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

                       AMENDMENT NO. 1 TO THE 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, 2001

                          COMMISSION FILE NO. 000-30486

                   ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            FLORIDA                                    65-0738251
--------------------------------          ------------------------------------
(State or Other Jurisdiction of           (I.R.S. Employer Identification No.)
 Incorporation or Organization)


               880 APOLLO STREET, SUITE 200, EL SEGUNDO, CA 90245
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (310) 416-1270
                         (REGISTRANT'S TELEPHONE NUMBER)

              SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT:

                   TITLE OF EACH CLASS TO BE REGISTERED: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

            COMMON STOCK, NO PAR VALUE, 200,000,000 SHARES AUTHORIZED

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

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






<PAGE>


         The  aggregate  market  value as of  September  30,  2001 of the voting
common equity held by non-affiliates is $19,762,276.


              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING PRECEDING FIVE YEARS

         Indicate by checkmark  whether the  Registrant  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

         Indicate the number of shares  outstanding of each of the  Registrant's
classes of common stock, as of the latest  practicable date. As of September 30,
2001,  there were  97,693,489  shares of the Company's no par value common stock
issued and outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

         Information  required  by Items 1 and 2 of Part I and Item 7 of Part II
of this Report is incorporated by reference from the  Registrant's  Registration
Statement filed on August 14, 2001.

         This Form 10-KSB contains "forward-looking  statements" relating to the
Registrant  which  represent the  Registrant's  current  expectations or beliefs
including,  but not limited to, statements concerning  Registrant's  operations,
performance,  financial  condition and growth.  For this purpose,  any statement
contained in this Form 10-KSB that are not  statements  of  historical  fact 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 and  variability of quarterly  results,  ability of
Registrant to continue its growth strategy and competition, certain of which are
beyond  the  Registrant's  control.  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.




                                       2
<PAGE>


                                     PART I


ITEM 1.  BUSINESS

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

         We are a party to a license and distribution agreement for SpectruCell,
a wireless  software based  communications  platform that is being  developed to
offer mobile communications  network providers the flexibility of processing and
transmitting  multiple wireless  communication signals through one base station.
The SpectruCell  product,  which is based on the Software  Defined Radio ("SDR")
platform,  is being developed to allow wireless  communication network providers
with the ability to not only direct multiple wireless  frequencies  (AMPS, CDMA,
GSM,  Mobile IP, Voice IP, etc.)  through one base station but will also provide
flexibility for future spectrum upgrades to 3G. The SpectruCell product is being
developed by our affiliated entity,  Advanced Communications  Technologies,  Pty
(Australia)  which we own a 20%  interest  in.  Mr.  May, a former  officer  and
director  and  significant  shareholder  owns  70%  of  Advanced  Communications
Technologies  (Australia) Pty Ltd. through Global Communications  Technology Pty
Ltd.,  his  wholly-owned   company.  Our  license  and  distribution   agreement
encompasses a territory comprising North,  Central, and South America and is for
an indefinite  period.  It grants us the exclusive right to license,  market and
distribute  SpectruCell  and other  products  being  developed by our affiliated
entity throughout the North, Central and South American  territories.  On May 7,
2002, Advanced Communications  (Australia) alleged that we are in default of the
license and distribution  agreement. We believe this allegation is without merit
and intend to defend our rights.

         We currently have no other products for licensing  and/or  distribution
other than  SpectruCell  and other  products  being  developed  for sale  and/or
license by Advanced  Communications  (Australia).  SpectruCell  has not yet been
commercially  tested and is expected to be field tested in the U.S. in 2002.  We
believe that SpectruCell is expected to be available for commercial  license and
distribution in the fourth quarter 2002.

         We  expect  to  generate  revenue  from the  licensing,  marketing  and
distribution of the SpectruCell product under our license agreement. The license
agreement gives us the exclusive  right to market and distribute  SpectruCell in
North,  Central and South America.  The  manufacturing  of  SpectruCell  will be
arranged by Advanced Communications  (Australia). We have not had any meaningful
revenues  to  date.  For the year  ended  June  30,  2001,  we had a net loss of
$19,755,566  or $.0.22 per share.  At June 30,  2001,  we had  negative  working
capital of $2,421,719 and an accumulated deficit of $25,515,955.

         SpectruCell  is  being  developed  as a  dynamic  technology  that,  we
believe,  will  reduce the  network  providers'  cost for  on-going  upgrades to
wireless formats 2.5 and 3G and beyond,  as each upgrade will be  software-based
rather than hardware-based.  We also believe that network providers implementing
a SpectruCell network architecture will be able to protect their existing client
base through  continued  support and expansion of their existing  services while
being able to support future 2.5 and 3G-based protocols. This flexible migration
path for network operators means that they can protect their existing  financial
asset while giving the operator both a technical and financial  migration to 2.5
and 3G.

LICENSE AGREEMENT

         On July 5, 2000, we entered into a license and  distribution  agreement
with  Advanced  Communications  Technologies  (Australia)  Pty Ltd, a company in
which we own a 20% interest and Mr. May indirectly owns a 70% interest.  Mr. May
is a former  officer and director and a significant  shareholder of our company.
Pursuant  to the  agreement,  we  received  an  exclusive  license to market and
distribute in North,  South and Central America the  SpectruCell  technology and
certain other  technologies  to be developed.  This license is for an indefinite
period of time. Upon the SpectruCell technology becoming commercially available,
our company  and  Advanced  Communications  (Australia)  will need to  negotiate
minimum guaranty  payments,  as well as the amount of the commission  payable to
our company.  These  amounts will be  negotiated  in  accordance  with  industry
standards after the final pricing of the SpectruCell technology is established.

         We are involved in litigation in Australia with Advanced Communications
(Australia)  regarding  the  license.  On April 26, 2002,  the Supreme  Court of
Victoria  at  Melbourne,  Australia  issued an interim  order  against  Advanced
Communications (Australia) and Mr. May in connection with the ongoing litigation
between Advanced  Communications and Advanced  Communications  (Australia).  The
interim order  prohibits  Advanced  Communications  (Australia) and Mr. May from
violating the terms of the license and distribution agreement.  Based on a press
release issued by Advanced Communications  (Australia),  Advanced Communications
(Australia)  appears  to be seeking to license  the  SpectruCell  technology  to


                                       3
<PAGE>

another entity in our territory. On April 26, 2002, the Australian court entered
the interim order.  On May 7, 2002,  Advanced  Communications  received a notice
from  Advanced  Communications  (Australia)  alleging  a breach of the  license.
Advanced  Communications believes the allegation is without merit and intends to
protect its legal rights.  On May 8, 2002,  the  Australian  court  extended its
April  26,  2002  order  through  May 14,  2002,  further  restraining  Advanced
Communications  (Australia)  from  "acting  upon or taking any further  steps in
reliance  upon" the notice of breach until May 14, 2002 when this matter will be
heard by the court.

COMPANY HISTORY

         We were  incorporated  on April 30, 1998 and were  inactive  from April
1998 to June 1998 except for the issuance of founders' shares. On April 7, 1999,
Media Forum  International,  Inc.,  a Florida  corporation,  acquired all of our
stock  in  exchange  for  its  stock.  Pursuant  to the  merger  agreement,  our
shareholders  received nine shares of Media Forum's  common stock for each share
of common stock held in our company.  After the merger,  our shareholders  owned
approximately   90%  of  Media  Forum.   Media  Forum,  the  surviving   entity,
subsequently changed its name to Advanced Communications Technologies, Inc. Upon
completion of the merger, we changed our trading symbol to "ADVC."

         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,  and consequently  became a "reporting  company" in compliance with the
NASD's requirements.

         On July 20, 1999, we formed  Advanced  Global  Communications,  Inc., a
Florida corporation.  Advanced Global was established to develop and operate our
international  telecommunications  network as well as to acquire other switching
and telecommunications companies. During the fiscal year ended June 30, 2001, we
ceased operating Advanced Global's international  telecommunications network and
wrote-off  our entire  investment  in various  telephone  equipment  and network
costs. Such write-off amounted to $69,506.

         On November 10, 1999,  Advanced  Global  entered into an agreement with
the  shareholders  of  World  IP  Incorporated  and  its  wholly-owned   foreign
subsidiaries, Sur Comunicaciones, S.A., a Chilean corporation, and Acinel, S.A.,
an Argentinean  corporation,  to acquire a 51% controlling interest in the World
IP. Under the terms of the agreement,  500,000  shares of our restricted  common
stock, plus $95,000 in cash was exchanged for 1,020 shares of stock representing
51% of the then issued and  outstanding  shares of World IP The 500,000 shares
of restricted  common stock were valued at the trading price on the closing date
and  together  with the  cash  consideration  resulted  in a  purchase  price of
$470,000.  World IP provides wholesale international telephone services from the
U.S. to Chile and Argentina.

         On  October  4, 2000,  we  notified  World  IP's  management  and its
shareholders  that we intended to rescind the agreement  because we were unable,
after  repeated  requests,  to obtain  from World  IP's  management  financial
records and audited financial  statements.  Consequently,  our management deemed
that it was in our best  interest  to  unilaterally  rescind the  agreement.  On
October  6,  2000,  we filed  suit in the  Circuit  Court in and for Palm  Beach
County,  Florida against the World IP and its shareholders for rescission of the
agreement and for monetary  damages  resulting from such breach.  On January 23,
2002,  the parties  entered into  Settlement  and  Rescission  Agreements  and a
Stipulation  for Dismissal  with Prejudice  (the  "Stipulation")  to settle this
matter.  The  Stipulation  states that the November 10, 1999,  Agreement and all
related  transactions,  including  the  issuance of 1,020  shares of World IP to
Advanced  Global and the 500,000  shares of restricted  common stock to World IP
shareholders,  are rescinded, AB INITIO,  effective November 10, 1999, as though
such transactions never occurred.  Further, as part of the settlement,  Advanced
Communications  issued a total of 320,000  shares of restricted  common stock to
certain  shareholders of World IP, which shares are being registered pursuant to
the  Registration  Statement  currently on file with the Securities and Exchange
Commission.  The  Circuit  Court in and for Palm  Beach  County  issued an Order
Approving Stipulation approving the Settlement and Rescission Agreements and the
Stipulation.

         For  financial  statement  purposes,  we  have  treated  the  World  IP
rescission  transaction  as if we had  never  acquired  the  World IP stock  and
wrote-off  our $125,000  investment  in World IP in our June 30, 2000  financial
statements.

         On April 5,  2000,  we entered  into a Stock  Purchase  Agreement  with
Advanced  Communications  Technologies  (Australia)  Pty Ltd.  to  acquire a 20%
interest  for  $19,350,000.   The  majority  owner  of  Advanced  Communications
Technologies  (Australia)  is Roger May,  who was the Chief  Executive  Officer,
Chairman of the Board of Directors of our company  until  November 30, 2001.  In
consideration  for our purchase of the stock, we issued  5,000,000 shares of our
common  stock  having  a  value  of  $11,850,000  and  a  $7,500,000   unsecured
non-interest bearing note payable in installments.  The note payable was payable
in three equal monthly installments  commencing May 31, 2000. Under the terms of
the April 2000 agreement, the monthly installment deadline was extended, without
interest,  to allow for our company to, on a best efforts basis,  raise the cash


                                       4
<PAGE>

portion of the purchase price through the sale of securities.  Upon raising such
funds, our company is obligated to repay Advanced  Communications  (Australia)'s
note payable after deducting for reserves needed for current operations, working
capital and the  development  and expansion of its operations and the operations
of its subsidiaries,  as determined by its Board of Directors. The shares issued
were valued at the average quoted trading price during the  acquisition  period.
The fair value of the  investment at the  acquisition  date was determined to be
$3,657,472.  The  excess  of the  purchase  price  over  the  fair  value of the
investment in the amount of $15,692,528 was accounted for as goodwill.

         Our 20% interest in Advanced  Communications  (Australia) was accounted
for using the equity method of accounting  and was stated at the amortized  cost
of goodwill and the equity in  undistributed  earnings  since  acquisition.  The
equity in earnings of Advanced  Communications  (Australia) was adjusted for the
amortization of the goodwill, as discussed above. Amortization was computed on a
straight-line  basis over  fifteen  years  until June 30,  2001 at which time we
reassessed  the life of the  goodwill  to be five  years.  The  amortization  of
goodwill  charged to income for each of the six months  ended  December 31, 2001
and December 31, 2000 was $200,000 and $523,084, respectively.

         The  following  information  is provided  for  Advanced  Communications
(Australia) at December 31, 2001 and 2000 and has been  translated to US dollars
using the average exchange rate for the three-month period:
<TABLE>
                                                             DECEMBER 31, 2001        DECEMBER 31, 2000
         <S>                                                 <C>                      <C>
         Average exchange rate for the period                $        0.51393         $        .55820
         Revenue from operations                             $        639,882         $         6,851
         Gross profit                                        $        639,882         $         6,851
         Net loss from operations                            $    (3,163,694)         $   (1,195,132)
         Net loss for the quarter                            $    (3,163,694)         $   (1,195,132)
</TABLE>

         The  table  above  reflects  the  results  of  operations  of  Advanced
Communications  (Australia) and its consolidated  subsidiaries,  translated into
U.S.  dollars  at  the  prevailing   exchange  rate.   Advanced   Communications
(Australia) owns a controlling interest in various Australian  subsidiaries that
operate a local  telecommunications  network.  Consolidated revenue reflects the
revenue from these  operations and from  government  grant funds received and do
not reflect any revenue from sales of SpectruCell.

         During the year ended June 30, 2001,  we reduced the carrying  value of
our investment in Advanced  Communications  (Australia)  to $2,000,000  based on
management evaluation of Advanced  Communications  (Australia).  This adjustment
was  necessitated by FASB 121 ("Accounting for Impairment of Long Lived Assets")
and APB 18 ("The Equity Method of Accounting for  Investments in Common Stock").
Such  pronouncements  require the annual  evaluation  of  long-lived  assets for
impairment.

         The components of the investment in Advanced Communications (Australia)
at December 31, 2001 are as follows:

<TABLE>
                                              INVESTMENT        GOODWILL              TOTAL
                                              ----------        --------              -----
         <S>                               <C>              <C>               <C>
         At acquisition                    $  3,657,472     $  15,692,528     $    19,350,000
         Cumulative Investment loss          (3,657,472)                --         (3,657,472)
         Amortization of goodwill                     --       (1,292,664)         (1,292,664)
         Impairment of goodwill                       --      (12,399,864)        (12,399,864)
         Balance at June 30, 2001                     --        2,000,000           2,000,000
         Cumulative amortization of
           Goodwill through 12/31/01                             (200,000)           (200,000)
         Balance at December 31, 2001      $          --    $   1,800,000     $     1,800,000
</TABLE>

         On July 5, 2000, we entered into a License and  Distribution  Agreement
with Advanced Communications  Technologies (Australia) Pty Ltd. where by we were
granted the exclusive  right to market and  distribute  within North,  South and
Central America the SpectruCell and other technologies to be developed.

         On July 24, 2000,  our company  formed  Australon USA, Inc., a Delaware
corporation,  owned 50% by our company and 50% by  Australon  Enterprises  Pty.,
Ltd.  Australon  Enterprises  is controlled  by Roger May, a former  officer and
director of our company.  We formed  Australon  USA, Inc. to market and sell the
Australon suite of products in the U.S., Canada and South America. Australon USA
intended to develop  products and  applications  for the  monitoring and control
industry.  These  products  and  applications  were  unrelated  to  SpectruCell.


                                       5
<PAGE>

Australon  USA,  Inc. is presently  inactive and had no revenues or expenses for
the fiscal year ended June 30, 2001.

         In November 2000, we formed Advanced Network  Technologies (USA), Inc.,
a Delaware corporation, owned 70% by us and 30% by Advanced Network Technologies
Pty. Ltd.  Advanced Network intended to acquire wireless network  infrastructure
in North and South America.  This  infrastructure  was intended to help showcase
SpectruCell within a working network environment.  To date, no acquisitions have
been made.  Advanced Network  Technologies (USA), Inc. is presently inactive and
had no revenues or expenses for the fiscal year ended June 30, 2001.

FINANCIAL CONDITION

         We had net losses of $19,755,566 and $5,387,495  during the years ended
June 30, 2001 and 2000, respectively. As of June 30, 2001, we had cash of $6,816
and current  liabilities of $2,438,535.  We do not have sufficient cash or other
assets to meet our current liabilities.  In order to meet those obligations,  we
will  need to raise  cash  from the sale of  securities  or from  borrowings.  A
detailed  discussion of our financial condition is contained in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
of this filing.

CHALLENGES TO COMPLETING THE DEVELOPMENT AND TESTING OF SPECTRUCELL

         Advanced  Communications  (Australia)  faces a number of  challenges in
completing and commercializing the SpectruCell technology.  These challenges can
be  placed  into  four   categories,   financial,   technical,   regulatory  and
competitive. Each of these categories is discussed below.

         FINANCIAL. Advanced Communications (Australia) will require significant
funding to complete  the  development  and  commercial  release the  SpectruCell
technology.  Advanced Communications Technologies (Australia) Pty Ltd. estimates
that it will need  approximately  U.S.  $10  million in funding to  successfully
complete the  commercialization of SpectruCell through field testing in the U.S.
and  arrange  for the  manufacturing  of the  product.  Although we are aware of
capital  raising  activities  by Mr.  May  and  others  on  behalf  of  Advanced
Communications  Technologies  (Australia)  Pty  Ltd.,  we have no  knowledge  of
whether any of these funding activities have been or will be successful.

         TECHNICAL.  To the  best  of our  knowledge,  the  following  technical
developments  remain  to be  completed  prior  to the  commercialization  of the
SpectruCell product.

         o   Analogue to Digital converter (referred to as the DC card). We have
             been  advised  that  the DC card  has  been  designed  in-house  at
             Advanced Communications  (Australia) and is at the prototype stage.
             Completion  of a first release  production  design is scheduled for
             the second or third  quarter of 2002.  Daranmount,  an  independent
             Australian company, is developing and manufacturing  various boards
             for  SpectruCell   under  contract  with  Advanced   Communications
             (Australia).

         o   Demonstration of the production version of the SpectruCell hardware
             to show  simultaneous  operation  of  multiple  protocols.  This is
             intended to be demonstrated upon the first release of the product.

         REGULATORY.  Advanced  Communications  (Australia)  or our company will
need  to  gain  the   appropriate   regulatory   approvals   from  the   Federal
Communications  Commission and other relevant  authorities in order to implement
the SpectruCell technology.  The Federal Communications  Commission has realized
the potential of  software-defined  radio insofar as its  capability to maximize
spectrum usage and increase flexibility for network operators.  Accordingly, the
Federal   Communications   Commission  recently  amended  their  regulations  to
accommodate  the increased  flexibility of SDR. At this time, we cannot estimate
how long this process will take.

         COMPETITIVE. Like most new technologies the introduction of SpectruCell
will  require  demonstrations  and  education  through  field trials and similar
demonstrations  to introduce the product to the potential  market. No assurances
can be given that the market will  accept the  SpectruCell  technology,  or that
other competing  products will be developed or achieve better market  acceptance
than our product.

         Advanced   Communications   Technologies   (Australia)   Pty  Ltd.  has
identified  at  least  one  competitor  to  the  SpectruCell  technology.   This
competitor is Airnet (www.Airnet.com).  We expect to face increasing competition
as other  telecommunications  companies  realize the advantages of SDR and begin
devoting  more  resources to  developing  SDR base  technologies.  Many of these
companies have substantially  greater resources than we do. These companies also
have more  experience  than we do in obtaining  governmental  approval  from the


                                       6
<PAGE>

Federal Communications Commission and other agencies.

ACQUISITIONS

         On September  7, 2001 we entered into a Letter of Intent with  Advanced
Communications Technologies, Pty (Australia). to acquire all of the intellectual
property,  including the worldwide rights (other than rights to territories that
we currently  possess) for the licensing  and  distribution  of the  SpectruCell
product  (the "IP  Rights").  The Letter of Intent  which was executed by Messrs
Roberts  and  May  on  behalf  of  Advanced  Communications  Technologies,   Pty
(Australia) and us,  respectively,  includes various conditions precedent to the
transfer  of the IP Rights  including,  but not limited to, the raising by us of
$80  million  in the  US  capital  markets,  appropriate  regulatory  approvals,
approval  by both our  Board of  Directors  and  shareholders,  appropriate  due
diligence  and  definitive  agreements.  During the period from  January 2002 to
present,  we,  along with our  Australian  financial  and legal  advisors,  have
attempted to negotiate with Mr. May in good faith to enter into a Non-Disclosure
Agreement to allow us to commence our due diligence on the financial,  legal and
technological affairs of Advanced  Communications  Technologies  (Australia) Pty
Ltd. In addition,  during this period we have filed two lawsuits against Mr. May
and Advanced Communications  Technologies (Australia) Pty Ltd. for breach of our
April 5, 2000 Stock Purchase Agreement and July 5, 2000 License and Distribution
Agreement.  Consequently,  we have been  unable to  execute  any  Non-Disclosure
Agreement  nor commence any active or meaningful  negotiations  with Mr. May for
the  acquisition  of the  SpectruCell  technology  pursuant  to the terms of the
September  7, 2001  Letter of Intent.  Because of the matters  described  above,
there can be no assurance  that the proposed  acquisition of all of the tangible
and  intangible  (including  the IP Rights)  assets will be completed  under the
terms and conditions as expressed in the Letter of Intent or at all.

         During  the  year,   we  were  also   involved   in  two   unsuccessful
acquisitions.  On February 28, 2001, we were the  successful  bidder to purchase
all of the  assets  of  ORBCOMM  Global  L.P and  related  debtors.  ORBCOMM,  a
partnership formed by Teleglobe Holding Corp. and Orbital Sciences  Corporation,
is the owner and operator of 30 low earth orbit  satellites,  digital  satellite
communications  systems,  gateway earth stations,  control center facilities and
related  equipment,  and  intellectual  property and provides asset  monitoring,
global  positioning,  communications  and other data  information  services.  In
September 2000, ORBCOMM filed for Chapter 11 Bankruptcy protection in the United
States  Bankruptcy  Court for the  District of Delaware.  On March 9, 2001,  the
Court  entered an Order to approve the sale of  substantially  all of  ORBCOMM's
assets to us. The  acquisition  of the assets was viewed by us as an opportunity
to engage in a business that was  synergistic to the marketing and deployment of
our  SpectruCell  technology,  and to augment  Australon  Limited's  business of
providing real time remote smart metering and other  Lon-works  based  services.
The assets were to be owned by a newly  formed  entity  wholly  owned by our 50%
owned U.S.  affiliate,  Australon USA, Inc. We also entered into a joint venture
agreement  with another  bidder to sell a portion of the new entity's  equity in
return for a substantial  capital commitment.  Our joint venture partner,  Final
Analysis  Corporation,  subsequently  defaulted  on its  commitment  to  provide
capital to the new entity.  Because of the extreme time constraints place by the
Court on us to close the  transaction,  and the substantial  capital  commitment
needed to turn ORBCOMM's business around, our management subsequently determined
that it was no longer in our best interest to pursue the purchase of the assets.

