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

                                   FORM 10-KSB

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the Fiscal Year Ended June 30, 2005

                          Commission File No. 000-30486

                   ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.
                 (Name of small business issuer in its charter)

           FLORIDA                                    65-0738251
-------------------------------          ---------------------------------------
(State or other jurisdiction of          (I.R.S. employer identification number)
 incorporation or organization)


                    420 Lexington Avenue, New York, NY 10170
                     (Address of principal executive office)

                                 (646) 227-1600
                        (Registrant's telephone number)

              Securities registered under Section 12(b) of the Act:

                                      None

              Securities registered under Section 12(g) of the Act:

           Common Stock, No Par Value, 5,000,000,000 shares authorized

      Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 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|_|

      Check if there is no disclosure of delinquent  filers pursuant to Item 405
of  Regulation  S-B is not  contained  in this  form and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

      Indicate  by check mark  whether  the  registrant  is a shell  company (as
defined in rule 12b-2 of the Exchange Act) Yes |_| No |X|

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      The issuer's revenue for fiscal year ended June 30, 2005 was $7,521,723.

      The  aggregate  market value as of September 1, 2005 of the voting  common
equity held by non-affiliates is $1,962,155.



               APPLICABLE ONLY TO ISSUER'S INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING PRECEDING FIVE YEARS


      Check  whether the issuer has filed all  documents and reports to be filed
by Section 12, 13 or 15(d) of the Securities  Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court.

                                YES ____ NO ____

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

      As of September 1, 2005, there were 3,151,773,731  shares of the Company's
no par value common stock issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None




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    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                                   FORM 10-KSB

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                PAGE #S
                                                                                -------
<S>                                                                             <C>

PART I
   ITEM 1.   Description of Business............................................1-6
   ITEM 2.   Description of Property............................................6
   ITEM 3.   Legal Proceedings..................................................6
   ITEM 4.   Submission of Matters to a Vote of Security Holders................7

PART II
   ITEM 5.   Market For Common Equity, Related Stockholder Matters and
             Small Business Issuer Purchases of Equity Securities...............8-9
   ITEM 6.   Management's Discussion and Analysis or Plan of Operation..........10-21
   ITEM 7.   Financial Statements...............................................22
   ITEM 8.   Changes In and Disagreements with Accountants on Accounting
             and Financial Disclosure...........................................22
   ITEM 8A.  Controls and Procedures............................................22
   ITEM 8B.  Other Information .................................................22

PART III
   ITEM 9.   Directors, Executive Officers, Promoters and Control
             Persons; Compliance with Section 16(a) of the Exchange Act.........23-26
   ITEM 10.  Executive Compensation.............................................26-30
   ITEM 11.  Security Ownership of Certain Beneficial Owners and Management.....30-32
   ITEM 12.  Certain Relationships and Related Transaction......................32
   ITEM 13.  Exhibits...........................................................33-37
   ITEM 14.  Principal Accountant Fees and Services.............................38-39

ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2005...........................F-1-F-22
</TABLE>


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      As  used  herein,  the  terms  the  "Company",   "Advanced  Communications
Technologies",   "we",   "us",   or  "our"  refer  to  Advanced   Communications
Technologies, Inc., a Florida corporation.



                           Forward-Looking Statements

      Certain   statements   in  the   "Description   of  Business"   (Item  1),
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operation"  (Item  6) and  elsewhere  in  this  Annual  Report  on  Form  10-KSB
constitute  "forward-looking  statements"  (within  the  meaning of the  Private
Securities  Litigation  Reform Act of 1995 (the  "Act"))  relating to us and our
business, which represent our current expectations or beliefs including, but not
limited  to,  statements  concerning  our  operations,   performance,  financial
condition and growth. The Act may, in certain circumstances, limit our liability
in any lawsuit based on forward-looking statements we have made. All statements,
other than  statements  of historical  facts,  included in this Annual Report on
Form 10-KSB that address  activities,  events or developments  that we expect or
anticipate  will or may  occur in the  future,  including  such  matters  as our
projections,   future  capital  expenditures,   business  strategy,  competitive
strengths,  goals, expansion, market and industry developments and the growth of
our businesses and operations are forward looking  statements.  Without limiting
the generality of the foregoing,  words such as "may," "anticipation," "intend,"
"could,"   "estimate,"  or  "continue"  or  the  negative  or  other  comparable
terminology  are  intended  to  identify   forward-looking   statements.   These
statements by their nature involve substantial risks and uncertainties,  such as
credit  losses,  dependence  on management  and key  personnel,  variability  of
quarterly results,  our ability to continue our growth strategy and competition,
certain  of which are  beyond  our  control.  Any or all of our  forward-looking
statements  may  turn  out to be  wrong.  They  may be  affected  by  inaccurate
assumptions  that we might make or by known or unknown  risks or  uncertainties.
Should one or more of these  risks or  uncertainties  materialize  or should the
underlying assumptions prove incorrect, actual outcomes and results could differ
materially from those indicated in the forward-looking statements.

      Additional  factors  that  could  affect  future  results  are  set  forth
throughout  the  "Description  of  Business"  (Item 1)  section,  including  the
subsection  entitled  "Risks  Related to Our  Business,"  and  elsewhere in this
Annual Report on Form 10-KSB. Because of the risks and uncertainties  associated
with  forward-looking  statements,  you should not place undo  reliance on them.
Further, any forward-looking statement speaks only as of the date on which it is
made, and we undertake no obligation to update any forward-looking  statement to
reflect events or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events.


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<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

      Advanced  Communications  Technologies,  Inc.  ("we,"  "us," "our," or the
"Company")  is a New  York-based  public  holding  company  specializing  in the
technology aftermarket service and supply chain, known as reverse logistics. Our
wholly-owned   subsidiary  and  principal   operating   unit,   Encompass  Group
Affiliates,  Inc.  ("Encompass"),  acquires and operates businesses that provide
computer and electronics  repair and end-of-life cycle services.  Encompass owns
Cyber-Test, Inc. ("Cyber-Test"), an electronic equipment repair company based in
Florida  and  our  principal  operating  business.  Additionally,   through  our
wholly-owned  investment  subsidiary,  Hudson Street Investments,  Inc. ("Hudson
Street"),  we seek to acquire  minority  investments  in various  privately-held
profitable businesses.

      We  are   focused  on   becoming  a   full-service   provider  of  repair,
refurbishment  and recycling  services in the computer  peripheral  and consumer
electronics  market.  We intend to provide  single source life cycle  management
services for technology products to businesses and consumers worldwide.

The Business Of Cyber-Test, Inc.

      Cyber-Test,   a  Delaware  corporation  and  wholly-owned   subsidiary  of
Encompass,  operates as an independent service  organization.  From its roots in
the space  industry  more than 19 years  ago,  Cyber-Test  provides  board-level
repair  of  technical  products  to  third-party  warranty  companies,  original
equipment  manufacturers  ("OEMs"),   national  retailers  and  national  office
equipment dealers.  Service options include advance exchange, depot repair, call
center support, parts and warranty management. Cyber-Test's technical competency
extends from office  equipment  and fax machines to printers,  scanners,  laptop
computers, monitors, multi-function units and high-end consumer electronics such
as PDAs and  digital  cameras.  Cyber-Test  plans to offer  repair and  exchange
services during fiscal 2006 on gaming products including Sony's PlayStation(TM),
Microsoft's  X-Box(TM)  and  Nintendo's  Game  Cube(TM)  consoles.  Programs are
delivered   nationwide  through   proprietary  systems  that  feature  real-time
electronic  data  interchange  ("EDI"),   flexible  analysis  tools  and  repair
tracking.


The Business Of Encompass Group Affiliates, Inc.

      Encompass,  a Delaware  corporation,  and our wholly-owned  subsidiary and
principal  operating unit, owns Cyber-Test,  our core operating  computer repair
business.  Encompass  seeks to become a leader in the integrated  technology and
services  industry  through  the  acquisition  of assets and  companies  in that
industry,  and then instilling  sustainable  growth skills as a core competency.
Encompass is focused on  eliminating  the risks  associated  with  environmental
compliance in the e-Recycle  industry by  repairing,  refurbishing,  sorting and
selling old components to specialized processors, such as smeltering plants.

The Business Of Hudson Street Investments, Inc.

      Hudson  Street a Delaware  corporation,  and our  wholly-owned  investment
subsidiary,  was formed to purchase and hold  minority  investments  in selected
financial and technology-based  businesses. In addition to holding securities in
both private and public  companies,  Hudson Street owned a minority  interest in
Yorkville Advisors  Management,  LLC ("Yorkville  Advisors"),  a privately-owned
investment  management firm.  During the fiscal year ended June 30, 2005, Hudson
Street redeemed, in full, its interest in Yorkville Advisors.

      Through  Hudson  Street,  we will  continue  to seek  investments  in high
growth-potential businesses in a variety of industries.

The Business Of Pacific Magtron International Corporation, Inc.

      Pacific Magtron International Corporation, Inc. ("PMIC") together with its
wholly-owned   subsidiaries  Pacific  Magtron,  Inc.  ("PMI"),  Pacific  Magtron
International (GA), Inc. ("PMIGA") and Live Warehouse,  Inc. ("LWI"), is our 62%
majority-owned   subsidiary.   PMIC's  principal   business   consisted  of  the
importation  and  wholesale  distribution  of  electronics  products,   computer
components,  and computer peripheral equipment throughout the United States. LWI
sold consumer  computer  products  through the Internet and distributed  certain
computer  products to resellers.  On May 11, 2005 (the "Petition  Date"),  PMIC,
PMI,  PMIGA and LWI filed  voluntary  petitions to reorganize  their  businesses
under  Chapter  11 of the United  States  Bankruptcy  Code in the United  States
Bankruptcy Court for the Southern District of Nevada, (the "Bankruptcy  Court").
The  Bankruptcy  Court is jointly  administering  these cases as "In re: Pacific
Magtron International Corporation, Inc., et al., Case No.BK-S-05-14326 LBR".


                                       1
<PAGE>

      Due to the bankruptcy filing of PMIC and its subsidiaries on May 11, 2005,
and as of that  date,  the  Company  is no longer  able to  exercise  management
control over PMIC's business operations.  Consequently, as of June 30, 2005, the
Company  accounted  for  the  investment  in  PMIC  under  the  cost  method  of
accounting.  Because PMIC was  unsuccessful in reaching an agreement with one of
its secured creditors, on June 23, 2005 it ceased all business activities except
those necessary to liquidate its remaining assets.

The Reverse Logistics And e-Recycle Industry

      The following Reverse Logistics and e-Recycle industry discussion is based
on a report prepared by D.F.  Blumberg & Associates  published earlier this year
relating to the 2004 calendar year:

      The $60 billion U.S.  technology  aftermarket  services industry is highly
fragmented  and  ripe  for  consolidation.   The  industry,  known  as  "reverse
logistics",  encompasses  all  operations  related to the reuse of products  and
materials, or the collection and disassembling process of used products, product
parts, and/or materials in order to ensure an environmentally friendly recovery.
The  management of these  operations is concerned with the care for products and
materials after they have been used.

      The reverse logistics  industry has seen a dramatic increase in demand for
services such as technical support, repair, asset recovery,  end-of-life product
management,  disposal and recycling.  This rapidly  emerging market is driven by
environmental  regulations,  outsourcing  trends, and accelerating  product life
cycles across numerous technologies.

      Electronic discards are among the fastest growing segments of our nation's
waste stream and are  increasingly  being  considered  "toxic" waste when dumped
into landfills. Industry estimates for the U.S. alone project that by 2006, more
than 163,000  televisions  and computers are expected to become  obsolete  every
day. This  translates  into 3,500 tons of potentially  hazardous  material which
would cost approximately $100 million a month to dispose of properly.

      Environmental  concerns and regulatory  momentum are contributing to rapid
growth  in the  e-Recycle  industry.  Both  producers  and  users of  electronic
products  need a single  source  solution  that  efficiently  disassembles  this
equipment  and  safely   recovers  the   components  for  use  in  new  material
manufacturing.

The Computer Repair/Warranty Management Industry

      Cyber-Test  continues to operate within the office  equipment and computer
peripheral products repair/warranty  management industry, with its primary focus
on facsimile machines, printers, scanners, PDAs, laptop computers, monitors, and
multi-function  units.  Warranty periods and longer product life cycles demand a
maintenance/repair commitment that can typically support a product for up to ten
(10) years. In addition,  the industry  relationship among OEMs, the integrator,
and the third- and fourth-party  service providers has become more complex.  The
end-user,  or consumer,  must have  assurance  that products are supported by an
after-sales service team capable of providing  preventive  maintenance and/or an
immediate remedy upon equipment failure.

      With  the  technological   advances  and  associated  cost  reductions  in
shipping,  the warranty  manager's  challenge  is to meet and exceed  customer's
expectations with respect to speed of response. The repair/warranty industry has
seen a shift towards  outsourcing  warranty  service to companies  whose primary
purpose and core strength is to manage  complex  demands of the  repair/warranty
chain process. Warranty service companies are expected to be able to:

      o     offer one-stop / turnkey service;

      o     have the technical ability to repair multi-products for
            multi-vendors;

      o     offer advance exchange of office equipment computer peripheral
            products;

      o     offer distribution logistics from call management through delivery;
            and

      o     demonstrate supply-line parts management logistics efficiencies.


                                       2
<PAGE>

      In  addition  to  existing   warranty   service   companies,   traditional
distribution  logistics providers (such as UPS, Airborne Express, etc.) are also
entering this industry.  Ultimately,  the success or failure of meeting warranty
commitments  will depend on the ability of the warrantor or its service provider
to have the right  component  in the right place at the right time and the right
skills to affect the necessary repair at the most cost-effective price.

Cyber-Test's Products and Services

      The following describes the individual components that make up the current
Cyber-Test family of products and services.

      Repair  and  Exchange.   Cyber-Test  has  offered  board-level  repair  of
technical  products  for more than 19 years,  and offers  service  programs  for
equipment  dealers,  OEMs,  extended  warranty  companies,  retail  outlets  and
end-users. The service programs include:

      o     return to depot repair of office equipment and computer peripheral
            products;

      o     advance exchange of office equipment and computer peripheral
            products;

      o     board-level repair of circuit boards and sub assemblies;

      o     return to depot repair for component-level circuit boards;

      o     OEM warranty exchange and repair programs;

      o     large volume repair and refurbishment; and

      o     call center technical support.

      Cyber-Test's  repair and  exchange  service  is  managed by a  proprietary
system  designed  and  developed  by the  management  team  of  Cyber-Test  with
software-tracking  that allows customers or the call center function (whether it
is onsite at Cyber-Test's  facilities or at the customer's  facility) to be able
to track the repair status of the given unit, and provide a delivery date to the
end-user,  while  allowing  executives of Cyber-Test to manage the output volume
and quality of the repair process.

      In  addition,  Cyber-Test's  software  allows  its  clients  to view their
inventory,  parts,  parts used per unit,  and the status of all  equipment  on a
real-time basis via its secure website.  Clients may also change  priorities and
escalate orders directly from this proprietary, customized web portal.

      Parts And Sales. Cyber-Test stocks a full line of parts, accessories,  and
consumables  for its  in-house  repair  needs and offers these parts for sale as
well.  Cyber-Test  stocks over 32,000 parts for  printers,  facsimile  machines,
scanners,  monitors  and PDAs.  Customer's  can view a full  listing of parts at
Cyber-Test's  website (in the  ADVANCEX(TM)  section) and, if any part is not in
stock, it can usually be made available in one business day. Cyber-Test's unique
parts ordering system has the capability to search, order, and buy parts without
an OEM part number.  Cyber-Test's search feature will cross-reference  other OEM
parts that may fit the ordered part from other manufacturers or OEMs.

      In  addition to repair  services,  Cyber-Test  sells parts and  consumable
supplies to dealers and end-users and has a customer base of approximately 1,500
dealers and repair shops,  two OEMs and four major extended  warranty  companies
that service five (5) of the top office equipment /computer retail chains.

      In addition to parts,  Cyber-Test stocks an extensive inventory of new and
refurbished  equipment  available for  purchase.  New equipment is backed with a
full  OEM  warranty,  and  90 day  warranties  are  offered  by  Cyber-Test  for
refurbished units.

      Call Center Technical Support. Cyber-Test offers partial or full (turnkey)
Help Desk support  through its Call Center.  The Call Center has handled as many
as  25,000  calls  per  month  from  its  customers   and   currently   averages
approximately  5,000  calls per month.  The Call  Center has a greater  than 50%
phone-fix  rate,  which  significantly   reduces   Cyber-Test's  overall  costs.
Cyber-Test's  Call Center is the sole  technical  help line for  selected  Xerox
printers and fax machines.


                                       3
<PAGE>

      Reverse  Logistics  and  Outsourcing.  Cyber-Test  offers its customers an
outsourcing  service of  inventory,  warehousing,  and shipping of parts and end
products  for  warranty  fulfillment,  with  full  refurbishing  and  inspection
programs  including  "A" and "B"  goods  logistics.  OEMs can  direct  all store
returns to Cyber-Test  for  inspection.  If units have not been taken out of the
box,  those items can be inspected  and resold out as "A" goods.  Products  that
have been used or are defective are processed through the refurbishment  process
and repackaged  and resold as "B" goods.  Cyber-Test can assist the OEM with "B"
goods distribution and resale.

      Cyber-Test  also has a salvage  division that receives  extended  warranty
products that were "bought out" by the warranty provider. Products are received,
sorted and palletized for resale to wholesalers worldwide.

      Service Contracts. In addition to OEMs and major retailers, Cyber-Test has
established  relationships with a number of insurance  companies and third-party
service  providers  to provide  full  repair and call  center  support  service.
Extended manufacturer's warranties sold at retail stores are typically backed by
a third party  insurance  company.  In other  cases,  the  extended  warranty is
managed by the retailer  itself.  If a product covered in a service  contract is
determined to be in need of repair by the Call Center, a replacement unit may be
sent directly to the end-user via ADVANCEX(TM).  Cyber-Test  manages the process
from call receipt and receiving the defective product back from the customer, to
tracking  the  product,  repairing  the returned  units,  and  managing  against
customer fraud.

      Cyber-Test   also  offers  an  "Advance   Exchange"   program,   known  as
ADVANCEX(TM),  which  provides same day service to its customers on all products
Cyber-Test  repairs.  With  the  ADVANCEX(TM)  program,  Cyber-Test  can ship an
equivalent-to-new  ("ETN") replacement product directly to the customer if phone
support  fails to correct the problem.  The customer  then returns the defective
unit to Cyber-Test for repair and  refurbishment  and subsequent use for another
customer.  Its proprietary  systems allow the OEM to gather failure analysis and
failure  trends  critical to the release of new products.  This  information  is
collected online,  while Cyber-Test  provides level II and III technical support
directly  to the  customer.  Its  telephone  support  achieves  a current  phone
fix-rate  of more  than  50%,  saving  OEMs  millions  of  dollars  per  year in
unnecessary product exchange.  Cyber-Test has a same-day  fulfillment up to 5:00
p.m. Eastern Time on all ADVANCEX(TM)  products,  and ships  approximately 6,500
repaired  units per month.  The  ADVANCEX(TM)  program has resulted in decreased
product returns and increased customer satisfaction.

Competition

      Cyber-Test's  business is highly  competitive.  Cyber-Test  competes  with
companies  that  provide  repair  services  for office  equipment  and  computer
peripheral  products,  with  companies  that  supply  parts and  consumables  to
end-users  and  repair  companies  of such  equipment  and  products,  and  with
resellers of such equipment and products.

      Competition within the office equipment and computer  peripheral  products
service and repair  industry is based on quality of service,  depth of technical
know-how,  price, availability of parts, speed and accuracy of delivery, and the
ability to tailor  specific  solutions  to customer  needs.  According to a 2004
industry  directory  and  yearbook  published  by National  Electronics  Service
Dealers  Association/International  Society of Certified Electronic Technicians,
there are more than 800  manufacturers of technical  products in the U.S. of the
type Cyber-Test repairs,  more than 1,000 independent companies in the U.S. that
repair products in a manner similar to  Cyber-Test's,  over 350 companies in the
U.S.  that  supply  parts and  components  for use in  repair,  and many tens of
thousands  of  independent  service  technicians  that  do  on-site  repair.  In
addition, there are thousands of companies that sell technical products that may
need repair, and many of these do their own repair or service work.

      Many of  Cyber-Test's  competitors  are  larger  in size and have  greater
financial and other resources than does Cyber-Test,  such as Decision One, Depot
America, Teleplan, DataTech America, and DEX.

      Cyber-Test  also  competes with  manufacturers  and OEMs that do their own
repair work,  as well as large  distribution  and  logistics  companies  such as
United Parcel Service and Airborne Logistics.

Customers

      Cyber-Test  currently  relies  on a few  large  customers  to  generate  a
significant portion of its revenues.  The loss of one or more of these customers
would have a material adverse effect on our business,  results of operations and
financial condition.  Management believes it is essential to expand Cyber-Test's
customer  base to minimize  this  dependency.  Cyber-Test's  ability to do so is
dependent upon many variables including its ability to successfully  attract and
retain  technicians  that are  capable  of  performing  repair on all brands and
models of office  equipment  and  computer  peripherals  at prices  which remain
competitive.


                                       4
<PAGE>

Company History

      We were  incorporated  in Florida  on April 30,  1998 under the name Media
Forum  International,  Inc. ("Media Forum"). We were inactive from April 1998 to
June 1998,  except for the issuance of founders' shares during such time period.
On  April  7,  1999,  Advanced  Communications  Technologies,   Inc.,  a  Nevada
corporation  ("Advanced  Communications  (Nevada)")  merged  with  and  into us.
Pursuant to this merger,  the shareholders of Advanced  Communications  (Nevada)
received  90% of our  outstanding  common  stock and we received all of Advanced
Communications  (Nevada)'s  assets.  These assets  included all of the North and
South  American  rights  to  market  and  distribute  SpectruCell,   a  wireless
software-defined radio ("SDR")-based  communications  platform under development
in  Australia  by entities  related to a founding  shareholder,  to offer mobile
communications  network providers the flexibility of processing and transmitting
multiple  wireless   communications   signals  through  one  base  station.   We
subsequently  changed  our name  from  Media  Forum to  Advanced  Communications
Technologies,  Inc. Upon completion of the merger, we changed our trading symbol
to "ADVC." As a result of the merger, Advanced Communications (Nevada) ceased to
exist as a separate entity.

      In 2002,  we closed  operations  relating  to  SpectruCell,  significantly
reduced our expenses,  and shifted to a holding company structure,  as it became
uncertain whether SpectruCell's  development would ever be completed and brought
to market in the U.S. On December  17,  2003,  we formed  SpectruCell,  Inc.,  a
wholly-owned  Delaware  subsidiary,  and  transferred  all of our  rights in the
SpectruCell  technology  to this  subsidiary.  SpectruCell,  Inc.  is  presently
inactive  and the  technology,  to the best of our  knowledge,  has  never  been
commercially developed and/or tested.

      On July 20, 1999, we formed Advanced Global Communications,  Inc. ("AGC"),
a Florida  corporation.  AGC was formed to develop and operate our international
telecommunications network from the United States to Pakistan and India, as well
as to acquire other switching and telecommunications  companies. The network was
established  in 2000 and operated  until 2001,  when the  regulatory  climate in
Pakistan  and India made it legally  and  economically  impractical  to operate.
During  the  fiscal  year  ended  June  30,  2001,  we  ceased  operating  AGC's
international  telecommunications network and wrote-off our entire investment in
various  telephone  equipment and network costs.  AGC still exists as a separate
entity, but has been inactive since July 1, 2001.

      On January 31, 2000, we acquired  Smart  Investments.com,  Inc.  through a
stock  exchange  with Smart  Investments'  sole  shareholder.  Immediately  upon
completion of that acquisition, we elected successor issuer status in accordance
with Rule  12g-3  promulgated  under the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange  Act"),  and  consequently  became a "reporting  company"
under the Exchange Act.

      On  April  13,  2004,  we  formed   Encompass   Group   Affiliates,   Inc.
("Encompass"), a Delaware corporation, to be our wholly-owned subsidiary for the
purpose of becoming our principal operating unit. Encompass is the direct parent
company to Cyber-Test, Inc., our core operating business.

      On June 3,  2004,  pursuant  to the terms of an asset  purchase  agreement
dated May 27, 2004,  Encompass  acquired 100% of the assets and core business of
Cyber-Test,  Inc. ("Cyber-Test"),  a Delaware corporation,  Upon consummation of
the acquisition, Cyber-Test became the core operating business of Encompass with
85  employees  and  annual  sales of  approximately  $6,000,000,  at the time of
acquisition.  Cyber-Test,  a 19 year old established electronic equipment repair
company  located in  Longwood,  Florida,  specializes  in the repair of computer
peripheral  products and provides a multitude of services  that offer support at
any level from repair, warranty exchange, to end-of-life product support to OEMs
(Original Equipment Manufacturers), warranty companies, dealers and end-users.


                                       5
<PAGE>

Employees

      As of September  1, 2005,  the Company had 100  full-time  and 3 part-time
employees.

ITEM 2. DESCRIPTION OF PROPERTY

      The  Company's  principal  executive  office is located  at 420  Lexington
Avenue,  Suite 2738,  New York, New York 10170.  The Company,  through a license
agreement effective December 1, 2004 with Danson Partners,  LLC, a party related
to our chief  executive  officer,  occupies a 499 square  foot  office  facility
having a monthly lease obligation of $1,478, as adjusted  annually.  Our license
agreement is on a month-to-month basis and is at fair market rental.

      The  Company's  core  operating  business,  Cyber-Test  is  located at 448
Commerce Way, Longwood,  Florida 32750. This 29,000 square foot office/warehouse
facility  has a one-year  triple net lease that  commenced on August 1, 2004 and
ended on July 31, 2005, and provides for two one year options at a monthly lease
obligation of $13,900. Cyber-Test exercised its one year option and extended its
lease to July 31,  2006.  The  lease is  renewable  on a  year-to-year  basis by
providing  written  notice 60 days prior to the  expiration  of the then current
term.

      The  Company's  principal  operating  unit,  Encompass  is located at 1600
California  Circle,  Milpitas,  California 95035.  Encompass leases 2,000 square
feet of office space on a  month-to-month  basis for $2,000 per month. The lease
commenced on July 1, 2005.


ITEM 3. LEGAL PROCEEDINGS

      The  Company  has been,  and may in the future be,  involved as a party to
various  legal  proceedings,  which are  incidental  to the  ordinary  course of
business.  Management  regularly analyzes current information and, as necessary,
provides accruals for probable  liabilities on the eventual disposition of these
matters.  In the  opinion  of  management,  as of June 30,  2005,  there were no
threatened  or pending  legal  matters that would have a material  impact on the
Company's consolidated results of operations, financial position or cash flows.

      On May 10, 2005,  our  majority-owned  subsidiary,  PMIC,  terminated  the
employment agreements dated December 30, 2004 among PMIC, Encompass, us and each
of Theodore S. Li and Hui Cynthia Lee (the "Employment  Agreements') for "cause"
pursuant  to the terms of such  agreements.  The  Employment  Agreements  became
effective contemporaneously with the sale of an aggregate of 6,454,300 shares of
the common stock of PMIC by Mr. Li and Ms. Lee,  representing 61.56% of the then
issued and  outstanding  common  stock,  to us. In addition to base salaries and
other compensation,  the Employment Agreements provided for payment of a signing
bonus of $225,000 to each of Mr. Li and Ms. Lee on or before  January 29,  2005.
No part of these  bonuses  has been paid by PMIC.  On May 11,  2005,  we filed a
complaint in the United States  District Court for the Southern  District of New
York  against  Theodore  S. Li and Hui  Cynthia  Lee,  the former  officers  and
principal  shareholders  of PMIC,  for the  recovery  of  damages  and costs for
securities  fraud,  breach of  contract,  misrepresentation  and other counts in
connection with the Stock Purchase  Agreement dated December 10, 2004 between us
and Mr. Li and Ms. Lee. On or about July 6, 2005, the defendants  filed a motion
for a more  definite  statement  of our  complaint.  That motion  remains  under
consideration by the court and discovery has not yet commenced.

