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

                                   FORM 10-KSB

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

                     For the Fiscal Year Ended June 30, 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)
               19200 Von Karman Ave., Suite 500, Irvine, CA 92612

                    (Address of principal executive offices)

                                 (949) 622-5566

                         (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.

                                     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.


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COMPANY OVERVIEW

We are a party to a  license  and  distribution  agreement  for  SpectruCell,  a
wireless   software   based   communications   platform   that   offers   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,  will 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. We believe that the  SpectruCell  technology is
the only SDR based  technology  with the capability of providing  flexibility in
commercial and military wireless  communications.  Without SpectruCell,  network
carriers would need to provide  separate base stations  and/or networks for each
wireless frequency. The SpectruCell product is being developed by our affiliated
entity, Advanced Communications Technologies, Pty (Australia) which we own a 20%
interest  in. Our license and  distribution  agreement  encompasses  a territory
comprising North 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 and South
American territories.

We have no other products that we will be licensing  and/or  distributing  other
than  SpectruCell  and other products being developed for sale and/or license by
our Australian affiliate. SpectruCell is expected to be available for commercial
license and distribution in the third quarter 2002.

We expect  to  generate  revenue  from the  marketing  and  distribution  of the
SpectruCell  product  under  our  license  agreement.  We will  not  manufacture
SpectruCell  in the U.S.,  but will  instead  be the  exclusive  distributor  of
SpectruCell in the North and South American territories.

                                INDUSTRY OVERVIEW

Growth of the Wireless Telecom Industry

The  wireless  telecom  industry  is one of the most  rapidly  growing  business
sectors  in the  world  today,  driven  by the  dramatic  increase  in  wireless
telephone  usage, as well as strong demand for wireless  Internet and other data
services.  Since 1992,  wireless  has been the  fastest-growing  telecom  market
sector, according to Forrester Research.  International Data Corporation expects
that by 2003, the U.S.  wireless  subscriber base will grow to over 185 million,
generating revenues in excess of $68 billion. EMC World Cellular Database at the
end of June 2001 have  stated  that there are 854.7  million  users of  cellular
services  world wide.  The demand for  wireless  Internet  access and other data
services is 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


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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.  Dataquest estimates that the market for broadband wireless equipment
in North America will grow from $90.7 million in 1998 to $901.3 million in 2002,
a  compound  annual  growth  rate of 77.5%.  Alcatel  forecasts  that the global
third-generation  mobile telephone  infrastructure  market will be valued at $60
billion to $80  billion  between  2001 and 2004 as new  networks  are rolled out
beginning in several European countries.

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

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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 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


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<PAGE>

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 our Australian  affiliate.  The COTS hardware used
is industry standard equipment and sourced from manufacturers worldwide.

The software can 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  developed 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 ("RMIT") 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 our Australian  affiliate in  collaboration  with the Department of
Computer Systems Engineering at RMIT.

Our Australian affiliate has developed and beta tested a wireless  communication
network  technology  that will be  trademarked  and  marketed as  "SpectruCell".
Unlike existing communications networks, SpectruCell supports 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  network.  By  utilizing  the  multiple
protocol  wireless  base  station,  network  providers  will be able to  support
substantially  all  current  and  future  wireless  frequencies  with  the  same
equipment on the same network through software  upgrades.  For example,  Telstra
Australia reportedly spent approximately $500 million in implementing a new CDMA
network to compliment  their  existing GSM network.  With  SpectruCell,  Telstra
could have simply  plugged in a SpectruCell  base station to their  existing GSM
network, enabling it to carry both protocols (CDMA and GSM) on the same network.


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The SpectruCell  system  architecture is a distinct  departure from conventional
Cellular/PCS network structure.  The SpectruCell  architecture provides 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.

In a SpectruCell  network  environment,  the additional hardware and/or software
upgrades would only be required at the MTSO/Central Office Switch location.  The
potential savings in network  implementation  and establishment  costs, and cell
site  maintenance  costs savings would be  substantial.  In addition,  given the
SpectruCell  network's  ability to carry all  current  evolving  and future call
protocols,  the network  operator  would also benefit from future  revenues from
foreign roaming calls.

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.   Upon  implementation,
SpectruCell, however, will allow carriers to maintain and utilize their existing
networks  within a modern  network  platform  that will  enable  them to support
evolving protocols. 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 include:

      o     significantly 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;


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      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  operating  system and hardware  platform has been  compared in
concept  to the use of  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
provides open systems and a standard operating platform to an industry dominated
by proprietary applications and interfaces.

