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, 2002

                          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)

                    420 LEXINGTON AVENUE, NEW YORK, NY 10170
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (646) 227-1600
                         (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        X Yes   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 November 15, 2002 of the voting  common
equity held by non-affiliates is $1,188,526.


              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 November 15,
2002, there were  118,852,622  shares of the Company's no par value common stock
issued and outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

      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.

                                       i

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

      Certain statements in this Annual Report on Form 10-KSB, including certain
statements contained in the "Business" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations",  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words or phrases "can be", "expects",  "may affect",  "may depend",  "believes",
"estimate",  project",  and similar  words and phrases are  intended to identify
such forward-looking  statements. Such forward-looking statements are subject to
various known and unknown risks and  uncertainties  and the Company cautions you
that any forward-looking  information provided by or on behalf of the Company is
not a guarantee of future performance. The Company's actual results could differ
materially from those  anticipated by such  forward-looking  statements due to a
number of factors,  some of which are beyond our  control,  in addition to those
risks discussed below and in the Company's other public filings,  press releases
and  statements  by the  Company's  management,  including  (i) the volatile and
competitive nature of the telecommunications  industry; (ii) changes in domestic
and foreign  economic  and market  conditions;  and (iii) the effect of federal,
state  and  foreign   regulation   on  the   Company's   businesses.   All  such
forward-looking  statements  are  current  only  as of the  date on  which  such
statements  were made. The Company does not undertake any obligation to publicly
update any  forward-looking  statement to reflect events or circumstances  after
the date on which any such  statement  is made or to reflect the  occurrence  of
unanticipated events.

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

      We own the North  and South  American  rights  to  market  and  distribute
SpectruCell,  a wireless  software based  communications  platform that is being
developed to offer mobile  communications  network  providers the flexibility of
processing and transmitting multiple wireless  communication signals through one
base station.  The SpectruCell  product,  which is based on the Software Defined
Radio  ("SDR")  platform,  is being  developed to allow  wireless  communication
network  providers  with  the  ability  to not  only  direct  multiple  wireless
frequencies  (AMPS,  CDMA,  GSM,  Mobile IP,  Voice IP,  etc.)  through one base
station but is expected to provide  flexibility for future spectrum  upgrades to
3G.  The  SpectruCell  product is being  developed  by  Advanced  Communications
Technologies (Australia),  Pty. Ltd. ("Advanced Communications  (Australia)") an
insolvent development stage company, in which we formerly owned a 20% interest.

      During most of 2002,  we were in  litigation  with Roger May and  Advanced
Communications  (Australia)  over our  stock  ownership  interests  in  Advanced
Communications  (Australia) and our rights to market and distribute SpectruCell.
Based on a substantial  record created in that  proceeding,  the Australia Court
granted us broad injunctions  protecting our rights pending trial on the matters
at issue. In early October, 2002, Advanced Communications (Australia) terminated
an interim  License  Agreement  we  entered  into with  Advanced  Communications
(Australia)  in  July  2000  to  facilitate  implementation  of  our  rights  to
SpectruCell on the grounds that we were insolvent and our insolvency constituted
an irreparable breach of the interim License Agreement.  Our initial response to
the purported  termination of the interim License Agreement was to oppose it and
seek  leave of the  Australian  Court to apply  for an  injunction  to  prohibit
Advanced  Communications  (Australia)  from acting on the purported  termination
pending trial.  The Australian  Court granted us leave to do so. However,  after
considering the situation  further and receiving advice of counsel,  we made the
strategic  decision  to alter our  approach  and  withdraw  from the  Australian
litigation.

      This decision was based on various factors,  including the following:  (i)
the actions of Mr. May against the Company over the past 11 months, which in the
Company's view demonstrated a consistent lack of good faith on his part that was
unlikely to change,  (ii) a recent  statement  made by Mr. May under oath to the
Australian  Court that "IT IS IMPORTANT FROM THE OUTSET TO UNDERSTAND THAT THERE
WAS NO  SPECTRUCELL  PRODUCT  IN 1999 AND TODAY  THERE  STILL IS NO  SPECTRUCELL
PRODUCT AS IT IS CLEARLY  STILL IN THE  DEVELOPMENT  STAGE AND AT LEAST 12 TO 18
MONTHS  FROM  THE  FINAL  PRODUCT  STAGE.",   which  was  contrary  to  previous
information  consistently  provided  by  Mr.  May  and  Advanced  Communications
(Australia) to the Company and the public on that subject,  (iii) the completion
of the research and development of SpectruCell is currently projected to require
an additional US$12 to 15 million;  (iv) the Company's  opinion that development
of SpectruCell  is unlikely to be completed and a product  brought to successful
commercialization under Mr. May's leadership (v) the Company's limited resources
at the present time are  insufficient to enable it take all of the legal actions
that would be  necessary  to defend and  enforce  its rights in  Australia;  and
(v)the  need  for  the  Company  to use  available  funds  to  continue  current
operations so that its rights and viability will be  meaningfully  preserved for
the future.

                                       1
<PAGE>

      On October 25, 2002, we withdrew from the  Australian  litigation  against
Mr. May and Advanced  Communications  (Australia).  The effect of the  Company's
decision  to  withdraw  from the  Australia  litigation  was  that the  existing
injunctions  issued by the  Australia  Court have been lifted and the  purported
termination  of the interim  License  Agreement is not being  challenged  in the
Australia Court.

      Notwithstanding  our withdrawal from the Australia  litigation,  we retain
our rights to damages and other available legal and equitable relief against Mr.
May,  Advanced  Communications  (Australia)  and other parties who have acted in
concert  with them in  violation  of our rights.  In  addition,  we still retain
ownership of the rights to SpectruCell  and related  technology that we acquired
in the 1999 merger with  Advanced  Communications  Technologies,  Inc., a Nevada
corporation  ("Advanced  Communications  (Nevada)"),  which  rights were neither
created by nor subject to cancellation under the interim License Agreement.  The
Company  intends to protect these rights to the fullest  extent it is able to do
so, and anticipates  that Mr. May and Advanced  Communications  (Australia) will
refuse to acknowledge these rights.

      As a minority shareholder in Advanced Communications  (Australia),  we had
no management rights in its daily operations or any control over the development
of the SpectruCell product. Our interest in Advanced Communications  (Australia)
was evidenced by a Stock Purchase Agreement and was reflected by stock ownership
records  on file  with  the  Australian  Securities  Investment  Commission,  an
Australian   government  agency.   The  Company  owes  Advanced   Communications
(Australia) $1,791,166 under the terms of the Stock Purchase Agreement,  subject
to claims or offsets the  Company  has as a result of the damages  caused by Mr.
May and Advanced  Communications  (Australia)  to the Company during the past 12
months. Mr. May, a former officer and director and significant  shareholder owns
70%  of  Advanced  Communications   (Australia)  through  Global  Communications
Technology Pty Ltd., his wholly owned  company.  On November 11, 2002,  Advanced
Communications (Australia) issued a Notice of Termination to the Company stating
that the April 2000 Stock Purchase  Agreement was terminated  immediately due to
the Company's insolvency.  The effect of the purported Notice of Termination vis
a vis the Stock Purchase  Agreement was to cancel the Company's  stock ownership
interest in Advanced Communications (Australia). Consistent with our decision to
withdraw from the Australia  litigation,  we have not  challenged  the purported
termination of the Stock Purchase  Agreement in the Australia Court.  Given that
Advanced Communications (Australia) is in an insolvency proceeding in Australia,
that it is unlikely to emerge as an operating  entity,  and that the Company has
written off its entire investment in Advanced  Communications  (Australia),  the
financial impact of this on the Company is not believed to be significant.

      On or about July 18, 2002, Advanced  Communications  (Australia) filed for
administration  under  Australia's  insolvency laws and appointed an independent
administrator to operate and manage its business. Shortly thereafter, a receiver
was appointed over the assets of Advanced  Communications  (Australia).  In late
September  2002,  a  plan  of  arrangement  was  proposed  and  approved  in the
administrative insolvency proceeding of Advanced Communications  (Australia), as
a result  of which  its  significant  assets  will be sold to third  parties  to
provide  a source of  payment  of its  debts.  At this  time,  it  appears  that
SpectruCell  will be  sold  to a third  party  controlled  by Mr.  May and  that
Advanced Communications (Australia) will cease operations as a going concern.

      We currently have no products for licensing and/or  distribution and, as a
result of the above-described events, our ability to market SpectruCell in North
and South  America and  exercise  the rights we acquired in the 1999 merger with
Advanced  Communications  (Nevada) is unclear.  Apart from this,  SpectruCell is
still under  development.  Moreover,  given the litigation and current situation
between the Company, Mr. May and Advanced Communications  (Australia), we do not
have (and do not expect to obtain) any reliable information on the status of the
SpectruCell  product,  when it will be  available,  if at all, to  commercial or
military users, the timetable for completing its development, or if the required
financing can be obtained by Advanced Communications  (Australia) or a successor
in interest, to do so.

      We expected to generate revenue from the marketing and distribution of the
SpectruCell  product,  if and when it became  available to us. Although we still
own the  North  America  and South  America  rights  to  market  and  distribute
SpectruCell,  acquired pursuant to the 1999 merger with Advanced  Communications
(Nevada), it is unclear at this point whether we will be able to actualize those
rights if SpectruCell is ever brought to the market and is a commercially viable
product.  We have not had any  meaningful  revenues to date.  For the year ended
June 30, 2002, we had a net loss of $4,332,693 or $.0.04 per share.  At June 30,
2002, we had negative  working capital of $3,252,643 and an accumulated  deficit
of $29,848,648.

                                       2
<PAGE>

INTERIM LICENSE AGREEMENT

      In April 1999, Advanced  Communications  (Nevada) merged with and into the
Company.  Pursuant to this merger,  the shareholders of Advanced  Communications
(Nevada) (of which Mr. May was the  principal  shareholder)  received 90% of the
Company's  outstanding  common  stock and the Company  received  all of Advanced
Communications  (Nevada)'s  assets  which  included  all of the  North and South
American rights to SpectruCell.

      On July 5, 2000,  we  entered  into an interim  License  and  Distribution
Agreement  (the  "interim  License  Agreement")  with  Advanced   Communications
Technologies  (Australia)  Pty Ltd.  to help  facilitate  implementation  of the
rights we acquired in the 1999 merger with Advanced Communications  (Nevada). At
that time, we owned a 20% interest and Mr. May indirectly owns a 70% interest in
Advanced  Communications  (Australia).  Mr. May is a former officer and director
and a  significant  shareholder  of our company.  Consistent  with the rights to
SpectruCell  that we acquired in the 1999  merger with  Advanced  Communications
(Nevada),  the interim License  Agreement  confirmed our  indefinite,  exclusive
license to market and  distribute  in North and South  America  the  SpectruCell
technology and certain other technologies to be developed.  It was the intention
of the  parties  that  upon the  SpectruCell  technology  becoming  commercially
available,  our company and Advanced Communications  (Australia) would negotiate
royalty payments,  in accordance with industry standards on an arms-length basis
after the final  pricing of the  SpectruCell  technology  was  established.  The
Company's  rights to  SpectruCell  acquired in the April 1999 merger was neither
created by nor subject to cancellation under the interim License Agreement.

      During  most of 2002 we were  involved in  litigation  in  Australia  with
Advanced  Communications  (Australia) regarding SpectruCell.  On April 26, 2002,
the  Supreme  Court of  Victoria  at  Melbourne,  Australia  issued  an  interim
injunction against Advanced Communications (Australia) and Mr. May in connection
with  the  ongoing  litigation  between  Advanced  Communications  and  Advanced
Communications   (Australia).   The  interim  injunction   prohibited   Advanced
Communications  (Australia)  and Mr. May from violating the terms of the interim
License  Agreement.  Based on a press release issued by Advanced  Communications
(Australia),  it appeared that Advanced  Communications  (Australia) intended to
license the SpectruCell technology to another entity in our territory. On May 7,
2002, we received a notice from Advanced  Communications  (Australia) alleging a
breach of the license,  accompanied  by a notice of  termination  of the interim
License Agreement.  We believed the purported  termination was without merit and
took  steps to  temporarily  enjoin  Advanced  Communications  (Australia)  from
terminating our rights under the interim License Agreement.  On May 8, 2002, the
Australian court extended its April 26, 2002 order further restraining  Advanced
Communications  (Australia)  from  "acting  upon or taking any further  steps in
reliance upon" the notice of breach.

      A dispute also arose between Advanced  Communications  (Australia) and the
Company  as to whether  the  Company's  SpectruCell  license  included  military
applications as well as commercial applications. Contrary to previous statements
and understandings,  Advanced  Communications  (Australia) claimed for the first
time on or about March 2002 that military  applications  were not included under
the  Company's  SpectruCell  license,  and that these  rights  were  exclusively
reserved to Advanced  Communications  (Australia).  A dispute also arose between
the parties as to whether the Company's  SpectruCell  license included marketing
rights, in addition to distribution rights.  Contrary to previous statements and
understandings,  Advanced Communications  (Australia) claimed for the first time
on or about March 2002 that the  Company's  SpectruCell  license did not include
marketing  rights,  and that these rights were exclusively  reserved to Advanced
Communications (Australia).  The Company disputed these claims and requested the
court  to  expand  the  existing  injunctions  against  Advanced  Communications
(Australia) to include marketing rights and military applications of SpectruCell
technology in the Exclusive  Territory and to continue the existing  injunctions
in effect until the trial on the case.

      The marketing and military  applications  rights were relevant because the
Company had been contacted by a U.S.  defense  contractor  that was bidding on a
U.S. Army project that involved a SpectruCell-type component that the contractor
wanted the Company to provide for the project. The Company was also contacted at
this time by another U.S. defense-related company regarding similar products. It
was also relevant  because it had become  apparent that the best way to generate
short term  revenues  for  SpectruCell-related  products  was  through  military
applications   which  were  easier  and  less  expensive  to  produce  than  the
technically  much more  sophisticated  commercial  products  being  designed for
public telephone system use.

      The  above-mentioned  matters  were  argued  before the court at a two day
hearing on May 27 and 28, 2002. The court took the matters under submission.  On
August 23, 2002, the court issued its ruling in which the judge concluded:

            "IT  IS  PREFERABLE,  IN MY  OPINION,  THAT  ALL  ACTIVITY
            [RELATED TO  SPECTRUCELL]  ON BEHALF OF ACT [AUSTRALIA] IN
            THE EXCLUSIVE  TERRITORY  PENDING THE TRIAL BE CARRIED OUT
            BY ACT INC [ADVANCED COMMUNICATIONS]."

                                       3
<PAGE>

      Based on this  conclusion,  the court issued a  comprehensive  preliminary
injunction  granting all the relief  sought by the Company.  Among other things,
the  injunction  prohibits  Advanced  Communications  (Australia),  directly  or
indirectly,  from taking any action in the exclusive  territory  with respect to
marketing,  distributing,  selling or  otherwise  dealing  with the  SpectruCell
technology  (including the military  applications  thereof),  except through and
with the prior written  consent of the Company.  Quoted below is the text of one
of the sections of the court's order:

            "...THE    FIRSTNAMED     DEFENDANT    [I.E.,     ADVANCED
            COMMUNICATIONS  (AUSTRALIA)],  WHETHER BY ITSELF OR BY ITS
            OFFICERS,  EMPLOYEES AGENTS,  ATTORNEYS, OR ANY OF THEM OR
            HOWSOEVER OTHERWISE,  BE RESTRAINED FROM ITSELF MARKETING,
            DISTRIBUTING,  SELLING,  SUPPLYING,  OFFERING  TO  SELL OR
            SUPPLY  OR  OTHERWISE  DEALING  IN  OR  WITH  THE  PRODUCT
            INCLUDING  ANY  MILITARY   APPLICATIONS  OR  USES  OF  THE
            SPECTRUCELL TECHNOLOGY, IN THE EXCLUSIVE TERRITORY WITHOUT
            THE PRIOR WRITTEN CONSENT OF [ADVANCED COMMUNICATIONS]."

      The court's order also prohibited Advanced Communications (Australia) from
licensing,  marketing,  distributing,  selling  or  otherwise  dealing  with the
SpectruCell technology, including military applications of the product, and from
offering to do any of the  foregoing,  in the  exclusive  territory  through any
third party without the Company's prior written consent.  The court's order also
prohibited Advanced  Communications  (Australia) from entering into a license or
sub-license agreement to market, distribute,  sell, provide promotional material
or  otherwise  deal  with  the  SpectruCell   technology,   including   military
applications thereof, in the exclusive territory except to the company or at its
request. The court's order also prohibited Advanced  Communications  (Australia)
from  granting any license to any third party to use,  sub-license  or reproduce
the product in the exclusive territory, except at the request of the Company.

      REPUDIATION OF INTERIM LICENSE AGREEMENT IN OCTOBER 2002. In early October
2002, Mr. May and Advanced Communications  (Australia) applied to the Australian
Court to modify the  above-referenced  injunctions issued on August 23, 2002, on
the grounds that they were  meaningless and,  therefore,  should be disregarded.
The primary basis for the application was the assertion of Mr. May, set forth in
an Affidavit  sworn under oath,  dated  October 8, 2002,  that  SpectruCell  had
evolved  from a base  station  hardware  technology  (its  original  form)  to a
software defined radio based operating system (its current form). Based on this,
Mr. May stated that in it's current form  SpectruCell  was not covered under the
interim  License  Agreement and had not been covered  under the interim  License
Agreement for approximately two years. Mr. May contended that the Company had no
rights to the SpectruCell  technology  under the interim  License  Agreement and
that the  injunctions  issued by the  Australia  Court on August 23, 2002 had no
application to what ACT-Australia is presently doing vis a vis SpectruCell.  The
Company  rejected  Mr.  May's sworn  statements  as self  serving to his current
purposes of nullifying the Company's rights under the interim License  Agreement
and as being  inconsistent with numerous prior public statements he had made and
the intentions of the parties,  as reflected in the agreements  between them and
their prior actions.

      TERMINATION OF INTERIM  LICENSE  AGREEMENT IN OCTOBER 2002. In mid-October
2002, Mr. May and Advanced Communications  (Australia)'s  purportedly terminated
the  interim  License  Agreement  based on the  assertion  that the  Company  is
insolvent and that its insolvency  constitutes  an irreparable  event of default
thereunder.  As stated  above,  the  Company  made a strategic  decision  not to
challenge  the  termination.  Further,  despite the  termination  of the interim
License Agreement, the Company still owns the North and South American rights to
SpectruCell  that it received  pursuant  to the April 1999 merger with  Advanced
Communications (Nevada).

      Following the purported termination of the interim License Agreement,  Mr.
May contacted the Company on several  occasions in response to previous attempts
by the  Company  to settle  the  existing  disputes.  He  indicated  that he was
interested  in reaching a settlement  and on October 14, 2002, he stated that he
would  submit a settlement  proposal to the Company.  He has not yet done so and
has refused to respond to follow-up overtures from the Company in that regard.

      The Company  believes that Mr. May's purported  termination of the interim
License  Agreement  and his  failure  to  negotiate  in good faith to settle the
existing disputes, in spite of his promise to do so, were part of a preconceived
plan on his part to nullify the Company's  rights as a  stockholder  of Advanced
Communications  (Australia)  and as the owner of the  North  and  South  America
rights  to the  SpectruCell  technology  and to  transfer  the  technology  to a
controlled  third  party  substantially  free of the  claims  of third  parties,
including the Company.


FINANCIAL CONDITION

      We had net losses of  $4,332,693  and  $19,732,566  during the years ended
June 30,  2002 and  2001,  respectively.  As of June  30,  2002,  we had cash of
$11,093 and current liabilities of $3,263,736. We do not have sufficient cash or
other  assets  to  meet  our  current  liabilities.   In  order  to  meet  those

                                       4
<PAGE>

obligations,  we will  need to raise  cash from the sale of  securities  or from
borrowings.  Our  independent  auditors have added an  explanatory  paragraph to
their audit opinions issued in connection with the years 2002 and 2001 financial
statements, which states that our ability to continue as a going concern depends
upon our  ability  to  resolve  liquidity  problems,  principally  by  obtaining
capital,   commencing  sales  and  generating   sufficient  revenues  to  become
profitable.  Our ability to obtain additional funding will determine our ability
to continue as a going  concern.  Our  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.

      If we are unable to obtain  additional  funding through our Equity Line of
Credit  facility (as  described  in the  Management  Discussion  and Analysis of
Financial  Condition and Results of Operations included elsewhere in this Annual
Report)  until such time as the  SpectruCell  product is ready to be sold within
our  exclusive  markets,  then the  failure to obtain this  funding  will have a
material  adverse  effect on our business and our ability to continue as a going
concern.  As a  consequence,  we may be  forced  to seek  protection  under  the
bankruptcy  laws.  In that event,  it is unclear  whether we could  successfully
reorganize  our capital  structure and  operations,  or whether we could realize
sufficient  value for our assets to satisfy our creditors in full.  Accordingly,
should we be forced to file for  bankruptcy  protection,  there is no  assurance
that our  stockholders  would  receive any value.  A detailed  discussion of our
financial condition is contained in the Management's  Discussion and Analysis of
Financial Condition and Results of Operations section of this filing.


ADVANCED COMMUNICATIONS (AUSTRALIA) VOLUNTARY ADMINISTRATION

      On or about July 15,  2002,  the  Australia  Tax Office  ("ATO")  filed an
action against  Advanced  Communications  (Australia) to appoint a liquidator of
the company for failure to pay back taxes.  SpectruCell  SDR Pty Ltd ("SDR"),  a
company  controlled by Roger May to which  Advanced  Communications  (Australia)
intends to transfer its rights to the SpectruCell technology,  was also named as
a defendant in this action.

      At the  request  of ATO,  on or about  July 15,  2002,  the  court  issued
injunctions  against  Advanced  Communications  (Australia)  and SpectruCell SDR
prohibiting them from selling, transferring,  charging,  mortgaging,  disposing,
leasing,  diminishing or dealing in any way with any of Advanced  Communications
(Australia)'s assets or undertakings.  On or about July 18, 2002, in response to
the   ATO's   action,   Advanced   Communications   (Australia)   appointed   an
administrator,  who took control of the company.  On or about July 22, 2002, the
court made the above-mentioned injunctions applicable to the administrator.

      On or about  July  29,  2002,  Global  Communications  Technology  Pty Ltd
("Global"),  a company  controlled  by Roger May,  appointed a  receiver/manager
("Receiver")   to  take  control  of  the  assets  of  Advanced   Communications
(Australia) under the terms of a security agreement. On or about August 1, 2002,
the ATO filed  another  action in which it joined Global and the Receiver to the
first action and sought to have declared invalid Global's  security  interest in
the assets of Advanced Communications  (Australia).  On or about August 2, 2002,
the court  made the  above-mentioned  injunctions  applicable  to Global and the
Receiver.

      On or about August 30,  2002,  at the request of the  Receiver,  the court
approved a sale of Advanced  Communications  (Australia)'s  shares in  Australon
Enterprises   Pty  Ltd   ("Australon"),   now  known  as  Intermoco   Ltd.,  for
AUS$6,000,000.

      On  or  about  September  10,  2002,  the  ATO,  Advanced   Communications
(Australia),  SDR, Global, and the Receiver entered into a settlement  agreement
pursuant to which it was agreed,  among other  things,  that the majority of the
amounts owed by Advanced  Communications  (Australia)  to ATO would be paid from
the proceeds of the sale of the Australon shares,  that a portion of the balance
of the  sale  proceeds  would  be used to pay the  expenses  of  administration,
employee wages and the unsecured creditors,  and the balance would go to Global.
Subject to  completion  of the sale of the  Australon  shares,  which is to take
place in  February  2003,  the ATO agreed to drop its actions  against  Advanced
Communications (Australia), Global and the Receiver.

      On or about September 18, 2002, a plan of reorganization  was submitted to
the administrator,  which is supported by management of Advanced  Communications
(Australia).  Under the plan, the expenses of  administration  and the claims of
employees and unsecured  creditors will be partially or fully paid over a 3-year
period from (i) a portion of the sale proceeds from the Australon shares, (ii) a
portion of the sale proceeds or license royalties,  if any, from the SpectruCell
technology,  which will be licensed  or sold to SDR,  and (iii) a portion of the
net recovery,  if any, from various  lawsuits in which  Advanced  Communications
(Australia) is the plaintiff.

      At a meeting  of the  creditors  held on  September  26,  2002,  a plan of
reorganization  was approved and the  administration  was continued to allow the
administration to oversee the implementation of the plan of reorganization.

                                       5
<PAGE>

      The  Company  submitted  a claim to the  administrator  in  regard  to the
damages  that were  caused to the  Company by the  hostile  actions of  Advanced
Communications  (Australia) following the removal of Roger May as an officer and
director  of the  Company  in  December  2001.  The  administrator  allowed  the
Company's  claim to the  extent  of $1.  As a result,  the  Company  will not be
receiving any meaningful amounts from the plan of reorganization.

      Based on the hostile actions of Roger May toward the Company over the past
11 months,  if Roger May  controls the entity that  ultimately  ends up owing or
licensing the SpectruCell  technology,  the Company  anticipates that its rights
VIS A VIS SpectruCell will continue to be disregarded and violated. Although the
Company  intends to use all  resources  available to it to protect the Company's
rights in that regard,  as it has during the past 11 months,  it is not known if
the Company will be successful in doing so.


COMPANY HISTORY

      We were  incorporated  on April 30, 1998 and were inactive from April 1998
to June 1998 except for the  issuance  of  founders'  shares.  On April 7, 1999,
Advanced Communications  (Nevada) merged with and into the Company.  Pursuant to
this merger, the shareholders of Advanced  Communications (Nevada) (of which Mr.
May was the principal  shareholder)  received 90% of the  Company's  outstanding
common stock and the Company received all of Advanced Communications  (Nevada)'s
assets which included all of the North and South American rights to SpectruCell.

      Mr.  May  and  his  related  entities   including  Global   Communications
Technology  Pty Ltd,  his wholly  owned  entity,  as majority  owner of Advanced
Communications (Nevada), received approximately 42,000,000 shares in the Company
under the share exchange.

      Media  Forum,  the  surviving  entity,  subsequently  changed  its name to
Advanced  Communications  Technologies,  Inc. Upon completion of the merger,  we
changed our trading symbol to "ADVC."

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

      On July 20, 1999, we formed Advanced Global Communications,  Inc. ("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 with the  shareholders
of  World  IP  Incorporated  and  its  wholly-owned  foreign  subsidiaries,  Sur
Comunicaciones,  S.A., a Chilean  corporation,  and Acinel, S.A., an Argentinean
corporation,  to acquire a 51%  controlling  interest in the World IP. Under the
terms of the  agreement,  500,000 shares of our  restricted  common stock,  plus
$95,000 in cash was exchanged for 1,020 shares of stock  representing 51% of the
then issued and  outstanding  shares of World.  The 500,000 shares of restricted
common  stock were valued at the trading  price on the closing date and together
with the cash consideration  resulted in a purchase price of $470,000.  World IP
provides wholesale  international  telephone services from the U.S. to Chile and
Argentina.   On  October  4,  2000,  we  notified  World's  management  and  its
shareholders  that we intended to rescind the 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 agreement.  On October 6, 2000, we
filed suit in the Circuit  Court in and for Palm Beach County,  Florida  against
the  World IP and its  shareholders  for  rescission  of the  agreement  and for
monetary  damages  resulting from such breach.  On January 23, 2002, the parties
entered  into  Settlement  and  Rescission  Agreements  and  a  Stipulation  for
Dismissal  with  Prejudice  (the  "Stipulation")  to  settle  this  matter.  The
Stipulation  states  that the  November  10,  1999,  Agreement  and all  related
transactions,  including the issuance of 1,020 shares of World IP to AGC and the
500,000  shares  of  restricted  common  stock  to World  IP  shareholders,  are
rescinded,  AB initio,  effective November 10, 1999, as though such transactions
never  occurred.  Further,  as part of the settlement,  Advanced  Communications
issued  a total  of  320,000  shares  of  restricted  common  stock  to  certain
shareholders of World IP, which shares are being  registered.  The Circuit Court
in and for Palm Beach County issued an Order Approving Stipulation approving the
Settlement  and  Rescission  Agreements  and the  Stipulation.  The  lawsuit was
dismissed by a court order dated January 29, 2002.