      On  February  5, 2004,  we filed suit in Superior  Court,  Orange  County,
California  against  Advanced  Communications  (Australia),  Roger  May,  Global
Communications  Technologies Limited and Global Communications  Technologies Pty
Ltd to  recover  damages  incurred  as a  result  of  wrongful  actions  of such
defendants  against  the  Company  and to clarify  the  status of the  Company's
obligations to such defendants under various agreements and other  arrangements,
from  which  the  Company  believes  it has been  relieved  as a result  of such
wrongful actions. In May and August 2004, the court entered default judgments in
favor of the Company and  against  all of the above  defendants.  On October 22,
2004,  the court held a hearing to determine the amount the Company was entitled
to recover  against the  defendants in the action.  In November  2004, the court
entered a  judgment  in favor of the  Company  in the  approximate  amount of $8
million.  The Company  offset against the judgment  approximately  $2,847,000 of
debt carried on its books as owing to one or more of the defendants.  Because of
the uncertainty of collecting the balance of the judgment or approximately  $5.1
million,  we  have  not  recorded  the  unliquidated  portion  of  the  judgment
receivable  and the related  income in the June 30, 2005  financial  statements.
Additional debt forgiveness  income will be recorded in the period or periods in
which collection or seizure of assets is made.


                                       6
<PAGE>

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

      None.




                                       7
<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES

Price Range Of Common Stock

      Our common  stock is  currently  traded on the  Over-the-Counter  Bulletin
Board  ("OTCBB")  under the symbol  "ADVC." As of September 1, 2005,  there were
3,151,773,731 common shares issued and outstanding and approximately 505 holders
of record.  We believe  that the number of  beneficial  owners is  substantially
greater than the number of record holders  because a large portion of our common
stock is held in "broker" or "street names".

      The following table sets forth, for the fiscal periods indicated,  the bid
price range of our common stock, as reported by Bloomberg Financial Markets:

                                         High Bid   Low Bid
                                         --------   -------
      Fiscal Year 2005
      Quarter Ended September 30, 2004   $ .00119   $ .0005
      Quarter Ended December 31, 2004        .002    .00038
      Quarter Ended March 31, 2005          .0015     .0009
      Quarter Ended June 30, 2005           .0015     .0005

      Fiscal Year 2004
      Quarter Ended September 30, 2003   $   .007   $.00163
      Quarter Ended December 31, 2003      .00363    .00169
      Quarter Ended March 31, 2004          .0025    .00131
      Quarter Ended June 30, 2004           .0015    .00081


      Such market quotations reflect inter-dealer prices without retail mark-up,
mark-down or commissions and may not represent actual transactions.

      We did not pay any  dividends  during  fiscal 2005 and have never paid any
dividends on our capital stock.  We currently  expect that we will retain future
earnings  for use in the  operation  and  expansion  of our  business and do not
anticipate paying any cash dividends in the foreseeable  future. Any decision on
the future  payment of  dividends  will  depend on our  earnings  and  financial
position  at that time and such other  factors as our Board of  Directors  deems
relevant.

Recent Sales Of Unregistered Securities

      All  issuances of  restricted  stock have been valued based on the closing
price of the stock as of the date the Company's Board of Directors  approved the
grant of  shares  of our  common  stock or under  the  terms of our  Convertible
Debentures.

      On June 28,  2005,  the  Board  of  Directors  approved  the  issuance  of
12,500,000   shares  of  common  stock  to  Martin  Nielson,   our  Senior  Vice
President-Acquisitions  and  director,  pursuant  to the terms of Mr.  Nielson's
deferred  compensation  provision  of his June 24, 2004  employment  contract as
amended on June 1,  2005.  These  shares  represent  the  earned  portion of Mr.
Nielson's  deferred  compensation  arrangement,  the  cost  of  which  has  been
amortized as deferred  compensation  expense in the amount of $250,000 in fiscal
2005. The shares were issued on July 1, 2005 to Mr. Nielson.

      On January  12,  2005,  the  Company's  Board of  Directors  approved  the
issuance of  5,000,000  shares of  restricted  common  stock to Hawk  Associates
valued at $.0015 per share, or $7,500 pursuant to the terms of Hawk  Associates'
service agreement with us. The shares were issued on February 4, 2005.

      With respect to the sale of unregistered  securities referenced above, all
transactions  were exempt  from  registration  pursuant  to Section  4(2) if the
Securities  Act of  1933  (the  "Securities  Act").  These  offerings  may  have
qualified  for other  exemptions as well.  In each  instance,  the purchaser had
access to sufficient information regarding the Company so as to make an informed
investment  decision.  More specifically,  the Company had a reasonable basis to
believe  that  each  purchaser  was  an  "accredited  investor"  as  defined  in
Regulation  D  under  the  Securities  Act,  which   information  was  based  on
representations  received from such  investors,  and otherwise had the requisite
sophistication to make an investment in the Company's securities.


                                       8
<PAGE>

Issuer Purchases of Equity Securities

      We did not make any purchases of equity  securities during the fiscal year
ended June 30, 2005.

Selected Financial Data

      The following  selected financial data is derived from, and should be read
in,  conjunction with our financial  statements and related notes,  which appear
elsewhere in this Annual Report on Form 10-KSB. Our financial statements for the
years  ended July 31,  2005,  2004 and 2003 were  audited by Weinberg & Company,
P.A.

<TABLE>
<CAPTION>
                                                    For the Years Ended June 30,
                                       ---------------------------------------------------
                                             2005               2004              2003
                                       ---------------    ---------------    -------------
<S>                                    <C>                <C>                <C>

Sales                                  $     7,521,723    $       605,468    $          --
Cost of Sales                                4,879,081            400,265               --
Gross Profit                                 2,642,642            205,203               --
Operating Expenses                           4,449,536            788,261        1,216,776
Operating (Loss)                            (1,806,893)          (583,058)      (1,216,776)
Income (Loss) from Investments                (474,893)           439,999               --
Other Income (Expense)                       2,741,327            618,879         (652,255)
Income (Loss) Before Income Taxes              459,541            475,820       (1,869,031)
Provision for Income Taxes                          --                 --               --
(Loss) from Discontinued Operations,
  Net of minority interest                  (1,195,374)                --               --
Net Income (Loss)                             (735,833)           475,820       (1,869,031)
Net Income (Loss) Per Share:
  Basic and Diluted                    $           .00    $           .00    $        (.01)
Weighted Average Shares:
  Basic and Dilutive                     2,072,211,255      1,084,885,437      152,960,499
                                       ===============    ===============    =============

Cash                                   $       836,876    $     1,193,170    $      22,527
Working Capital (Deficiency)                  (139,363)        (2,197,667)      (4,044,795)
Total Assets                                 4,970,038          7,996,339           70,748
Total Liabilities                            2,043,949          6,571,877        6,030,922
Stockholders' Equity (Deficiency)            2,926,089          1,424,462       (5,960,174)
</TABLE>


                                       9
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      The following  discussion should be read in conjunction with our financial
statements and the related notes and the other financial  information  appearing
elsewhere in this report. In addition to historical  information,  the following
discussion  and  other  parts  of this  Annual  Report  contain  forward-looking
information  that involves  risks and  uncertainties  including the use of words
such as "estimates,"  "expects,"  "anticipates,"  "believes," "intends," "will,"
"seek" and other similar expressions,  are intended to identify  forward-looking
information that involves risks and uncertainties.  In addition,  any statements
that  refer to  expectations  or other  characterizations  of  future  events or
circumstances are forward-looking statements.  Actual results and outcomes could
differ  materially  as a result of  important  factors  including,  among  other
things,  general economic conditions,  the Company's ability to renew or replace
key supply and credit agreements,  fluctuations in operating results,  committed
backlog,  public market and trading issues,  risks associated with dependence on
key personnel,  competitive market conditions in the Company's existing lines of
business   and   technological   obsolescence,   as  well  as  other  risks  and
uncertainties.

General

      We  are a New  York-based  public  holding  company  specializing  in  the
technology aftermarket service and supply chain, known as reverse logistics. Our
wholly-owned   subsidiary  and  principal   operating   unit,   Encompass  Group
Affiliates,  Inc.  ("Encompass"),  acquires and operates businesses that provide
computer and electronics  repair and end-of-life cycle services.  Encompass owns
Cyber-Test, Inc. ("Cyber-Test"), an electronic equipment repair company based in
Florida  and  our  principal  operating  business.  Additionally,   through  our
wholly-owned  investment  subsidiary,  Hudson Street Investments,  Inc. ("Hudson
Street"),  we seek to acquire  minority  investments in various  privately-held,
profitable businesses.

      We have three principal  means of  diversifying  and growing our business,
each of  which is  designed  to give  shareholders  a strong  value  driver.  As
described further below, Encompass, our principal operating subsidiary,  intends
to acquire synergistic companies in support of its technology services strategy.
Until February 2005, Hudson Street was a minority partner in the management firm
of an  institutional  investment  company.  Through Hudson  Street,  we may seek
opportunities  to make  minority  investments  in publicly  and  privately  held
companies in technology and other diverse industries.

      Although   we  believe  we  can   continue  to  grow   through   strategic
acquisitions,  there is no  guarantee  as to when,  if ever,  we would  identify
prospective  acquisitions or complete such strategic  acquisitions.  Appropriate
acquisition  candidates  may require more  resources  than are  available to us.
Additionally,  in the event we consummate an acquisition,  there is no guarantee
such acquisition would be successful.

Encompass' Strategy - Integrated Technology Life Cycle Services

      Our wholly-owned subsidiary and principal operating unit Encompass, is the
operating  company through which we expect to grow and implement our strategy in
the technology  services industry.  This industry,  often broadly referred to as
Reverse  Logistics,  consists  of  companies  that  provide  repair and  upgrade
services,  new and used parts in support  of the  repair  and  upgrades,  return
services from  resellers or for products no longer needed by the original  users
(often called asset recovery), refurbishment and resale services, and ultimately
recycling or disposal  services.  These  services and  processes are part of the
end-of-life-cycle for technology products, and are the opposite of "supply chain
services"..

      This industry is a highly fragmented,  yet according to a report published
by D.F.  Blumberg &  Associates  earlier this year  relating to 2004,  its sales
volumes  account for more than $60 billion in sales in the United  States market
each year.

      It is Encompass'  strategy to acquire,  integrate,  and grow complementary
companies in the reverse  logistics  field such that our customers and end users
can realize an extended life for their technology  products,  and can ultimately
replace these products cost effectively,  efficiently and in accordance with the
legal and moral  responsibility  to recycle the  products  without  damaging the
environment.  It is our intent to acquire  technology  services  companies  with
significant  growth-potential  and which complement our expansion plan such that
we can provide a continuous  expansion of these  integrated  life cycle services
for the technology products within the consumer electronics industry.


                                       10
<PAGE>

      We seek to differentiate ourselves by being the first company to provide a
broad and  complete  scope of services  and  products  in the reverse  logistics
consumer electronics industry and by providing exceptional and reliable customer
service.

      The candidate  companies that we have been pursuing for  acquisition  must
demonstrate the following  minimum financial and business  criteria:  i) obvious
commercial synergies;  ii) share our vision for the industry  opportunity;  iii)
strong financial  position-cash and other current assets, little or no debt, and
strong  cash flow;  iv)  accretive  within the first year;  v)  superior  growth
prospects;  vi) corporate  culture and management  team highly  compatible  with
ours; vii) proprietary technologies or other superior differentiation  strategic
fit;  viii)  satisfactory  owners'  background  checks;  and ix) if  applicable,
Sarbanes-Oxley  compliant.  These criteria represent our business  philosophy of
acquiring financially strong,  self-sufficient  enterprises that will not depend
on or require our financial support to operate and grow their business.

      Cyber-Test is an electronic  equipment repair company and is our principal
service  business.  A 19 year old  company,  Cyber-Test  was  acquired to be the
platform from which our services business would expand. Cyber-Test's technicians
are highly  skilled  at  performing  board-level  repair for nearly all types of
integrated  circuit  board  products and in the timely and  efficient  repair of
various  consumer  electronics.  It  is  our  expectation  that  this  technical
proficiency,  combined  with  Cyber-Test's  operational  systems  and  blue-chip
customer  base will  provide us with a suitable  base for growth both by organic
means and by acquiring complementary repair companies.

      As described  above,  we intend to continue to pursue the  acquisition of,
and  investment  in,  technology  and/or  brand  differentiated  companies  with
significant  growth-potential that complement our expansion plan of providing an
integrated life cycle service for the consumer electronics  industry. We seek to
make the process of growth,  through both organic and  inorganic  means,  a core
competency of each company that we acquire or in which we invest.

Fiscal Year Ended June 30, 2005 Compared To Fiscal Year Ended June 30, 2004

Overall Results Of Operations

      During the fiscal year ended June 30, 2005, Cyber-Test, our core operating
business  unit  continued to increase both revenue and profits,  earning  record
revenues and strong profits of approximately  $382,000 on sales of $7.5 million.
Cyber-Test's  net income was augmented by $194,000 of net investment  income and
$2.8 million of forgiveness  of debt income as a result of a favorable  judgment
against our former CEO and his related  entities  that  allowed us to  discharge
these  obligations.  However,  we experienced a setback with our  acquisition of
PMIC which  experienced a swift downturn in its financial  condition and results
of  operations  in the third and fourth  quarters  ultimately  resulting  in the
Chapter  11  bankruptcy  filing of PMIC and its  subsidiaries,  our  filing of a
federal  lawsuit  against  the  former  shareholders  and  officers  of PMIC for
misrepresentation  and  breach  of  contract  and the  write-off  of our  entire
investment  in PMIC in the amount of  $669,000.  Because we owned a  controlling
interest in PMIC prior to the May 11, 2005 bankruptcy  filing,  our statement of
operations  includes the results of PMIC for the four and one-half  month period
of our equity ownership, January 1, 2005 through May 10, 2005. This loss of $1.2
million  is  shown  as a Loss  from  Discontinued  Operations,  net of  minority
interest on our Statement of Operations... In addition to the one-time charge of
$1.9  million  attributable  to  our  ownership  and  investment  in  PMIC,  our
consolidated results of operations also include $475,000 of compensation expense
attributable to executive and director stock grants and bonus.

      During the fiscal year ended June 30, 2004, our financial  results reflect
an overall profit of $476,000 or $.00 per share which was a substantial increase
of  $2,345,000  from the net loss of  $1,869,000  or  $(.012)  per share for the
fiscal year ended June 30, 2003. The substantial  turnaround in net earnings for
the fiscal year ended June 30, 2004 was attributable to management's  successful
efforts in  restructuring  and settling  substantially  all of our  obligations,
significantly reducing our ongoing operating and interest costs and generating a
source of ingoing  earnings and cash flow through the purchase of an interest in
a profitable  financial  services  business and the purchase of Cyber-Test,  our
core operating business. Of the $2,345,000 increase in net income, $781,000 is a
result of us  negotiating  and settling a majority of our  accounts  payable and
other  liabilities  at a substantial  discount  which  generated  forgiveness of
indebtedness income along with a $919,000 reduction in interest expense, lawsuit
settlements  and operating  expense.  An additional  $440,000 of net  investment
income was also realized.


                                       11
<PAGE>

Overall Net Income (Loss) For The Year Ended June 30, 2005

      For the fiscal year ended June 30, 2005, our financial  results reflect an
overall  loss of $736,000  or $.00 per share which was a decrease of  $1,212,000
from the net profit of $476,000 or $.00 per share for the fiscal year ended June
30,  2004.  Our  overall  consolidated  net loss was  principally  the result of
reporting a $1.2 million loss from the discontinued  operations of our 62% owned
subsidiary,  PMIC plus the $669,000  write-off of our investment in PMIC.  Total
consolidated  net other income of $2.3  million was  primarily  attributable  to
forgiveness of debt income.  The components of our consolidated net loss for the
fiscal  year  ended  June  30,  2005 as  compared  with  the  components  of our
consolidated  net income for the fiscal  year ended June 30,  2004 is  described
below

Summary Of Results Of Operations

<TABLE>
<CAPTION>
                                                               Fiscal Year Ended        Period to Period
                                                                    June 30,                % Change
                                                            ------------------------    ----------------
                                                                2005          2004
                                                            -----------    ---------
<S>                                                         <C>            <C>          <C>

Net income from Cyber-Test operations                       $   381,760    $      --                 -- %
Net income from investments                                     193,941      439,999                (55)%
Write-off of investment in PMIC                                (668,834)          --                 -- %
Parent company and Encompass overhead                        (2,188,653)    (583,058)               279 %
Net interest expense                                           (106,184)    (162,059)               (34)%
Forgiveness of debt                                           2,847,511      780,938                265)%
                                                            -----------    ---------    ----------------
Consolidated net income from continuing operations          $   459,541    $ 475,820                 (3)%
Net (loss) from PMIC operations, net of minority interest    (1,195,374)          --                 -- %
                                                            -----------    ---------    ----------------
Consolidated net (loss) income                                 (735,833)     475,820                 -- %
                                                            ===========    =========    ================
</TABLE>


Overview Of Fiscal Year 2005 Results

      For the fiscal  year ended June 30,  2005,  we realized  consolidated  net
income  from  continuing  operations  of  $459,000  compared  with net income of
$476,000 for the fiscal year ended June 30, 2004,  or a 3% decrease.  The fiscal
year ended June 30, 2005 is the first full fiscal year reflecting the results of
Cyber-Test's operating business.  During this period, Cyber-Test recorded record
sales of $7.5 million relating to the repair,  service and warranty and exchange
of  various   office   equipment,   PDAs,   laptop   computers,   monitors   and
multi-functional  units.  Gross  margin was 35%.  Cyber-Test's  net profit  from
operations  of  $382,000  or 5.1% of sales was  slightly  below  its net  profit
percentage as compared to the previous nine-month results.  Cyber-Test continues
to shift its sales mix from the repair of core  products  such as fax  machines,
printers and multifunction machines to PDA and laptop repair.


      For the fiscal year ended June 30, 2005, we reported a  consolidated  loss
from  continuing  operations  before  other  income of $1.8  million  because of
consolidated  corporate overhead costs at the parent and Encompass levels in the
net amount of $2.2 million  versus a $583,000  loss from  continuing  operations
before other  income for the fiscal year ended June 30, 2004.  Included in these
overhead   costs  is  $374,000  of  non-cash   charges  for   depreciation   and
amortization.  Our  consolidated  loss from continuing  operations was offset by
$2.9 million of other investment and forgiveness of debt income.

Revenue

      Consolidated  revenue  for the fiscal  year  ended June 30,  2005 was $7.5
million as compared  to revenue of  $605,000  for the fiscal year ended June 30,
2004. All revenue was entirely  attributable to Cyber-Test's  operations for the
full fiscal year ended June 30,  2005 and for the  one-month  period from June 3
through June 30, 2004.  All revenue was generated from the repair and service of
office equipment and computer peripheral  products,  extended warranty sales and
the sale of used electronic parts.

Gross Profit

      Consolidated  gross  operating  margin for the fiscal  year ended June 30,
2005 was 35% from Cyber-Test's operations.  Cyber-Test's gross profit percentage
remained consistent throughout the year and dipped slightly overall from a gross
margin of 37% for the  one-month  period in fiscal  2004.  The decrease in gross
margin is due to the  change in  product  mix  during  the year from the  higher
margin  service and repair of printers and fax machines to lower margin,  higher
volume service and repair of laptops and PDAs.


                                       12
<PAGE>

Operating Expenses

      Consolidated  operating  expenses  for the fiscal year ended June 30, 2005
and 2004 were $4.4  million  and  $788,000,  respectively,  representing  a $3.6
million  increase  from the fiscal year ended June 30, 2004.  This  increase was
primarily  attributable  to an increase in selling,  general and  administrative
costs of $3.3  million  due to the  addition  of the  Encompass  and  Cyber-Test
operations and an increase of $183,000 in  professional  and consulting  expense
from  the  fiscal  year  ended  June 30,  2004.  Consolidated  depreciation  and
amortization  expense  for the  fiscal  year ended June 30,  2005  increased  by
$145,000 to $374,000  from  $229,000 for the fiscal year ended June 30, 2004 due
to deferred  commitment fees and financing costs being fully amortized in fiscal
year 2004 and the amortization of deferred  compensation and deferred  financing
fees in the amount of $355,000 and depreciation on property and equipment in the
amount of $19,000 for the fiscal year ended June 30, 2005.

      Consolidated  other general and  administrative  expenses amounted to $3.6
million for the fiscal year ended fiscal year ended June 30,  2005,  which was a
$3.3 million  increase  from the  comparative  prior period due, in part,  to an
increase  in  compensation  related  expenses  in the  amount  of  $805,000  and
Cyber-Test's  operating  business overhead during the fiscal year ended June 30,
2005. Such overhead expenses include the overhead  operation and cost associated
with  employing   approximately  100  employees  and  operating  an  office  and
service/repair facility in Florida.

Other Income (Expenses)

      During the fiscal year ended June 30,  2005,  we realized  $2.3 million of
consolidated  net other  income of which $2.8 million was  attributable  to debt
forgiveness  income resulting from the favorable judgment against our former CEO
and related entities that allowed us to discharge these  obligations.  This item
of income was offset,  in part,  by net interest  expense of  $106,000.  We also
realized  $385,000 of  investment  income  from our  partnership  investment  in
Yorkville Advisors,  which was offset, in part, by a $191,000 loss on redemption
of our  partnership  interest.  In addition,  consolidated  net other income was
reduced by a one-time charge of $669,000  representing the complete write-off of
our stock investment in PMIC.

      During the fiscal year ended June 30, 2004, we realized  $1,059,000 of net
other  income  due to the  favorable  results  of our  investment  in  Yorkville
Advisors,  which generated $440,000 of net income and $781,000 of forgiveness of
indebtedness income generated from the successful settlement,  at a discount, of
certain of our debts.  These items were offset, in part by, net interest expense
of  $162,000  attributable  to $69,000 of accrued  interest  on our 10%  Secured
Convertible Debentures,  the remaining 5% Convertible Debentures and the 8% Note
Payable and $93,000 of debt discount expense treated as interest attributable to
the beneficial conversion feature of our 10% Secured Convertible Debentures, net
of $725 of interest income

      Overall consolidated net interest expense decreased by $56,000 to $106,000
from $162,000 for the fiscal year ended June 30, 2005 because of the substantial
reduction in interest-bearing debt in fiscal 2005 compared to fiscal 2004.


Significant Accounting Policies

      Financial  Reporting  Release No. 60, which was  recently  released by the
SEC,  requires  all  companies to include a  discussion  of critical  accounting
policies  or  methods  used in the  preparation  of  financial  statements.  The
following is a brief discussion of the more significant  accounting policies and
methods used by us. In addition, Financial Reporting Release No. 61 was recently
released by the SEC to require all companies to include a discussion to address,
among other  things,  liquidity,  off-balance  sheet  arrangements,  contractual
obligations and commercial commitments.



                                       13
<PAGE>

Use Of Estimates

      The preparation of the consolidated financial statements of the Company in
conformity with generally accepted accounting  principles requires management to
make  estimates and  assumptions  that affect the reported  amount of assets and
liabilities at the date of the financial  statements and the reported  amount of
revenues and expenses during the period.  In particular,  significant  estimates
are required to value inventory and estimate the future cost associated with the
Company's  warranties.  If the actual value of the Company's inventories differs
from  these  estimates,  the  Company's  operating  results  could be  adversely
impacted.  The actual  results with regard to warranty  expenditures  could also
have an adverse  impact on the Company if the actual  rate of repair  failure or
the cost to  re-repair  a unit is  greater  than  what the  Company  has used in
estimating the warranty expense accrual.

Inventory

      Inventory  consists  primarily of repair  parts,  consumable  supplies for
resale and used machines  that are held for resale,  and are stated at the lower
of weighted  average  cost or market.  The  weighted  average  cost of inventory
approximates  the  first-in,  first-out  ("FIFO")  method.  Management  performs
periodic  assessments  to determine the existence of obsolete,  slow-moving  and
nonsalable  inventory and records necessary  provisions to reduce such inventory
to net realizable value.

Allowance For Doubtful Accounts

      We  make  judgments  as  to  our  ability  to  collect  outstanding  trade
receivables  and  provide   allowances  for  the  portion  of  receivables  when
collection becomes doubtful. Provisions are made based upon a specific review of
all  significant  outstanding  invoices.  For those  invoices  not  specifically
reviewed,  provisions are provided at differing rates, based upon the age of the
receivable.  In  determining  these  percentages,   we  analyze  our  historical
collection experience and current economic trends. If the historical data we use
to calculate the allowance  provided for doubtful  accounts does not reflect our
future ability to collect  outstanding  receivables,  additional  provisions for
doubtful  accounts may be needed and the future  results of operations  could be
materially affected.

Long-Lived Assets

      Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  If such review  indicates  that the asset is impaired,
when the carrying amount of an asset exceeds the sum of its expected future cash
flows, on an undiscounted  basis, the asset's carrying amount is written down to
fair value.  Long-lived  assets to be  disposed of are  reported at the lower of
carrying amount or fair value less cost to sell.

Excess Of Cost Over Net Assets Acquired

      In accordance with SFAS No. 141, the Company  allocates the purchase price
of its  acquisitions to the tangible assets,  liabilities and intangible  assets
acquired based on their  estimated fair values.  The excess  purchase price over
those fair values is recorded as "Excess of Cost Over Net Assets Acquired".  The
fair value assigned to intangible  assets acquired is either based on valuations
prepared  by  independent  third  party  appraisal  firms  using  estimates  and
assumptions  provided by management or  negotiated  at  arms-length  between the
Company and the seller of the acquired assets.  In accordance with SFAS No. 142,
goodwill and purchased intangibles with indefinite lives acquired after June 30,
2001  are not  amortized,  but will be  reviewed  periodically  for  impairment.
Purchased  intangibles  with finite lives will be  amortized on a  straight-line
basis over their respective useful lives.

Earnings (Loss) Per Share

      Basic  earnings  (loss) per share is computed by  dividing  income  (loss)
available to common stockholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share  reflect the potential
dilution of securities,  using the treasury stock method that could share in the
earnings  of an entity.  During the fiscal year ended June 30,  2005,  shares of
common stock that could have been issued upon  conversion  of  convertible  debt
were excluded from the  calculation  of diluted  earnings  (loss) per share,  as
their effect would have been anti-dilutive.


                                       14
<PAGE>

Revenue Recognition

      The  Company  recognizes  revenue  from the sale of  refurbished  computer
equipment and related  products  upon delivery of goods to a common  carrier for
delivery to the customer.  Revenue for the repair of customer owned equipment is
recognized upon  completion of the repair.  The Company assumes the risk of loss
due to damage or loss of products during shipment.  The Company is reimbursed by
the common  carriers for  shipping  damage and lost  products.  The Company also
sells extended warranty and product  maintenance  contracts.  Revenue from these
contracts is deferred and recognized as income on a straight-line basis over the
life of the  contract,  which is  typically  for a period of one  year.  Service
warranty  and  product  maintenance  revenue  represented  less  than  5% of the
Company's total revenue for the fiscal year ended June 30, 2005.

Recent Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123 (R), "Share-Based Payment".  SFAS No. 123 (R) revises SFAS No. 123,
"Accounting  for  Stock-Based  Compensation"  and supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees".  SFAS No. 123 (R) focuses  primarily
on the accounting for transactions in which an entity obtains employee  services
in  share-based  payment  transactions.  SFAS No. 123 (R) requires  companies to
recognize in the statement of operations the cost of employee  services received
in exchange for awards of equity  instruments based on the grant-date fair value
of those awards (with limited  exceptions).  SFAS No. 123 (R) is effective as of
the first interim or annual reporting period that begins after June 15, 2005 for
non-small  business  issuers  and after  December  15,  2005 for small  business
issuers.  Accordingly,  the  Company  will adopt SFAS No. 123 (R) in its quarter
ending March 31, 2006.  The Company is currently  evaluating  the  provisions of
SFAS No. 123 (R) and has not yet  determined  the impact,  if any, that SFAS No.
123 (R) will have on its financial statement presentation or disclosures.

Liquidity And Capital Resources

      We  have  financed  our  acquisitions  and  investments  principally  with
short-term  borrowings  through our Equity Line of Credit with  Cornell  Capital
Partners,  L.P.  ("Cornell  Capital")  and cash  received  in  exchange  for the
issuance of 4,200 shares of our Series A Convertible  Preferred Stock to Cornell
Capital.  We have funded our ongoing  operations  through cash distributions and
redemption proceeds received from (i) our investment in an investment management
partnership, and (ii) working capital generated by Cyber-Test. Our cash and cash
equivalents totaled $836,876 at June 30, 2005.