         We  incurred a loss in the amount of $835,375  in  connection  with our
unsuccessful  attempt to acquire the assets.  This loss is reflected in our June
30,  2001  financial  statements  as  professional  fees  ($395,151),   loss  on
investment  acquisition  deposit  ($425,000)  and  other  selling,  general  and
administrative expenses ($15,224).

         On  February 5, 2001,  we entered  into a Letter of Intent with Dr. Gil
Amelio and his majority owned company,  Beneventure Capital, LLC, to acquire all
of the assets of Beneventure  in exchange for stock of our company.  Beneventure
is a privately  held  technology  investment  and  management  company that owns
varying  interests  in private  companies  involved  in the  telecommunications,
semiconductor,  Internet and financial services industries.  After many attempts
to negotiate a fair  agreement  with  Beneventure,  we ceased  negotiations  and
determined  that the Beneventure  acquisition  was not in our best interest.  We
incurred  $125,965 of professional fees and expenses in the transaction that are
included in our June 30, 2001 financial statements.

INDUSTRY OVERVIEW

         GROWTH OF THE WIRELESS TELECOM INDUSTRY

         The wireless telecom industry is a rapidly growing business,  driven by
the dramatic increase in wireless  telephone usage, as well as strong demand for
wireless Internet and other data services. U.S. mobile subscribers are projected
to grow to  226.8  million  by 2010 and  generate  revenues  of  $72.8  billion,
according to Analysts  Bakerville (Feb.  2002). In June 2001, EMC World Cellular
Database  stated  that there  were  854.7  million  users of  cellular  services
worldwide.  The demand for wireless  Internet  access and other data services is


                                       7
<PAGE>

accelerating  the  adoption of new  technologies  such as those  embodied in the
emerging  third-generation  (3G) standard.  High-speed  fiber optic networks are
being coupled with broadband  wireless  technologies to deliver enhanced telecom
capabilities and features to new customers and markets.

         Wireless  carriers must  continuously  upgrade their  networks with new
technologies  and  expand  into  new  geographic  regions  in  order  to  remain
competitive  and  satisfy the demand for  wireless  service.  Additionally,  new
carriers are entering  the market as a result of  deregulation,  the issuance of
new licenses and the demand for new  services,  fueling the  development  of new
networks. Consequently, carriers are deploying new network equipment both in the
U.S. and abroad. New technologies,  such as broadband  wireless,  are helping to
fuel demand for more  advanced  wireless  equipment.  Global  revenues  from the
broadband  market are  expected to exceed $88 billion by 2007,  according to the
ARC Group (Feb.  2002).  Worldwide  3G networks  may cost up to $751  billion to
build according to a study by Herschel Shosteck Associates (Jan. 2001).

         CHANGES IN THE WIRELESS TELECOM INDUSTRY

         As carriers deploy their networks,  they face significant  competition.
Through  privatization  in  the  1980s  and  deregulation  in  the  1990s,  both
domestically  and  internationally,  the  competitive  landscape has changed for
wireless  carriers.   For  carriers  to  differentiate   themselves  and  remain
competitive in this new environment, they are deploying networks to:

         o   provide seamless  nationwide  coverage and avoid expensive  roaming
             costs on  competitors'  networks in markets  where  carriers do not
             currently own infrastructure;

         o   offer PCS service in new geographic markets;

         o   offer  enhanced  services,  such as one rate plans,  calling  party
             pays, caller ID, text messaging and emergency 911 locator services;

         o   implement the new third-generation (3G) network standard to deliver
             wireless  broadband data services,  including  Internet  access and
             two-way e-mail;

         o   introduce    other   emerging   data   networking   and   broadband
             technologies,  such as  LMDS,  MMDS and  other  point-to-multipoint
             architectures,  for the  provision  of  high  speed  data  wireless
             Internet access and other broadband services; and

         o   offer wireless local loop systems  domestically to bypass incumbent
             wireline  competitors  and in developing  countries  lacking modern
             wireline telephone infrastructure.

         The convergence of traditional wireless, wireline and cable services is
also adding  complexity to the telecom  environment as carriers  deploy networks
spanning  traditional  wireless/wireline  boundaries  to  offer  these  enhanced
services and new technologies.

         NEW CHALLENGES FOR WIRELESS CARRIERS AND EQUIPMENT VENDORS

         Due to this  increasingly  competitive  environment,  carriers  need to
focus  on  satisfying  customer  demand  for  enhanced  services,  seamless  and
comprehensive  coverage,  better quality,  more bandwidth and lower prices.  The
proliferation of carriers and new technologies has created an environment  where
speed to  market  is an  essential  element  of a  wireless  carrier's  success.
Carriers are also experiencing challenges managing increasingly complex networks
and   technologies.   For  example,   the  introduction  of  wireless   Internet
technologies  and the  growth  in  broadband  wireless  services  requiring  the
transmission  of large  amounts of data  creates  additional  new  technological
hurdles for carriers  establishing or upgrading their networks.  In this dynamic
environment,   customer   acquisition  and  retention  are  the  most  important
determinants of success. This has led carriers to increasingly  prioritize their
resources,  focusing on mission critical revenue  generating  activities such as
marketing,  billing and customer  care and  outsourcing  whenever they can do so
effectively.

         The  changing  environment  is  also  placing  significant  operational
challenges  on  carriers.  Carriers  must make  critical  decisions  about which
geographic  markets to serve and which services and technologies to offer.  They
are  striving  to avoid  the cost  uncertainties  and  considerable  operational
challenges associated with the staffing and process implementation  software for
the  deployment  and  management  of their  networks.  Furthermore,  the rapidly
changing and  increasingly  complex nature of wireless  technologies has made it
difficult for carriers to optimize  employee  training and  utilization for what


                                       8
<PAGE>

are often one-time upgrades for each generation of new technology. Additionally,
networks are being  implemented  with equipment from unrelated  vendors,  posing
system integration challenges. This situation is exacerbated by consolidation in
the industry, which often entails the integration of disparate networks.

         Equipment  vendors  are  facing  numerous  challenges  in  the  current
environment,  as  carriers  are  requiring  them to develop new  generations  of
equipment that are capable of handling increased features and functionality.  In
addition, vendors must provide equipment that can be deployed within a carrier's
existing network and integrate with equipment offered by other vendors. Carriers
are more  likely to select a vendor who  provides a full suite of  products  and
deployment  services.  Given the rapid pace of technological  change,  equipment
vendors are finding it increasingly difficult to justify using resources for the
deployment,   integration  and  optimization  of  their  current  generation  of
products.  This has  increasingly  led equipment  vendors to focus on their core
competencies   to  offer   competitive   solutions  in  this  rapidly   changing
technological  environment  and to  outsource  network  design,  deployment  and
management services.

         CONVENTIONAL WIRELESS COMMUNICATIONS TECHNOLOGY

         Conventional  mobile  networks  primarily  rely  upon  long-established
mobile radio technology and traditional voice channel transmission. This was the
only suitable technology available when cellular communications first evolved 20
years ago. The SpectruCell  Technology represents a departure from this somewhat
antiquated technology.

         Conventional  telephone networks were  traditionally  configured with a
major  Central  Office  Switch (CO) and  numerous  smaller  switches  (Points of
Presence  or POPS)  throughout  the  network.  The POPS  collect  calls from the
outlying reaches of the network and route them back to the CO for processing and
routing to the call termination.

         Cellular  telephone  networks evolved from the long established  mobile
radio telephone technology and the traditional call processing and voice channel
transmission  applications  associated  with that  technology.  Much of the call
processing and routing is done at the cell site and this can be very restrictive
because it depends upon the number of voice channels and processing  capacity at
each cell site. In a conventional  telephone network environment any upgrades or
call capacity  changes can be effected at the Central Office Switch,  whereas in
the present cellular network environment hundreds of cell sites would have to be
upgraded individually.

         The SpectruCell platform is comprised of a base hardware platform and a
software  operating  system that controls the hardware.  The hardware portion of
SpectruCell  uses  mainly  commercial  off  the  shelf  components  (COTS)  with
proprietary processing cards developed by Advanced  Communications  (Australia).
The  COTS  hardware  used  is  industry  standard  equipment  and  sourced  from
manufacturers worldwide.

         The software is expected to be designed to be upgraded without the need
to upgrade the hardware. The types of software upgrade possible are the changing
of  protocols  supported,  new  versions  of the  protocol  software  or  custom
applications may be installed and upgraded or removed.  The analogy is very much
like your home PC where you have  hardware  and  software.  If you would like to
make your system more powerful you can choose to upgrade the hardware.  It is up
to the network  operator  to choose how much  processing  power they  require in
order to run their chosen  software.  The hardware itself is built upon industry
standard  platforms so that it can be easily  scaled up or down by installing or
removing  processing cards. The CPCI chassis allows for the use of hot-swappable
hardware allowing for the removal and upgrade of cards when required.

         THE SPECTRUCELL TECHNOLOGY

         The SpectruCell  concept was originally  conceived in the United States
in an entirely different format and configuration to the current product design.
The  request to develop  the  SpectruCell  Wireless  Base  Station  concept  was
presented to the Royal Melbourne Institute of Technology University in the first
quarter of 1998 for evaluation and development.  The current  technology for the
SpectruCell Wireless Base Station unit has been developed entirely in Melbourne,
Australia  by Advanced  Communications  (Australia)  in  collaboration  with the
Department of Computer Systems  Engineering at the Royal Melbourne  Institute of
Technology University.

         Advanced  Communications  (Australia)  has  developed and beta tested a
wireless  communication network technology that will be trademarked and marketed
as "SpectruCell".  Beta testing consists of sampling by the intended audience of
a  product  and  is  conducted  prior  to  commercial  release.  At  this  time,
SpectruCell is not commercially available.  Advanced Communications  (Australia)
is in discussions with U.S. based network  providers to begin field tests of the
product. Unlike existing communications networks,  SpectruCell is being designed
to support a wireless  network  architecture  designed to process  and  transmit
numerous  communications  protocols (AMPS,  CDMA,  TDMA, GSM, W-CDMA,  UMTS, 3G,
Voice IP,  etc.),  as well as  wireless  Internet  applications,  all within one


                                       9
<PAGE>

network. We are in the process of developing these applications. Accordingly, we
do not currently have applications  capable of supporting all of these protocols
or wireless  frequencies.  By utilizing  the  multiple  protocol  wireless  base
station,  network providers are expected to be able to support substantially all
current and future  wireless  frequencies  with the same  equipment  on the same
network through software upgrades.

         The  SpectruCell  architecture is being designed to provide a method of
transmitting the entire base bank spectrum from the receiving  Antenna/Cell to a
centralized  Mobile  Telephone  Switching  Office (MTSO) for call processing and
redistribution,   rather  than  processing   calls  at  the  cell  site.   Until
approximately three years ago almost all cellular  transmissions were Analog. In
the current cellular network  environment,  additional call processing  hardware
has to be added to each  cell  site  (usually  around  200+  cells  per  average
network),  for network  operators  to transmit  evolving  new digital  protocols
(CDMA, TDMA, GSM, W-CDMA, etc.) over their existing cellular networks.

         We believe that SpectruCell also has the capacity to dynamically assign
channels and spectrum (i.e.,  call carrying  capacity) to the cells requiring it
most.  In a sense,  the cellular  operator  would  possess a so-called  "elastic
capacity" at cells in the system.  Since all voice  channels  would be centrally
located at the switch instead of at the  cell/antenna  sites,  individual  voice
channels and RF trunks can be distributed as needed to busy cell/antenna  sites.
Channels  would be essentially  "borrowed"  from  surrounding  cells and used to
support call traffic at the busier  sites  during call volume  peaks.  This is a
distinct  departure from present  "honeycomb  style" systems where each cellular
network is dedicated to a single  protocol and each cell has fixed call carrying
capacity or bandwidth, that is limited by the number of voice channels installed
at each cell site. In essence, the SpectruCell architecture provides a basis for
a  paradigm  shift  from  the  conventional  telecommunications  central  office
switching structure for evolving wireless networks.

         For carriers to support multiple protocols such as GSM and CDMA digital
mobile phones, current wireless communications technology requires separate cell
sites with separate  equipment for each protocol  carried.  We believe that upon
implementation,  SpectruCell  will allow  carriers to maintain and utilize their
existing  networks  within a modern  network  platform  that will enable them to
support  evolving  protocols.  We also believe that by utilizing the SpectruCell
multiple  protocol  wireless base  station,  network  providers  will be able to
support current and in all probability  future protocols with the same equipment
on the same existing  networks.  Future  protocols would be added to the network
through software upgrades.

         Benefits of the SpectruCell network are expected to include:

         o   lower rollout cost due to the network being wireless;

         o   cost effective  upgrades to existing  networks to handle additional
             protocols  through  utilization of existing network  infrastructure
             rather than creating a new structure;

         o   fewer  dropped  calls and busy signals in current  mobile  networks
             that are caused through  bottlenecks,  as calls on the  SpectruCell
             network would be configured  through a distributed  network  rather
             than a centralized switching facility; and

         o   direct  access to Internet  services for cellular  subscribers  via
             mobile IP and other evolving data protocols (such as ITU 3G).

         In third  world  countries  or regions  of the world with  little or no
existing communications infrastructure, the SpectruCell system would provide for
the deployment of a wireless  communications  network infrastructure (known as a
"greenfield-installation").  This  could be  achieved  at lower  cost,  and in a
shorter time frame than an equivalent land-based infrastructure network.

         The  SpectruCell  technology  can be thought  of as a generic  hardware
running a common  operating  system allowing for the deployment of applications.
As examples MS word,  MS Excel etc.  are  applications  running on an  operating
system  independent  of the  type  of  hardware.  In a  SpectruCell  sense,  the
applications are software modules that support  cellular  protocols (AMPS,  GSM,
CDMA, WCDMA, UMTS, etc.).  SpectruCell is being designed as an open system, with
a  standard   operating   platform  to  an  industry  dominated  by  proprietary
applications and interfaces.

         Some of the key applications of the SpectruCell Platform are:


                                       10
<PAGE>

         o   SpectruCell  is  being  designed  as a  new  mobile  communications
             wireless  base  station/switch  built on a Software  Defined  Radio
             (SDR) platform.

         o   A  SpectruCell  SDR base  station is being  designed  to be able to
             simultaneously    process   and    transmit    multiple    wireless
             communications  protocols (AMPS, CDMA, TDMA, GSM, W-CDMA, UMTS, 3G,
             Voice IP, etc.),  as well as wireless  Internet  applications,  all
             within the one base station and network infrastructure.

         o   SpectruCell   is  being   designed  as  a  publishable   API  (open
             architecture)  so  that  network  operators  can  write  their  own
             interfaces,  and it is also software upgradeable so that additional
             protocols (UMTS, 3G, etc.) can be added to an existing  SpectruCell
             base  station  by  uploading  another  software  module to the base
             station.

         o   SpectruCell  is being  designed  with a 25mhz  front end capable of
             processing  signals  anywhere  from 400 MHz to 2.9 GHz which covers
             all  proposed 3G  frequency  ranges.  It is also being  designed to
             accept all backbones (wire,  fiber,  cable,  microwave,  satellite,
             etc.)  SpectruCell's  technology is expected to work in any country
             of the world using a variety of air  interfaces  such as GSM, CDMA,
             CDMA2000,  WCDMA & UMTS.  Its RF front  end  flexibility  makes its
             attractive  to areas of the  world  that  have  cluttered  spectrum
             allocation for cellular systems such as found in the U.S. market.

         o   Network  operators are expected to be able to install a SpectruCell
             base  station/switch  into their  existing 2G networks  and it will
             process  their  existing  customer  base  while  at the  same  time
             providing an efficient  migration path to 2.5G and 3G services with
             the addition of the appropriate  SpectruCell  software modules. And
             as an added benefit, the SpectruCell base station is being designed
             to  process  all  protocols  simultaneously  over the same  network
             infrastructure.

         o   The  SpectruCell  system is patent pending with the first 3 of some
             35 proposed patents filed in Australia.

         Several  other  applications  that have been  identified  for potential
deployment upon SpectruCell these include:

         |X| A  hardware   platform  for  3G  cellular  test   equipment   where
             SpectruCell's  SDR based  flexibility  can be employed to allow for
             testing of varying 3G standards;

         |X| A hardware platform for high end military based signal  processing.
             SDR originated in the military and SpectruCell's  ability to handle
             multiple communications  standards is expected to make it desirable
             for test  and  development  of  advanced  military  communications'
             system, such as;

             o  Radar;

             o  Sonar;

             o  Military communications;

         |X| Aerial   communications   and  mobile   communications   platforms.
             SpectruCell is being designed such that it can be deployed aerially
             or in mobile  situations  in order to  provide  rapid and  flexible
             coverage for a particular area;

         |X| A base  development  platform  for new  protocols  and base station
             equipment from existing vendors (Nokia, Lucent, Siemens,  Ericsson,
             etc.) and new third party developers; and

         |X| A 3G  capable  development  platform  for  new  technology  vendors
             looking to enter the market with a head start.

PATENTS

         Advanced Communications (Australia) has filed these patent applications
with the  Australian  patent  office  under  the  Patent  Cooperation  Treaty in
connection with the SpectruCell  technology and anticipates preparing and filing
additional patents in fiscal 2002. Under this treaty, any patents issued provide
patent  protection  in 111 member  countries,  including the United  States.  No
patents have issued to date.  Information  regarding  patents  filed by Advanced
Communications  (Australia)  is included in this  filing  because our  company's


                                       11
<PAGE>

success is highly  dependent  on the  technology  being  developed  by  Advanced
Communications  (Australia)  and its  ability to  protect  the  technology  from
potential competitors through patents.

SPECTRUCELL MARKETING ADVANTAGES

         We believe  that  SpectruCell's  greatest  marketing  advantage  is its
unique flexibility and open system approach to mobile communications.  Providers
using  SpectruCell  will have the  ability to expand and  utilize  technological
advances as they occur  without  making  their  current  network  infrastructure
redundant.  The open  system,  non-proprietary  approach  means that third party
developers  can  manufacture  products  for use  within the  system,  as well as
develop additional applications ensuring a SpectruCell network will be always at
the leading edge of technology.

         We believe that using a network of SpectruCell  base stations,  network
providers  will  have  architecture  that can be  reconfigured  to  support  the
following:

         |X| Multiple  protocols.  The  cell  site's  protocols  can be added or
             removed. These are wireless protocols like AMPS, GSM, CDMA, W-CDMA,
             UMTS, 3G and new evolving standards;

         |X| Intelligent  call  routing.  Calls can be routed  centrally or in a
             distributed fashion to ease network  congestion,  allowing for more
             efficient use of network resources; and

         |X| Flexible  management  and billing  systems.  The open  architecture
             interfaces  of  SpectruCell  allow  for  the  provision  of a  more
             customer   driven   service  that  utilizes  third  party  software
             applications.

         We also believe that existing  network  providers will have the ability
to:

         |X| Upgrade their  existing  network to evolving new protocols  without
             having to start  again with a new  network,  maintaining  the asset
             base of their old networks;

         |X| Gradually  and  seamlessly   replace  their  existing  mobile  base
             stations with SpectruCell base stations.  In October 2001, Advanced
             Communications (Australia) demonstrated the completion of the first
             known  two-way  voice  call on a SDR  platform  using  the  CDMAone
             (IS-95B)  protocol.  This  involved the use of a standard  Qualcomm
             handset and interaction with industry  standard  network  emulation
             equipment provided by Alcatel;

         |X| Replace  existing  base stations with  SpectruCell  base  stations,
             allowing  network  providers to rollout new services and protocols;
             and

         |X| Increase their current call capacity while still  maintaining their
             existing infrastructure.  As the SpectruCell technology is software
             based, it provides the network  operator with the ability to adjust
             network parameters in real time, as opposed to traditional hardware
             based  technologies  whose  settings  are  fixed  at the  point  of
             manufacture  or must be updated  manually and  individually  in the
             field.   By  utilizing   SpectruCell's   software   defined   radio
             capabilities,   network  operators  are  expected  to  be  able  to
             dynamically  assign call carrying  capacity  between cells. In this
             instance,  a carrier could assign capacity from underutilized cells
             to resource  deficient cells,  thereby  increasing traffic handling
             capacity  in that  particular  cell.  By  allowing  the  carrier to
             effectively  increase the traffic handling capability of individual
             network  cells,  the  carrier  is  expected  to be able to  address
             customer demand as and when it occurs. The carrier is also expected
             to be able to do this with existing  infrastructure  as SpectruCell
             has been  designed  to utilize  existing  antenna  arrays and fiber
             optic links between cell sites and the central switching office.

COMPETITION

         We believe that the  SpectruCell  system will compete with  traditional
cellular telephone and other wireless communications  technologies.  However, we
will have to differentiate our technology through cost savings in implementation
and upgrades and through improved service.

         Some of the competitive  advantages of the SpectruCell  system are more
efficient  equipment  utilization,  reduced  capital  equipment costs and higher
revenues from increased U.S. and foreign roaming,  or multiple  protocol,  calls
handled in domestic networks. If a network provider has implemented  SpectruCell
into their existing  network  infrastructure  the ability for a customer to roam


                                       12
<PAGE>

onto that network is directly  related to whether or not that  network  provider
decided  to  implement  the  relevant  wireless  protocol  onto  their  existing
infrastructure.  So if one  network  provider  deployed  CDMA  and GSM  over its
existing  TDMA network  through a SpectruCell  base station,  customers of other
network  providers  would be able to roam the network covered by the SpectruCell
base  station.  Consequently,  the one  network  provider  would  bill the other
providers  for  customers  roaming onto its network,  thereby  offering  greater
coverage.

         Advanced   Communications   Technologies   (Australia)   Pty  Ltd.  has
identified  at  least  one  competitor  to  the  SpectruCell  Technology.   This
competitor is Airnet (www.Airnet.com).  We expect to face increasing competition
as other  telecommunications  companies  realize  the  advances of SDR and begin
devoting  more  resources to  developing  SDR base  technologies.  Many of these
companies have substantially  greater resources than we do. These companies also
have  more  experience  than we do in  obtaining  government  approval  from the
Federal Communications  Commission and other agencies. We cannot be sure that we
will be able to effectively  compete with existing wireless network companies or
that we will gain acceptance for the SpectruCell system.

SALES AND DISTRIBUTION

         We expect to have independent distribution and sales offices located in
Los Angeles, New York City and Fort Lauderdale. Sales from these offices will be
directed  mainly  to  OEMs,  Network  Operators  and  telecommunication  product
manufacturers  who are  buying  components  to add to their own  product  or the
SpectruCell Platform as a third party developer.

GOVERNMENT REGULATION

         Our proposed provision of wireless  communications  services is subject
to  substantial  government  regulation.  Federal law regulates  interstate  and
international   telecommunications,   while   states  have   jurisdiction   over
telecommunications  that  originate and terminate  within the same state.  These
regulations require Advanced Communications (Australia) or our company to obtain
regulatory approval from the Federal Communications  Commission prior to the use
of the  SpectruCell  product.  At this time,  we cannot  estimate  how long this
process will take to complete or whether these efforts will be  successful.  The
inability to obtain FCC approval  would  prevent us from  deploying any wireless
applications,  which would be detrimental to our proposed  business  operations.
Changes in  existing  policies  or  regulations  in any state or by the  Federal
Communications  Commission  ("FCC") could have a material  adverse effect on our
financial condition or results of operations. There can be no assurance that the
regulatory  authorities  in one or more  states or the FCC will not take  action
having an adverse  effect on our business or  financial  condition or results of
operations.  The use of SDR  technology  in the  commercial  area is  subject to
conditions  specified  by the FCC. The FCC has stated that it will allow for the
deployment of SDR platforms and support the regulation of such equipment.

