISE PRICE        EXERCISABLE        EXERCISE PRICE
--------------        -----------           -------          --------------        -----------        ---------------
<S>                     <C>                   <C>               <C>                <C>                     <C>
$0.375 - $1.00           65,000               9.3                 $0.38               32,500                $0.38
$1.01 -  $2.00          197,652               6.4                 $1.42              155,652                $1.43
$3.01 -  $4.00           25,000               0.4                 $2.80               25,000                $2.80
$4.01 -  $5.00           27,960               3.2                 $4.48               27,960                $4.48
</TABLE>

     The outstanding stock options as of December 31, 2001 vest as follows: (a)
half of the option shares are vested on the date of grant with an additional
one-half vesting in the first anniversary therefrom (186,652 options outstanding
at December 31, 2001); or (b) one-third of the option shares are vested on the
date of the grant with an additional one-third vesting on the first and second
anniversaries therefrom, respectively (40,000 options outstanding at December
31, 2001); or (c) one hundred percent of the option shares are vested on the
date of grant (16,960 options outstanding at December 31, 2001) or (d) one-fifth
of the options shares are vested on the date of grant with an additional
one-fifth vesting on the first, second, third and fourth anniversaries there
from, respectively (72,000 shares outstanding at December 31, 2001).

                                      F-15
<PAGE>
     As provided for in SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company utilizes the intrinsic value method of expense recognition under APB
No. 25. Accordingly, no compensation cost has been recognized for the stock
option plans as all options have been issued with exercise prices equal to fair
market value. Had compensation expense for the stock option plans been
determined consistent with the provisions of SFAS No. 123, the Company's net
income and net income per share would have been the pro forma amounts indicated
below:
                                    2001              2000             1999
                                ------------      ------------     ------------
(Loss) income from
continuing operations:

As reported                     $ (2,922,686)     $    825,216     $  2,342,900
Pro forma                         (2,969,298)          743,162        2,295,818

Basic (loss) income from
continuing operations
per common share:

As reported                     $      (0.56)     $       0.16     $       0.47
Pro forma                              (0.57)             0.14             0.46

Diluted (loss) income from
continuing operations per
common share:

As reported                     $      (0.56)     $       0.16     $       0.46
Pro forma                              (0.57)             0.14             0.45

     The weighted average fair value of those options granted during the years
ended December 31, 2001, 2000 and 1999 was estimated as $0.34, $1.07 and $.75,
respectively. The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rate of 5.6%, 6.6% and 6.2% for 2001,
2000 and 1999, respectively; expected dividend yield of 0%; expected life of 6.9
years; and expected volatility of 100%, 119% and 95% for 2001, 2000 and 1999,
respectively.

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

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

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

     Also, in connection with the acquisition of Battery Network, on January 7,
1997 the Company issued five-year warrants to purchase 100,000 shares of common
stock at a price of $4.125 per share. No such warrants have been exercised and
expired January 2002.

                                      F-16
<PAGE>
6.   INCOME TAXES:

     The provision (benefit) for income taxes on continuing operations consists
of:
                             2001              2000              1999
                         ------------      ------------      ------------
Current:
Federal                  $   (582,751)          718,124      $  1,277,187
State                         (48,457)          183,659           127,734
                         ------------      ------------      ------------
                             (631,208)          901,783         1,404,921
                         ------------      ------------      ------------
Deferred:
Federal                       559,006          (257,015)         (139,776)
State                         142,968           (65,732)           57,772
                         ------------      ------------      ------------
                              701,974          (322,747)          (82,004)
                         ------------      ------------      ------------
Total provision
for income taxes         $     70,766      $    579,036      $  1,322,917
                         ============      ============      ============

     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,
                                           -------------------------------
                                              2001                 2000
                                           ----------           ----------
Deferred income tax assets:
Benefit of net operating losses
   carryforward                            $  155,789           $       --
Accrued compensation                          104,081              146,081
Inventory reserve                             372,406              298,280
Bad debts reserve                             163,999              108,470
Sales returns and allowances                   54,857              103,790
Goodwill                                      324,713                   --
Other                                          46,285              104,462
                                           ----------           ----------
                                            1,222,130              761,083
                                           ----------           ----------
Deferred income tax liabilities:

State taxes                                    38,164               48,609
Other                                              --               10,500
                                           ----------           ----------
                                               38,164               59,109

                                           ----------           ----------
Valuation allowance                         1,183,966                   --
                                           ----------           ----------
Net deferred tax asset                     $       --           $  701,974
                                           ==========           ==========