      We have been exploring various  alternative sources of financing to reduce
our reliance on the Equity Line of Credit with Cornell  Capital and the dilutive
effect such  facility  has on our stock price.  We have had various  discussions
with banking  institutions and other  institutional  investors to secure up to a
$30  million  acquisition  debt  facility  to be used by us for the  purpose  of
acquiring private and/or public companies in the technology and service industry
that we believe  will be  compatible  with our  business  and  accretive  to our
results of  operations.  We have  recently  engaged a New York based  investment
banking  firm to assist us in  securing  an  acquisition  debt  facility  and/or
long-term  strategic  equity  investors,  for the purpose of  providing  us with
acquisition  funds and funds for  ongoing  working  capital  needs and a planned
recapitalization  of our  common  and  preferred  stock.  Although  we  and  our
investment  bankers intend to find  alternative  financing to our Equity Line of
Credit,  there can be no  assurance  that we will be able to find  investors  or
lenders that would provide us with financing at suitable  valuations or rates of
interest, if at all. In addition,  there is no guarantee that we will be able to
secure financing to permit us to pursue strategic acquisitions and investments.

      On November 22, 2002, we entered into a Securities Purchase Agreement with
Cornell  Capital,  whereby  we agreed to issue and sell a $250,000  10%  Secured
Convertible Debenture. The Secured Convertible Debenture had a term of two years
and is  convertible  into shares of common stock at a conversion  price equal to
$.001 per share. The Secured Convertible Debenture accrued interest at a rate of
10% per year and is convertible at the holder's option. On November 22, 2004 and
December  27,  2004,  Cornell  Capital  elected to convert,  at $.001 per share,
$10,000 and $100,000 of principal and $2,000 of accrued interest,  respectively,
into 112,000,000  shares of common stock. On February 11, 2005,  Cornell Capital
indicated its intention to convert the balance of the  convertible  note, in the
amount of $77,500 of principal at $.001 per share, into common stock. On May 12,
2005,  Cornell Capital converted the $77,500 plus $40,526 of accrued interest at
$.001 per share into 118,026,000  shares of common stock. No amount remains owed
to Cornell Capital on the Secured Convertible Debenture.


                                       15
<PAGE>

      In conjunction with our acquisition of the Cyber-Test business,  we issued
4,200 shares of Series A  Convertible  Preferred  Stock (the "Series A Preferred
Shares")  having a liquidation  value of $1,000 per share,  to Cornell  Capital.
During fiscal 2005, a portion of these shares was transferred by Cornell Capital
to unrelated  parties.  Holders of the Series A Preferred Shares are entitled to
receive cash dividends on a cumulative basis, in arrears,  at the annual rate of
5% when and if a dividend is scheduled by our Board of  Directors.  The Series A
Preferred Shares are convertible,  in whole or in part, on or after May 21, 2005
into shares of common  stock at the fixed price of $.01 per share or 100% of the
average  of the  three  lowest  closing  bid  prices  for the ten  trading  days
immediately  preceding the date of conversion,  whichever is lower. The Series A
Preferred  Shares are nonvoting and redeemable at the option of the Company,  in
whole or in part, at any time at a 20% premium to liquidation value. At June 30,
2005, no Series A Preferred Shares had been converted into common stock.

      In conjunction with our license of certain  intangible  assets,  we issued
300 shares of  nonvoting  Series B  Convertible  Preferred  Stock (the "Series B
Preferred Shares"), having a liquidation value of $1,000 per share. The Series B
Preferred  Shares have the same terms and  privileges  as the Series A Preferred
Shares,  but are  junior  to the  Series A  Preferred  Shares  in the event of a
liquidation  of the Company,  and are  convertible,  in whole or in part,  on or
after June 23, 2005 into shares of common  stock on the same terms of the Series
A  Preferred  Shares.  On June 23,  2005,  holders  of 200  shares  of  Series B
Convertible  Preferred stock elected to convert $200,000 of preferred stock at a
price of $.0005 per share into  400,000,000  shares of common stock. At June 30,
2005, 100 shares of Series B Convertible Preferred stock remain outstanding.

      During the fiscal year ended June 30,  2005,  we made  advances  under the
Equity  Line of Credit in the  aggregate  amount of  $100,000  in  exchange  for
issuing  172,881,526  shares of common stock to Cornell Capital.  These advances
were used to pay down our short-term  note to Cornell  Capital.  We entered into
the $30 million  Equity Line of Credit  facility  with  Cornell  Capital in July
2003.  Pursuant  to the  Equity  Line  of  Credit,  we may,  at our  discretion,
periodically  issue and sell to  Cornell  Capital  shares of common  stock for a
total  purchase  of $30  million.  The  amount of each  advance is subject to an
aggregate  monthly  maximum  advance  amount of $2 million in any 30-day period.
Cornell  Capital  will  purchase the shares of common stock for a 9% discount to
the lowest  closing bid price of our common  stock  during the five trading days
after a notice date. Cornell Capital intends to sell any shares under the Equity
Line of Credit at the then prevailing market price.

      Also during the fiscal year ended June 30, 2005,  Hudson  Street  received
$280,000 of membership cash  distributions  and $800,000 of net cash proceeds on
the redemption of its partnership interest from Yorkville Advisors. Our existing
sources of liquidity  including  cash  resources  and cash provided by operating
activities will not provide us with sufficient resources to meet our present and
future  working  capital  and  cash   requirements   for  the  next  12  months.
Consequently,  we and our investment  banker are actively  pursuing a short-term
bridge facility in the amount of up to $750,000 to provide us with the necessary
working  capital  over  the next 12  months  in the  event  we fail to  secure a
suitable  acquisition  and working  capital debt facility.  We do not anticipate
making any further advances under the Equity Line of Credit.

      We had  total  liabilities  of  $2,043,949  as of  June  30,  2005  versus
$6,571,877 as of June 30, 2004. These  contractual  obligations,  along with the
dates on which such payments are due, are described below:

<TABLE>
<CAPTION>
                                                 Payments Due by Period (from June 30, 2005)
                                        ------------------------------------------------------------
                                                           1           2-3         4-5      After 5
Contractual Obligations                   Total      Year or Less     Years       Years      Years
-------------------------------------   ----------   ------------   ---------   ---------   --------
<S>                                     <C>          <C>            <C>         <C>         <C>

Notes Payable                           $1,225,395   $  1,020,028   $ 205,367   $      --   $     --
Accounts Payable and Accrued Expenses      818,554        818,554          --          --         --
Other Current Liabilities                       --             --          --          --         --
                                        ----------   ------------   ---------   ---------   --------
  Total Contractual Obligations         $2,043,949   $  1,838,581   $ 205,367   $      --   $     --
                                        ==========   ============   =========   =========   ========
</TABLE>


      During  the fiscal  year ended June 30,  2005,  the  Company  reduced  its
contractual  obligations by $2,233,416 through cash payments.  At June 30, 2005,
we had a working capital deficiency of $139,363.

      On February 11,  2005,Hudson  Street,  our wholly-owned  subsidiary became
entitled  to  receive a  distribution  of  $2,625,000  from  Yorkville  Advisors
Management,   LLC   ("Yorkville")   in  exchange  for  all  of  Hudson  Street's
Preferential Rights Membership  Interest in Yorkville,  pursuant to the terms of
Yorkville's Limited Liability Company Agreement,  as amended. In connection with
the above arrangements,  we entered into a Letter Agreement,  dated February 11,
2005,  with Cornell  Capital (the "Letter  Agreement"),  whereby Cornell Capital
agreed to extend and set the maturity  date of a past-due  non-interest  bearing
Promissory Note, in the original principal amount of $3,000,000, issued by us to
Cornell Capital on January 23, 2004 (the "Cornell Capital Note").


                                       16
<PAGE>

      In accordance with the terms of the Letter  Agreement,  we used $1,725,000
of the redemption  proceeds  received by Hudson Street to reduce our outstanding
short-term  obligation to Cornell  Capital from  $2,000,000  to $275,000,  after
paying extension and legal fees of $100,000.

      In addition,  pursuant to the Letter  Agreement,  the Cornell Capital Note
was  extended  to June 30, 2005 and bears  interest at a rate of 10%  commencing
February  10,  2005.  Previously,  the  Cornell  Capital  Note was  non-interest
bearing.  We  received  $800,000  of cash  proceeds  from  the  redemption.  The
short-term  interim  Cornell Capital Note in the amount of $275,000 is currently
in default.

      Yorkville was the investment  advisor to Cornell  Capital and has been our
major source of investment funding and one of our significant creditors.

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit  opinions  issued in  connection  with the years  2005 and 2004  financial
statements, which states that our ability to continue as a going concern depends
upon  our  ability  to  resolve  liquidity  problems  by  generating  sufficient
operating profits to provide additional  working capital.  Our ability to obtain
additional  funding and pay off our  obligations  will  determine our ability to
continue  as a going  concern.  Our  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

      Below is a discussion of our sources and uses of funds for the fiscal year
ended June 30, 2005:

Overall Net Change In Cash Flow For The Fiscal Year Ended June 30, 2005

      During  the  fiscal  year  ended  June 30,  2005,  our cash  decreased  by
$356,294.  The net decrease in cash was due to the Company using $2.2 million of
cash to repay  short-term and installment  debt  obligations and $900,000 of net
cash used in operating  activities  offset,  in part,  by the  approximate  $2.7
million of net cash that we received from investing activities.

Net Cash (Used In) Operating Activities

      Net cash used in  operating  activities  was $875,933 and $829,775 for the
fiscal  years ended June 30, 2005 and June 30,  2004,  respectively.  Net use of
cash in  operating  activities  for the  fiscal  year  ended  June 30,  2005 was
principally  from net income of  $459,541  increased  by an increase in accounts
payable of $220,212 and offset by net non-cash  income and charges of $1,563,710
attributable to depreciation, amortization, stock issued for services, the write
off our  investment  in PMIC,  forgiveness  of debt  income and net  partnership
income.  The use of cash in operating  activities for the fiscal year ended June
30, 2004 was  principally  from net income of $475,820  offset by a reduction in
accounts payable in the amount of $419,696,  and an increase in debt forgiveness
income offset by non-cash  charges for amortization and debt discount expense in
the net aggregate amount of $458,083.

Net Cash From (Used In) Investing Activities

      Cash  provided  from  investing  activities of $2.7 million for the fiscal
year ended June 30, 2005 was attributable to $2.9 million of cash  distributions
and redemption  proceeds from our partnership  investment offset by $285,000 for
the purchase of fixed assets and marketable investment securities.  Cash used in
investing  activities for the fiscal year ended June 30, 2004 was $5,176,000 and
was  attributable  to the Company's  investment in a partnership  for $2,670,000
reduced by $335,000 of cash distributions  from this partnership  investment and
our purchase of the Cyber-Test business,  net of cash acquired, in the amount of
$2,841,000.

Net Cash From (Used In) Provided by Financing Activities

      Net cash of $2.2 million used in financing  activities for the fiscal year
ended June 30, 2005 was for the  repayment  of our  short-term  and  installment
notes to  Cornell  Capital  and  others in the  amount of  $2,233,000  offset by
$70,000 of proceeds  from  Cyber-Test's  capital  lease.  Net cash of $7,177,000
provided  by  financing  activities  for the fiscal year ended June 30, 2004 was
from net proceeds of $513,000  from the sale of shares of the  Company's  common
stock to Cornell  Capital,  under the Company's  Equity Line of Credit facility,
proceeds of  $3,000,000  from the  issuance of a short-term  promissory  note to
Cornell  Capital,  and net proceeds of $3,756,500 from the issuance of shares of
the Company's Series A Convertible  Preferred Stock to Cornell Capital offset by
the repayment of short-term and installment debt in the amount of $93,000.


                                       17
<PAGE>

Off-Balance Sheet Arrangements

      There are no off-balance  sheet  arrangements  between the Company and any
other entity that have,  or are  reasonably  likely to have, a current or future
effect on the Company's  financial  condition,  changes in financial  condition,
revenues or expenses, results of operations, liquidity, capital expenditures, or
capital  resources.  The  Company  does not have  any  non-consolidated  special
purpose entities.

Risks Related To Our Business

      In addition to historical facts or statements of current  condition,  this
Annual   Report   on   Form   10-KSB   contains   forward-looking    statements.
Forward-looking  statements  provide our current  expectations  or  forecasts of
future events.

      The  following  discussion  outlines  certain  factors that we think could
cause  our  actual   outcomes  and  results  to  differ   materially   from  our
forward-looking  statements  as well as impact our future  overall  performance.
These factors are in addition to those set forth elsewhere in this Annual Report
on Form 10-KSB.

We Have A History Of Losses, And May Incur Additional Losses

      We are a holding company with a limited history of operations. We achieved
profitability  for the first time in fiscal  year 2004.  While we have  achieved
profitability in the prior year, we cannot be sure that we will maintain revenue
sufficient  for us to be profitable  in future years.  For the fiscal year ended
2005, we incurred an overall net loss of $735,833.

We Will Need Additional Capital

      To pursue our growth objectives,  we will need additional  capital,  which
may not be  available to us. This may delay or inhibit our progress in achieving
our goals.

      We will require funds in excess of our existing cash resources:

            o     to seek out and find investment opportunities in high
                  growth-potential companies;

            o     to acquire the assets or stock of technology-related companies
                  in the reverse logistics arena;

            o     to hire and retain highly skilled employees who understand,
                  and can implement, our business model; and

            o     to finance the growth of our current operations.

      In the past,  we have  funded  all of our growth  through  equity and debt
financings.  We anticipate that our existing capital resources will enable us to
maintain  currently  planned  operations  through the next  twelve (12)  months.
However,  this  expectation is based on our current  operating plan, which could
change as a result of many factors,  and we may need  additional  funding sooner
than   anticipated.   Because  our  operating  and  capital   resources  may  be
insufficient to meet future requirements,  we may need to raise additional funds
in the near future to continue our business expansion plans.

      It is possible that we will be unable to obtain additional  funding as and
when we need it.  If we are  unable  to obtain  additional  funding  as and when
needed,  we could be forced  to delay the  progress  of our  business  expansion
plans.

New Equity Financing Could Dilute Current Stockholders

      If we raise funds  through  equity  financing to meet the needs  discussed
above,  it will have a  dilutive  effect on  existing  holders  of our shares by
reducing their percentage  ownership.  The shares may be sold at a time when the
market price is low because we need the funds. This will dilute existing holders
more than if our stock price was higher.  In addition,  equity  financings often
involve shares sold at a discount to the current market price.


                                       18
<PAGE>

The Loss Of Any One Of Cyber-Test's  Key Customers Could Have A Material Adverse
Effect On Our Business

      Cyber-Test  relies heavily on the business of a few key  customers.  While
all these key customers are contractually committed to purchase parts or service
from Cyber-Test, these contracts are terminable within 60 to 90 days. If any one
(or all) of these key customers terminates its relationship with Cyber-Test,  it
could have a material adverse effect on our business.

We And Our Subsidiaries Operate In Competitive Industries

      Cyber-Test's  business is highly  competitive.  Cyber-Test  competes  with
companies  that  provide  repair  services  for office  equipment  and  computer
peripheral  products,  with  companies  that  supply  parts and  consumables  to
end-users  and  repair  companies  of such  equipment  and  products,  and  with
resellers of such equipment and products.

      Competition within the office equipment and computer  peripheral  products
service and repair  industry is based on quality of service,  depth of technical
know-how,  price, availability of parts, speed and accuracy of delivery, and the
ability to tailor  specific  solutions to customer  needs.  Many of Cyber-Test's
competitors  are larger in size and have greater  financial and other  resources
than  Cyber-Test,  such as  Decision  One,  Depot  America,  Teleplan,  DataTech
America,  and DEX.  Cyber-Test also competes with manufacturers and OEMs that do
their own repair work, as well as large  distribution  and  logistics  companies
such as United Parcel Service and Airborne Logistics.

      Management  believes  Cyber-Test has a competitive  advantage over many of
its competitors, but Cyber-Test's ability to maintain such competitive advantage
is dependent upon many variables,  including its ability to successfully attract
and retain  technicians that are capable of performing  repair on all brands and
models of office  equipment  and  computer  peripherals  at prices  which remain
competitive.  We can provide no assurances that Cyber-Test will continue to have
the resources to successfully compete in the technology repair service industry.

Our Business Could Suffer If There Is A Prolonged Economic Downturn

      We derive a  substantial  amount of our net  revenue  from the  repair and
resale by  Cyber-Test  of office  equipment  and computer  peripheral  products.
Revenue  from the  repair  and  resale  of such  equipment  does  not  generally
fluctuate widely with economic cycles. However, a prolonged national or regional
economic recession could have a material adverse effect on our business.

      We  also  derive  a  substantial  amount  of our  net  revenue  from  cash
distributions  received by us from our  investments  in  companies  operating in
diverse  industries.  A prolonged  economic downturn could hinder the ability of
these  companies  to  provide  us  with a  substantial,  or any,  return  on our
investments.

Fluctuations In The Price Or Availability Of Office Equipment Parts And Computer
Peripheral Products Could Materially Adversely Affect Us

      The price of office equipment parts and computer  peripheral  products may
fluctuate  significantly  in the future.  Changes in the supply of or demand for
such parts and  products  could  affect  delivery  times and  prices.  We cannot
provide any  assurances  that  Cyber-Test  will  continue to have access to such
parts and products in the necessary  amounts or at reasonable prices or that any
increases  in the cost of such  parts  and  products  will  not have a  material
adverse effect on our business.

We Could Be Materially Affected By Turnover Among Our Service Representatives

      Cyber-Test  depends on its ability to identify,  hire,  train,  and retain
qualified service personnel as well as a management team to oversee the services
that Cyber-Test  provides.  A loss of a significant  number of these experienced
personnel  would  likely  result in reduced  revenues for  Cyber-Test  and could
materially  affect our  business.  Cyber-Test's  ability  to attract  and retain
qualified service representatives depends on numerous factors, including factors
that  Cyber-Test  cannot  control,  such as conditions  in the local  employment
markets in which it operates.  We cannot provide any assurances  that Cyber-Test
will be able to hire or retain a sufficient number of service representatives to
achieve its financial objectives.


                                       19
<PAGE>

To Service Our Indebtedness,  We Will Require A Significant  Amount Of Cash; Our
Ability To Generate Cash Depends On Many Factors Beyond Our Control

      Our ability to make  payments  on our  indebtedness,  and to fund  planned
capital  expenditures  will  depend on our  ability  to  generate  cash from our
operations  in the  future.  This,  to a certain  extent,  is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Based on our current level of operations, we believe our
cash flow from operations,  available cash and anticipated borrowings from banks
and other  lending  institutions  will be adequate to meet our future  liquidity
needs for at least the next twelve (12) months.

      We cannot provide any assurances, however, that our business will generate
sufficient cash flow from operations or that future borrowings will be available
to us in an amount  sufficient to enable us to pay our  indebtedness  or to fund
our other  liquidity  needs.  We may need to refinance or  restructure  all or a
portion of our indebtedness on or before maturity. We cannot make any assurances
that  we  will be able to  refinance  any of our  indebtedness  on  commercially
reasonable terms or at all. If we cannot service our  indebtedness,  we may have
to take actions such as selling assets, seeking additional equity or reducing or
delaying  capital   expenditures,   strategic   acquisitions,   investments  and
alliances.  We cannot make any assurances  that any such actions,  if necessary,
could be effect on commercially reasonable terms, or at all.

We Have A Working Capital  Deficit,  Which Means That Our Current Assets On June
30, 2005 Were Not Sufficient To Satisfy Our Current Liabilities On That Date

      We had a working  capital  deficit of $139,363 as of June 30, 2005,  which
means that our current  liabilities  exceeded  our current  assets by  $139,363.
Current assets are assets that are expected to be converted into cash within one
year and, therefore,  may be used to pay current liabilities as they become due.
Our working  capital deficit means that our current assets on June 30, 2005 were
not sufficient to satisfy all of our current liabilities on that date.

Our  Independent  Auditors Have Added A Going  Concern  Opinion To Our Financial
Statements, Which Means That We May Not Be Able To Continue Operations Unless We
Obtain Additional Funding

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit  opinions  issued in  connection  with the years  2005 and 2004  financial
statements, which states that our ability to continue as a going concern depends
upon  our  ability  to  resolve  liquidity  problems  by  generating  sufficient
operating profits to provide additional  working capital.  Our ability to obtain
additional  funding and pay off our  obligations  will  determine our ability to
continue  as a going  concern.  Our  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

We Could Fail To Attract Or Retain Key Personnel

      Our  success   largely  depends  on  the  efforts  and  abilities  of  key
executives,  including Mr. Wayne Danson, our President,  Chief Executive Officer
and  Chief   Financial   Officer,   Mr.   Martin   Nielson,   our  Senior   Vice
President-Acquisitions  and Ms. Lisa Welton,  our President and Chief  Executive
Officer of Cyber-Test.  The loss of the services of Mr.  Danson,  Mr. Nielson or
Ms. Welton could  materially  adversely  affect our business because of the cost
and time  necessary to replace and train a  replacement.  Such a loss would also
divert  management's  attention  away from  operational  issues.  We  maintain a
$2,000,000 key-man life insurance policy for each of Mr. Danson, Mr. Nielson and
Ms. Welton.

Risks Related To Our Stock

The Future  Conversion Of Our Outstanding  Series A And B Convertible  Preferred
Stock Will Cause Dilution To Our Existing Shareholders, Which Means That Our Per
Share Income And Stock Price Could Decline


                                       20
<PAGE>

      The  issuance  of shares  upon any future  conversion  of the  outstanding
Series A Convertible Preferred Stock and B Convertible Preferred Stock will have
a  dilutive  impact  on  our  stockholders.  We  currently  have  $4,300,000  of
outstanding  shares of Series A  Convertible  Preferred  Stock and B Convertible
Preferred Stock that are convertible  into shares of our common stock.  Both the
Series A  Convertible  Preferred  Stock and B  Convertible  Preferred  Stock are
convertible  at a price of $0.01 per share or 100% of the  average  of the three
lowest  closing bid prices for the ten trading days  immediately  preceding  the
date of  conversion,  whichever  is  lower.  If our  share  price is equal to or
greater than $.01 per share at the time of conversion,  the Series A Convertible
Preferred Stock and B Convertible  Preferred Stock would be convertible  into an
aggregate of 430,000,000  shares of our common stock.  In the event the price of
our  common  stock is less than $.01 per  share at the time of  conversion,  the
number of shares of our common stock issuable would be greater than 430,000,000.
If such  conversions  had taken place at $0.001,  our recent stock  price,  then
holders of our Series A Convertible  Preferred Stock and B Convertible Preferred
Stock would have received 4,300,000,000 shares of our common stock. As a result,
our net income per share could decrease in future periods,  and the market price
of our common stock could decline.


The Conversion Of Our Series A Convertible  Preferred Stock Could Cause A Change
Of Control

      The  issuance of shares upon the  conversion  of our Series A  Convertible
Preferred Stock could result in a change of control.  Cornell Capital  Partners,
L.P.  holds  $2,700,000 of our Series A Convertible  Preferred  Stock,  which if
converted at current prices would result in the issuance of up to  2,700,000,000
shares of our common stock.  After such  conversions,  Cornell Capital Partners,
L.P. would own approximately 37% of our then outstanding shares of Common Stock,
computed  based on  5,000,000,000  shares that are  currently  authorized  to be
issued.  In such event,  Cornell  Capital  Partners,  L.P.  would be our largest
shareholder and would be able to exercise  control of us by electing  directors,
increasing  the number of authorized  shares of common stock that we could issue
or otherwise.

The Price of Our Common  Stock May Be Affected By A Limited  Trading  Volume And
May Fluctuate Significantly

      There is a limited public market for our common stock, and there can be no
assurance that an active  trading market will continue.  An absence of an active
trading  market could  adversely  affect our  stockholders'  ability to sell our
common stock in short time periods, or at all. Our common stock has experienced,
and is  likely  to  experience  in the  future,  significant  price  and  volume
fluctuations  that could  adversely  affect the market price of our common stock
without  regard to our  operating  performance.  In  addition,  we believe  that
factors, such as quarterly  fluctuations in our financial results and changes in
the overall economy or the condition of the financial  markets,  could cause the
price of our common stock to fluctuate substantially.

Our Common Stock Is Deemed To Be "Penny Stock," Which May Make It More Difficult
For Investors To Sell Their Shares Due To Suitability Requirements

      Our common stock is deemed to be "penny  stock" as that term is defined in
Rule 3a51-1  promulgated  under the Exchange Act. These  requirements may reduce
the  potential  market for our common  stock by reducing the number of potential
investors.  This may make it more difficult for investors in our common stock to
sell shares to third parties or to otherwise  dispose of them.  This could cause
our stock price to decline. Penny stocks:

      o     have a price of less than $5.00 per share;

      o     are not traded on a "recognized" national exchange;

      o     are not quoted on the NASDAQ automated quotation system (NASDAQ
            listed stock must still have a price of not less than $5.00 per
            share); or

      o     include stock in issuers with net tangible assets of less than $2.0
            million (if the issuer has been in continuous operation for at least
            three years) or $5.0 million (if in continuous operation for less
            than three years), or with average revenues of less than $6.0
            million for the last three years.

      Broker/dealers  dealing in penny stocks are required to provide  potential
investors  with a  document  disclosing  the  risks of penny  stocks.  Moreover,
broker/dealers  are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.


                                       21
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

      The  financial  statements  required by item 7 are included in this Annual
Report on Form 10-KSB beginning on page F-1.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL REPORTING

      None.

ITEM 8A. CONTROLS AND PROCEDURES

(A) Evaluation Of Disclosure Controls And Procedures

      As of June 30, 2005, we carried out an evaluation,  under the  supervision
and with the  participation  of our Chief Executive  Officer and Chief Financial
Officer,  of the  effectiveness  of the design and  operation of our  disclosure
controls and procedures (as defined in  ss.240.13a-15(e)  or 240.15d-15(e) under
the Exchange Act).  Based on this  evaluation,  our Chief Executive  Officer and
Chief  Financial  Officer  concluded  that,  as of the end of the June 30,  2005
fiscal year,  our  disclosure  controls and  procedures  are effective in timely
alerting  them to material  information  required to be included in our periodic
reports  that are filed with the SEC.  It should be noted that the design of any
system  of  controls  is  based  in part  upon  certain  assumptions  about  the
likelihood of future events,  and there can be no assurance that any design will
succeed in achieving  its stated goals under all  potential  future  conditions,
regardless of how remote.

(B) Changes In Internal Control Over Financial Reporting

      There were no changes in the  Company's  internal  control over  financial
reporting (as defined in Section  240.13a-15(f) or 240.15d-15(f) of the Exchange
Act) during our fourth fiscal  quarter  ended June 30, 2005 that has  materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial reporting.

ITEM 8B. OTHER INFORMATION

      Not applicable.


                                       22
<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

      The following table sets forth the names and ages of our current directors
and executive officers,  and their principal offices. Our executive officers are
elected  annually by the Board of Directors and serve terms of one year or until
their death,  resignation  or removal by the Board of  Directors.  Our directors
serve  one-year terms until their  successors  are elected.  There are no family
relationships  or  understandings  between any of the  directors  and  executive
officers. In addition, except for the arrangement with Mr. Nielson, as described
in  Mr.  Nielson's  profile  set  forth  below,  there  was  no  arrangement  or
understanding  between any  executive  officer and any other person  pursuant to
which any person was selected as an executive officer.

      Our directors and executive officers are as follows:

Name and Address                Age   Position
-----------------------------   ---   --------------------------------------

Wayne I. Danson                  52   President, Chief Executive Officer,
420 Lexington Avenue                  Chief Financial Officer and Director
New York, NY 10170

Dr. Michael Finch                57   Director
37 Walnut Street
Wellesley, MA 02481

Jonathan J. Lichtman             53   Secretary and Director
120 Palmetto Park Road
Boca Raton, FL 33432

Martin Nielson                   53   Senior Vice President-Acquisitions and
420 Lexington Avenue                  Director
New York, NY 10170

Randall Prouty                   53   Director
420 Lexington Avenue
New York, NY 10170

Wilbank J. Roche                 59   Director
520 South Sepulveda Boulevard
Los Angeles, CA 90049


      The directors  named above will serve until the next annual meeting of our
shareholders  or until  their  successors  shall be  elected  and  accept  their
positions.