EMPLOYEES AND CONSULTANTS

         As of  February  15,  2002,  we have  eight  full  time  employees  and
consultants.  None of our  employees  are covered by any  collective  bargaining
agreement.






                                       13
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

         Our principal  executive office is located at 880 Apollo Street,  Suite
200, El Segundo,  California  90245.  We have a three-year  lease for our office
that expires on December 31, 2004.  The monthly rent is $7,634  inclusive of the
cost of monthly parking.

ITEM 3.  LEGAL PROCEEDINGS

         We are a defendant in number of lawsuits as described  below. We do not
believe that these matters will have a material adverse impact on our business.

         In NANCY J. NEEDHAM;  EDMUND R. DUPONT ET AL V. ADVANCED COMMUNICATIONS
TECHNOLOGIES,  INC., ET AL, an action filed July 2000 in the Fifteenth  Judicial
Circuit in the State of Florida,  two former  officers and directors of Advanced
Communications are seeking damages and injunctive relief arising out of Advanced
Communications'  refusal  to provide  legal  opinion  letters  and to take other
actions necessary to allow the former officers to convert  restricted stock into
unrestricted  stock under an exemption  under Rule 144. The plaintiffs  have not
specified the amount of damages they are seeking.  Advanced  Communications  has
filed a  counterclaim  to rescind all of the  Plaintiffs'  stock for lack and/or
failure of consideration  and other damages.  Advanced  Communications  believes
that it has  meritorious  defenses to the suit and is  vigorously  defending the
litigation.  In  October  2001,  the  Court  denied  summary  judgment  for  the
Plaintiffs.

         In  ADVANCED  COMMUNICATIONS  TECHNOLOGIES,  INC.,  ET AL V.  WORLD  IP
INCORPORATED,  ET AL, an action filed in the Fifteenth  Judicial  Circuit in the
State of  Florida,  Advanced  Communications  sued  World IP  Incorporated,  its
subsidiaries and shareholders (collectively, "World") for breach of the terms of
a Stock  Subscription and Purchase  Agreement between the parties dated November
10,  1999.  The parties  entered  into  Settlement  and  Rescission  Agreements,
pursuant  to which all  transactions  between the  parties  including  the Stock
Subscription  and  Purchase  Agreement,  the issuance of World stock to Advanced
Communications  and the issuance of 500,000  shares of Advanced  Communications'
stock to World's  shareholders  were  rescinded  effective  November  10,  1999.
Further,   World's   shareholders   were  issued   320,000  shares  of  Advanced
Communications'  stock which will be  registered  pursuant  to the  Registration
Statement currently on file with the Securities Exchange Commission. The lawsuit
was dismissed by a Court order dated January 29, 2002.

         On April 24, 2002,  Advanced  Communications  entered into a Settlement
Agreement with the two remaining  September 1999 Convertible  Debenture holders,
AJW Partners,  LLC and New Millennium  Capital Partners II, LLC. Under the terms
of the Settlement Agreement, Advanced Communications is obligated to issue, over
a 180 day  period,  8,500,000  shares of its common  stock in  exchange  for the
dismissal  of the  lawsuit  and in  satisfaction  of the  remaining  outstanding
principal and accrued interest.  Advanced  Communications has the option,  until
July 23,  2002,  to  substitute  cash in lieu of shares.  On  closing,  Advanced
Communications  issued  1,460,725 and 664,275  shares of its common stock to AJW
Partners,  LLC and New  Millennium  Capital  Partners II, LLC,  respectively.  A
Stipulation and Order of Discontinuance  was filed with and Ordered by the court
on April 25, 2002 (See Note 7A ).

         On December 6, 2001,  Mr.  Roger May, as Chairman  and Chief  Executive
Officer  of  Advanced  Communications  (Australia),  sent a letter  to  Advanced
Communications  demanding  full  payment  of all  amounts  due  under  the Stock
Purchase Agreement between Advanced  Communications and Advanced  Communications
(Australia)  (the  "STOCK  PURCHASE  AGREEMENT).  This letter was dated six days
after  Mr.  May was  removed  by the  Board  of  Directors  from  all  executive
capacities  including as President  and Chief  Executive  Officer.  Mr. May sent
additional  demand  letters on December 11, 2001,  and December 21, 2001.  These
demand   letters   threatened  to  exercise  the  rights   granted  to  Advanced
Communications  (Australia) under its  constitutional  documents,  which include
exercising Advanced Communications (Australia)'s lien over the shares registered
in the name of  Advanced  Communications  or  declaring  that  those  shares  be
forfeited. Advanced Communications believes that it has fully met its obligation
under the Stock Purchase Agreement, which states that payments are only required
to be paid to Advanced  Communications  (Australia)  from those funds  remaining
after deduction of reserves needed for current  operations,  working capital and
the  development  and  expansion of its  operations  and the  operations  of its
subsidiaries  as determined by its Board of  Directors.  At this time,  Advanced
Communications  does not have  sufficient  funds  available  to pay to  Advanced
Communications  (Australia).  On January 23, 2002, Advanced Communications filed
suit against  Advanced  Communications  (Australia) and Roger May in the Supreme
Court of Victoria at Melbourne, Australia to protect its investment.

         On January 23,  2002,  the Court  issued an interim  order  effectively
enjoining   and   prohibiting   Advanced    Communications    (Australia)   from
"transferring,  dealing with, charging,  diminishing,  mortgaging,  assigning or
disposing  of"  Advanced   Communications'  stock  in  Advanced   Communications


                                       14
<PAGE>

(Australia).  Although the court order had already been extended  twice,  it was
again extended by the court on February 20, 2002, until a final determination is
made at trial. Advanced Communications (Australia) declined to contest the court
orders sought by Advanced  Communications.  Advanced Communications  (Australia)
filed its Answer to the suit and the parties are currently  conducting discovery
of material documents.

         On March 15, 2002, Advanced  Communications  (Australia) issued a press
release  stating  that  EntrePort  Corporation  ("EntrePort"),  an  AMEX  listed
company,  executed  "definitive  documents"  whereby  EntrePort  would acquire a
minority   interest  in  Advanced   Communications   (Australia)   and  Advanced
Communications  (Australia)  would  purchase a majority  interest in  EntrePort.
Further, on March 14, 2002, Advanced Communications  (Australia) entered into an
Acquisition Agreement with EntrePort (the "Acquisition  Agreement") which stated
that Advanced  Communications  (Australia)  "now plans to locate and establish a
base of operations in the United States for the continued development, marketing
and distribution of the SpectruCell  product in the USA and Canada. Such base of
operations will involve the  establishment of engineering  facilities,  research
and development,  sales,  marketing and distribution." The Acquisition Agreement
also stated that EntrePort's  name would be changed to "Advanced  Communications
USA, Inc." Mr. May resigned from Advanced Communications' Board of Directors one
day before entering into the Acquisition Agreement.

         Advanced Communications believes that the transaction with EntrePort as
described in the Acquisition  Agreement is inconsistent  with the rights granted
to it by Advanced  Communications  (Australia)  in the License and  Distribution
Agreement dated July 5, 2000 pursuant to which Advanced  Communications received
the exclusive  rights to market and  distribute  the  SpectruCell  technology in
North, South and Central America.  Advanced Communications  therefore instructed
its  Australian  lawyers  to  write  to  Advanced   Communications   (Australia)
requesting  an  undertaking  that it would not  appoint  EntrePort  or any other
person to market and  distribute  the  SpectruCell  technology  in the exclusive
territory  in  breach  of  the  license   agreement.   Advanced   Communications
(Australia) refused to provide the undertaking sought by Advanced Communications
and,  accordingly,  Advanced  Communications  applied  to the Court for an order
restraining Advanced Communications  (Australia) from breaching the terms of the
license  agreement.  On April 26, 2002, the Court issued an interim order on the
following terms:

         "Until the determination of the plaintiff's  [i.e.,  Advanced
         Communications']  summons  filed on 23 April  2002 or further
         order,  the first defendant  [i.e.,  Advanced  Communications
         (Australia)],   whether   by  itself  or  by  its   officers,
         employees, agents, attorneys, or any of them or otherwise, be
         restrained  from appointing or agreeing to appoint in any way
         whatsoever  EntrePort  Corporation  or any  other  person  to
         distribute,  sell,  offer to sell or supply or otherwise deal
         in  or  with  the  wireless  or  terrestrial  multi-protocols
         communication   network   technology   known  as  SpectruCell
         (`Product')  (incorporating  the software  which  enables the
         Product to perform to its specifications, consisting of a set
         of instructions or statements in machine readable medium, and
         any enhancement or modification of that software (`Software')
         and  related  hardware  performing  part of the base  station
         controller    which    processes   and    transmits    mobile
         communications  protocols  such  as  AMPS,  CDMA,  TDMA  GSM,
         W-CDMA, UMTS, 3G & Voice IP) in the United States of America,
         the North American and South American Continents  (`Exclusive
         Territory')   without  the  prior  written   consent  of  the
         plaintiff."

         On May 7, 2002,  Advanced  Communications  received a notice alleging a
breach  from   Advanced   Communications   (Australia)   stating  that  Advanced
Communications had breached its obligation under the License Agreement. Advanced
Communications  believes  that the notice of breach is  without  merit and it is
taking  the  necessary   legal  actions  to  prevent   Advanced   Communications
(Australia) from terminating its rights under the License Agreement.

         On May 8, 2002, the Court extended its April 26, 2002 order through May
14, 2002, further restraining Advanced  Communications  (Australia) from "acting
upon or taking any further  steps in reliance  upon" the notice of breach  until
May 14, 2002 when this matter will be heard by the Court.

         In  STAR  MULTI  CARE   SERVICES,   INC.  v.  ADVANCED   COMMUNICATIONS
TECHNOLOGIES, INC., an action filed September 18, 2000 in the Fifteenth Judicial
Circuit in the State of Florida,  Star Multi Care Services,  Inc.  ("Star") sued
Advanced  Communications  for alleged  breach of contract  and the recovery of a
break-up or termination  fee in excess of $50,000 in  conjunction  with Advanced
Communications'  alleged  failure to  consummate a proposed  merger with Star in
January 2000.  Advanced  Communications  believes that the suit is without basis
and is vigorously defending the alleged claim.

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

         There were no votes submitted during the fiscal year end.


                                       15
<PAGE>

         On September 11, 2001 a Special Meeting of Stockholders was held at our
offices in Irvine,  California. At this meeting, our stockholders authorized the
following changes to our Articles of Incorporation:

         1. To increase our authorized  shares of common stock from  100,000,000
shares to 200,000,000;

         2. To provide for a class of 25,000,000 shares of Preferred Stock which
will have such  terms as the Board of  Directors  shall  determine  from time to
time; and

         3. To provide for indemnification of our officers, directors, employees
and agents to the full extent permitted by law.

         A Certificate of Amendment to our Articles of  Incorporation  embodying
the above changes was filed in Florida on September 27, 2001.






                                       16
<PAGE>

                                     PART II

         ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         MARKET INFORMATION

         Our common stock is currently  traded on the  National  Association  of
Securities  Dealers  Automated  Quotation System Over the Counter Bulletin Board
("OTCBB")  under the  symbol  "ADVC".  As of  September  30,  2001,  there  were
97,693,489 common shares outstanding and approximately 345 holders of record.

         The following table sets forth, for the fiscal periods  indicated,  the
bid price range of our common stock:

                                                    HIGH BID          LOW BID
                                                    --------          -------

          2000
          Quarter Ended September 30, 1999             $ .72            $ .24
          Quarter Ended December 31, 1999               5.50              .31
          Quarter Ended March 31, 2000                  7.19             2.00
          Quarter Ended June 30, 2000                   2.62             1.03

          2001
          Quarter Ended September 30, 2000             $1.25            $ .56
          Quarter Ended December 31, 2000               1.19              .48
          Quarter Ended March 31, 2001                  1.03              .45
          Quarter Ended June 30, 2001                    .68              .27

         Such market quotations reflect the high bid and low prices as reflected
by the OTCBB or by prices,  without retail mark-up,  markdown or commissions and
may not necessarily represent actual transactions.

         We did not pay any dividends during fiscal 2001 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 the Board of  Directors  deems
relevant.  See  Item 7,  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations".

RECENT SALES OF UNREGISTERED SECURITIES

         In January 2002, Advanced  Communications  entered into the Equity Line
of Credit  Agreement  where  Advanced  Communications  may,  at its  discretion,
periodically  issue and sell to Cornell Capital Partners,  L.P. shares of common
stock for a total purchase  price of $30 million.  The amount of each advance is
subject to an aggregate  maximum  advance amount of $2 million in any thirty-day
period. Cornell Capital Partners,  L.P. 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 an advance notice. In addition, Cornell Capital Partners
is  entitled  to retain 3% of each  advance  under the  Equity  Line of  Credit,
together with a one-time  commitment  fee of $740,000,  payable in shares of its
common stock. On January 28, 2002, we issued  2,960,000 shares of our restricted
common stock to Cornell Capital Partners,  LP with a market value of $740,000 as
a commitment fee for the $30 million  structured  equity line facility.  Cornell
Capital  Partners  intends to sell any shares purchased under the Equity Line of
Credit at the then prevailing  market price.  Additionally,  Westrock  Advisors,
Inc. was paid a fee of 40,000 shares of Advanced  Communications'  common stock,
which is equal to $10,000  at a closing  bid of $0.25 on  January  10,  2002 for
acting as the placement agent.

         In January  2002,  Advanced  Communications  entered  into a Securities
Purchase  Agreement  with  Buyers  (as listed in  Schedule  1 of the  Securities
Purchase Agreement), where they shall issue and sell to Buyers up to One Million
Dollars  of  convertible  debentures  Advanced  Communications  has  outstanding
convertible  debentures with an original principal balance of $1,000,000.  These
debentures are convertible into shares of common stock at a price equal to equal
to either  (a) an  amount  equal to one  hundred  twenty  percent  (120%) of the
closing bid price of the common stock as of the closing date or $0.40, whichever
is higher,  or (b) an amount equal to eighty percent (80%) of the lowest closing
bid price of the common stock for the five trading  days  immediately  preceding
the conversion  date. If such conversion had taken place at $0.16 (i.e.,  80% of


                                       17
<PAGE>

the recent price of $0.20), then the holders of the convertible debentures would
have received  7,812,500 shares of common stock.  These  convertible  debentures
accrue  interest  at a rate 5% per  year  and are  convertible  at the  holder's
option.  These  convertible  debentures  have  a term  two  years.  At  Advanced
Communications'  option,  these  debentures may be paid in cash or redeemed at a
20% premium prior to January 2004.

         On January 22,  2002,  our  directors,  excluding  Mr. May and Roberts,
pursuant  to a January  4, 2002 Board of  Directors  Meeting,  were each  issued
200,000 shares for a total of 1,000,000  shares of our  restricted  common stock
for services rendered to us as directors for the 2001 and 2002 fiscal years.

         During the quarter ended December 31, 2001, we issued 557,408 shares of
our  restricted  common stock,  of which 419,681  shares valued at $116,335 were
issued in exchange for  professional  services and 137,727 shares were issued to
our placement  agent for placement  fees in connection  with the 504(d)  private
placement.

         During the quarter ended  September 30, 2001,  Advanced  Communications
issued 3,203,573 shares of its restricted  common stock, of which 780,240 shares
valued at $244,224  were issued in exchange for services  and  1,190,000  shares
valued at  $357,001  were  issued to various  employees  and vendors of Advanced
Communications (Australia) in partial repayment of our note payable.

         As of  September  30,  2001 and  June 30,  2001,  $200,750  of  Secured
Convertible Debentures were outstanding.  Advanced  Communications is in default
based on the April 1, 2000 due date and Advanced  Communications is currently in
litigation  with  these  debenture   holders.   On  April  24,  2002,   Advanced
Communications  agreed to settle  this  matter by  issuing a total of  8,500,000
shares of common stock over a 180-day period.

         During the year ended June 30,  2001,  Advanced  Communications  issued
1,051,491 shares of common stock for services. The stock was valued based on the
quoted trading price on the grant dates, which aggregated $328,870.

         During the quarter ending June 30, 2001, Advanced Communications issued
780,240  shares of restricted  common stock for  services.  The stock was valued
based on the quoted trading price on the grant dates, which aggregated $244,224.

         During  the  period of  December  2000 to August  2001,  pursuant  to a
private placement under Regulation D, Rule 506, Advanced  Communications  issued
3,060,600  shares of common  stock and  3,060,000  warrants  at $.30 per  share.
Advanced  Communications  received  $1,168,180  from  investors,  which included
$250,000 for stock not yet issued as of June 30, 2001 and $275,454 for warrants.
Advanced  Communications  issued  250,000  shares  of  common  stock,  valued at
$75,000, in payment of offering costs incurred. The value assigned to this stock
was based on the private  placement  memorandum of $.30 per share.  The value of
the common stock has been charged to equity as direct costs to the offering. The
fair market value of the warrants,  aggregating  $275,454,  was estimated on the
grant date using the  Black-Scholes  option pricing model as required under FASB
123 with the following weighted average assumptions: expected dividend yield 0%,
volatility 49.84%,  risk-free interest rate 4.22%, expected option life 2 years.
To date, no warrants have been exercised.

         During the quarter  ended  September  30, 2001, we issued an additional
1,233,333  shares of restricted  common stock for cash and warrants at $0.30 per
share that were  subscribed  for prior to August 2001. On February 27, 2002, our
Board of  Directors  approved a  resolution  to reprice  the  private  placement
offering from $0.30 per share to $0.20 per share.  This repricing will result in
the issuance of an additional  2,146,967  shares of common stock and warrants to
the private  placement  investors.  These additional  shares are included in the
number of shares that we are  registering  for these selling  shareholders.  The
exercise price of the underlying warrants will remain at $0.30 per share.

         During  December 2000,  holders of $412,800 of  convertible  debentures
elected to  convert  their  notes into  1,803,545  of  Advanced  Communications'
restricted  common stock.  Advanced  Communications  further reduced these bonds
payable by offsetting a related bond receivable in the amount of $36,450.

         As of April 5, 2000, Advanced Communications had a non-interest bearing
note payable to an affiliate of $7,500,000.  The following  schedule  represents
payments  on such debt by  issuance  of  restricted  common  stock to either the
affiliate or creditors of the affiliate.  Such transactions were recorded at the
market price of the stock at date of issuance.


                                       18
<PAGE>

                                              SHARES OF
                                            COMMON STOCK
         DATE                                  ISSUED                 VALUE
         ------------------------------     --------------       -------------
         September 2000                        5,000,000       $   3,500,000
         October 2000(1)                         460,000             460,000
         June 2001                             1,137,000             567,100
         September 2001                        1,190,000             357,001
         December 2001
                                               ---------       -------------

                                               7,787,000       $   4,884,101
                                               =========       =============

(1)   This transaction resulted in a gain on extinguishment of debt of $23,000.

         In April 2000, Advanced Communications acquired 20% of the common stock
of Advanced  Communications  (Australia).  The purchase  price of the investment
amounted to $19,350,000,  and was comprised of a note payable for $7,500,000 and
the  issuance  of  5,000,000  shares  of  restricted   common  stock  valued  at
$11,850,000.  The shares issued were valued at the average  quoted trading price
during  the  acquisition  period.  The  fair  value  of  the  investment  at the
acquisition  date was  determined to be  $3,657,472.  The excess of the purchase
price over the fair value of the  investment  in the amount of  $15,692,528  was
accounted for as goodwill.

         In April  2000,  Advanced  Communications'  20%  interest  in  Advanced
Communications  (Australia)  was  accounted  for  using  the  equity  method  of
accounting  and was stated at the  amortized  cost of goodwill and the equity in
undistributed  earnings  since  acquisition.  The equity in earnings of Advanced
Communications (Australia) was adjusted for the amortization of the goodwill, as
discussed above. Amortization was computed on a straight-line basis over fifteen
years.  The  amortization  of  goodwill  charged to income for each of the three
months ended September 30, 2001 and September 30, 2000 was $261,542.

         On September  30, 1999,  Advanced  Communications  entered into secured
convertible  debentures  purchase  agreement  with  two  companies,  which  were
stockholders of Advanced  Communications,  whereby Advanced  Communications sold
$500,000 of 12% Secured  Convertible  Debentures  due April 1, 2000,  which were
convertible into shares of Advanced  Communications'  Common Stock. In addition,
on September  30,  1999,  Advanced  Communications  issued  another  convertible
debenture to an unrelated  party in the amount of $150,000.  The debentures were
convertible,  at the holder's option, into shares of common stock in whole or in
part at any time after the original  issue date.  The number of shares of common
stock  issuable  upon  a  conversion  was  to  be  determined  by  dividing  the
outstanding principal amount of the debenture to be converted,  plus all accrued
interest,  by the  conversion  price.  The  conversion  price in  effect  on any
conversion date is 50% of the average of the bid price during the twenty trading
days  immediately  preceding the applicable  conversion  date.  The  convertible
debentures  contained a beneficial  conversion feature computed at its intrinsic
value which is the difference between the conversion price and the fair value on
the  debenture  issuance  date  of the  common  stock  into  which  the  debt is
convertible,  multiplied  by the  number  of  shares  into  which  the  debt  is
convertible at the commitment date. Since the beneficial  conversion  feature is
to be  settled by  issuing  equity,  the  amount  attributed  to the  beneficial
conversion  feature,  of  $650,000,  was  recorded as an interest  expense and a
component of equity on the  issuance  date during the fiscal year ended June 30,
2000.

         MFI (as previously  defined) was obligated to pay $150,000 to a company
(the "Payee")  pursuant to a convertible  promissory note. During December 1997,
MFI issued  75,000 of its common  shares to settle the amounts due to the Payee.
However,  a dispute arose as to whether the Payee authorized the issuance of the
shares.  The Payee filed a suit during  December 1997 to enforce the convertible
promissory  note.  Total  interest  payable  was  $84,507  as of June  30,  2000
resulting in the total principal and accrued  interest  payable at June 30, 2000
of $234,507. In June 2000, the parties agreed to settle the matter for a payment
of $200,000.  This resulted in a gain on extinguishment of debt in the amount of
$34,507. Advanced Communications made a payment of $50,000 by June 30, 2000. The
$150,000  remainder was to be paid with proceeds from the 75,000 shares of stock
and any  remaining  balance to be paid by Advanced  Communications.  The revised
obligation was to be paid by August 14, 2000. Advanced Communications  defaulted
on  this  revised   payment   obligation   and  a  judgment   against   Advanced
Communications was entered.  In October 2000,  Advanced  Communications sold the
75,000 shares of stock realizing  $41,802 which it remitted in partial repayment
of its outstanding debt. As of June 30, 2001, Advanced Communications' remaining
balance and accrued  interest on this  obligation  was  $118,530.  An additional
$4,206 of interest  was  accrued on this note and on October  19, 2001  Advanced
Communications  paid the  obligation  in full.  On  October  24,  2001  Advanced
Communications  received  notice  from  the  court  that its  judgment  has been
satisfied.