      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.

                                       6
<PAGE>

      On April 5, 2000, we entered into a Stock Purchase Agreement with Advanced
Communications  (Australia)  to  acquire a 20%  interest  for  $19,350,000.  The
majority owner of Advanced Communications  (Australia) is Roger May, who was the
Chief Executive Officer, Chairman of the Board of Directors of our company until
November 30, 2001.  In  consideration  for our purchase of the stock,  we issued
5,000,000  shares  of our  common  stock  having  a value of  $11,850,000  and a
$7,500,000 unsecured non-interest bearing note payable in installments. The note
payable was payable in three equal monthly installments commencing May 31, 2000.
Under  the  terms of the  April  2000  Stock  Purchase  Agreement,  the  monthly
installment  deadline was extended,  without interest,  to allow for our company
to, on a best  efforts  basis,  raise the cash  portion  of the  purchase  price
through  the sale of  securities.  Upon  raising  such  funds,  our  company  is
obligated to repay  Advanced  Communications  (Australia)'s  note payable  after
deducting for reserves  needed for current  operations,  working capital and the
development   and  expansion  of  its  operations  and  the  operations  of  its
subsidiaries,  as determined  by its Board of Directors.  The shares issued were
valued at the average quoted trading price during the  acquisition  period.  The
fair  value of the  investment  at the  acquisition  date was  determined  to be
$3,657,472.  The  excess  of the  purchase  price  over  the  fair  value of the
investment in the amount of $15,692,528 was accounted for as goodwill.

      Our 20% interest in Advanced Communications  (Australia) was accounted for
using the equity  method of accounting  and was stated at the amortized  cost of
goodwill and the equity in undistributed earnings since acquisition.  The equity
in  earnings  of  Advanced  Communications  (Australia)  was  adjusted  for  the
amortization of the goodwill, as discussed above. Amortization was computed on a
straight-line  basis over  fifteen  years  until June 30,  2001 at which time we
reassessed  the life of the  goodwill  to be five  years.  The  amortization  of
goodwill  charged to income for each of the fiscal years ended June 30, 2002 and
June 30, 2001 was $300,000 and $1,046,169, respectively.

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

      Due  to  litigation  by  the  Australian   Tax  Office  against   Advanced
Communications (Australia) and Advanced Communications  (Australia)'s subsequent
filing on or about July 18, 2002 for  protection  under  Australia's  insolvency
laws by appointing an  Independent  Administrator  to take over its business and
affairs,  management has determined  that its remaining  goodwill  investment is
impaired  pursuant to the provisions of SFAS 142.  Accordingly,  the Company has
written off the balance of its  unamortized  goodwill of  $1,700,000  during the
fiscal year ended June 30, 2002.

      The components of the investment in Advanced Communications (Australia) at
June 30, 2002 are as follows:
<TABLE>
<CAPTION>

                                         INVESTMENT       GOODWILL            TOTAL
                                      -------------     ------------      --------------
<S>                                   <C>               <C>               <C>

At acquisition                        $   3,657,472     $ 15,692,528      $  19,350,000
Cumulative Investment loss              (3,657,472)                --        (3,657,472)
Amortization of goodwill                         --       (1,292,664)        (1,292,664)
Impairment of goodwill                           --      (12,399,864)       (12,399,864)
Balance at June 30, 2001                         --         2,000,000         2,000,000
Cumulative amortization of
  Goodwill through March 31, 2002                           (300,000)          (300,000)
Impairment of Goodwill                                    (1,700,000)        (1,700,000)
Balance at June 30, 2002               $         --      $         --     $           --
</TABLE>

      On November 11, 2002, Advanced Communications  (Australia) issued a Notice
of  Termination  to the  Company  stating  that the April  2000  Stock  Purchase
Agreement is terminated immediately due to the Company's insolvency.  The effect
of the purported Notice of Termination is to cancel the Company's stock interest
in Advanced Communications (Australia). Consistent with our decision to withdraw
from the Australia litigation,  we have not challenged the purported termination
of the Stock  Purchase  Agreement in the  Australia  Court.  Given that Advanced
Communications  (Australia)  is in an insolvency  proceeding  in  Australia,  is
unlikely to emerge as an operating entity,  and that the Company has written off
its  entire  investment  in  Advanced  Communications  (Australia),  the  future
financial impact of this on the Company is not believed to be significant.

      On July 5, 2000,  we  entered  into an interim  License  and  Distribution
Agreement with Advanced  Communications  Technologies  (Australia) (the "interim
License  Agreement") to facilitate  implementation  of our rights to SpectruCell
acquired in the 1999 merger with Advanced Communications (Nevada).

                                       7
<PAGE>

      During most of 2002,  we were in  litigation  with Roger May and  Advanced
Communications (Australia) over our rights to market and distribute SpectruCell.
Based on a substantial  record created in that  proceeding,  the Australia Court
granted us broad injunctions  protecting our rights pending trial on the matters
at issue. In early October, 2002, Advanced Communications (Australia) terminated
the interim  License  Agreement  on the grounds that we were  insolvent  and our
insolvency  constituted an irreparable  breach of the interim License Agreement.
Our  initial  response  to the  purported  termination  of the  interim  License
Agreement was to oppose it and seek leave of the  Australian  Court to apply for
an  expansion  of  our  existing   injunctions  that  would  prohibit   Advanced
Communications  (Australia)  from acting on the  purported  termination  pending
trial.  The  Australian  Court  granted  us  leave  to  do  so.  However,  after
considering the situation  further and receiving advice of counsel,  we made the
strategic  decision  to alter our  approach  and  withdraw  from the  Australian
litigation.

      This decision was based on various factors,  including the following:  (i)
the actions of Mr. May against the Company over the past 11 months, which in the
Company's view demonstrated a consistent lack of good faith on his part that was
unlikely to change,  (ii) a recent  statement  made by Mr. May under oath to the
Australian  Court that "IT IS IMPORTANT FROM THE OUTSET TO UNDERSTAND THAT THERE
WAS NO  SPECTRUCELL  PRODUCT  IN 1999 AND TODAY  THERE  STILL IS NO  SPECTRUCELL
PRODUCT AS IT IS CLEARLY  STILL IN THE  DEVELOPMENT  STAGE AND AT LEAST 12 TO 18
MONTHS  FROM  THE  FINAL  PRODUCT  STAGE.",   which  was  contrary  to  previous
information  consistently  provided  by Mr. May to the Company and the public on
that  subject,   (iii)  the  completion  of  the  research  and  development  of
SpectruCell is currently projected to require an additional US$12 to 15 million;
(iv) the Company's  opinion that  development  of  SpectruCell is unlikely to be
completed and a product brought to successful  commercialization under Mr. May's
leadership  (v)  the  Company's  limited  resources  at  the  present  time  are
insufficient  to enable it take all of the legal actions that would be necessary
to defend and enforce its rights in  Australia;  and (v)the need for the Company
to use  available  funds to continue  current  operations so that its rights and
viability will be meaningfully preserved for the future.

      On October 25, 2002, we withdrew from the  Australian  litigation  against
Mr. May and Advanced Communications  (Australia).  The effect of our decision to
withdraw from the Australia  litigation was that the existing injunctions issued
by the  Australia  Court have been lifted and the purported  termination  of the
License is not being challenged in the Australia Court.

      Notwithstanding  our withdrawal from the Australia  litigation,  we retain
our rights to damages and other available legal and equitable relief against Mr.
May,  Advanced  Communications  (Australia)  and other parties who have acted in
concert  with them in  violation  of our rights.  In  addition,  we still retain
ownership of the rights to SpectruCell  and related  technology  acquired in the
1999 merger with Advanced Communications (Nevada), which were neither created by
nor subject to  cancellation  under the interim License  Agreement.  The Company
intends to protect  these rights to the fullest  extent it is able to do so, and
anticipates  that  Mr.  May and  Advanced  Communications  (Australia)  will not
acknowledge these rights.

      On July 24,  2000,  our company  formed  Australon  USA,  Inc., a Delaware
corporation,  owned 50% by our company and 50% by  Australon  Enterprises  Pty.,
Ltd. a publicly traded company listed on the Australian Stock Exchange and a 66%
owned subsidiary of Advanced Communications  (Australia).  Australon Enterprises
Pty Ltd is an Australian public company that manufactures and distributes remote
monitoring  devices for homes and  businesses  such as remote meter  reading and
residential  automated  gateway  devices.  While Mr.  May,  our  former  CEO and
Chairman  of  the  Board  has a  significant  ownership  interest  in  Australon
Enterprise  Pty,  through his  ownership  interest  in  Advanced  Communications
(Australia),  he is not involved in Australon  `s daily  management  or business
operations and is not  represented on its Board of Directors.  The joint venture
relationship was established while Mr. May controlled both companies.  We formed
Australon  USA, Inc. to market and sell the  Australon  suite of products in the
U.S.,  Canada and South America.  Presently,  the company is not in negotiations
with  Australon  Enterprises  Pty and will not enter into any  discussions  with
Australon's management until the Company's lawsuit with Advanced  Communications
(Australia)  and Mr. May is  resolved.  Australon  USA, Inc is inactive and will
remain inactive for the foreseeable future.  Australon USA, Inc. had no revenues
or expenses for the fiscal years ended June 30, 2002 or 2001.

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

                                       8
<PAGE>

ACQUISITIONS

      On  September  7, 2001 we entered  into a Letter of Intent  with  Advanced
Communications  Technologies  (Australia)  to  acquire  all of the  intellectual
property,  including the worldwide rights (other than rights to territories that
we currently  possess) for the licensing  and  distribution  of the  SpectruCell
product  (the "IP  Rights").  The Letter of Intent which was executed by Messrs.
Roberts  and  May on  behalf  of  Advanced  Communications  (Australia)  and us,
respectively,  includes various  conditions  precedent to the transfer of the IP
Rights including, but not limited to, the raising by us of $80 million in the US
capital markets, appropriate regulatory approvals, approval by both our Board of
Directors and shareholders, appropriate due diligence and definitive agreements.
During the period from  January 2002 to present,  we, along with our  Australian
financial and legal  advisors,  have attempted to negotiate with Mr. May in good
faith to enter into a  Non-Disclosure  Agreement to allow us to commence our due
diligence  on  the  financial,  legal  and  technological  affairs  of  Advanced
Communications  (Australia).  In addition,  during this period we have filed two
lawsuits against Mr. May and Advanced  Communications  (Australia) for breach of
our  April 5,  2000  Stock  Purchase  Agreement  and July 5,  2000  License  and
Distribution  Agreement.  Consequently,  we have  been  unable  to  execute  any
Non-Disclosure Agreement nor commence any active or meaningful negotiations with
Mr. May for the acquisition of the SpectruCell  technology pursuant to the terms
of the September 7, 2001 Letter of Intent.  On September 7, 2002,  the September
7,  2001  Letter  of  Intent  that  the  Company   entered  into  with  Advanced
Communications   (Australia)  to  acquire  all  of  the  intellectual  property,
including the worldwide  rights (other than the rights to  territories  that the
Company currently possess) for the licensing and distribution of the SpectruCell
product, expired.

      Due  to  the   litigation   with  Mr.  May  and  Advanced   Communications
(Australia),  the restrictions on foreign ownership and Advanced  Communications
(Australia) voluntary administration described above, the Company will no longer
pursue the  acquisition of Advanced  Communications  (Australia)'s  intellectual
property.


INDUSTRY OVERVIEW


      GROWTH OF THE WIRELESS TELECOM INDUSTRY

      The wireless telecom industry is a rapidly growing business, driven by the
dramatic  increase in wireless  telephone  usage,  as well as strong  demand for
wireless Internet and other data services. U.S. mobile subscribers are projected
to grow to  226.8  million  by 2010 and  generate  revenues  of  $72.8  billion,
according to Analysts  Bakerville (Feb.  2002). 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  deregulation,  the issuance of
new licenses and the demand for new  services,  fueling the  development  of new
networks. Consequently, carriers are deploying new network equipment both in the
U.S. and abroad. New technologies,  such as broadband  wireless,  are helping to
fuel demand for more  advanced  wireless  equipment.  Global  revenues  from the
broadband  market are  expected to exceed $88 billion by 2007,  according to the
ARC  Group   (Feb.   2002).   However,   during   the  past  six   months,   the
telecommunications  industry has  experienced the adverse effect of the downturn
in the  global  economy,  and  as a  result,  has  significantly  curtailed  its
infrastructure capital spending.


      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 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;

                                       9
<PAGE>

      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
            wire line  competitors  and in developing  countries  lacking modern
            wire line telephone infrastructure.

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


      NEW CHALLENGES FOR WIRELESS CARRIERS AND EQUIPMENT VENDORS

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

      The  changing   environment  is  also  placing   significant   operational
challenges  on  carriers.  Carriers  must make  critical  decisions  about which
geographic  markets to serve and which services and technologies to offer.  They
are  striving  to avoid  the cost  uncertainties  and  considerable  operational
challenges associated with the staffing and process implementation  software for
the  deployment  and  management  of their  networks.  Furthermore,  the rapidly
changing and  increasingly  complex nature of wireless  technologies has made it
difficult for carriers to optimize  employee  training and  utilization for what
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.  On  top  of  the  technological  challenges,  facing  the
telecommunications  industry,  the  recent  downturn  in  the  U.S.  and  global
economies as well as the bankruptcy filings of Worldcom and Quest Communications
have caused a dramatic  decrease in not only the capital  budgets of the telecom
giants but in the industry's overall financial stability.


      THE SPECTRUCELL TECHNOLOGY

      As  previously  discussed,  due to  litigation  between  us  and  Advanced
Communications  (Australia)  and  Roger  May,  we have  not been  provided  with
meaningful  and  reliable  information  about  the  status  of  the  SpectruCell
technology and when it will be available, if at all, to military users and field
tested  for  commercial   applications.   Further,  as  stated  above,  Advanced
Communications  (Australia) has undergone a voluntary  insolvency and its assets
are  being  sold to pay off  creditors.  The  SpectruCell  technology  is  being
transferred to  SpectruCell  SDR Pty Ltd., a company owned and controlled by Mr.
May,  and Advanced  Communications  (Australia)  has  terminated  the  Company's
interim  License  Agreement  for  SpectruCell.  The following  discussion  about
SpectruCell is a general  description of the technology  based on information we
have been provided with and should be read in this context.

      The SpectruCell  concept was originally  conceived in the United States in
an entirely  different  format and  configuration to the current product design.
The  request to develop  the  SpectruCell  Wireless  Base  Station  concept  was

                                       10
<PAGE>

presented to the Royal Melbourne Institute of Technology University in the first
quarter of 1998 for evaluation and development.  The current  technology for the
SpectruCell Wireless Base Station unit has been developed entirely in Melbourne,
Australia  by Advanced  Communications  (Australia)  in  collaboration  with the
Department of Computer Systems  Engineering at the Royal Melbourne  Institute of
Technology University.

      Advanced Communications  (Australia) is, based on information we have been
provided with, developing a wireless  communication network technology that will
be trademarked and marketed as "SpectruCell".  At this time,  SpectruCell is not
commercially  available  and is still in the  concept  and  prototype  stages of
development.  SpectruCell is expected to use commercial off the shelf components
to the  extent  that  they are  available.  The  SpectruCell  conceptual  design
incorporates new design concepts and approaches to the development of a software
defined  radio  operating  system.  Unlike  existing  communications   networks,
SpectruCell  is being  designed  to  support  a  wireless  network  architecture
designed to process and transmit numerous communications  protocols (AMPS, CDMA,
TDMA,  GSM,  W-CDMA,  UMTS,  3G, Voice IP, etc.),  as well as wireless  Internet
applications, all within one network. Advanced Communications (Australia) is, we
believe, in the process of developing these software applications.  Accordingly,
applications   capable  of  supporting  all  of  these   protocols  or  wireless
frequencies do not currently exist. By utilizing the SpectruCell  software-based
operating  system,  network  providers  are  expected  to  be  able  to  support
substantially  all  current  and  future  wireless  frequencies  with  the  same
equipment on the same network through software upgrades.

      We believe that a prototype  version of the  software  suitable to support
the laboratory  operation of a prototype with restricted  functionality has been
developed. We believe that Advanced  Communications  (Australia) plans to have a
beta test version of the commercial  version of the software  available in 2004.
While some presales  activity may take place during 2003,  sales of a commercial
product are unlikely before that date.  However,  custom  designed,  specialist,
non-commercial  applications  such as military  applications may be available by
the end of 2003. The current prototype  SpectruCell product can only support the
CDMA-1 and GSM protocols. Any planned development of future product applications
will focus on the development of a product supporting the CDMA 2000 protocol.

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

      We believe  that  SpectruCell  is being  developed to have the capacity to
dynamically  assign channels and spectrum (i.e., call carrying  capacity) to the
cells  requiring it most.  In a sense,  the cellular  operator  would  possess a
so-called  "elastic  capacity" at cells in the system.  Since all voice channels
would be centrally  located at the switch instead of at the cell/antenna  sites,
individual  voice  channels and RF trunks can be  distributed  as needed to busy
cell/antenna  sites.  Channels would be essentially  "borrowed" from surrounding
cells and used to support  call  traffic at the busier  sites during call volume
peaks. This is a distinct departure from present "honeycomb style" systems where
each cellular  network is dedicated to a single protocol and each cell has fixed
call  carrying  capacity  or  bandwidth,  that is limited by the number of voice
channels installed at each cell site. In essence,  the SpectruCell  architecture
provides a basis for a paradigm shift from the  conventional  telecommunications
central office switching structure for evolving wireless networks.  For carriers
to  support  multiple  protocols  such as GSM and CDMA  digital  mobile  phones,
current wireless  communications  technology  requires  separate cell sites with
separate   equipment   for  each   protocol   carried.   We  believe  that  upon
implementation,  SpectruCell  will allow  carriers to maintain and utilize their
existing  networks  within a modern  network  platform  that will enable them to
support  evolving  protocols.  We also believe that by utilizing the SpectruCell
multiple  protocol  wireless base  station,  network  providers  will be able to
support current and in all probability  future protocols with the same equipment
on the same existing  networks.  Future  protocols would be added to the network
through software

      Other  applications  that have been  identified  for potential  deployment
include:

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

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

                                       11
<PAGE>

      o   Radar;

      o   Sonar; and

      o   Military communications.

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


PATENTS

      We have been told that Advanced Communications  (Australia) has filed five
patent   applications  with  the  Australian  patent  office  under  the  Patent
Cooperation  Treaty  in  connection  with  certain  aspects  of the  SpectruCell
technology.  Under this treaty,  any patents issued provide patent protection in
111 member  countries,  including the United States. No patents have been issued
to date and we have no  assurance  that any such  patents  will be issued in the
future.   Information   regarding  patents  filed  by  Advanced   Communications
(Australia) is included in this filing  because our company's  success is highly
dependent  on  the  technology   being  developed  by  Advanced   Communications
(Australia) and its ability to protect the technology from potential competitors
through patents.


COMPETITION

      We believe  that the  SpectruCell  system will  compete  with  traditional
cellular telephone and other wireless communications technologies.  However, the
technology will have to be differentiated through cost savings in implementation
and  upgrades  and through  improved  service.  Like most new  technologies  the
introduction of SpectruCell will require  demonstrations  and education  through
field  trials  and  similar  demonstrations  to  introduce  the  product  to the
potential  market.  No  assurances  can be given that the market will accept the
SpectruCell  technology,  or that other competing  products will be developed or
achieve better market acceptance than the SpectruCell technology.

      The   wireless   telecommunications   infrastructure   market   is  highly
competitive.  The market for a  SpectruCell  type  product is  characterized  by
rapidly changing  technology,  evolving industry wireless standards and frequent
new  product  introductions  and  enhancements.  Failure to keep pace with these
changes could seriously harm our ability to compete once it becomes commercially
available.  Our ability to compete depends on many factors  including the timing
of delivery to market the  SpectruCell  product,  its  flexibility,  price,  and
reliability.

      Current and potential  competitors consist primarily of major domestic and
international  companies,   most  of  which  have  longer  operating  histories;
installed   customer   bases;   higher  volumes;   substantially   greater  name
recognition; and greater financial, technical,  manufacturing,  marketing, sales
and  distribution  resources.  We have identified at least one competitor to the
SpectruCell  technology.  This competitor is Airnet  Communications  Corporation
(www.airnet.com).   We  expect   to  face   increasing   competition   as  other
telecommunications  companies  realize the  advantages of SDR and begin devoting
more resources to developing SDR base technologies. Many of these companies have
substantially  greater  resources  than we do.  These  companies  also have more
experience  than we do in  obtaining  governmental  approval  from  the  Federal
Communications Commission and other agencies.

      We  cannot  be sure  that we will  be  able to  effectively  compete  with
existing  wireless  network  companies or that we will gain  acceptance  for the
SpectruCell system.


SALES AND DISTRIBUTION

      We planned to have  independent  distribution and sales offices located in
California, New York and Florida once SpectruCell became commercially available.
Given the litigation between us and Advanced Communications  (Australia) and the
current state of the SpectruCell  development,  it is unclear when or whether we
will carry out such plans.


GOVERNMENT REGULATION

      The  proposed  sale  of  wireless   communications  services  through  the
SpectruCell  product  may be  subject  to  government  regulation.  Federal  law
regulates  interstate and  international  telecommunications,  while states have
jurisdiction  over  telecommunications  that originate and terminate  within the

                                       12
<PAGE>


same state. These regulations may require Advanced  Communications  (Australia),
its  successor,  or our company to obtain  regulatory  approval from the Federal
Communications  Commission prior to the use of the SpectruCell  product. At this
time, we cannot  estimate how long this process will take to complete or whether
these  efforts  will be  successful  or how  and  when  Advanced  Communications
(Australia) will satisfy the FCC, if at all.  Moreover,  because  SpectruCell is
not yet  developed  for the  commercial  market,  it is uncertain  what form the
product will ultimately take and whether  Advanced  Communications  (Australia),
the company or the commercial  user will be required to comply with the specific
FCC  regulations  in effect at the time  SpectruCell  is  available  for sale to
commercial customers.  The inability to obtain FCC approval, if required,  would
prevent us from deploying any wireless applications,  which would be detrimental
to our proposed business operations. Changes in existing policies or regulations
in any state or by the Federal  Communications  Commission  ("FCC") could have a
material  adverse  effect on our financial  condition or results of  operations.
There can be no assurance that the regulatory  authorities in one or more states
or the FCC will not take  action  having an adverse  effect on our  business  or
financial condition or results of operations.


EMPLOYEES AND CONSULTANTS

      As of November 15, 2002, we have no full time employees and four part time
consultants.  None of our consultants  are covered by any collective  bargaining
agreement.


ITEM 2.  DESCRIPTION OF PROPERTY

      As of August 1, 2002, the Company relocated its principal executive office
from  California to 420 Lexington  Avenue,  New York, NY 10170 within the office
facility of Danson  Partners,  LLC, a privately  owned  company that employs our
President and Chief Financial Officer. No rent or facility use fee is charged to
the Company by Danson  Partners,  LLC.  The  Company is a party to a  three-year
office lease that  commenced  January 1, 2002 and ends December 31, 2004 for its
former  California  office located at 880 Apollo Street,  Suite 200, El Segundo,
CA. The monthly  rent is $7,634  inclusive of the cost of monthly  parking.  The
minimum  lease  payments for the  remaining  life of the lease is $229,020.  The
Company has engaged Grubb & Ellis to find a suitable  subtenant to assume all or
a portion of the Company's remaining lease obligation.

      The Company is a guarantor to Jason Webster's one year  residential  lease
which expires  January 25, 2003. The Guaranty which was executed in January 2002
requires  the  Company to  reimburse  the  landlord in the event of a default by
Jason Webster,  the former Director of Corporate  Communications of the Company.
The rent under the  residential  lease is $1,690 per month.  The Company has not
been required to perform under the Guaranty.


ITEM 3.  LEGAL PROCEEDINGS

(I)   NANCY J. NEEDHAM AND EDMUND R. DUPONT LAWSUIT

      In Nancy J.  Needham;  Edmund R. DuPont et al v.  Advanced  Communications
Technologies,  Inc., et al, an action filed July 2000 in the Fifteenth  Judicial
Circuit  in the State of  Florida,  two former  officers  and  directors  of the
Company are seeking  damages and injunctive  relief arising out of the Company's
refusal to provide legal opinion letters and to take other actions  necessary to
allow the former officers to convert  restricted stock into  unrestricted  stock
under an exemption  under Rule 144. The plaintiffs have not specified the amount
of damages they are seeking. The Company has filed a counterclaim to rescind all
of the  Plaintiffs'  stock for lack and/or  failure of  consideration  and other
damages.  In October 2001, the Court denied summary judgment for the Plaintiffs.
On November 14, 2002, the Company settled the litigation with the Needham/DuPont
plaintiffs by agreeing to release the  plaintiffs'  stock from  restriction  and
issuing a three year  promissory  note for $173,494 to reimburse the  plaintiffs
for its  legal  costs.  The  plaintiffs  agreed to  release  the  Company,  it's
officers,  and directors,  except Mr. May and Mr. Halperin, the Company's former
SEC  counsel  from any claims for  damages.  On  November  18,  2002 a Notice of
Voluntary Dismissal was filed with the court.

      On or  about  July  2000,  the  Company  entered  into an  indemnification
agreement  with Jack Halperin,  Esq., our then SEC counsel,  whereby the Company
agreed to indemnify Mr. Halperin for all costs and damages  incurred as a result
of Mr.  Halperin  being named a defendant in the  Needham/DuPont  lawsuit  filed
against the  Company,  Mr. May and Mr.  Halperin in July 2000.  Mr. May executed
this agreement on behalf of the Company. The agreement includes a provision that
prohibits  the  Company  from  entering  into any  settlement  agreement  in the
Needham/DuPont  lawsuit  unless  such  settlement  agreement  provides  for  the
unconditional  release of Mr. Halperin from any claim. On November 14, 2002, the
Company settled the Needham/DuPont  lawsuit without obtaining a full release for
Mr.  Halperin.  The Company's  Board of Directors is consulting with its current
legal counsel to determine the validity of the indemnification agreement.