Some of the key applications of the SpectruCell Platform are:

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

      o     A SpectruCell  SDR base station has the unique ability of being able
            to simultaneously  process and transmit all 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 built with 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 easily added to an existing SpectruCell base station by
            uploading another software module to the base station.

      o     SpectruCell  has a 25mhz  front end  capable of  processing  signals
            anywhere  from  400 MHz to 2.9 GHz  which  covers  all  proposed  3G
            frequency  ranges.  It can also accept all backbones  (wire,  fiber,
            cable, microwave,  satellite, etc.) SpectruCell's technology is such
            that is able 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 US market.

      o     Network   operators  can  seamlessly   install  a  SpectruCell  base
            station/switch  into their  existing 2G networks and it will process
            their  existing  customer  base while at


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<PAGE>

            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 will
            process  all   protocols   simultaneously   over  the  same  network
            infrastructure.

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

      o     SpectruCell has been built 3G ready and will be commercially  tested
            in the first and second quarter of 2002, with the first  SpectruCell
            base  stations  expected to be  available  in the fourth  quarter of
            2002.   SpectruCell   hardware  will  be  released  to  third  party
            developers for 3G application licensing in late 2002.

      o     Prototype work on the  SpectruCell  hardware and software  framework
            have  been  completed  and  now  the  work  is  moving  towards  the
            completion  of  hardware  and  software  capable  of being used in a
            telecommunication  field trial. Field trials are being scheduled for
            late first quarter 2002.

      o     All  external  interfaces  to  a  SpectruCell   Platform  are  of  a
            non-proprietary   nature.  All  SpectruCell  interfaces  conform  to
            existing  standards  for  information  exchange  including  the  air
            interface,  switch interface and billing and management  interfaces.
            Such an open system  ensures its future  viability  in a  constantly
            changing  marketplace.  The interface  encapsulates the following to
            facilitate complete network interoperability: (ATM, E1/T1 and IP)

The  SpectruCell  technology  is  a  safe  choice  for  developers  as  all  the
implementation of 3G protocols is in software. With the current confusion over a
3G standard (15+ proposals) it is hard for  manufacturers  to provide a hardware
based solution,  whereas with  SpectruCell all 15+ protocols can be supported on
the one hardware platform.

Other Applications include:

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

      o     A hardware platform for 3G cellular test equipment

      o     A hardware platform for high end military based signal processing

      o     Radar

      o     Sonar

      o     Military communications

      o     Aerial communications and mobile communications platforms


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

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

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.

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

      o     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.

      o     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.

      o     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.

Existing network providers will have the ability to:

o     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;

o     Gradually and seamlessly  replace their existing mobile base stations with
      SpectruCell base stations;

o     Replace existing base stations with  SpectruCell  base stations,  allowing
      network  providers to rollout new services and  protocols  with a software
      upgrade.

o     Dramatically  increase their current call capacity while still maintaining
      their existing infrastructure.


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<PAGE>

Competition

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 (preliminarily estimated
at 50%-70% less),  and higher revenues from increased U.S. and foreign  roaming,
or multiple  protocol,  calls handled in domestic  networks.  One very important
advantage is that SpectruCell can be implemented into domestic networks. Another
very important  advantage is that  SpectruCell can be implemented  into existing
cellular  networks  and  run in  parallel  with  conventional  cellular  network
technology.  It does not require the complete  redesign and  replacement  of the
existing  cellular  network  structure.  Rather it can be implemented in stages,
until  the  entire  network  structure  has  been  upgraded  to the  SpectruCell
architecture.

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.

Prospective Customers

The market for telecommunications  infrastructure  equipment will continue to be
stimulated by the increasing demand for voice and high-speed data  applications.
Network  operators will be forced to replace or upgrade their existing  networks
to  facilitate  the  introduction  of  3G  services.   Infrastructure  equipment
manufacturers  not already well into the  development of 3G products will now be
looking for proprietary components to reduce their development schedules.

Therefore  there are three distinct target markets that have now been identified
for the SpectruCell product:

      o     Primary & Secondary Network Operators

      o     Infrastructure Manufacturers and 3rd Party Developers

      o     Military (Signals Intelligence)

The initial marketing focus will target existing network operators, particularly
smaller  network  operators  in the US  currently  using CDMA,  IS95 & IS136 air
interfaces.  This initial  implementation of "SpectruCell"  will provide network
operators  with a  natural  migration  path  to  2.5G  and 3G  technologies  via
CDMA2000.