                                       19
<PAGE>

With  respect  to the sale of  unregistered  securities  referenced  above,  all
transactions  were exempt  from  registration  pursuant  to Section  4(2) of the
Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated  under the
1933 Act. In each instance,  the purchaser had access to sufficient  information
regarding Advanced Communications so as to make an informed investment decision.
More  specifically,  Advanced  Communications  had a reasonable basis to believe
that each purchaser was an  "accredited  investor" as defined in Regulation D of
the  1933  Act  and  otherwise  had  the  requisite  sophistication  to  make an
investment in Advanced Communications' securities.






                                       20
<PAGE>

<TABLE>
<CAPTION>
ITEM 6.  SELECTED FINANCIAL DATA

                                                                                FOR THE YEARS ENDED JUNE 30,
                                                                    ----------------------------------------------------
                                                                           2001             2000              1999
                                                                          ------           ------             -----
<S>                                                                 <C>                 <C>               <C>
Revenue                                                                   $ 50,000               $--               $--
Cost of Revenue                                                             57,310                --                --
Gross Profit (Loss)                                                         (7,310)               --                --
Operating Expenses                                                       3,334,581         4,635,186           673,274
Operating Profit (Loss)                                                 (3,341,891)       (4,635,186)         (673,274)
Other (Expense) Income/ Extraordinary Gain                             (16,390,675)         (475,241)              312
(Loss) Before Income Taxes                                             (19,732,566)       (5,110,427)         (672,692)
Provision for Income Taxes                                                      --                --                --
Net (Loss)                                                            $(19,732,566)      $(5,110,427)       $ (672,692)
Net (Loss) Per Share:
Basic and Diluted                                                           $ (.22)           $ (.07)           $ (.01)
Pro Forma Weighted Average Shares:
Basic and Dilutive                                                      87,976,428        76,750,291        60,619,676
                                                                    ==============      ============      ============


                                                                                FOR THE YEARS ENDED JUNE 30,
                                                                    ----------------------------------------------------
                                                                           2001             2000              1999
                                                                          ------           ------             -----
Cash and Cash Equivalents                                                    6,816          $ 36,979          $ 39,270
Working Capital                                                              6,816            36,979           412,770
Total Assets                                                             2,041,940        19,714,622           876,723
Total Debt                                                               4,611,702         9,007,570         1,231,002
(Deficiency)/Equity                                                     (2,569,762)       10,707,052          (354,279)


</TABLE>



                                       21
<PAGE>

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

         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.


YEAR ENDED JUNE 30, 2001 COMPARED TO YEAR ENDED JUNE 30, 2000

         The following summarizes our operations for both fiscal years:

<TABLE>
                                                            FOR THE YEARS ENDED JUNE 30,
                                                             ---------------------------
                                                               2001              2000
                                                               -----             -----
<S>                                                      <C>               <C>
Consolidated Statement of Operations Data:
Revenue                                                  $     50,000                --
Cost of Revenue                                                57,310                --
                                                         ------------      ------------
Gross Profit (Loss)                                            (7,310)               --
Selling, General and
Administrative Expenses                                     2,283,412         4,384,691
                                                         ------------      ------------
Operating Profit (Loss)                                    (2,290,722)       (4,384,691)
Loss from Investment Writedown                             (3,571,654)          (85,818)
Loss from Impairment of Goodwill                         (12,399,864)                --
Total Other (Expense) Income                                 (422,157)         (666,491)
Extraordinary Gain                                             23,000           277,068
                                                         ------------      ------------
(Loss) before Depreciation and Amortization               (18,681,397)       (4,859,932)
Depreciation and Amortization                              (1,051,169)         (250,495)
                                                         ------------      ------------
Net Income (Loss)                                         (19,732,566)       (5,110,427)
Earnings (Loss) per share                                       $(.22)            $(.07)
</TABLE>

         REVENUE

         We realized nominal revenue during the year from sales of international
telephone  services into Pakistan through our international  network  providers.
Such  revenue  represented  a 100%  increase  from the  prior  year.  We  ceased
operating our international  telephone  services network during the year because
of regulatory  difficulties we encountered in our target market.  We realized no
revenue from the sale and/or license of the SpectruCell  product as such product
was not ready to be commercially sold in our territory.

         OPERATING EXPENSES

         Total  operating  expenses for the fiscal years ended June 30, 2001 and
June 30, 2000 were $3,334,581 and $4,635,186  respectively  and represents a 28%
decrease from the prior fiscal year. Of these amounts, $1,214,739 and $3,409,038
or 36% and 74%  respectively,  were for professional  services rendered of which
$328,870 (27%) and $3,009,388  (88%) during the fiscal years ended June 30, 2001
and June 30, 2000, respectively,  was paid via the issuance of restricted common
stock and represent a non-cash  expense.  During the fiscal years ended June 30,
2001 and June 30, 2000, we paid $307,002 and $215,756 respectively, in cash fees
for professional  services rendered.  Professional fees decreased  substantially
from the  prior  year due  principally  to the fact  that  shares  issued in the
current fiscal year in exchange for professional  services  rendered were issued
at a lower price per share than the prior fiscal year.

         Depreciation and amortization  expense increased by $800,674 due to the
full year  amortization  of goodwill  associated with our investment in Advanced
Communications (Australia).

         Consulting fees, which includes employee payments,  increased nominally
from the prior  year.  During the fiscal  year ended June 30,  2001 and June 30,
2000, $32,000 and $259,970 respectively, was paid via the issuance of restricted
common stock and represents a non-cash expense.


                                       22
<PAGE>

         Other general and  administrative  expenses  (exclusive of professional
fees,  consulting  expenses and other non-cash charges) amounted to $501,048 for
the fiscal  year ended June 30,  2001,  an  increase  of $88,938  from the prior
fiscal year.

         Interest expense decreased $736,778 from the fiscal year ended June 30,
2000  due  principally  to the  issuance,  in  September  1999,  of our  Secured
Convertible  Debentures.  Approximately  $715,000  of the  decrease  in interest
expense is attributable to the intrinsic value of the convertible  debentures as
well as bond issuance costs charged to interest expense in fiscal 2000.

         Other  income  (expense)  includes a  one-time  write-off  of  $425,000
attributable  to the  abandonment  of our  investment  deposit for the  proposed
acquisition  of the ORBCOMM  assets and $192,474 of other income  recognized  in
fiscal 2000 on the abandonment of certain  accounts payable and accrued expenses
of MFI. It also includes a $12,399,864  loss in fiscal 2001 on the write-down of
Goodwill associated with our investment in Advanced Communications  (Australia),
as well as an increase of $3,485,836 in our share of a full year's loss from our
equity  ownership in Advanced  Communications  (Australia).  The  write-down  in
Advanced Communications  (Australia) was based on management's evaluation of the
business  prospects,  which  were  necessitated  by FASB  121  ("Accounting  for
Impairment  of Long Lived  Assets") and APB 18 ("The Equity Method of Accounting
for  Investments  in Common  Stock").  Such  pronouncements  require  the annual
evaluation  of  long-lived  assets  for  impairment.   Advanced   Communications
(Australia) has been in the development stage since inception,  and has not made
sales.  Based on these factors,  management  believed that the carrying value of
the good will in the investment should be reduced to $2,000,000,  resulting in a
$12,399,864 write-down of goodwill.

         EXTRAORDINARY GAIN

         Extraordinary  gain for the fiscal year ended June 30, 2001  included a
$23,000  gain on the  issuance  of our  restricted  common  stock to  vendors of
Advanced Communications  (Australia) in excess of the then current market value.
In  fiscal   2000,   we  realized   extraordinary   gains  of  $242,561  on  the
extinguishments  of prior  shareholder  loans in  exchange  for  600,000  of our
restricted  common stock,  and $34,507 on the  settlement of the Grassland  loan
payable. The prior shareholders were not shareholders of Advanced Communications
at the time these loans were forgiven.

YEAR ENDED JUNE 30, 2000 COMPARED TO THE YEAR ENDED JUNE 30, 1999

         REVENUE

         We  realized  no revenue  during  either the fiscal year ended June 30,
2000  or the  year  ended  June  30,  1999.  We are a  party  to a  license  and
distribution agreement with Advanced Communications  (Australia) which grants us
the right to license and sell the  SpectruCell  product  being  developed by our
affiliate.  Such product was still in the development stage as of June 30, 2000.
We have also developed a wholesale  telecommunications  network for service into
Pakistan which was not fully operational as of June 30, 2000.

         OPERATING EXPENSES

         General and administrative expenses for the fiscal years ended June 30,
2000 and June 30,  1999 were  $4,384,691  and  $673,274  respectively.  Of these
amounts,  $3,409,038  and  $148,379,  or 78%  and  22%  respectively,  were  for
professional  services rendered of which $3,009,388 (88%) during the fiscal year
ended June 30, 2000 was paid via the  issuance of  restricted  common  stock and
represent a non-cash  expense.  During the fiscal  years ended June 30, 2000 and
June 30, 1999,  we paid  $215,756 and  $148,378  respectively,  in cash fees for
professional services rendered.  Professional fees increased  substantially from
the prior year due  principally to the fact that a majority of our shares issued
in the current  fiscal year in exchange for services  were issued when the stock
was trading in the price range of $2.50 to $4 per share.

         Consulting fees, which includes employee  payments,  increased $146,877
from the prior year due  principally to an increase in staff and the issuance of
restricted  common stock at a higher  market price to third party  marketing and
promotional organizations. For the fiscal years ended June 30, 2000 and June 30,
1999,  $259,970  and  $330,166  respectively,  was  paid  via  the  issuance  of
restricted common stock and represents a non-cash expense.

         Other general and  administrative  expenses  (exclusive of professional
fees,  consulting  expenses and other non-cash charges) amounted to $412,110 for
the fiscal year ended June 30,  2000,  an  increase of $306,516  from the fiscal
year ended June 30, 1999. This increase is attributable to additional  corporate
overhead expenses resulting from the expansion of our corporate  headquarters in
California and the $125,000 bad debt reserve for the World IP receivable.


                                       23
<PAGE>

         Interest expense  increased from $5,580 to $747,110 or by $741,530 from
the fiscal year ended June 30,  1999 as a result of the  issuance of the Secured
Convertible Debentures in September 1999. Approximately $650,000 of our interest
expense in fiscal 2000 is attributable to the intrinsic value of the convertible
debentures  executed  by us. Bond  issuance  costs  being  amortized  during the
current  fiscal year  accounted  for an additional  $65,000  charged to interest
expense.

         Other income  (expense)  includes a ($85,818)  loss  (expressed in U.S.
dollars) from our  investment  in Advanced  Communications  (Australia)  for the
period  April 5, 2000  through June 30,  2000,  as  determined  under the equity
method of  accounting.  In addition,  $192,474 of other income was recognized on
the abandonment of certain accounts payable and accrued expenses of MFI.

         EXTRAORDINARY GAINS (LOSSES)

         Extraordinary   Gains  (Losses)   include   $242,561  of  gain  on  the
extinguishments  of prior  shareholder  loans in  exchange  for  600,000  of our
restricted  common stock and a gain of $34,507 on  settlement  of the  Grassland
loan payable. We realized no extraordinary gain or loss in the fiscal year ended
June 30,  1999.  The  prior  shareholders  were  not  shareholders  of  Advanced
Communications at the time these loans were forgiven.

LIQUIDITY AND CAPITAL RESOURCES

         Since our inception,  we have financed our operations  through the sale
of common stock and  convertible  debentures and from  unsecured  loans from our
major shareholder. We have raised approximately $2,900,000 before offering costs
through the sale of these securities and have borrowed  $992,736 from Roger May,
a former  officer and  director of our  company and a  significant  shareholder.
These loans are non-interest bearing and are unsecured.

         At June 30, 2001, our cash and cash  equivalents  balance was $6,816, a
decrease  of $23,338  from the balance of $30,154 at June 30,  2000.  During the
year ended June 30, 2001,  cash provided by (used in)  operations  and investing
activities amounted to ($1,479,999) and $256,019, respectively. Cash provided by
financing  activities during the year ended June 30, 2001 amounted to $1,712,680
and  consisted  of loans from Roger May, a former  officer  and  director of our
company and a  significant  shareholder  and the sale of  securities  in private
offerings. We had a working capital deficiency in the amount of ($2,431,719) for
the year ended June 30, 2001.

         On August 14, 2001, we filed a S-1  Registration  Statement to register
37,500,000 of our shares in connection with our proposed $12,000,000 equity line
credit facility with Ladenburg  Thalmann & Co., Inc. and Wanquay Limited.  Based
on comments  received by the SEC  relating  to the terms and  conditions  of the
proposed equity line and on advice of counsel, on November 30, 2001, we withdrew
the  Registration  Statement with the SEC.  Advanced  Communications  intends to
terminate this equity line of credit facility.

         On December 13, 2001, we entered into a 90-day $325,000 Promissory Note
(the "Note") with Cornell Capital Partners, LP. The Note had an interest rate of
12% and was  secured by a  Guaranty  and Pledge  Agreement  executed  by Messrs.
Danson,  Lichtman  and  Prouty.  We  realized  $269,000  of net  proceeds  after
financing  costs and legal  fees.  The Note was repaid on January  14, 2002 with
proceeds from Advanced Communications' $1 million Convertible Debentures.

         On January 10, 2002,  we executed  various  financing  agreements  with
Cornell Capital Partners, LP ("Cornell"),  a New Jersey-based hedge fund whereby
Cornell and certain  other  investors  purchased  from us $1 million of two-year
Convertible  Debentures and Cornell entered into a $30 million structured equity
facility.  Pursuant to the Convertible Debenture financing, we received $564,000
net of financing and closing costs and the repayment of the $325,000  ninety-day
note. Under the terms of the $30 million structured equity facility, we have the
right to require  Cornell to make  monthly  purchases of up to $2 million of our
stock on a discounted basis.

         Our  anticipated  cash needs over the next 12 months consist of general
working  capital  needs  of  $1,200,000,   plus  the  repayment  of  outstanding
indebtedness  of  $2,671,773.  These  obligations  include  outstanding  secured
convertible  debentures  in an amount of $200,750  that are subject of a pending
lawsuit brought by the lenders, as well as accounts payable and accrued expenses
of  $847,737,  accrued  compensation  of  $566,550  and  a  loan  payable  to  a
shareholder of $992,736.

         In addition, our company has a note payable to Advanced  Communications
(Australia) of $1,791,166 at December 31, 2001.


                                       24
<PAGE>

         We  anticipate  that our cash needs  over the next 12 months  will come
primarily  from the sale of  securities  or loans,  including the Equity Line of
Credit.  Pursuant to the Equity Line of Credit,  we may  periodically  issue and
sell to  Cornell  Capital  Partners,  L.P.  shares of  common  stock for a total
purchase  price of $30  million.  The  amount of each  advance  is subject to an
aggregate maximum advance amount of $2 million in any thirty-day period. Cornell
Capital  Partners,  L.P.  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 an advance notice. In addition,  Cornell Capital Partners may
retain 3% of each  advance  under the  Equity  Line of Credit.  Cornell  Capital
Partners intends to sell any shares purchased under the Equity Line of Credit at
the then prevailing market price.  Except for the Equity Line of Credit, we have
no commitments for capital.

         Our ability to draw upon the Equity Line of Credit is conditioned  upon
our  company  registering  with the SEC the shares of common  stock to be issued
under the Equity Line of Credit.

         On September  30, 1999,  Advanced  Communications  entered into secured
convertible  debentures  purchase  agreement  with  two  companies,  which  were
stockholders of Advanced  Communications,  whereby Advanced  Communications sold
$500,000 of 12% Secured  Convertible  Debentures  due April 1, 2000,  which were
convertible into shares of Advanced  Communications'  Common Stock. In addition,
on September  30,  1999,  Advanced  Communications  issued  another  convertible
debenture to an unrelated  party in the amount of $150,000.  The debentures were
convertible,  at the holder's option, into shares of common stock in whole or in
part at any time after the original  issue date.  The number of shares of common
stock  issuable  upon  a  conversion  was  to  be  determined  by  dividing  the
outstanding principal amount of the debenture to be converted,  plus all accrued
interest,  by the  conversion  price.  The  conversion  price in  effect  on any
conversion date is 50% of the average of the bid price during the twenty trading
days immediately preceding the applicable conversion date.

         The convertible  debentures  contained a beneficial  conversion feature
computed at its intrinsic  value which is the difference  between the conversion
price and the fair value on the debenture issuance date of the common stock into
which the debt is convertible, multiplied by the number of shares into which the
debt is  convertible  at the commitment  date.  Since the beneficial  conversion
feature  is to be  settled  by issuing  equity,  the  amount  attributed  to the
beneficial conversion feature, of $650,000,  was recorded as an interest expense
and a component of equity on the issuance date during the fiscal year ended June
30, 2000.

         During  December 2000,  holders of $412,800 of  convertible  debentures
elected to  convert  their  notes into  1,803,545  of  Advanced  Communications'
restricted  common stock.  Advanced  Communications  further reduced these bonds
payable by offsetting a related bond receivable in the amount of $36,450.

         As of  December  31,  2001 and  June  30,  2001,  $200,750  of  Secured
Convertible  Debentures was outstanding.  Advanced  Communications is in default
based on the April 1, 2000 due date.  The  holders of these  debentures  are AJW
Partners,  LLC, New  Millennium  Capital  Partners II, LLC and Bank  Insinger de
Beaufort,  N.V. These debentures were convertible,  at the holder's option, into
shares of common stock at a conversion  price equal to 50% of the average of the
bid price during the twenty  trading days  immediately  preceding the applicable
conversion date. These debentures had been the subject of litigation  pending in
the Federal Court for the Eastern  District of New York. On April 24, 2002, this
matter was  settled.  Pursuant to the terms of the  settlement,  we will issue a
total of 8,500,000  shares of common stock to the two  debenture  holders over a
180 day period.

         During December 1997, MFI, Advanced Communications' former name, issued
75,000 of its common  shares to settle the amounts due,  which was $150,000 to a
company (the "Payee") pursuant to a convertible  promissory note (the "Grassland
Note"). However, a dispute arose as to whether the Payee authorized the issuance
of the  shares.  The Payee  filed a suit  during  December  1997 to enforce  the
convertible  promissory  note. Total interest payable was $84,507 as of June 30,
2000 resulting in the total principal and accrued  interest  payable at June 30,
2000 of $234,507.  In June 2000,  the parties  agreed to settle the matter for a
payment of $200,000.  This resulted in a gain on  extinguishment  of debt in the
amount of $34,507. Advanced Communications made a payment of $50,000 by June 30,
2000. The $150,000 remainder was to be paid with proceeds from the 75,000 shares
of stock and any remaining  balance to be paid by Advanced  Communications.  The
revised  obligation was to be paid by August 14, 2000.  Advanced  Communications
defaulted on this revised  payment  obligation and a judgment  against  Advanced
Communications was entered.  In October 2000,  Advanced  Communications sold the
75,000 shares of stock realizing  $41,802 which it remitted in partial repayment
of its outstanding debt. As of June 30, 2001, Advanced Communications' remaining
balance and accrued  interest on this  obligation  was  $118,530.  An additional
$4,206 of interest  was  accrued on this note and on October  19, 2001  Advanced
Communications  paid the  obligation  in full.  On October 24,  2001,  the court
issued its notice of satisfaction and release.


                                       25
<PAGE>

         Advanced  Communications had a non-interest  bearing note payable to an
affiliate of $7,500,000 as of April 5, 2000. The following  schedule  represents
payments  on such debt by  issuance  of  restricted  common  stock to either the
affiliate or creditors of the affiliate.  Such transactions were recorded at the
market price of the stock at date of issuance.

                                 SHARES OF COMMON
         DATE                       STOCK ISSUED         VALUE
         ----------------------  -----------------     ----------
         September 2000             5,000,000        $  3,500,000
         October 2000(1)              460,000             460,000
         June 2001                  1,137,000             567,100
         September 2001             1,190,000             357,001
                                 -----------------     ----------
                                    7,787,000        $  4,884,101
                                 =================     ==========

(1)  This transaction resulted in a gain on extinguishment of debt of $23,000.

         During the year ended June 30, 2001 Advanced  Communications  repaid an
aggregate of $247,608 of the obligation in cash.  During the three-month  period
ended September 2001, Advanced  Communications  repaid $25,000 of the obligation
in cash.  No  payments  on the note were made  during  the  three  months  ended
December 31, 2001.

         Pursuant  to the terms of the April 5, 2000  Stock  Purchase  Agreement
between  Advanced  Communications  and  Advanced   Communications   (Australia),
Advanced  Communications  has elected to reduce its outstanding  loan balance by
$552,125 for funds previously advanced to Advanced Communications (Australia).

         As of  December  31,  2001,  the  balance of  Advanced  Communications'
obligation  to Advanced  Communications  (Australia)  was  $1,791,166.  Advanced
Communications   is  currently  in  litigation   with  Advanced   Communications
(Australia)  regarding the timing for the repayment of Advanced  Communications'
obligation.

         As of December  31,  2001,  Advanced  Communications  owed Roger May, a
former  officer  and  director of our  company  and a  significant  shareholder,
$992,736  for funds  advanced  to  Advanced  Communications  to provide  working
capital  and  for  the   repayment   of  certain  of  Advanced   Communications'
obligations. This loan is non-interest bearing and unsecured. This loan does not
have a scheduled date of repayment.

         On December  13, 2001  Advanced  Communications  entered  into a 90-day
$325,000  Promissory  Note (the "Note") with Cornell Capital  Partners,  LP. The
Note had an  interest  rate of 12% and was  secured  by a  Guaranty  and  Pledge
Agreement   executed  by  Messrs.   Danson,   Lichtman   and  Prouty.   Advanced
Communications realized $269,000 of net proceeds after financing costs and legal
fees.  The Note was repaid on  January  14,  2002 with  proceeds  from  Advanced
Communications' $1 million Convertible Debenture.

         During  the  period of  December  2000 to August  2001,  pursuant  to a
private placement under Regulation D, Rule 506, Advanced  Communications  issued
3,060,600  shares of common  stock and  3,060,000  warrants  at $.30 per  share.
Advanced  Communications  received  $1,168,180  from  investors,  which included
$250,000 for stock not yet issued as of June 30, 2001 and $275,454 for warrants.

         Advanced  Communications  issued 250,000 shares of common stock, valued
at $75,000,  in payment of offering costs  incurred.  The value assigned to this
stock was based on the private placement memorandum of $.30 per share. The value
of the common stock has been charged to equity as direct costs of the offering.

         The  fair  market  value  of the  warrants,  aggregating  $275,454  and
$110,000 at June 30, 2001 and September 30, 2001, respectively, was estimated on
the grant date using the  Black-Scholes  option  pricing model as required under
FASB 123 with the following  weighted  average  assumptions:  expected  dividend
yield 0%, volatility 49.84%, risk-free interest rate 4.22%, expected option life
2 years. At December 31, 2001, no warrants have been exercised.

         During  the  three  months   ended   September   30,   2001,   Advanced
Communications  received  the  balance of the  offering  proceeds  and issued an
additional  1,233,333  shares of its  restricted  common  stock  and  associated
warrants.