      Wayne I. Danson,  President,  Chief  Executive  Officer,  Chief  Financial
Officer and Director. Mr. Danson has served as our Chief Financial Officer since
December 1, 1999, as a Director since January 3, 2000, as President  since April
30, 2002, and was appointed Chief Executive  Officer on June 7, 2005. Mr. Danson
also serves as Chairman of the Board of  Encompass.  Mr. Danson has served as an
officer and director of certain  subsidiaries of Pacific  Magtron  International
Corporation,  Inc.  Mr.  Danson is the  Managing  Director and Founder of Danson
Partners, LLC, a financial advisory firm specializing in middle market companies
in the real estate and technology industries.  Prior to forming Danson Partners,
LLC  in  May  1999,   Mr.   Danson  was   co-head  and   Managing   Director  of
PricewaterhouseCoopers  LLP's  Real  Estate  Capital  Markets  Group.  Prior  to
rejoining  PricewaterhouseCoopers in 1996, Mr. Danson was a Managing Tax Partner
with Kenneth  Leventhal & Company in New York and Washington  D.C., where he was
also  Kenneth  Leventhal's  National  Director  of its  International  and  Debt
Restructure Tax Practices.  Prior to his involvement  with Kenneth  Leventhal in
1988,  Mr.  Danson was a Managing  Director  with Wolper Ross & Co., Ltd. in New
York, a closely held financial  services company  specializing in financial tax,
pension  consulting,  designing  financial  instruments  and  providing  venture
capital and investment  banking services.  Mr. Danson graduated with honors from
Bernard M. Baruch College with a BBA in Accounting and an MBA in Taxation. He is
a certified  public  accountant and a member of the AICPA and the New York State
Society of CPAs.


                                       23
<PAGE>

      Martin Nielson, Senior Vice President-Acquisitions,  Director. Mr. Nielson
was appointed  Senior Vice  President-Acquisitions  in June 2004 and Director in
August 2004.  Mr. Nielson also serves as Chief  Executive  Officer of Encompass,
our wholly-owned subsidiary and principal operating unit. Mr. Nielson has served
as  President,   Chief  Executive   Officer  and  director  of  Pacific  Magtron
International  Corporation,  Inc. and also has served as an officer and director
of certain subsidiaries of Pacific Magtron International Corporation,  Inc. From
2003 until his appointment to the foregoing  offices,  he was Chairman of Innova
Holdings,  Inc.  (formerly  known as Hy-Tech  Technology  Group,  Inc.). He also
served as Chairman of  Inclusion  Technologies,  Inc.  from 2000 to 2002.  Since
1994,  he has been the Chairman and Chief  Executive  Officer of Altos  Bancorp,
Inc., a privately-held mergers and acquisition company. In 1991, Mr. Nielson was
founder and Chief Executive Officer of The Business Superstore, an office supply
and  computer  superstore/telesales  company in London  that  merged with Office
World in 1993.  In 1982,  Mr.  Nielson was part of the founding  team and served
until 1991 as Vice President of  Businessland,  Inc., a New York Stock Exchanged
listed computer and networking  reseller.  From 1972 until 1981, Mr. Nielson was
employed as a senior officer of The Gap Stores.  Mr. Nielson  graduated from San
Jose State  University with a BS in business  management with a concentration in
mathematics  and  engineering,  and attended San  Francisco  State  University's
Graduate School of Business with a concentration in operations research.

      Jonathan J. Lichtman, Secretary and Director. Mr. Lichtman has served as a
Director and  Secretary  since  November 9, 1999 and is currently a partner with
the Boca Raton law firm of Levinson & Lichtman,  LLP,  where he  specializes  in
structuring  corporate  and  partnership  transactions,  including  real  estate
syndications.  Mr.  Lichtman is also currently a general partner of several real
estate  partnerships in New York,  North Carolina and Florida.  Prior to forming
Levinson and Lichtman LLP, Mr. Lichtman was an attorney with English,  McCaughan
and O'Bryan,  PA, where he performed  legal work for domestic and  international
clients,  as well as real estate  partnerships  and  development.  Mr.  Lichtman
obtained his J.D. degree, cum laude, from Syracuse University College of Law and
his LLM degree in taxation  from the  University  of Miami  School of Law. He is
also a certified  public  accountant  and is licensed to practice law in Florida
and New York.

      Dr.  Michael  Finch,  Director.  Dr. Finch has served as a Director  since
March 10, 1997.  For the four years before that,  he was employed by Media Forum
(first in the UK,  and then in the U.S.) as  Director  of  Product  Development.
Since  1998,  he has been  Chief  Technology  Officer  of New  Media  Solutions,
responsible for the conception,  planning, creation, execution and deployment of
all software  products and  projects.  He was  responsible  for  developing  and
implementing  Media  Forum's  software   capabilities  and  strategy,   managing
technical  and complex  software  projects for high-end  clients,  and pre-sales
demonstrations  to clients of Media Forum's software stance and expertise.  From
1983 to 1993, Dr. Finch was a Financial Software Engineer,  who designed,  wrote
and implemented  sophisticated real-time computer programs for trading Financial
Instruments and Commodities on the Chicago and New York Futures exchanges. Prior
to 1983, Dr. Finch was a research scientist and mathematician,  with an academic
career at four UK universities. He obtained a Doctorate of Mathematics at Sussex
University for original  research into Einstein's  Theory of General  Relativity
and its application to Neutron Stars. He lectured at Queen Mary's College London
on advanced mathematics.

      Randall Prouty,  Director. Mr. Prouty has served as a Director since March
10,  1997.  Mr.  Prouty  served as our  Chairman  from  November  30, 2001 until
December 12, 2002.  Mr. Prouty is also  currently the President and CEO of World
Associates,  Inc., a publicly traded real estate development company. He is also
the sole  owner of  Bristol  Capital,  Inc.,  a firm  active in  consulting  and
business  development work for companies seeking access to capital markets,  and
through  which he is  incubating  other  e-business  ventures.  Mr.  Prouty is a
licensed real estate and mortgage broker in the State of Florida.  His technical
background includes being a qualified  Webmaster and developing  e-businesses on
the web.

      Wilbank J. Roche,  Director.  Mr. Roche was  appointed a Director on March
25, 1999 and is currently a principal with the law firm of Roche & Holt in Santa
Monica,  California.  Mr. Roche was an honors  graduate  from the  University of
Southern  California in 1976, as well as from Loyola  University  School of Law,
Los Angeles,  in 1979. He was admitted to the  California  State Bar in 1979 and
has been practicing law actively since that time. Mr. Roche worked for law firms
in the Los Angeles  area from 1976 to 1983,  when he opened his own  office.  In
1985,  he formed Roche & Holt.  Mr.  Roche's law  practice has revolved  largely
around  representing  small businesses and their owners.  In that regard, he has
provided legal services in connection  with the formation,  purchase,  sale, and
dissolution of numerous  entities,  as well as in connection with their on-going
operations.


                                       24
<PAGE>

Other Significant Employees

      Lisa A. Welton, President and Chief Executive Officer of Cyber-Test,  Inc.
and Executive Vice President of Encompass  Group  Affiliates,  Inc. From 1990 to
June 3, 2004,  Ms.  Welton served as President  and Chief  Executive  Officer of
Cyber-Test,  where she was responsible for overseeing the company's operational,
marketing,   contractual,   and  communications   efforts,   including  business
development and growth. Upon our acquisition of Cyber-Test's  assets, Ms. Welton
was  appointed  to the same  offices  and given the same  responsibilities  with
Cyber-Test.  Ms. Welton was appointed  Executive  Vice President of Encompass in
June 2004 and assists in the overall vision and  implementation of the business.
From 1987 to 1989,  Ms.  Welton  served as the  National  Director  of  Business
Development for Charlan Brock and  Associates,  an  International  architectural
firm  specializing  in hotels and high-end custom home  developments,  where she
secured architectural  contracts for the firm's clients in the United States and
Europe.  From 1985 to 1987,  Ms. Welton was Senior  Account  Manager at Robison,
Yesawich and  Pepperdine,  an advertising and public  relations firm,  where she
coordinated  hotel property grand openings and all subsequent press events.  Ms.
Welton  graduated  from  the  University  of  Wisconsin  with  a  BS  degree  in
advertising and marketing.

      Thomas  Sutlive,  Vice President of  Cyber-Test,  Inc. From August 1995 to
June 3, 2004, Mr.  Sutlive was employed by  Cyber-Test,  where he served as Vice
President,  since  January 2004,  and was  responsible  for the overall  service
structure and  establishment  of purchasing  policies and  procedures.  Upon our
acquisition  of  Cyber-Test's  assets,  Mr.  Sutlive was  appointed  to the same
offices  and  given  the same  responsibilities  with  Cyber-Test.  Prior to Mr.
Sutlive's  appointment to Vice President,  he served as Cyber-Test's Director of
Operations  from  September  1999 to January  2004 and  Purchasing  Manager from
August 1995 to September  1999. From 1989 to 1995, Mr. Sutlive was Lead Electric
Technician with Sprague Electric,  where he handled the operational readiness of
specialized precision manufacturing  equipment.  Mr. Sutlive previously held the
position of Systems  Analyst with Dyncorp,  a defense  contractor,  where he was
responsible for generating  failure analyses for naval missile tracking systems.
Mr. Sutlive earned a bachelors  degree from the University of Georgia and served
six honorable years with the United States Navy.

Meetings And Committees Of The Board Of Directors

      Our  business  affairs are  managed  under the  direction  of the Board of
Directors.  During the fiscal year ended June 30,  2005,  our Board of Directors
held four (4)  meetings  and took  action by  written  consent  three (3) times.
During the fiscal year ended June 30, 2005, all of the directors attended all of
the Board of Directors meetings that were held.

      The  Board  of  Directors  has   established  an  Audit  Committee  and  a
Compensation Committee.

      The Audit  Committee was  established  May 15, 2001.  The Audit  Committee
reports to our Board of Directors  regarding the  appointment of our independent
public accountants,  the scope and results of our annual audits, compliance with
our accounting and financial  policies and management's  procedures and policies
relative  to the  adequacy  of  our  internal  accounting  controls.  The  Audit
Committee is comprised of Messrs. Prouty and Finch.

      The Compensation  Committee was established May 15, 2001. The Compensation
Committee of our Board of  Directors  reviews and makes  recommendations  to our
Board  of  Directors  regarding  our  compensation  policies  and all  forms  of
compensation  to be  provided  to  our  executive  officers.  In  addition,  the
Compensation Committee will review bonus and stock compensation arrangements for
all  employees.  The  Compensation  Committee is comprised of Messrs.  Roche and
Prouty.

      The Board of Directors also has established an Acquisitions  Committee and
a SpectruCell Committee.  Messrs.  Prouty, Danson,  Lichtman and Roche currently
serve on the Acquisitions Committee and Messrs. Prouty, Danson,  Lichtman, Roche
and Finch serve on the  SpectruCell  Committee,  which will address and make all
decisions relating to SpectruCell matters.


                                       25
<PAGE>

Audit Committee Financial Expert

      Our Audit Committee does not currently have an "audit committee  financial
expert" as defined under Item 401(e) of  Regulation  S-B. Our Board of Directors
is actively  seeking to appoint an  individual to the Board of Directors and the
Audit Committee who would be deemed an audit committee  financial expert and who
would be independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A.

Corporate Governance

      In April 2004, we  established a Code of Business  Conduct and Ethics (the
"Code"), applicable to all of our employees,  including our principal executive,
accounting  and  financial  officers,  which states that we are committed to the
highest  standards  of legal and  ethical  conduct.  This  Code  sets  forth our
policies with respect to the way we conduct  ourselves  individually and operate
our business.  The provisions of this Code are designed to deter  wrongdoing and
to  promote  honest  and  ethical  conduct  among our  employees,  officers  and
directors.  The Code is attached  hereto as Exhibit [14.1] and can also be found
on our  corporate  website  at  www.advancedcomtech.net.  We  will  satisfy  our
disclosure  requirement under Item 5.05 of Form 8-K regarding certain amendments
to, or waivers of, any provision of our Code by posting such  information on our
corporate  website.  We will provide a copy of the Code,  without  charge,  upon
request.  You  may  request  a copy  of the  Code by  writing  to the  Company's
corporate  office  located at 420  Lexington  Avenue,  Suite 2739,  New York, NY
10170.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section  16(a) of the Exchange  requires  that our directors and executive
officers  and any persons who own more than ten percent of our common stock file
with the SEC initial reports of ownership and reports of changes in ownership of
our common stock and other equity  securities.  Such persons are required by SEC
regulations to furnish us with copies of all such reports that they file. To our
knowledge,  based  upon our  review of these  reports,  all  Section  16 reports
required to be filed by our directors and executive  officers  during the fiscal
year ended June 30, 2005 were filed on a timely basis.

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

      The following table shows all cash compensation  accrued and/or paid by us
to our two executive  officers,  as well as certain other  compensation  paid or
accrued,  for the fiscal years ended June 30, 2005,  2004 and 2003.  Mr. Nielson
became an executive  officer in June 2004.  Other than as set forth  herein,  no
executive  officer's  cash  salary  and bonus  exceeded  $100,000  in any of the
applicable  years. The following  information  includes the dollar value of base
salaries,  bonus awards,  the value of restricted  shares issued in lieu of cash
compensation and certain other compensation, if any, whether paid or deferred.

<TABLE>
<CAPTION>
                                                                                   Long-Term Compensation
                                                                       -------------------------------------------------
                                     Annual Compensation                        Awards            Payouts
                              -----------------------------------      ------------------------   -------
                                                         Other         Restricted                                All
                                                        Annual           Stock         Options/     LTIP        Other
                              Salary        Bonus    Compensation       Award(s)         SARs     Payouts   Compensation
Name and                      -------      -------   ------------      ----------      --------   -------   ------------
Principal Position     Year    ($)           ($)          ($)             ($)            (#)        ($)          ($)
--------------------   ----   -------      -------   ------------      ----------      --------   -------   ------------
<S>                    <C>    <C>          <C>       <C>               <C>             <C>        <C>       <C>

Wayne I. Danson,       2005   215,000      125,000         22,476(3)      140,000
President, CEO & CFO   2004   150,000           --          9,122(1)           --            --        --             --
                       2003   190,138(2)        --             --              --            --        --             --

Martin Nielson,        2005   225,000       15,000             --         125,000(4)
Sr. VP-Acquisitions    2004    16,667       15,000             --              --            --        --             --
                       2003        --           --             --              --            --        --             --
</TABLE>

------------
(1)   Represents  reimbursement  of  out-of-pocket  expenses,  net of a  $35,000
      write-off,  received by Mr. Danson through Danson Partners, LLC, an entity
      owned and operated by Mr. Danson.

(2)   Represents  accrued fees and out-of-pocket  expenses.  Mr. Danson received
      $3,000 in cash and $1,000 in stock for fiscal 2003 services rendered.

(3)   Represents reimbursement of out-of-pocket expenses.

(4)   Represents  12,500,000  shares  of common  stock  valued at $.01 per share
      earned by Mr. Nielson pursuant to the deferred  compensation  provision of
      his June 24, 2004 employment contract, as amended.


                                       26
<PAGE>

      We  have  no  stock  options,  SAR or  other  bonus  arrangements  for our
employees  and/or  directors.  During the fiscal year ended June 30,  2005,  all
decisions  concerning  executive  compensation  were  made  by our  Compensation
Committee.

Employment Agreements

      On June 7,  2005,  the  Company  entered  into a Services  Agreement  (the
"Services Agreement") with Wayne I. Danson and Danson Partners,  LLC , a limited
liability company of which Mr. Danson is a principal ("DPL").

      Under the Services  Agreement,  DPL will provide Mr. Danson's  services to
the Company and Mr. Danson will serve as Chief Executive Officer,  President and
Chief Financial Officer of the Company.  In addition,  the Company will take all
necessary  action to cause Mr.  Danson to continue as a member of the  Company's
Board of  Directors,  and, if elected,  Mr.  Danson will  continue to serve as a
director of the Company.  The Services  Agreement  further provides that, at the
request of the  Company's  Board of  Directors,  Mr. Danson also will serve as a
director  or  officer  of any  subsidiary  of  the  Company  without  additional
compensation.  The  Services  Agreement  is  effective as of January 1, 2005 and
expires  on  the  second  anniversary   thereof  unless  earlier  terminated  in
accordance with its terms.

      Under the Services Agreement,  the Company will pay DPL an annual base fee
of $250,000.  Pursuant to the Services Agreement,  DPL is also entitled to (i) a
cash  bonus of  $250,000,  including  $50,000,  which  was paid in July 2004 and
$75,000, which was paid in January 2005 with the remaining $125,000 to be earned
as of August  1, 2005 and paid on or before  August  31,  2005  (this  remaining
amount has not been paid as of the date of this report),  and (ii) a share bonus
of  200,000,000  fully  vested  shares  of the  Company's  Common  Stock  issued
contemporaneously  with the execution of the Services Agreement.  Mr. Danson has
entered  into a  Lock-Up  Agreement  with the  Company  in  connection  with the
issuance of the share bonus.  For each fiscal year or portion  therefore  during
the  term of the  Services  Agreement,  the  Company  may  pay to DPL an  annual
performance  bonus,  in cash and/or  restricted  shares of Common  Stock,  in an
amount determined at the sole discretion of the Compensation  Committee,  taking
into  account  such  factors  as it  considers  appropriate,  including  but not
necessarily limited to, Mr. Danson's contribution to the Company's  consolidated
net earnings and stock  appreciation  during such fiscal year. In addition,  the
Company may grant cash bonuses, restricted shares of Common Stock, or options to
DPL in  consideration  for Mr. Danson's  services,  with a vesting  schedule and
other terms  established  by the  Company's  Compensation  Committee in its sole
discretion. Neither Mr. Danson nor DPL will receive additional consideration for
Mr. Danson's service as a director of the Company. Under the Services Agreement,
the Company is obligated to provide a $2,000,000  term life insurance  policy on
Mr. Danson,  the  beneficiary of which will be Mr.  Danson's wife, and to insure
Mr. Danson under a $2,000,000 key man life insurance policy,  the beneficiary of
which will be the Company.

      The Company may  terminate  the Services  Agreement  for "cause" or in the
event that Mr. Danson becomes  "Permanently  Disabled."  The Services  Agreement
automatically  terminates upon Mr. Danson's death. In the event that the Company
terminates the Services  Agreement  without cause or Mr. Danson or DPL terminate
the Services  Agreement for "Good  Reason," the Company shall pay to DPL (i) any
accrued annual base fees and reimbursements for business expenses incurred prior
to the termination date and any unpaid bonus fees for a prior fiscal year, which
amounts  will  be  payable  in a lump  sum no  later  than  30  days  after  the
termination  date, and (ii) a severance payment equal to the annual base fee for
the twelve-month period immediately following the termination date, payable in a
lump sum within 30 days of the termination  date if Mr. Danson or DPL terminates
the Services Agreement for "Good Reason" or in twelve equal monthly installments
if the Company  terminates the Services Agreement without cause. If within three
months prior to, or twelve  months  following,  a "Change of  Control,"  (i) the
Company  terminates the Services  Agreement  without cause or (ii) Mr. Danson or
DPL terminate the Services Agreement for certain occurrences  constituting "Good
Reason," the severance  payment will be increased to an amount which, when added
to the annual  base fees paid to DPL from the date of the "Change in Control" to
the  termination  date,  if any,  equals  299% of the amount of annual base fees
which would have been payable to DPL during the twelve-month  period immediately
following the termination  date and will be payable in a lump sum within 30 days
of the last to occur of the termination date or the "Change in Control," and (y)
all unvested stock options or stock awards held by either DPL or Mr. Danson will
immediately become accelerated and vested.

      Under the  Services  Agreement,  the  following  terms  have the  meanings
specified below:


                                       27
<PAGE>

      o     "cause" means (i) any act or omission by Mr. Danson that constitutes
            malfeasance,  misfeasance or nonfeasance in the course of his duties
            thereunder, or in the judgment of the Board of Directors, Mr. Danson
            has been grossly negligent  (including  habitual neglect of duties),
            incompetent or insubordinate in carrying out his duties  thereunder,
            (ii) a  material  breach  of the  Services  Agreement  by DPL or Mr.
            Danson  that is not cured  within ten (10) days of receipt of notice
            thereof, (iii) Mr. Danson's or DPL's breach of a fiduciary duty owed
            to the  Company or its  affiliates,  or (iv) Mr.  Danson's  or DPL's
            conviction of, or pleading nolo contendere to, a criminal offense or
            crime constituting a misdemeanor or felony, or conviction in respect
            to any act involving  fraud,  dishonesty or moral  turpitude  (other
            than minor traffic infractions or similar minor offenses);

      o     "Permanently  Disabled" means becomes  disabled or  incapacitated as
            determined under the Company's Long Term Disability Policy,  whether
            or not such Policy covers Mr.  Danson,  or, in the event the Company
            does not have a Long Term  Disability  Policy at the relevant  time,
            Mr.   Danson's   inability   to  fully   perform   his   duties  and
            responsibilities  thereunder  to the  full  extent  required  by the
            Company  by  reason  of  illness,   injury  or  incapacity  for  120
            consecutive days or for more than six months during any twelve month
            period;

      o     "Good Reason" means the  occurrence of any of the following  without
            Mr.  Danson's  consent:  (i) a material  reduction  in Mr.  Danson's
            duties or  authority,  or a change in reporting  relationship  which
            requires  Mr.  Danson to report to any person or persons  other than
            the  Board  of  Directors  or a  Committee  of  the  Board,  (ii)  a
            requirement that Mr. Danson be relocated to an office outside of the
            New York City metropolitan area, (iii) a reduction in the Base Fees,
            or (iv) the Company is a party to a merger or consolidation in which
            it is not the surviving entity, and the surviving or new entity does
            not undertake to assume and perform the Company's  obligations under
            the Services Agreement; and

      o     "Change in Control" means any one of the following:

            (i)   Any "person" as such term is used in Sections  13(d) and 14(d)
                  of the  Exchange  Act (other than the  Company,  officers  and
                  directors  of the  Company  as of  the  date  of the  Services
                  Agreement and certain other persons or entities) is or becomes
                  the  "beneficial  owner" (as  defined in Rule 13d-3  under the
                  Exchange Act),  directly or  indirectly,  of securities of the
                  Company  representing twenty five percent (25%) or more of the
                  combined  voting  power  of  the  Company's  then  outstanding
                  securities;

            (ii)  The  share   owners  of  the  Company   approve  a  merger  or
                  consolidation  of the  Company  with any  other  company  that
                  results  in a  change  of  ownership  of more  than 50% of the
                  combined voting power of the voting  securities of the Company
                  or such surviving entity  outstanding  immediately  after such
                  merger or consolidation;

            (iii) The share owners of the Company  approve a plan of liquidation
                  of the Company or an agreement for the sale or  disposition by
                  the  Company  of all  or  substantially  all of the  Company's
                  assets; or

            (iv)  The Current  Director Group  constitutes  less than 50% of the
                  members of the Board of Directors.

            Notwithstanding  the  foregoing,  a "Change  in  Control"  shall not
            include any transaction under subparagraphs (ii) or (iii) unless Mr.
            Danson and DPL have voted their  shares of the Company  against such
            transaction,  or any triggering change in the Current Director Group
            under subparagraph (iv), unless Mr. Danson, as a Director, shall not
            have had a vote with  respect to, or shall have voted  against,  the
            members whose  addition to the Board of Directors  subsequent to the
            effective date causes the Current Director Group to "constitute less
            50% of the members of the Board."


                                       28
<PAGE>

      In connection with the execution of the Services Agreement, the Consulting
Agreement  in effect  between Mr.  Danson and the Company  prior to June 7, 2005
expired. The Consulting Agreement initially covered the period September 1, 2000
through  August 31, 2001 and was orally  extended  through  December  31,  2001.
Effective  January 1, 2002,  Mr. Danson  agreed to orally extend the  Consulting
Agreement  through  December  31,  2003  at a  monthly  rate  of  $12,500,  plus
reimbursement  for  reasonable out of pocket  expenses.  On January 1, 2004, Mr.
Danson agreed to extend his oral  agreement  indefinitely.  While the Consulting
Agreement was in effect,  the Company provided Mr. Danson with a $2,000,000 life
insurance  policy for his benefit and also insured Mr. Danson under a $2,000,000
key man life insurance policy for the benefit of the Company.

      On June 24, 2004, the Company entered into a two year employment agreement
with  Martin  Nielson,  our Senior  Vice  President-Acquisitions  (the  "Nielson
Agreement").  Under the terms of the Nielson Agreement,  Mr. Nielson is employed
as  Encompass'   President  and  Chief  Executive  Officer  and  a  Senior  Vice
President-Acquisitions  of the  Company.  Mr.  Nielson is entitled to a $200,000
annual  salary and the right to earn up to 50,000,000  shares of our  restricted
common  stock  valued at $.01 per share,  or  $500,000,  to vest over a two-year
period. Mr. Nielson is also entitled to receive an Incentive Bonus determined at
the discretion of our  Compensation  Committee based on his  contribution to our
overall  performance as well as a bonus based on the overall  separate  business
and  financial   performance  of  Encompass  and  its   wholly-owned   operating
subsidiaries.  In addition,  we have provided Mr. Nielson with a $1 million life
insurance  policy for his benefit and also insure Mr. Nielson under a $2 million
key man life insurance  policy.  If Mr. Nielson's  employment with us terminates
for any reason other than by us for "cause," Mr.  Nielson is entitled to receive
an  additional  amount of base  salary  equal to the  amount of base  salary Mr.
Nielson  would  have  received  during  the six  (6)  month  period  immediately
following the date of his termination.  The severance payment is payable in cash
in equal monthly installments of the first business day of each month during the
six (6) month period  immediately  following the date of his termination.  Under
Mr. Nielson's employment agreement,  "cause" means the following: (i) any act or
omission by Mr. Nielson that constitutes malfeasance, misfeasance or nonfeasance
in the course of his duties, or in the judgment of our Board of Directors or our
Chief  Executive  Officer,  Mr.  Nielson has been grossly  negligent  (including
habitual  neglect of duties),  incompetent or  insubordinate in carrying out his
duties,  (ii) a material breach by Mr. Nielson of his employment  agreement that
is not cured  within  ten (10) days of  receipt  of  notice  thereof,  (iii) Mr.
Nielson's  breach of a fiduciary duty owed to us or our affiliates,  or (iv) Mr.
Nielson's  conviction of, or pleading nolo contendere to, a criminal  offense or
crime  constituting a misdemeanor or felony, or conviction in respect to any act
involving  fraud,  dishonesty  or moral  turpitude  (other  than  minor  traffic
infractions or similar minor offenses).

      Mr. Nielson's  contract was amended effective June 1, 2005 to provide that
Mr. Nielson's annual  compensation for fiscal 2005 and 2006 will be $225,000 and
$175,000, respectively.

      The Company recorded $250,000 of amortization  expense for the fiscal year
ended June 30, 2005 in  connection  with the  issuance of  12,500,000  shares of
common  stock  that  vested  on July 1,  2005  under  Mr.  Nielson's  employment
agreement.

      On June 3, 2004, we entered into a three-year  employment  agreement  with
Lisa Welton. In accordance with the terms of Ms. Welton's employment  agreement,
Ms. Welton will hold the offices of President and Chief Executive  Officer,  and
be a  director,  of  Cyber-Test,  as  well  as  hold  the  office  of  Executive
Vice-President of Encompass. Ms. Welton is entitled to a $120,000 annual salary.
Ms.  Welton is also  entitled to receive an incentive  bonus  determined  at the
discretion  of our  Compensation  Committee  based  on her  contribution  to our
overall  performance as well as a bonus based on the overall  separate  business
and financial performance of Cyber-Test. In addition, we insure Ms. Welton under
a $2 million key man life insurance policy.  If Ms. Welton's  employment with us
terminates  for any reason other than by us for "cause," Ms.  Welton is entitled
to  receive  an  additional  amount of base  salary  equal to the amount of base
salary  Ms.  Welton  would  have  received  during  the  six  (6)  month  period
immediately  following the date of her  termination.  The  severance  payment is
payable in cash in equal monthly  installments of the first business day of each
month  during the six (6) month  period  immediately  following  the date of her
termination.   Under  Ms.  Welton's  employment  agreement,  "cause"  means  the
following:  (i) any act or omission by Ms. Welton that constitutes  malfeasance,
misfeasance or  nonfeasance  in the course of her duties,  or in the judgment of
our Board of  Directors  or our Chief  Executive  Officer,  Ms.  Welton has been
grossly  negligent  (including  habitual  neglect  of  duties),  incompetent  or
insubordinate  in carrying out her duties,  (ii) a material breach by Ms. Welton
of her employment agreement that is not cured within ten (10) days of receipt of
notice thereof,  (iii) Ms. Welton's breach of a fiduciary duty owed to us or our
affiliates,  or (iv) Ms. Welton's conviction of, or pleading nolo contendere to,
a criminal offense or crime  constituting a misdemeanor or felony, or conviction
in respect to any act involving fraud, dishonesty or moral turpitude (other than
minor traffic infractions or similar minor offenses).