Strong demand is also expected from Canada, Mexico and Latin America as a result
of   increasing   demand  for  Internet   access  and  the  extension  of  basic
telecommunications services that will stimulate infrastructure spending in these
regions.

The advantages of SpectruCell to Network Operators:


                                                                              11

<PAGE>

      o     Enables  upgrading  of existing  network to evolving  new  protocols
            without   having  to  start  again  with  a  new  network,   thereby
            maintaining the asset base of their old networks;

      o     Can   seamlessly   replace   existing   mobile  base  stations  with
            SpectruCell   base   stations,   ensuring   the   existing   network
            functionality  remains intact,  whilst at the same time allowing the
            provider  access to the features and  advantages  not available on a
            conventional network;

      o     Flexible  migration  to  3G  technologies.  As  a  network  provider
            replaces existing base stations with SpectruCell base stations,  the
            network is changed in a way that allows network providers to rollout
            new services and protocols with a software upgrade; and

      o     Benefits of the SpectruCell system for Network Operators include:

            1.    Cheaper  rollout cost due to the network  being  wireless;


            2.    Cheaper  costs  for  upgrading  existing  networks  to  handle
                  additional  protocols through  utilization of existing network
                  infrastructure and software upgrades;

            3.    Will  enable  cellular  subscribers  to  access  all  Internet
                  services via mobile IP and other evolving data protocols (such
                  as ITU  3G).

            4.    Financial  asset saver  offering a migration from 2G to 3G for
                  existing network providers.

The  definition  of a third  party  developer  can be further  broken  down into
several categories:

      o     Core  developer  - an  organization  that  sells  product to Network
            Operators. Examples would be companies like Siemens, Nokia, Alcatel,
            Ericsson,  Sony, etc. The main advantage of the SpectruCell platform
            to this type of  developer is the rapid time to market that they can
            achieve with a  standardized  platform and available  library source
            code; and

      o     2nd  Tier   Developer  -   organizations   offering   core   network
            enhancements  in the 3G and wireless  arena.  Examples are companies
            like WSI, M-Diversity,  Open Telecommunications.  The main advantage
            to these types of  organizations is that it provides a platform that
            they can deploy their  technology on, while  partitioning  off their
            core  functionality.  In essence they can use SpectruCell to enhance
            existing  systems.   Without  a  solution  like  SpectruCell,   such
            developers require integration with all existing proprietary systems
            to get their technology to market.  SpectruCell provides them with a
            standard 3G capable operating platform and open system architecture.


                                                                              12

<PAGE>

Sales and Distribution

We expect to have independent  distribution and sales offices located in Newport
Beach,  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.  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.
Another  area that may affect the use of  SpectruCell  in the U.S.  3G  cellular
market  will be  associated  with  the  timetable  surrounding  the 3G  spectrum
allocation by the FCC.

Patents

Our  Australian  affiliate  has  filed  various  patent  applications  with  the
Australian  patent  office in connection  with the  SpectruCell  technology  and
anticipates preparing and filing additional patents in our fiscal year 2002. Our
affiliate is  confident  that its  applications  for patent  protection  will be
granted by the Australian regulatory authorities.

                                 COMPANY HISTORY

We 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. ("MFI"), a Florida corporation, acquired all of our stock in
exchange  for MFI stock.  Pursuant  to the merger  agreement,  our  shareholders
received  nine  shares of MFI's  common  stock for each share of Company  common
stock held. After the merger, our shareholders  owned  approximately 90% of MFI.
MFI,  the   surviving   entity   subsequently   changed  its  name  to  Advanced
Communications  Technologies,  Inc.  Upon  completion of the merger with MFI, we
changed our trading symbol to "ADVC."

On January 31, 2000, we acquired Smart Investments.com,  Inc. ("SICI") through a
stock exchange with SICI's 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.


                                                                              13

<PAGE>

On July 20,  1999 we  formed  Advanced  Global  Communications,  Inc.  ("AGC") a
Florida   corporation.   AGC  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 AGC'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, AGC entered into an agreement (the "World Agreement") with
the shareholders of World IP Incorporated ("World") and its wholly-owned foreign
subsidiaries Sur Comunicaciones,  S.A. (A Chilean  Corporation) and Acinel, S.A.
(An Argentinean  Corporation),  hereinafter the "World Group",  to acquire a 51%
controlling interest in the World Group. Under the terms of the World Agreement,
500,000 shares of the Company's 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. 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. The World Group provides
wholesale international telephone services from the U.S. to Chile and Argentina.