         On February 27, 2002,  our Board of Directors  approved a resolution to
reprice the private placement  offering from $0.30 per share to $0.20 per share.
This repricing will result in the issuance of an additional  2,146,967 shares of
common stock and warrants to the private placement  investors.  These additional


                                       26
<PAGE>

shares are  included in the number of shares that we are  registering  for these
selling shareholders.  The exercise price of the underlying warrants will remain
at $0.30 per share.

         During  the  three   months   ended   December   31,   2001,   Advanced
Communications  issued  137,727  shares of common  stock,  valued at  $41,318 in
payment of offering costs  incurred.  The value assigned to this stock was based
on the private  placement  memorandum of $.30 per share. The value of the common
stock has been charged to equity as direct costs to the offering.

We believe that the financings  described  above will provide us with sufficient
capital to meet our  immediate  and long term capital  needs with respect to our
plans  to  purchase  the   worldwide   rights  to   SpectruCell   from  Advanced
Communications  (Australia),  distribute and market  SpectruCell  throughout the
U.S. and other world markets as well as implement  other  acquisition and growth
strategies in the communications industry.

ACQUISITIONS

         None.

SUBSEQUENT EVENTS

         On August 29, 2001 we issued in the aggregate,  3,203,573 shares of our
restricted  common stock to the  following  parties:  1,233,333 to purchasers in
connection  with  our  Reg.  D  Section  506  private   placement,   780,240  to
professionals  for legal and other  services  provided  to us and  1,190,000  to
employees  and  vendors  of  Advanced  Communications   (Australia)  in  partial
repayment of our note  payable.  All  restricted  shares were issued at $.30 per
share.

         On  September  11, 2001 we convened a Special  Shareholders  meeting to
vote on  certain  amendments  to our  Articles  of  Incorporation.  See  Item 4.
Submission of Matters to a Vote to Security  Holders for a complete  description
of our shareholder meeting.

         On October 19, 2001 our  obligation to Grassland was settled in full by
the cash payment of $122,736  representing the unpaid balance of the amount owed
plus accrued interest.

ITEM 8.  FINANCIAL STATEMENTS

         The financial statements of Advanced  Communications are submitted as a
separate  section of this Form 10-KSB on pages F-1 through  F-19.  In  addition,
because Advanced  Communications  (Australia)'s financial results and operations
are an integral part of our business,  we have included the audited consolidated
financial statements of our affiliate as Exhibit 11 to our Form 10-KSB.

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

         None.






                                       27
<PAGE>

                                    PART III


ITEM 10. 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,  their principal offices and positions and the
date each such person  became a director or  executive  officer.  Our  executive
officers are elected  annually by the Board of Directors.  Our  directors  serve
one-year terms until their successors are elected.  The executive officers serve
terms of one year or until their death,  resignation  or removal by the Board of
Directors.  There are no family  relationships or understandings  between any of
the directors and executive officers.  In addition,  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 officers are as follows:

     NAME AND ADDRESS                AGE      POSITION
     ----------------------------  --------   ----------------------------------

     Wayne I. Danson                  48      President, Chief Financial Officer
     420 Lexington Ave.                       and Director
     New York, NY 10170

     Jonathan J. Lichtman             49      Director
     4800 N. Federal Hwy
     Boca Raton, FL 33431

     Dr. Michael Finch                53      Director
     37 Walnut Street
     Wellesley, MA 02481

     Randall Prouty                   49      Chairman of the Board of Directors
     19200 Von Karman Ave.
     Irvine, CA 92612

     Wilbank J. Roche                 50      Director
     2530 Wilshire Blvd.
     Santa Monica, CA 90403

         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.  Mr. Danson is party to a written consulting  agreement that entitles
him to $10,000 per month for the period  September  1, 2000  through  August 31,
2001 and, as extended orally, to December 31, 2001. Mr. Danson is reimbursed for
reasonable  out-of-pocket  expenses  relating to their  activities  for Advanced
Communications.

         Our directors are not  compensated  for their services as a director of
Advanced  Communications,  but are  reimbursed  for all of  their  out-of-pocket
expenses incurred in connection with the rendering of services as a director.

         WAYNE I. DANSON,  PRESIDENT,  CHIEF FINANCIAL OFFICER AND DIRECTOR. Mr.
Danson has served as Advanced  Communications's  Chief  Financial  Officer since
December 1, 1999,  and  President  since  April 30,  2002,  and was  appointed a
Director on January 3, 2000. 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 from  August  1996 to April 1999 Mr.  Danson  was  co-head of and
Managing  Director of  PricewaterhouseCoopers  LLP's Real Estate Capital Markets
Group.  Prior to  joining  PricewaterhouseCoopers,  from 1988  through  1995 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,  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


                                       28
<PAGE>

Taxation.  He is a certified public accountant and a member of the AICPA and the
New York State Society of CPAs.

         JONATHAN J. LICHTMAN,  DIRECTOR.  Mr. Lichtman was appointed a Director
of Advanced  Communications  on 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, from 1988 to 1998, 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 was  appointed a Director of
Advanced  Communications  on March  10,  1997 and  since  1998,  has been  Chief
Technology  Officer  of New Media  Solutions,  responsible  for the  conception,
planning,  creation,  execution  and  deployment  of all  software  products and
projects.  For the four years before that, he was employed by Media Forum (first
in the UK,  and  then in the US) as  Director  of  Product  Development.  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,  a  co-founder  of  Advanced
Communications  and Director  since March 10, 1997,  since May 1999 has been the
President and CEO of World Associates, Inc., a publicly traded development stage
company.  He is also the sole  owner of  Bristol  Capital,  Inc.  (successor  to
Bristol  Realty  Corp.) from 1984 to present,  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  and is
considered an expert in real estate finance.  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 of
Advanced  Communications 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  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.  In the past several years,  he has
devoted substantial time to clients in the telecommunications business.

COMMITTEES OF THE BOARD OF DIRECTORS

         In a board meeting held on May 15 2001, both an audit and  compensation
committee  was  established.  The  audit  committee  will  report  to the  board
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 of the board of  directors  will
review and make recommendations to the board 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 of our other  employees.  The  compensation  committee  is
comprised of Messrs. Roche and Prouty.

RESIGNATIONS

         Effective March 14, 2002, Roger May and Allen Roberts resigned from our
company's Board of Directors.


                                       29
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table shows all cash compensation  accrued and/or paid by
Advanced Communications,  as well as certain other compensation paid or accrued,
for the  fiscal  years  ended  June 30,  2001 and 2000.  Other than as set forth
herein, no executive  officer's cash salary and bonus exceeded $50,000 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>
                                        ANNUAL COMPENSATION                     LONG-TERM COMPENSATION
                                                                                  AWARDS         PAYOUTS
                                                               OTHER       RESTRICTED
                                                              ANNUAL         STOCK       OPTIONS/  LTIP     ALL OTHER
NAME AND                             SALARY      BONUS     COMPENSATION     AWARD(S)      SARS   PAYOUTS  COMPENSATION
PRINCIPAL POSITION        YEAR         ($)        ($)           ($)           ($)         (#)      ($)         ($)
<S>                        <C>   <C>             <C>             <C>        <C>            <C>      <C>           <C>
Roger May, CEO             2001  $197,500(1)     $50,000         --               --       --       --            --
CEO                        2000  $120,000(1)          --         --               --       --       --            --

Wayne I. Danson,           2001  $235,931(2)          --         --         $167,500       --       --            --
CFO                        2000  $ 50,000(3)          --         --         $223,400(4)    --       --            --


(1)  Accrued and unpaid compensation. No cash was received by Mr. May during the fiscal years ended June 30, 2001 and
     2000. Mr. May's  compensation  for fiscal 2001 includes a $50,000 cash bonus which remains unpaid as of June 30,
     2001. Mr. May left Advanced Communications on November 30, 2001.


(2)  Represents the value of accrued fees and  stock-based  compensation  earned by Mr. Danson during the fiscal year
     ended June 30, 2001.  Stock-based  compensation  amounted to $167,500.  Of accrued consulting fees earned in the
     amount  of  $235,931,  only  $23,105  was  paid in cash to Mr.  Danson.  The  balance  of Mr.  Danson's  accrued
     compensation  remains unpaid as of June 30, 2001. In August 2001, Mr. Danson agreed to receive 500,000 shares of
     our restricted common stock in lieu of $150,000 of unpaid consulting fees.

(3)  Mr.  Danson  became  Chief  Financial  Officer of  Advanced  Communications  on December 1, 1999 and such amount
     reflects the cash  compensation  (exclusive of reimbursement of expenses) paid to him during the period December
     1, 1999 to June 30, 2000.
</TABLE>

         Advanced  Communications has no deferred  compensation,  stock options,
SAR or other bonus  arrangements for its employees and/or directors.  During the
fiscal year ended June 30, 2001, all decisions concerning executive compensation
were  made  by the  Board  of  Directors  and  effective  May  15,  2001  by our
compensation  committee.  Our  compensation  committee  will  be  reviewing  the
propriety of  establishing  various stock option and SAR Grant  programs for the
benefit of our executive employees during the fiscal year ending June 30, 2002.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table contains information about the beneficial ownership
of our common stock as of September 30, 2001 for:

         o   each  person who  beneficially  owns more than five  percent of the
             common stock;

         o   each of our directors;

         o   the named executive officers; 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.,  880 Apollo  Street,
Suite 200, El Segundo, CA 90245.

         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.  Except as indicated by footnote,  and subject


                                       30
<PAGE>

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  97,693,489  shares of  common  stock  outstanding  as of
September 30, 2001.

<TABLE>
                                                                      NUMBER OF
                                                                        SHARES
                                                                     BENEFICIALLY              PERCENTAGE OF
                                                                        OWNED                SHARES OUTSTANDING
                                                                   ----------------         --------------------
                   <S>                                                 <C>          <C>           <C>
                   Roger May                                           24,482,000   (1)(2)        25.1%
                   Nancy Needham                                       11,958,801   (3)*          12.2%
                   R.H. Du Pont                                         6,200,383   (4)*           6.4%
                   Wayne Danson                                           974,316   (5)            1.0%
                   Jonathan J. Lichtman                                 1,047,500   (6)            1.1%
                   Dr. Michael Finch                                      100,000   **
                   Randall Prouty                                         774,500   **
                   Wilbank J. Roche                                        50,000   **
                   Allen Roberts                                          100,000   (7)**
                   All Officers and Directors as a Group               27,528,316                 28.2%

(1)   No shares are owned  directly  by Mr.  May.  All  shares  beneficially  owned by Mr.  May are owned  through
      affiliated entities and/or by family members.


(2)   Includes 10,000,000 shares beneficially owned through Advanced Communications Technologies Pty Ltd.


(3)   Includes 4,790,347 shares held by Mrs. Needham's adult children.


(4)   Includes 5,173,572 shares held by Mr. DuPont's adult children and in trust for Rhett DuPont, a minor.


(5)   Includes 824,316 shares owned beneficially by Mr. Danson's affiliated entity.


(6)   Excludes 160,000 shares  beneficially owned through various family trusts because Mr. Lichtman does not have
      voting or investment making decision over the shares held by the trusts. Mr. Lichtman  disclaims  beneficial
      ownership of these shares.


(7)   All shares are indirectly held by a Family Trust.

*     We are disputing the ownership of these shares.  In July 2000, these  shareholders  filed a suit against our
      company for failing to provide an opinion  regarding  the sale of these  shares  under Rule 144  promulgated
      under the 1933 Securities Act. Our company filed a counterclaim  seeking to rescind these shares for lack of
      consideration and other reasons. These shareholders were former officers and directors of our company.

**    Less than 1%.
</TABLE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Mr. May, an officer and director of our company until November 30, 2001
and March 14, 2002, respectively, and a principal shareholder,  through a family
trust established in Australia by the May family, indirectly owns a 70% interest
in  Advanced  Communications  (Australia),  Advanced  Communications  Technology
(Australia)  Pty Ltd. We own 20% of the common stock of Advanced  Communications
Technology  (Australia) Pty Ltd. There are no agreements or understandings  with
Advanced Communications (Australia) regarding future loans or advances.

         During the year,  we repaid  $5,326,833  of our  obligation to Advanced
Communications  (Australia),  Advanced Communications Technology (Australia) Pty
Ltd.,  in part by the issuance of 6,597,000  shares of  restricted  common stock
having a value of  $4,527,100.  The balance of our repayments was in the form of
cash and the  offset of  previous  funds  advanced  to  Advanced  Communications
(Australia).

         In the year ended June 30, 2001, our company owed Global Communications
Technologies,  Ltd.,  an entity owned by Mr. May, an officer and director of our
company  until  November  30,  2001 and  March  14,  2002,  respectively,  and a
principal   shareholder,   a  total  of  $796,000.   Our  obligation  to  Global
Communications Technologies,  Ltd. is non-interest bearing, unsecured and is due
on demand.  During the fiscal  year ended June 30,  2000,  we were  indebted  to
Global Communications  Technologies,  Ltd. for $251,500 for advances made. There
are no agreements or understandings with Global Communications  regarding future
loans or  advances.  In  addition,  Mr. May has  deferred  receiving  his annual


                                       31
<PAGE>

compensation   and  is  owed   $479,050  and  $231,550  in  accrued  and  unpaid
compensation  as  of  June  30,  2001  and  2000,  respectively.   The  deferred
compensation does not accrue interest and has no scheduled due date.

         Effective July 1, 2000, Advanced Communications and Mr. May, an officer
of our company until November 30, 2001 and a director of our company until March
14, 2002 and a principal  shareholder,  entered into a revised  oral  employment
agreement that provides for Mr. May to receive $15,000 per month in compensation
and a  special  bonus of  $50,000.  Effective  December  1,  2001,  our Board of
Directors granted Mr. May an increase in salary to $17,500 per month.

On September 1, 2000,  Mr. Danson entered into a one-year  consulting  agreement
with Advanced Communications for the period September 1, 2000 through August 31,
2001.  Under the terms of the  consulting  agreement,  Mr.  Danson will  receive
$10,000 per month in cash and $10,000 per month in stock for his  services.  Mr.
Danson's agreement expired on August 31, 2001 and has been extended orally by us
through December 31, 2001.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

         (a)    Financial Statements:

                (i)   Registrant.

                (ii)  Advanced Communications Technology (Australia) PTY, LTD
                      and Controlled Entities.

         (b)    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

<TABLE>
EXHIBIT NO.       DESCRIPTION                                              LOCATION
-------------
<S>               <C>                                                      <C>
1.1               Exchange Agreement between MRC Legal Services            Incorporated by reference to Exhibit 1.1 to
                  Corporation and Advanced Communications Technologies,    Company's Form 8-K filed on February 4, 2000
                  Inc. dated as of January 31, 2000

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

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

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

2.4               Bylaws of the Company                                    Incorporated by reference to Exhibit 2.4 to
                                                                           the Company's Form S-8 filed on February 9,
                                                                           2000

2.5               Articles of Incorporation as currently in effect for     Incorporated by reference to Exhibit 3.1 to
                  the Company                                              Form S-1 Registration Statement filed on
                                                                           August 14, 2001

2.6               Bylaws, as currently in effect                           Incorporated by reference to Exhibit 3.2 to
                                                                           Form S-1 Registration Statement filed on
                                                                           August 14, 2001

2.7               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

                                                           32
<PAGE>

10.1              Lease Agreement dated as of November 27, 2001 between    Incorporated by reference to Exhibit 10.1 to
                  the Company and Continental Development, L.P. II         the Form SB-2 filed with the SEC on March 5,
                                                                           2002

10.2              Stock Purchase Agreement between Advanced                Incorporated by reference to Exhibit 10.2 to
                  Communications Technologies, Inc. and Advanced           the Form S-1 Registration Statement filed on
                  Communications Technologies (Australia) Pty Ltd.         August 14, 2001

10.3              Agreement dated June 27, 2000, between Ladenburg         Incorporated by reference to Exhibit 10.3 to
                  Thalmann & Co. and the Company                           the Company's Form S-1 Registration Statement
                                                                           filed on August 14, 2001

10.4              Common Stock Purchase Agreement dated December 14,       Incorporated by reference to Exhibit 10.4 to
                  2000, between the Company and Wanquay Ltd.               the Company's Form S-1 Registration Statement
                                                                           filed on August 14, 2001

10.5              Registration Rights Agreement dated December 14, 2000,   Incorporated by reference to Exhibit 10.5 to
                  between the Company and Wanquay Ltd.                     the Company's Form S-1 Registration Statement
                                                                           filed on August 14, 2001

10.6              Escrow Agreement dated December 14, 2000, among the      Incorporated by reference to Exhibit 10.6 to
                  Company, Wanquay Ltd. and Epstein Becker & Green         the Company's Form S-1 Registration Statement
                                                                           filed on August 14, 2001

10.7              Consulting Agreement with M. Richard Cutler dated        Incorporated by reference to Exhibit 10.1 to
                  January 31, 2000                                         the Company's Form S-8 filed on February 9,
                                                                           2000

10.8              Stock Purchase Agreement dated April 5, 2000, between    Incorporated by reference to Exhibit 10.5 to
                  Advanced Communications Technologies, Inc. and           the Company's Form 10-QSB filed on May 24, 2000
                  Advanced Communications Technologies Pty Ltd.

10.9              Securities Purchase Agreement dated January 10, 2002,    Incorporated by referenced to Exhibit 10.9 to
                  by and among Advanced Communications Technologies,       the Company's Form 10-QSB filed on February
                  Inc. and Buyers                                          12, 2002

10.10             Investor Registration Rights Agreement dated January     Incorporated by reference to Exhibit 10.10 to
                  10, 2002, by and among Advanced Communications           the Company's Form 10-QSB filed on February
                  Technologies, Inc. and Investors                         12, 2002

10.11             Transfer Agent Instructions                              Incorporated by reference to Exhibit 10.11 to
                                                                           the Company's Form 10-QSB filed on February
                                                                           12, 2002

10.12             Escrow Agreement dated January 10, 2002, by and among    Incorporated by reference to Exhibit 10.12 to
                  Advanced Communications Technologies, Inc., Buyers and   the Company's Form 10-QSB filed on February
                  First Union National Bank                                12, 2002

10.13             Equity Line of Credit Agreement dated January 10,        Incorporated by reference to Exhibit 10.13 to
                  2002, by and between Cornell Capital Partners, LP and    the Company's Form 10-QSB filed on February
                  Advanced Communications Technologies, Inc.               12, 2002

10.14             Registration Rights Agreement dated January 10, 2002,    Incorporated by reference to Exhibit 10.14 to
                  by and between Advanced Communications Technologies,     the Company's Form 10-QSB filed on February
                  Inc.                                                     12, 2002

                                                           33
<PAGE>

10.15             Placement Agent Agreement dated January 10, 2002, by     Incorporated by reference to Exhibit 10.15 to
                  and between Advanced Communications Technologies, Inc.   the Company's Form 10-QSB filed on February
                  and Westrock Advisors, Inc.                              12, 2002

10.16             Escrow Agreement dated January 10, 2002, by and among    Incorporated by reference to Exhibit 10.16 to
                  Advanced Communications Technologies, Inc., Cornell      the Company's Form 10-QSB filed on February
                  Capital Partners, LP, Butler Gonzalez LLP and First      12, 2002
                  Union National Bank

10.17             License and Distribution Agreement dated as of July 5,   Provided herewith.
                  2002, between Advanced Communications Technologies,
                  Inc. and Advanced Communications Technologies
                  (Australia) Pty. Ltd.

11.0              Audited Consolidated Financial Statements for Advanced   Incorporated by reference to Exhibit 11.0 to
                  Communications Technology (Australia) PTY Ltd. and       the Company's Form 10-KSB filed on October 30,
                  controlled entities                                      2001

         (ii)     Reports on Form 8-K.

                  None.


</TABLE>


                                                           34
<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  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


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

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


/s/ Wayne I. Danson
----------------------------------
Wayne I. Danson                               President (Principal Executive Officer), Chief           May 22, 2002
                                              Financial Officer (Principal Accounting Officer)
                                              and Director


/s/ Jonathan Lichtman
----------------------------------
Jonathan Lichtman                             Secretary and Director                                   May 22, 2002


/s/ Randall Prouty
----------------------------------
Randall Prouty                                Director and Chairman of the Board                       May 22, 2002


/s/ Michael Finch
-----------------------------------
Michael Finch                                 Director                                                 May 22, 2002


/s/ Wilbank Roche
------------------------------------
Wilbank Roche                                 Director                                                 May 22, 2002

</TABLE>






                                       35
<PAGE>


           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS


                               AS OF JUNE 30, 2001






                                       36
<PAGE>




           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2001

                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
                                                                                              PAGE(S)
                                                                                              -------
<S>                                                                                             <C>
Independent Auditor's Report                                                                    F-1

Consolidated Balance Sheet as of June 30, 2001                                                  F-2

Consolidated Statements of Operations for the Years Ended June 30, 2001 and 2000                F-3

Consolidated Statement of Changes in Stockholders' Equity (Deficiency) for the
Years Ended June 30, 2001 and 2000                                                              F-4

Consolidated Statements of Cash Flows for the Years Ended June 30, 2001 and 2000                F-5

Notes to Consolidated Financial Statements                                                      F-7






</TABLE>





                                       37


<PAGE>

                          INDEPENDENT AUDITORS' REPORT

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

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Advanced
Communications Technologies,  Inc., and Subsidiaries as of June 30, 2001 and the
related consolidated  statements of operations,  changes in stockholders' equity
(deficiency)  and cash flows for the years ended June 30,  2001 and 2000.  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 generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the 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, 2001, and the
results of their  operations  and their cash flows for the years  ended June 30,
2001 and 2000 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's  significant net loss of
$19,732,566  for the year ended June 30, 2001, a working  capital  deficiency of
$2,421,719,  and a  stockholders'  deficiency of $2,569,792,  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
October 19, 2001








                                      F-1
<PAGE>



           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               AS OF JUNE 30, 2001

                                     ASSETS

CURRENT ASSETS
   Cash                                                                  6,816
Prepaid expenses                                                        10,000
                                                                  ------------
           Total Current Assets                                         16,816

PROPERTY AND EQUIPMENT - NET                                            19,599
OTHER ASSETS                                                         2,005,525
                                                                  ------------
TOTAL ASSETS                                                       $ 2,041,940
                                                                  ============
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
   Accounts payable                                              $     844,205
   Accrued compensation                                                479,050
   Note payable                                                        118,530
   Loan payable to shareholder                                         796,000
   Convertible debentures                                              200,750
                                                                  ------------
           Total Current Liabilities                                 2,438,535

LONG-TERM LIABILITIES
   Note payable to affiliate                                         2,173,167
                                                                  ------------
TOTAL LIABILITIES                                                    4,611,702
                                                                  ------------
STOCKHOLDERS' DEFICIENCY
   Common stock, no par value, 100,000,000 shares
       authorized, 94,489,916 shares issued and
       outstanding                                                  22,696,193
   Common stock to be issued, 833,333 shares                           250,000
   Accumulated deficit                                             (25,515,955)
                                                                  ------------
           Total Stockholders' Deficiency                           (2,569,762)
                                                                  ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                     $ 2,041,940
                                                                  ============


          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

<TABLE>
                 ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                          FOR THE YEARS ENDED JUNE 30 2001 AND 2000