                                       29
<PAGE>

      On June 3, 2004, we entered into a three-year  employment  agreement  with
Thomas  Sutlive.  In  accordance  with  the  terms of Mr.  Sutlive's  employment
agreement, Mr. Sutlive will hold the office of Vice-President of Cyber-Test. Mr.
Sutlive is entitled to a $110,000 annual salary. Mr. Sutlive is also entitled to
receive an incentive  bonus  determined at the  discretion  of our  Compensation
Committee  based on his  contribution  to our overall  performance  as well as a
bonus  based on the overall  separate  business  and  financial  performance  of
Cyber-Test.  If Mr. Sutlive's employment with us terminates for any reason other
than by us for "cause," Mr. Sutlive is entitled to receive an additional  amount
of base  salary  equal to the  amount of base  salary  Mr.  Sutlive  would  have
received during the six (6) month period  immediately  following the date of his
termination.  The  severance  payment  is  payable  in  cash  in  equal  monthly
installments  of the first  business  day of each month during the six (6) month
period  immediately  following the date of his termination.  Under Mr. Sutlive's
employment  agreement,  "cause" means the following:  (i) any act or omission by
Mr.  Sutlive that  constitutes  malfeasance,  misfeasance  or nonfeasance in the
course of his duties,  or in the judgment of our Board of Directors or our Chief
Executive Officer,  Mr. Sutlive has been grossly negligent  (including  habitual
neglect of duties),  incompetent  or  insubordinate  in carrying out his duties,
(ii) a material  breach by Mr. Sutlive of his  employment  agreement that is not
cured  within ten (10) days of receipt of notice  thereof,  (iii) Mr.  Sutlive's
breach of a fiduciary duty owed to us or our affiliates,  or (iv) Mr.  Sutlive's
conviction  of, or  pleading  nolo  contendere  to, a criminal  offense or crime
constituting  a  misdemeanor  or  felony,  or  conviction  in respect to any act
involving  fraud,  dishonesty  or moral  turpitude  (other  than  minor  traffic
infractions or similar minor offenses).

      Each  of  the  foregoing  agreements  contains  standard  confidentiality,
noncompete and work-for-hire provisions.

Compensation Of Directors

      Our  directors  did not receive any cash or stock  compensation  for their
services as a director in fiscal 2004 or 2003,  but were  reimbursed  for all of
their  out-of-pocket  expenses  incurred in  connection  with the  rendering  of
services  as a  director.  Under  NASDAQ  Rules  and  Regulations,  each  of the
independent  directors  is  entitled  to $25,000 in cash  compensation,  payable
$6,250 per quarter of services rendered. In fiscal 2005, each of the independent
directors received $18,750 in cash  compensation,  payable $6,250 per quarter of
service. Messer. Prouty received an additional $5,000 for serving as Chairman of
the Compensation  Committee.  As of June 30, 2005, each independent  director is
owed $6,250, or $25,000 in the aggregate,  for director services rendered during
the three  months  ended June 30,  2005.  These fees have not yet been paid.  In
addition, on June 29, 2005, each independent director received 75,000,000 shares
of common stock  having a value of $52,500 as  compensation  for prior  services
rendered.  The stock grants were made under the Company's 2005 Stock Plan.  Each
independent  director  entered  into a Lock-Up  Agreement  with the Company with
respect to such stock grant.

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

      The following table contains information about the beneficial ownership of
our common stock as of September 1, 2005 for:

      o     any person, who at June 30, 2005 owned more than five percent (5%)
            of our common stock;

      o     each of our directors;

      o     each of our executive officers named in the Summary Compensation
            Table in Part III - Item 10. Executive Compensation of this Annual
            Report on Form 10-KSB; and

      o     all directors and executive officers as a group.

      Unless  otherwise  indicated,  the address for each person or entity named
below is c/o Advanced Communications  Technologies,  Inc., 420 Lexington Avenue,
Suite 2738, New York, NY 10170.

      Beneficial ownership is determined in accordance with the rules of the SEC
and generally  includes  voting or investment  power with respect to securities.
Except as indicated by footnote,  and subject to community  property  laws where
applicable, 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. The percentage of beneficial ownership is based on 3,151,773,731 shares of
common stock outstanding as of September 1, 2005.


                                       30
<PAGE>

                                                           Common Stock
                                                       Beneficially Owned
                                                  ----------------------------
Name/Title                                           Number         Percent(1)
-----------------------------------------------   -------------     ----------

Wayne I. Danson, President, CEO, CFO & Director     248,658,832(2)        7.89%

Martin Nielson, Sr. VP-Acq. & Director               22,500,000              *

Jonathan J. Lichtman, Secretary & Director          105,710,334(3)        3.35%

Dr. Michael Finch, Director                          75,591,334            2.4%

Randall Prouty, Director                             88,527,080           2.81%

Wilbank Roche, Director                              93,507,143           2.97%

David G. Boshart                                    555,124,500(4)       17.61%
                                                  -------------     ----------
  Total                                           1,189,619,223          37.74%
                                                  =============     ==========
All Executive Officers and Directors as a
Group (6 persons)                                   634,494,723          20.13%
                                                  =============     ==========
------------
(1)   Percentage  of  outstanding  shares  is based on  3,151,773,731  shares of
      common stock  outstanding  as of September 1, 2005,  together  with shares
      deemed  beneficially  owned by each shareholder.  Beneficial  ownership is
      determined in  accordance  with the rules of the  Securities  and Exchange
      Commission and generally  includes voting or investment power with respect
      to securities.

(2)   Includes  63,308,832 shares  beneficially owned by Mr. Danson's affiliated
      entity and spouse.  Excludes  16,500,000 shares held by Mr. Danson's adult
      children. Mr. Danson has no beneficial ownership in these shares.

(3)   Excludes 396,666 shares held by various family trusts. Mr. Lichtman has no
      beneficial ownership in these shares.

(4)   Includes  shares owned in trust for Mr.  Boshart's  adult child and shares
      held by tenants in common with Mr. Boshart's brother and sister.

 *    Less than 1%.


      Although pursuant to the terms of our Series A Convertible Preferred Stock
issued to Cornell Capital and other investors (the  "Holders"),  the Holders are
not permitted to own more than 9.99% of our outstanding  common stock at any one
time,  the Holders are  permitted  to waive such  restriction,  which  waiver is
effective on the 61st day after delivery of the waiver to us. Accordingly, there
are a  sufficient  number of  shares  of our  common  stock  issuable  under the
outstanding  Series A Convertible  Preferred Stock, such that by delivering such
waiver the Holders  could  affect a change of control of the Company on or after
the 61st day following delivery.

Existing Stock Compensation Plans

      The following  table sets forth  information as of June 30, 2005 regarding
our  existing  compensation  plans  and  individual  compensation   arrangements
pursuant to which our equity securities are authorized for issuance to employees
or non-employees  (such as directors,  consultants and advisors) in exchange for
consideration in the form of services:


                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                                            Number of securities
                                                                                           remaining available for
                                                                                            future issuance under
                                         Number of securities to     Weighted-average        equity compensation
                                         be issued upon exercise     exercise price of        plans (excluding
                                         of outstanding options,   outstanding options,    securities reflected in
             Plan Category                 warrants and rights      warrants and rights          column (a))
--------------------------------------   -----------------------   ---------------------   -----------------------
                                                   (a)                      (b)                      (c)
<S>                                      <C>                       <C>                     <C>
Equity compensation plans approved by
security holders                                               0                       0                         0

Equity compensation plans not approved
by security holders (1)                               37,500,000   $                0.01               200,000,000
                                         -----------------------   ---------------------   -----------------------

Total                                                 37,500,000   $                0.01               200,000,000
                                         =======================   =====================   =======================
</TABLE>

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

(1)   Pursuant to the terms of Mr. Nielson's employment  agreement,  Mr. Nielson
      is  entitled  to receive  50,000,000  shares of the  Company's  restricted
      common stock,  priced at $.01 per share,  of which (i)  12,500,000  shares
      vested on July 1, 2005; and (ii) 37,500,000 shares will fully vest on July
      1, 2006,  provided that Mr.  Nielson is then employed by the Company.  The
      12,500,000 shares were issued to Mr. Nielson on July 1, 2005. The terms of
      Mr. Nielson's employment agreement are discussed in more detail under Part
      III - Item 10. Executive Compensation - Employment Agreements.

(2)   Pursuant  to the  Company's  2005 Stock  Plan,  200,000,000  shares of the
      Company's  common stock remain  available for issuance as incentive  stock
      options or as nonqualified  stock options. A description of the 2005 Stock
      Plan is set  forth in Note  11(E) of the Notes to  Consolidated  Financial
      Statements included in this Annual Report on Form 10-KSB.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Jonathan  J.  Lichtman,  Secretary  and a director  of the  Company,  is a
partner at  Levinson &  Lichtman,  LLP,  a law firm in Boca  Raton,  FL that the
Company  retained to provide legal  services  during fiscal years 2005 and 2004.
The Company  paid  Levinson & Lichtman,  LLP,  $45,705 and $0 in cash and stock,
respectively  during  fiscal  2005,  and $93,612 and $105,000 in cash and stock,
respectively,  during fiscal 2004 for legal  services  rendered.  As of June 30,
2005,  the Company owes Levinson & Lichtman,  LLP $340 in cash for current legal
services.

      Wilbank Roche, a director of the Company,  is a partner at Roche & Holt, a
law firm in Los Angeles,  CA that the Company retained to provide legal services
during fiscal years 2005 and 2004.  The Company paid Roche & Holt $31,177 and $0
in cash and stock,  respectively  during fiscal 2005, and $56,392 and $50,000 in
cash and stock, respectively, during fiscal 2004 for legal services rendered. As
of June 30, 2005, the Company had no amounts owed to Roche & Holt.

      During the fiscal year ended June 30, 2005,  the Company  paid Mr.  Prouty
$20,073 in cash for past services rendered. As of June 30, 2005, the Company had
no amounts owed to Mr. Prouty.

      During  the fiscal  year ended June 30,  2004,  the  Company  engaged  the
services of Dr.  Michael  Finch,  a director,  to evaluate  certain  third party
software programs and proposed business and investment  candidates.  The Company
incurred $10,000 of expenses to Dr. Finch for his services,  of which $6,666 was
paid as of June 30,  2004.  The balance of $3,334 was paid to Dr.  Finch  during
fiscal 2005. As of June 30, 2005, the Company had no amounts owed to Dr. Finch.

      The Company,  through a license agreement  effective December 1, 2004 with
Danson Partners, LLC, a party related to our chief executive officer, occupies a
499 square foot office  facility at 420  Lexington  Avenue,  New York, NY 10170,
having a monthly lease obligation of $1,478, as adjusted annually. The Company's
license agreement is on a month-to-month basis and is at fair market rental.


                                       32
<PAGE>

ITEM 13. EXHIBITS


<TABLE>
<CAPTION>
Exhibit No.   Description                                            Location (1)
-----------   ---------------------------------------------------    -----------------------------------------
<S>           <C>                                                    <C>

2.1           Asset Purchase Agreement dated May 27, 2004, by        Incorporated by reference to Exhibit 10.1
              and between Cyber-Test, Inc., a Delaware               to the Company's Form 8-K filed with the
              corporation, and Cyber-Test, Inc., a Florida           SEC on June 18, 2004
              corporation.

2.2           Stock Purchase Agreement, dated as of December         Incorporated by reference to Exhibit 4.1
              10, 2004, among Advanced Communications                to the Company's Form 8-K filed with the
              Technologies, Inc., Theodore S. Li and Hui             SEC on December 14, 2004
              Cynthia Lee.

3(I)(a)       Articles of Incorporation of Media Forum               Incorporated by reference to Exhibit 2.1
              International, Inc.                                    to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

3(I)(b)       Second Amendment to Articles of Incorporation          Incorporated by reference to Exhibit 2.2
              of Telenetworx,  Inc.                                  to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

3(I)(c)       Third Amendment to Articles of Incorporation of        Incorporated by reference to Exhibit 2.3
              Media Forum International, Inc.                        to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

3(I)(d)       Fourth Amendment to Articles of Incorporation          Incorporated by reference to Exhibit 2.7
                                                                     to the Form SB-2 filed with the SEC on
                                                                     March 5, 2002

3(I)(e)       Fifth Amendment to Articles of Incorporation           Incorporated by reference to Exhibit 2.8
                                                                     to the Form SB-2 filed with the SEC on
                                                                     July 16, 2003

3(I)(f)       Sixth Amendment to Articles of Incorporation           Incorporated by reference to Exhibit
                                                                     3.1.6 the Company's Form 10-KSB filed
                                                                     with the SEC on November 3, 2004

3(I)(g)       Seventh Amendment to Articles of Incorporation         Incorporated by reference to Exhibit
                                                                     3.1.7 the Company's Form 10-KSB filed
                                                                     with the SEC on November 3, 2004

3(II)         Bylaws of the Company                                  Incorporated by reference to Exhibit 2.4
                                                                     to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

4.1           6% Secured Convertible Promissory Note, dated          Incorporated by reference to Exhibit 10.1
              December 30, 2004, issued to Theodore S. Li.           to the Company's Form 8-K filed with the
                                                                     SEC on January 5, 2005

4.2           6% Secured Convertible Promissory Note, dated          Incorporated by reference to Exhibit 10.2
              December 30, 2004, issued to Hui Cynthia Lee.          to the Company's Form 8-K filed with the
                                                                     SEC on January 5, 2005
</TABLE>


                                       33
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                    <C>
4.3           Secured Convertible Debenture                          Incorporated by reference to Exhibit
                                                                     10.21 to the Company's Form 10-KSB filed
                                                                     with the SEC on December 6, 2002

4.4           Securities Purchase Agreement, dated November          Incorporated by reference to Exhibit
              2002, by and among Advanced Communications             10.19 to the Company's Form 10-KSB filed
              Technologies, Inc. and Buyers.                         with the SEC on December 6, 2002

4.5           Investor Registration Rights Agreement, dated          Incorporated by reference to Exhibit
              November 2002, by and among Advanced                   10.20 to the Company's Form 10-KSB filed
              Communications Technologies, Inc. and Investors.       with the SEC on December 6, 2002

4.6           Escrow Agreement, dated November 2002, by and          Incorporated by reference to Exhibit
              among Advanced Communications Technologies,            10.22 to the Company's Form 10-KSB filed
              Inc., Buyers, and Wachovia Bank, N.A.                  with the SEC on December 6, 2002

4.7           Irrevocable Transfer Agent Instructions, dated         Incorporated by reference to Exhibit
              November 2002                                          10.23 to the Company's Form 10-KSB filed
                                                                     with the SEC on December 6, 2002


4.8           Security Agreement, dated November 2002, by and        Incorporated by reference to Exhibit
              among Advanced Communications Technologies,            10.24 to the Company's Form 10-KSB filed
              Inc. and Buyers                                        with the SEC on December 6, 2002


4.9           6% Senior Unsecured Promissory Note, in the            Incorporated by reference to Exhibit 10.2
              original principal amount of $547,000 issued on        to the Company's Form 8-K filed with the
              June 3, 2004 by Cyber-Test, Inc., a Delaware           SEC on June 18, 2004
              corporation, in favor of Cyber-Test, Inc., a
              Florida corporation.

4.10          Escrow Agreement, dated June 3, 2004, by and           Incorporated by reference to Exhibit 10.3
              between Cyber-Test, Inc., a Delaware                   to the Company's Form 8-K filed with the
              corporation, and Cyber-Test, Inc., a Florida           SEC on June 18, 2004
              corporation.

4.11          Amendment No. 1 to 6% Unsecured Promissory Note        Incorporated by reference to Exhibit
              dated August 10, 2004.                                 10.35 to the Company's Form 10-KSB filed
                                                                     with the SEC on November 3, 2004
</TABLE>


                                       34
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                    <C>
4.12          Form of Exchange Agreement, dated June 24,             Incorporated by reference to Exhibit
              2004, by and among Advanced Communications             10.40 to the Company's Form 10-KSB filed
              Technologies, Inc. and certain debenture               with the SEC on November 3, 2004
              holders of Hy-Tech Technology Group, Inc.

4.13          Escrow Agreement dated May 28, 2004 by and             Incorporated by reference to Exhibit
              among Advanced Communications Technologies,            10.42 to the Company's Form 10-KSB filed
              Inc., Buyers and Butler Gonzalez, LLP, Escrow          with the SEC on November 3, 2004
              Agent.

4.14          Investment Agreement dated May 28, 2004 by and         Incorporated by reference to Exhibit
              between Advanced Communications Technologies,          10.43 to the Company's Form 10-KSB filed
              Inc. and Cornell Capital Partners, LP.                 with the SEC on November 3, 2004

4.15          Registration Rights Agreement dated May 28,            Incorporated by reference to Exhibit
              2004 by and between Advanced Communications            10.44 to the Company's Form 10-KSB filed
              Technologies, Inc. and Cornell Capital                 with the SEC on November 3, 2004
              Partners, LP.

10.1          Custodial and Stock Pledge Agreement, dated            Incorporated by reference to Exhibit 10.3
              December 30, 2004, among Advanced                      to the Company's Form 8-K filed with the
              Communications Technologies, Inc., Theodore S.         SEC on January 5, 2005
              Li and Hui Cynthia Lee, and Quarles & Brady
              Streich Lang LLP.

10.2          Employment Agreement, dated December 30, 2004,         Incorporated by reference to Exhibit 10.4
              among Pacific Magtron International                    to the Company's Form 8-K filed with the
              Corporation, Inc., Advanced Communications             SEC on January 5, 2005
              Technologies, Inc., Encompass Group Affiliates,
              Inc., and Theodore S. Li.

10.3          Employment Agreement, dated December 30, 2004,         Incorporated by reference to Exhibit 10.5
              among Pacific Magtron International                    to the Company's Form 8-K filed with the
              Corporation, Inc., Advanced Communications             SEC on January 5, 2005
              Technologies, Inc., Encompass Group Affiliates,
              Inc., and Hui Cynthia Lee.

10.4          Indemnity Agreement, dated December 30, 2004,          Incorporated by reference to Exhibit 10.6
              among Advanced Communications Technologies,            to the Company's Form 8-K filed with the
              Inc., Theodore S. Li and Hui Cynthia Lee.              SEC on January 5, 2005

10.5*         Form of Grant Instrument under Advanced                Incorporated by reference to Exhibit 10.1
              Communications Technologies, Inc. 2005 Stock           to the Company's Form 8-K filed with the
              Plan for Non-Employee Director.                        SEC on July 6, 2005
</TABLE>


                                       35
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                    <C>
10.6*         Form of Lock-Up Agreement for Executive                Incorporated by reference to Exhibit 10.2
              Officer/Director of Advanced Communications            to the Company's Form 8-K filed with the
              Technologies, Inc.                                     SEC on July 6, 2005

10.7*         Form of Grant Instrument under Advanced                Incorporated by reference to Exhibit 10.3
              Communications Technologies, Inc. 2005 Stock           to the Company's Form 8-K filed with the
              Plan for Executive Officer/Employee.                   SEC on July 6, 2006

10.8*         Services Agreement entered into on June 7, 2005        Incorporated by reference to Exhibit 10.1
              by and among Advanced Communications                   to the Company's Form 8-K filed with the
              Technologies, Inc., Wayne I. Danson and Danson         SEC on July 13, 2005
              Partners, LLC.

10.9          Equity Line of Credit Agreement dated July             Incorporated by reference to Exhibit
              2003, by and between Cornell Capital Partners,         10.13 to the Company's Form SB-2 filed
              LP and Advanced Communications Technologies,           with the SEC on July 16, 2003
              Inc.

10.10         Registration Rights Agreement dated July 2003,         Incorporated by reference to Exhibit
              by and between Advanced Communications                 10.14 to the Company's Form SB-2 filed
              Technologies, Inc. and Cornell Capital                 with the SEC on July 16, 2003
              Partners, LP.

10.11         Placement Agent Agreement dated July 2003, by          Incorporated by reference to Exhibit
              and between Advanced Communications                    10.15 to the Company's Form SB-2 filed
              Technologies, Inc. and Westrock Advisors, Inc.         with the SEC on July 16, 2003

10.12         Escrow Agreement dated July 2003, by and among         Incorporated by reference to Exhibit
              Advanced Communications Technologies, Inc.,            10.16 to the Company's Form SB-2 filed
              Cornell Capital Partners, LP, Butler Gonzalez          with the SEC on July 16, 2003
              LLP and First Union National Bank.

10.13         Consulting Agreement dated July 1, 2002 between        Incorporated by reference to Exhibit
              Advanced Communications Technologies, Inc. and         10.26 to the Company's Form 10-KSB/A
              Randall H. Prouty.                                     filed on February 7, 2003

10.14         NonCompetition Agreement, dated June 3, 2004,          Incorporated by reference to Exhibit 10.4
              by and among Cyber-Test, Inc., a Delaware              to the Company's Form 8-K filed with the
              corporation, Cyber-Test, Inc., a Florida               SEC on June 18, 2004
              corporation, and the shareholders of Cyber-Test.

10.15         Employment Agreement, dated June 3, 2004, by           Incorporated by reference to Exhibit 10.5
              and between Cyber-Test, Inc., a Delaware               to the Company's Form 8-K filed with the
              corporation, and Lisa Welton.                          SEC on June 18, 2004
</TABLE>


                                       36
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                    <C>
10.16         Employment Agreement, dated June 3, 2004, by           Incorporated by reference to Exhibit 10.6
              and between Cyber-Test, Inc., a Delaware               to the Company's Form 8-K filed with the
              corporation, and Thomas Sutlive.                       SEC on June 18, 2004

10.17         Agreement, dated May 27, 2004, by and among            Incorporated by reference to Exhibit
              Encompass Group Affiliates, Inc., Hy-Tech              10.36 to the Company's Form 10-KSB filed
              Technology Group, Inc. and Hy-Tech Computer            with the SEC on November 3, 2004
              Systems, Inc.

10.18         Customer Lists License Agreement, dated June           Incorporated by reference to Exhibit
              24, 2004, by and among Encompass Group                 10.37 to the Company's Form 10-KSB filed
              Affiliates, Inc., Hy-Tech Technology Group,            with the SEC on November 3, 2004
              Inc. and Hy-Tech Computer Systems, Inc.

10.19         Websites License Agreement, dated June 24,             Incorporated by reference to Exhibit
              2004, by and among Encompass Group Affiliates,         10.38 to the Company's Form 10-KSB filed
              Inc., Hy-Tech Technology Group, Inc. and               with the SEC on November 3, 2004
              Hy-Tech Computer Systems, Inc.

10.20         Non-Competition and Nondisclosure Agreement by         Incorporated by reference to Exhibit
              and among Encompass Group Affiliates, Inc.,            10.39 to the Company's Form 10-KSB filed
              Hy-Tech Technology Group, Inc. and Hy-Tech             with the SEC on November 3, 2004
              Computer Systems, Inc.

10.21*        Employment Agreement dated June 24, 2004 by and        Incorporated by reference to Exhibit
              among Encompass Group Affiliates, Inc.,                10.41 to the Company's Form 10-KSB filed
              Advanced Communications Technologies, Inc. and         with the SEC on November 3, 2004
              Martin Nielson.

10.22*        June 1, 2005 Amendment to Employment Agreement         Provided herewith
              by and among Encompass Group Affiliates, Inc.,
              Advanced Communications Technologies, Inc. and
              Martin Nielson.

14            Code of Business Conduct and Ethics for                Incorporated by reference to Exhibit 14.1
              Advanced Communications Technologies, Inc.             to the Company's Form 10-KSB filed with
                                                                     the SEC on November 3, 2004

21            Subsidiaries of Advanced Communications                Provided herewith
              Technologies, Inc.

31            Certification by Chief Executive Officer and           Provided herewith
              Chief Financial Officer pursuant to
              Sarbanes-Oxley Section 302
</TABLE>


                                       37
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                    <C>
32            Certification by Chief Executive Officer and           Provided herewith
              Chief Financial Officer pursuant to 18 U.S.C.
              Section 1350
</TABLE>

*     Management contract or management compensatory plan or arrangement.

(1) In the case of  incorporation by reference to documents filed by the Company
under the  Exchange  Act,  the  Company's  file number under the Exchange Act is
000-30486.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees


                                       38
<PAGE>

      The aggregate fees billed for professional services rendered by Weinberg &
Company,  P.A., the Company's independent auditors,  was $96,520 and $59,795 for
the audit of the  Company's  annual  financial  statements  for the fiscal years
ended June 30, 2005 and 2004,  respectively,  and the  reviews of the  financial
statements included in the Company's Forms 10-QSB for those fiscal years.

Audit-Related Fees

      The aggregate fees billed for professional  services  rendered was $12,785
and $15,271 in connection  with due diligence  services for PMIC and Cyber-Test,
Inc. for the fiscal years ended June 30, 2005 and 2004, respectively.

Tax Fees

      No fees were billed in each of the last two fiscal years for  professional
services rendered by the principal accountant for tax compliance, tax advice and
tax planning services.

All Other Fees

      Other than the services  described  above,  the aggregate  fees billed for
services  rendered by the principal  accountant was $0 and $2,818 for the fiscal
years  ended June 30,  2005 and 2004,  respectively.  These fees  related to the
review of the Company's 424B filing in fiscal 2004.

Policy For Pre-Approval Of Audit And Non-Audit Services

      All engagements of our  independent  auditor to perform any audit services
and non-audit  services were approved by the Audit  Committee in accordance with
its normal  functions.  During the fiscal years ended June 30, 2005 and 2004, no
audit  services or  non-audit  services  were  approved  by the Audit  Committee
pursuant to Rule  2-01(c)(7)(i)(C) of Regulation S-X. The Board of Directors and
the Audit  Committee are in the process of creating a policy to pre-approve  all
audit  services and all  non-audit  services that our  independent  auditor will
perform for us under applicable federal securities regulations.  As permitted by
the applicable regulations, we anticipate that the Audit Committee's policy will
utilize a  combination  of  specific  pre-approval  on a  case-by-case  basis of
individual  engagements of our independent  auditor and general  pre-approval of
certain  categories of engagements up to  predetermined  dollar  thresholds that
will be reviewed annually by the Audit Committee.


                                       39
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused  this  amended  report  to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.

                                     ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.

                                     By: /s/ Wayne I. Danson
                                        ----------------------------------------
                                     Name:  Wayne I. Danson
                                     Title: President, Chief Executive Officer
                                            and Chief Financial Officer
                                     Date:  October 3, 2005

      In accordance  with the Exchange Act, this amended  report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                    TITLE                                             DATE
-------------------------    -----------------------------------------------   ---------------
<S>                          <C>                                               <C>

/s/ Wayne I. Danson
-------------------------    President, Chief Executive Officer(Principal
Wayne I. Danson              Executive Officer), Chief Financial Officer
                             (Principal Accounting Officer) and Director       October 3, 2005



/s/ Martin Nielson
-------------------------
Martin Nielson               Senior Vice President-Acquisitions and Director   October 3, 2005



/s/ Jonathan Lichtman
-------------------------
Jonathan Lichtman, Esq.      Secretary and Director                            October 3, 2005



/s/ Dr. Michael Finch
-------------------------
Dr. Michael Finch            Director                                          October 3, 2005



/s/ Randall Prouty
-------------------------
Randall Prouty               Director                                          October 3, 2005



/s/ Wilbank J. Roche
-------------------------
Wilbank J. Roche, Esq.       Director                                          October 3, 2005
</TABLE>


                                       40
<PAGE>

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit No.   Description                                           Location (1)
-----------   ---------------------------------------------------   ------------------------------------------
<S>           <C>                                                   <C>

2.1           Asset Purchase Agreement dated May 27, 2004,          Incorporated by reference to Exhibit 10.1
              by and between Cyber-Test, Inc., a Delaware           to the Company's Form 8-K filed with the
              corporation, and Cyber-Test, Inc., a Florida          SEC on June 18, 2004
              corporation.

2.2           Stock Purchase Agreement, dated as of December        Incorporated by reference to Exhibit 4.1
              10, 2004, among Advanced Communications               to the Company's Form 8-K filed with the
              Technologies, Inc., Theodore S. Li and Hui            SEC on December 14, 2004
              Cynthia Lee.