On October 4, 2000, we notified World's  management and its shareholders that we
intended to rescind the World Agreement  because we were unable,  after repeated
requests,  to obtain  from  World's  management  financial  records  and audited
financial  statements.  Consequently,  our management  deemed that it was in our
best interest to unilaterally  rescind the World Agreement.  On October 6, 2000,
we filed suit in the Circuit Court in and for Palm Beach County, Florida against
the World Group and its  shareholders  for rescission of the World Agreement and
for monetary  damages  resulting from World and its  management's  breach of the
World Agreement.

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. ("ACT-Australia") to acquire a
20% interest in ACT-Australia for $19,350,000. In consideration for our purchase
of the  ACT-Australia  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.

On July 24, 2000, the Company formed Australon USA, Inc., a Delaware Corporation
owned 50% by the Company and 50% by  Australon  Enterprises  Pty.,  Ltd.,  a 66%
owned subsidiary of our Australian  affiliate.  We formed Australon USA, Inc. to
market and sell the  Australon  suite of products in the U.S.,  Canada and South
America. Australon USA, Inc is presently inactive and had no revenue and expense
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 our Australian  affiliate.  We
formed Advanced Network  Technologies (USA) Inc. to market and sell the products
and services being developed and sold by ANT-Australia. Advanced Network


                                                                              14

<PAGE>

Technologies  (USA), Inc is presently inactive and had no revenue or expense for
the fiscal year ended June 30, 2001.

Acquisitions

During the year we were 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 (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  (the  "Assets")  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  (the
"Court").  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  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 ("Beneventure") to acquire
all of  the  assets  of  Beneventure  in  exchange  for  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 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.

Employees and Consultants

As of September 30, 2001, we have seven full time employees and consultants. Our
Australian  affiliate  and its  subsidiaries  has  approximately  150 full  time
employees of


                                                                              15

<PAGE>

which  approximately  110 are engaged in research and  development and technical
support.  None  of  our  employees  are  covered  by any  collective  bargaining
agreement.

ITEM 2. DESCRIPTION OF PROPERTY

Facilities

Our  principal  executive  office is  located  at 19200 Von  Karman,  Suite 500,
Irvine,  California  92612.  We have a one-year  renewable  lease for our office
which expires in March 2002. The monthly rent is $7,050 exclusive of the cost of
various  office  services  which is in addition to the monthly  rent. We believe
that we can  lease  the same or  comparable  office  at  approximately  the same
monthly rate in the event that we do not renew our lease next year.

ITEM 3. LEGAL PROCEEDINGS

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

In  Nancy  J  Needham;  Thomas  R.B  Wardell  et al v.  Advanced  Communications
Technologies,  Inc. et al, an action filed July 2000 in the Florida State Court,
two former  officers  and  directors  of the  Company  are  seeking  damages and
injunctive  relief  arising out of our refusal to provide legal opinion  letters
and to take other  actions  necessary  to allow the former  officers to transfer
restricted securities to unrestricted  securities under a Rule 144 exemption. We
have filed a  counterclaim  to rescind  all of the  Plaintiffs'  shares for lack
and/or failure of consideration and other damages.  Plaintiffs moved for Summary
Judgement on their claims,  which motion was dismissed by the court.  We believe
that we have meritorious  defenses to the suit and are vigorously  defending the
litigation  on  procedural as well as  substantive  grounds.  It is too early to
predict the outcome of this litigation.

Bank Insinger v Advanced  Communications  Technologies  Inc, was filed in August
2000 in the Eastern  District of New York by a purchaser  of $150,000 of our 12%
Secured  Convertible  Debentures  for alleged  breach of the debenture and other
claims. In December 2000, we subsequently  settled this claim with Bank Insinger
by issuing our common stock in exchange for the convertible debenture.

In Star Multi Care Services,  Inc v Advanced  Communications  Technologies,  Inc
filed in the Fifteenth Judicial Circuit in the State of Florida on September 18,
2000,  Star Multi Care Services,  Inc ("Star") has sued us for alleged breach of
contract and the recovery of a break-up or termination  fee in excess of $50,000
in  conjunction  with our alleged  failure to consummate a proposed  merger with
Star in  January  2000.  We believe  that the suit is  without  basis and we are
vigorously defending the alleged claim.