<CAPTION>
                                                                  2001             2000
                                                             --------------     -------------
<S>                                                         <C>               <C>
REVENUES                                                    $        50,000   $            --
COST OF REVENUES                                                    (57,310)               --
                                                              -------------     -------------
GROSS PROFIT (LOSS)                                                  (7,310)               --
                                                              -------------     -------------
OPERATING EXPENSES
   Consulting fees                                                  567,625           563,543
   Depreciation and amortization                                  1,051,169           250,495
   Professional fees                                              1,214,739         3,409,038
   Other selling, general, administrative expenses                  501,048           412,110
                                                              -------------     -------------
              Total Operating Expenses                            3,334,581         4,635,186
                                                              -------------     -------------
LOSS FROM OPERATIONS                                             (3,341,891)       (4,635,186)
                                                              -------------     -------------
OTHER INCOME (EXPENSE)
   Interest income (expense)                                        (10,332)         (739,040)
   Loss from investment                                          (3,571,654)          (85,818)
   Loss from impairment of goodwill                             (12,399,864)               --
   Loss on investment acquisition deposit                          (425,000)               --
   Realized loss on decline in marketable securities                 (6,825)         (119,925)
   Other income                                                          --           192,474
                                                              -------------     -------------
              Total Other Income (Expense)                      (16,413,675)         (752,309)
                                                              -------------     -------------
LOSS BEFORE EXTRAORDINARY GAIN                                  (19,755,566)       (5,387,495)
EXTRAORDINARY GAIN
   Gains on extinguishment of debt                                   23,000           277,068
                                                              -------------     -------------
NET LOSS                                                       $(19,732,566)   $   (5,110,427)
                                                              =============     =============
Net loss per share-- basic and diluted                               $(0.22)           $(0.07)
                                                              =============     =============
Weighted average number of shares outstanding
   during the period-- basic and diluted                         87,976,428        76,750,291
                                                              =============     =============

                 See accompanying notes to consolidated financial statements.
</TABLE>



                                             F-3
<PAGE>

<TABLE>
                                     ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
                                            FOR THE YEARS ENDED TO JUNE 30, 2001 AND 2000

<CAPTION>
                                                                                           ACCUMULATED
                                                       COMMON STOCK                           OTHER         COMMON
                                COMMON STOCK           TO BE ISSUED          ACCUMULATED   COMPREHENSIVE    STOCK
                            SHARES     AMOUNT        SHARES     AMOUNT         DEFICIT         LOSS        ADVANCES        TOTAL
                           ---------  -----------   -------    --------      -----------      -------       -------      ----------
<S>                                   <C>                     <C>          <C>               <C>          <C>          <C>
Balance, June  30, 1999   73,312,280  $   416,183        --   $      --      $(672,962)      $(97,500)    $      --    $  (354,279)
Stock issued for
   services                2,585,000    3,384,358        --          --              --            --            --      3,384,358
Stock issued for
   office furniture           30,000        9,900        --          --              --            --            --          9,900
Stock issued for
   extinguishment
   of debt                   600,000      180,000        --          --              --            --            --        180,000
Stock issued for
   acquisitions            5,700,000   12,225,000        --          --              --            --            --     12,225,000
Change in unrealized
   loss on securities
   available  for sale            --           --        --          --              --        97,500            --         97,500
Interest on beneficial
   conversion of
   debentures                     --      650,000        --          --              --            --            --        650,000
Common stock advances             --           --        --          --              --            --      (375,000)      (375,000)
Net loss for  the year
   ended June 30, 2000            --           --        --          --      (5,110,427)           --            --     (5,110,427)
                           ---------  -----------   -------    --------      -----------      -------       -------      ----------
Balance, June 30,
   2000                   82,227,280   16,865,441        --          --      (5,783,389)           --      (375,000)    10,707,052
Stock issued for cash      3,060,600      642,726        --          --              --            --            --        642,726
Stock warrants
   issued for  cash               --      275,454        --          --              --            --            --        275,454
Stock to be issued                                  833,333     250,000              --            --            --        250,000
Stock issued for
   offering costs            250,000           --        --          --              --            --            --             --
Stock issued for
   services                1,051,491      328,870        --          --              --            --            --        328,870
Stock issued for
   extinguishment of
   debt                    6,597,000    4,545,902        --          --              --            --            --      4,545,902
Stock issued for
   conversion of
   convertible
   debentures              1,803,545      412,800        --          --              --            --            --        412,800
Stock retired               (500,000)    (375,000)       --          --              --            --       375,000             --
Net loss for the
   year ended
   June 30, 2001                  --           --        --          --     (19,732,566)           --            --    (19,732,566)
                           ---------  -----------   -------    --------      -----------      -------       -------      ----------
BALANCE,
   JUNE 30, 2001          94,489,916  $22,696,193   833,333   $ 250,000    $(25,515,955)     $     --     $      --    $(2,569,762)
                           =========  ===========   =======    ========      ===========      =======       =======      ==========


                                    See accompanying notes to consolidated financial statements.

</TABLE>



                                                                F-4
<PAGE>

<TABLE>
                              ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     FOR THE YEARS ENDED TO JUNE 30, 2001 AND 2000

<CAPTION>
                                                                                            2001              2000
                                                                                       -------------      ------------
<S>                                                                                     <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                                $(19,732,566)     $ (5,110,427)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization                                                           1,051,169           250,495
   Interest expense-- amortization of debt costs                                                  --            65,000
   Realized loss on decline in marketable securities                                           6,825           119,925
   Stock issued for services                                                                 328,870         3,384,358
   Interest for beneficial conversion feature                                                     --           650,000
   Gain on extinguishment of debt                                                            (23,000)         (277,068)
   Gain on settlement of note receivable                                                          --            (8,070)
   Forgiveness of accounts payable                                                                --          (192,474)
   Loss from investment                                                                    3,571,654            85,818
   Loss from impairment of goodwill                                                       12,399,864                --
   Provision for doubtful account                                                                 --           125,000
   Accrued compensation                                                                      247,500           120,000
Changes in operating assets and liabilities:
   (Increase) decrease in assets
   Prepaid expense                                                                            36,118           (46,118)
   Other deposits                                                                             40,000           (40,000)
   Security deposits                                                                              --            (5,525)
Increase (decrease) in liabilities:
   Accounts payable                                                                          633,235           184,450
   Interest payable                                                                           10,332           (17,890)
   Other liabilities                                                                              --          (115,000)
   Deferred revenue                                                                          (50,000)           50,000
                                                                                       -------------      ------------
            Net Cash Used In Operating Activities                                         (1,479,999)         (777,526)
                                                                                       -------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Loan to affiliated company                                                               (247,608)         (242,125)
   Purchase of fixed assets                                                                   (8,411)           (6,335)
   Other Investments                                                                              --            33,070
                                                                                       -------------      ------------
            Net Cash Used In Investing Activities                                           (256,019)         (215,390)
                                                                                       -------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Loan from affiliate                                                                       544,500           251,500
   Proceeds from common stock subscriptions                                                       --           273,500
   Proceeds from issuance of common stock and warrants, net of offering costs                918,180                --
   Proceeds from common stock to be issued                                                   250,000                --
   Proceeds from issuance of convertible debt, net                                                --           488,050
                                                                                       -------------      ------------
            Net Cash Provided By Financing Activities                                      1,712,680         1,013,050
                                                                                       -------------      ------------
Net (DECREASE) increase in cash                                                              (23,338)           20,134
Cash and cash equivalents at beginning of YEAR                                                30,154            10,020
                                                                                       -------------      ------------
Cash and cash equivalents at end of YEAR                                                $      6,816      $     30,154
                                                                                       =============      ============

                              See accompanying notes to consolidated financial statements.
</TABLE>



                                                          F-5
<PAGE>

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


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

In April  2000,  the  Company  acquired  20% of the  common  stock  of  Advanced
Communications  Technologies,  Pty, an Australian corporation  ("ACT_AU").  This
resulted in an investment totaling  $19,350,000,  comprised of a note payable of
$7,500,000  and the  issuance of  5,000,000  shares of  restricted  common stock
valued at $11,850,000 (See Note 3).

During the year ended June 30, 2000, the Company issued 500,000 shares of common
stock, valued at $375,000,  related to a rescinded  acquisition.  As of June 30,
2000,  the Company had not received  the funds for these  shares;  therefore,  a
common stock advance had been recorded in the equity  section,  in the amount of
$375,000, to offset the value of the shares that were issued at year-end.

On January 31, 2000 the Company issued 200,000 shares of common stock to acquire
100% of Smart Investment.com Inc. (See Note 1(A)).

During the year ended June 30, 2000, the Company accrued  interest,  of $32,110,
on a note payable. The terms of the obligation were renegotiated and an interest
accrual of $34,507 was incorporated in the gain on extinguishment of debt.

During the year ended June 30,  2001,  the Company  issued  6,597,000  shares of
common stock, valued at $4,545,902,  in partial payment of notes payable held by
a  related  Australian  corporation,  in whom we  hold a 20%  investment,  and a
non-related company (See Notes 7(A) and (B))).

During the year ended June 30,  2001,  the Company  issued  1,803,545  shares of
common stock, valued at $412,800, for the conversion of convertible debentures.



          See accompanying notes to consolidated financial statements.





                                      F-6
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

            (A) Organization


            The Company was formed on April 30, 1998 and was  inactive  from its
            date of  formation  until  April  1999 when it  acquired  all of the
            issued and  outstanding  stock of Media  Forum  International,  Inc.
            ("MFI")  in a reverse  merger.  In July  1999,  the  Company  formed
            Advanced  Global  Communications,  Inc.  ("AGC")  as a wholly  owned
            subsidiary   to  conduct   its   international   telephone   network
            distribution  business.  The merger was treated as an acquisition of
            all of the assets of MFI and as a  recapitalization  of the Company.
            On January 31, 2000, the Company acquired all of the then issued and
            outstanding  shares  of   SmartInvestment.com,   Inc.  ("Smart")  an
            inactive reporting company,  for 200,000 shares of restricted common
            stock. The Company elected successor issuer status to become a fully
            reporting   company.   The  Company   treated  the   purchase  as  a
            recapitalization,  and has not recorded any goodwill associated with
            the acquisition. On April 5, 2000, the Company acquired a 20% equity
            ownership interest in Advanced  Communications  Technologies Pty Ltd
            (Australia)  ("ACT-AU"),  an affiliated entity. The Company accounts
            for its  investment in ACT-AU under the equity method of accounting.
            In July 2000, the Company formed Australon USA, Inc.  ("Australon"),
            a Delaware corporation owned 50% by the Company and 50% by Australon
            Enterprises  Pty.,  Ltd., a publicly  traded  company  listed on the
            Australian Stock Exchange and a 66% owned  subsidiary of ACT-AU.  In
            November  2000,  the Company formed  Advanced  Network  Technologies
            (USA), Inc. ("ANT"), a Delaware corporation owned 70% by the Company
            and 30% by ACT-AU. Both Australon and ANT are inactive.  The Company
            intends to account for the future results of operations of Australon
            on an equity basis and ANT on a consolidated basis.

            The  Company is a holding  company,  whose  primary  activity is the
            investment in companies  involved in the wireless telecom  industry.
            The  Company   expects  to  generate   revenue  from  marketing  and
            distribution  of  their  wireless   communication  network  products
            through licensing agreements with network providers.

            (B) Principles of Consolidation


            The  accompanying  consolidated  financial  statements  include  the
            accounts  of the  Company  and its wholly  owned  subsidiaries  AGC,
            Australon  and ANT  (all  inactive).  All  significant  intercompany
            transactions and balances have been eliminated in consolidation.

            (C) Use of Estimates


            In preparing  consolidated  financial  statements in conformity with
            generally accepted accounting principles,  management is required to
            make estimates and assumptions  that affect the reported  amounts of
            assets and liabilities  and the disclosure of contingent  assets and
            liabilities at the date of the consolidated financial statements and
            revenues and expenses  during the reported  period.  Actual  results
            could differ from those estimates.

            (D) Fair Value of Financial Instruments


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

            (E) Marketable Securities


            Management   determines  the  appropriate   classification   of  its
            investments  at  the  time  of  acquisition  and  reevaluates   such
            determination   at  each  balance  sheet  date.   Available-for-sale
            securities  are  carried  at fair  value,  with  unrealized  losses,
            reported as a separate component of stockholders' equity.

            Declines  in  the  fair  value  of  individual  available  for  sale
            securities  below  their  cost that are other than  temporary  would
            result in  write-downs  of the  individual  securities to their fair
            value. The related  write-downs are included in earnings as realized
            losses.


            (F) Property and Equipment


            Property and  equipment  are stated at cost and  depreciated,  using
            accelerated methods, over the estimated useful lives of 5 years.


            (G) Long-Lived Assets


            The  Company  reviews  long-lived  assets and  certain  identifiable
            assets related to those assets for impairment whenever circumstances
            and  situations  change  such that there is an  indication  that the
            carrying amounts may not be recoverable.




                                      F-7
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (H) Income Taxes


            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.  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.


            There was no current income tax expense for the years ended June 30,
            2001 and 2000 due to the net losses in both  years and any  deferred
            tax asset  arising  from the  future  benefit of the  Company's  net
            operating loss carryforwards has been fully reserved.


            (I) Comprehensive Income


            The Company  accounts  for  Comprehensive  Income  (Loss)  under the
            Financial   Accounting   Standards  Board  Statements  of  Financial
            Accounting  Standards  No.  130,  "Reporting  Comprehensive  Income"
            (Statement No. 130").  Statement No. 130  establishes  standards for
            reporting and display of comprehensive income and its components.


            The  unrealized  gains and losses,  net of tax,  resulting  from the
            valuation of available-for-sale  marketable securities at their fair
            market value at year end are reported as Other Comprehensive  Income
            (Loss) in the  Statement  of  Operations  and as  Accumulated  Other
            Comprehensive  Income  (Loss)  in  Stockholders'  Equity  and in the
            Statement of Stockholders' Equity.


            (J) Revenue Recognition


            Revenue  was  generally  recognized  at the time  telephone  service
            minutes were used and based on the volume of call  service  provided
            to customers  and  processed by the  Company's  contractual  service
            providers.


            (K) 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.


            (L) Loss Per Share


            Net loss  per  common  share is  computed  based  upon the  weighted
            average common shares outstanding.







                                      F-8
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


            (M) New Accounting Pronouncements


            The Financial Accounting Standards Board has recently issued several
            new Statements of Financial Accounting Standards. Statement No. 141,
            "Business  Combinations"  supersedes  APB  Opinion  16  and  various
            related  pronouncements.  Pursuant to the new  guidance in Statement
            No. 141, all business  combinations  must be accounted for under the
            purchase method of accounting; the pooling-of-interests method is no
            longer permitted. SFAS 141 also establishes new rules concerning the
            recognition  of goodwill and other  intangible  assets  arising in a
            purchase  business  combination  and  requires  disclosure  of  more
            information concerning a business combination in the period in which
            it is completed.  This statement is generally effective for business
            combinations initiated on or after July 1, 2001.


            Statement No. 142, "Goodwill and Other Intangible Assets" supercedes
            APB  Opinion  17 and  related  interpretations.  Statement  No.  142
            establishes   new  rules  on  accounting  for  the   acquisition  of
            intangible  assets not  acquired in a business  combination  and the
            manner  in  which  goodwill  and all  other  intangibles  should  be
            accounted for subsequent to their initial  recognition in a business
            combination  accounted  for under SFAS No. 141.  Under SFAS No. 142,
            intangible  assets  should be  recorded  at fair  value.  Intangible
            assets with finite useful lives should be amortized over such period
            and  those  with  indefinite  lives  should  not be  amortized.  All
            intangible assets being amortized as well as those that are not, are
            both subject to review for potential  impairment under SFAS No. 121,
            "Accounting  for  the  Impairment  of  Long-Lived   Assets  and  for
            Long-Lived  Assets to be Disposed  of".  SFAS No. 142 also  requires
            that  goodwill  arising  in a  business  combination  should  not be
            amortized but is subject to impairment testing at the reporting unit
            level to  which  the  goodwill  was  assigned  to at the date of the
            business combination.


            SFAS No. 142 is effective  for years  beginning  after  December 15,
            2001 and must be  applied  as of the  beginning  of such year to all
            goodwill and other intangible assets that have already been recorded
            in the  balance  sheet as of the first day in which  SFAS No. 142 is
            initially  applied,  regardless  of when such assets were  acquired.
            Goodwill  acquired in a business  combination whose acquisition date
            is on or after July 1, 2001, should not be amortized,  but should be
            reviewed for  impairment  pursuant to SFAS No. 121, even though SFAS
            No.  142 has not yet  been  adopted.  However,  previously  acquired
            goodwill should continue to be amortized until SFAS No. 142 is first
            adopted.


            Statement  No. 143  "Accounting  for Asset  Retirement  Obligations"
            establishes  standards for the initial  measurement  and  subsequent
            accounting for obligations associated with the sale, abandonment, or
            other type of disposal of long-lived  tangible  assets  arising from
            the  acquisition,   construction,   or  development   and/or  normal
            operation  of such  assets.  SFAS No.  143 is  effective  for  years
            beginning after June 15, 2002, with earlier application encouraged.


            The future adoption of these pronouncements will not have a material
            effect on the Company's financial position or results of operations.

NOTE 2      DUE FROM UNCONSOLIDATED AFFILIATE

            The Company has advanced funds to ACT-AU that is majority owned by a
            principal  stockholder  of the  Company  and in  which  it has a 20%
            investment (See Note 3 and 7(B)). These funds were provided in order
            to  support  the  related  company's  operations.  The  Company  has
            advanced  $552,125  through June 30, 2001.  These advances have been
            offset against the Company's Note Payable to ACT-AU (See Note 7(B)).

NOTE 3      LOSS FROM INVESTMENT IN UNCONSOLIDATED AFFILIATE

            In April  2000,  the  Company  acquired  20% of the common  stock of
            ACT-AU,  an affiliate  (See Note 10(B)).  The purchase  price of the
            investment  amounted to  $19,350,000,  and was  comprised  of a note
            payable  for  $7,500,000  (See  Note  1(d)  and Note  7(B))  and the
            issuance of 5,000,000  shares of  restricted  common stock valued at
            $11,850,000.  The shares  issued were  valued at the average  quoted
            trading price during the acquisition  period.  The fair value of the
            investment at the acquisition  date was determined to be $3,657,472.
            The  excess  of the  purchase  price  over  the  fair  value  of the
            investment  in  the  amount  of  $15,692,528  was  accounted  for as
            Goodwill.




                                      F-9
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


            The  Company's  20% interest in ACT-AU,  was accounted for using the
            equity method of accounting  and was stated at the amortized cost of
            Goodwill and the equity in undistributed earnings since acquisition.
            The equity in earnings of ACT-AU was adjusted  for the  amortization
            of the Goodwill as discussed  above.  Amortization was computed on a
            straight-line basis over fifteen years. The amortization of Goodwill
            charged  to income  for the year  ended  June 30,  2001 and 2000 was
            $1,046,169 and $246,495 respectively.


            The  following  information  is provided for ACT-AU at June 30, 2001
            and 2000 and have been  translated  to US dollars  using the average
            exchange rate for the years ended:

                                                     JUNE 30, 2001 JUNE 30, 2000
                                                     ------------  ------------
            Average exchange rate for the year      $       53913  $      62939
            Revenue from operations                 $   3,109,395  $     22,282
            Gross profit                            $   3,109,395  $     22,282
            Net loss from operations                $ (18,525,300) $ (1,708,728)
            Net loss                                $ (18,525,300) $ (1,708,728)


            The table  above  reflects  the  results of  operations  of Advanced
            Communications   (Australia)  and  its  consolidated   subsidiaries,
            translated  into  U.S.  dollars  at the  prevailing  exchange  rate.
            Advanced  Communications  (Australia) owns a controlling interest in
            various    Australian    subsidiaries    that    operate   a   local
            telecommunications   network.   Consolidated  revenue  reflects  the
            revenue  from  these  operations  and from  government  grant  funds
            received and do not reflect any revenue from sales of SpectruCell.


            During  the year  ended  June 30,  2001,  the  Company  reduced  the
            carrying  value of its  investment in ACT-AU to $2,000,000  based on
            management evaluation of ACT-AU. This adjustment was necessitated by
            FASB 121  ("Accounting for Impairment of Long Lived Assets") and APB
            18 ("The  Equity  Method of  Accounting  for  Investments  in Common
            Stock").  Such pronouncements  require the annual evaluation of long
            lived  assets  for  impairment.  Based upon  management's  review of
            ACT-AU's  forecasted  sales  and  cash  flows,  as  well  as a draft
            independent  valuation  of  ACT-AU  and  its  subsidiaries,  it  was
            determined that insufficient  empirical  evidence existed to support
            the position that the investment was not impaired. Consequently, the
            Company's  investment in ACT-AU was completely  written-off  and the
            Company's  investment  in ACT-AU's  goodwill was written down to the
            estimated   realizable  value  of  the  Company's   portion  of  its
            investment  in ACT-AU  that is  represented  by  ACT-AU's  ownership
            interest in the publicly traded company Australon Enterprise, Pty.


            ACT-AU has a current period operating loss,  combined with a history
            of  operating  losses,  due to the  fact  that  ACT-AU  has  been in
            development  stage activities since inception,  and has not yet made
            any sales related to the sale of SpectruCell.  ACT-AU projections of
            estimated  future  cash  flows  could  not be  verified  objectively
            because  ACT-AU has not  completed  scheduled  field trials of their
            system,  a requisite  before  sales could be  recognized.  The sales
            reflected  in  the  table  above  reflect  sales  made  by  ACT-AU's
            subsidiaries that operate a local telecommunications  network. These
            sales reflect sales from these  operations and not from  SpectruCell
            or grant dollars received from the Australian government.


            The  components of the  investment in ACT-AU at June 30, 2001 are as
            follows:

<TABLE>
<CAPTION>
                                              INVESTMENT        GOODWILL           TOTAL
                                             ------------     ------------      ------------
<S>                                          <C>              <C>               <C>
            At acquisition                   $ 3,657,472      $ 15,692,528      $ 19,350,000
            Investment loss                   (3,657,472)               --        (3,657,472)
            Amortization of goodwill                  --        (1,292,664)       (1,292,664)
            Impairment of goodwill                    --       (12,399,864)      (12,399,864)
            ------------                    ------------      ------------      ------------
            Balance at June 30, 2001 $                --       $ 2,000,000       $ 2,000,000
                                             ===========      ============      ============
</TABLE>



                                      F-10
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4      REALIZED LOSS ON DECLINE IN MARKETABLE SECURITIES

            The  Company's  marketable   securities  were  comprised  of  equity
            securities, all classified as available-for-sale, which were carried
            at their fair value  based  upon the quoted  market  prices of those
            investments  at June 30,  2001 and 2000.  Declines in the fair value
            that  are  other  than  temporary   result  in  write-downs  of  the
            securities and included in earnings as realized losses.  The Company
            determined there was a permanent  decline in the fair value of these
            securities  and at June 30,  2001 and 2000 the  Company  wrote  down
            these securities to their fair value of $0 and $6,825  respectively.
            This  resulted  in  $6,825  and  $119,925  being  recognized  in the
            statements of operations as a realized loss on decline in marketable
            securities for the year ended June 30, 2001 and 2000.