                                       13
<PAGE>

(II)  WORLD IP INCORPORATED SETTLEMENT

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

(III) AJW PARTNERS, LLC AND NEW MILLENNIUM CAPITAL PARTNERS II, LLC

      On April 24, 2002,  the Company  entered into a Settlement  Agreement with
the two remaining  September 1999 Convertible  Debenture holders,  AJW Partners,
LLC and New  Millennium  Capital  Partners  II,  LLC.  Under  the  terms  of the
Settlement Agreement,  the Company is obligated to issue, over a 180 day period,
8,500,000  shares of its  common  stock in  exchange  for the  dismissal  of the
lawsuit and in satisfaction of the remaining  outstanding  principal and accrued
interest. The Company had the option, until July 23, 2002, to substitute cash in
lieu of shares.  On closing,  the Company issued 1,460,725 and 664,275 shares of
its common stock to AJW Partners,  LLC and New Millennium  Capital  Partners II,
LLC, respectively.  A Stipulation and Order of Discontinuance was filed with and
Ordered by the court on April 25,  2002.  On June 4, 2002 the Company  issued an
additional  1,460,725 and 664,275 shares of common stock to AJW Partners LLC and
New Millennium Capital Partners, II, LLC.

      On both  August 26,  2002 and  September  24,  2002,  the  Company  issued
1,460,725  and  664,275  shares  of  common  stock to AJW  Partners  LLC and New
Millennium  Capital  Partners II, LLC,  respectively,  in full settlement of the
Company's  outstanding  obligation  on the  remaining  September  30,  1999  12%
Convertible Debenture.

(IV)  ADVANCED COMMUNICATIONS (AUSTRALIA) LITIGATION

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

      On January 23, 2002,  the court issued an interim  injunction  effectively
enjoining   and   prohibiting   Advanced    Communications    (Australia)   from
"transferring,  dealing with, charging,  diminishing,  mortgaging,  assigning or
disposing of" the Company's stock in Advanced  Communications  (Australia).  The
interim   injunction   was  recently   extended  by  the  court  until  a  final
determination is made at trial.

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

                                       14
<PAGE>

USA, Inc." Mr. May resigned from the Company's Board of Directors one day before
entering into the Acquisition Agreement.

      The Company  believes that the transaction  with EntrePort as described in
the  Acquisition  Agreement  was  inconsistent  with  our  ownership  rights  to
SpectruCell in North and South America acquired in the 1999 merger with Advanced
Communications (Nevada) and under the interim License and Distribution Agreement
dated  July  5,  2000  which  we  entered  into  with  Advanced   Communications
(Australia) to facilitate  implementation of our rights in SpectruCell  acquired
in the 1999 merger.  The Company therefore  instructed its Australian lawyers to
write to Advanced  Communications  (Australia) requesting an undertaking that it
would not appoint  EntrePort  or any other person to market and  distribute  the
SpectruCell  technology  in the  exclusive  territory  in breach of the  interim
License Agreement.  Advanced  Communications  (Australia) refused to provide the
undertaking sought by the Company and,  accordingly,  the Company applied to the
court  for  an  order  restraining  Advanced  Communications   (Australia)  from
breaching  the terms of the  license  agreement.  On April 26,  2002,  the court
issued an interim order on the following terms:

            "UNTIL  THE   DETERMINATION  OF  THE  PLAINTIFF'S   [I.E.,
            ADVANCED  COMMUNICATIONS']  SUMMONS FILED ON 23 APRIL 2002
            OR FURTHER  ORDER,  THE FIRST  DEFENDANT  [I.E.,  ADVANCED
            COMMUNICATIONS    (AUSTRALIA)   ADVANCED    COMMUNICATIONS
            (AUSTRALIA)],  WHETHER  BY  ITSELF  OR  BY  ITS  OFFICERS,
            EMPLOYEES, AGENTS, ATTORNEYS, OR ANY OF THEM OR OTHERWISE,
            BE  RESTRAINED  FROM  APPOINTING OR AGREEING TO APPOINT IN
            ANY WAY  WHATSOEVER  ENTREPORT  CORPORATION  OR ANY  OTHER
            PERSON  TO  DISTRIBUTE,  SELL,  OFFER TO SELL OR SUPPLY OR
            OTHERWISE  DEAL IN OR WITH  THE  WIRELESS  OR  TERRESTRIAL
            MULTI-PROTOCOLS  COMMUNICATION NETWORK TECHNOLOGY KNOWN AS
            SPECTRUCELL (`PRODUCT')  (INCORPORATING THE SOFTWARE WHICH
            ENABLES  THE  PRODUCT TO  PERFORM  TO ITS  SPECIFICATIONS,
            CONSISTING  OF A SET  OF  INSTRUCTIONS  OR  STATEMENTS  IN
            MACHINE   READABLE   MEDIUM,   AND  ANY   ENHANCEMENT   OR
            MODIFICATION  OF THAT  SOFTWARE  (`SOFTWARE')  AND RELATED
            HARDWARE  PERFORMING  PART OF THE BASE STATION  CONTROLLER
            WHICH  PROCESSES  AND  TRANSMITS   MOBILE   COMMUNICATIONS
            PROTOCOLS SUCH AS AMPS, CDMA, TDMA GSM, W-CDMA, UMTS, 3G &
            VOICE  IP) IN THE  UNITED  STATES  OF  AMERICA,  THE NORTH
            AMERICAN  AND  SOUTH   AMERICAN   CONTINENTS   (`EXCLUSIVE
            TERRITORY')  WITHOUT  THE  PRIOR  WRITTEN  CONSENT  OF THE
            PLAINTIFF."

      EntrePort was added as a defendant to the proceedings.

      On May 7,  2002,  the  Company  received a notice  alleging a breach  from
Advanced  Communications  (Australia)  stating that Advanced  Communications had
breached its obligation under the interim License Agreement. In addition, on May
7, 2002, Advanced Communications  (Australia) sent a termination notice formally
terminating the interim License Agreement. We believed that the notice of breach
and the termination notice were without merit and immediately took the necessary
legal action to protect our interests  acting on either notice.  On May 8, 2002,
the court  extended  its April 26,  2002 order and further  restrained  Advanced
Communications  (Australia)  from  "acting  upon or taking any further  steps in
reliance upon" the notice of breach and termination notice.

      A dispute also arose between Advanced Communications (Australia) and the
Company as to whether our rights in SpectruCell included military applications
as well as commercial applications. Contrary to previous statements and
understandings, Mr. May and Advanced Communications (Australia) claimed for the
first time in or about March 2002 that military applications were not included
under the Company's SpectruCell license, and that these rights were exclusively
reserved to Advanced Communications (Australia). A dispute also arose between
Advanced Communications (Australia) and the Company as to whether our rights in
SpectruCell included marketing rights, in addition to distribution rights.
Contrary to previous statement and understandings, Mr. May and Advanced
Communications (Australia) claimed for the first time in or about March 2002
that the Company's rights in SpectruCell did not include marketing rights, and
that these rights were exclusively reserved to Advanced Communications
(Australia).

      The Company  disputed  these claims and  requested the court to expand the
existing  injunctions  against  Advanced  Communications  (Australia) to include
marketing  rights and military  applications  of  SpectruCell  technology in the
Exclusive Territory and to continue the existing injunctions in effect until the
trial on the case.

      The marketing and military  applications  rights were relevant because the
Company had been contacted by a major U.S.  defense  contractor that was bidding
on a large U.S. Army project that involved a SpectruCell-type component that the
contractor  wanted the Company to provide for the project.  The Company was also
contacted at this time by another U.S. defense-related company regarding similar
products.  It was also relevant because it had become apparent that the best way
to generate  short term  revenues for  SpectruCell-related  products was through
military  applications  which were easier and less expensive to produce than the

                                       15
<PAGE>

technically  much more  sophisticated  commercial  products  being  designed for
public telephone system use.

      The  above-mentioned  matters were argued before the Australia  court at a
two day  hearing  on May 27 and 28,  2002.  The  court  took the  matters  under
submission.  On August 23, 2002, the Australia  court issued its ruling in which
the judge concluded:

            "IT  IS  PREFERABLE,  IN MY  OPINION,  THAT  ALL  ACTIVITY
            [RELATED TO  SPECTRUCELL]  ON BEHALF OF ACT (AUSTRALIA) IN
            THE EXCLUSIVE  TERRITORY  PENDING THE TRIAL BE CARRIED OUT
            BY ACT INC. [ADVANCED COMMUNICATIONS]."

      Based on this  conclusion,  the court issued a  comprehensive  preliminary
injunction  granting all the relief  sought by the Company.  Among other things,
the  injunction  prohibits  Advanced  Communications  (Australia),  directly  or
indirectly,  from taking any action in the Exclusive  Territory  with respect to
marketing,  distributing,  selling or  otherwise  dealing  with the  SpectruCell
technology  (including the military  applications  thereof),  except through and
with the prior written  consent of the Company.  Quoted below is the text of one
of one of the sections of the court's order:

            "...THE   FIRSTNAMED   DEFENDANT  [I.E.,  ACT  AUSTRALIA],
            WHETHER BY ITSELF OR BY ITS  OFFICERS,  EMPLOYEES  AGENTS,
            ATTORNEYS,  OR ANY OF  THEM  OR  HOWSOEVER  OTHERWISE,  BE
            RESTRAINED FROM ITSELF MARKETING,  DISTRIBUTING,  SELLING,
            SUPPLYING, OFFERING TO SELL OR SUPPLY OR OTHERWISE DEALING
            IN OR WITH THE PRODUCT INCLUDING ANY MILITARY APPLICATIONS
            OR USES OF THE  SPECTRUCELL  TECHNOLOGY,  IN THE EXCLUSIVE
            TERRITORY  WITHOUT THE PRIOR WRITTEN  CONSENT OF [ADVANCED
            COMMUNICATIONS]."

      The court's order also prohibited Advanced Communications (Australia) from
licensing,  marketing,  distributing,  selling  or  otherwise  dealing  with the
SpectruCell technology, including military applications of the product, and from
offering to do any of the  foregoing,  in the  Exclusive  Territory  through any
third party without the Company's prior written consent.  The court's order also
prohibited Advanced  Communications  (Australia) from entering into a license or
sub-license agreement to market, distribute,  sell, provide promotional material
or  otherwise  deal  with  the  SpectruCell   technology,   including   military
applications thereof, in the Exclusive Territory except to the company or at its
request. The court's order also prohibited Advanced  Communications  (Australia)
from  granting any license to any third party to use,  sub-license  or reproduce
the product in the Exclusive Territory, except at the request of the Company.

      In mid-July 2002, Mr. May placed Advanced Communications  (Australia) into
an administrative  insolvency proceeding in Australia,  as a result of which the
Company's  stock  interest  in  Advanced   Communications   (Australia)   became
worthless.  Shortly thereafter,  Mr. May appointed a receiver over the assets of
Advanced Communications (Australia),  including SpectruCell,  based on a blanket
security  interest  he  had  created  in  December  2001,  in  favor  of  Global
Communications  Technology Pty Ltd ("Global"), an entity owned and controlled by
Mr. May and his son, Jason May. In  mid-September  2002, Mr. May proposed a plan
of company  arrangement in the insolvency  proceeding pursuant to which Advanced
Communications   (Australia)'s   two  main  assets  (its  shares  in   Australon
Enterprises  Pty Ltd  ("Australon")  and  the  SpectruCell  technology)  will be
disposed  of  with  no  benefit  to  the  minority   shareholders   of  Advanced
Communications (Australia),  which includes the Company. Advanced Communications
(Australia)'s  shares  in  Australon  will be sold  and a  portion  of the  sale
proceeds  will  go  to  third  party  creditors  and  to  pay  the  expenses  of
administration. The balance of the sale proceeds will go to Global, the majority
shareholder of Advanced  Communications  (Australia).  Further,  the SpectruCell
technology will be transferred by the receiver to an entity owned and controlled
by Mr.  May.  The plan of  company  arrangement  was  approved  at a meeting  of
creditors held on September 26, 2002. The Company voted against the plan.

      Shortly  after the plan of company  arrangement  was adopted,  Mr. May and
Advanced Communications  (Australia) filed a motion with the Australian Court to
terminate the Court's  injunctions in favor of the Company regarding the interim
License  Agreement.  The  motion  to  terminate  the  injunctions  was  based on
statements  made by Mr.  May  under  oath to the  effect  that  the  SpectruCell
technology in its current form had evolved from the original licensed technology
and was no longer  subject to the  interim  License  Agreement  and had not been
subject to the interim License Agreement for the last two years. Neither Mr. May
nor Advanced Communications  (Australia) addressed the Company' ownership rights
to  SpectruCell  in North and South  America  acquired  in the 1999  merger with
Advanced  Communications  (Nevada).  This  contention  was directly  contrary to
numerous  statements made by Mr. May,  Advanced  Communications  (Australia) and
others in various forums,  including Internet posts, press releases, SEC filings
and  documents  exchanged  between the  parties.  Several  days later,  Advanced
Communications  (Australia) acting on Mr. May's  instructions,  sent a letter to
the Company  purportedly  terminating the interim License Agreement on the basis
that the Company is insolvent,  as determined under Australian law, and that the
Company's  insolvency  constitutes  an  irreparable  event of default  under the
interim License Agreement.

                                       16
<PAGE>

      The company's  initial response to the receiver's  motion to terminate the
injunctions  and the receiver's  purported  termination  of the interim  License
Agreement was to oppose them and seek leave of the Australian Court to apply for
an injunction to prohibit Advanced Communications (Australia) from acting on the
purported  termination  pending trial.  The Australian Court granted the Company
leave to do so. However,  after  considering the situation further and receiving
advice of counsel, the Company made the strategic decision to alter its approach
and withdraw from the Australian litigation.  This decision was based on various
factors, including the following: (i) the actions of Mr. May against the Company
over the past 10 months,  which in the Company's view  demonstrated a consistent
lack of good  faith on his part that was  unlikely  to  change;  (ii) Mr.  May's
recent  statement made under oath to the Australian  Court that "IT IS IMPORTANT
FROM THE OUTSET TO UNDERSTAND THAT THERE WAS NO SPECTRUCELL  PRODUCT IN 1999 AND
TODAY  THERE  STILL IS NO  SPECTRUCELL  PRODUCT  AS IT IS  CLEARLY  STILL IN THE
DEVELOPMENT  STAGE AND AT LEAST 12 TO 18 MONTHS FROM THE FINAL PRODUCT  STAGE.",
which was contrary to previous information  consistently  provided by Mr. May to
the Company and the public on that subject; (iii) the completion of the research
and  development  of  SpectruCell  that is  currently  projected  to  require an
additional  U.S.$12 to $15 million;  (iv) the Company's opinion that development
of SpectruCell  is unlikely to be completed and a product  brought to successful
commercialization  under  Mr.  May's  leadership;   (v)  the  Company's  limited
resources  at the  present  time are  insufficient  to enable it take all of the
legal  actions  that  would be  necessary  to defend and  enforce  its rights in
Australia;  and (vi) the need for the Company to use available funds to continue
current  operations  so that  its  rights  and  viability  will be  meaningfully
preserved for the future.

      On October 25, 2002, we withdrew from the  Australian  litigation  against
Mr. May and Advanced  Communications  (Australia).  The effect of the  Company's
decision to withdraw from the Australia  litigation is that the interim  License
Agreement  has  been  terminated  and the  existing  injunctions  issued  by the
Australia  Court have been lifted and the purported  termination  of the interim
License   Agreement  is  not  being   challenged   in  the   Australia   Court..
Notwithstanding  this,  the  Company  retains  its  rights to bring an action or
actions for damages and other available  legal and equitable  relief against Mr.
May, Advanced Communications (Australia) and other related and unrelated parties
who have  damaged it. In addition,  we still  retain  ownership of the rights to
SpectruCell  and related  technology  acquired in the 1999 merger with  Advanced
Communications   (Nevada),   which  were  neither  created  by  nor  subject  to
cancellation under the interim License Agreement. The Company intends to protect
these rights to the fullest extent it is able to do so, and anticipates that Mr.
May and Advanced Communications (Australia) will not acknowledge these rights..

V)    STAR MULTICARE SERVICES, INC.

      In STAR MULTI CARE SERVICES, INC. v. ADVANCED COMMUNICATIONS TECHNOLOGIES,
INC., an action filed  September 18, 2000 in the Fifteenth  Judicial  Circuit in
the State of Florida,  Star Multi Care Services,  Inc. ("Star") sued the Company
for alleged breach of contract and the recovery of a break-up or termination fee
in excess of  $50,000  in  conjunction  with the  Company's  alleged  failure to
consummate a proposed merger with Star in January 2000.


CONTINGENCIES


      INDEMNIFICATION OF DIRECTORS AND EMPLOYEES IN RE: ADVANCED  COMMUNICATIONS
      (AUSTRALIA) V. COMPANY DIRECTORS AND EMPLOYEES

      On or about May 10, 2002, Advanced  Communications  (Australia) filed suit
in the Superior court of Orange County,  California against the Company,  all of
its  directors,  its  former  president,  and  some of its  former  and  present
employees,  including  the  Company's  receptionist.  On or about May 17,  2002,
Advanced  Communications  (Australia)  voluntarily  dismissed the suit as to the
Company but not as to the individual defendants.

      The complaint sets forth multiple causes of action against the defendants,
including  various  business  torts.  The  basis  of the  complaint  is that the
defendants improperly interfered with and conspired to ruin plaintiff's business
and conspired to force plaintiff into bankruptcy.

      In the  opinion of the  Company,  based on input from legal  counsel,  the
complaint is deficient and subject to attack on numerous  procedural grounds. In
the  opinion  of  the  Company,   based  on  its  knowledge  of  the  facts  and
circumstances  underlying  the  action,  the  complaint  is  also  substantively
deficient and meritless.

      Under the Company's  articles of incorporation and applicable Florida law,
the Company is obligated to indemnify  and defend its  directors and the officer
named as defendants  who have been served in the action.  The Company might also
be under an  obligation  to  indemnify  and defend the other  former and present
employees  named as  defendants  who have not been served in the action,  if and
when they are served. This determination will be made on a case-by-case basis.

                                       17
<PAGE>


      INDEMNIFICATION  AGREEMENT  BETWEEN  THE  COMPANY  AND JACK  HALPERIN  RE:
      NEEDHAM/DUPONT LAWSUIT

      On or  about  July  2000,  the  Company  entered  into an  indemnification
agreement  with Jack Halperin,  Esq., our then SEC counsel,  whereby the Company
agreed to indemnify Mr. Halperin for all costs and damages  incurred as a result
of Mr.  Halperin  being named a defendant in the  Needham/DuPont  lawsuit  filed
against the  Company,  Mr. May and Mr.  Halperin in July 2000.  Mr. May executed
this agreement on behalf of the Company. The agreement includes a provision that
prohibits  the  Company  from  entering  into any  settlement  agreement  in the
Needham/DuPont  lawsuit  unless  such  settlement  agreement  provides  for  the
unconditional  release of Mr. Halperin from any claim. On November 14, 2002, the
Company settled the Needham/DuPont  lawsuit without obtaining a full release for
Mr.  Halperin.  The Company's  Board of Directors is consulting with its current
legal counsel to determine the validity of the indemnification agreement.


      PENDING  CLAIM  BY  ADVANCED  COMMUNICATIONS   (AUSTRALIA)  FOR  COSTS  OF
      AUSTRALIA LITIGATION AND FOR DAMAGES

      Following our withdrawal from the Australia litigation against Mr. May and
Advanced Communications (Australia), Advanced Communications (Australia) applied
to the  court for an order  awarding  its costs of the  litigation  against  the
Company.  Advanced  Communications  (Australia)  has indicated that its costs of
litigation were  approximately  Aus $400,000.  The Company believes a cost award
will be  made  by the  Australia  Court  in  favor  of  Advanced  Communications
(Australia)  but it  does  not  know  in what  amount.  Advanced  Communications
(Australia)  has also applied for an order awarding  damages against the Company
in the  amount of Aus  $6,000,000  as a result of the  Company  notifying  third
parties in the U.S. with which Advanced  Communications  (Australia) was dealing
in regard to  SpectruCell,  of the Australia  Court's August 23, 2002 injunctive
orders.  The Company  believes that based on  information  made available to it,
Advanced  Communications  (Australia) proposed AUS. $6,000,000 claim for damages
is without  merit.  As far as the Company  knows,  the  Australia  Court has not
awarded any costs and has not awarded any damages against the Company. It is not
known if such awards will be made and, if they are made, what their amounts will
be.

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

      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.

                                       18
<PAGE>

                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


PRICE RANGE OF COMMON STOCK

      Our common  stock is  currently  traded on the  Over-the-Counter  Bulletin
Board  ("OTCBB")  under the symbol "ADVC".  As of November 15, 2002,  there were
118,852,622  common shares  outstanding and approximately 414 holders of record.
We believe that the number of beneficial  owners is  substantially  greater than
the number of record holders because a large portion of our common stock is held
in "broker" or "street names".

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

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

                2001
                Quarter Ended September 30, 2,000  $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

                2002
                Quarter Ended September 30, 2001   $ .41      $ .25
                Quarter Ended December 31, 2001      .38        .17
                Quarter Ended March 31, 2002         .26        .06
                Quarter Ended June 30, 2002          .08        .02

                2003
                Quarter Ended September 30, 2000     .08       .005

      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 2002 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.


RECENT SALES OF UNREGISTERED SECURITIES

      On October  10,  2002,  the  Company's  Board of  Directors  approved  the
issuance of 100,000 shares each to Messrs. Danson, Prouty,  Lichtman,  Roche and
Finch,  having a value of $1,000 each in partial  satisfaction  of unpaid  prior
legal and consulting fees. These shares have not yet been issued.

      On both  August 26,  2002 and  September  24,  2002,  the  Company  issued
1,460,725  and  664,275  shares  of  common  stock to AJW  Partners  LLC and New
Millennium  Capital  Partners II, LLC,  respectively,  in full settlement of the
Company's  outstanding  obligation  on the  remaining  September  30,  1999  12%
Convertible  Debenture.  April 24,  2002 and June 4, 2002,  we issued a total of
2,921,450  and  1,328,550  shares of common stock to AJW  Partners,  LLC and New
Millennium Capital Partners II, LLC respectively, in satisfaction of $100,343 of
the September 30, 1999 12% Secured Convertible Debentures.

      On or about May 3, 2002, we issued 1,100,000  shares of restricted  common
stock  having a value of  $55,000  to Randy  Prouty,  our  Chairman,  for  prior
consulting services.

      On or about May 3, 2002, we issued  111,290  shares of  restricted  common
stock  having a value of $5,565 to Simon  Sigalos and  Spyredes,  P.A. for prior
legal services.
                                       19
<PAGE>

      On or about May 3,  2002 we issued  800,000  shares of  restricted  common
stock having a value of $40,000 to Danson Partners,  LLC for consulting services
rendered during fiscal 2002.

      On or about May 3,  2002 we issued  800,000  shares of  restricted  common
stock  having a value of $40,000 to Levinson and  Lichtman,  LLP for prior legal
services.

      On or about May 3,  2002 we issued  300,000  shares of  restricted  common
stock having a value of $15,000 to Roche and Holt for prior legal services.

      On or about May 3, 2002 we issued 10,000 shares of restricted common stock
having  a value  of $500 to  Dynamic  Voice  Networks  for  consulting  services
rendered during fiscal 2002.

      On or about March 26, 2002,  666,667 shares having a value of $50,000 were
issued to Danson Partners,  LLC for consulting  services  rendered during fiscal
2002.

      On or about March 26, 2002,  666,667 shares having a value of $50,000 were
issued to Levinson & Lichtman,  LLP for legal  services  rendered  during fiscal
2002.

      On or about March 26, 2002,  400,000 shares having a value of $30,000 were
issued to Jack Halperin, Esq. for legal services rendered during fiscal 2002.

      On or about March 26, 2002,  133,334 shares having a value of $10,000 were
issued to Dr. Michael Finch for  professional  services  rendered  during fiscal
2002.

      On or about March 26, 2002,  27,800  shares  having a value of $2,085 were
issued to The Law Offices of Alan Foxman for prior legal services.

      On or about March 26, 2002,  119,000  shares having a value of $8,925 were
issued to DDInvestor.com, Inc. for prior investor relations services.

      On or about February 27, 2002,  2,146,967  shares and associated  warrants
were issued to all (23) of the individual private placement investors.

      On or about  February  7,  2002,  160,000  shares  each  having a value of
$40,000 were each issued to Eduardo Acosta and Alberto Monteiro in settlement of
the World IP recession lawsuit.

      On or about January 28, 2002,  2,960,000 shares having a value of $740,000
were issued to Cornell Capital Partners, LP as a one-time commitment fee for the
$30 million Equity Line of Credit facility.

      On or about January 28, 2002, 40,000 shares having a value of $10,000 were
issued to Westrock Advisors,  Inc. for financial advisory services in connection
with the Equity Line of Credit facility.

      In January 2002, Advanced  Communications  entered into the Equity Line of
Credit  Agreement  where  Advanced   Communications   may,  at  its  discretion,
periodically  issue and sell to Cornell Capital Partners,  L.P. shares of common
stock for a total purchase  price of $30 million.  The amount of each advance is
subject to an aggregate  maximum  advance amount of $2 million in any thirty-day
period. Cornell Capital Partners,  L.P. will purchase the shares of common stock
for a 9%  discount  to the  prevailing  market  price of our  common  stock.  In
addition,  Cornell  Capital  Partners is  entitled to retain 3% of each  advance
under the Equity  Line of Credit,  together  with a one-time  commitment  fee of
$740,000,  payable in shares of its common stock. On January 28, 2002, we issued
2,960,000 shares of our restricted common stock to Cornell Capital Partners,  LP
with a  market  value  of  $740,000  as a  commitment  fee for  the $30  million
structured  equity line facility.  Cornell Capital  Partners intends to sell any
shares  purchased under the Equity Line of Credit at the then prevailing  market
price. Additionally,  Westrock Advisors, Inc. was paid a fee of 40,000 shares of
Advanced  Communications'  common stock,  which is equal to $10,000 at a closing
bid of $0.25 on January 10, 2002 for acting as the placement agent.

      In  January  2002,  Advanced  Communications  entered  into  a  Securities
Purchase   Agreement  with  Cornell  Capital  Partners  and  other  third  party
investors,  where they shall issue and sell to Buyers up to One Million  Dollars
of convertible  debentures Advanced  Communications has outstanding  convertible

                                       20
<PAGE>


debentures with an original  principal  balance of $1,000,000.  These debentures
are convertible  into shares of common stock at a price equal to equal to either
(a) an amount  equal to one  hundred  twenty  percent  (120%) of the closing bid
price of the common stock as of the closing date or $0.40,  whichever is higher,
or (b) an amount equal to eighty  percent (80%) of the lowest  closing bid price
of the  common  stock  for the  five  trading  days  immediately  preceding  the
conversion  date. If such conversion had taken place at $0.016 (i.e., 80% of the
recent price of $0.02),  then the holders of the  convertible  debentures  would
have received  62,500,000 shares of common stock.  These convertible  debentures
accrue  interest  at a rate 5% per  year  and are  convertible  at the  holder's
option.  These  convertible  debentures  have a term of two years.  At  Advanced
Communications'  option,  these  debentures may be paid in cash or redeemed at a
20%  premium  prior to  January  2004.  The  convertible  debentures  contain  a
beneficial  conversion  feature  computed  at its  intrinsic  value  that 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 $250,000,
was  recorded as an interest  expense and a component  of equity on the issuance
date.

      On January 22, 2002,  our  directors,  excluding Mr. May and Mr.  Roberts,
pursuant  to a January  4, 2002 Board of  Directors  Meeting,  were each  issued
200,000 shares for a total of 1,000,000  shares of our  restricted  common stock
for  services  rendered to us as directors  for the 2001 and 2002 fiscal  years.
Each director received $36,000 worth of stock as compensation.