Grassland  Capital Group v Media Forum  International,  Inc was filed in 1998 in
the State of Florida against Media Forum  International,  Inc., our predecessor,
for  enforcement  of a convertible  promissory  note.  In May 2000,  the parties
agreed to settle  the matter for a fixed sum of  $200,000  of which the  Company
paid  $50,000.  On August  31,  2000 the state  court  entered a final  judgment
against us in the amount of $150,000.  In October 2000,


                                                                              16

<PAGE>

we paid $41,802  towards this amount and on October 19, 2001 we paid the balance
of the outstanding  judgment of $108,198 plus accrued  interest of approximately
$15,000.

On On April 13, 2001, New Millennium  Capital Partners II, LLC and AJW Partners,
LLC, holders of the remaining amount of our 12% Secured  Convertible  Debentures
totaling $200,750,  filed an action in the Federal Court in the Eastern District
of New York seeking  recovery of the  principal  amount of the  obligation  plus
accrued  interest and other monetary  damages.  We believe that the  Plaintiffs'
breached the terms of the  debenture  and as such, we are defending the suit and
pursuing various legal remedies.

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

There were no votes submitted during the fiscal year end.

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.

                                     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:


                                                                              17

<PAGE>

                                                 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".

Item 6. SELECTED FINANCIAL DATA

                                           For the Years Ended June 30,
                                           ----------------------------

                                       2001            2000             1999
                                       ----            ----             ----

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
                                   ============    ============    ============


                                                                              18

<PAGE>

                                         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)


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:

                                         For the Years Ended June 30,
                                         ----------------------------

                                         2001                     2000
                                         ----                     ----

Consolidated Statement of
  Operations Data:

Revenue                              $   50,000                        --
Cost of Revenue                          57,310                        --
                                      ---------                 ---------
Gross Profit (Loss)                      (7,310)                       --
Selling, General and
Administrative Expenses
before Depreciation and
Amortization                          2,283,412                 4,384,691
                                      ---------                 ---------
Operating Profit (Loss)              (2,290,722)               (4,384,691)
Loss from Unconsolidated
  Subsidiary                         (3,571,654)                  (85,818)
Total Other (Expense) Income        (12,842,021)                 (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)


                                                                              19

<PAGE>

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 our  Australian
affiliate.

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.

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.


                                                                              20

<PAGE>

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 our  Australian  affiliate  as  well as an
increase  of  $3,485,836  in our share of a full  year's  loss  from our  equity
ownership in our Australian affiliate.

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 our Australian
affiliate  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.

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 our Australian  affiliate 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


                                                                              21

<PAGE>

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.

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 our  Australian  affiliate 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.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception,  we have financed our operations through the sale of common
stock and convertible  debentures and from loans from our major shareholder.  We
have raised  approximately  $2,700,000 before offering costs through the sale of
these securities and have borrowed $796,000 from our major shareholder.

At June 30, 2001, the Company's 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
fiscal  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 fiscal year amounted to $1,712,680
and  consisted of loans from our  principal  shareholder  and the sale of common
stock pursuant to our Reg. D Section 506 private offering.

On August 14, 2001, we filed a S-1 Registration Statement to register 37,500,000
of our shares in connection  with our  $12,000,000  equity line credit  facility
with  Ladenburg  Thalmann & Co., Inc.  ("LTCO") and Wanquay  Limited.  Under the
terms of the credit  facility,  we will be able to draw down up to $500,000  per
month based on a formula  which takes into account the volume  weighted  average
price  of our  stock.  The  credit  facility  will be  available  only  upon the
effectiveness of our registration  statement.  While we believe that the monthly
proceeds  from the LTCO equity line  facility  will be sufficient to satisfy our
immediate and projected cash  requirements  over the next twelve months,  we are
uncertain on the timing of when, if ever,  the LTCO equity credit  facility will
be available


                                                                              22

<PAGE>

to us.  Because the timing of our ability to access the LTCO credit  facility is
uncertain,  we have entered  into  discussions  with other  sources of short and
medium  term  financing.  There  can be no  assurance  that  we  will be able to
successfully complete these alternate financings or that such financings will be
on terms favorable to us.