NOTE 5      PROPERTY AND EQUIPMENT
            Computer and office equipment                           $ 31,234
            Less: Accumulated depreciation                           (11,635)
                                                                ------------
               Property and equipment - net                         $ 19,599
                                                                ============

            Depreciation  expense  for the year ended June 30, 2001 and 2000 was
            $5,000 and $4,000, respectively.

NOTE 6      ACCRUED COMPENSATION

            The  Company has an  agreement  with an  individual  to serve as the
            Chief Executive Officer of the Company (See Note 11). The individual
            agreed to defer  payment of the  amounts  owed him  pursuant  to the
            agreement due to the Company's lack of funds. During fiscal June 30,
            2001,  $247,500  was accrued and charged to  consulting  fees on the
            statement of operations. The Company owed the individual $479,050 at
            June 30, 2001.

NOTE 7      NOTES AND LOAN PAYABLE

            (A) Note Payable


            MFI  was  obligated  to pay  $150,000  to a  company  (the  "Payee")
            pursuant to a convertible promissory note. During December 1997, MFI
            issued  75,000 of its common shares to settle the amounts due to the
            Payee.  However,  a dispute arose as to whether the Payee authorized
            the issuance of the shares.  The Payee filed a suit during  December
            1997, to enforce the  convertible  promissory  note.  Total interest
            payable  was  $84,507  as of June 30,  2000  resulting  in the total
            principal and accrued interest payable at June 30, 2000 of $234,507.
            In June 2000,  the parties agreed to settle the matter for a payment
            of $200,000.  This resulted in a gain on  extinguishment  of debt in
            the amount of $34,507. The Company made a payment of $50,000 by June
            30, 2000.  The $150,000  remainder was to be paid with proceeds from
            the 75,000 shares of stock and any  remaining  balance to be paid by
            the  Company.  The revised  obligation  was to be paid by August 14,
            2000. The Company defaulted on this revised payment obligation and a
            judgment  against the  Company was  entered.  In October  2000,  the
            Company sold the 75,000 shares of stock  realizing  $41,802 which it
            remitted in partial  repayment of its  outstanding  debt. As of June
            30, 2001, the Company's  remaining  balance and accrued  interest on
            this obligation was $118,530 (See Note 15).


            (B) Note Payable to affiliate


            The Company had a non-interest bearing note payable to an affiliate,
            ACT-AU,  of  $7,500,000  as of  April 5,  2000  (See  Note  3).  The
            following schedule  represents  payments on such debt by issuance of
            restricted  common  stock.  Such  transactions  were recorded at the
            market price of the stock at date of issuance.

                         SHARES OF COMMON
                               DATE          STOCK ISSUED             VALUE
                               ----          ------------             -----

                September 2000                 5,000,000            $ 3,500,000
                October 2000(1)                  460,000                460,000
                June 2001                      1,137,000                567,100
                                               ---------            -----------
                                               6,597,000            $ 4,527,100
                                               =========            ===========



                                      F-11
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (1) This transaction resulted in a gain on extinguishment of debt of
            $23,000.  During the year ended June 30, 2001 the Company  repaid an
            aggregate of $247,608 of the obligation in cash.

            Pursuant to the terms of the April 5, 2000 Stock Purchase  Agreement
            between the  Company  and ACT-AU,  the Company has elected to reduce
            its  outstanding  loan  balance  by  $552,125  for funds  previously
            advanced to ACT-AU.


            As of June 30,  2001,  the balance of the  Company's  obligation  to
ACT-AU was $2,173,167.


            (C) Loan Payable to Shareholder


            As of June 30,  2001,  the Company owed a  shareholder  $796,000 for
            funds advanced to the Company to provide  working capital for normal
            business   operations.   This  loan  is  non-interest   bearing  and
            unsecured.

NOTE 8      CONVERTIBLE DEBENTURES

            On September 30, 1999, the Company entered into secured  convertible
            debentures   purchase   agreement  with  two  companies,   who  were
            stockholders  of the Company,  whereby the Company sold  $500,000 of
            12% Secured  Convertible  Debentures  due April 1, 2000,  which were
            convertible  into shares of the Company's  Class A Common Stock.  In
            addition,   on  September  30,  1999,  the  Company  issued  another
            convertible  debenture  to an  unrelated  party  in  the  amount  of
            $150,000 (See Note 13(B)(ii).  The debentures were  convertible,  at
            the holder's option, into shares of common stock in whole or in part
            at any time after the original  issue date.  The number of shares of
            common stock  issuable  upon a conversion  was to be  determined  by
            dividing the  outstanding  principal  amount of the  debenture to be
            converted,  plus all accrued interest,  by the conversion price. The
            conversion  price in  effect  on any  conversion  date is 50% of the
            average of the bid price during the twenty trading days  immediately
            preceding the applicable conversion date.


            The convertible debentures contained a beneficial conversion feature
            computed at its intrinsic value which is the difference  between the
            conversion  price and the fair value on the debenture  issuance date
            of the common stock into which the debt is  convertible,  multiplied
            by the number of shares  into which the debt is  convertible  at the
            commitment  date. Since the beneficial  conversion  feature is to be
            settled by issuing equity,  the amount  attributed to the beneficial
            conversion feature, of $650,000, was recorded as an interest expense
            and a component of equity on the issuance date (See Note 13(B)(i)).


            During December, 2000, holders of $412,800 of convertible debentures
            elected  to convert  their  notes into  1,803,545  of the  Company's
            restricted  common stock.  The Company  further  reduced these bonds
            payable by  offsetting  a related bond  receivable  in the amount of
            $36,450.


            As of June 30, 2001, $200,750 of Secured Convertible  Debentures are
            still  outstanding.  The Company is in default based on the April 1,
            2000 due date (See Note 13(B)(i)).


            (A) Private Placement


            During  the period of  December  2000 to June  2001,  pursuant  to a
            private  placement under  Regulation D, Rule 506, the Company issued
            3,060,600 shares of common stock and 3,060,000  warrants at $.30 per
            share.  The  Company  received  $1,168,180  from  investors,   which
            included  $250,000  for stock not yet issued as of June 30, 2001 and
            $275,454 for warrants.


            The  Company  issued  250,000  shares  of  common  stock,  valued at
            $75,000,  in payment of offering costs incurred.  The value assigned
            to this stock was based on the private placement  memorandum of $.30
            per share.  The value of the common stock has been charged to equity
            as direct costs to the offering.


            The fair market value of the  warrants,  aggregating  $275,454,  was
            estimated on the grant date using the  Black-Scholes  option pricing
            model as required under FASB 123 with the following weighted average
            assumptions:   expected  dividend  yield  0%,   volatility   49.84%,
            risk-free interest rate 4.22%, expected option life 2 years. At June


                                      F-12
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            30, 2001,  no warrants have been  exercised.  Such amounts have been
            netted against proceeds  received from the issuance of shares in the
            previous quarter.


            (B) Stock Issued For Services


            During the year ended June 30, 2001,  the Company  issued  1,051,491
            shares of common stock for  services.  The stock was valued based on
            the  quoted  trading  price on the  grant  dates,  which  aggregated
            $328,870.


            During the year ended June 30, 2000,  the Company  issued  2,585,000
            shares of common stock for  services.  The stock was valued based on
            the  quoted  trading  price on the  grant  dates,  which  aggregated
            $3,384,358.

















                                      F-13
<PAGE>

            (C) Stock Issued For Extinguishment of Debt


            During the year ended June 30, 2001,  the Company  issued  6,597,000
            shares of common stock for the extinguishment of debt. The stock was
            valued based on the quoted  trading price on the grant dates,  which
            aggregated $4,545,902 (See Notes 7(A) & 7(B)).


            (D) Stock Retired


            During the year ended June 30,  2001,  the Company  retired  500,000
            shares of restricted common stock, valued at $375,000. The stock was
            originally  issued to the owners of World IP in connection with that
            company's acquisition in November 1999 and was then retired pursuant
            to a rescission of this transaction in October 2000.

NOTE 10     RELATED PARTIES

            (A)  Global  Communications  Technology  Consultants,   Inc.  Global
            Communications  Technology  Consultants,  Inc., a related party,  is
            wholly owned by Mr. May who owns Global Communications  Technologies
            Ltd., a principal stockholder of the Company.


            (B)  Advanced   Communications   Technologies   Pty.  Ltd.  Advanced
            Communications  Technologies  Pty. Ltd., an Australian  company,  is
            majority owned by entities beneficially related to Mr. May.


            (C) Legal Counsel


            Certain of the  Company's  legal  counsel  are  stockholders  of the
            Company.  (See  Notes  2,  3,  & 11  for  additional  related  party
            disclosures).

NOTE 11     EXECUTIVE EMPLOYMENT AGREEMENTS

            On  November  29,  1999,  the  Company  entered  into an  employment
            agreement  with a consulting  organization  to provide the functions
            customarily  provided by a Chief Financial Officer.  As compensation
            for these services, the Company pays $5,000 monthly in advance, plus
            100,000  restricted  shares of the Company's common stock.  Starting
            April 1, 2000,  compensation for these services increased to $10,000
            per month.  On September 1, 2000,  the Company  entered into another
            one-year  consulting  agreement with the Chief Financial  Officer. A
            signing  bonus of  75,000  shares  of stock  was  issued,  valued at
            $67,500.  This  contract  expired  August 31,  2001,  but was orally
            extended to December  31,  2001.  As  compensation,  the  individual
            receives $10,000 per month in cash and $10,000 per month in stock


            Effective July 1, 2000, the Company and its Chief Executive  Officer
            entered into an employment agreement that compensates the individual
            at $15,000 per month and a bonus of $50,000.  Effective  December 1,
            2000, the compensation increased to $17,500 per month.

NOTE 12      UNSUCCESSFUL PROPOSED ACQUISITIONS

            (A) ORBCOMM Global L.P.


            In February 2001, the Company was the successful  bidder to purchase
            the assets of ORBCOMM Global L.P. and related debtors  (collectively
            "ORBCOMM"). ORBCOMM, a partnership formed by Teleglobe Holding Corp.
            and Orbital  Sciences  Corporation,  is the owner and operator of 30
            low  earth  orbit  satellites,   digital  satellite   communications
            systems,  gateway earth  stations,  control  center  facilities  and
            related equipment, and intellectual property. ORBCOMM provides asset
            monitoring,  global  positioning,   communications  and  other  data
            information  services.  In September 2000, ORBCOMM filed for Chapter
            11 Bankruptcy  protection in the United States  Bankruptcy Court for
            the District of Delaware  (the  "Court").  In March 2001,  the Court
            entered  an  Order  to  approve  the  sale of  substantially  all of
            ORBCOMM's assets to the Company.


            The assets were to be owned by a newly  formed  entity  owned by the
            Company's 50% owned U.S. affiliate,  Australon USA, Inc. The Company
            also entered into a joint venture  agreement  with another bidder to
            sell  a  portion  of  the  new  entity's  equity  in  return  for  a
            substantial capital commitment.  The Company's joint venture partner
            subsequently  defaulted on its commitment to provide  capital to the
            new entity.  Because of the extreme  time  constraints  place by the
            Court on the Company to close the  transaction,  and the substantial


                                      F-14
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            capital commitment needed to turn ORBCOMM's business around, Company
            management  subsequently  determined  that it was no  longer  in the
            Company's  best  interest  to  pursue  this   acquisition.   In  the
            unsuccessful  attempt to acquire the assets of ORBCOMM,  the Company
            incurred  expenses  totaling  $835,375  which  are  included  in the
            Company's Income Statement for the year ended June 30, 2001. Of this
            amount,  the  Company  incurred  a loss in the  amount  of  $425,000
            relating to a non-refundable bid deposit made in connection with the
            proposed  acquisition.  The  balance of  expenses  were  included in
            professional  fees  totaling  $395,151  and  in  other  selling  and
            administrative expenses totaling $15,224.


            (B) Beneventure Capital, LLC


            On February 5, 2001,  the  Company  entered  into a Letter of Intent
            with an  individual  and his  majority  owned  company,  Beneventure
            Capital, LLC ("Beneventure") to acquire the assets of Beneventure in
            exchange  for  shares  of stock  of the  Company.  Beneventure  is a
            privately held  technology  investment  and management  company that
            owns  varying  interests  in  private  companies   involved  in  the
            telecommunications,  semiconductor,  Internet and financial services
            industries.  After many  attempts to  negotiate  an  agreement  with
            Beneventure, the Company ceased negotiations and determined that the
            acquisition  was not in the best  interests of the  Company.  In the
            unsuccessful  attempt to  acquire  the  assets of  Beneventure,  the
            Company incurred $125,965 of professional fees and expenses that are
            included in the Company's  Income  Statement for the year ended June
            30, 2001.

NOTE 13     COMMITMENTS AND CONTINGENCIES

            (A) Lease Agreements


            The  Company  has   agreements   for  the  rental  of  its  offices,
            aggregating  $7,050 per month with lease  terms of twelve  months as
            renewed on the first day of March and April  2001,  with  options to
            automatically  renew  these  leases  each year.  The  minimum  lease
            payments for the remaining life of these leases is $56,400.


            (B) Legal Matters

            (i)   As of  June  30,  2001,  the  Company  is in  default  on  its
                  obligation to the debenture holders based on the April 1, 2000
                  due date. (See Note 8). Two debenture  holders filed a lawsuit
                  during April 2001 for damages arising from the alleged default
                  of the Company in making  payments of principal  and interest.
                  The  complaint  also  alleges  that the  plaintiffs  sustained
                  damages   arising  from  the  Company's   failure  to  file  a
                  registration  statement which was required by the terms of the
                  debentures.   The  Company   intends  to  defend  this  action
                  vigorously.  Based on the facts known to date, an  unfavorable
                  outcome is likely,  however the likely range of potential loss
                  is not determinable at this time.

            (ii)  As of June 30,  2001,  the  Company  had  agreed  to  settle a
                  dispute regarding the convertible promissory note. The Company
                  is in  default on this  obligation.  A  judgment  against  the
                  Company has been entered. The potential loss is believed to be
                  the  recorded  liability  at June 30,  2001 of  $118,530  plus
                  additional accrued interest (See Note 7(A)). This judgment was
                  fully satisfied in October 2001.

            (iii) In July 2000, several stockholders filed an action against the
                  Company to allow  shares of the stock to be  transferred  from
                  restrictive to unrestrictive  under a Rule 144 exemption.  The
                  outcome of this litigation is unknown.

            (iv)  In September  2000, a Third Party  complaint was filed against
                  the Company,  which  alleges that the Company  failed to pay a
                  break-up  or  termination  fee  in  excess  of  $50,000.  This
                  allegedly  was due to a failure of the parties to consummate a
                  merger agreement. The outcome of this litigation is unknown.

            (v)   In October  2000,  the  Company  filed suit  against the World
                  Group and its  stockholders for the rescission of the World IP
                  agreement and for monetary damages resulting from management's
                  alleged  breach  of  the   agreement.   The  outcome  of  this
                  litigation is unknown.

NOTE 14     GOING CONCERN

            The Company's  consolidated  financial statements for the year ended
            June 30, 2001 have been  prepared on a going  concern  basis,  which
            contemplates  the  realization  of  assets  and  the  settlement  of
            liabilities  and  commitments in the normal course of business.  The
            Company's  significant  net loss of  $19,732,566  for the year ended


                                      F-15
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            June 30, 2001, a working  capital  deficiency of  $2,421,719,  and a
            stockholders'  deficiency of  $2,569,792,  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 raise additional  capital and
            implement  its  business  plan.  Management   anticipates  that  the
            issuance of securities will generate sufficient  resources to assure
            continuation of the Company's operations (See Note 9A and 15).


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

NOTE 15      SUBSEQUENT EVENTS

            In July and August  2001,  the Company  authorized  the  issuance of
            1,190,000 Regulation 144 shares on behalf of ACT-AU in consideration
            for a $357,000  credit ($.30 a share) against the  outstanding  debt
            incurred  for the 20% equity  purchase of ACT-AU.  These shares were
            issued on August 29, 2001.


            In addition, on August 29, 2001, the Company issued 1,233,333 shares
            of stock for cash of $370,000 to  purchasers  in  connection  with a
            Regulation D Section 506 private placement.  Finally,  on August 29,
            2001, the Company  issued  780,240 shares of stock to  professionals
            for legal and other services, valued at $234,700.






















                                      F-16
<PAGE>

             ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                 ACN 086 856 617
                             AND CONTROLLED ENTITIES

                                FINANCIAL REPORT
                         FOR THE YEAR ENDED 30 JUNE 2001





<PAGE>




                                TABLE OF CONTENTS

                                                                        PAGE
                                                                         ----
Directors' Report                                                         1

Financial Report

        Statement of Financial Performance                                3

        Statement of Financial Position                                   4

        Statement of Cash Flows                                           5

        Notes to Financial Statements                                   6-11

Directors' Declaration                                                   12

Independent Audit Report                                                13-14






<PAGE>

                                DIRECTORS' REPORT

Your directors  present their financial report on the company and its controlled
entity for the financial year ended 30 June 2001.


DIRECTORS

The names of  directors  in  office  at any time  during or since the end of the
financial year are:

Jason Roger May                                      Roger Thomas May

Directors  have been in office since the start of the financial year to the date
of this report unless otherwise stated.


NET LOSS AFTER INCOME TAX

The  consolidated  loss of the  economic  entity  for the  financial  year after
providing for income tax and eliminating  outside equity  interests  amounted to
$34,361,472.


REVIEW OF OPERATIONS

A review of the operations of the economic  entity during the financial year and
the results of those operations are as follows:

During  the year,  the  economic  entity  continued  to engage in its  principal
activity,  the  results  of  which  are  disclosed  in  the  attached  financial
statements.


SIGNIFICANT CHANGES IN STATE OF AFFAIRS

No significant  changes in the state of affairs of the economic  entity occurred
during the financial year.


PRINCIPAL ACTIVITIES

The principal activities of the economic entity during the financial year were:

No  significant  change in the nature of these  activities  occurred  during the
year.


AFTER BALANCE DATE EVENTS

No matters or  circumstances  have arisen  since the end of the  financial  year
which significantly  affected or may significantly  affect the operations of the
economic entity, the results of those operations, or the state of affairs of the
economic entity in subsequent financial years.


LIKELY DEVELOPMENTS

Likely  developments  in the operations of the economic  entity and the expected
results  of those  operations  have  not been  included  in this  report  as the
directors believe, on reasonable grounds, that the inclusion of such information
would be likely to result in unreasonable prejudice to the economic entity.


ENVIRONMENTAL ISSUES

The  economic  entity's   operations  are  not  regulated  by  any  law  of  the
Commonwealth or of a State or Territory.


DIVIDENDS PAID, RECOMMENDED AND DECLARED

No dividends  were paid or declared  since the start of the  financial  year. No
recommendation for payment of dividends has been made.


OPTIONS

No options over issued  shares or interests in the economic  entity were granted
during  or  since  the end of the  financial  year  and  there  were no  options
outstanding at the end of the financial year.


INDEMNIFICATION OF OFFICER OR AUDITOR

No indemnities have been given or insurance  premiums paid,  during or since the
end of the  financial  year,  for any  person  who is or has been an  officer or
auditor of the economic entity.




                                      F-1
<PAGE>

             ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                 ACN 086 856 617
                             AND CONTROLLED ENTITIES


PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring  proceedings  on behalf of the
company or intervene in any  proceedings to which the company is a party for the
purpose of taking responsibility on behalf of the company for all or any part of
those proceedings.

The company was not a party to any such proceedings during the year.

Signed in accordance with a resolution of the directors:



Director       /s/ Jason May
-----------------------------------
              Jason Roger May



Director       /s/ Roger May
------------------------------------
             Roger Thomas May



Dated this 17th day of October 2001























                                      F-2
<PAGE>

<TABLE>
             ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                 ACN 086 856 617
                             AND CONTROLLED ENTITIES

                       STATEMENT OF FINANCIAL PERFORMANCE
                    FOR THE FINANCIAL YEAR ENDED 30 JUNE 2001

                                                            ECONOMIC ENTITY                      PARENT ENTITY
                                                     ------------------------------     ------------------------------
                                               NOTE      2001               2000            2001               2000
                                                           $                  $               $                  $
                                              -----  ------------      -----------      ------------       -----------
<S>                                              <C>  <C>               <C>              <C>                <C>
Revenues from ordinary activities                3      5,767,431           35,402         4,467,444            25,632
Expenses from ordinary activities, excluding
   borrowing costs expense
      Employee benefits expense                        (9,646,844)      (1,609,344)       (8,433,159)       (1,495,925)
      Depreciation and amortization expenses           (1,542,230)        (164,517)         (935,517)         (164,517)
      Other expenses from ordinary activities         (34,326,199)      (1,069,420)      (26,733,691)         (863,122)
                                                     ------------      -----------      ------------       -----------
                                                      (45,515,273)      (2,843,281)      (36,102,367)       (2,523,564)
                                                     ------------      -----------      ------------       -----------
Profit (loss) from ordinary activities
   before income tax expense (income tax
   revenue)                                      2    (39,747,842)      (2,807,879)      (31,634,923)       (2,497,932)
                                                     ------------      -----------      ------------       -----------
Income tax expense                                             --               --                --                --
Profit (loss) from ordinary activities after related
    income tax expense (income tax revenue)           (39,747,842)      (2,807,879)      (31,634,923)       (2,497,932)
                                                     ------------      -----------      ------------       -----------
Net Profit/loss attributable to outside equity
   interests                                            5,386,370           92,984                --                --
Net profit (loss) attributable to the members of
   the entity                                         (34,361,472)      (2,714,895)      (31,634,923)       (2,497,932)
Total changes in equity other than those
   resulting from transactions with owners
   as owners                                          (34,361,472)      (2,714,895)      (31,634,923)       (2,497,932)
                                                     ============      ===========      ============       ===========

                           The accompanying notes form part of these financial statements.