3(I)(a)       Articles of Incorporation of Media Forum               Incorporated by reference to Exhibit 2.1
              International, Inc.                                    to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

3(I)(b)       Second Amendment to Articles of Incorporation          Incorporated by reference to Exhibit 2.2
              of Telenetworx,  Inc.                                  to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

3(I)(c)       Third Amendment to Articles of Incorporation of        Incorporated by reference to Exhibit 2.3
              Media Forum International, Inc.                        to the Company's Form S-8 filed with the
                                                                     SEC on February 9, 2000

3(I)(d)       Fourth Amendment to Articles of Incorporation          Incorporated by reference to Exhibit 2.7
                                                                     to the Form SB-2 filed with the SEC on
                                                                     March 5, 2002

3(I)(e)       Fifth Amendment to Articles of Incorporation          Incorporated by reference to Exhibit 2.8
                                                                    to the Form SB-2 filed with the SEC on
                                                                    July 16, 2003

3(I)(f)       Sixth Amendment to Articles of Incorporation          Incorporated by reference to Exhibit
                                                                    3.1.6 the Company's Form 10-KSB filed
                                                                    with the SEC on November 3, 2004

3(I)(g)       Seventh Amendment to Articles of Incorporation        Incorporated by reference to Exhibit
                                                                    3.1.7 the Company's Form 10-KSB filed
                                                                    with the SEC on November 3, 2004

3(II)         Bylaws of the Company                                 Incorporated by reference to Exhibit 2.4
                                                                    to the Company's Form S-8 filed with the
                                                                    SEC on February 9, 2000

4.1           6% Secured Convertible Promissory Note, dated         Incorporated by reference to Exhibit 10.1
              December 30, 2004, issued to Theodore S. Li.          to the Company's Form 8-K filed with the
                                                                    SEC on January 5, 2005

4.2           6% Secured Convertible Promissory Note, dated         Incorporated by reference to Exhibit 10.2
              December 30, 2004, issued to Hui Cynthia Lee.         to the Company's Form 8-K filed with the
                                                                    SEC on January 5, 2005
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                   <C>
4.3           Secured Convertible Debenture                         Incorporated by reference to Exhibit
                                                                    10.21 to the Company's Form 10-KSB filed
                                                                    with the SEC on December 6, 2002

4.4           Securities Purchase Agreement, dated November         Incorporated by reference to Exhibit
              2002, by and among Advanced Communications            10.19 to the Company's Form 10-KSB filed
              Technologies, Inc. and Buyers.                        with the SEC on December 6, 2002

4.5           Investor Registration Rights Agreement, dated         Incorporated by reference to Exhibit
              November 2002, by and among Advanced                  10.20 to the Company's Form 10-KSB filed
              Communications Technologies, Inc. and                 with the SEC on December 6, 2002
              Investors.

4.6           Escrow Agreement, dated November 2002, by and         Incorporated by reference to Exhibit
              among Advanced Communications Technologies,           10.22 to the Company's Form 10-KSB filed
              Inc., Buyers, and Wachovia Bank, N.A.                 with the SEC on December 6, 2002

4.7           Irrevocable Transfer Agent Instructions, dated        Incorporated by reference to Exhibit
              November 2002                                         10.23 to the Company's Form 10-KSB filed
                                                                    with the SEC on December 6, 2002


4.8           Security Agreement, dated November 2002, by           Incorporated by reference to Exhibit
              and among Advanced Communications                     10.24 to the Company's Form 10-KSB filed
              Technologies, Inc. and Buyers                         with the SEC on December 6, 2002


4.9           6% Senior Unsecured Promissory Note, in the           Incorporated by reference to Exhibit 10.2
              original principal amount of $547,000 issued          to the Company's Form 8-K filed with the
              on June 3, 2004 by Cyber-Test, Inc., a                SEC on June 18, 2004
              Delaware corporation, in favor of Cyber-Test,
              Inc., a Florida corporation.

4.10          Escrow Agreement, dated June 3, 2004, by and          Incorporated by reference to Exhibit 10.3
              between Cyber-Test, Inc., a Delaware                  to the Company's Form 8-K filed with the
              corporation, and Cyber-Test, Inc., a Florida          SEC on June 18, 2004
              corporation.

4.11          Amendment No. 1 to 6% Unsecured Promissory            Incorporated by reference to Exhibit
              Note dated August 10, 2004.                           10.35 to the Company's Form 10-KSB filed
                                                                    with the SEC on November 3, 2004
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                   <C>
4.12          Form of Exchange Agreement, dated June 24,            Incorporated by reference to Exhibit
              2004, by and among Advanced Communications            10.40 to the Company's Form 10-KSB filed
              Technologies, Inc. and certain debenture              with the SEC on November 3, 2004
              holders of Hy-Tech Technology Group, Inc.

4.13          Escrow Agreement dated May 28, 2004 by and            Incorporated by reference to Exhibit
              among Advanced Communications Technologies,           10.42 to the Company's Form 10-KSB filed
              Inc., Buyers and Butler Gonzalez, LLP, Escrow         with the SEC on November 3, 2004
              Agent.

4.14          Investment Agreement dated May 28, 2004 by and        Incorporated by reference to Exhibit
              between Advanced Communications Technologies,         10.43 to the Company's Form 10-KSB filed
              Inc. and Cornell Capital Partners, LP.                with the SEC on November 3, 2004

4.15          Registration Rights Agreement dated May 28,           Incorporated by reference to Exhibit
              2004 by and between Advanced Communications           10.44 to the Company's Form 10-KSB filed
              Technologies, Inc. and Cornell Capital                with the SEC on November 3, 2004
              Partners, LP.

10.1          Custodial and Stock Pledge Agreement, dated           Incorporated by reference to Exhibit 10.3
              December 30, 2004, among Advanced                     to the Company's Form 8-K filed with the
              Communications Technologies, Inc., Theodore S.        SEC on January 5, 2005
              Li and Hui Cynthia Lee, and Quarles & Brady
              Streich Lang LLP.

10.2          Employment Agreement, dated December 30, 2004,        Incorporated by reference to Exhibit 10.4
              among Pacific Magtron International                   to the Company's Form 8-K filed with the
              Corporation, Inc., Advanced Communications            SEC on January 5, 2005
              Technologies, Inc., Encompass Group
              Affiliates, Inc., and Theodore S. Li.

10.3          Employment Agreement, dated December 30, 2004,        Incorporated by reference to Exhibit 10.5
              among Pacific Magtron International                   to the Company's Form 8-K filed with the
              Corporation, Inc., Advanced Communications            SEC on January 5, 2005
              Technologies, Inc., Encompass Group
              Affiliates, Inc., and Hui Cynthia Lee.

10.4          Indemnity Agreement, dated December 30, 2004,         Incorporated by reference to Exhibit 10.6
              among Advanced Communications Technologies,           to the Company's Form 8-K filed with the
              Inc., Theodore S. Li and Hui Cynthia Lee.             SEC on January 5, 2005

10.5*         Form of Grant Instrument under Advanced               Incorporated by reference to Exhibit 10.1
              Communications Technologies, Inc. 2005 Stock          to the Company's Form 8-K filed with the
              Plan for Non-Employee Director.                       SEC on July 6, 2005
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                   <C>
10.6*         Form of Lock-Up Agreement for Executive               Incorporated by reference to Exhibit 10.2
              Officer/Director of Advanced Communications           to the Company's Form 8-K filed with the
              Technologies, Inc.                                    SEC on July 6, 2005

10.7*         Form of Grant Instrument under Advanced               Incorporated by reference to Exhibit 10.3
              Communications Technologies, Inc. 2005 Stock          to the Company's Form 8-K filed with the
              Plan for Executive Officer/Employee.                  SEC on July 6, 2006

10.8*         Services Agreement entered into on June 7,            Incorporated by reference to Exhibit 10.1
              2005 by and among Advanced Communications             to the Company's Form 8-K filed with the
              Technologies, Inc., Wayne I. Danson and Danson        SEC on July 13, 2005
              Partners, LLC.

10.9          Equity Line of Credit Agreement dated July            Incorporated by reference to Exhibit
              2003, by and between Cornell Capital Partners,        10.13 to the Company's Form SB-2 filed
              LP and Advanced Communications Technologies,          with the SEC on July 16, 2003
              Inc.

10.10         Registration Rights Agreement dated July 2003,        Incorporated by reference to Exhibit
              by and between Advanced Communications                10.14 to the Company's Form SB-2 filed
              Technologies, Inc. and Cornell Capital                with the SEC on July 16, 2003
              Partners, LP.

10.11         Placement Agent Agreement dated July 2003, by         Incorporated by reference to Exhibit
              and between Advanced Communications                   10.15 to the Company's Form SB-2 filed
              Technologies, Inc. and Westrock Advisors, Inc.        with the SEC on July 16, 2003

10.12         Escrow Agreement dated July 2003, by and among        Incorporated by reference to Exhibit
              Advanced Communications Technologies, Inc.,           10.16 to the Company's Form SB-2 filed
              Cornell Capital Partners, LP, Butler Gonzalez         with the SEC on July 16, 2003
              LLP and First Union National Bank.

10.13         Consulting Agreement dated July 1, 2002               Incorporated by reference to Exhibit
              between Advanced Communications Technologies,         10.26 to the Company's Form 10-KSB/A
              Inc. and Randall H. Prouty.                           filed on February 7, 2003

10.14         NonCompetition Agreement, dated June 3, 2004,         Incorporated by reference to Exhibit 10.4
              by and among Cyber-Test, Inc., a Delaware             to the Company's Form 8-K filed with the
              corporation, Cyber-Test, Inc., a Florida              SEC on June 18, 2004
              corporation, and the shareholders of
              Cyber-Test.

10.15         Employment Agreement, dated June 3, 2004, by          Incorporated by reference to Exhibit 10.5
              and between Cyber-Test, Inc., a Delaware              to the Company's Form 8-K filed with the
              corporation, and Lisa Welton.                         SEC on June 18, 2004
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                   <C>
10.16         Employment Agreement, dated June 3, 2004, by          Incorporated by reference to Exhibit 10.6
              and between Cyber-Test, Inc., a Delaware              to the Company's Form 8-K filed with the
              corporation, and Thomas Sutlive.                      SEC on June 18, 2004

10.17         Agreement, dated May 27, 2004, by and among           Incorporated by reference to Exhibit
              Encompass Group Affiliates, Inc., Hy-Tech             10.36 to the Company's Form 10-KSB filed
              Technology Group, Inc. and Hy-Tech Computer           with the SEC on November 3, 2004
              Systems, Inc.

10.18         Customer Lists License Agreement, dated June          Incorporated by reference to Exhibit
              24, 2004, by and among Encompass Group                10.37 to the Company's Form 10-KSB filed
              Affiliates, Inc., Hy-Tech Technology Group,           with the SEC on November 3, 2004
              Inc. and Hy-Tech Computer Systems, Inc.

10.19         Websites License Agreement, dated June 24,            Incorporated by reference to Exhibit
              2004, by and among Encompass Group Affiliates,        10.38 to the Company's Form 10-KSB filed
              Inc., Hy-Tech Technology Group, Inc. and              with the SEC on November 3, 2004
              Hy-Tech Computer Systems, Inc.

10.20         NonCompetition and Nondisclosure Agreement by         Incorporated by reference to Exhibit
              and among Encompass Group Affiliates, Inc.,           10.39 to the Company's Form 10-KSB filed
              Hy-Tech Technology Group, Inc. and Hy-Tech            with the SEC on November 3, 2004
              Computer Systems, Inc.

10.21*        Employment Agreement dated June 24, 2004 by           Incorporated by reference to Exhibit
              and among Encompass Group Affiliates, Inc.,           10.41 to the Company's Form 10-KSB filed
              Advanced Communications Technologies, Inc. and        with the SEC on November 3, 2004
              Martin Nielson.

10.22*        June 1, 2005 Amendment to Employment Agreement        Provided herewith
              by and among Encompass Group Affiliates, Inc.,
              Advanced Communications Technologies, Inc. and
              Martin Nielson.

14            Code of Business Conduct and Ethics for               Incorporated by reference to Exhibit 14.1
              Advanced Communications Technologies, Inc.            to the Company's Form 10-KSB filed with
                                                                    the SEC on November 3, 2004

21            Subsidiaries of Advanced Communications               Provided herewith
              Technologies, Inc.

31            Certification by Chief Executive Officer and          Provided herewith
              Chief Financial Officer pursuant to
              Sarbanes-Oxley Section 302
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                   <C>
32            Certification by Chief Executive Officer and          Provided herewith
              Chief Financial Officer pursuant to 18 U.S.C.
              Section 1350
</TABLE>

*     Management contract or management compensatory plan or arrangement.

(1) In the case of  incorporation by reference to documents filed by the Company
under the  Exchange  Act,  the  Company's  file number under the Exchange Act is
000-30486.


<PAGE>



















           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005



















                                       i
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES


                                    CONTENTS


PAGE       F-1      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PAGE       F-2      CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2005 AND 2004

PAGE       F-3      CONSOLIDATED  STATEMENTS OF  OPERATIONS  FOR THE YEARS ENDED
                    JUNE 30, 2005 AND 2004

PAGE       F-4      CONSOLIDATED  STATEMENTS OF CHANGES IN STOCKHOLDERS'  EQUITY
                    FOR THE YEARS ENDED JUNE 30, 2005 AND 2004

PAGE    F-5 -F- 6   CONSOLIDATED  STATEMENTS  OF CASH FLOWS FOR THE YEARS  ENDED
                    JUNE 30, 2005 AND 2004

PAGES   F7 - F-22   NOTES TO  CONSOLIDATED  FINANCIAL  STATEMENTS AS OF JUNE 30,
                    2005


                                       ii
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:
   Advanced Communications Technologies, Inc. and Subsidiaries

We have  audited  the  accompanying  consolidated  balance  sheets  of  Advanced
Communications  Technologies,  Inc., and Subsidiaries ("Company") as of June 30,
2005 and 2004 and the related consolidated statements of operations,  changes in
stockholders' equity and cash flows for the years then ended. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted  our audits in  accordance  with  auditing  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable  assurance about whether the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall 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  Advanced
Communications Technologies, Inc. and Subsidiaries as of June 30, 2005 and 2004,
and the  results  of their  operations  and their  cash flows for the years then
ended in conformity with accounting  principles generally accepted in the United
States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 14 to
the consolidated  financial  statements,  the Company had a net loss of $735,833
and a negative cash flow from operations of $875,933 for the year ended June 30,
2005 and had a working  capital  deficiency of $139,363 at June 30, 2005.  These
matters  raise  substantial  doubt  about its  ability  to  continue  as a going
concern.  Management's  plans in regards to these matters are also  described in
Note 14. The accompanying  consolidated  financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

WEINBERG & COMPANY, P.A.


Boca Raton, Florida
September 23, 2005


                                      F-1
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                   For The Years Ended June 30,
                                                                                   ----------------------------
                                                                                       2005            2004
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
ASSETS

   Current Assets
     Cash and cash equivalents                                                     $    836,876    $  1,193,170
     Accounts receivable, net of allowance for doubtful accounts of $4,723 and
       $8,914 at June 30, 2005 and 2004, respectively                                   364,285         400,747
     Inventories                                                                        367,453         350,963
     Prepaid expenses and other current assets                                          130,605          81,863
                                                                                   ------------    ------------
   Total Current Assets                                                               1,699,219       2,026,743
                                                                                   ------------    ------------

   Property and equipment, net of accumulated depreciation of
     $20,697 and $1,082, as of June 30, 2005 and 2004, respectively                     259,764         165,434
                                                                                   ------------    ------------

   Other Assets
     Partnership Investment                                                                  --       2,774,999
     Licensed Intangibles and rights                                                    400,000         400,000
     Excess of cost over fair value of assets acquired                                2,611,055       2,611,055
     Other assets                                                                            --          18,108
                                                                                   ------------    ------------
   Total Other Assets                                                                 3,011,055       5,804,162
                                                                                   ------------    ------------

TOTAL ASSETS                                                                       $  4,970,038    $  7,996,339
                                                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

   Current Liabilities
     Current portion of notes payable                                              $  1,020,028    $  3,639,090
     Accounts payable and accrued expenses                                              818,554         585,320
                                                                                   ------------    ------------
   Total Current Liabilities                                                          1,838,582       4,224,410
   Long-term Notes and Loans Payable, less current portion                              205,367       2,347,467
                                                                                   ------------    ------------

TOTAL LIABILITIES                                                                     2,043,949       6,571,877
                                                                                   ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

   Preferred stock, $.01 par value, 25,000 shares authorized:
   Series A convertible preferred stock, $.01 par value, 4,200 shares issued                 42              42
   Series B convertible preferred stock, $.01 par value, 100 and 300 shares
     issued and outstanding, respectively                                                     1               3
   Common stock, no par value, 5,000,000,000 shares authorized,
     3,151,773,731 and 1,994,365,845 shares issued and outstanding, respectively     29,751,907      28,745,253
   Additional paid in capital                                                         5,426,831       4,056,455
   Deferred commitment and equity financing fees, net of accumulated
     amortization                                                                       (25,000)       (135,432)
   Deferred compensation                                                               (250,000)             --
   Accumulated deficit                                                              (31,977,692)    (31,241,859)
                                                                                   ------------    ------------
   Total Stockholders'
   Equity                                                                             2,926,089       1,424,462
                                                                                   ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $  4,970,038    $  7,996,339
                                                                                   ============    ============
</TABLE>


           See accompanying notes to consolidated financial statements

                                      F-2
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                      For The Years Ended June 30,
                                                                   ----------------------------------
                                                                         2005               2004
                                                                   ---------------    ---------------
<S>                                                                <C>                <C>

GROSS SALES                                                        $     7,521,723    $       605,468
COST OF SALES                                                            4,879,081            400,265
                                                                   ---------------    ---------------
GROSS PROFIT                                                             2,642,642            205,203
                                                                   ---------------    ---------------

OPERATING EXPENSES
   Depreciation and amortization                                           374,175            229,103
   Professional and consulting fees                                        476,718            292,633
   Other selling, general and administrative expenses                    3,598,643            266,525
                                                                   ---------------    ---------------

TOTAL OPERATING EXPENSES                                                 4,449,536            788,261
                                                                   ---------------    ---------------

Loss From Continuing Operations before Other Income and Expenses        (1,806,893)          (583,058)
                                                                   ---------------    ---------------

OTHER INCOME AND (EXPENSES)
   Forgiveness of debt                                                   2,847,511            780,938
   Loss on partnership redemption                                         (191,292)                --
   Distributable share of partnership income                               385,233            439,999
   Write-off of investment in Pacific Magtron International, Inc          (668,834)                --
   Interest expense, net                                                  (106,184)          (162,059)
                                                                   ---------------    ---------------

TOTAL OTHER INCOME, NET                                                  2,266,434          1,058,878
                                                                   ---------------    ---------------

INCOME FROM CONTINUING OPERATIONS                                  $       459,541    $       475,820

LOSS FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST             (1,195,374)                --
                                                                   ---------------    ---------------

NET (LOSS) INCOME                                                  $      (735,833)   $       475,820
                                                                   ===============    ===============


Net (loss) income per share - basic and dilutive                   $            --    $            --
                                                                   ===============    ===============

Weighted average number of shares
  outstanding during the year - basic and dilutive                   2,072,211,255      1,084,885,437
                                                                   ===============    ===============
</TABLE>


           See accompanying notes to consolidated financial statements

                                      F-3
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 2005 AND 2004


<TABLE>
<CAPTION>
                                                                                     PREFERRED
                                                         COMMON STOCK                  STOCK          ADDITIONAL
                                                ------------------------------    ----------------      PAID IN       ACCUMULATED
                                                    SHARES           AMOUNT       SHARES    AMOUNT      CAPITAL         DEFICIT
                                                --------------    ------------    ------    ------    -----------    --------------
<S>                                             <C>               <C>             <C>       <C>       <C>            <C>

BALANCE AT JUNE 30, 2003                           198,852,622    $ 25,945,005        --    $   --    $        --    $  (31,717,679)

Common Stock issued for cash, net                  361,956,145         648,557        --        --             --                --
Preferred Stock-Series A issued for cash, net               --              --     4,200        42      3,756,458                --
Stock issued for conversion of convertible
 debt and accrued interest                         585,283,270       1,117,681        --        --             --                --
Amortization of deferred commitment fees                    --              --        --        --             --                --
Stock issued for professional services              16,000,000          17,810        --        --             --                --
Stock issued to settle trade creditors             125,297,618         335,000        --        --             --                --
Stock issued to settle creditor claims              26,976,190          56,200        --        --             --                --
Preferred Stock-Series B issued for licensed
 intangibles                                                --              --       300         3        299,997                --
Escrowed stock                                     162,999,640              --        --        --             --                --
Stock issued in partial payment of short
 term note                                         517,000,360         625,000        --        --             --                --
                                                --------------    ------------    ------    ------    -----------    --------------
Net income for the year                                                               --        --             --           475,820

BALANCE AT JUNE  30, 2004                        1,994,365,845    $ 28,745,253     4,500    $   45    $ 4,056,455    $  (31,241,859)
Reversal of escrowed stock issued to pay
 short term debt                                  (162,999,640)             --        --        --             --                --
Stock issued in partial payment of short
 term note                                         172,881,526         100,000        --        --             --                --
Stock issued in exchange for services              505,000,000         357,500        --        --             --                --
Stock issued on conversion of Series B
 preferred stock                                   400,000,000         200,000      (200)       (2)      (199,998)
Deferred compensation                               12,500,000         125,000        --        --        375,000                --
Amortization of deferred compensation                       --              --        --        --             --                --
Adjustment to reflect the effect of a change
 in accounting  from the equity method to the
 cost method for the investment in Pacific
 Magtron International, Inc.                                --              --        --        --      1,195,374                --
Amortization of deferred commitment and
 financing fees                                             --          (5,872)       --        --             --                --
Stock issued for convertible debt and accrued
 interest                                          230,026,000         230,026        --        --             --                --
Net (loss) for the year                                     --              --        --        --             --          (735,833)
                                                --------------    ------------    ------    ------    -----------    --------------

BALANCE AT JUNE 30, 2005                         3,151,773,731    $ 29,751,907     4,300    $   43    $ 5,426,831    $  (31,977,692)
                                                ==============    ============    ======    ======    ===========    ==============
<CAPTION>
                                                   DEFERRED
                                                  COMMITMENT
                                                  AND EQUITY         DEFERRED
                                                FINANCING FEES     COMPENSATION        TOTAL
                                                --------------    --------------    -----------
<S>                                             <C>               <C>               <C>

BALANCE AT JUNE 30, 2003                        $     (187,500)   $           --     (5,960,174)

Common Stock issued for cash, net                     (135,432)               --        513,125
Preferred Stock-Series A issued for cash, net               --                --             --
Stock issued for conversion of convertible
 debt and accrued interest                                  --                --      1,117,681
Amortization of deferred commitment fees               187,500                --        187,500
Stock issued for professional services                      --                --         17,810
Stock issued to settle trade creditors                      --                --        335,000
Stock issued to settle creditor claims                      --                --         56,200
Preferred Stock-Series B issued for licensed
 intangibles                                                --                --        300,000
Escrowed stock                                              --                --             --
Stock issued in partial payment of short
 term note                                                  --                --        625,000
                                                --------------    --------------    -----------
Net income for the year                                     --                --        475,820

BALANCE AT JUNE  30, 2004                       $     (135,432)   $           --    $ 1,424,462
Reversal of escrowed stock issued to pay
 short term debt                                            --                --             --
Stock issued in partial payment of short
 term note                                                  --                --        100,000
Stock issued in exchange for services                       --                --        357,500
Stock issued on conversion of Series B
 preferred stock                                                                             --
Deferred compensation                                       --          (500,000)            --
Amortization of deferred compensation                       --           250,000        250,000
Adjustment to reflect the effect of a change
 in accounting  from the equity method to the
 cost method for the investment in Pacific                                                   --
 Magtron International, Inc.                                --                --      1,195,374
Amortization of deferred commitment and
 financing fees                                        110,432                --        104,560
Stock issued for convertible debt and accrued
 interest                                                   --                --        230,026
Net (loss) for the year                                     --                --       (735,833)
                                                --------------    --------------    -----------

BALANCE AT JUNE 30, 2005                        $      (25,000)   $     (250,000)   $ 2,926,089
                                                ==============    ==============    ===========
</TABLE>


           See accompanying notes to consolidated financial statements

                                      F-4
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                For The Years Ended June 30,
                                                                ----------------------------
                                                                     2005           2004
                                                                 -----------    -----------
<S>                                                              <C>            <C>
CASH FLOWS (USED IN) CONTINUING OPERATIONS:
Net  income from continuing operations                           $   459,541    $   475,820
Adjustments to reconcile net income to net cash used in
operating activities:
  Depreciation and amortization                                      374,175        229,103
  Stock issued in payment of accrued interest                         40,526             --
  Stock issued for services                                          357,500          2,810
  Debt discount expense                                               36,977         93,752
  Forgiveness of debt                                             (2,847,511)      (780,938)
  Loss on partnership redemption                                     191,292             --
  Distributive share of partnership income                          (385,233)      (439,999)
 Write-off of investment in Pacific Magtron International Inc.       668,834             --
Changes in operating assets and liabilities:
(Increase) decrease in assets:
  Accounts receivables                                                36,462             --
  Deferred Costs and other receivables                               (37,252)       (58,619)
  Inventories                                                        (16,490)          (483)
  Prepaid expense/security deposits                                   12,011          5,486
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses                              220,212       (419,696)
  Interest payable                                                    13,023         62,989
                                                                 -----------    -----------
Net cash used in continuing operating activities                    (875,933)      (829,775)
                                                                 -----------    -----------

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Partnership investment                                                    --     (2,670,000)
Partnership distributions                                            280,000        335,000
Purchase of business/fixed assets                                   (193,945)    (3,484,571)
Cash acquired on business asset purchase                                  --        643,195
Proceeds from partnership redemption                               2,688,940             --
Purchase of investment securities                                    (91,618)            --
                                                                 -----------    -----------
Net cash flow provided by (used in) investing activities           2,683,377     (5,176,376)
                                                                 -----------    -----------

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
                                                                          --             --
Proceeds from the issuance of Series A Preferred Stock, net               --      3,756,500
Proceeds from issuance of common stock, net                               --        513,125
Proceeds from short-term promissory note                                  --      3,000,000
Repayment of short-term and installment notes                     (2,233,416)       (92,831)
Proceeds from capitalized lease                                       69,678             --
                                                                 -----------    -----------
Net cash (used in) provided by financing activities               (2,163,738)     7,176,794
                                                                 -----------    -----------

Net (decrease) increase in cash                                  $  (356,294)   $ 1,170,643

Cash at beginning of year                                          1,193,170         22,527
                                                                 -----------    -----------

CASH AT END OF YEAR                                              $   836,876    $ 1,193,170
                                                                 ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest Paid                                                    $    19,481    $     6,043
Income Taxes Paid                                                $         0    $         0
</TABLE>



SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the fiscal year ended June 30, 2005,  the Company  issued  230,026,000 of
common stock in full  repayment of $187,500 of principal  and $42,526 of accrued
interest on the 10% Secured Convertible Debenture.

During the fiscal year ended June 30, 2005,  the Company  issued  172,881,526 of
common  stock  valued  at  $100,000  in  partial  repayment  of  its  short-term
promissory note.


           See accompanying notes to consolidated financial statements

                                      F-5
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS continued...


During the fiscal year ended June 30, 2005, the Company issued  5,000,000 shares
of common stock valued at $7,500 for professional services.

During the fiscal  year ended June 30,  2005,  the  Company  issued  400,000,000
shares of common  stock  valued at  $200,000  to  various  Series B  Convertible
Preferred shareholders upon conversion of their shares.

During the fiscal  year ended June 30,  2005,  the  Company  issued  500,000,000
shares of common stock valued at $350,000 to certain  officers and  directors as
compensation.

During the fiscal year ended June 30, 2005, the Company issued 12,500,000 shares
of common stock as the earned portion of deferred compensation.

During  the fiscal  year ended June 30,  2004,  the  Company  recorded  $391,200
representing  152,273,808  shares of  restricted  common  stock issued for prior
unpaid accrued professional fees and various creditor settlements.

During the fiscal year ended June 30, 2004, debenture holders converted $944,000
and $173,681 of principal  and  interest,  respectively,  into  492,801,173  and
92,482,097 shares of common stock respectively in full payment of this debt.

During the fiscal year ended June 30, 2004, the 5% convertible debenture holders
forgave $85,372 of accrued interest.

During the fiscal year ended June 30, 2004, the Company issued 16,000,000 shares
of restricted common stock valued at $17,810 for professional services rendered,
of which $2,810 was expensed and $15,000 was  capitalized as part of the Hy-Tech
acquisition.

During the year ended June 30, 2004,  the Company issued  517,000,360  shares of
common  stock for the  repayment  of $625,000 of  short-term  loans and escrowed
162,999,640 shares of common stock for future payment of such loan.


           See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


NOTE 1. BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES

(A) Organization

      Unless the context requires otherwise,  "we", "us", "our" or the "Company"
refers  to  Advanced  Communications  Technologies,  Inc.  and  its  wholly  and
majority-owned subsidiaries on a consolidated basis.