In the past we have financed our operations through a combination of shareholder
loans,  convertible  securities and the private placement of our stock. While we
are  confident  that we will be able to continue to finance our  operations  and
infrastructure  growth  sufficient  to market  and  distribute  the  Spectrucell
product over the next twelve  months,  there can be no assurance that we will be
able to achieve this. Our current  monthly capital  requirements  are modest and
have been covered either by the sale of our securities or by shareholder  loans.
However,  we  expect  that our  capital  requirements  over the next  twelve  to
eighteen  months  will be  substantial.  If we are  unable to raise the  capital
sufficient to enable us to grow our business and market and sell the Spectrucell
product  effectively,  we may be  forced to sell or merge  our  business  with a
company  that has the  resources  to execute  our  marketing  plan and  generate
Spectrucell  sales.  If we are  unable to either  raise  sufficient  capital  to
continue our business or find a merger partner to assist in the execution of our
sales and marketing of Spectrucell, we may be unable to continue our operations.

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 our  Australian  affiliate 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 the Company are submitted as a separate  section of
this Form 10-KSB on pages F-1 through F-19. In addition,  because our Australian
affiliate'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.


                                                                              23

<PAGE>

                                    PART III

ITEM  10.  DIRECTORS,   EXECUTIVE  OFFICERS,   PROMOTORS  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
----------------                        ---          --------

Roger May                                55          Chief Executive Officer,
19200 Von Karman Ave.                                Chairman of the Board
Irvine, CA 92612                                     and Director

Wayne I. Danson                          48          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          Director
19200 Von Karman Ave.
Irvine, CA 92612

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

Allen Roberts                            50          Director
350 Queen Street
Melbourne Australia


                                                                              24

<PAGE>

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.  May is a party  to a  written  employment  agreement  with  the
Company,  as amended,  that  entitles him to a salary of $210,000 per year.  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.  Both  Mr.  May and Mr.  Danson  are
reimbursed for reasonable  out-of-pocket  expenses  relating to their activities
for the Company. In addition,  Mr. May is reimbursed for his automobile expenses
in connection with Company business.

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

Roger May, Chief Executive  Officer,  Chairman of the Board and Director.  Roger
May has been the Chairman and Chief Executive Officer of the Company since March
10, 1997. In 1991 he founded the nationwide central  reservation system known as
Independent  Reservation  Services Ltd.  ("IRSL") In 1997 Mr. May negotiated the
sale of IRSL to a Florida public company,  Teleservices  International Group. In
1987,  Mr.  May  began  his  focus  on  telecommunications,  first  establishing
nationwide  distribution  networks  for a  private  network  and then  marketing
discounted   telecommunications   products  and   associated   services  to  the
hospitality  industry.  He  established  successful  joint ventures with Cable &
Wireless,  and relationships with Rochester Telephone,  Bell Atlantic,  Frontier
Communications  and others.  Mr. May moved to Los Angeles from Australia in 1980
to  capitalize  on  export  incentive   allowances  offered  by  the  Australian
government.  He began  operating a wool  exporting  company and then purchased a
franchise for International Business Exchange,  Inc., a barter exchange company.
Mr. May began his marketing  career in Australia in 1969, where he was a General
Manager for the largest General Motors dealership in Australia.

Wayne I. Danson, Chief Financial Officer and Director.  Mr. Danson has served as
the Company's Chief Financial Officer since December 1, 1999 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


                                                                              25

<PAGE>

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

Jonathan J.  Lichtman,  Director.  Mr.  Lichtman was appointed a Director of the
Company 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,
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 the Company
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 the Company and Director
since March 10, 1997, is currently  the  President and CEO of World  Associates,
Inc. a publicly traded  development stage company.  He is also the sole owner of
Bristol Capital, Inc., a firm active in consulting and business development work
for  companies  seeking  access to  capital  markets,  and  through  which he is
incubating other e-business  ventures.  Mr. Prouty is a licensed real estate and
mortgage  broker in the State of  Florida  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 the Company 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


                                                                              26

<PAGE>

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.

Allen Roberts,  Director. Mr. Roberts was appointed a Director of the Company on
July  10,  2001 and is  currently  Vice  President-Mergers  &  Acquisitions  for
ACT-Australia.  Since joining ACT-Australia, Mr. Roberts was responsible for and
directly  involved in the Gawler Gold, Data Link Technologies Pty, LTD, Victoria
Communications  and  Simoco  Australia  Pty Ltd  acquisitions.  Prior to joining
ACT-Australia,  Mr.  Roberts was the sole  shareholder  of an  Australian  based
financial consulting company  specializing in mergers,  acquisitions and capital
markets  activities.  Prior  to  that,  he was  Head of  Credit  for the Bank of
Melbourne  where he reported to the  Managing  Director  and the Bank's Board of
Directors.