      On November 8, 2001,  34,449  shares having a value of $10,335 were issued
to James Rennie for prior accrued expenses.

      On October 15, 2001,  286,667 shares having a value of $86,000 were issued
to Levinson & Lichtman, LLP for legal services rendered through June 30, 2001.

      On October 15, 2001,  33,334  shares having a value of $10,000 were issued
to Groman Ross & Tisman for prior legal services.

      On October 15, 2001,  65,231  shares having a value of $20,000 were issued
to Danson  Partners,  LLC for consulting  services for the period August through
September 2001.

      On October 15, 2001,  137,727 shares having a value of $41,318 were issued
to Attkisson Carter & Co. for private placement fees.

      On August 29, 2001,  566,159 shares having a value of $180,000 were issued
to Danson Partners,  LLC for consulting  services for the fiscal year ended June
30, 2001.

      On August 29, 2001,  133,333  shares having a value of $40,000 were issued
to Jack Halperin, Esq. for prior legal services.

      On August 29, 2001,  30,000 shares having a value of $9,000 were issued to
Trois Mousquetaires for prior legal services.

      On August 29, 2001, 50,748 shares having a value of $15,224 were issued to
Sean Repko for prior accrued expenses.

      On May 25, 2001,  100,000  shares having a value of $30,000 were issued to
Attkisson Carter & Co. for private placement fees.

      On May 25, 2001,  233,333  shares having a value of $50,000 were issued to
Levinson & Lichtman, LLP for prior legal services.

      On May 25, 2001,  41,667  shares  having a value of $12,500 were issued to
Simon Sigalos & Spyredes for prior legal services.

      On May 25, 2001,  183,334  shares having a value of $50,000 were issued to
Jack Halperin, Esq. for prior legal services.

                                       21
<PAGE>

      On May 25, 2001,  83,333  shares  having a value of $25,000 were issued to
Danson Partners, LLC for prior consulting services.

      On April 19, 2001, 150,000 shares having a value of $45,000 were issued to
Attkisson Carter & Co. for private placement fees.

      On April 19, 2001,  32,740 shares having a value of $20,000 were issued to
Danson  Partners,  LLC for consulting  services  rendered for February and March
2001.

      On April 19, 2001,  30,000 shares having a value of $19,800 were issued to
DDInvestor.com, Inc. for prior consulting services.

      On April 19, 2001,  50,000 shares having a value of $32,000 were issued to
Sean Repko for a signing bonus.

      On February 5, 2001,  15,338  shares having a value of $10,000 were issued
to Danson Partners, LLC for consulting services rendered during January 2001.

      On January 19, 2001,  33,353  shares having a value of $20,000 were issued
to Danson  Partners,  LLC for consulting  services  rendered during November and
December 2000.

      On January 19, 2001,  100,000 shares having a value of $35,000 were issued
to Jack Halperin, Esq. for prior legal services.

      On December  19,  2000,  500,000  shares  having a value of $375,000  were
CANCELLED to World IP for recession of the World IP acquisition.

      On December 19, 2000, 100,000 shares having a value of $50,000 were issued
to Levinson & Lichtman, LLP for prior legal services.

      On December 19, 2000, 103,393 shares having a value of $87,500 were issued
to Danson Partners,  LLC for consulting  services  rendered during September and
October 2000 and as a re-signing bonus.

      On October 26, 2000,  50,000  shares having a value of $37,000 were issued
to Simon  Sigalos & Spyredes  for prior legal  services.  On October  26,  2000,
25,000  shares  having a value of $18,500 were issued to the Law Offices of Alan
J. Foxman for prior legal services.

      On September 22, 2000, 20,000 shares having a value of $13,120 were issued
to DDInvestor.com, Inc. for prior consulting services.

      During  the period of  December  2000 to  September  2001,  pursuant  to a
private placement under Regulation D, Rule 506, Advanced  Communications  issued
4,293,933  shares of common  stock and  4,293,933  warrants  at $.30 per  share.
Advanced  Communications  received  $1,288,180  from  investors,  which included
$250,000 for stock not yet issued as of June 30, 2001 and $275,454 for warrants.
Advanced  Communications  issued  137,729  and 250,000  shares of common  stock,
valued  at  $41,318  and  $75,000,   in  payment  of  offering   costs  incurred
respectively.  The  value  assigned  to this  stock  was  based  on the  private
placement  memorandum of $.30 per share.  The value of the common stock has been
charged to equity as direct costs to the offering.  The fair market value of the
warrants,  aggregating  $275,454,  was  estimated  on the grant  date  using the
Black-Scholes option pricing model as required under FASB 123 with the following
weighted average  assumptions:  expected dividend yield 0%,  volatility  49.84%,
risk-free  interest  rate  4.22%,  expected  option  life 2 years.  To date,  no
warrants  have been  exercised.  On February  27,  2002,  our Board of Directors
approved a resolution to reprice the private  placement  offering from $0.30 per
share to $0.20 per share.  The Board of Directors  repriced  these shares due to
the delay in registering the shares sold to investors in the private  placement.
The Company did not receive any  consideration  for the repricing of the shares.
This  repricing  resulted in the issuance of an additional  2,146,967  shares of
common stock and warrants to the private placement  investors.  These additional
shares are  included in the number of shares that we are  registering  for these
selling  shareholders.  The exercise price of the underlying warrants remains at
$0.30 per share.

                                       22
<PAGE>

      Between  October and December 2000,  AJW Partners,  LLC and New Millennium
Capital  Partners II, LLC elected to convert  $262,800 of their 12%  Convertible
Debentures  into 860,378 shares of Advanced  Communications'  restricted  common
stock.  The Company is in default of its remaining  obligations to AJW Partners,
LLC and New  Millennium  Capital  Partners II, LLC and on April 24, 2002 entered
into a Settlement Agreement.  Under the terms of the Settlement  Agreement,  the
Company is obligated to issue,  over a 180 day period,  8,500,000  shares of its
common stock in exchange for the dismissal of the lawsuit and in satisfaction of
the remaining  outstanding  principal and accrued interest.  The Company had the
option,  until July 23, 2002, to substitute cash in lieu of shares.  On closing,
the  Company  issued  1,460,725  and 664,275  shares of its common  stock to AJW
Partners,  LLC and New  Millennium  Capital  Partners II, LLC,  respectively.  A
Stipulation and Order of Discontinuance  was filed with and Ordered by the court
on April 25, 2002. On June 4, 2002 the Company  issued an  additional  1,460,725
and  664,275  shares  of common  stock to AJW  Partners  LLC and New  Millennium
Capital  Partners,  II, LLC. On both August 26, 2002 and September 24, 2002, the
Company issued  1,460,725 and 664,275 shares of common stock to AJW Partners LLC
and New Millennium Capital Partners II, LLC, respectively, in full settlement of
the Company's  outstanding  obligation  on the remaining  September 30, 1999 12%
Convertible Debenture.

      On December 19, 2000, Bank Insinger de Beauford,  N.V.  converted $150,000
of its September 30, 1999 12%  convertible  debenture,  inclusive of accrued and
unpaid interest into 943,167 shares of restricted common stock.

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

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

                                                  7,787,000  $  4,884,101
                                            ================ ============
(1)   This transaction resulted in a gain on extinguishment of debt of $23,000.


      In April 2000, Advanced Communications acquired 20% of the common stock of
Advanced  Communications  (Australia).  The  purchase  price  of the  investment
amounted to $19,350,000,  and was comprised of a note payable for $7,500,000 and
the  issuance  of  5,000,000  shares  of  restricted   common  stock  valued  at
$11,850,000.  The shares issued were valued at the average  quoted trading price
during  the  acquisition  period.  The  fair  value  of  the  investment  at the
acquisition  date was  determined to be  $3,657,472.  The excess of the purchase
price over the fair value of the  investment  in the amount of  $15,692,528  was
accounted  for as  goodwill.  On  November  11,  2002,  attorneys  for  Advanced
Communications   (Australia)'s   Receivers  and  Managers  issued  a  Notice  of
Termination  terminating  the Company's 20% stock  interest under the April 2000
Stock Purchase Agreement.

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

                                       23
<PAGE>

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

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

<TABLE>

ITEM 6.  SELECTED FINANCIAL DATA
<CAPTION>

                                                   FOR THE YEARS ENDED JUNE 30,
                                          ----------------------------------------------------
                                               2002                 2001              2000
                                          -------------        -------------      ------------
<S>                                         <C>                <C>                <C>

Revenue                                     $          --      $      50,000        $       --
Cost of Revenue                                        --             57,310                --
Gross Profit (Loss)                                    --            (7,310)                --
Operating Expenses                              2,314,570          3,334,581         4,635,186
Operating (Loss)                              (2,314,570)        (3,341,891)       (4,635,186)
(Loss) from Investment                                 --        (3,571,654)                --
(Loss) from Goodwill Impairment               (1,700,000)       (12,399,864)                --
Other Expense (Net of $23,000 of
  Extraordinary Gain in Fiscal 2001)            (318,123)          (419,157)                --
(Loss) Before Income Taxes                    (4,332,693)       (19,732,566)       (5,110,427)
Provision for Income Taxes                             --                 --                --
Net (Loss)                                    (4,332,693) $    $(19,732,566)      $(5,110,427)
Net (Loss) Per Share:
  Basic and Diluted                         $       (.04)      $       (.22)      $      (.07)
  Pro Forma Weighted Average Shares:
  Basic and Dilutive                          100,576,484         87,976,428        77,107,560
                                            =============      =============      ============

                                                        FOR THE YEARS ENDED JUNE 30,
                                            --------------------------------------------------
                                                    2002            2001              2000
                                            ----------------   -------------      ------------
Cash and Cash Equivalents                         $   11,093   $       6,816      $     30,154
Working Capital (Deficiency)                     (3,252,643)     (2,421,719)       (1,424,473)
Total Assets                                         114,852       2,041,940        19,714,622
Total Debt                                         5,054,902       4,611,702         9,007,570
(Deficiency)/Equity                              (4,940,050)     (2,569,762)        10,707,052
</TABLE>

                                       24
<PAGE>


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

      The following  discussion should be read in conjunction with our financial
statements and the related notes and the other financial  information  appearing
elsewhere in this report. In addition to historical  information,  the following
discussion  and  other  parts  of this  Annual  Report  contain  forward-looking
information that involves risks and uncertainties.


OVERVIEW

      We are a marketing  company whose primary focus has been the licensing and
distribution of a product for the wireless  telecommunications industry known as
SpectruCell.   SpectruCell  is  being   developed  by  Advanced   Communications
Technologies  (Australia) Pty Ltd ("Advanced  Communications  (Australia)"),  an
insolvent  development  stage company in which we owned a 20% interest until the
purported termination of our interest by Advanced Communications  (Australia) on
November 11, 2002.  We own the North and South  America  rights to  SpectruCell,
which we acquired in our 1999 merger with Advanced  Communications  (Nevada). In
July 2000 we entered into an interim  License and  Distribution  Agreement  with
Advanced Communications  (Australia) to facilitate  implementation of the rights
to SpectruCell that we acquired in the 1999 merger.

      During most of 2002,  we were in  litigation  with Roger May and  Advanced
Communications (Australia) over our rights to market and distribute SpectruCell.
Based on a substantial  record created in that  proceeding,  the Australia Court
granted us broad injunctions  protecting our rights pending trial on the matters
at issue. In early October, 2002, Advanced Communications (Australia) terminated
the interim  License  Agreement  on the grounds that we were  insolvent  and our
insolvency  constituted an irreparable  breach of the interim License Agreement.
Our  initial  response  to the  purported  termination  of the  interim  License
Agreement was to oppose it and seek leave of the  Australian  Court to apply for
an  expansion  of  our  existing   injunctions  that  would  prohibit   Advanced
Communications  (Australia)  from acting on the  purported  termination  pending
trial.  The  Australian  Court  granted  us  leave  to  do  so.  However,  after
considering the situation  further and receiving advice of counsel,  we made the
strategic  decision  to alter our  approach  and  withdraw  from the  Australian
litigation.

      This decision was based on various factors,  including the following:  (i)
the actions of Mr. May against the Company over the past 11 months, which in the
Company's view demonstrated a consistent lack of good faith on his part that was
unlikely to change,  (ii) a recent  statement  made by Mr. May under oath to the
Australian  Court that "IT IS IMPORTANT FROM THE OUTSET TO UNDERSTAND THAT THERE
WAS NO  SPECTRUCELL  PRODUCT  IN 1999 AND TODAY  THERE  STILL IS NO  SPECTRUCELL
PRODUCT AS IT IS CLEARLY  STILL IN THE  DEVELOPMENT  STAGE AND AT LEAST 12 TO 18
MONTHS  FROM  THE  FINAL  PRODUCT  STAGE.",   which  was  contrary  to  previous
information  consistently  provided  by Mr. May to the Company and the public on
that  subject,   (iii)  the  completion  of  the  research  and  development  of
SpectruCell is currently projected to require an additional US$12 to 15 million;
(iv) the Company's  opinion that  development  of  SpectruCell is unlikely to be
completed and a product brought to successful  commercialization under Mr. May's
leadership  (v)  the  Company's  limited  resources  at  the  present  time  are
insufficient  to enable it take all of the legal actions that would be necessary
to defend and enforce its rights in  Australia;  and (v)the need for the Company
to use  available  funds to continue  current  operations so that its rights and
viability will be meaningfully preserved for the future.

      On October 25, 2002, we withdrew from the  Australian  litigation  against
Mr. May and Advanced Communications  (Australia).  The effect of our decision to
withdraw from the Australia  litigation was that the existing injunctions issued
by the  Australia  Court have been lifted and the purported  termination  of the
License is not being challenged in the Australia Court.

      Notwithstanding  our withdrawal from the Australia  litigation,  we retain
our rights to damages and other available legal and equitable relief against Mr.
May,  Advanced  Communications  (Australia)  and other parties who have acted in
concert  with them in  violation  of our rights.  In  addition,  we still retain
ownership of the rights to SpectruCell  and related  technology  acquired in the
1999 merger with Advanced Communications (Nevada), which were neither created by
nor subject to  cancellation  under the interim License  Agreement.  The Company
intends to protect  these rights to the fullest  extent it is able to do so, and
anticipates  that  Mr.  May and  Advanced  Communications  (Australia)  will not
acknowledge these rights.

      No  sales  of  SpectruCell  have  been  made  by  Advanced  Communications
(Australia)  or us.  Since  inception  in April  1999,  our  efforts  have  been
principally devoted to describing and marketing the to- be developed SpectruCell
technology to U.S. based  customers,  building an  infrastructure  of marketing,
technical and  administrative  support staff to support our future sales efforts
at such time as  SpectruCell  became  available to the  military and  commercial
marketplaces and raising capital. Since inception through June 30, 2002, we have
sustained  cumulative net losses of $29,848,648,  including  non-cash charges in
the amount of  $19,350,000  for the  write-off  of our  investment  in  Advanced
Communications  (Australia).  In addition,  a non-cash  charge of $4,580,762 was
incurred in connection with the issuance of stock for services.  Our losses have

                                       25
<PAGE>

resulted   primarily  from  expenditures   incurred  in  connection  with  costs
associated  with  unsuccessful  acquisitions,  office  infrastructure  costs and
general and administrative  expenses.  From inception through June 30, 2002, the
cost associated with unsuccessful  acquisitions amounted to $961,340 and general
and administrative  costs amounted to $4,956,546.  From inception we have earned
$50,000 in revenues from the sale of international  wholesale  telephone minutes
and effective July 1, 2001, we terminated this business.

      Since  inception,  the  Company has had limited  resources,  has  incurred
cumulative  net operating  losses of  $29,848,648  and,  based on our historical
focus, expects to incur additional losses unless the SpectruCell product is made
available to us for sale to military and commercial customers in North and South
America.  Based on the litigation with Advanced  Communications  (Australia) and
the current  situation,  it is unclear if this will ever occur.  We currently do
not have any marketing or promotional  employees or engineers to market and sell
SpectruCell.  Moreover,  given the litigation  between the Company,  Mr. May and
Advanced  Communications  (Australia),  we have no reliable  information  on the
status of the SpectruCell  product and when it will be available,  if at all, to
military users and be field tested for commercial applications.  In the interim,
in order for us to  continue  operating,  we will  require  additional  funding.
Assuming that the SpectruCell product will be developed and made available to us
for marketing and  distribution in our exclusive  territory,  we believe that we
will need  funds to  re-build  our  marketing  and sales  team,  hire  qualified
engineers  and pay our debts which include  $1,044,676  of accounts  payable and
accrued expenses,  $1,062,917 of convertible debentures and other obligations of
$2,846,902.  Our  plans  with  regard to these  matters  include  continuing  to
minimize the company's  infrastructure  costs while seeking  additional  capital
through  the draw down of our  Equity  Line of Credit  facility  and from  other
sources until such time as the SpectruCell  product becomes  available to us for
marketing and  distribution  to military and commercial  customers.  Although we
continue to pursue these plans, there is no assurance that SpectruCell will ever
be completed and become a commercially  viable product,  that we will be able to
exercise  our rights to market  and  distribute  SpectruCell  in North and South
America,  or that we will be  successful  in obtaining  sufficient  financing on
terms acceptable to us, or establish the marketing team and network necessary to
enable us to do so. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. Unless the company is able to
activate its Equity Line of Credit facility within the near future or seek other
sources  of  capital,  management  will be  unable  to  continue  operating  the
company..

      To date, we have not generated any revenue from the commercial or military
sale of SpectruCell or any products.  It is not known when  SpectruCell  will be
available,  if  at  all,  for  sale  to  the  commercial  or  military  markets.
Accordingly, we can expect to incur operating losses for the foreseeable future.
There can be no assurance that we will ever achieve profitable operations.

      On  September  7,  2002,  the Letter of Intent  between  the  Company  and
Advanced Communications  (Australia) expired. The Letter of Intent which was for
a  one-year  period,  gave  us the  right  to  acquire  all of the  intellectual
property,  including the worldwide  rights (other than the rights to territories
that we currently possess) for the licensing and distribution of the SpectruCell
product (the "IP  Rights").  The Letter of Intent  included  various  conditions
precedent  to the transfer of the IP Rights  including,  but not limited to, the
raising  of $80  million  in the U.S.  capital  markets,  appropriate  U.S.  and
Australian government regulatory approvals,  approval of both Board of Directors
and shareholders,  appropriate financial,  technical and legal due diligence and
definitive  agreements.  Due to  our  litigation  and  restrictions  on  foreign
ownership,  the  Company  will no longer  pursue  the  acquisition  of  Advanced
Communications (Australia) intellectual property.


SIGNIFICANT ACCOUNTING POLICIES

      Financial  Reporting  Release No. 60, which was  recently  released by the
Securities  and  Exchange  Commission,  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 2 of the Notes to the Financial Statements includes a
summary  of  the  significant  accounting  policies  and  methods  used  in  the
preparation of our Financial Statements.  The following is a brief discussion of
the more  significant  accounting  policies and methods used by us. In addition,
Financial  Reporting  Release No. 61 was recently released by the Securities and
Exchange Commission to require all companies to include a discussion to address,
among  other  things,  liquidity,  off-balance  sheet  arrangement,  contractual
obligations and commercial commitments.


      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

                                       26
<PAGE>

must  be  accounted   for  under  the  purchase   method  of   accounting;   the
pooling-of-interests  method is no longer  permitted.  SFAS 141 also establishes
new rules  concerning the  recognition of goodwill and other  intangible  assets
arising in a purchase  business  combination  and  requires  disclosure  of more
information  concerning  a  business  combination  in the  period in which it is
completed.  This  statement is  generally  effective  for business  combinations
initiated on or after July 1, 2001.

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

      SFAS No. 142 is effective for years  beginning after December 15, 2001 and
must be  applied  as of the  beginning  of such year to all  goodwill  and other
intangible assets that have already been recorded in the balance sheet as of the
first day in which SFAS No. 142 is initially  applied,  regardless  of when such
assets  were  acquired.  Goodwill  acquired  in  a  business  combination  whose
acquisition  date is on or after July 1,  2001,  should  not be  amortized,  but
should be reviewed for impairment pursuant to SFAS No. 121, even though SFAS No.
142 has not yet been  adopted.  However,  previously  acquired  goodwill  should
continue to be amortized  until SFAS No. 142 is first  adopted.  The Company has
adopted the  provisions of SFAS 142 in its financial  statements  for the fiscal
year ended June 30, 2002.

      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.

      In August 2001, the FASB issued SFAS 144,  "Accounting  for the Impairment
or Disposal of Long-Lived Assets." This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supercedes
FASB Statement No. 121,  "Accounting for the Impairment of Long-Lived Assets and
for  Long-Lived  Assets to be Disposed of." The  provisions of the statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001.

      With the  exception of the adoption of SFAS No. 142, the adoption of these
pronouncements  is not  expected  to have a  material  effect  on the  Company's
financial position or results of operations.


YEAR ENDED JUNE 30, 2002 COMPARED TO YEAR ENDED JUNE 30, 2001


      REVENUE

      We did not  generate  any  revenue  during the year.  Revenue for the year
ended June 30, 2001 was $50,000 and was realized  entirely from our subsidiary's
U.S.-Pakistan  international telephone distribution network. We ceased operating
our  international  telephone  services  network  on June 30,  2001  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, 2002 and June
30, 2001 were  $2,314,570  and  $3,334,581  respectively  and  represents  a 31%
decrease from the prior fiscal year. Of these amounts, $1,228,780 and $1,214,739
or 53% and 36%  respectively,  were for professional  services rendered of which
$677,634 and  $328,870  during the fiscal years ended June 30, 2002 and June 30,
2001,  respectively,  was paid via the issuance of  restricted  common stock and
represent a non-cash  expense.  During the fiscal  years ended June 30, 2002 and
June 30, 2001,  we paid  $246,782 and  $307,002  respectively,  in cash fees for
professional services rendered.

      Depreciation  and  amortization  expense  decreased by $543,002 due to the
write-off of the unamortized balance of Goodwill as of June 30, 2002.

                                       27
<PAGE>

      Consulting fees, which includes employee payments, decreased $577,774 from
the fiscal year ended June 30, 2001 due to the  curtailment of our employees and
outside  consultants  during the fiscal  year ended June 30, 2002 as well as the
reversal of  $394,361 of accrued  compensation  due Mr.  May,  our former  Chief
Executive  Officer and Chairman.  During the fiscal year ended June 30, 2002 and
June 30,  2001,  $0 and  $3,200,  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 $407,772 for the
fiscal year ended June 30,  2002,  a decrease of $93,276  from the prior  fiscal
year.

      Interest  expense  increased  $307,791 from the fiscal year ended June 30,
2001 due  principally  to the issuance,  in January 2002, of our 5%  Convertible
Debentures.  $250,000 of the increase in interest expense is attributable to the
intrinsic value of the beneficial conversion feature included in the convertible
debentures.

      Other  expense  for the  fiscal  year  ended  June  30,  2002  includes  a
$1,700,000  loss from  impairment of Goodwill  associated with our investment in
Advanced Communications (Australia). The impairment loss of $1,700,000 was based
on  management's  evaluation,  in  accordance  with FASB 121 and SFAS 142 of the
carrying value of our  investment in Advanced  Communications  (Australia).  The
decision to  write-down  our  remaining  Goodwill was based  principally  on the
ongoing financial  difficulties of Advanced  Communications  (Australia) and its
filing for voluntary  administration  (bankruptcy) in Australia on or about July
18, 2002.

      Other  expense for the fiscal year ended June 30, 2001 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.  It  also  includes  a
$12,399,864 loss on the write-down of Goodwill associated with our investment in
Advanced  Communications  (Australia),  as well as the  write-off of  $3,571,654
representing  our  remaining  equity   investment  in  Advanced   Communications
(Australia).  The write-down in Advanced Communications (Australia) was based on
management's  evaluation of the business  prospects,  which were necessitated by
FASB 121  ("Accounting  for  Impairment of Long Lived  Assets") and APB 18 ("The
Equity  Method  of  Accounting   for   Investments  in  Common   Stock").   Such
pronouncements   require  the  annual   evaluation  of  long-lived   assets  for
impairment.  Advanced  Communications  (Australia)  has been in the  development
stage  since  inception,  and has not made any  sales.  Based on these  factors,
management  believed that the carrying  value of the good will in the investment
should be  reduced to  $2,000,000,  resulting  in a  $12,399,864  write-down  of
goodwill.


      EXTRAORDINARY GAIN

      Extraordinary  gain for the fiscal  year ended  June 30,  2001  included a
$23,000 gain on the issuance of our restricted common stock to unrelated vendors
of Advanced  Communications  (Australia)  in excess of the then  current  market
value. In fiscal 2002, we realized no extraordinary gains.


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


      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.

                                       28
<PAGE>

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

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

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

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

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


EXTRAORDINARY GAIN

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


LIQUIDITY AND CAPITAL RESOURCES


      OVERVIEW

      Since our inception,  we have financed our operations  through the private
sales of common stock and  convertible  debentures and from unsecured loans from
an entity  controlled  by Mr.  Roger May, a former  officer and  director of our
company and a significant  shareholder.  We have raised approximately $3,900,000
before  offering  costs through the sale of these  securities  and have borrowed
$1,055,736 from an entity wholly owned by Mr. May. These loans are  non-interest
bearing,  are  unsecured,  and  have  no  fixed  date  for  repayment.  Advanced
Communications does not believe that the loans are due upon demand. However, the
actual  repayment terms are not known with any  specificity  since the terms are
not contained in a written  document.  At June 30, 2002, our principal source of
liquidity was $11,093 of cash and cash equivalents. We have no credit facilities
in place.  On  January  10,  2002,  we  entered  into an  Equity  Line of Credit
Agreement with Cornell  Capital  Partners,  L.P.  Pursuant to the Equity Line of
Credit, we may, at our discretion, periodically sell to Cornell Capital Partners
shares of common stock for a total purchase  price of up to $30.0  million.  For
each share of common stock  purchased  under the Equity Line of Credit,  Cornell
Capital  Partners  will pay 91% of the  lowest  closing  bid price of our common
stock on the Over-the-Counter  Bulletin Board or other principal market on which
our common stock is traded for the 5 days immediately following the notice date.
Cornell  Capital  Partners  is a  private  limited  partnership  whose  business
operations are conducted through its general partner,  Yorkville Advisors,  LLC.
Further,  Cornell Capital Partners will retain a fee of 3% of each advance under
the Equity Line of Credit as a fee. In addition,  we engaged Westrock  Advisors,
Inc., a registered  broker-dealer,  to advise us in  connection  with the Equity
Line of Credit. For its services, Westrock Advisors, Inc. received 40,000 shares
of our common  stock.  The  effectiveness  of the sale of the  shares  under the
Equity Line of Credit is conditioned  upon us  registering  the shares of common
stock with the Securities and Exchange Commission.  Our Equity Line of Credit is
not yet  effective  and the  Company  has not  drawn  down any  funds  from this
facility.  Except for the  Equity  Line of Credit,  we have no  commitments  for
capital.

                                       29
<PAGE>

      We  anticipate  that our cash  needs  over the next 12 months  consist  of
general  working  capital needs of $600,000,  plus the repayment of  outstanding
indebtedness of $3,263,736.  These obligations include  outstanding  convertible
debentures in the amount of $1,163,324,  as well as accounts payable and accrued
expenses in the amount of  $872,493,  accrued  compensation  of $172,183  and an
unsecured,  non-interest-bearing loan payable to an entity wholly-owned by Roger
May, a former officer and director and a significant  shareholder.  In addition,
we have a note payable to Advanced  Communications  (Australia) in the amount of
$1,791,166  at June 30,  2002 that was the  subject  of a lawsuit  by us against
Roger May and Advanced Communications (Australia). As of June 30, 2002, we had a
working capital deficiency of $3,252,643. We anticipate that our cash needs over
the next 12 months will come  primarily  from the sale of  securities  or loans,
including the Equity Line of Credit.