      We  are a New  York-based  public  holding  company  specializing  in  the
technology aftermarket service and supply chain, known as reverse logistics. Our
wholly-owned   subsidiary  and  principal   operating   unit,   Encompass  Group
Affiliates,  Inc.  ("Encompass"),  acquires and operates businesses that provide
computer and electronics  repair and end-of-life cycle services.  Encompass owns
Cyber-Test, Inc. ("Cyber-Test"), an electronic equipment repair company based in
Florida  and  our  principal  operating  business.  Additionally,   through  our
wholly-owned  investment  subsidiary,  Hudson Street Investments,  Inc. ("Hudson
Street"),  we  seek  to  acquire  minority  investments  in  various  profitable
businesses.

      Encompass,  a Delaware  corporation,  and our wholly-owned  subsidiary and
principal operating unit, seeks to become a leader in the integrated  technology
and services  industry  through the  acquisition of assets and companies in that
industry,  and then  instilling  sustainable  growth skills as a core competency
(See Notes 6 and 7).  Encompass is focused on eliminating  the risks  associated
with   environmental   compliance  in  the  e-Recycle   industry  by  repairing,
refurbishing,  sorting and selling old components to specialized processors such
as smeltering plants.

      Cyber-Test,  a  Delaware  corporation,   and  wholly-owned  subsidiary  of
Encompass,  operates as an independent service  organization.  From its roots in
the space  industry  more than 19 years  ago,  Cyber-Test  provides  board-level
repair of technical products to third-party  warranty companies,  OEMs, national
retailers and national office equipment dealers. Service options include advance
exchange,  depot repair,  call center  support,  parts and warranty  management.
Cyber-Test's technical competency extends from office equipment and fax machines
to printers,  scanners,  laptop computers,  monitors,  multi-function  units and
high-end  consumer  electronics such as PDAs and digital  cameras.  Programs are
delivered  nationwide  through  proprietary  systems that feature real-time EDI,
flexible analysis tools and repair tracking.

      Pacific Magtron International Corporation, Inc. ("PMIC") together with its
wholly-owned   subsidiaries  Pacific  Magtron,  Inc.  ("PMI"),  Pacific  Magtron
International (GA), Inc. ("PMIGA") and Live Warehouse,  Inc. ("LWI"), is our 62%
majority-owned  subsidiary  that was  acquired as of December 30, 2004 (See Note
8).  PMIC's  principal  business  consisted  of the  importation  and  wholesale
distribution  of  electronics  products,   computer  components,   and  computer
peripheral  equipment  throughout the United States.  LWI sold consumer computer
products  through the  Internet and  distributed  certain  computer  products to
resellers. On May 11, 2005 (the "Petition Date"), PMIC, PMI, PMIGA and LWI filed
voluntary  petitions to  reorganize  their  businesses  under  Chapter 11 of the
United  States  Bankruptcy  Code in the United States  Bankruptcy  Court for the
Southern District of Nevada, (the "Bankruptcy  Court").  The Bankruptcy Court is
jointly  administering  these  cases as "In re:  Pacific  Magtron  International
Corporation, Inc., et al., Case No.BK-S-05-14326 LBR".

      Because PMIC was  unsuccessful  in reaching an  agreement  with one of its
secured  creditors,  on June 23, 2005 it ceased all business  activities  except
those necessary to liquidate its remaining assets.

(B) Financial Statement Presentation And Principles Of Consolidation

      The consolidated  financial  statements include the Company and all of its
wholly-owned  subsidiaries.  The Company  consolidates  all  majority-owned  and
controlled subsidiaries, uses the equity method of accounting for investments in
which the Company is able to exercise significant  influence,  and uses the cost
method for all other  investments.  In  accordance  with  ARB51 and  FAS94,  the
Company's  consolidated  financial statements include the consolidated financial
results of PMIC, a majority-owned and controlled  company,  and its wholly-owned
subsidiaries,  PMI, PMIGA and LWI for the period January 1, 2005 through May 11,
2005, the date PMIC and its subsidiaries filed voluntary petitions to reorganize
their businesses under Chapter 11 of the U.S. Bankruptcy Code. PMIC's results of
operations are shown in the  consolidated  financial  statements as discontinued
operations (See Note 2).


                                      F-7
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      Due to the bankruptcy filing of PMIC and its subsidiaries on May 11, 2005,
and as of that  date,  the  Company no longer  was able to  exercise  management
control over PMIC's business or operations.  Effective May 11, 2005, the Company
accounted for its  investment  in PMIC under the cost method of accounting  (See
Note 8). All  significant  intercompany  transactions  have been  eliminated  in
consolidation.

(C) Concentration of Major Customers

      During  the  fiscal  year ended  June 30,  2005,  Cyber-Test  sales to two
customers  accounted for approximately 89% of its sales. As of June 30, 2005 and
2004,  accounts  receivable  from two major  customers  aggregated  $284,000 and
$253,847 or 78% and 63% of accounts receivable, respectively.

(D) Use of Estimates

      The preparation of the consolidated financial statements of the Company in
conformity with generally accepted accounting  principles requires management to
make  estimates and  assumptions  that affect the reported  amount of assets and
liabilities at the date of the financial  statements and the reported  amount of
revenues and expenses during the period.  In particular,  significant  estimates
are required to value inventory and estimate the future cost associated with the
Company's  warranties.  If the actual value of the Company's inventories differs
from  these  estimates,  the  Company's  operating  results  could be  adversely
impacted.  The actual  results with regard to warranty  expenditures  could also
have an adverse  impact on the Company if the actual  rate of repair  failure or
the cost to  re-repair  a unit is  greater  than  what the  Company  has used in
estimating the warranty expense accrual.


(E) Allowance For Doubtful Accounts

      We  make  judgments  as  to  our  ability  to  collect  outstanding  trade
receivables  and  provide   allowances  for  the  portion  of  receivables  when
collection becomes doubtful. Provisions are made based upon a specific review of
all  significant  outstanding  invoices.  For those  invoices  not  specifically
reviewed,  provisions are provided at differing rates, based upon the age of the
receivable.  In  determining  these  percentages,   we  analyze  our  historical
collection experience and current economic trends. If the historical data we use
to calculate the allowance  provided for doubtful  accounts does not reflect our
future ability to collect  outstanding  receivables,  additional  provisions for
doubtful  accounts may be needed and the future  results of operations  could be
materially  affected.  During the fiscal years ended June 30, 2005 and 2004, the
Company  established  an allowance  for doubtful  accounts of $4,723 and $8,914,
respectively.

(F) Long-Lived Assets

      Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  If such review  indicates  that the asset is impaired,
when the carrying amount of an asset exceeds the sum of its expected future cash
flows, on an undiscounted  basis, the asset's carrying amount is written down to
fair value.  Long-lived  assets to be  disposed of are  reported at the lower of
carrying amount or fair value less cost to sell.

(G) Excess Of Cost Over Net Assets Acquired

      In accordance with SFAS No. 141, the Company  allocates the purchase price
of its  acquisitions to the tangible assets,  liabilities and intangible  assets
acquired based on their  estimated fair values.  The excess  purchase price over
those fair values is recorded as "Excess of Cost Over Net Assets Acquired".  The
fair value assigned to intangible  assets acquired is either based on valuations
prepared  by  independent  third  party  appraisal  firms  using  estimates  and
assumptions  provided by management or  negotiated  at  arms-length  between the
Company and the seller of the acquired assets.  In accordance with SFAS No. 142,
goodwill and purchased intangibles with indefinite lives acquired after June 30,
2001  are not  amortized,  but will be  reviewed  periodically  for  impairment.
Purchased  intangibles  with finite lives will be  amortized on a  straight-line
basis over their respective  useful lives. As of June 30, 2005, these intangible
assets were not impaired.


                                      F-8
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


(H) Inventory

      Inventory  consists  primarily of repair  parts,  consumable  supplies for
resale and used machines  that are held for resale,  and are stated at the lower
of weighted  average  cost or market.  The  weighted  average  cost of inventory
approximates  the  first-in,  first-out  ("FIFO")  method.  Management  performs
periodic  assessments  to determine the existence of obsolete,  slow-moving  and
nonsalable  inventory and records necessary  provisions to reduce such inventory
to net realizable value.

(I) Earnings (Loss) Per Share

      Basic  earnings  (loss) per share is computed by  dividing  income  (loss)
available to common stockholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share  reflect the potential
dilution of securities,  using the treasury stock method that could share in the
earnings  of an entity.  During the fiscal  years  ended June 30, 2005 and 2004,
shares  of  common  stock  that  could  have  been  issued  upon  conversion  of
convertible  debt were excluded from the calculation of diluted  earnings (loss)
per share, as their effect would have been anti-dilutive.

(J) Property and Equipment

      Property and equipment are stated at cost.  Assets are  depreciated  using
the straight-line  method for both financial statement and tax purposes based on
the following estimated useful lives:

      Machinery and equipment                  3 to 7 years
      Furniture and fixtures                   5 to 7 years

      Maintenance and repairs are charged to expense when incurred.

(K) Warranty Reserve

      Refurbished peripheral computer equipment sold to customers and the repair
of customer  owned  equipment  is  guaranteed  for a period of ninety days and a
period of 12 months for the repair of circuit boards. Any defective  refurbished
equipment is replaced  free of charge and customer  owned  equipment is repaired
without  charge during the warranty  period.  Cyber-Test  provides a reserve for
warranty  repairs  based on historical  failure rates and the estimated  cost to
repair.

(L) Fair Value of Financial Instruments

      The  carrying  amounts  of  the  Company's   accounts   payable,   accrued
liabilities,  debentures,  and loans payable  approximate  fair value due to the
relatively short period to maturity for these instruments.

(M) Business Segments

      The Company applies  Statement of Financial  Accounting  Standards No. 131
"Disclosures  about Segments of an Enterprise and Related  Information".  During
the fiscal  year ended June 30,  2005,  the Company  operated  in two  segments,
Cyber-Test,  Inc.  and  Pacific  Magtron  International  Corporation,  Inc.,  as
described below:

      Cyber-Test, Inc. ("Cyber-Test"), a subsidiary of Encompass, operates as an
independent service organization. From its roots in the space industry more than
19 years ago,  Cyber-Test  provides  board-level repair of technical products to
third-party  warranty  companies,  OEMs,  national retailers and national office
equipment dealers.  Service options include advance exchange, depot repair, call
center support, parts and warranty management. Cyber-Test's technical competency
extends from office  equipment  and fax machines to printers,  scanners,  laptop
computers, monitors, multi-function units and high-end consumer electronics such
as  PDAs  and  digital  cameras.   Programs  are  delivered  nationwide  through
proprietary  systems that feature  real-time  EDI,  flexible  analysis tools and
repair tracking.


                                      F-9
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      Pacific Magtron International Corporation, Inc. ("PMIC") together with its
wholly-owned   subsidiaries  Pacific  Magtron,  Inc.  ("PMI"),  Pacific  Magtron
International (GA), Inc. ("PMIGA") and Live Warehouse,  Inc. ("LWI"), is our 62%
majority-owned  subsidiary.  LWI sold  consumer  computer  products  through the
Internet  and  distributed  certain  computer  products  to  resellers.   PMIC's
principal  business  through May 11,  2005,  consisted  of the  importation  and
wholesale  distribution  of  electronics  products,   computer  components,  and
computer peripheral equipment throughout the United States.

      The following table presents information about reported continuing segment
profit or loss for the fiscal year ended June 30, 2005:

                                                                   2005
                                                              (in thousands)
                                                              --------------
      Revenues from external customers:
      ---------------------------------

      Cyber-Test                                                     $ 7,521
                                                                     =======

      Segment income (loss):
      ----------------------

      Cyber-Test                                                     $   400
      PMIC (loss from discontinued operations) (See Note 2)           (1,195)
                                                                     -------

      Net loss for reportable segments                               $  (795)
      Parent and Encompass net income                                     59
                                                                     -------

      Consolidated net loss from continuing
        and discontinued operations                                  $  (736)
                                                                     =======


(N) Revenue Recognition

      The  Company  recognizes  revenue  from the sale of  refurbished  computer
equipment and related  products  upon delivery of goods to a common  carrier for
delivery to the customer.  Revenue for the repair of customer owned equipment is
recognized upon  completion of the repair.  The Company assumes the risk of loss
due to damage or loss of products during shipment.  The Company is reimbursed by
the common  carriers for  shipping  damage and lost  products.  The Company also
sells extended warranty and product  maintenance  contracts.  Revenue from these
contracts is deferred and recognized as income on a straight-line basis over the
life of the  contract,  which is  typically  for a period of one  year.  Service
warranty  and  product  maintenance  revenue  represented  less  than  5% of the
Company's total revenue for the year.


(O) Income Taxes

      The Company  accounts for income taxes under SFAS No. 109  "Accounting for
Income  Taxes".  Under SFAS No. 109,  deferred  tax assets and  liabilities  are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective tax bases.  Deferred tax assets and  liabilities  are measured
using  enacted  tax rates  expected  to apply to taxable  income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and  liabilities  of a change in
tax rates is  recognized  in income in the period that  includes  the  enactment
date.

      The Company has made no current  provision  (benefit)  for federal  income
taxes  because of  financial  statement  and tax losses since its  inception.  A
valuation  allowance has been used to offset the recognition of any deferred tax
assets arising from net operating loss  carryforwards  due to the uncertainty of
future  realization.  The use of any tax loss carryforward  benefits may also be
limited as a result of changes in Company ownership.


                                      F-10
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


(P) Concentration of Credit Risk

      The Company maintains its cash in bank deposit accounts,  which, at times,
may exceed federally insured limits.  The Company has not experienced any losses
in such accounts and believes it is not exposed to any  significant  credit risk
on cash and cash equivalents.

(Q) Investment in Unconsolidated Partnership

      The Company accounts for its investment in an  unconsolidated  partnership
under  the  equity  method  of  accounting,  as the  Company  does  not have any
management  control over this entity.  This investment was recorded initially at
cost and subsequently adjusted for equity in net earnings and cash distributions
(See Note 4).

(R) Recent Accounting Pronouncements

      In December 2004, the FASB issued SFAS No. 123 (R), "Share-Based Payment".
SFAS No. 123 (R) revises SFAS No. 123, "Accounting for Stock-Based Compensation"
and supersedes APB Opinion No. 25,  "Accounting  for Stock Issued to Employees".
SFAS No. 123 (R) focuses  primarily on the accounting for  transactions in which
an entity obtains employee services in share-based  payment  transactions.  SFAS
No. 123 (R) requires  companies to recognize in the statement of operations  the
cost of employee services received in exchange for awards of equity  instruments
based on the  grant-date  fair value of those awards (with limited  exceptions).
SFAS No. 123 (R) is effective as of the first interim or annual reporting period
that  begins  after  June 15,  2005 for  non-small  business  issuers  and after
December  15, 2005 for small  business  issuers.  Accordingly,  the Company will
adopt SFAS No. 123 (R) in its  quarter  ending  March 31,  2006.  The Company is
currently  evaluating  the  provisions  of  SFAS  No.  123  (R)  and has not yet
determined the impact,  if any, that SFAS No. 123 (R) will have on its financial
statement presentation or disclosures.

NOTE 2. DISCONTINUED OPERATIONS

      On May 11, 2005, PMIC and its wholly-owned subsidiaries ceased operations.
The operating  results for the four and one-half month period ended May 11, 2005
was as follows:

                                  January 1 - May 11, 2005
                                       (in thousands)
                                  ------------------------

      Net sales                   $                 10,701
      Net loss                    $                 (1,195)

                                 Consolidated Balance Sheet
                                   (Going Concern Basis)
                                    as of June 30, 2005
                                       (in thousands)
                                  ------------------------
      Assets:
        Current Assets            $                  7,531
        Property and Equipment                       3,907
        Other                                          303
                                  ------------------------
                                  $                 11,741
                                  ========================
      Liabilities and
      Shareholders' Equity:
        Current Liabilities       $                  8,074
        Mortgages Payable                            3,032
        Shareholders' Equity                           635
                                  ------------------------
                                  $                 11,741
                                  ========================


                                      F-11
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


NOTE 3. PROPERTY AND EQUIPMENT

                                             2005         2004
                                          ---------    ---------
Computer, office equipment and fixtures   $ 135,494    $  38,123
Machinery and equipment                      23,731       16,652
Leasehold improvements                      121,236      111,741
Less: Accumulated depreciation              (20,697)      (1,082)
                                          ---------    ---------
Property and equipment, net               $ 259,764    $ 165,434
                                          =========    =========


      Depreciation  expense  for the  years  ended  June  30,  2005 and 2004 was
$19,615 and $1,082 respectively.

NOTE 4. INVESTMENT IN UNCONSOLIDATED PARTNERSHIP

      On January 14, 2004, the Company's wholly-owned subsidiary, Hudson Street,
purchased  a  minority   interest  in   Yorkville   Advisors   Management   LLC,
("Yorkville"),  a  privately-owned  investment  management  partnership  and the
portfolio  manager of Cornell  Capital  Partners,  L.P., for a purchase price of
$2,625,000.  The purchase was  effective  as of January 1, 2004.  Hudson  Street
incurred $45,000 of legal and professional  fees associated with the purchase of
the partnership interest, which were capitalized.  During the fiscal years ended
June 30, 2005 and 2004,  Hudson  Street  received  $280,000 and $335,000 of cash
distributions  from this  investment  and recorded  $385,233 and $439,999 as its
distributive share of partnership net earnings.

      On January 31, 2005, the Managing Member of Yorkville Advisors Management,
LLC,  announced that Yorkville will begin winding up its affairs and is expected
to dissolve later this year.  Subsequently,  on February 11, 2005, the Company's
partnership interest in Yorkville Advisors Management,  LLC was redeemed in full
for  $2,625,000.  We  recorded  a loss  of  $191,292  on the  redemption  of our
Yorkville interest.

      The  Company  used  $1,825,000  of  redemption   proceeds  to  reduce  its
outstanding  short-term  obligation  to  Cornell  Capital  Partners,  L.P.  from
$2,000,000 to $275,000,  after paying extension and legal fees of $100,000.  The
promissory  note was  extended to June 30, 2005 and bears  interest at a rate of
10%  commencing  February  10,  2005.   Previously,   the  promissory  note  was
non-interest  bearing  (See Note  9(D).  The  Company  received  the  balance of
$800,000 of cash proceeds from the redemption.

NOTE 5. DEBT FORGIVENESS

      On February  5, 2004,  the Company  filed suit in Superior  Court,  Orange
County,  California,  against Advanced  Communications  (Australia),  Roger May,
Global   Communications   Technologies   Limited   and   Global   Communications
Technologies Pty Ltd to recover damages incurred as a result of wrongful actions
of such  defendants  against  the  Company  and to  clarify  the  status  of the
Company's  obligations  to such  defendants  under various  agreements and other
arrangements,  from which the Company  believes it has been relieved as a result
of such wrongful  actions.  In May and August 2004,  the court  entered  default
judgments  in favor of the Company and against all of the above  defendants.  On
October 22, 2004,  the court held a hearing to determine  the amount the Company
was entitled to recover against the defendants in the action.  In November 2004,
the court entered a judgment in favor of the Company in the  approximate  amount
of $8 million. The Company offset against the judgment approximately  $2,847,000
of debt carried on its books as owing to one or more of the  defendants  and the
Company  recognized  debt  forgiveness  income in that  amount.  Because  of the
uncertainty  of  collecting  the  balance  of the  judgment  approximately  $5.1
million,  we  have  not  recorded  the  unliquidated  portion  of  the  judgment
receivable  and the related  income in the June 30, 2005  financial  statements.
Additional debt forgiveness  income will be recorded in the period or periods in
which collection or seizure of assets is made. (See Note 9(B) and (C)).

      During  the  fiscal  year ended June 30,  2004,  the  Company  negotiated,
settled  and/or  converted  approximately  $2,250,000  of  accounts  payable and
accrued  liabilities  and  convertible  debentures  at  a  discount,  generating
$780,938 of forgiveness of debt income.  The Company settled these  liabilities,
in part, with cash and in part, through the issuance of restricted common stock.


                                      F-12
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


NOTE 6. ACQUISITION OF CYBER-TEST, INC.

      On June 2, 2004, our wholly-owned subsidiary,  Encompass Group Affiliates,
Inc.  ("Encompass"),  acquired the business  and assets of  Cyber-Test,  Inc., a
Florida-based,  electronic equipment repair company.  Cyber-Test became the core
operating   business  of  Encompass  with  85  employees  and  annual  sales  of
approximately  $6,000,000.  The Company accounted for this acquisition using the
purchase method of accounting in accordance with the provisions of SFAS 141.This
acquisition  is the  Company's  first step in expanding  the  businesses  of the
Company's subsidiaries into an integrated technology and service business. Under
the terms of the Asset  Purchase  Agreement  between  Cyber-Test  and Encompass,
Encompass  acquired  all  of  the  operating  assets,  tangible  and  intangible
property, rights and licenses, good-will and business of Cyber-Test, for a total
purchase  price of $3,498,469  consisting of $3,000,000 in cash,  and a $498,469
three year 6% unsecured  installment note. The Company also incurred $234,108 of
capitalized  transaction  costs inclusive of $125,000 of broker fees for a total
acquisition cost of $3,732,577.

      This  acquisition  has  been  accounted  for by  the  purchase  method  of
accounting  and,  accordingly,  the operating  results have been included in the
Company's  consolidated results of operations from the date of acquisition.  The
Company  acquired net tangible  assets valued at  $1,286,985.  The excess of the
consideration given over the fair value of net assets acquired has been recorded
as goodwill of $2,445,592.  The Company  accounts for the purchased  goodwill in
accordance with the provisions of SFAS 142.

NOTE 7. LICENSED INTANGIBLES

      On May 27, 2004 the Company's  wholly-owned  subsidiary,  Encompass  Group
Affiliates,  Inc. entered into an Agreement with Hy-Tech  Technology  Group, Inc
and Hy-Tech Computer Systems, Inc (collectively "Hy-Tech") to license and use on
an exclusive, worldwide, royalty-free, perpetual, non-terminable and irrevocable
right basis various  intangible  assets of Hy-Tech  including its customer lists
and  corporate  web  addresses.  In  addition,  and as  part  of the  Agreement,
Encompass  acquired all of Hy-Tech's  rights to  negotiate  and acquire  certain
business and assets of three independent companies in the technology and service
business  as well as the  exclusive  right to extend an offer of  employment  to
Martin Nielson, to become an executive officer of Encompass. In exchange for the
above, Encompass agreed to assume $503,300 of Hy-Tech's convertible  debentures.
On June 23,  2004,  the Company  closed on the  Agreement  and  entered  into an
Exchange  Agreement with the Hy-Tech  debenture holders wherein the Company paid
$203,300  to the  debenture  holders  in  cash  and  issued  300  shares  of its
non-voting Convertible Preferred Shares having a liquidation value of $1,000 per
share in full satisfaction of the convertible debentures (See Note 11(B)).

      The Company  recorded  $400,000 of licensed  intangibles  and  $165,463 of
goodwill (inclusive of $62,163 of capitalized transaction costs) as Other Assets
on its June 30, 2005 and 2004 balance sheets.

NOTE 8. PACIFIC MAGTRON INTERNATIONAL CORPORATION, INC. AND SUBSIDIARIES

      On December 30, 2004, we completed the acquisition of 6,454,300  shares of
the common stock of Pacific Magtron  International  Corporation,  Inc.  ("PMIC")
(the "PMIC  Shares") for the aggregate  purchase price of $500,000 from Theodore
S. Li and Hui Cynthia Lee  (collectively,  the  "Stockholders")  pursuant to the
terms of a Stock Purchase Agreement, dated December 10, 2004, among the Company,
Mr. Li and Ms. Lee (the "Stock Purchase Agreement"). The PMIC Shares represented
61.56% of the currently  issued and  outstanding  common stock of PMIC. PMIC was
primarily engaged in the business of distributing  computer peripheral products,
such as components and multimedia and systems networking  products,  through its
wholly-owned  subsidiaries.  PMIC's  common stock trades on the Over the Counter
Bulletin Board,  and separately  files periodic  reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.

      The Company  accounted for this  acquisition  using the purchase method of
accounting in  accordance  with the  provisions  of SFAS 141.  This  acquisition
expanded the Company's  business  into a vertically  integrated  technology  and
service  business  to the  consumer  electronics  industry.  At the  time of the
acquisition, PMIC employed approximately 60 people in California and Georgia and
had annual sales of approximately $70 million.


                                      F-13
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      We acquired all of the operating assets, tangible and intangible property,
rights and licenses,  goodwill and business of PMIC,  for a total purchase price
of $500,000  consisting of two one-year 6% secured  notes (See Note 9 (F)).  The
Company also  incurred  $168,834 of  capitalized  transaction  costs for a total
acquisition cost of $668,834.

      On May 11, 2005, PMIC and its  subsidiaries  filed voluntary  petitions to
reorganize  their  businesses  under Chapter 11 of the United States  Bankruptcy
Code in the United States  Bankruptcy Court for the Southern District of Nevada.
Also on May 11, 2005, we filed a complaint in the United States  District  Court
for the  Southern  District of New York  against  Theodore S. Li and Hui Cynthia
Lee, the former officers and principal shareholders of PMIC, for the recovery of
damages and costs for securities  fraud,  breach of contract and other counts in
connection with the Stock Purchase Agreement dated December 10, 2004 between the
Company and Mr. Li and Ms. Lee.

      As of June 30, 2005,  our entire  investment  of $668,834 in PMIC has been
written  off  and is  recorded  under  Other  Income  (Loss)  in  the  Company's
consolidated statement of operations.

NOTE 9. NOTES AND LOAN PAYABLE

                                     June 30, 2005   June 30, 2004
                                     -------------   -------------

      Current:

      8% Note Payable-Current        $      57,832   $      57,831
      Loan Payable-Shareholder                  --       1,055,736
      Note Payable-Cornell Capital         275,000       2,375,000
      6% Secured Note Due 12/05            500,000              --
      6% Unsecured Note due 6/07           166,157              --
      10% Secured Convertible Note              --         150,523
      Capitalized Lease                     21,039              --
                                     -------------   -------------
      Notes Payable-Current          $   1,020,028   $   3,639,090
                                     =============   =============

      Long-Term:

      6% Unsecured Note              $     166,157   $     498,469
      Note Payable-ACT Australia                --       1,791,166
      8% Note Payable                           --          57,832
      Capitalized Lease                     39,210              --
                                     -------------   -------------
      Notes Payable-Long-Term        $     205,367   $   2,347,467
                                     =============   =============


(A) 8% Note Payable

      On  November  14,  2002,  the  Company  settled  its  litigation  with the
Needham/DuPont  plaintiffs  by agreeing to release  the  plaintiffs'  stock from
restriction  and  issued  a  three-year  unsecured  8%  promissory  note  in the
principal  amount of $173,494 to reimburse the plaintiffs for their legal costs.
The  note is  payable  in three  equal  annual  installments  of  principal  and
interest,  the  first of which  was due on  December  1,  2003  with  additional
installments  due on December 1, 2004 and December 1, 2005. As of June 30, 2005,
$57,832 is outstanding and is recorded as a current liability.

(B) Note Payable to Advanced Communications (Australia)

      The  Company had a  non-interest  bearing and  unsecured  note  payable to
Advanced Communications  (Australia) of $7,500,000 as of April 5, 2000. The note
was payable in three equal  monthly  installments  commencing  on May 31,  2000.
Under the terms of an April 5,  2000  Stock  Purchase  Agreement  with  Advanced
Communications  (Australia)  (the  `Stock  Purchase  Agreement"),   the  monthly
installment  payments were extended  indefinitely  without interest to allow the
Company,  on a best  efforts  basis,  to raise the cash  portion of the purchase
price through a private or public offering of securities. There were no default,
penalty  or  acceleration  provisions  under  the  terms of the  Stock  Purchase
Agreement.


                                      F-14
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      On November 11, 2002, Advanced Communications  (Australia) issued a Notice
of Termination to the Company which stated that the Stock Purchase Agreement was
terminated immediately due to the Company's insolvency. The effect of the Notice
of  Termination   was  to  cancel  the  Company's  stock  interest  in  Advanced
Communications (Australia). In February 2004, the Company filed suit in Superior
Court, Orange County, California,  against Advanced Communications  (Australia),
Mr.  May,  our former  Chairman  and CEO,  Global  Communications  Technologies,
Limited  and Global  Communications  Technologies  Pty Ltd.  to recover  damages
incurred as a result of wrongful actions by such defendants  against the Company
and to clarify the status of the Company's  obligations to such defendants under
the  above  arrangement.  In May and  August  2004,  the court  entered  default
judgments  in favor of the Company and against all of the above  defendants.  On
October 22, 2004,  the court held a hearing to determine  the amount the Company
was entitled to recover against the defendants in the action.  In November 2004,
the court entered a judgment in favor of the Company in the  approximate  amount
of $8 million. The Company offset against the judgment approximately  $2,847,000
of debt carried on its books as owing to one or more of the  defendants  and the
Company  recognized  debt  forgiveness  income in that  amount.  Because  of the
uncertainty  of  collecting  the  balance  of the  judgment  approximately  $5.1
million,  we  have  not  recorded  the  unliquidated  portion  of  the  judgment
receivable  and the related  income in the June 30, 2005  financial  statements.
Additional debt forgiveness  income will be recorded in the period or periods in
which collection or seizure of assets is made.