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.


ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following summary compensation table shows certain compensation  information
for services  rendered in all  capabilities  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.

                                  June 30, 2001              June 30, 2000
                                  --------------             -------------

Roger May, CEO                      $247,500(1)               $120,000(1)

Wayne I. Danson, CFO                 403,431(2)                 50,000(3)


                                                                              27

<PAGE>

(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.

(2) Represents the value of accrued fees and stock-based compensation paid to or
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 the Company 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 - June 30, 2000.  Mr.
Danson also received 100,000 shares of our stock as a signing bonus.

The Company  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.,  19200 Von Karman Ave., Suite
500, Irvine, CA 92612.


                                                                              28

<PAGE>

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
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.

                                           Number of Shares       Percentage of
                                             Beneficially             Shares
                                                Owned              Outstanding
                                           ----------------       -------------

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                 **
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.
Mr. Lichtman disclaims beneficial ownership of these shares.

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

*   The Company presently is disputing the ownership of these shares.

**  Less than 1%.


                                                                              29

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. May, the Company's principal shareholder, through a family trust established
in  Australia  by the May  family,  indirectly  owns a majority  interest in our
Australian  affiliate.  We own  20%  of  the  common  stock  of  our  Australian
affiliate.

During  the year,  we repaid  $5,326,833  of our  obligation  to our  Australian
affiliate,  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 our  Australian
affiliate.

As of June 30, 2001, we are indebted to Global Communications Technologies, Ltd,
("Global") an entity owned by Mr. May, in the amount of $796,000. Our obligation
to Global is  non-interest  bearing and unsecured.  During the fiscal year ended
June 30, 2000,  we were indebted to Global for  $251,500  for advances  made. In
addition,  Mr. May has deferred  receiving his annual  compensation  and is owed
$479,050 and $231,550 in accrued and unpaid compensation as of June 30, 2001 and
2000, respectively.

Effective  July 1, 2000,  the Company and Mr. May  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 the Company 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, LIST AND REPORTS ON FORM 8-K

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) Reports on Form 10-K

      None



                                                                              30

<PAGE>

(c) Exhibits.
                                                        Incorporated by
          Description of Document                         Reference to
--------------------------------------------------------------------------------
3.1       Articles of Incorporation, as             Exhibit 3.1 to Form S-1
          currently in effect for the Company.      Registration Statement
                                                    (No. 333-67524) filed on
                                                    August 14, 2001 (the
                                                    "Registration Statement")
--------------------------------------------------------------------------------
3.2       Bylaws, as currently in effect.           Exhibit 3.2 to the
                                                    Registration Statement
--------------------------------------------------------------------------------
10.1      Office Lease by and between the           Exhibit 10.1 to the
          Company and DBS, Inc.                     Registration Statement
--------------------------------------------------------------------------------
10.2      Stock Purchase Agreement between          Exhibit 10.2 to the
          the Company and ACT-Australia.            Registration Statement
--------------------------------------------------------------------------------
10.3      Agreement dated June 27, 2000 between     Exhibit 10.3 to the
          Ladenburg Thalmann & Co. and the Company. Registration Statement
--------------------------------------------------------------------------------
10.4      Common Stock Purchase Agreement dated     Exhibit 10.4 to the
          December 14, 2000 between  the Company    Registration Statement
          and Wanquay Ltd.
--------------------------------------------------------------------------------
10.5      Registration Rights Agreement dated       Exhibit 10.5 to the
          December 14, 2000 between the Company     Registration Statement
          and Wanquay Ltd.
--------------------------------------------------------------------------------
10.6      Escrow Agreement dated December 14, 2000  Exhibit 10.6 to the
          among the Company,  Wanquay Ltd. and      Registration Statement
          Epstein Becker & Green.
--------------------------------------------------------------------------------
11.0      Audited Consolidated Financial Statements
          for Advanced  Communications Technology
          (Australia) PTY Ltd and controlled entities
--------------------------------------------------------------------------------


                                                                              31

<PAGE>


SIGNATURES

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

Registrant:
Advanced Communications Technologies, Inc.