      Our financial  statements  have been  prepared on a going  concern  basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business; and as a consequence, the financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and  classification of liabilities that
might be necessary  should we be unable to continue as a going concern.  We have
experienced net operating losses and negative cash flows since inception and, as
of June 30, 2002, we had an  accumulated  deficit of  $29,848,648.  Cash used in
operations  for the  years  ended  June 30,  2002 and  2001 was  $1,103,254  and
$1,479,999,  respectively.  At June 30, 2002,  our only source of liquidity  was
$11,093 of cash. Such conditions raise substantial doubt that we will be able to
continue as a going concern for a reasonable  period of time.  Subsequent to the
end of the fiscal year,  we have  substantially  curtailed our overhead and have
closed our office in  California.  As of November 15, 2002, our cash balance was
under  $1,000.  Unless  we are  able to raise  additional  capital  through  the
issuance of stock or  convertible  debentures  or commence  drawing  down on our
Equity  Line of Credit  once it is  declared  effective  by the SEC,  we will be
unable to  continue  our  operations.  Because we believe  that the  SpectruCell
product  will not be available  for sale to the military  market until 2003 (and
the  commercial  market  beyond  2003),  we will have no source of revenue until
then.  Consequently,  unless we are able to raise additional capital through our
Equity Line of Credit or from other sources,  we will be unable to continue as a
going concern. Considering the depressed state of the private and public capital
markets,  we  believe  that our only  reasonable  chance of  raising  additional
capital is through  our Equity  Line of Credit with  Cornell  Capital  Partners,
L.P., once and if it is declared effective by the SEC.

      Our future results of operations involve a significant number of risks and
uncertainties.  The  worldwide  market for  telecommunications  products such as
those that are under development by Advanced Communications (Australia) has seen
a dramatic  reduction  in capital  spending  in 2001 and the first six months of
2002,  as compared to the late 1990's and 2000.  It is  uncertain  as to when or
whether market conditions will improve.  Moreover, given Advanced Communications
(Australia)  precarious financial position and its current  administration under
Australia's  insolvency laws, it is uncertain  whether  Advanced  Communications
(Australia)  or the successor in interest to its rights to  SpectruCell  will be
able to raise the capital  necessary to complete the  development of the product
and will be able to complete  such  development  and bring it to the market in a
timely and commercially viable manner.

      If we are unable to obtain  additional  funding through our Equity Line of
Credit  facility  or  alternate  sources of  funding,  this will have a material
adverse  effect on our business and our ability to continue as a going  concern.
As a consequence, we may be forced to seek protection under the bankruptcy laws.
In that  event,  it is unclear  whether  we could  successfully  reorganize  our
capital structure and operations,  or whether we could realize  sufficient value
for our assets to  satisfy  our  creditors  in full.  Accordingly,  should we be
forced  to file  for  bankruptcy  protection,  there  is no  assurance  that our
stockholders would receive any value.


CAPITAL RESOURCES

      Pursuant to the Equity Line of Credit,  we may periodically sell shares of
common  stock to Cornell  Capital  Partners,  L.P. to raise  capital to fund our
working  capital needs.  The periodic sale of shares is known as an advance.  We
may request an advance  every 5 trading  days.  A closing will be held 7 trading
days after such written  notice at which time we will  deliver  shares of common
stock and Cornell Capital Partners,  L.P. will pay the advance amount,  less the
3% retention.  We may request  advances under the Equity Line of Credit once the
underlying  shares are registered  with the Securities and Exchange  Commission.
Thereafter,  we may continue to request  advances until Cornell Capital Partners
has  advanced  $30.0  million  or two  years  after  the  effective  date of the
accompanying registration statement,  whichever occurs first. The amount of each
advance is subject to an aggregate  maximum  advance amount of $2 million in any
thirty-day  period.  The amount available under the Equity Line of Credit is not
dependent on the price or volume of our common stock.

      We are  attempting  to  register  70,000,000  shares  of  common  stock in
connection with the Equity Line of Credit and upon conversion of the debentures.
We cannot  predict  the  actual  number of shares of common  stock  that will be

                                       30
<PAGE>


issued  pursuant to the Equity  Line of Credit,  in part,  because the  purchase
price of the shares will fluctuate based on prevailing  market conditions and we
have not determined the total amount of advances we intend to draw. Nonetheless,
if we issued all  70,000,000  shares of common  stock at a recent price of $0.01
per share (which assumes that no shares would need to be issued upon  conversion
of debentures),  then we would receive  $679,000 under the Equity Line of Credit
(after  deducting a 3% retention  payable to Cornell).  This is $29,300,000 less
than is available under the Equity Line of Credit. Our stock price would have to
rise  substantially for us to have access to the full amount available under the
Equity Line of Credit.  These  shares  would  represent  38% of our  outstanding
common stock upon issuance.  Accordingly,  we would need to register  additional
shares of common  stock in order to fully  utilize the $30.0  million  available
under the Equity  Line of Credit at the  current  price of $0.01 per  share.  In
addition,  we would be required to obtain the  approval of our  shareholders  to
increase  the  number of  authorized  shares of common  stock.  Pursuant  to our
Articles of Incorporation,  we are authorized to issue up to 200,000,000  shares
of common stock.  At a recent price of $0.01 per share,  we would be required to
issue  3,000,000,000  shares of common stock in order to fully utilize the $30.0
million available.  We would be required to obtain a vote of at least a majority
of the outstanding  shares in order to increase our authorized  shares of common
stock for this purpose.  Our inability to obtain such approval would prohibit us
from  increasing  our  authorized  shares of common  stock and from  issuing any
additional  shares under the Equity Line of Credit or to otherwise raise capital
from the sale of capital stock.

      In  November  2002,  Advanced  Communications  entered  into a  Securities
Purchase  Agreement with Cornell Capital  Partners,  L.P.,  whereby it agreed to
issue  and sell  Two  Hundred  Fifty  Thousand  Dollars  ($250,000)  of  secured
convertible debentures.  These secured convertible debentures have a term of two
years and are convertible  into shares of common stock at a price equal to $.001
per share commencing on December 31, 2002. These secured convertible  debentures
accrue  interest  at a rate  10% per year and are  convertible  at the  holder's
option. At Advanced Communications' option, these debentures may be paid in cash
or redeemed at a 20% premium on or before  December 15 2002 and at a 50% premium
after  December  15, 2002 and prior to November  2004.  In  connection  with the
Securities Purchase Agreement,  Advanced  Communications entered into a Security
Agreement  in favor of  Cornell  Capital  Partners,  L.P.  whereby  it granted a
security interest in all of its assets as security for its obligations under the
secured  convertible  debentures,  as well as all other  obligations of Advanced
Communications to Cornell Capital  Partners,  L.P. whether arising before, on or
after the date of the Security Agreement,  including,  without limitation, those
obligations of Advanced  Communications to Cornell Capital Partners,  L.P. under
the convertible  debentures dated January 2002. The security agreement provides,
however,  that  upon  the  payment  in full by  Advanced  Communications  of its
obligations  to Cornell  Capital  Partners,  L.P.  arising  from the  Securities
Purchase  Agreement dated November 2002, and the related  documents of even date
therewith, Cornell Capital Partners, L.P. agrees to release any and all security
interests  it may then  maintain  on  SpectruCell  and the  related  License and
Distribution  Agreement dated July 5, 2000, between the Advanced  Communications
and Advanced Communications  Technologies (Australia) Pty., Ltd. The issuance of
the  secured  convertible   debentures  is  expected  to  contain  a  beneficial
conversion  feature  computed  at its  intrinsic  value  that 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.  Advanced
Communications has not determined the amount of this expense as of this date.

      On January 10, 2002, we executed various financing agreements with Cornell
Capital Partners,  LP whereby Cornell and certain other investors purchased from
us $1 million of two-year Convertible  Debentures and Cornell entered into a $30
million Equity Line of Credit.  Pursuant to the Convertible Debenture financing,
we received $564,000 net of financing and closing costs and the repayment of the
$325,000  ninety-day  note. The debentures are convertible into shares of common
stock at a price  equal to equal to either  (a) an amount  equal to one  hundred
twenty  percent  (120%) of the closing  bid price of the common  stock as of the
closing  date or $0.40,  whichever  is higher,  or (b) an amount equal to eighty
percent  (80%) of the lowest  closing bid price of the common stock for the five
trading days  immediately  preceding the conversion date. If such conversion had
taken place at $0.008 (i.e., 80% of the recent price of $0.01), then the holders
of the convertible  debentures would have received  125,000,000 shares of common
stock  leaving no stock  available to be issued under the Equity Line of Credit.
These  convertible  debentures  accrue  interest  at a rate 5% per  year and are
convertible at the holder's option. These convertible  debentures have a term of
two years. At our option,  these debentures may be paid in cash or redeemed at a
20% premium prior to January 2004. The issuance of shares upon conversion of the
Debentures or pursuant to the Equity Line of Credit will have a dilutive  impact
on our  existing  stockholders.  As a result,  our net  income  per share  could
decrease  in future  periods,  and the market  price of our common  stock  could
decline.  In  addition,  the lower our stock  price is the more shares of common
stock we will  have to issue  upon  conversion  of the  debentures  or under the
Equity  Line of  Credit.  If our  stock  price  were  lower,  then our  existing
stockholders  would  experience  greater  dilution.  The convertible  debentures
contain a beneficial  conversion feature computed at its intrinsic value that 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 $250,000,
was recorded as an interest  expense for the fiscal year ended June 30, 2002 and
a component of equity on the issuance date.

                                       31
<PAGE>

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

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

      During the period of December  2000 to August 2001,  pursuant to a private
placement under Regulation D, Rule 506, Advanced Communications issued 4,293,933
shares of common  stock  and  4,293,933  warrants  at $.30 per  share.  Advanced
Communications  received $1,288,180 from investors,  which included $250,000 for
stock not yet issued as of June 30, 2001 and  $275,454  for  warrants.  Advanced
Communications  issued  137,729 and 250,000  shares of common  stock,  valued at
$41,318 and $75,000,  in payment of offering  costs incurred  respectively.  The
value  assigned to this stock was based on the private  placement  memorandum of
$.30 per  share.  The value of the  common  stock has been  charged to equity as
direct costs to the offering. The fair market value of the warrants, aggregating
$275,454, was estimated on the grant date using the Black-Scholes option pricing
model  as  required  under  FASB  123  with  the  following   weighted   average
assumptions:  expected dividend yield 0%, volatility 49.84%,  risk-free interest
rate  4.22%,  expected  option  life 2 years.  To date,  no  warrants  have been
exercised. On February 27, 2002, our Board of Directors approved a resolution to
reprice the private placement  offering from $0.30 per share to $0.20 per share.
The Board of Directors repriced these shares due to the delay in registering the
shares sold to investors in the private  placement.  The Company did not receive
any  consideration for the repricing of the shares.  This repricing  resulted in
the issuance of an additional  2,146,967  shares of common stock and warrants to
the private  placement  investors.  These additional  shares are included in the
number of shares that we are  registering  for these selling  shareholders.  The
exercise price of the underlying warrants remains at $0.30 per share.

      Between  October and December 2000,  AJW Partners,  LLC and New Millennium
Capital Partners II, LLC elected to convert $262,800 of their September 30, 1999
12%  Convertible  Debentures  into  860,378  shares of Advanced  Communications'
restricted common stock. The Company is in default of its remaining  obligations
to AJW Partners,  LLC and New Millennium  Capital  Partners II, LLC and on April
24, 2002 entered into a Settlement Agreement.  Under the terms of the Settlement
Agreement,  the Company is obligated to issue, over a 180 day period,  8,500,000
shares of its common stock in exchange  for the  dismissal of the lawsuit and in
satisfaction of the remaining  outstanding  principal and accrued interest.  The
Company had the  option,  until July 23,  2002,  to  substitute  cash in lieu of
shares.  On closing,  the Company  issued  1,460,725  and 664,275  shares of its
common stock to AJW Partners,  LLC and New Millennium  Capital Partners II, LLC,
respectively.  A  Stipulation  and Order of  Discontinuance  was filed  with and
Ordered by the court on April 25,  2002.  On June 4, 2002 the Company  issued an
additional  1,460,725 and 664,275 shares of common stock to AJW Partners LLC and
New Millennium Capital Partners,  II, LLC. On both August 22, 2002 and September
24,  2002 we issued  1,460,725  and 664,275  shares of common  stock each to AJW
Partners, LLC and New Millennium Capital Partners II, LLC respectively,  in full
satisfaction of the September 30, 1999 12% Convertible Debentures.

      During  December  2000,  Bank  Insinger de Beauford,  N.V.  converted  its
$150,000 September 30, 1999 12% convertible debenture,  inclusive of accrued and
unpaid interest into 943,167 shares of restricted common stock.

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

                                       32
<PAGE>

was  recorded as an interest  expense and a component  of equity on the issuance
date during the fiscal year ended June 30, 2000.

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


NET CASH USED IN OPERATING ACTIVITIES

      Net cash used in operating activities was $1,479,999 and $1,103,254 in the
fiscal  years  ended June 30,  2001 and 2002,  respectively.  The use of cash by
operating  activities  was  principally  the  result of net losses  during  both
reporting periods together with a reduction in accrued compensation and deferred
revenue in fiscal years ended 2002 and 2001, respectively.


NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

      We used net cash of  $247,608  and $25,000  during the fiscal  years ended
June 30, 2001 and 2002,  respectively,  for the repayment of our loan payable to
Advanced  Communications   (Australia).   As  of  June  30,  2002,  the  balance
outstanding  to  Advanced  Communications  (Australia)  on the loan  payable  is
$1,791,166. During the fiscal years ended June 30, 2001 and 2002, we used $8,411
and $1,625 respectively, to purchase office equipment.


NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES

      Net cash provided by financing activities for the year ended June 30, 2002
was  $1,134,206  and was due to the net  proceeds  received  from the sale of 5%
convertible  debentures in January 2002 in the amount of $863,000  (inclusive of
cash received from the $325,000  December 2001 bridge loan and net of $26,000 in
financing  fees),  $130,000  received  from  the  private  placement  of  equity
securities  that  commenced  December 2000 and ended August 2001 and $259,736 of
loan proceeds received from Global Communications  Technology Pty Ltd, an entity
wholly owned by Roger May, a former officer and director of the company.

      Net cash provided by financing  activities  for the fiscal year ended June
30, 2001 was  $1,712,680  and was due to the receipt of  $1,168,180  of proceeds
from the sale of equity  securities  pursuant to the Company's private placement
that commenced in December 2000 and ended August 2001. In addition,  the Company
received  $544,500 of loan proceeds from Global  Communications  Technology  Pty
Ltd, an entity  wholly owned by Roger May, a former  officer and director of the
Company.

      Net cash used by financing  activities  for the fiscal year ended June 30,
2002 of $118,530  resulted  entirely from the payment of the  Grassland  Capital
Group loan  payable  and  accrued  interest  that was in  default  and which was
subject to a judgment against the Company.


EQUITY LINE OF CREDIT

      Pursuant to the Equity Line of Credit,  we may periodically sell shares of
common  stock to Cornell  Capital  Partners,  L.P. to raise  capital to fund our
working  capital needs.  The periodic sale of shares is known as an advance.  We
may request an advance  every 5 trading  days.  A closing will be held 7 trading
days after such written  notice at which time we will  deliver  shares of common
stock and Cornell Capital Partners,  L.P. will pay the advance amount,  less the
3% retention.

                                       33
<PAGE>

      We may  request  advances  under  the  Equity  Line  of  Credit  once  the
underlying  shares are registered  with the Securities and Exchange  Commission.
Thereafter,  we may continue to request  advances until Cornell Capital Partners
has  advanced  $30.0  million  or two  years  after  the  effective  date of the
accompanying registration statement, whichever occurs first.

      The amount of each  advance is subject  to an  aggregate  maximum  advance
amount of $2 million in any thirty-day  period.  The amount  available under the
Equity  Line of Credit  is not  dependent  on the price or volume of our  common
stock.

      We cannot predict the actual number of shares of common stock that will be
issued  pursuant to the Equity  Line of Credit,  in part,  because the  purchase
price of the shares will fluctuate based on prevailing  market conditions and we
have not determined the total amount of advances we intend to draw. Nonetheless,
we can  estimate  the number of shares of our  common  stock that will be issued
using certain  assumptions.  Assuming we issued the maximum  number of shares of
common stock being  registered  at a recent  price of $0.01 per share,  we would
issue 70,000,000  shares of common stock to Cornell Capital  Partners,  L.P. for
gross proceeds of $700,000 (or $679,000 after deducting the 3% to be retained by
Cornell), or $29,300,000 less than is available under the Equity Line of Credit.
These shares would represent 38% of our outstanding  common stock upon issuance.
We are  registering  70,000,000  shares of common  stock for the sale  under the
Equity Line of Credit and the  conversion of debentures.  Accordingly,  we would
need to register additional shares of common stock in order to fully utilize the
$30.0 million  available under the Equity Line of Credit at the current price of
$0.01 per share. In addition, we would be required to obtain the approval of our
shareholders  to  increase  the  number of  authorized  shares of common  stock.
Pursuant to our  Articles of  Incorporation,  we are  authorized  to issue up to
200,000,000  shares of common  stock.  At a recent price of $0.01 per share,  we
would be  required  to issue  3,000,000,000  shares of common  stock in order to
fully utilize the $30.0 million available. We would be required to obtain a vote
of at least a  majority  of the  outstanding  shares  in order to  increase  our
authorized shares of common stock for this purpose. Our inability to obtain such
approval would prohibit us from increasing our authorized shares of common stock
and from  issuing any  additional  shares  under the Equity Line of Credit or to
otherwise raise capital from the sale of capital stock.

      There is an inverse relationship between our stock price and the number of
shares to be issued under the Equity Line of Credit. That is, as our stock price
declines,  we would be  required to issue a greater  number of shares  under the
Equity  Line of  Credit  for a  given  advance.  This  inverse  relationship  is
demonstrated  by the  following  table,  which  shows the number of shares to be
issued under the Equity Line of Credit at a recent price of $0.016 per share and
25%, 50% and 75%  discounts to the recent  price.  Note that we are  registering
70,000,000  shares of common  stock  under the  Equity  Line of Credit  and upon
conversion  of  debentures.  As such,  the table has been  prepared  to show the
effect of issuing the 70,000,000 shares.

         Purchase
         Purchase Price:        $0.0025       $0.0050      $0.0075         $0.01


         No. of Shares(1):   70,000,000    70,000,000   70,000,000    70,000,000


         Total
         Outstanding(2):    188,852,622   188,852,622  188,852,622   188,852,622

         Percent
         Outstanding(3):          37.1%         37.1%        37.1%         37.1%

         Maximum
         Proceeds(4):          $175,000      $350,000     $525,000      $700,000

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

(1)   Represents the maximum  number of shares of common stock being  registered
      under the Equity Line of Credit.


(2)   Represents  the total number of shares of common stock  outstanding  as of
      November  15,  2002,  plus the  shares  to be issued  to  Cornell  Capital
      Partners, L.P. under the Equity Line of Credit.


(3)   Represents  the shares of common stock to be issued as a percentage of the
      total number shares outstanding.


(4)   Represents  the maximum  proceeds to be received  under the Equity Line of
      Credit for the prices and number of shares set forth in the table.

                                       34
<PAGE>


      We expect to incur expenses of  approximately  $85,000 in connection  with
registering the Equity Line of Credit with  Securities and Exchange  Commission,
consisting primarily of professional fees. In addition, Cornell Capital Partners
will retain 3% of each advance. In connection with the Equity Line of Credit, we
paid Cornell  Capital  Partners a commitment fee of $740,000,  which was paid by
the issuance of 2,960,000  shares of common  stock.  The number of shares issued
for the  commitment  fee was equal to $0.25 per share.  In  addition,  we issued
40,000 shares of common stock, valued at $10,000, to Westrock Advisors,  Inc., a
registered broker-dealer, as a placement agent fee.


RISKS RELATED TO OUR BUSINESS

      THE CONVERSION OF OUR  OUTSTANDING  DEBENTURES  WILL CAUSE DILUTION TO OUR
      EXISTING SHAREHOLDERS

      The issuance of shares upon the conversion of the  outstanding  debentures
will have a dilutive impact on our stockholders. We currently have $1,250,000 of
outstanding  convertible  debentures.  Of that total,  $250,000  of  convertible
debentures  are  convertible  at a fixed price of $0.001 per share,  which would
upon  conversion  result in the issuance of 250,000,000  shares of common stock.
The balance of $1,000,000 of convertible  debentures are convertible into shares
of common  stock at a price equal to equal to either (a) an amount  equal to one
hundred twenty percent (120%) of the closing bid price of the common stock as of
the closing date or $0.40, whichever is higher, or (b) an amount equal to eighty
percent  (80%) of the lowest  closing bid price of the common stock for the five
trading days  immediately  preceding the conversion date. If such conversion had
taken  place at $0.0072  (i.e.,  80% of the recent  price of  $0.009),  then the
holders of the convertible  debentures would have received 138,888,889 shares of
common stock. As a result,  our net income per share could  decrease,  in future
periods, and the market price of our common stock could decline.

      THE  CONVERSION  OF OUR  OUTSTANDING  DEBENTURES  COULD  CAUSE A CHANGE OF
      CONTROL

      The issuance of shares upon the conversion of the  outstanding  debentures
could result in a change of control.  Cornell Capital Partners holds convertible
debentures,  which if  converted  would  result in the  issuance of  388,888,889
shares of our common stock.  Currently,  we are authorized to issue a maximum of
200,000,000  shares of common  stock.  Accordingly,  we do not have a sufficient
number of shares of common stock to honor all such conversions. If we issued the
maximum  number of shares that we are  authorized  to issue to Cornell  Capital,
then  Cornell  would  receive  81,147,347  shares of common  stock,  which would
represent 40.6% of our outstanding shares. In such event,  Cornell Capital would
be our largest  shareholder and would likely be able to exercise  control of our
company by electing  directors,  increasing  the number of authorized  shares of
common stock that our company could issue or otherwise.


      TERMINATION OF THE INTERIM LICENSE AGREEMENT

      In early October, 2002, Advanced Communications  (Australia) terminated an
interim  License   Agreement  we  entered  into  with  Advanced   Communications
(Australia)  in  July  2000  to  facilitate  implementation  of  our  rights  to
SpectruCell on the grounds that we were insolvent and our insolvency constituted
an irreparable breach of the interim License Agreement.  Our initial response to
the purported  termination of the interim License Agreement was to oppose it and
seek  leave of the  Australian  Court to apply  for an  injunction  to  prohibit
Advanced  Communications  (Australia)  from acting on the purported  termination
pending trial.  The Australian  Court granted us leave to do so. However,  after
considering the situation  further and receiving advice of counsel,  we made the
strategic  decision  to alter our  approach  and  withdraw  from the  Australian
litigation.

      On October 25, 2002, we withdrew from the  Australian  litigation  against
Mr. May and Advanced  Communications  (Australia).  The effect of the  Company's
decision  to  withdraw  from the  Australia  litigation  was  that the  existing
injunctions  issued by the  Australia  Court have been lifted and the  purported
termination  of the interim  License  Agreement is not being  challenged  in the
Australia Court.

      Notwithstanding  our withdrawal  from the Australia  litigation,  we still
retain ownership of the rights to SpectruCell and related technology acquired in
the 1999 merger with Advanced Communications  Technologies (Nevada),  which were
neither  created  by nor  subject  to  cancellation  under the  interim  License
Agreement.   It  is  anticipated  that  Mr.  May  and  Advanced   Communications
(Australia) will refuse to acknowledge these rights.


      OUR RELATIONSHIP WITH MR. MAY AND ADVANCED COMMUNICATIONS (AUSTRALIA) IS
      SIGNIFICANTLY IMPAIRED

      Given all of the  litigation  by the Company  against Mr. May and Advanced
Communications  (Australia)  over rights to  SpectruCell  and the  Company's 20%
stock  interest in Advanced  Communications  (Australia),  it is likely that the
Company will continue to be involved in substantive  litigation  against Mr. May
and other  parties to protect its rights to, and  interest  in, the  SpectruCell
technology for the North and South American markets.

                                       35
<PAGE>

      Even if we are able to prevail against Mr. May and Advanced Communications
(Australia)  or its  successor  in  interest  as to  SpectruCell,  or settle our
disputes  with those parties which is unlikely  under  current  conditions,  the
success of the SpectruCell  project and our financial viability on this basis is
subject to many other risks and  contingencies,  including,  but not limited to,
the ones mentioned below.


      WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE

      We have  historically  lost money. In the fiscal years ended June 30, 2002
and 2001,  we had a net loss of  ($4,332,693)  and  ($19,732,566)  or ($.04) and
($0.22) per share, respectively. Future losses are likely to occur. Accordingly,
we may  experience  significant  liquidity  and cash flow  problems  because our
operations  are not  profitable.  No  assurances  can be  given  that we will be
successful in reaching or maintaining profitable operations.


      WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS

      We have relied on significant  external  financing to fund our operations.
Such financing has  historically  come from a combination of borrowings and sale
of common stock from third  parties and funds  provided by certain  officers and
directors.  We cannot assure you that financing whether from external sources or
related parties will be available if needed or on favorable terms. Our inability
to  obtain  adequate  financing  will  result  in the need to  curtail  business
operations.  Any of these events would be materially harmful to our business and
may result in a lower stock price. We will need to raise  additional  capital to
fund our  anticipated  operating  expenses  and future  expansion.  Among  other
things, external financing will be required to cover our operating costs. Unless
the company is able to activate  its Equity Line of Credit  Facility  within the
near  future or seek other  sources  of  capital,  management  will be unable to
continue operating the company.


      OUR  INDEPENDENT  AUDITORS  HAVE  ADDED A  GOING  CONCERN  OPINION  TO OUR
      FINANCIAL  STATEMENTS,  WHICH  MEANS  THAT WE MAY NOT BE ABLE TO  CONTINUE
      OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit  opinions  issued in  connection  with the years  2002 and 2001  financial
statements, which states that our ability to continue as a going concern depends
upon our  ability  to  resolve  liquidity  problems,  principally  by  obtaining
capital,   commencing  sales  and  generating   sufficient  revenues  to  become
profitable.  Our ability to obtain additional funding will determine our ability
to continue as a going  concern.  Our  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.


      WE HAVE A WORKING CAPITAL DEFICIT,  WHICH MEANS THAT OUR CURRENT ASSETS ON
      JUNE 30, 2002 WERE NOT  SUFFICIENT TO SATISFY OUR CURRENT  LIABILITIES  ON
      THAT DATE

      We had a working capital deficit of $3,252,643 as of June 30, 2002,  which
means that our current  liabilities  exceeded our current  assets by $3,252,643.
Current assets are assets that are expected to be converted into cash within one
year and, therefore,  may be used to pay current liabilities as they become due.
Our working  capital deficit means that our current assets on June 30, 2002 were
not sufficient to satisfy all of our current liabilities on that date.