                                      F-17
<PAGE>
The effective income tax rate varied from the U.S. Federal statutory tax rate
as follows:
                                         2001         2000        1999
                                        ------       ------      ------
Statutory income tax rate                (34.0)%       34.0%       34.0%
State income (benefit) taxes, net         (4.0)         5.5         3.4
of federal tax benefit
Meals and entertainment                     --          0.7         0.2
Other                                     (1.0)         1.0        (1.5)
Valuation allowance                       41.5           --          --
                                        ------       ------      ------
Effective tax rate                         2.5%        41.2%       36.1%
                                        ======       ======      ======

     As of December 31, 2001 the Company has federal and state net operating
loss carryforward amounts of approximately $294,000 and $1,798,000,
respectively. These net operating loss carry forward amounts begin to expire in
2011. SFAS No. 109 requires the establishment of a deferred tax asset for all
deductible temporary difference including operating loss carry forwards. The
Company has provided a valuation allowance for all of its deferred tax asset as
a result of the uncertainty that the Company will generate sufficient income in
the future to fully or partially realize the net deferred tax asset of
approximately $1,184,000. At December 31, 2001, the deferred tax asset has been
offset by a valuation allowance of the same amount.

     Under the Tax Reform Act of 1986, the utilization of a corporation's net
operating loss carryforward is limited following a greater than 50% change in
ownership. Due to the Company's prior and current equity transactions, the
Company's net operating loss carryforwards may be subject to an annual
limitation generally determined by multiplying the value of the Company on the
date of the ownership change by the federal long-term tax exempt rate. Any
unused annual limitation may be carried forward to future years for the balance
of the net operating loss carryforward period.

7.   COMMITMENTS AND CONTINGENCIES:

     The Company was notified in the fall of 2000 that certain of its products
might have infringed the patents of an original equipment manufacturer (OEM).
The Company discontinued the sale of such products in question, and in early
2001 developed alternative products to meet its customer needs that it believes
do not infringe.

     Several other distributors have either settled or are in the process of
litigating similar claims with the OEM. The Company has outside counsel to
assist it in resolving all financial issues relating to the Company's sales
prior to the discontinuance of alleged patent infringement. At this point, the
Company is involved in the information discovery phase with the OEM, which
hopefully will lead to a reasonable settlement of any and all outstanding
issues.

     The amount any claim if any unknown at this time and management cannot
reasonably assess has liability exposure. We believe that the possibility of an
unfavorable outcome will not have a material adverse effect on our financial
position.

     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-18
<PAGE>
     The Company leases various types of warehouse and other space and
equipment, furniture and fixtures under noncancellable operating lease
agreements, which expire at various dates. Certain leases for warehouse and
other space contain rental escalation clauses based on the Consumer Price Index.
Future minimum lease payments under noncancellable operating leases for the
years ending December 31 are as follows:

2002                              $   537,196
2003                                  541,524
2004                                  322,542
2005 and thereafter                    32,370
                                  -----------
Total                             $ 1,433,632
                                  ===========

     Rent expense exclusive of common area maintenance where applicable for all
operating leases for the years ended December 31,2001, 2000 and 1999 was
$533,035, $452,707 and $429,625, respectively.

     During 2000, the Company entered into certain capital leases for equipment
and office furniture. Total future lease payments under these lease obligations
are $64,129, $33,603 and $7,014 in 2002, 2003 and 2004 respectively. Included
in future lease payments is $12,949 representing interest.

8.   RELATED PARTY TRANSACTIONS:

     The Company leases certain office space in Pennsylvania from an affiliate
of the current Chief Executive Officer. The lease expired on December 31, 1999
and was on a month-to-month basis until the mutually agreed termination date of
April 30, 2000. Rent expense related to this lease was $0, $76,000 and $76,000
in 2001, 2000 and 1999, respectively.

     The Company employs Susan Rade, wife of Stephen Rade, current Chief
Executive Officer of the Company, as a sales person with certain administrative
duties. In this role, Mrs. Rade earns the bulk of her compensation as part of
the Company's sales incentive commission programs earning $253,760, $329,981 and
$439,063 in 2001, 2000 and 1999, respectively, including draws, commission and a
$30,000 salary for administration duties.

     Messrs. Warren H. Haber, the former Chairman of the Board, and John L.
Teeger, the former Vice President, Secretary and Director of the Company, were
the sole stockholders, officers and directors of Founders Management. Pursuant
to the Management Agreement between Founders and the Company dated as of June 6,
1995, as subsequently amended, Founders was to provide advice and consultative
services regarding management, overall strategic planning, acquisition policy,
relations with commercial and investment banking institutions, and stockholder
matters to or on behalf of the Company. In addition to an annual base fee of
$150,000 and a fee based on the Company's profits, Founders was entitled to
receive originating fees with respect to acquisitions or financings for which it
performed originating services.