/s/ Roger May                                             October 30, 2001
---------------------------------
    By:  Roger May
    Chief Executive Officer and Director

/s/ Wayne I. Danson                                       October 30 , 2001
---------------------------------
    By:  Wayne I. Danson
    Chief Financial Officer and Director

Pursuant to the  requirements  of the  Securities  & Exchange  Act of 1934,  the
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated:

/s/ Randall Prouty                                        October 30, 2001
---------------------------------
    Randall Prouty
    Director

/s/ Jonathan Lichtman                                     October 30, 2001
---------------------------------
    Jonathan Lichtman
    Director

/s/ Michael Finch                                         October 30, 2001
---------------------------------
    Michael Finch
    Director

/s/ Wilbank Roche                                         October 30, 2001
---------------------------------
    Wilbank Roche
    Director

/s/ Allen Roberts                                         October 30, 2001
---------------------------------
     Allen Roberts
     Director


                                                                              32

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                               AS OF JUNE 30, 2001


                                                                              33

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2001

                          INDEX TO FINANCIAL STATEMENTS

                                                                       Page(s)
                                                                       -------

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


                                                                              34

<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>

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

                                                       2001            2000
                                                   ------------    ------------
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.


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                                                            Other         Common
                       Common Stock         Common Stock to be Issued     Accumulated    Comprehensive     Stock
                  Shares         Amount       Shares        Amount          Deficit          Loss         Advances         Total
                ----------    ------------  ----------    -----------    -------------   -------------  ------------  -------------
<S>             <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 extin-
  guishment
  of debt          600,000         180,000          --              --             --              --             --        180,000
Stock issued
  for acquisi-
  tions          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
  extinguish-
  ment 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)
                ==========    ============  ==========    ============   ============    ============   ============   ============

</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

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

<TABLE>
<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
                                                      ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

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

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.


                                      F-7
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

        (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.

        (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.


                                      F-8
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

        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.

        (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


                                      F-9
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

        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 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)).


                                      F-10
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

NOTE 3  LOSS FROM INVESTMENT IN 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.

        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)

        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.

        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. 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.


                                      F-11
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

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

                                   Investment       Goodwill           Total
                                  ------------    ------------     ------------
        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
                                  ============    ============     ============

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,  2001and  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.


                                      F-12
<PAGE>

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

        (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.


                                      F-13
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

        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.

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)).


                                      F-14
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

NOTE 9   STOCKHOLDERS' EQUITY (DEFICIENCY)

        (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 30, 2001, no
        warrants have been exercised.

        (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.

        (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.


                                      F-15
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

NOTE 10 RELATED PARTIES

        (A) Global Communications Technology Consultants, Inc.

        Global Communications Technology Consultants,  Inc., a related party, is
        wholly  owned  by  the   individual   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 a  principal
        stockholder.

        (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


                                      F-16
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

        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  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,


                                      F-17
<PAGE>

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

        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).


                                      F-18
<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2001

        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-19
<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>


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

                                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.

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


                                      -1-
<PAGE>

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

                          DIRECTORS' REPORT (CONTINUED)

PROCEEDINGS ON BEHALF OF THE COMPANY (CONTINUED)

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


                                      -2-
<PAGE>

             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

<TABLE>
<CAPTION>
                                                                 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 amortisation 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)
                                                          ===========     ==========    ===========     ==========
</TABLE>

        The accompanying notes form part of these financial statements.


                                      -3-
<PAGE>

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

                         STATEMENT OF FINANCIAL POSITION
                               AS AT 30 JUNE 2001

<TABLE>
<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
                                              ===========     ==========    ===========     ==========
</TABLE>

        The accompanying notes form part of these financial statements.


                                      -4-
<PAGE>

             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

<TABLE>
<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
                                                    ----------    ----------    ----------    ----------
</TABLE>

        The accompanying notes form part of these financial statements.


                                      -5-
<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

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 unrealised 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:

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


                                      -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

(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 capitalised,  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 recognised  upon the delivery of goods
        to customers.

(g)     Comparatives

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


                                      -7-
<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

<TABLE>
<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
Amortisation 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>


                                      -8-
<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

<TABLE>
<CAPTION>
                                                      Economic Entity              Parent Entity
                                     Note         2001            2000          2001            2000
                                                    $               $             $               $

<S>                                            <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 Amortisation                     (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>


                                      -9-
<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

<TABLE>
<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>


                                      -10-
<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

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.


                                      -11-
<PAGE>

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

                             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


                                      -12-
<PAGE>

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

                            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  recognised.  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.


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<PAGE>

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

                            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 realise 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.


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