(C) Loan Payable to Shareholder

      As of June 30,  2004,  the Company owed Global  Communications  Technology
Pty,  an  Australian  company  wholly-owned  by Mr.  May, a former  officer  and
director  of the  Company,  $1,055,736,  for funds  advanced  to the  Company to
provide working capital.  This loan was non-interest bearing and unsecured,  and
had no scheduled date for repayment.  The Company believed that the loan was not
due upon demand.  However,  since the actual repayment terms were not known with
any specificity  because the terms are not confirmed in a written document,  the
loan was classified as a current liability.  In February 2004, the Company filed
suit  in  Superior   Court,   Orange  County,   California,   against   Advanced
Communications (Australia), Mr. May, Global Communications Technologies, Limited
and Global Communications Technologies Pty Ltd. to recover damages incurred as a
result of wrongful actions by such defendants against the Company and to clarify
the  status of the  Company's  obligations  to such  defendants  under the above
arrangement.  In May and August 2004,  the court  entered  default  judgments in
favor of the Company and  against  all of the above  defendants.  On October 22,
2004,  the court held a hearing to determine the amount the Company was entitled
to recover  against the  defendants in the action.  In November  2004, the court
entered a  judgment  in favor of the  Company  in the  approximate  amount of $8
million.  The Company  offset against the judgment  approximately  $2,847,000 of
debt  carried  on its  books as owing to one or more of the  defendants  and the
Company  recognized  debt  forgiveness  income in that  amount.  Because  of the
uncertainty  of  collecting  the  balance  of the  judgment  approximately  $5.1
million,  we  have  not  recorded  the  unliquidated  portion  of  the  judgment
receivable  and the related  income in the June 30, 2005  financial  statements.
Additional debt forgiveness  income will be recorded in the period or periods in
which collection or seizure of assets is made.

(D) Note Payable-Cornell Capital Partners, L.P.

      During  January  2004,  the Company  entered  into a  six-month  unsecured
promissory note with Cornell Capital Partners, L.P. in the amount of $3,000,000,
of which the net  proceeds  of  $2,829,000  were used to purchase  its  minority
interest  in  the  Yorkville  Advisors  partnership.  Under  the  terms  of  the
promissory  note, the Company agreed to repay the note either in cash or through
the net  proceeds to be received by the Company  under its Equity Line of Credit
facility over a 24-week period commencing February 23, 2004. The promissory note
is non-interest bearing and only becomes interest-bearing, at the rate of 24% or
the highest rate  permitted by law, if lower,  in the event that the note is not
repaid when due. As of June 30, 2004,  the Company  repaid  $625,000 of the note
from  proceeds on the issuance of  517,000,360  shares of common stock under its
Equity Line of Credit  facility.  During the fiscal year ended June 30, 2005, we
repaid a total of  $2,100,000  of principal on the note,  of which  $100,000 was
repaid by issuing  172,881,526  shares of common stock and $2,000,000 was repaid
in cash leaving a balance of  $275,000.  No interest is accrued on or owed under
the terms of the  original  $3,000,000  short-term  obligation.  On February 10,
2005, the note was modified,  extended to June 30, 2005, and bears interest at a
rate of 10%. The note was not paid when due and is currently in default.


                                      F-15
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


(E) 6% Unsecured Note Payable

      Pursuant  to the terms of the  Cyber-Test,  Inc.  acquisition,  on June 2,
2004, the Company issued a $498,469 three year 6% unsecured  installment note to
the  shareholders of Cyber-Test,  Inc. as part of the purchase of the Cyber-Test
assets.  The note matures on June 2, 2007,  and is payable in three equal annual
installments  of $166,156  plus accrued  interest.  During the fiscal year ended
June 30,  2005,  we paid the  first  installment  on the note in the  amount  of
$166,156,  plus $9,970 of accrued interest.  As of June 30, 2005, the balance of
the note is $332,313, of which $166,157 is reported as a current liability.

(F) 6% Secured Note Payable

      On December 10, 2004, the Company entered into a Stock Purchase  Agreement
with  Theodore  S. Li and Hui  Cynthia Lee  (collectively,  the  "Stockholders")
pursuant to which the Company agreed to purchase from the Stockholders,  and the
Stockholders  agreed to sell to the Company, an aggregate of 6,454,300 shares of
the common stock of Pacific Magtron International  Corporation,  Inc. (the "PMIC
Shares")  for the  aggregate  purchase  price of $500,000  (the "Stock  Purchase
Agreement").

      Under the terms of the Stock  Purchase  Agreement,  the  Company  paid the
purchase  price for the PMIC Shares by  delivering  two  convertible  promissory
notes (the "Notes") in the principal  amounts of $166,889 and $333,111 to Mr. Li
and Ms. Lee,  respectively  (See Note 8). The Notes will mature on December  29,
2005 and no principal or interest  payments will be required prior to such date.
The Notes bear interest at 6.0% per annum.  Upon the  occurrence  and during the
continuation  of any Event of Default (as specified in the Notes),  the interest
rate will  increase  to 10.0% per annum and the holders of the Notes may declare
the principal amount of the Notes and all accrued and unpaid interest thereon to
be  immediately  due and  payable.  The Company  will be able to redeem all or a
portion of the Notes on or prior to the maturity date at 110.0% of the principal
amount redeemed,  plus all accrued and unpaid interest  thereon.  The holders of
the Notes,  at their  option,  may  convert,  at any time and from time to time,
until payment in full of all amounts due and owing under their Note,  any unpaid
principal  amount of their Note into shares of common  stock of the Company at a
conversion  price per share of $0.01. If the full original  principal  amount of
the Notes were  converted,  this would result in the issuance of an aggregate of
50,000,000  shares  of the  Company's  common  stock  to the  Stockholders.  The
Company's payment obligations under the Notes (the "Obligations") are secured by
the PMIC Shares  pursuant  to a  Custodial  and Stock  Pledge  Agreement,  dated
December  30,  2004,  among the Company,  the  Stockholders  and Quarles & Brady
Streich Lang LLP, as custodian  (the "Pledge  Agreement").

      On May 11,  2005,  we filed suit  against  Mr. Li and Ms. Lee for  various
breaches of the Stock Purchase Agreement (See Note 12(D)).

(G) Capitalized Lease Obligation-Future Minimum Lease Payments

      The  Company  leases  a  telephone  system  including  software  under  an
agreement that is classified as a capital lease. The cost of equipment  purchase
was  $69,678  and is included in the  Balance  Sheets as  property,  plant,  and
equipment at June 30, 2005. Accumulated amortization of the leased equipment was
$3,484 as of June 30,  2005.  Amortization  of assets  under  capital  leases is
included in depreciation expense.

      The future minimum lease payments required under the capital lease and the
present  value of the net  minimum  lease  payments  as of June 30 2005,  are as
follows:

                                                        Year Ending
                                                         June 30,      Amount
                                                        -----------   --------
                                                            2006      $ 27,392
                                                            2007        27,392
                                                            2008        15,978
                                                                      --------
Total minimum lease payments                                            70,762
Less: Amount representing interest                                     (10,513)
                                                                      --------
Present value of net minimum lease payments                             60,249
Less: Current maturities of capital lease obligations                  (21,039)
                                                                      --------
Long-term capital lease obligations                                   $ 39,210
                                                                      ========


                                      F-16
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      Future maturities of long-term debt as of June 30, 2005 are as follows:

                           Date              Amount
                           -------------   ----------

                           June 30, 2006    1,020,028
                           June 30, 2007      205,367
                           Thereafter              --
                                           ----------
                             Total         $1,225,395
                                           ==========


NOTE 10. CONVERTIBLE DEBENTURE

(A) 10% Secured Convertible Debenture Due November 2004

      On November 22,  2002,  the Company  entered  into a  Securities  Purchase
Agreement with Cornell Capital  Partners,  L.P.,  whereby we agreed to issue and
sell a Two Hundred Fifty Thousand  Dollars  ($250,000)  10% secured  convertible
debenture.  The  secured  convertible  debenture  had a term of two years and is
convertible into shares of common stock at a conversion price equal to $.001 per
share. The secured  convertible  debenture accrued interest at a rate of 10% per
year and is convertible at the holder's  option.  At the Company's  option,  the
debenture  may be paid in cash or redeemed  at a 50%  premium  prior to November
2004. In connection with the Securities Purchase Agreement,  the Company entered
into a Security Agreement in favor of Cornell Capital Partners, L.P. whereby the
Company granted to Cornell a security  interest in all of its assets as security
for its  obligations  under the secured  convertible  debenture,  as well as all
other  obligations  of the Company to Cornell  Capital  Partners,  L.P.  whether
arising before, on or after the date of the Security Agreement.

      At June 30, 2004,  the  outstanding  principal  balance of the 10% secured
convertible  debenture  amounted  to $187,500  net of debt  discount of $36,777,
which totaled $150,523.

      On November 22, 2004, the outstanding 10% secured convertible debenture in
the amount of $187,500 plus accrued  interest of $38,588 held by Cornell Capital
Partners, L.P. matured.

      On November 22, 2004 and December 27, 2004, Cornell Capital Partners, L.P.
elected to convert,  at $.001 per share,  $10,000 and $100,000 of principal  and
$2,000 of accrued  interest,  respectively,  into  112,000,000  shares of common
stock.

      On February 11, 2005,  Cornell  Capital  Partners,  L.P.  indicated  their
intention  to convert  the  balance of the  convertible  note,  in the amount of
$77,500 of principal  at $.001 per share,  into common  stock.  On May 12, 2005,
Cornell  Capital  Partners,  L.P.  converted the $77,500 plus $40,526 of accrued
interest at $.001 per share into 118,026,000 shares of common stock. At June 30,
2005,  no  amount  remains  owed  to  Cornell  Capital  Partners,  L.P.  on  the
convertible debenture.

NOTE 11. STOCKHOLDERS' EQUITY

(A) Equity Line of Credit Facility

      In July 2003, the Company entered into a $30 million Equity Line of Credit
facility  with  Cornell  Capital  Partners,  LP.  Pursuant to the Equity Line of
Credit,  the Company  may,  at its  discretion,  periodically  issue and sell to
Cornell Capital Partners,  LP shares of common stock for a total purchase of $30
million.  The amount of each advance is subject to an aggregate  monthly maximum
advance amount of $2 million in any 30-day period.  Cornell Capital Partners, LP
will purchase the shares of common stock for a 9% discount to the lowest closing
bid price of the Company's common stock during the 5 trading days after a notice
date.  Cornell Capital Partners,  LP intends to sell any shares under the Equity
Line of Credit at the then  prevailing  market price.  On July 31, 2003, the SEC
declared effective the Company's Registration Statement.


                                      F-17
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


(B) Preferred Stock

      o     Series A Convertible Preferred Stock

      The Company has 25,000 shares of preferred  stock  authorized for issuance
in one or more series, at a par value of $.01 per share. In conjunction with the
acquisition  of the  Cyber-Test  business,  the Company  issued  4,200 shares of
Series A Convertible  Preferred Stock (the "Series A Preferred Shares") having a
liquidation value of $1,000 per share, to Cornell Capital Partners,  L.P. During
fiscal  2005,  a portion of these  shares  was  transferred  by Cornell  Capital
Partners,  L.P. to unrelated  parties.  Holders of the Series A Preferred Shares
are entitled to receive cash dividends on a cumulative basis, in arrears, at the
annual rate of 5% when and if a dividend is scheduled by the Company's  board of
directors.  The Series A Preferred Shares are convertible,  in whole or in part,
on or after May 21, 2005 into shares of common  stock at the fixed price of $.01
per share or 100% of the average of the three lowest  closing bid prices for the
ten trading days  immediately  preceding  the date of  conversion,  whichever is
lower.

      The Series A Preferred  Shares are nonvoting and  redeemable at the option
of the Company, in whole or in part, at any time at a 20% premium to liquidation
value.

      In any liquidation of the Company,  each of the Series A Preferred  Shares
will be entitled to a liquidation preference before any distribution may be made
on the  Company's  common stock or any series of capital stock that is junior to
the Series A Preferred Shares.  In the event of a fundamental  change in control
of the Company or its current  management,  the Holder of the Series A Preferred
Shares has the immediate  right to convert their Series A Preferred  Shares into
common stock of the Company.

      At June 30, 2005,  no  preferred  shares have been  converted  into common
stock.

      o     Series B Convertible Preferred Stock

      In conjunction with the Company's  license of certain  intangible  assets,
the Company issued 300 shares of nonvoting Series B Convertible  Preferred Stock
(the  "Series B Preferred  Shares"),  having a  liquidation  value of $1,000 per
share.  The Series B Preferred  Shares have the same terms and privileges as the
Series A Preferred  Shares,  but are junior to the Series A Preferred  Shares in
the event of a liquidation of the Company,  and are convertible,  in whole or in
part, on or after June 23, 2005 into shares of common stock on the same terms of
the Series A Preferred Shares. On June 23, 2005, holders of 200 shares of Series
B Convertible  Preferred stock elected to convert $200,000 of preferred stock at
a price of $.0005 per share into 400,000,000 shares of common stock. At June 30,
2005, 100 shares of Series B Convertible Preferred stock remain outstanding.

(C) Stock Issued For Note Payable To Cornell Capital Partners, L.P.

      During the fiscal year ended June 30, 2005, the Company issued 172,881,526
shares of common  stock  having a value of $100,000 in partial  repayment of the
short-term note payable due to Cornell Capital Partners, L.P.

(D) Stock Issued For Convertible Debt

      During the fiscal year ended June 30, 2005, the Company issued 230,026,000
shares of common stock  valued at $187,500 and $42,526 of principal  and accrued
interest,  respectively, in full payment on the 10% secured convertible debt. No
amount  remains  owed to  Cornell  Capital  Partners,  L.P.  on the  convertible
debenture.

(E) Stock Issued Under 2005 Stock Plan

      During  the  fiscal  year  ended June 30,  2005,  the  Company's  Board of
Directors  adopted  the  Company's  2005  Stock  Plan (the  "Plan")  to  provide
designated  employees of the Company and its subsidiaries,  certain  independent
consultants and advisors and non-employee members of the Board of Directors with
the opportunity to receive grants of incentive stock options, nonqualified stock
options and restricted  stock. The Company believes that the Plan will encourage
the  participants to contribute  materially to the growth of the Company and its
business  thereby  benefiting  the  Company's  stockholders  and will  align the
economic interests of the participants with those of the stockholders.


                                      F-18
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      Subject to adjustment for stock dividends, splits or recapitalization, the
aggregate  number of shares of common stock of the Company that may be issued or
transferred under the Plan or upon which awards under the Plan may be granted is
700,000,000  shares,  (i) 500,000,000 of which may be issued as Restricted Stock
and (ii)  200,000,000  of which may be  issued as  incentive  stock  options  or
non-incentive stock options, some of all of which may be incentive stock options
when issued to individuals  entitled to receive  incentive  stock  options.  The
shares may be  authorized  but  unissued  shares of common  stock or  reacquired
shares of common stock,  including  shares  purchased by the Company on the open
market for purposes of the Plan. If and to the extent Options  granted under the
Plan terminate,  expire,  or are canceled,  forfeited,  exchanged or surrendered
without  having been  exercised,  or if any Restricted  Stock is forfeited,  the
shares subject to such Grants shall again be available for purposes of the Plan,
unless otherwise provided by the Board.

      On May  24,  2005,  the  Board  of  Directors  approved  the  issuance  of
75,000,000 shares of the Company's common stock to each of the four non-employee
directors of the Company,  or 300,000,000  in the  aggregate,  having a value of
$52,500 each or $210,000 in the aggregate,  in  recognition of the  considerable
time and effort that each  non-employee  director  has devoted to the  Company's
business since at least October 1999 without  adequate  compensation and without
the  protection  of  directors  and  officers  liability  insurance  (the "Stock
Grants").  The Stock  Grants  were  formally  issued  pursuant  to the terms and
conditions of the Plan on June 29, 2005.

      Pursuant to the terms of the June 7, 2005 Services  Agreement  between Mr.
Danson,  Danson Partners,  LLC and the Company, (See Note 12(A)), Mr. Danson was
to receive a share bonus of 200,000,000  restricted,  fully vested shares of the
Company's  Common Stock (the "Stock  Bonus").  On June 29, 2005, the Stock Bonus
was formally  issued  pursuant to the terms and  conditions  of the Plan.  These
shares had a value of $140,000 and together with the Stock Grants above, have an
aggregate value of $350,000 that was charged to earnings as compensation expense
for the fiscal year ended June 30, 2005.

(F) Stock Issued For Services

      During the fiscal year ended June 30, 2005, the Company  issued  5,000,000
shares of our common  stock having a value of $7,500 for  professional  services
rendered.

NOTE 12. COMMITMENTS AND CONTINGENCIES

(A) Employment Agreements

      On June 7,  2005,  the  Company  entered  into a Services  Agreement  (the
"Services Agreement") with Wayne I. Danson and Danson Partners,  LLC , a limited
liability company of which Mr. Danson is a principal ("DPL").  Prior to entering
into the Services  Agreement,  Mr. Danson had served as the Company's  President
and Chief Financial Officer pursuant a Consulting Agreement.  Under the Services
Agreement,  DPL will provide Mr. Danson's services to the Company and Mr. Danson
will serve as Chief Executive Officer,  President and Chief Financial Officer of
the Company.  In addition,  the Company will take all necessary  action to cause
Mr. Danson to continue as a member of the Company's Board of Directors,  and, if
elected,  Mr.  Danson will  continue to serve as a director of the Company.  The
Services  Agreement further provides that, at the request of the Company's Board
of  Directors,  Mr.  Danson  also will  serve as a  director  or  officer of any
subsidiary  of  the  Company  without  additional  compensation.   The  Services
Agreement  is  effective  as of  January  1,  2005  and  expires  on the  second
anniversary thereof unless earlier terminated in accordance with its terms.

      Under the Services Agreement,  the Company will pay DPL an annual base fee
of $250,000.  Pursuant to the Services Agreement,  DPL is also entitled to (i) a
cash  bonus of  $250,000,  including  $50,000,  which  was paid in July 2004 and
$75,000, which was paid in January 2005 with the remaining $125,000 to be earned
as of August  1, 2005 and paid on or before  August  31,  2005  (this  remaining
amount has not been paid as of the date of this report),  and (ii) a share bonus
of  200,000,000  fully  vested  shares  of the  Company's  Common  Stock  issued
contemporaneously  with the execution of the Services Agreement.  Mr. Danson has
entered  into a  Lock-Up  Agreement  with the  Company  in  connection  with the
issuance of the share bonus.  For each fiscal year or portion  therefore  during
the  term of the  Services  Agreement,  the  Company  may  pay to DPL an  annual
performance  bonus,  in cash and/or  restricted  shares of Common  Stock,  in an
amount determined at the sole discretion of the Compensation  Committee,  taking
into  account  such  factors  as it  considers  appropriate,  including  but not
necessarily limited to, Mr. Danson's contribution to the Company's  consolidated
net earnings and stock  appreciation  during such fiscal year. In addition,  the
Company may grant cash bonuses, restricted shares of Common Stock, or options to
DPL in  consideration  for Mr. Danson's  services,  with a vesting  schedule and
other terms  established  by the  Company's  Compensation  Committee in its sole
discretion. Neither Mr. Danson nor DPL will receive additional consideration for
Mr. Danson's service as a director of the Company. Under the Services Agreement,
the Company is obligated to provide a $2,000,000  term life insurance  policy on
Mr. Danson,  the  beneficiary of which will be Mr.  Danson's wife, and to insure
Mr. Danson under a $2,000,000 key man life insurance policy,  the beneficiary of
which will be the Company.


                                      F-19
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


      On June 24, 2004,  we entered into a two year  employment  agreement  with
Martin   Nielson,   our  Senior  Vice   President-Acquisitions   (the   "Nielson
Agreement").  Under the terms of the Nielson Agreement,  Mr. Nielson is employed
as  Encompass'   President  and  Chief  Executive  Officer  and  a  Senior  Vice
President-Acquisitions  of the  Company.  Mr.  Nielson is entitled to a $200,000
annual  salary and the right to earn up to 50,000,000  shares of our  restricted
common  stock  valued at $.01 per share,  or  $500,000,  to vest over a two-year
period.  As of June 30,  2005,  Mr.  Nielson has received  12,500,000  shares of
common  stock and is entitled to receive the balance of  37,500,000  shares when
the stock fully vests in June 2006.  Mr.  Nielson is also entitled to receive an
Incentive Bonus determined at the discretion of our Compensation Committee based
on his  contribution to our overall  performance as well as a bonus based on the
overall  separate  business  and  financial  performance  of  Encompass  and its
wholly-owned operating  subsidiaries.  In addition, we have provided Mr. Nielson
with a $1 million  life  insurance  policy for his  benefit  and also insure Mr.
Nielson under a $2 million key man life insurance policy.

      Mr.  Nielson's  contract  was amended on June 1, 2005 to provide  that Mr.
Nielson's  annual  compensation  for fiscal 2005 and 2006 will be  $225,000  and
$175,000, respectively.

      The Company recorded  amortization of deferred compensation expense in the
amount of $250,000  for the fiscal year ended June 30, 2005 in  connection  with
Mr. Nielson's employment agreement.

      On June 3, 2004, we entered into a three-year  employment  agreement  with
Lisa Welton. In accordance with the terms of Ms. Welton's employment  agreement,
Ms. Welton will hold the offices of President and Chief Executive  Officer,  and
be a  director,  of  Cyber-Test,  as  well  as  hold  the  office  of  Executive
Vice-President of Encompass. Ms. Welton is entitled to a $120,000 annual salary.
Ms.  Welton is also  entitled to receive an incentive  bonus  determined  at the
discretion  of our  Compensation  Committee  based  on her  contribution  to our
overall  performance as well as a bonus based on the overall  separate  business
and financial performance of Cyber-Test. In addition, we insure Ms. Welton under
a $2 million key man life insurance policy.


      On June 3, 2004, we entered into a three-year  employment  agreement  with
Thomas  Sutlive.  In  accordance  with  the  terms of Mr.  Sutlive's  employment
agreement, Mr. Sutlive will hold the office of Vice-President of Cyber-Test. Mr.
Sutlive is entitled to a $110,000 annual salary. Mr. Sutlive is also entitled to
receive an incentive  bonus  determined at the  discretion  of our  Compensation
Committee  based on his  contribution  to our overall  performance  as well as a
bonus  based on the overall  separate  business  and  financial  performance  of
Cyber-Test.

(B) Termination of Employment Agreements

      On May 10,  2005,  Pacific  Magtron  International  Corp.  terminated  the
Employment   Agreements,   dated  December  30,  2004,   among  Pacific  Magtron
International Corp., Advanced Communications  Technologies,  Inc., and Encompass
Group Affiliates,  Inc. and each of Theodore S. Li and Hui Cynthia Lee. PMIC has
terminated these Employment  Agreements and the employment of Mr. Li and Ms. Lee
with  PMIC  and its  subsidiaries  for  "cause"  pursuant  to the  terms  of the
Employment   Agreements.    These   Employment   Agreements   became   effective
contemporaneously  with the sale of an  aggregate  of  6,454,300  shares  of the
common  stock of PMIC by Mr.  Li and Ms.  Lee,  representing  61.56% of the then
issued and  outstanding  common  stock,  to the  Company.  In  addition  to base
salaries and other compensation,  the Employment Agreements provided for payment
of a  signing  bonus of  $225,000  to each of Mr.  Li and Ms.  Lee on or  before
January 29, 2005. No part of these bonuses has been paid.


                                      F-20
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


(C) Operating Lease Commitment

      The  Company's  principal  executive  office is located  at 420  Lexington
Avenue,  Suite 2738,  New York, New York 10170.  The Company,  through a license
agreement effective December 1, 2004 with Danson Partners,  LLC, a party related
to our chief  executive  officer,  occupies a 499 square  foot  office  facility
having a monthly lease obligation of $1,478, as adjusted  annually.  The term of
the Company's license  agreement is a month-to-month  term and is at fair market
rental.

      The  Company's  core  operating  business,  Cyber-Test  is  located at 448
Commerce Way, Longwood,  Florida 32750. This 29,000 square foot office/warehouse
facility  has a one-year  triple net lease that  commenced on August 1, 2004 and
ends on July 31,  2005,  and  carries  two one year  options at a monthly  lease
obligation of $13,900. Cyber-Test exercised its one year option and extended its
lease to July 31,  2006.  The  lease is  renewable  on a  year-to-year  basis by
providing  written  notice 60 days prior to the  expiration  of the then current
term.

      The  Company's  principal  operating  unit,  Encompass  is located at 1600
California  Circle,  Milpitas,  California 95035.  Encompass leases 2,000 square
feet of office space on a  month-to-month  basis for $2,000 per month. The lease
commenced on July 1, 2005.

(D) Legal Matters

      The  Company has been,  and may in the future be  involved  as, a party to
various legal  proceedings,  which are incidental to the ordinary  course of its
business.  Management  regularly analyzes current information and, as necessary,
provides accruals for probable  liabilities on the eventual disposition of these
matters.  In the  opinion  of  management,  as of June 30,  2005,  there were no
threatened  or pending  legal  matters that would have a material  impact on the
Company's consolidated results of operations, financial position or cash flows.

      On May 11, 2005, we filed a complaint in the United States  District Court
for the  Southern  District of New York  against  Theodore S. Li and Hui Cynthia
Lee, the former officers and principal shareholders of PMIC, for the recovery of
damages and costs for securities  fraud,  breach of contract and other counts in
connection with the Stock Purchase Agreement dated December 10, 2004 between the
Company and Mr. Li and Ms. Lee. On or about July 6, 2005, the defendants filed a
motion for a more definite statement of our complaint. That motion remains under
consideration by the court and discovery has not yet commenced.


NOTE 13. RELATED PARTIES

(A) Legal Counsel

      Certain of the Company's legal counsel are  stockholders  and directors of
the Company.  The Company has paid these attorneys,  for current and prior legal
services, an aggregate of $76,882 in cash and $0 in stock during the fiscal year
2005 and $150,004 in cash and $155,000 in stock during the fiscal year 2004.  At
June 30, 2005, the Company had no balance owed to these attorneys.

(B) President, Chief Executive Officer and Chief Financial Officer

      The  Company's  President,  Chief  Executive  Officer and Chief  Financial
Officer,  who is also a director and  stockholder  of the Company,  and Managing
Director  and  Founder of a separate  company,  has been  contracted  to provide
executive and  financial  consulting  services to the Company.  The Company paid
this executive, for current and prior executive and financial services, $362,476
in cash and  $140,000 in stock  during the fiscal year 2005 and $279,794 in cash
and $150,000 in stock during the fiscal year 2004. At June 30, 2005, the Company
had no balance owed to this executive.

(C)  Independent Directors

      Certain of the Company's  independent directors were contracted to provide
business services to the Company. The Company paid these independent  directors,
for current and prior business services,  an aggregate of $23,406 in cash and $0
in stock  during the fiscal  year 2005 and  $24,666 in cash and $30,000 in stock
during the fiscal  year 2004.  At June 30,  2005,  the  Company did not have any
remaining obligation to these independent directors.


                                      F-21
<PAGE>

    ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2005


NOTE 14. GOING CONCERN

      The Company's  consolidated financial statements for the fiscal year ended
June 30, 2005, have been prepared on a going concern basis,  which  contemplates
the realization of assets and the settlement of liabilities in the normal course
of business.  The  Company's  net loss of $735,833  and negative  cash flow from
operations  of $875,933  for the year ended June 30,  2005 and  working  capital
deficiency of $139,363 as of June 30, 2005,  raise  substantial  doubt about its
ability to continue as a going concern.

      The ability of the Company to continue as a going  concern is dependent on
the Company's  ability to resolve  liquidity  problems by generating  sufficient
operating profits to provide an additional source of working capital.

      The consolidated  financial statements do not include any adjustments that
might result from the outcome of this uncertainty.