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

     In addition to an annual fee, Founders was issued five year warrants to
purchase 100,000 shares of the Company's Common Stock, at a price of $4.125 per
share. These warrants expired on January 7, 2002.

     Since May 1998, when Messrs. Haber and Teeger resigned as officers and
directors of the Company, Founders has provided no services to the Company and
the Company has not paid any fees to Founders. Although neither the Company nor
Founders has formally terminated the Management Agreement, both parties have
acted as if the Management Agreement has been terminated. Founders initiated a
lawsuit against the Company with respect to this Management Agreement. In a
lawsuit filed in November 1999, Founders alleged that the Company improperly
repudiated this Management Agreement and sought damages. In March 2000, the
Company filed an answer to the lawsuit and asserted counterclaims against
Founders related to the Management Agreement. In October 2001 the Company
settled in full all matters relating to this lawsuit for $228,000, effectively
ending any Founders current or future claims relating to the Management
Agreement.

9.   SEGMENT DISCLOSURE:

     As a result of the decision to exit the Battery Segment, the Company
effectively operates in one business segment, the Wireless Products Segment,
which distributes cellular telephone accessory products including batteries,
chargers and antennas throughout North and South America. The Wireless Products
Segment is headquartered in Huntingdon Valley, Pennsylvania and through March
28, 2001 consisted of Advanced Fox Antenna, Cliffco of Tampa Bay, Inc. and
AccessorySolutions.com, Inc. Effective on March 1, 2002, the Companies merged
with Wireless Xcessories Group, Inc. (The Surviving Company) and fully
consolidated its operations during 2001. 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, 2001, 2000, and 1999.

     Export sales for the years ended December 31, 2001, 2000 and 1999 were as
follows:
                                        2001           2000           1999
                                     ----------     ----------     ----------
Europe, Middle East & Africa         $  101,792     $  111,677     $   45,472
Asia and Pacific                        130,965          7,387          8,345
Americas excluding United States        333,899        452,857        712,723
                                     ----------     ----------     ----------
Total                                $  566,656     $  571,921     $  766,540
                                     ==========     ==========     ==========

     Receivables from export sales at December 31, 2001, and 2000, were $36,866,
and $113,802, respectively.

                                      F-19
<PAGE>
10.  QUARTERLY RESULTS (UNAUDITED):

     The following table summarizes quarterly financial data for 2001 and 2000:

     (Dollars in thousands)
<TABLE><CAPTION>
                                             MARCH 31          JUNE 30         SEPTEMBER 30       DECEMBER 31
                                           ------------      ------------      ------------      ------------
<S>                                        <C>               <C>               <C>               <C>
2001
----
Net sales                                  $      5,855      $      4,897      $      4,867      $      5,271
Gross profit                                      2,696             2,108             1,936             1,704
                                           ------------      ------------      ------------      ------------
Net loss                                   $       (106)     $       (291)     $     (1,226)     $     (1,300)
                                           ============      ============      ============      ============
Basic and diluted net (loss) per share     $      (0.02)     $      (0.06)     $      (0.24)     $       0.25)
Weighted average common shares outstanding
(Basic and Diluted)                           5,217,747         5,197,009         5,175,005         5,151,350


2000
----
Net sales                                  $      7,137      $      7,020      $      7,692      $      8,279
Gross profit                                      3,577             3,536             3,734             3,840
Income from continuing operations          $        174      $         85      $        247      $        320
(Loss) from discontinued operations                  --               (82)             (373)             (124)
Net income (loss)                          $        174      $          3      $       (126)     $        196
                                           ============      ============      ============      ============

Basic income (loss) per common share

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

Weighted average common shares
outstanding (Basic)                           5,133,282         5,196,860         5,222,080         5,222,080

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

Weighted average common shares
outstanding (Diluted)                         5,222,083         5,212,890         5,222,080         5,222,080
</TABLE>

                                      F-20
<PAGE>
                                   SCHEDULE II

                         WIRELESS XCESSORIES GROUP, INC.

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES








<TABLE>
<CAPTION>
DESCRIPTION                                 BEGINNING BALANCE              ADDITIONS      DEDUCTIONS      ENDING BALANCE
-----------                            -----------------------------       ---------      ----------      --------------
<S>                                    <C>                  <C>            <C>            <C>             <C>
Inventory reserves                     January 1, 1999       $93,495       $ 221,701      $   32,704        $  282,492
                                       January 1, 2000       282,492         615,046         373,258           524,280
                                       January 1, 2001       524,280       1,527,009       1,071,272           980,017

Allowance for doubtful accounts        January 1, 1999       170,317         182,993         232,843           120,467
                                       January 1, 2000       120,467         647,758         504,949           263,276
                                       January 1, 2001       263,276         361,196         192,895           431,577
</TABLE>




                                       S-1