      THE PRICE OF OUR COMMON STOCK MAY BE AFFECTED BY A LIMITED  TRADING VOLUME
      AND MAY FLUCTUATE SIGNIFICANTLY

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


      OUR  COMMON  STOCK IS DEEMED TO BE "PENNY  STOCK,"  WHICH MAY MAKE IT MORE
      DIFFICULT  FOR   INVESTORS  TO  SELL  THEIR  SHARES  DUE  TO   SUITABILITY
      REQUIREMENTS

      Our common stock is deemed to be "penny  stock" as that term is defined in
Rule  3a51-1  promulgated  under  the  Securities  Exchange  Act of 1934.  These
requirements  may reduce the  potential  market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third  parties or to otherwise  dispose of
them. This could cause our stock price to decline. Penny stocks are stock:

                                       36
<PAGE>

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

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

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

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

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


      WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

      Our success largely depends on the efforts and abilities of key executives
and  consultants,  including  Wayne Danson,  our  President and Chief  Financial
Officer.  The loss of the  services  of Mr.  Danson  could  materially  harm our
business  because  of the  cost  and  time  necessary  to  replace  and  train a
replacement.  Such a loss  would  also  divert  management  attention  away from
operational issues. We do not presently maintain a key-man life insurance policy
on Mr. Danson.


ITEM 8.  FINANCIAL STATEMENTS

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


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

          None.

                                       37
<PAGE>

                                    PART III


ITEM  10.  DIRECTORS,   EXECUTIVE  OFFICERS,   PROMOTERS  AND  CONTROL  PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      The following table sets forth the names and ages of our current directors
and executive officers,  their principal offices and positions and the date each
such person became a director or executive  officer.  Our executive officers are
elected  annually by the Board of Directors.  Our directors serve one-year terms
until their  successors are elected.  The executive  officers serve terms of one
year or until their  death,  resignation  or removal by the Board of  Directors.
There are no family relationships or understandings between any of the directors
and executive officers.  In addition,  there was no arrangement or understanding
between any executive  officer and any other person pursuant to which any person
was selected as an executive officer.

      Our directors and officers are as follows:

       NAME AND ADDRESS                  AGE     POSITION
       ------------------------------  -------   --------------------------
                                                 President, Chief Financial
       Wayne I. Danson                    49     Officer
       420 Lexington Ave.                        and Director
       New York, NY 10170

       Dr. Michael Finch                  54     Director
       37 Walnut Street
       Wellesley, MA 02481

       Jonathan J. Lichtman               50     Director
       4800 N. Federal Hwy
       Boca Raton, FL 33431

                                                 Chairman of the Board of
       Randall Prouty                     50     Directors and
       420 Lexington Avenue                      Director
       New York, NY 10170

       Wilbank J. Roche                   56     Director
       2530 Wilshire Blvd.
       Santa Monica, CA 90403

      The directors  named above will serve until the next annual meeting of our
shareholders  or until  their  successors  shall be  elected  and  accept  their
positions.  Mr. Danson is party to a written consulting  agreement that entitles
him to  $20,000  per month in cash and stock for the  period  September  1, 2000
through August 31, 2001 and, as extended orally, to December 31, 2001. Effective
January 1, 2002,  Mr. Danson agreed to orally  extend his  consulting  agreement
with  Advanced  Communications  through  December  31, 2003 at a monthly rate of
$12,500. Mr. Danson is reimbursed for reasonable out-of-pocket expenses relating
to their activities for Advanced Communications.

      Our directors do not receive any cash compensation for their services as a
director, but are reimbursed for all of their out-of-pocket expenses incurred in
connection  with the  rendering  of services as a director.  The  directors  are
compensated  through  the grant and  issuance  of 100,000  shares of  restricted
common  shares  for each of the fiscal  years  ended 2002 and 2001 in which they
have  served as  directors.  The value of the stock  issued to each  director on
January 22, 2002 was $36,000.

      WAYNE I. DANSON,  PRESIDENT,  CHIEF  FINANCIAL  OFFICER AND DIRECTOR.  Mr.
Danson has served as our company's  Chief  Financial  Officer since  December 1,
1999,  was appointed a Director on January 3, 2000,  and appointed  President on
April 30,  2002.  Mr.  Danson is the  Managing  Director  and  Founder of Danson
Partners, LLC, a financial advisory firm specializing in middle market companies
in the real estate and technology industries.  Prior to forming Danson Partners,
LLC  in  May  1999,  Mr.  Danson  was  co-head  of  and  Managing   Director  of
PricewaterhouseCoopers  LLP's  Real  Estate  Capital  Markets  Group.  Prior  to
rejoining  PricewaterhouseCoopers in 1996, Mr. Danson was a Managing Tax Partner
with Kenneth  Leventhal & Company in New York and Washington  D.C., where he was
also  Kenneth  Leventhal's  National  Director  of its  International  and  Debt
Restructure Tax Practices.  Prior to his involvement  with Kenneth  Leventhal in
1988,  Mr.  Danson was a Managing  Director  with Wolper Ross & Co., Ltd. in New
York, a closely held financial  services company  specializing in financial tax,
pension  consulting,  designing  financial  instruments  and  providing  venture

                                       38
<PAGE>


capital and investment  banking services.  Mr. Danson graduated with honors from
Bernard M. Baruch College with a BBA in Accounting and an MBA in Taxation. He is
a certified  public  accountant and a member of the AICPA and the New York State
Society of CPAs.

      JONATHAN J. LICHTMAN, SECRETARY AND DIRECTOR. Mr. Lichtman was appointed a
Director 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 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 U.S.) 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,  CHAIRMAN  OF THE  BOARD  AND  DIRECTOR.  Mr.  Prouty,  a
co-founder 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.  His technical
background includes being a qualified  Webmaster and developing  e-businesses on
the web.

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


RESIGNATIONS

      Effective  November  30,  2001,  Mr. May was  removed  as Chief  Executive
Officer, President and Chairman of the Board. The Board of Directors removed Mr.
May because it had become dissatisfied with Advanced  Communications'  direction
under Mr. May's leadership. Mr. Prouty assumed the role of Chairman of the Board
effective  November 30, 2001 and Mr. Gary Ivaska was appointed  President of the
Company. Effective March 14, 2002, Roger May and Allen Roberts resigned from the
Board of  Directors.  Neither Mr. May nor Mr.  Roberts were replaced on Advanced
Communications'  Board of  Directors.  Effective  April  30,  2002,  Mr.  Ivaska
resigned as our President.


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

                                       39
<PAGE>


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.

      The Board of Directors also  established an Acquisitions  Committee and an
Advanced Communications (Australia) Committee.  Messrs. Prouty, Danson, Lichtman
and Roche  currently  serve on the  Acquisitions  Committee and Messrs.  Prouty,
Danson,  Lichtman,  Roche and Finch serve on the Australian Affiliate Committee,
which will  address and make all  decisions  relating to the  activities  of our
Australian Affiliate and SpectruCell.


ITEM 11.  EXECUTIVE COMPENSATION


SUMMARY COMPENSATION TABLE

      The following  table shows all cash  compensation  accrued  and/or paid by
Advanced Communications,  as well as certain other compensation paid or accrued,
for the fiscal years ended June 30, 2002, 2001 and 2000. Other than as set forth
herein, no executive  officer's cash salary and bonus exceeded $50,000 in any of
the applicable  years.  The following  information  includes the dollar value of
base salaries,  bonus awards,  the value of restricted  shares issued in lieu of
cash  compensation  and certain  other  compensation,  if any,  whether  paid or
deferred.

<TABLE>
<CAPTION>

                        ANNUAL COMPENSATION           LONG TERM COMPENSATION
                ----------------------------------- --------------------------
                                                                                AWARDS      PAYOUTS
                                                                        ------------------  -------
                                                             OTHER        RESTRICTED
                                                             ANNUAL         STOCK       OPTION     LTIP     ALL OTHER
                                    SALARY        BONUS    COMPENSATION    AWARD(S)      SARS    PAYOUT   COMPENSATION
NAME AND                           --------     -------    ------------  -----------   -------   ------   ------------
PRINCIPAL POSITION   YEAR             ($)           ($)        ($)           ($)          (#)      ($)         ($)
------------------   ----          --------     -------   ------------  ------------  -------   ------   ------------
<S>                 <C>         <C>             <C>             <C>     <C>             <C>      <C>            <C>

Wayne I. Danson,    2002        $149,933(1)             --      --      $110,000(1)     --       --             --
President and CFO   2001        $235,931(2)                             $167,500(2)
                    2000        $ 50,000(3)                             $223,400(4)

Roger May, CEO      2002        $ 87,500(5)             --      --               --     --       --             --
                    2001        $197,500(5)     $50,000(5)      --               --     --       --             --
                    2000        $120,000(5)             --      --               --     --       --             --
</TABLE>


(1)   Represents  accrued fees and out-of-pocket  expenses.  Mr. Danson received
      $65,000 in cash for fiscal 2002 services and $32,775 for  reimbursement of
      prior  and  current  out-of-pocket  expenses.  Mr.  Danson  was  appointed
      President on April 30, 2002.


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


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


(4)   Mr. Danson also received 100,000 shares of our stock as a signing bonus in
      December  1999 and June 2000.  During this time,  the shares were  trading
      between $1.50 - $3.50 per share.


(5)   Accrued and unpaid  compensation.  No cash was  received by Mr. May during
      the fiscal  years ended June 30, 2000,  June 30, 2001 and 2002.  Mr. May's
      compensation  for fiscal 2001  includes a $50,000 cash bonus which remains
      unpaid  as of June 30,  2001.  Mr.  May left  Advanced  Communications  on
      November 30, 2001. On March 26, 2002,  the Board of Directors  unanimously
      approved the  recommendation  of the Compensation  Committee to reduce Mr.
      May's  current and prior  accrued  compensation  by $394,361  representing
      services Mr. May performed for Advanced Communications (Australia).


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

                                       40
<PAGE>

EMPLOYMENT AGREEMENTS

      On November 29, 1999, we entered into an employment  agreement with Danson
Partners, LLC to provide the functions customarily provided by a Chief Financial
Officer. As compensation for these services,  we paid $5,000 monthly in advance,
plus  100,000  restricted  shares  of  common  stock.  Starting  April 1,  2000,
compensation for these services  increased to $10,000 per month. On September 1,
2000,  we entered  into  another  one-year  consulting  agreement  with Wayne I.
Danson,  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,  Mr.  Danson  receives
$10,000 per month in cash and $10,000 per month in stock.  Effective  January 1,
2002,   Mr.   Danson   agreed  to  orally  extend  his  contract  with  Advanced
Communications through December 31, 2003, at a monthly rate of $12,500.

      Effective July 1, 2000,  Advanced  Communications  and Mr. May, our former
Chief Executive Officer, entered into an oral employment agreement that entitled
Mr. May to receive $15,000 per month and a bonus of $50,000.  Effective December
1, 2000, Mr. May's compensation  increased to $17,500 per month. On November 30,
2001,  Mr.  May was  terminated  as  Advanced  Communications'  Chief  Executive
Officer.  The  Compensation  Committee  of the Board of  Directors  reviewed the
nature and extent of Mr.  May's past  services  to  Advanced  Communications  to
determine how much of Mr. May's prior  services are more  properly  allocable to
Advanced Communications  (Australia). At Advanced Communications' March 26, 2002
Board of Director's  meeting,  the Board of Directors  unanimously  approved the
recommendation  of the Compensation  Committee to reduce Mr. May's prior accrued
compensation  by $394,361  representing  services Mr. May performed for Advanced
Communications (Australia), leaving a balance of $172,183 at June 30, 2002.

      On November 30, 2001, we entered into an oral  employment  agreement  with
Mr.  Gary  Ivaska to serve as our  President  at a rate of  $120,000  per annum.
Effective April 30, 2002, Mr. Gary Ivaska  resigned as Advanced  Communications'
President.


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 15, 2002 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., 420 Lexington Avenue,
New York, NY 10170.

      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  118,852,622  shares of common  stock  outstanding  as of
November 15, 2002.

                                       41
<PAGE>

                                                    COMMON STOCK
                                                  BENEFICIALLY OWNED
                                           ------------------------------------
NAME/ADDRESS                                    NUMBER             PERCENT(1)
-------------------------------------      -------------   ---------------------

Roger May                                    18,228,000(1)(2)      15.34%

Nancy Needham                                7,168,454(3)*          6.03%

E.R. DuPont                                  2,751,335(4)*          2.31%

Wayne Danson                                 2,811,214(5)           2.37%

Jonathan J. Lichtman                         2,710,334(6)           2.28%

Dr. Michael Finch                              591,334                  *

Randall Prouty                               2,218,056              1.87%

Wilbank J. Roche                               650,000                  *
                                           -------------------------------
All Officers and Directors as a Group        8,980,938              7.56%
------------------------------------

(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 (Australia) Pty Ltd.

(3) Excludes 4,790,347 shares held by Dr. Needham's adult children.  Dr. Needham
    has no beneficial ownership in these shares.

(4) Excludes  3,449,048  shares held by Mr. DuPont's adult children and in trust
    for Rhett DuPont, a minor.  Mr. DuPont has no beneficial  ownership in these
    shares.

(5) Includes  2,461,214  shares owned  beneficially by Mr.  Danson's  affiliated
    entity and children.

(6) Excludes  396,666 shares  beneficially  owned through various family trusts.
    Mr. Lichtman has no beneficial ownership in these shares.

* Less than 1%.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

      Effective   April  30,  2002,   Mr.  Gary  Ivaska   resigned  as  Advanced
Communications' Chief Executive Officer.  Advanced Communications and Mr. Ivaska
have settled all outstanding  amounts  otherwise due him for his prior services.
Under the terms of the Ivaska Agreement, Advanced Communications is obligated to
pay Mr.  Ivaska  $40,000  at the rate of  $10,000  per  month  for  four  months
commencing on May 31, 2002. No payments have been made to Mr. Ivaska.

      During the fiscal year ended June 30, 2002, Advanced Communications issued
200,000 shares of its restricted  common stock having a value of $36,000 to each
of its five current directors for services  rendered to Advanced  Communications
as directors.  Advanced Communications issued a total of 1,000,000 shares in the
aggregate  having a value of $180,000.  The stock was valued based on the quoted
trading price of Advanced Communications' stock on the date that the shares were
granted to the individual directors.

      At the  request  of  Advanced  Communications'  Board  of  Directors,  the
Compensation  Committee  conducted  a review of the nature of the past  services
provided by Mr. May to Advanced Communications to determine whether a portion of
such   services  are  more   properly   allocable  to  Advanced   Communications
(Australia).  At Advanced  Communications'  March 26,  2002 Board of  Director's
meeting,  the Board of Directors  unanimously approved the recommendation of the
Compensation  Committee  to reduce  Mr.  May's  prior  accrued  compensation  by
$394,361  representing  services Mr. May performed  for Advanced  Communications
(Australia), leaving a balance of $172,183 at June 30, 2002.

      On January 10, 2002, the Company  executed  various  financing  agreements
with  Cornell  Capital  Partners,  LP, a New  Jersey-based  hedge fund,  whereby
Cornell and certain other investors  purchased from Advanced  Communications  $1
million of two-year  Convertible  Debentures and Cornell  provided a $30 million
structured  equity facility.  Pursuant to the Convertible  Debenture  financing,
Advanced Communications received $564,000 net of financing and closing costs and
the  repayment  of the  $325,000  ninety-day  note.  Under  the terms of the $30
million  structured equity facility,  Advanced  Communications  has the right to
require  Cornell to make  monthly  purchases  of up to $2  million  of  Advanced
Communications'  stock on a discounted  basis.  Advanced  Communications  issued
2,960,000 shares of common stock with a market value of $740,000 as a commitment
fee as part of this transaction.

      On  January  15,  2002,  Advanced   Communications   moved  its  corporate
headquarters from Irvine to El Segundo,  California.  The lease has a three-year

                                       42
<PAGE>

term commencing on January 1, 2002. As of August 1, 2002, the Company  relocated
its principal  executive  office from  California to 420 Lexington  Avenue,  New
York, NY 10170 within the office facility of Danson  Partners,  LLC, a privately
owned company that employs our President and Chief Financial Officer. No rent or
facility use fee is charged to the Company by Danson Partners, LLC.

      On January 23, 2002, Advanced  Communications  filed suit against Advanced
Communications  (Australia)  and Roger May in the  Supreme  Court at  Melbourne,
Victoria,  Australia,  and on that date the court  issued an interim  injunction
effectively enjoining and prohibiting Advanced  Communications  (Australia) from
"transferring,  dealing with, charging,  diminishing,  mortgaging,  assigning or
disposing of" the Company's stock in Advanced  Communications  (Australia).  The
interim  injunction  was  extended  on April 26, 2002 by the court until a final
determination  is made at trial.  On May 7, 2002, the Company  received a notice
alleging a breach from Advanced Communications (Australia) stating that Advanced
Communications  had breached its obligation under the interim License Agreement.
In  addition,  on  May  7,  2002,  Advanced  Communications  (Australia)  sent a
termination  notice  formally  terminating the interim  License  Agreement.  The
Company  believed  that the notice of breach  and the  termination  notice  were
without  merit and it took the  necessary  legal  actions  to  prevent  Advanced
Communications (Australia) from terminating its rights under the interim License
Agreement.  On May 8, 2002,  the court extended its April 26, 2002 order further
restraining Advanced Communications  (Australia) from "acting upon or taking any
further steps in reliance upon" the notice of breach and termination  notice. On
May 27,  2002 and May 28, 2002 the court held full  hearings  on the  injunction
application,  took the matter under  advisement and indicated that it would rule
on the  matter  in the near  future.  On August  23,  2002,  the court  issued a
comprehensive  preliminary  injunction  granting  all the  relief  sought by the
Company.  Among other things, the injunction  prohibits Advanced  Communications
(Australia),  directly or  indirectly,  from taking any action in the  Exclusive
Territory with respect to marketing,  distributing, selling or otherwise dealing
with the SpectruCell  technology (including the military applications  thereof),
except through and with the prior written  consent of the Company.  In addition,
the ruling granted the Company a preliminary  injunction until trial prohibiting
Advanced Communications (Australia) from "transferring,  dealing with, charging,
diminishing,  mortgaging,  assigning or  disposing  of" the  Company's  stock in
Advanced Communications  (Australia).  In mid-October 2002, Mr. May and Advanced
Communications  (Australia) purportedly terminated the interim License Agreement
based on the  assertion  that the Company is insolvent  and that its  insolvency
constitutes an irreparable  event of default  thereunder.  As stated above,  the
Company made a strategic  decision not to challenge the termination.  On October
25,  2002,   the  Company   withdrew  from  the  litigation   against   Advanced
Communications  (Australia) and Mr. May.  Despite the termination of the interim
License Agreement, the Company still owns the North and South American rights to
SpectruCell  that it acquired  pursuant  to the April 1999 merger with  Advanced
Communications (Nevada).

      Through a family trust  established in Australia,  Mr. May, an officer and
director of the company until November 30, 2001 and March 14, 2002  respectively
and a principal  shareholder  of our  company,  indirectly  owns a 70%  majority
interest in Advanced Communications  (Australia). Up until November 11, 2002, we
owned  20% of the  common  stock  of  Advanced  Communications  (Australia).  On
November  11, 2002,  Advanced  Communications  (Australia)'s  issued a Notice of
Termination to the Company stating that the April 2000 Stock Purchase  Agreement
was  terminated   immediately   due  to  the  Company's   insolvency.   Advanced
Communications (Australia) filed for protection under Australia's insolvency law
on July 18, 2002 and  appointment an independent  administrator  and receiver to
manage and operate its business.

      As of June 30, 2002, Advanced  Communications  owed Global  Communications
Technology  Pty Ltd, a  wholly-owned  entity of Roger May, a former  officer and
director of the  Company and a  significant  shareholder,  $1,055,736  for funds
advanced  to  Advanced  Communications  to provide  working  capital and for the
repayment  of  certain of  Advanced  Communications'  obligations.  This loan is
non-interest bearing and unsecured.  This loan does not have a scheduled date of
repayment.  Advanced Communications does not believe that the loans are due upon
demand.  However,  the actual repayment terms are not known with any specificity
since the terms are not contained in a written document.

      In April 2000,  our company  acquired  20% of the common stock of Advanced
Communications  (Australia).  The purchase price of the  investment  amounted to
$19,350,000, and was comprised of a note payable for $7,500,000 and the issuance
of 5,000,000 shares of restricted common stock valued at $11,850,000. The shares
issued were valued at the average  quoted  trading price during the  acquisition
period.  Our interest in Advanced  Communications  (Australia) is evidenced by a
Stock  Purchase  agreement and is reflected by stock  ownership  records on file
with the Australian Securities Investment  Commission,  an Australian government
agency. We owe Advanced Communications (Australia) $1,791,166 under the terms of
the  Stock  Purchase  Agreement.  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. Mr. May is a principal shareholder of our company and
Advanced Communications (Australia). Through June 30, 2002, we repaid $5,708,834
of our  obligation  to  Advanced  Communications  (Australia),  in  part  by the
issuance  of  7,787,000  shares of  restricted  common  stock  having a value of
$4,884,101. The balance of our repayments was in the form of cash and the offset
of $552,125 of funds previously advanced to Advanced Communications (Australia).
During the years ended June 30, 2001 and 2002 Advanced  Communications repaid an
aggregate  of $247,608  and $25,000 of the  obligation  in cash.  As of June 30,
2002, the balance of our obligation to Advanced  Communications  (Australia) was
$1,791,166.   Advanced   Communications   was  in   litigation   with   Advanced
Communications (Australia) regarding the attempt by Mr. May to lien and transfer

                                       43
<PAGE>

the company's  shares in the  affiliate for alleged  nonpayment of the company's
obligations as well as to terminate our License and Distribution  Agreement.  On
November  11,  2002,  Advance  Communications  (Australia)  issued a  Notice  of
Termination  to the  Company  that the April 2000 Stock  Purchase  Agreement  is
terminated immediately due to the Company's insolvency.

      On  September  1, 2000,  Mr.  Danson  entered  into a one-year  consulting
agreement  with our company for the period  September 1, 2000 through August 31,
2001. Under the terms of the consulting  agreement,  Mr. Danson received $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. Mr. Danson has agreed to orally extend his
consulting agreement with Advanced Communications through December 31, 2003 at a
monthly rate of $12,500.

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

      Jonathan J. Lichtman,  Assistant  Secretary and a director of the Company,
is a partner at Levinson & Lichtman,  LLP, a law firm in Boca Raton, FL that the
Company  retained to provide  legal  services  during the fiscal  years 2002 and
2001.  The Company has paid Levinson & Lichtman,  LLP $43,184 and $90,000 in the
form of cash and stock  respectively,  for legal services rendered during fiscal
2002. No cash was paid to Levinson & Lichtman,  LLP during  fiscal 2001.  During
fiscal 2001,  the Company issued  $186,000 of restricted  common stock for legal
services rendered.

      Wilbank Roche, a director of the Company,  is a partner at Roche & Holt, a
law firm in Los Angeles,  CA that the Company retained to provide legal services
during the fiscal  year 2002.  The  Company  has paid Roche & Holt  $13,515  and
$15,000  in the  form  of cash  and  stock,  respectively,  for  legal  services
rendered.

      Effective  July 1, 2002, the Company  entered into a consulting  agreement
with  Randall  Prouty,  Chairman  of the Board and a  director  of the  Company,
pursuant to which Mr. Prouty has agreed to provide certain business  services to
the Company.  Pursuant to the terms of the consulting agreement, Mr. Prouty will
accrue  $10,000 in monthly  compensation  for services  provided to the Company.
During the fiscal year ended June 30, 2002, the Company issued  1,100,000 shares
of  restricted  common stock having a value of $55,000 to Mr. Prouty and $10,986
in cash compensation for business services rendered to the Company.

      Dr.  Michael  Finch,  a director of the Company,  has been issued  133,334
shares of restricted  common stock having a value of $10,000 for engineering and
software design consulting services rendered to the Company during fiscal 2002.


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

      (A)   FINANCIAL STATEMENTS:

            (i)   Registrant.

      (B)   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

            (i)   Exhibits:

<TABLE>
<CAPTION>

EXHIBIT NO.   DESCRIPTION                            LOCATION
------------  -----------------------------------    ----------------------------
<S>           <C>                                    <C>

1.1           Exchange Agreement between MRC Legal   Incorporated by reference to
              Services Corporation and Advanced      Exhibit 1.1 to Company's Form
              Communications Technologies, Inc.      8-K filed on February 4, 2000
              dated as of January 31, 2000

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

                                       44
<PAGE>

EXHIBIT NO.   DESCRIPTION                            LOCATION
------------  -----------------------------------    ----------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       45
<PAGE>

EXHIBIT NO.   DESCRIPTION                            LOCATION
------------  -----------------------------------    ----------------------------

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

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

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

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

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

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

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

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

10.17         License and Distribution Agreement     Incorporated by reference to
              dated as of July 5, 2000, between      Exhibit 10.17 to the Company's
              Advanced Communications Technologies,  Amendment to Form 10-KSB filed
              Inc. and Advanced Communications       on May 23, 2002.
              Technologies (Australia) Pty. Ltd.

10.18         Letter of Intent dated September 7,    Incorporated by reference to
              2001 re: Purchase of Advanced          Exhibit 10.18 to Amendment No.
              Communications (Australia)             1 to the Company's Form 10-QSB
                                                     for the quarter ended December
                                                     31, 2001

10.19         Securities Purchase Agreement, dated   Provided herewith
              November 2002, by and among Advanced
              Communications and Buyers

10.20         Investor Registration Rights           Provided herewith
              Agreement, dated November 2002, by
              and among Advanced Communications and
              Investors

10.21         Secured Convertible Debenture          Provided herewith

10.22         Escrow Agreement, dated November       Provided herewith
              2002, by and among Advanced
              Communications, Buyers, and Wachovia
              Bank, N.A.

                                       46
<PAGE>

EXHIBIT NO.   DESCRIPTION                            LOCATION
------------  -----------------------------------    ----------------------------

10.23         Irrevocable Transfer Agent             Provided herewith
              Instructions, dated November 2002

10.24         Security Agreement, dated November     Provided herewith
              2002, by and among Advanced
              Communications and Buyers

10.25         Middletons Lawyers Letter, dated       Provided herewith
              November 11, 2002, terminating the
              April 2000 Stock Purchase Agreement
              between Advanced Communications
              Technologies, Inc. and Advanced
              Communications (Australia)
</TABLE>


            (ii)  Reports on Form 8-K:

      On May 10, 2002,  the Company filed a Form 8-K disclosing an update to its
pending litigation with Advanced Communications (Australia),  the resignation of
Gary Ivaska,  as President and Chief Executive  Officer,  and the appointment of
Wayne Danson as President.

      On July 23, 2002, the Company filed a Form 8-K disclosing an update to its
pending  litigation with Advanced  Communications  (Australia) and its voluntary
administration.

      On September 4, 2002, the Company filed a Form 8-K disclosing an update to
its pending litigation with Advanced Communications (Australia).

      On November 6, 2002,  the Company filed a Form 8-K disclosing an update on
the status of its litigation against Advanced Communication  (Australia) and the
termination of the License and Distribution Agreement.

Item 14.  Controls and Procedures.