</TABLE>





                                                         F-3
<PAGE>

<TABLE>
                                ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                                    ACN 086 856 617
                                                AND CONTROLLED ENTITIES

                                            STATEMENT OF FINANCIAL POSITION
                                                  AS AT 30 JUNE 2001

<CAPTION>
                                                            ECONOMIC ENTITY                      PARENT ENTITY
                                                     ------------------------------     ------------------------------
                                               NOTE      2001               2000            2001               2000
                                                           $                  $               $                  $
                                              -----  ------------      -----------      ------------       -----------
<S>                                             <C>   <C>               <C>               <C>               <C>
CURRENT ASSETS
Cash assets                                      4        370,405           15,894             6,440             8,977
Receivables                                      5      5,293,984       12,551,607        10,743,976        12,543,837
Stock on hand                                             147,311               --                --
Other                                            6        136,186           40,101            56,213            40,081
                                                     ------------      -----------      ------------       -----------
TOTAL CURRENT ASSETS                                    5,947,886       12,607,602        10,806,629        12,592,895
                                                     ============      ===========      ============       ===========
NON-CURRENT ASSETS
Other financial assets                           7      3,003,000       19,586,777         3,000,000        19,586,777
Property, plant and equipment                    8      3,498,769        1,450,578         2,094,772         1,432,279
Intangible assets                                9     12,923,042               --                --                --
Other                                           10      3,286,548               --                --                --
                                                     ------------      -----------      ------------       -----------
TOTAL NON-CURRENT ASSETS                               22,711,359       21,037,355         5,094,772        21,019,056
                                                     ------------      -----------      ------------       -----------
TOTAL ASSETS                                           28,659,245       33,644,957        15,901,401        33,611,951
                                                     ============      ===========      ============       ===========
CURRENT LIABILITIES
Payables                                        11     20,822,514        4,227,372        17,766,125         3,910,323
Interest bearing liabilities                    12        431,571          207,359           239,676           207,359
Provisions                                      13        251,774          182,670           179,619           156,796
                                                     ------------      -----------      ------------       -----------
TOTAL CURRENT LIABILITIES                              21,505,859        4,617,401        18,185,420         4,274,468
                                                     ============      ===========      ============       ===========
TOTAL LIABILITIES                                      21,505,859        4,617,401        18,185,420         4,274,468
                                                     ============      ===========      ============       ===========
NET ASSETS                                              7,153,386       29,027,556        (2,284,019)       29,337,473
                                                     ============      ===========      ============       ===========
EQUITY
Contributed equity                                     31,983,472       31,983,502        31,983,472        31,983,472
Retained profits/(accumulated losses)                 (37,224,434)      (2,862,962)      (34,267,491)       (2,645,999)
                                                     ------------      -----------      ------------       -----------
Parent entity interest                                 (5,240,962)      29,120,540        (2,284,019)       29,337,473
Outside equity interest                                12,394,348          (92,984)               --                --
                                                     ------------      -----------      ------------       -----------
TOTAL EQUITY                                            7,153,386       29,027,556        (2,284,019)       29,337,473
                                                     ============      ===========      ============       ===========


                           The accompanying notes form part of these financial statements.
</TABLE>




                                                         F-4
<PAGE>
<TABLE>
                                ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                                    ACN 086 856 617
                                                AND CONTROLLED ENTITIES

                                                STATEMENT OF CASH FLOWS
                                       FOR THE FINANCIAL YEAR ENDED 30 JUNE 2001

<CAPTION>
                                                            ECONOMIC ENTITY                      PARENT ENTITY
                                                     ------------------------------     ------------------------------
                                               NOTE      2001               2000            2001               2000
                                                           $                  $               $                  $
                                              -----  ------------      -----------      ------------       -----------
<S>                                            <C>     <C>              <C>               <C>               <C>
CASH FLOW FROM OPERATING
   ACTIVITIES
Receipts from customers                                 5,246,206            6,396         5,759,763            4,426
Payments to suppliers and employees                    (5,003,041)      (1,089,050)       (5,873,746)         (937,256)
Interest received                                              --            5,272                --             5,232
Income tax paid                                            (7,471)              --            (7,471)               --
                                                     ------------      -----------      ------------       -----------
Net cash used in operating activities                     235,694       (1,077,382)         (121,454)         (927,598)
                                                     ------------      -----------      ------------       -----------
CASH FLOW FROM INVESTING
   ACTIVITIES
Payment for property, plant & equipment                (4,634,436)      (1,336,863)       (4,634,436)       (1,318,564)
Payment for investments                                    (5,650)              --            (5,650)               --
                                                     ------------      -----------      ------------       -----------
Net cash used in investing activities                  (4,640,086)      (1,336,863)       (4,640,086)       (1,318,564)
                                                     ------------      -----------      ------------       -----------
CASH FLOW FROM FINANCING
   ACTIVITIES
Proceeds from borrowing's                               4,514,010        2,111,060         4,514,010         1,936,060
                                                     ------------      -----------      ------------       -----------
Net cash used in financing activities                   4,514,010        2,111,060         4,514,010         1,936,060
                                                     ------------      -----------      ------------       -----------
Net (decrease)/increase in cash held                      109,618         (303,185)         (247,530)         (310,102)
Cash at beginning of the year                              15,894          319,079             8,977           319,079
                                                     ------------      -----------      ------------       -----------
Cash at end of year                            14(a)      125,512           15,894          (238,553)            8,977
                                                     ------------      -----------      ------------       -----------


                           The accompanying notes form part of these financial statements.
</TABLE>





                                                         F-5
<PAGE>

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

This financial report is a special purpose financial report prepared in order to
satisfy the financial report  preparation  requirements of the Corporations Law.
The  directors  have  determined  that the  economic  entity is not a  reporting
entity.

The  report  has  been  prepared  in  accordance  with the  requirements  of the
Corporations Law, and the following applicable Accounting Standards:

AASB 1031:        Materiality

AASB 1002:        Events Occurring After Reporting Date

AASB 1026:        Statement of Cash Flows

AASB 1018:        Statement of Financial Performance

AASB 1025:        Application  of the Reporting  Entity Concept and Other
                  Amendments

AASB 1034:        Information to be Disclosed in Financial Reports

AASB 1040:        Statement of Financial Position

No other applicable Accounting Standards, Urgent Issues Group Consensus Views or
other authoritative  pronouncements of the Australian Accounting Standards Board
have been applied.

The  following  specific  accounting  policies,  which are  consistent  with the
previous period unless otherwise stated, have been adopted in the preparation of
this report:

(a)     Principles of Consolidations

        The  economic  entity   comprises  the  financial   report  of  Advanced
        Communications  Technology  (Australia)  Pty Ltd  and of its  controlled
        entities.

        A controlled entity is any entity controlled by Advanced  Communications
        Technology (Australia) Pty Ltd. Control exists where Advanced

        Communications  Technology  (Australia)  Pty  Ltd has  the  capacity  to
        dominate the  decision-making in relation to the financial and operating
        policies  of  another  entity so that the  other  entity  operates  with
        Advanced  Communications  Technology  (Australia) Pty Ltd to achieve the
        objectives of Advanced Communications Technology (Australia) Pry Ltd.

        All  inter-company  balances and  transactions  between  entities in the
        economic entity,  including any unrealized profits or losses,  have been
        eliminated on consolidation.

        Where a controlled entity has entered or left the economic entity during
        the year its operating  results have been included from the date control
        was obtained or until the date control ceased.

(b)     Property, Plant and Equipment

        Property,  plant and  equipment  are  carried  at cost,  independent  or
        directors' valuation.  All assets, excluding freehold land and buildings
        are  depreciated  on a straight line basis over their useful lives or at
        depreciation rates set by the Commissioner of Taxation. The depreciation
        rates used for each class of assets are:




                                      F-6
<PAGE>

             ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                 ACN 086 856 617
                             AND CONTROLLED ENTITIES

                        NOTES TO THE FINANCIAL STATEMENTS
                    FOR THE FINANCIAL YEAR ENDED 30 JUNE 2001

CLASS OF FIXED ASSET                   DEPRECIATION RATES     DEPRECIATION BASIS

Buildings                                     2.5%               Straight Line
Leasehold improvements                        2.5%               Straight Line
Plant and equipment                         10-15%               Straight Line
Leased plant and equipment                  10-15%               Straight Line
Motor Vehicles                               22.5%               Straight Line
Office Equipment                            20-40%               Straight Line
Furniture, Fixtures and Fittings            10-20%               Straight Line
Computer Equipment                          30-40%               Straight Line
------------
 (c)    Leases

        Leases of fixed assets,  where  substantially all the risks and benefits
        incidental to the ownership of the asset,  but not the legal  ownership,
        Are   transferred  to  the  entities  within  the  economic  entity  are
        classified as finance leases. Finance leases are capitalized,  recording
        an asset and a liability equal to the present value of the minimum lease
        payments,  including any guaranteed  residual values.  Leased assets are
        depreciated on a straight line basis over their  estimated  useful lives
        where it is likely that the economic entity will obtain ownership of the
        asset,  or over the term of the  lease.  Lease  payments  are  allocated
        between the  reduction  of the lease  liability  and the lease  interest
        expense for the period.

(d)     Investments

        Investments are carried at cost or at directors valuation. Dividends are
        brought to account in the Profit and Loss Account when received.

(e)     Cash

        For the purposes of the  statement of cash flows;  cash includes cash on
        hand  and  at  call  deposits  with  banks  or  financial  institutions,
        investments in money market  instruments  maturing  within less than two
        months and net of bank overdrafts.

(f)     Revenue

        Revenue from the sale of goods is recognized  upon the delivery of goods
        to customers.

(g)     Comparatives

        Where  necessary  comparatives  have been amended to reflect  changes in
        applicable accounting standards.




                                      F-7
<PAGE>

<TABLE>
                                ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                                    ACN 086 856 617
                                                AND CONTROLLED ENTITIES

                                           NOTES TO THE FINANCIAL STATEMENTS
                                       FOR THE FINANCIAL YEAR ENDED 30 JUNE 2001

<CAPTION>
                                                            ECONOMIC ENTITY                      PARENT ENTITY
                                                     ------------------------------     ------------------------------
                                               NOTE      2001               2000            2001               2000
                                                           $                  $               $                  $
                                              -----  ------------      -----------      ------------       -----------
<S>                                                    <C>              <C>               <C>               <C>
NOTE 2: OPERATING PROFIT

Operating profit before abnormal items and
  income tax has been determined after:
(a) Expenses;
Depreciation of non-current assets                      1,024,554           78,818           866,614            78,818
Amortization of non-current assets                        517,677           85,699            68,904            85,699

(b) Significant expenses
The following items of expense are relevant
   in explaining the financial performance
Write-down of deferred exploration expenditure          5,300,000               --                --                --
Write-down of investment in ADVC                       20,586,777               --        20,586,777                --

NOTE 3: REVENUE

Operating activities
Aus Industry Grants                                     4,400,000               --         4,400,000                --
Sales income                                              567,215            9,730            12,300                --
Other operating Income                                    787,206           20,400            42,134            20,400
                                                     ------------      -----------      ------------       -----------
                                                        5,754,421           30,130         4,454,434            20,400
                                                     ------------      -----------      ------------       -----------
Non-operating activities
Interest received                                           9,271            5,272             9,271             5,232
Insurance received                                          3,739               --             3,739                --
-----------                                          ------------      -----------
                                                           13,010            5,272            13,010             5,232
                                                     ------------      -----------      ------------       -----------
Total Revenue                                           5,767,431           35,402         4,467,444            25,632
                                                     ============      ===========      ============       ===========

NOTE 4: CASH

Cash on hand                                                7,169            1,603             1,723             1,203
Cash at bank                                              363,236           14,291             4,717             7,774
                                                     ------------      -----------      ------------       -----------
                                                          370,405           15,894             6,440             8,977
                                                     ============      ===========      ============       ===========

NOTE 5: RECEIVABLES

CURRENT Trade debtors                                     538,172           23,711            16,875            15,971
                                                     ------------      -----------      ------------       -----------
Amounts receivable from:
Controlling entity                                      4,018,150       12,396,694         4,018,150        12,396,694
Australon Limited                                              --               --           310,573                --
Australon Pty Ltd                                              --               --           195,000                --
Advanced Network Technologies                                  --               --         5,444,400                --
Data Link Technologies                                         --               --            25,000                --
Other Receivables                                         737,662          131,202           733,978           131,172
                                                     ------------      -----------      ------------       -----------
                                                        4,755,812       12,527,896        10,727,101        12,527,866
                                                     ------------      -----------      ------------       -----------
                                                        5,293,984       12,551,607        10,743,976        12,543,837
                                                     ============      ===========      ============       ===========
</TABLE>


                                                         F-8
<PAGE>

<TABLE>
             ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                 ACN 086 856 617
                             AND CONTROLLED ENTITIES

                        NOTES TO THE FINANCIAL STATEMENTS
                    FOR THE FINANCIAL YEAR ENDED 30 JUNE 2001

<CAPTION>
                                                            ECONOMIC ENTITY                      PARENT ENTITY
                                                     ------------------------------     ------------------------------
                                               NOTE      2001               2000            2001               2000
                                                           $                  $               $                  $
                                              -----  ------------      -----------      ------------       -----------
<S>                                             <C>    <C>              <C>               <C>               <C>
NOTE 6: OTHER ASSETS

CURRENT Prepayments                                        65,801               --            56,213                --
Other                                                      70,385           40,101                --            40,081
                                                     ------------      -----------      ------------       -----------
                                                          136,186           40,101            56,123            40,081
                                                     ============      ===========      ============       ===========

NOTE 7: OTHER FINANCIAL ASSETS

NON-CURRENT Shares in controlling entity                3,000,000       19,586,777         3,000,000        19,586,777
Other investments                                           3,000               --                --                --
                                                     ------------      -----------      ------------       -----------
                                                        3,003,000       19,586,777         3,000,000        19,586,777
                                                     ============      ===========      ============       ===========

NOTE 8: PROPERTY, PLANT AND EQUIPMENT

Leasehold Improvements                                    215,331               --            48,931                --
Less Accumulated Depreciation                             (27,837)              --            (1,931)               --
                                                     ------------      -----------      ------------       -----------
                                                          187,494               --            47,000                --
                                                     ------------      -----------      ------------       -----------
Plant & Equipment                                       4,287,091        1,339,502         2,832,621         1,321,203
Less Accumulated Depreciation                          (1,153,900)         (78,959)         (945,573)          (78,959)
                                                     ------------      -----------      ------------       -----------
                                                        3,133,191        1,260,543         1,887,048         1,242,244
                                                     ------------      -----------      ------------       -----------
Plant & Equipment under lease                             333,461          275,734           313,396           275,734
Less Accumulated Depreciation                            (155,376)         (85,699)         (152,672)          (85,699)
                                                     ------------      -----------      ------------       -----------
                                                          178,085          190,035           160,725           190,035
                                                     ------------      -----------      ------------       -----------
Total Property, Plant & Equipment                       3,498,769        1,450,578         2,094,772         1,432,279
                                                     ============      ===========      ============       ===========

NOTE 9: INTANGIBLE ASSETS

Goodwill                                               12,041,611               --                --                --
Less Accumulated Amortization                            (323,468)              --                --                --
                                                     ------------      -----------      ------------       -----------
                                                       11,718,143               --                --                --
                                                     ------------      -----------      ------------       -----------
Intellectual property at Directors valuation            1,330,204               --                --                --
Less Accumulated Amortisation                            (125,305)              --                --                --
                                                     ------------      -----------      ------------       -----------
                                                        1,204,899               --                --                --
                                                     ------------      -----------      ------------       -----------
                                                       12,923,042               --                --                --
                                                     ============      ===========      ============       ===========
NOTE 10: OTHER ASSETS

NON-CURRENT Research and
   development-- at cost                                  245,061               --                --                --
                                                     ------------      -----------      ------------       -----------
Deferred Exploration Expenditure                        8,341,163               --                --                --
Less Provision for Diminution                          (5,300,000)              --                --                --
                                                     ------------      -----------      ------------       -----------
                                                        3,041,163               --                --                --
                                                     ------------      -----------      ------------       -----------
Other Assets                                                  324               --                --                --
                                                     ------------      -----------      ------------       -----------
                                                        3,286,548               --                --                --
                                                     ============      ===========      ============       ===========
</TABLE>


                                                         F-9
<PAGE>

<TABLE>
                                ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                                    ACN 086 856 617
                                                AND CONTROLLED ENTITIES

                                           NOTES TO THE FINANCIAL STATEMENTS
                                       FOR THE FINANCIAL YEAR ENDED 30 JUNE 2001

<CAPTION>
                                                            ECONOMIC ENTITY                      PARENT ENTITY
                                                     ------------------------------     ------------------------------
                                               NOTE      2001               2000            2001               2000
                                                           $                  $               $                  $
                                              -----  ------------      -----------      ------------       -----------
<S>                                                    <C>              <C>               <C>               <C>
NOTE 11: PAYABLES

CURRENT
Unsecured liabilities
Trade Creditors                                         7,442,724        l,634,322         5,943,815         1,492,273
Other Creditors & Accruals                              1,129,799               --           993,487                --
                                                     ------------      -----------      ------------       -----------
                                                        8,572,523        1,634,322         6,937,302         1,492,273
                                                     ------------      -----------      ------------       -----------
Loans payable to: ACT US Inc                                   --          588,163                --           588,163
Global Communications Technology                        2,646,666        1,819,887         2,646,666         1,644,887
Directors                                               5,292,269          185,000         4,935,000           185,000
May & Sons Pty Ltd                                         80,000               --            80,000                --
Australon Enterprises Ltd                                  (3,175)              --                --                --
Partnership Loan                                          269,942               --                --                --
Other loans                                             3,964,279               --         3,167,157                --
                                                     ------------      -----------      ------------       -----------
                                                       12,249,991        2,593,050        10,828,823         2,418,050
                                                     ------------      -----------      ------------       -----------
                                                       20,822,514        4,227,372        17,766,125         3,910,323
                                                     ============      ===========      ============       ===========

NOTE 12: INTEREST BEARING LIABILITIES

CURRENT Unsecured liabilities Bank overdrafts             248,282               --            75,275                --
Lease Liabilities                                         183,289          207,359           164,401           207,359
                                                     ------------      -----------      ------------       -----------
                                                          431,571          207,359           239,676           207,359
                                                     ============      ===========      ============       ===========

NOTE 13: PROVISIONS

CURRENT Employee entitlements                             251,774          137,911           179,619            44,758
Other provisions                                               --           44,759                --           112,038
                                                     ------------      -----------      ------------       -----------
                                                          251,774          182,670           179,619           156,796
                                                     ============      ===========      ============       ===========

NOTE 14: CASH FLOW INFORMATION

(a) Reconciliation of Cash
Cash at the end of the financial year as shown
   in the statements of cash flows is reconciled
   to the related items in the balance sheet as
   follows:
      Cash on hand                                          7,269            1,603             1,723             1,203
      Cash at bank                                        363,236           14,291             4,717             7,774
      Bank overdrafts                                    (244,993)              --          (244,993)               --
                                                     ------------      -----------      ------------       -----------
                                                          125,512           15,894          (238,553)            8,977
                                                     ============      ===========      ============       ===========
</TABLE>



                                                         F-10
<PAGE>

NOTE 15: ECONOMIC DEPENDENCE - GOING CONCERN

The major issue affecting the company is it's ongoing financial  viability.  The
group has as it's major asset technology  which is recorded in it's,  controlled
entity at directors valuation of $18 million. An independent  valuation has been
completed which is in excess of this amount.  The accounts have been prepared on
a going concern basis which assumes that the company has the ability to continue
in business in the foreseeable future. This ability is dependent upon:

         - Support of major shareholders

         - The successful exploitation of technology within the Group which will
generate sufficient profits or other Cash flows to support their carrying value.
























                                                         F-11
<PAGE>

                             DIRECTORS' DECLARATION

The directors of the company have determined that the company is not a reporting
entity. The directors have determined that this special purpose financial report
should be prepared in accordance with the accounting policies outlined in Note 1
to the financial statements.

The directors of the company declare that:

1.      The financial statements and notes, as set out on pages 3 to 11:

        (a)   comply  with  accounting  standards  as  detailed in Note 1 to the
              financial statements and the Corporations Law; and

        (b)   give a true and full view of the financial  position as at 30 June
              2001 and it's  performance  for the year ended on that date of the
              company and economic entity.

2.      In the directors'  opinion there are reasonable  grounds to believe that
        the  company  will be able to pay its debts as and when they  become due
        and payable.

This declaration is made in accordance with a resolution of the directors.


Director          /s/ Jason May
-----------------------------------------------
         Jason Roger May


Director          /s/ Roger May
-----------------------------------------------
         Roger Thomas May

Dated this        day of October    2001

















                                      F-12
<PAGE>

                            INDEPENDENT AUDIT REPORT
                                TO THE MEMBERS OF
            ADVANCED COMMUNICATIONS TECHNOLOGIES (AUSTRALIA) PTY LTD


SCOPE

We have  audited the  attached  financial  statements,  being a special  purpose
financial report of Advanced Communication  Technologies (Australia) Pty Ltd for
the financial year ended 30th June 2001  including the  Directors'  Declaration.
The  financial  report  includes the financial  statements  of the  consolidated
entity  comprising  the company and the entities it  controlled at year's end or
from time to time  during  the  financial  year.  The  company's  directors  are
responsible for the financial  report. We have conducted an independent audit of
this financial report in order to express an opinion on it to the members of the
company.

The  financial  report has been  prepared  for  distribution  to members for the
purpose of fulfilling the directors' financial reporting  requirements under the
company's  constitution.  We disclaim any assumption of  responsibility  for any
reliance  on this report or on the  financial  report to which it relates to any
person  other than the members or for any  purpose  other than that for which it
was prepared.

Our audit has been conducted in accordance with Australian Auditing Standards to
provide reasonable assurance, whether the financial report is free from material
misstatement.  Our procedures include examination,  on a test basis, of evidence
supporting the amounts and other  disclosures in the financial  report,  and the
evaluation of accounting policies and significant  accounting  estimates.  These
procedures  have been  undertaken  to from an opinion  whether,  in all material
respects, the financial report is presented fairly in accordance with Australian
Standards,  other mandatory  professional  reporting  requirements and statutory
requirements, in Australia, so as to present a view which is consistent with our
understanding of the company's and the consolidated  entity's financial position
and performance as represented by the results of their operations and their cash
flows.

Audit Opinion

In our opinion,  the financial  report of Advanced  Communications  Technologies
(Australia) Pty Ltd is in accordance with:

(a)     the Corporations Act 2001 including:

        (i)   giving a true and fair view of the company's and the  consolidated
              entity's  financial  position  as at 30  June  2001  and of  their
              performance for the year ended on that date in accordance with the
              accounting policies described in note 1; and

        (ii)  complying  with AASB 1025:  Application  of the  Reporting  Entity
              Concept  and  Other  Amendments,  AASB  1034:  Information  to  be
              Disclosed in Financial Report,  other Accounting  Standards to the
              extent described in Note 1 and the Corporations Regulations; and

(b)     other  mandatory  professional  reporting  requirements  to  the  extent
        described in Note 1.

Inherent Uncertainty

Without qualification to the opinion expressed above,  attention is drawn to the
following matters:

1. A  subsidiary  Australon  Limited has stated in their audit report that "As a
result of the acquisition of Australon  Enterprises Pty Ltd,  intangible  assets
representing  intellectual property, of $18,000,000 and goodwill, of $48,330,204
were  recognized.  The  valuation  of  each  of  these  assets  in  based  on an
independent  valuation.  The  valuation  takes into  account the future value of
contracts for the development of products  utilising the intellectual  property.
The  ability  of  Australon  Limited to recover  the costs  associated  with the
intellectual property and goodwill will depend on the successful  exploration of
assets  recorded in the balance  sheet to  generate  sufficient  profits or cash
flows to support  their  carrying  value." The company,  Australon  Limited is a
controlled  entity and these items have been eliminated on consolidation and the
technology is restated at its original cost to the group.




                                      F-13
<PAGE>

             ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY LTD
                                 ACN 086 856 617
                             AND CONTROLLED ENTITIES

                            INDEPENDENT AUDIT REPORT
                                TO THE MEMBERS OF
            ADVANCED COMMUNICATIONS TECHNOLOGIES (AUSTRALIA) PTY LTD

2.      The parent entity Advanced Communications  Technologies  (Australia) Pty
        Ltd is  dependent  upon the  financial  support of its  shareholders  to
        ensure it can continue as a going concern and therefore  whether it will
        realize its assets and extinguish  its  liabilities in the normal course
        of business. Refer note 15.

C W Stirling & Co. Chartered Accountants

/s/ John A. Phillips

-------------------------------------------
Mr. John A. Phillips
Partner

Dated this 17th day of October 2001.
















                                      F-14