      EVALUATION OF  DISCLOSURE  CONTROLS AND INTERNAL  CONTROLS.  Within the 90
days  prior  to the date of this  Annual  Report  on Form  10-KSB,  the  company
evaluated  the  effectiveness  of the design and  operation  of its  "disclosure
controls and procedures"  (Disclosure Controls),  and its "internal controls and
procedures for financial reporting"  (Internal  Controls).  This evaluation (the
Controls  Evaluation) was done under the supervision and with the  participation
of management,  including our Chief Executive  Officer (CEO) and Chief Financial
Officer  (CFO).  Rules  adopted by the SEC require  that in this  section of the
Quarterly  Report we present  the  conclusions  of the CEO and the CFO about the
effectiveness of our Disclosure  Controls and Internal  Controls based on and as
of the date of the Controls Evaluation.

      CEO AND CFO CERTIFICATIONS. Appearing immediately following the Signatures
section of this Annual Report there are two separate  forms of  "Certifications"
of the CEO and the CFO.  The first form of  Certification  is required in accord
with  Section  302  of  the   Sarbanes-Oxley   Act  of  2002  (the  Section  302
Certification).  This section of the  Quarterly  Report which you are  currently
reading is the information concerning the Controls Evaluation referred to in the
Section 302  Certifications  and this information  should be read in conjunction
with the Section 302  Certifications  for a more complete  understanding  of the
topics presented.

      DISCLOSURE  CONTROLS  AND  INTERNAL  CONTROLS.   Disclosure  Controls  are
procedures  that are designed with the  objective of ensuring  that  information
required to be disclosed in our reports filed under the Securities  Exchange Act
of 1934  (Exchange  Act),  such as this Annual Report,  is recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  (SEC)  rules and  forms.  Disclosure  Controls  are also
designed with the objective of ensuring that such information is accumulated and
communicated  to our  management,  including the CEO and CFO, as  appropriate to
allow timely decisions  regarding  required  disclosure.  Internal  Controls are
procedures  which  are  designed  with the  objective  of  providing  reasonable
assurance that (1) our transactions are properly authorized;  (2) our assets are
safeguarded  against  unauthorized or improper use; and (3) our transactions are
properly  recorded and reported,  all to permit the preparation of our financial
statements in conformity with generally accepted accounting principles.

      LIMITATIONS ON THE  EFFECTIVENESS OF CONTROLS.  The company's  management,
including the CEO and CFO, does not expect that our  Disclosure  Controls or our

                                       47
<PAGE>

Internal  Controls will prevent all error and all fraud.  A control  system,  no
matter how well  conceived  and  operated,  can  provide  only  reasonable,  not
absolute,  assurance that the objectives of the control system are met. Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints,  and the benefits of controls must be considered  relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud,  if any,  within  the  company  have  been  detected.  These  inherent
limitations  include the  realities  that  judgments in  decision-making  can be
faulty,  and that  breakdowns  can occur  because  of simple  error or  mistake.
Additionally,  controls  can be  circumvented  by the  individual  acts  of some
persons,  by collusion of two or more people,  or by management  override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving  its stated goals under all  potential
future  conditions;  over time, control may become inadequate because of changes
in conditions,  or the degree of compliance  with the policies or procedures may
deteriorate.  Because of the inherent  limitations in a  cost-effective  control
system, misstatements due to error or fraud may occur and not be detected.

      SCOPE OF THE CONTROLS EVALUATION. The CEO/CFO evaluation of our Disclosure
Controls and our Internal Controls included a review of the controls' objectives
and design,  the controls'  implementation  by the company and the effect of the
controls on the  information  generated  for use in this Annual  Report.  In the
course of the Controls Evaluation,  we sought to identify data errors,  controls
problems or acts of fraud and to confirm  that  appropriate  corrective  action,
including process improvements,  were being undertaken.  This type of evaluation
will be done on a quarterly  basis so that the conclusions  concerning  controls
effectiveness  can be reported  in our Annual  Reports on Form 10-KSB and Annual
Report on Form 10-KSB. The overall goals of these various evaluation  activities
are to monitor our  Disclosure  Controls and our  Internal  Controls and to make
modifications  as  necessary;  our intent in this regard is that the  Disclosure
Controls and the Internal  Controls will be  maintained as dynamic  systems that
change (including with improvements and corrections) as conditions warrant.

      Among other  matters,  we sought in our  evaluation  to determine  whether
there  were any  "significant  deficiencies"  or  "material  weaknesses"  in the
company's Internal  Controls,  or whether the company had identified any acts of
fraud involving  personnel who have a significant role in the company's Internal
Controls.  This  information  was  important  both for the  Controls  Evaluation
generally and because items 5 and 6 in the Section 302 Certifications of the CEO
and CFO require that the CEO and CFO disclose that  information to our Board and
to our independent  auditors and to report on related matters in this section of
the  Annual  Report.  In  the  professional  auditing  literature,  "significant
deficiencies"  are  referred to as  "reportable  conditions";  these are control
issues that could have a  significant  adverse  effect on the ability to record,
process,  summarize and report  financial  data in the financial  statements.  A
"material  weakness" is defined in the  auditing  literature  as a  particularly
serious  reportable  condition  where the internal  control does not reduce to a
relatively  low level the risk that  misstatements  caused by error or fraud may
occur in amounts that would be material in relation to the financial  statements
and not be detected  within a timely period by employees in the normal course of
performing their assigned functions.  We also sought to deal with other controls
matters  in  the  Controls  Evaluation,  and  in  each  case  if a  problem  was
identified,  we considered what revision,  improvement and/or correction to make
in accord with our on-going procedures.

      In accord with SEC requirements, the CEO and CFO note that, since the date
of the Controls Evaluation to the date of this Quarterly Report, there have been
no  significant  changes in  Internal  Controls or in other  factors  that could
significantly  affect Internal  Controls,  including any corrective actions with
regard to significant deficiencies and material weaknesses.

      CONCLUSIONS.  Based  upon the  Controls  Evaluation,  our CEO and CFO have
concluded that, subject to the limitations noted above, our Disclosure  Controls
are  effective to ensure that  material  information  relating to the Company is
made known to  management,  including the CEO and CFO,  particularly  during the
period when our  periodic  reports  are being  prepared,  and that our  Internal
Controls  are  effective  to provide  reasonable  assurance  that our  financial
statements are fairly presented in conformity with generally accepted accounting
principles.

                                       48
<PAGE>


                                   SIGNATURES

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

                                          ADVANCED COMMUNICATIONS TECHNOLOGIES,
                                          INC.

                                          By:    /S/ WAYNE I. DANSON
                                          Name:  Wayne I. Danson
                                          Title: President and Chief Financial
                                                 Officer


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

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

/s/ Wayne I. Danson
-------------------           President (Principal Executive Officer) Chief
Wayne I. Danson               Financial Officer (Principal Accounting Officer)        December 5, 2002
                              and Director

/s/ Randall Prouty
------------------
Randall Prouty                Chairman of the Board and Director                      December 5, 2002


/s/ Wilbank J. Roche, Esq.
--------------------------
Wilbank J. Roche, Esq.        Director                                                December 5, 2002


/s/ Michael Finch
--------------------------
Michael Finch                 Director                                                December 5, 2002
</TABLE>

                                       49
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In  connection   with  the  Annual   Report  of  Advanced   Communications
Technologies,  Inc. (the "Company") on Form 10-KSB for the period ended June 30,
2002 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the  "Report"),  each of the  undersigned,  in the  capacities and on the dates
indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act of  2002,  that  to his
knowledge:

      1.    The Report fully complies with the  requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      2.    The  information  contained in the Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of  operation of the
Company.


                                   By:  /s/ Wayne I. Danson
                                      ------------------------------------------
                                           Wayne I. Danson
                                           President and Chief Financial Officer

<PAGE>

                          FORM OF OFFICER'S CERTIFICATE
                            PURSUANT TO SECTION 302
                            -----------------------

      The  undersigned   President  and  Chief  Financial  Officer  of  Advanced
Communications Technologies, Inc., hereby certifies that:

      1.    he has reviewed the report;

      2.    based on his  knowledge,  the  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading  with respect to the period covered by the
report;

      3.    based  on  his  knowledge,  the  financial  statements,   and  other
financial  information  included in the report,  fairly  present in all material
respects the financial  condition,  results of operations  and cash flows of the
issuer as of, and for, the periods presented in the report;

      4.    he and the other certifying officers:

            a.    are responsible for establishing  and maintaining  "disclosure
controls  and  procedures"  (a  newly-defined  term  reflecting  the  concept of
controls and procedures  related to disclosure  embodied in Section 302(a)(4) of
the Act) for the issuer;

            b.    have  designed  such  disclosure  controls and  procedures  to
ensure that material information is made known to them,  particularly during the
period in which the periodic report is being prepared;

            c.    have evaluated the  effectiveness  of the issuer's  disclosure
controls and  procedures as of a date within 90 days prior to the filing date of
the report; and

            d.    have  presented  in the  report  their  conclusions  about the
effectiveness  of the disclosure  controls and procedures  based on the required
evaluation as of that date;

      5.    he and the other certifying  officers have disclosed to the issuer's
auditors  and to the audit  committee  of the  board of  directors  (or  persons
fulfilling the equivalent function):

            a.    all  significant  deficiencies  in the design or  operation of
internal controls (a pre-existing  term relating to internal controls  regarding
financial  reporting)  which  could  adversely  affect the  issuer's  ability to
record, process, summarize and report financial data and have identified for the
issuer's auditors any material weaknesses in internal controls; and

            b.    any fraud,  whether or not material,  that involves management
or  other  employees  who  have a  significant  role  in the  issuer's  internal
controls; and

      6.    he and the other  certifying  officers have  indicated in the report
whether or not there were significant  changes in internal  controls or in other
factors that could significantly affect internal controls subsequent to the date
of their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

                                            /s/ Wayne I. Danson
                                           -------------------------------------
                                           Wayne I. Danson
                                           President and Chief Financial Officer

<PAGE>

                             ADVANCED COMMUNICATIONS
                       TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2002

<PAGE>

                   ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.
                                AND SUBSIDIARIES

                                    CONTENTS

PAGE      F-2        INDEPENDENT AUDITORS' REPORT

PAGE      F-3        CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2002 AND 2001

PAGE      F-4        CONSOLIDATED  STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED
                     JUNE 30, 2002 AND 2001

PAGE      F-5        CONSOLIDATED   STATEMENTS   OF  CHANGES  IN   STOCKHOLDERS'
                     DEFICIENCY FOR THE YEARS ENDED JUNE 30, 2002 AND 2001

PAGE      F-6        CONSOLIDATED  STATEMENTS  OF CASH FLOWS FOR THE YEARS ENDED
                     JUNE 30, 2002 AND 2001

PAGES     F-8        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                      F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

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

We have  audited  the  accompanying  consolidated  balance  sheets  of  Advanced
Communications Technologies, Inc., and Subsidiaries as of June 30, 2002 and 2001
and the related consolidated statements of operations,  changes in stockholders'
deficiency  and cash  flows for the years  ended June 30,  2002 and 2001.  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 audits to obtain reasonable assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly  in  all  material   respects,   the   financial   position  of  Advanced
Communications Technologies, Inc. and Subsidiaries as of June 30, 2002 and 2001,
and the  results of their  operations  and their cash flows for the years  ended
June 30,  2002 and  2001 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 11 to
the consolidated  financial  statements,  the Company's  significant net loss of
$4,332,693  for the year ended June 30, 2002, a working  capital  deficiency  of
$3,252,643,  and a  stockholders'  deficiency of $4,940,050,  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  11.  The  accompanying
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.


WEINBERG & COMPANY, P.A.


Boca Raton, Florida
September  7, 2002  (except for Note 12 (A) and (B) as to which date is December
4, 2002)

                                      F-2
<PAGE>
<TABLE>

                ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                                CONSOLIDATED BALANCE SHEETS
                              JUNE 30, 2002 AND JUNE 30, 2001
<CAPTION>
                                                                           JUNE 30,
                                                                        2002         2001
                                                                     ----------------------
<S>                                                               <C>           <C>

                                           ASSETS
                                           ------
   CURRENT ASSETS
   Cash                                                           $     11,093  $       6,816
   Prepaid Expenses                                                          -         10,000
                                                                  ------------  -------------
   TOTALCURRENTASSETS                                                   11,093         16,816
                                                                  ------------  -------------
   PROPERTY AND EQUIPMENT (NET)                                         17,274         19,599
                                                                  ------------  -------------

   OTHER ASSETS
   Purchase Goodwill-ACF-AU                                                  -      2,000,000
   Security Deposits                                                    13,225          5,525
   Other Receivables                                                     9,927              -
   Deferred Bond Financing Costs, Net of Accumulated Amortization       63,333              -
                                                                  ------------  -------------
   TOTAL OTHER ASSETS                                                   86,485      2,005,525
                                                                  ------------  -------------
TOTAL ASSETS                                                         $ 114,852     $2,041,940
------------                                                      ============  =============

                          LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                          ----------------------------------------

LIABILITIES

   CURRENT LIABILITIES
   Accounts Payable                                                 $  872,493  $    844,205
   Accrued Compensation                                                172,183       479,050
   Note Payable-Grassland                                                            118,530
   Loan Payable to Shareholder                                       1,055,736       796,000
   12% Convertible Debentures                                          100,407       200,750
   5% Convertible Debentures                                         1,000,000             -
   Interest Payable                                                     62,917             -
                                                                  ------------  ------------
   Total Current Lialilities                                         3,263,736     2,438,535

   LONG-TERM LIABILITIES
   Note Payable-ACF-Australia                                        1,791,166     2,173,167
                                                                   -----------  ------------
   TOTAL OTHER LIABILITIES                                           1,791,166     2,173,167
                                                                  ------------  ------------
TOTAL LIABILITIES                                                    5,054,902     4,611,702
                                                                  ------------  ------------

STOCKHOLDERS' DEFICIENCY
   Preferred Stock, $01 Par Value, 25,000,000 Shares Authorized,
   none issued and outstanding
   Common Stock, No Par Value, 200,000,000 and 100,000,000
   Shares Authorized, 114,102,622 and 94,489,916
   shares issued and outstanding, respectively                      25,471,098    22,696,193
   Common Stockto be issued, 833,334 shares                                  -       250,000
   Deferred Commitizent fees , net of accumulated amortization       (562,500)             -
   Accumulated Deficit                                            (29,848,648)  (25,515,955)
                                                                  ------------  ------------
   TOTAL STOCKHOLDERS' DEFICIENCY                                  (4,940,050)   (2,569,762)
                                                                   -----------  ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                    $    114,852  $  2,041,940
----------------------------------------------                    ============  ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

<TABLE>

                ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE YEARS ENDED JUNE 30, 2002 AND JUNE 30, 2001
<CAPTION>

                                               2002            2001
                                                       ------------   ---------------
<S>                                                   <C>             <C>

SALES                                                 $         -     $       50,000
COST OF SALES                                                   -            (57,310)
                                                      ------------     --------------
GROSS PROFIT (LOSS)                                             -             (7,310)
                                                      ------------     --------------

OPERATING EXPENSES

   Consulting Fees                                          (10,149)         567,625
   Amortization and Depreciation                            508,167        1,051,169
   Professional Fees                                      1,228,780        1,214,739
   Other Selling, General and Administrative Expenses       407,772          501,048
   Stock-Based Compensation                                 180,000                -
                                                      --------------       ---------
TOTAL OPERATING EXPENSES                                  2,314,570        3,334,581
                                                      --------------   --------------
(LOSS) FROM OPERATIONS                                   (2,314,570)      (3,341,819)
                                                      ==============   ==============

OTHER EXPENSES
   Interest expense                                        (318,123)         (10,332)
   Loss from investment                                           -       (3,571,654)
   Loss from impairment of goodwill                      (1,700,000)     (12,399,864)
   Loss on investment acquisition deposit                         -         (425,000)
   Realized loss on decline in marketable securities              -           (6,825)
                                                      --------------   --------------

TOTAL OTHER (EXPENSES)                                   (2,018,123)     (16,413,675)
                                                      --------------   --------------

(LOSS) BEFORE EXTRAORDINARY GAIN                         (4,332,693)     (19,755,566)

EXTRAORDINARY GAIN

   Gain on extinguishment of debt                                 -           23,000
                                                      --------------   --------------

NET (LOSS)                                            $  (4,332,693)   $ (19,732,566)
                                                      ==============   ==============

Net (Loss) Per Share- Basic and Dilutive              $       (0.04)   $       (0.22)
                                                      ==============   ==============


Weighted Average Number of Shares
Outstanding During the Period-Basic and Dilutive       100,576,484        87,976,428
                                                      ==============   ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
<TABLE>

                ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                    FOR THE YEARS ENDED JUNE 30, 2002 AND JUNE 30, 2001
<CAPTION>



                                                  COMMON STOCK                                   COMMON STOCK TO  COMMON    DEFERRED
                                               ------------------               ACCUMULATED         BE ISSUED     STOCK   COMMITMENT
                                                SHARES             AMOUNT         DEFICIT     SHARES    AMOUNT   ADVANCES     FEES
                                               ------- -----------------------------------------------------------------------------
<S>                                              <C>            <C>             <C>          <C>       <C>       <C>      <C>

BALANCE AT JUNE 3O,2000                          82,227,280     $ 16,865,441    $ (5,783,389)                    (375,000)       -
5tock issued for cash                             3,060,600          642,726
5tock warrants issued for cash                                       275,454
Stock to be issued                                                                             833,334  $250,000
Stock issued for offering costs                     250,000
Stock issued for services                         1,051,491          328,870
Stock issued for extinguishment of debt           6,597,000        4,545,902
Stock issued for conversion of convertible debt   1,803,545          412,800
Common stock retired                              (500,000)        (375,000)     (19,732,566)                     375,000
Net (loss) for the year
                                               -------------------------------------------------------------------------------------

BALANCE AT JUNE 3O, 2001                        94,489,916      $ 22,696,193    $(25,515,955)  833,334  $250,000
                                               -------------------------------------------------------------------------------------


Stock issued for services                        6,334,679           677,634                  (33,334)  (10,000)
Stock issued for extinguishments of debt         1,190,000           357,001
Stock issued for conversion of convertible debt  4,250,000           100,343
Stock issued for cash                            1,233,333           260,000                 (800,000) (240,000)
Stock warrants issued for cash                           -           110,000
Stock issued for offering costs                    137,727                 -
Stock and warrants issued for pricing of
previously issued shares                         2,146,967                 -
Stock issued to Directors for services           1,000,000                 -
Stock issued for commitment fees                 3,000,000           750,000                                              $(562,500)
Capital contribution                                     -             9,927
Stock issued in settlement of lawsuit              320,000            80,000
Interest on beneficial conversion-
 Convertible Debentures                                  -           250,000

Net (loss) for the year                                                           (4,332,693)
                                               -------------------------------------------------------------------------------------
BALANCE AT JUNE 3O, 2002                       114,102,622      $ 25,471,098    $(29,848,648)        - $       -          $(562,500)
                                               =====================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

<TABLE>

                ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR THE YEARS ENDED JUNE 30, 2002 AND JUNE 30, 2001
<CAPTION>

CASH FLOWS FROM OPERATING ACTIVITIES:
--------- ---------------------------
<S>                                                       <C>               <C>

Net (loss)                                                $ (4,332,693)     $    (19,732,566)
Adjustments to reconcile net loss to net cash used:
Depreciation and amortization                                  508,167             1,051,169
Realized loss on decline in izarketable securities                   -                 6,825
Stock issued for services                                      847,634               328,870
Stock issued in settletment of lawsuit                          80,000
Gain on extinguishiment of debt                                      -               (23,000)
Loss from investment                                                 -             3,571,654
Loss from impairment of goodwill                             1,700,000            12,399,864
Accrued compensation                                          (306,867)              247,500
Interest Expense on Benefical Conversion Feature               250,000                     -
Changes in operating assets and liabilities:
(Increase) decrease in assets
Prepaid expense                                                 10,000                36,118
Deposits and other                                               7,700                40,000
Increase (decrease) in liabilities:
Accounts payable                                                28,288               633,235
Interest payable                                                62,917                10,332
Deferred revenue and other                                      41,600               (50,000)
                                                       ----------------     -----------------
  Net cash used in operating activities                     (1,103,254)           (1,479,999)
                                                       ----------------     -----------------


CASHFLOWS FROM INVESTING ACTIVITIES:
------------------------------------

Loan to unconsolidated affiliated conpany                            -              (247,608)
Purchase of fixed assets                                        (1,675)               (8,411)
Repayizent of loan to unconsolidated affiliate                 (25,000)                    -
                                                       ----------------     -----------------
  Net cash used in investing activities                        (26,675)             (256,019)
                                                       ----------------     -----------------


CASHFLOWS FROM FINANCING ACTIVITIES:
------------------------------------

Repayment of note payable                                     (118,530)                    -
Loan proceeds from shareholder                                 259,736               544,500
Proceeds from stock to be issued                                     -               250,000
Proceeds fromissuance of comnon stock
and warrants net of offering costs                             130,000               918,180
Proceeds from issuance of convertible debentures, net          889,000
Proceeds from short-term loan, net of financing fees           299,000                     -
Repayizent of short-term loan                                 (325,000)                    -
                                                       ----------------     -----------------
  Net cash provided by financing activities                  1,134,206             1,712,680
                                                       ----------------     -----------------
Net increase (decrease) in cash                                  4,277               (23,338)
Cash and cash equivalents at beginning of year                   6,816                30,154


CASH AND CASH EOU1VALENTS AT END OF YEAR                  $     11,093      $          6,816
----------------------------------------               ================     =================
</TABLE>


          See accompanying notes to consolidated financial statements.



                                       F-6
<PAGE>


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the year ended June 30,  2002,  the Company  issued  1,190,000  shares of
common stock, valued at $357,001,  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 6(B) and 8(D)).

During the year ended  June 30,  2002 the  Company  issued  4,250,000  shares of
common stock, valued at $100,343, for the conversion of convertible debentures.

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 6(B) and 8(D)).

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.

                                      F-7
<PAGE>

NOTE 1.     PRINCIPLES OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------------------------

(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. The merger
was  treated  as  an  acquisition  of  all  of  the  assets  of  MFI  and  as  a
recapitalization  of the  Company.  In July 1999,  the Company  formed  Advanced
Global Communications,  Inc. ("AGC") as a wholly owned subsidiary to conduct its
international  telephone network distribution business. 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  Technology  (Australia) Pty Ltd ("Advanced
Communications  (Australia)"),  an unconsolidated affiliated entity. The Company
is currently in litigation over its ownership  rights.  SEE NOTE  10(B)(IV).  On
July 5, 2000, the Company entered into a License and Distribution Agreement with
Advanced Communications  Technologies (Australia) Pty Ltd. pursuant to which the
Company  has the  exclusive  rights to market  and  distribute  the  SpectruCell
technology in North,  South and Central  America.  The License and  Distribution
Agreement is effective for an indefinite period. The parties to this License and
Distribution  Agreement are currently  involved in litigation in connection with
this agreement.  (SEE NOTE 10(B)(IV). 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 Advanced  Communications
(Australia).  In November 2000, the Company formed Advanced Network Technologies
(USA), Inc. ("ANT"), a Delaware  corporation owned 70% by the Company and 30% by
Advanced  Communications  (Australia).  Both  Australon and ANT are inactive and
have never been  operational.  Australon  Enterprises  Pty Ltd is an  Australian
public company that manufactures and distributes  remote monitoring  devices for
homes and  businesses  such as remote meter  reading and  residential  automated
gateway  devices.  While Mr. May, our former CEO and Chairman of the Board has a
significant   ownership  interest  in  Australon  Enterprise  Pty,  through  his
ownership  interest  in ACT  AU,  he is  not  involved  in  Australon  `s  daily
management  or  business  operations  and is not  represented  on its  Board  of
Directors.  The  joint  venture  relationship  was  established  while  Mr.  May
controlled both companies.  Presently,  the company is not in negotiations  with
Australon  Enterprises  Pty  and  will  not  enter  into  any  discussions  with
Australon's management until the Company's lawsuit with Advanced  Communications
(Australia)Advanced   Communications   (Australia)  and  Mr.  May  is  resolved.
Australon  USA,  Inc is inactive and will remain  inactive  for the  foreseeable
future.

The  Company  will  account  for the future  results of  operations,  if any, of
Australon on an equity basis and ANT on a consolidated basis.

The Company is a marketing  company whose  primary  activity is the ownership of
the rights to the SpectruCell  technology  including a License and  Distribution
Agreement and its investment in Advanced Communications (Australia). The Company
expects to generate  revenue from the  marketing  and  distribution  of Advanced
Communications (Australia)'s software defined radio based wireless communication
product  "SpectruCell".  The Company has not generated any meaningful revenue to
date.

(B) PRINCIPLES OF CONSOLIDATION
-------------------------------

The accompanying  consolidated  financial statements include the accounts of the
Company and its inactive  subsidiaries  AGC,  Australon and ANT. All significant
intercompany  transactions  and balances have been eliminated in  consolidation.
The Company accounts for its investment in Advanced Communications  (Australia),
a non-consolidated affiliate (a 20-50% owned company over which the Company does
not exercise control) under the equity method of accounting.

(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-8
<PAGE>

(D) FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------

The carrying amounts of the Company's  accounts  payable,  accrued  liabilities,
debentures,  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.

There was no current income tax expense for the fiscal years ended June 30, 2002
and 2001 due to net  operating  losses in both  periods.  Any deferred tax asset
arising  from  the  future   benefit  of  the  Company's   net  operating   loss
carryforward, of approximately $13,948,000, has been fully reserved.

(I) COMPREHENSIVE INCOME
------------------------

The  Company  accounts  for  Comprehensive  Income  (Loss)  under the  Financial
Accounting  Standards Board Statement 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.

(J) REVENUE RECOGNITION
-----------------------

For the fiscal year ended June 30, 2001, 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.  The Company recognized no revenue for the fiscal year ended June 30,
2002.

(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
------------------

Basic and dilutive net loss per common share is computed based upon the weighted
average common shares outstanding.

                                      F-9
<PAGE>

(M) NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------

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

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

SFAS No. 142 is effective for years  beginning  after December 15, 2001 and must
be applied as of the beginning of such year to all goodwill and other intangible
assets that have already been  recorded in the balance sheet as of the first day
in which SFAS No. 142 is initially applied,  regardless of when such assets were
acquired.  Goodwill acquired in a business combination whose acquisition date is
on or after July 1, 2001,  should not be  amortized,  but should be reviewed for
impairment  pursuant to SFAS No. 121,  even though SFAS No. 142 has not yet been
adopted.  However,  previously acquired goodwill should continue to be amortized
until SFAS No. 142 is first adopted. The Company intends to adopt the provisions
of SFAS 142 in its financial statements for the fiscal year ended June 30, 2002.

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.

In August 2001,  the FASB issued SFAS 144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived Assets." This statement  addresses  financial  accounting
and reporting for the impairment or disposal of long-lived assets and supercedes
FASB Statement No. 121,  "Accounting for the Impairment of Long-Lived Assets and
for  Long-Lived  Assets to be Disposed of." The  provisions of the statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001.

With the exception of the adoption of SFAS No. 142 (See Note 2), the adoption of
these pronouncements is not expected to have a material effect on the Company's
financial position or results of operations.


NOTE 2.     INVESTMENT IN UNCONSOLIDATED AFFILIATE
--------------------------------------------------

In April  2000,  the  Company  acquired  20% of the  common  stock  of  Advanced
Communications  (Australia),  an unconsolidated affiliate. 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(A) and Note 6(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 Advanced Communications  (Australia) was accounted
for using the equity method of accounting  and was stated at the amortized  cost
of goodwill and the equity in  undistributed  earnings  since  acquisition.  The
equity in earnings of Advanced  Communications  (Australia) was adjusted for the
amortization of the goodwill, as discussed above. During the year ended June 30,
2001,  the  Company  reduced the  carrying  value of its  unconsolidated  equity
investment  in  Advanced  Communications  to  $2,000,000  based on  management's
evaluation of Advanced  Communications  (Australia)'s  fair market  value.  This
adjustment  was required by FASB 121  ("Accounting  for Impairment of Long-Lived
Assets") and APB 18 ("The Equity Method of Accounting for  Investments in Common

                                      F-10
<PAGE>


Stock"). Such pronouncements  require the annual evaluation of long-lived assets
for impairment.

Advanced Communications (Australia) had a current period operating loss combined
with a history of operating losses due to the fact that Advanced  Communications
(Australia) has been in development stage activities since inception and has not
generated  any  sales  revenue  for  its   products.   Advanced   Communications
(Australia)'s   projections  of  estimated   future  cash  flows  could  not  be
objectively  verified  because  Advanced  Communications   (Australia)  had  not
completed scheduled field trials of the SpectruCell  product, a requisite before
sales can be recognized. Based on these factors, management completely wrote-off
its  investment  in  Advanced  Communications  (Australia)  and  wrote-down  its
investment in Advanced Communications (Australia)'s goodwill to $2,000,000 based
on the fair market value of Advanced  Communications  (Australia)'s 66% majority
ownership interest in Australon  Enterprises,  Ltd, a publicly traded Australian
company.

Amortization was computed on a straight-line basis over fifteen years until June
30, 2001 when the Company  re-assessed  the life of the  goodwill to be 5 years.
This change  coupled with the write down of goodwill  resulted in a reduction of
Goodwill  amortization  on a  quarterly  basis from  $261,542 to  $100,000.  The
amortization  of goodwill  charged to income for the fiscal years ended June 30,
2002 and June 30, 2001 was $300,000 and $1,046,169, respectively.

Due to litigation by the Australian Tax Office against  Advanced  Communications
(Australia) and Advanced  Communications  (Australia)'s  subsequent filing on or
about  July  18,  2002  for  protection  under  Australia's  insolvency  laws by
appointing an  Independent  Administrator  to take over its business and affairs
(see Note  10(B)(iv)),  management  has determined  that its remaining  goodwill
investment is impaired pursuant to the provisions of SFAS 142. Accordingly,  the
Company has written off the balance of its  unamortized  goodwill of  $1,700,000
during the fiscal year ended June 30, 2002.

The  components of the  Company's  investment  in its  unconsolidated  affiliate
Advanced Communications (Australia) at June 30, 2002 are as follows:
<TABLE>
<CAPTION>

                                    INVESTMENT         GOODWILL          TOTAL
                                  ---------------    -------------     -------------
<S>                               <C>              <C>               <C>

At acquisition                    $     3,657,472  $    15,692,528   $   19,350,000

Cumulative Investment loss             (3,657,472)               --      (3,657,472)
Amortization of goodwill                        --      (1,292,664)      (1,292,664)
Impairment of goodwill                          --     (12,399,864)     (12,399,864)
                                  ---------------- ---------------- ----------------

Balance at June 30, 2001          $             --  $    2,000,000   $    2,000,000

Cumulative amortization of
goodwill
  through March 31, 2002                                  (300,000)        (300,000)
Impairment of goodwill                          --      (1,700,000)      (1,700,000)
                                  ----------------  ---------------  ---------------
Balance at June 30, 2002          $             --  $            --  $            --
                                  ================  ===============  ===============
</TABLE>


NOTE 3.     REALIZED LOSS ON DECLINE IN MARKETABLE SECURITIES
-------------------------------------------------------------

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


NOTE 4.     PROPERTY AND EQUIPMENT
----------------------------------

                                                      2002        2001
                                                   ----------  ----------
                  Computer and office equipment   $    32,909  $   31,234
                  Less:  Accumulated depreciation    (15,635)    (11,635)
                                                   ----------  ----------
                  Property and equipment - net         17,274      19,599
                                                   ==========  ==========

                                      F-11
<PAGE>

Depreciation  expense  for the years ended June 30, 2002 and 2001 was $4,000 and
$5,000, respectively.


NOTE 5.     ACCRUED COMPENSATION
--------------------------------

The  Company  had an oral  agreement  with Mr.  Roger  May to serve as the Chief
Executive Officer of the Company. Mr. May agreed to defer payment of the amounts
owed him pursuant to the oral agreement due to the Company's lack of funds.  The
Company owed Mr. May $479,050 at June 30,  2001.  On November 30, 2001,  Mr. May
was removed as the Company's Chief Executive  Officer.  Subsequent to that date,
Mr.  May was not  entitled  to  receive  any  additional  compensation  from the
Company.

At the request of the Company's Board of Directors,  the Compensation  Committee
conducted a review of the nature of the past services provided by Mr. May to the
Company  to  determine  whether a portion  of such  services  are more  properly
allocable to the Company's unconsolidated Australian affiliate. At the Company's
March 26, 2002 Board of Director's meeting,  the Board of Directors  unanimously
approved the  recommendation  of the Compensation  Committee to reduce Mr. May's
prior accrued compensation by $394,361  representing  services Mr. May performed
for  Advanced  Communications  (Australia)Advanced  Communications  (Australia),
leaving a balance of $172,183 at June 30, 2002.


NOTE 6.    NOTES AND LOAN PAYABLE
---------------------------------

(A) NOTE PAYABLE-GRASSLAND
--------------------------

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.  An additional  $4,206 of
interest  was accrued on this note and on October 19, 2001 the Company  paid the
obligation  in full.  On October 24, 2001 the Company  received  notice from the
court that the judgment has been satisfied.

(B) NOTE PAYABLE TO ADVANCED COMMUNICATIONS (AUSTRALIA)
-------------------------------------------------------

The Company had a  non-interest  bearing and unsecured  note payable to Advanced
Communications  (Australia)  of $7,500,000 as of April 5, 2000 (See Note 2). The
note was payable in three equal monthly installments commencing on May 31, 2000.
Under the terms of the Stock  Purchase  Agreement  with Advanced  Communications
(Australia),  the monthly installment payments were extended without interest to
allow for the Company , on a best  efforts  basis,  to raise the cash portion of
the purchase price through a private or public offering of securities. There are
no  default  or  penalty  provisions  under  the  terms  of the  Stock  Purchase
Agreement.  Upon raising  funds  pursuant to a private or public  offering,  the
Company shall only be obligated to repay Advanced  Communications  (Australia)'s
note with those funds  remaining after deduction for reserves needed for current
operations,  working capital and the development and expansion of its operations
and the operations of its subsidiaries,  as determined by the Company's Board of
Directors.

                                      F-12
<PAGE>

The  following  schedule  represents  payments  on  such  debt  by  issuance  of
restricted  common  stock  to  either  Advanced  Communications  (Australia)  or
creditors or employees of Advanced Communications (Australia). Such transactions
were recorded at the market price of the stock at date of issuance.

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

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


During the fiscal years ended June 30, 2002 and 2001 the Company  repaid $25,000
and $247,608 of the obligation in cash, respectively.

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

As of June 30,  2002,  the  balance  of the  Company's  obligation  to  Advanced
Communications   (Australia)  was  $1,791,166.   The  Company  is  currently  in
litigation with Advanced Communications (Australia) regarding the attempt by Mr.
May and Advanced  Communications  (Australia)  to lien or transfer the Company's
shares in Advanced  Communications  (Australia)  for alleged  nonpayment  of the
Company's obligation (See Note 10 (B)(iv.)).

(C) LOAN PAYABLE TO SHAREHOLDER
-------------------------------

As of June 30, 2002 and 2001, the Company owed Global Communications  Technology
Pty Ltd., an Australian  company  wholly-owned  by Mr. May, a former officer and
director  of the  Company,  $1,055,736  and  $796,000  respectfully,  for  funds
advanced to the Company to provide  working  capital.  This loan is non-interest
bearing and  unsecured,  and has no scheduled  date for  repayment.  The Company
believes  that  the loan is not due  upon  demand.  However,  since  the  actual
repayment  terms are not known with any  specificity  because  the terms are not
confirmed  in a  written  document,  the loan has been  classified  as a current
liability.

(D) SHORT TERM LOAN PAYABLE
---------------------------

On December 13, 2001 the Company entered into a 90 day $325,000  Promissory Note
(the "Note") with Cornell  Capital  Partners,  LP. The Note bore interest at 12%
and  was  secured  by  a  Guaranty  and  Pledge  Agreement   executed  by  three
stockholders.  The Company  realized  $269,000 of net proceeds  after  financing
costs and legal fees. The Note was repaid on January 14, 2002 with proceeds from
the Company's $1 million Convertible Debenture (See Note 7(B)).


NOTE 7.     CONVERTIBLE DEBENTURES
----------------------------------

(A) AJW PARTNERS, LLC AND NEW MILLENNIUM CAPITAL PARTNERS II, LLC
-----------------------------------------------------------------

On September 30, 1999, the Company entered into secured  convertible  debentures
purchase  agreements  with two  investors,  who were  also  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 Common
Stock.  In  addition,   on  September  30,  1999,  the  Company  issued  another
convertible  debenture  to Bank  Insinger  de  Beaufort  N.V.  in the  amount of
$150,000.  The debentures were convertible,  at the holder's option, into shares
of common stock in whole or in part at any time after the  original  issue date.
The  number of  shares of common  stock  issuable  upon a  conversion  was to be
determined by dividing the outstanding  principal  amount of the debenture to be
converted,  plus all accrued  interest,  by the conversion price. The conversion
price in effect on any  conversion  date is 50% of the  average of the bid price
during the twenty trading days immediately  preceding the applicable  conversion
date.

                                      F-13
<PAGE>

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

The Company  further  reduced  these bonds  payable by offsetting a related bond
receivable in the amount of $36,450.

Between October and December 2000, AJW Partners,  LLC and New Millennium Capital
Partners  II, LLC elected to convert  $262,800 of  convertible  debentures  into
860,378 shares of the Company's restricted common stock.

In December  2000,  Bank Insinger de Beaufort N.V.  converted its $150,000 note,
inclusive of accrued and unpaid  interest  into 943,167  shares of the Company's
restricted common stock.

On April 24, 2002 the Company  entered into a Settlement  Agreement with the two
note holders,  AJW Partners,  LLC and New Millennium  Capital  Partners II, LLC.
Under the terms of the Settlement Agreement,  the note holders agreed to dismiss
their  lawsuit and convert  their  remaining  unpaid  obligation,  inclusive  of
accrued and unpaid  interest,  into  8,500,000  shares of the  Company's  common
stock,  payable over a 180-day  period.  On April 24, 2002 and June 4, 2002, the
Company issued a total of 2,921,450 and 1,328,550  shares of common stock to AJW
Partners,  LLC and New Millennium  Capital Partners II, LLC,  respectively  (See
Note 10(B)) for a total debt reduction of $100,343.

As of June 30,  2002 and June 30,  2001,  $100,407  and  $200,750 of 12% Secured
Convertible Debentures, respectively remain outstanding.

On August 26, 2002,  the Company issued its third set of shares to AJW Partners,
LLC  (1,460,725  shares) and New  Millennium  Capital  Partners II, LLC (664,275
shares). The final delivery of shares is due on or about October 21, 2002.

(B) CORNELL CAPITAL PARTNERS, LP
--------------------------------

In  January  2002,  the  Company  issued,  in the  aggregate,  $1  million of 5%
Convertible Debentures to Cornell Capital Partners, LP and other investors.

These debentures are convertible into shares of common stock at a price equal to
either (a) an amount  equal to 120% of the closing bid price of the common stock
as of the closing date or $.40,  whichever is higher,  or (b) an amount equal to
80% of the lowest  closing  bid price of the common  stock for the five  trading
days immediately  preceding the conversion date.  These  convertible  debentures
accrue  interest at a rate of 5% per year and are  convertible  at the  holder's
option. These convertible  debentures have a term of two years. At the Company's
option,  these  debentures  may be paid in cash at maturity or redeemed at a 20%
premium prior to January 2004.

The convertible  debentures contain a beneficial  conversion feature computed at
its intrinsic value that 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  $250,000,  was  recorded as an interest  expense and a
component of equity on the issuance date.

The Company accrued $22,917 of interest as of June 30, 2002 on these debentures.

The Company  realized  $564,000 of net proceeds after  financing  fees,  closing
costs and the  repayment of the $325,000  ninety-day  short-term  note (See Note
6(D)).

The  Company  incurred  $80,000  of  financing  costs  associated  with  the  5%
Convertible  Debentures that is being amortized over the life of the debentures.
Amortization of $16,667 was expensed for the fiscal year ended June 30, 2002.

NOTE 8.     STOCKHOLDERS' DEFICIENCY
------------------------------------

On September  11, 2001,  the Company's  stockholders  authorized a change in the
Company's  Articles of  Incorporation  increasing  the  authorized  no par value

                                      F-14
<PAGE>


common  shares from  100,000,000  to  200,000,000  and  providing for a class of
25,000,000  $.01 par value shares of preferred  stock which will have such terms
as the Board of Directors  shall  determine  from time to time. A Certificate of
Amendment to the Company's  Articles of  Incorporation  incorporating  the above
changes was filed on September 27, 2001.

(A) PRIVATE PLACEMENT

During  the  period of  December  2000 to  August  2001,  pursuant  to a private
placement,  the Company  issued  4,293,933  shares of common stock and 4,293,933
warrants at $.30 per share.  The Company  received  $1,288,180  from  investors,
which included  $250,000 for stock not yet issued as of June 30, 2001 (which was
subsequently  issued  during  the year  ended June 30,  2002) and  $275,454  for
warrants.

For the fiscal years ended June 30, 2002 and June 30, 2001,  the Company  issued
137,727  and  250,000  shares of common  stock,  valued at $75,000  and  $41,318
respectively,  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 $110,000 and $275,454 at June
30, 2002 and June 30, 2001, respectively,  was estimated on the grant date using
the  Black-Scholes  option  pricing  model as  required  under FASB 123 with the
following weighted average  assumptions:  expected dividend yield 0%, volatility
49.84%, risk-free interest rate 4.22%, expected option life 2 years. At June 30,
2002, no warrants have been exercised.

On February 27, 2002, the Company's Board of Directors  approved a resolution to
reprice the private  placement  offering  from $.30 per share to $.20 per share.
The Board of Directors  repriced these shares due the delay in  registering  the
shares sold to investors in such private placement.  The Company did not receive
any consideration for the repricing of the shares. The repricing resulted in the
additional  issuance of 2,146,967 of its restricted common stock and warrants to
the 23 investors that previously  subscribed to the Company's private placement.
The exercise price of the underlying warrants will remain at $.30 per share.

(B) EQUITY LINE OF CREDIT FACILITY
----------------------------------

On January 10,  2002,  the  Company  entered  into a $30 million  Equity Line of
Credit facility with Cornell Capital  Partners,  LP. Pursuant to the Equity Line
of Credit,  the Company may, at its discretion,  periodically  issue and sell to
Cornell Capital Partners,  LP shares of common stock for a total purchase of $30
million.  The amount of each advance is subject to an aggregate  monthly maximum
advance amount of $2 million in any 30-day period.  Cornell Capital Partners, LP
will purchase the shares of common stock for a 9% discount to the lowest closing
bid price of the Company's common stock during the 5 trading days after a notice
date. In addition,  Cornell Capital Partners,  LP will retain 3% of each advance
under the Equity  Line of Credit,  together  with a one-time  commitment  fee of
$740,000, paid in 2,960,000 shares of common stock. Cornell Capital Partners, LP
intends  to sell  any  shares  under  the  Equity  Line of  Credit  at the  then
prevailing market price. As of June 30, 2002, the Company has not drawn down any
funds on this line.

The Company has engaged Westrock Advisors, Inc., a registered broker-dealer,  to
advise it in connection with the Equity Line of Credit.  Westrock Advisors, Inc.
was paid a fee of 40,000 shares of the Company's  common stock,  which was equal
to $10,000 at a closing bid of $.25 on January 10, 2002.

For the fiscal  year ended June 30,  2002,  the  Company  recorded  amortization
expense of $187,500 in connection with the $750,000 two year commitment fees and
the  balance of $562,500  has been  recorded  as  deferred  commitment  fees and
classified as part of stockholders' deficiency (See Note 8(G)).

(C) STOCK ISSUED FOR SERVICES
-----------------------------

During the fiscal 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 fiscal year ended June 30, 2002, the Company issued  6,334,679 shares
of restricted common stock for services valued at $667,634. The stock was valued
based on the quoted trading price on the grant dates.

                                      F-15
<PAGE>

(D) STOCK ISSUED FOR EXTINGUISHMENT OF DEBT
-------------------------------------------

During the fiscal  years  ended June 30,  2002 and June 30,  2001,  the  Company
issued 6,597,000 and 1,190,000 shares of restricted  common stock  respectively,
to  Advanced  Communications  (Australia),  its vendors  and  employees  for the
partial extinguishment of debt. The stock was valued based on the quoted trading
price on the grant dates, which aggregated  $4,545,902 and $357,001 respectively
(See Note 6(B)).

(E) STOCK ISSUED TO DIRECTORS
-----------------------------

During the fiscal year ended June 30, 2002, the Company issued 200,000 shares of
its  restricted  common  stock  having  a value of  $36,000  to each of its five
current  Directors for services  rendered to the Company as directors during the
two-year  period  ending  September  30,  2002.  The  Company  issued a total of
1,000,000  shares in the  aggregate  having a value of  $180,000.  The stock was
valued based on the quoted trading price of the Company's stock on the date that
the shares were granted to the individual directors.

(F) STOCK ISSUED IN SETTLEMENT OF LAWSUIT
-----------------------------------------

During the year ended June 30, 2002,  the Company  issued  320,000 shares of its
restricted  common stock having a value of $80,000 to the principals of WORLD IP
in full  settlement  of the WORLD IP  rescission  lawsuit.  The stock was valued
based on the quoted  trading price of the  Company's  stock on the date that the
shares were granted (See Note 10B).

(G) STOCK ISSUED FOR PLACEMENT FEES
-----------------------------------

During the fiscal year ended June 30, 2002, the Company issued  2,960,000 shares
of its  restricted  common stock  having a value of $740,000 to Cornell  Capital
Partners,  LP as a one-time  commitment  fee in connection  with the $30 million
Equity Line of Credit  Agreement.  The stock was priced at the closing bid price
of $.25 per share on January 10, 2002.  In addition,  the Company  issued 40,000
shares of its  restricted  common  stock  having a value of $10,000 to  Westrock
Advisors,  Inc to advise it in  connection  with the Equity Line of Credit.  The
40,000  shares  were also priced at the closing bid price of $.25 on January 10,
2002.

(H) STOCK ISSUED FOR CONVERTIBLE DEBENTURES
-------------------------------------------

During the fiscal  years  ended June 30,  2002 and June 30,  2001,  the  Company
issued 1,803,545 and 4,250,000 shares of stock to the 12% Convertible  Debenture
holders in  extinguishments  of $412,800 and $100,343 of Convertible  Debentures
respectively (See Note 10B).


NOTE 9.     RELATED PARTIES
---------------------------

(A) GLOBAL COMMUNICATIONS TECHNOLOGY PTY LTD
--------------------------------------------

Global  Communications  Technology Pty Ltd., a related party, is wholly owned by
Mr. May a principal stockholder of the Company (See Note 6(C)).

(B) ADVANCED COMMUNICATIONS TECHNOLOGY (AUSTRALIA) PTY. LTD.
------------------------------------------------------------

Advanced Communications Technology (Australia) Pty. Ltd., an Australian company,
is 70% owned by Mr. May's wholly owned company, Global Communications Technology
Pty Ltd. Advanced Communications  Technologies (Australia) Pty Ltd placed itself
into voluntary administration on or about July 18, 2002 (See Note 10B(iv)).

(C) LEGAL COUNSEL
-----------------

Certain of the  Company's  legal counsel are  stockholders  and directors of the
Company.

                                      F-16
<PAGE>


NOTE 10.    COMMITMENTS AND CONTINGENCIES
-----------------------------------------

(A)   LEASE AGREEMENT
---------------------

The Company is a party to a three-year  office lease commencing  January 1, 2002
and ending  December 31, 2004. The monthly rent is $7,634  inclusive of the cost
of monthly  parking.  The minimum lease  payment for the  remaining  life of the
lease is $229,020.  On August 1, 2002, the Company notified the landlord that it
was relocating  its office from  California to New York. The Company has engaged
Grubb & Ellis to find a  suitable  subtenant  to assume  all or a portion of the
Company's remaining lease obligation.

The Company is a guarantor of Jason Webster's  one-year  residential lease which
expires  January 25,  2003.  The  Guaranty  which was  executed in January  2002
requires  the  Company to  reimburse  the  landlord in the event of a default by
Jason Webster,  the former Director of Corporate  Communications of the Company.
The rent under the  residential  lease is $1,600 per month.  The Company has not
been required to perform under the Guaranty.

(B)    LEGAL MATTERS
--------------------

(I)   NANCY J. NEEDHAM AND EDMUND R. DUPONT LAWSUIT

In  Nancy  J.  Needham;  Edmund  R.  DuPont  et  al v.  Advanced  Communications
Technologies,  Inc., et al, an action filed July 2000 in the Fifteenth  Judicial
Circuit  in the State of  Florida,  two former  officers  and  directors  of the
Company are seeking  damages and injunctive  relief arising out of the Company's
refusal to provide legal opinion letters and to take other actions  necessary to
allow the former officers to convert  restricted stock into  unrestricted  stock
under an exemption  under Rule 144. The plaintiffs have not specified the amount
of damages they are seeking. The Company has filed a counterclaim to rescind all
of the  Plaintiffs'  stock for lack and/or  failure of  consideration  and other
damages.  In October 2001, the Court denied summary judgment for the Plaintiffs.
In July 2002 the court  denied the  Company's  motion to  dismiss.  The  Company
believes  that  it has  meritorious  defenses  to  the  suit  and is  vigorously
defending the litigation.

(II)  WORLD IP INCORPORATED SETTLEMENT

In Advanced Communications  Technologies,  Inc., et al v. World IP Incorporated,
et al,  an  action  filed in the  Fifteenth  Judicial  Circuit  in the  State of
Florida,   the  Company  sued  World  IP  Incorporated,   its  subsidiaries  and
shareholders  (collectively,  "World")  for  breach  of  the  terms  of a  Stock
Subscription and Purchase Agreement between the parties dated November 10, 1999.
The parties entered into Settlement and Rescission Agreements, pursuant to which
all  transactions  between  the parties  including  the Stock  Subscription  and
Purchase Agreement,  the issuance of World stock to the Company and the issuance
of 500,000 shares of the Company's stock to World's  shareholders were rescinded
effective November 10, 1999. Further,  World's  shareholders were issued 320,000
shares of the Company's stock (See Note 8F) which will be registered pursuant to
the  Registration  Statement  currently  on file  with the  Securities  Exchange
Commission. The lawsuit was dismissed by a Court order dated January 29, 2002.

(III) AJW PARTNERS, LLC AND NEW MILLENNIUM CAPITAL PARTNERS II, LLC

On April 24, 2002, the Company entered into a Settlement  Agreement with the two
remaining September 1999 Convertible  Debenture holders,  AJW Partners,  LLC and
New  Millennium  Capital  Partners  II, LLC.  Under the terms of the  Settlement
Agreement,  the Company is obligated to issue, over a 180 day period,  8,500,000
shares of its common stock in exchange  for the  dismissal of the lawsuit and in
satisfaction of the remaining  outstanding  principal and accrued interest.  The
Company had the  option,  until July 23,  2002,  to  substitute  cash in lieu of
shares.  On closing,  the Company  issued  1,460,725  and 664,275  shares of its
common stock to AJW Partners,  LLC and New Millennium  Capital Partners II, LLC,
respectively.  A  Stipulation  and Order of  Discontinuance  was filed  with and
Ordered  by the  court on April 25,  2002  (See  Note  7A).  On June 4, 2002 the
Company issued an additional 1,460,725 and 664,275 shares of common stock to AJW
Partners LLC and New Millennium Capital Partners,  II, LLC (See Notes 7(A) and 8
(H)).

(IV) ADVANCED COMMUNICATIONS (AUSTRALIA)) LITIGATION

On December 6, 2001, Mr. Roger May, as Chairman and Chief  Executive  Officer of
Advanced Communications (Australia), sent a letter to the Company demanding full
payment  of all  amounts  due under the Stock  Purchase  Agreement  between  the
Company and Advanced Communications (Australia) (the "STOCK PURCHASE AGREEMENT).

                                      F-17
<PAGE>


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

On  January  23,  2002,  the Court  issued  an  interim  injunction  effectively
enjoining   and   prohibiting   Advanced    Communications    (Australia)   from
"transferring,  dealing with, charging,  diminishing,  mortgaging,  assigning or
disposing of" the Company's stock in Advanced  Communications  (Australia).  The
interim   injunction   was  recently   extended  by  the  court  until  a  final
determination is made at trial. .

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

The Company  believes that the  transaction  with  EntrePort as described in the
Acquisition  Agreement is inconsistent with the rights granted to it by Advanced
Communications  (Australia) in the License and Distribution Agreement dated July
5, 2000 pursuant to which the Company  received the  exclusive  rights to market
and distribute the SpectruCell  technology in North,  South and Central America.
The Company  therefore  instructed its  Australian  lawyers to write to Advanced
Communications  (Australia)  requesting an undertaking that it would not appoint
EntrePort  or  any  other  person  to  market  and  distribute  the  SpectruCell
technology  in the  exclusive  territory  in  breach of the  license  agreement.
Advanced Communications (Australia) refused to provide the undertaking sought by
the Company  and,  accordingly,  the  Company  applied to the Court for an order
restraining Advanced Communications  (Australia) from breaching the terms of the
license  agreement.  On April 26, 2002,  the Court issued an interim  order that
held  that  Advanced  Communications  (Australia),  whether  by itself or by its
officers,  employees,  agents,  attorneys  or any of  them  is  restrained  from
appointing or agreeing to appoint  EntrePort  Corporation or any other person to
distribute,  sell,  offer to sell or  supply  the  SpectruCell  product  and its
related  hardware in the U.S.,  and North and South  Americas  without the prior
written consent of the Company.

EntrePort was added as a defendant to the proceedings.

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

On May 8, 2002, the Court extended its April 26, 2002 order further  restraining
Advanced  Communications  (Australia)  from  "acting  upon or taking any further
steps in reliance upon" the notice of breach and termination  notice. On May 27,
2002,  the court held a full  hearing on the  injunction  application,  took the
matter under  advisement  and indicated  that it would rule on the matter in the
near future.

A dispute also arose between Advanced Communication  (Australia) and the Company
as to whether the Company's  SpectruCell license included military  applications
as  well  as  commercial  applications.  Contrary  to  previous  statements  and
understandings,  Advanced Communications  (Australia) claimed for the first time
in or about March 2002 that military  applications  were not included  under the
Company's  SpectruCell  license, and that these rights were exclusively reserved
to Advanced Communications (Australia). A dispute also arose between the parties
as to whether the Company's  SpectruCell  license included  marketing rights, in
addition  to   distribution   rights.   Contrary  to  previous   statement   and
understandings,  Advanced Communications  (Australia) claimed for the first time

                                      F-18
<PAGE>

in or about March 2002 that the  Company's  SpectruCell  license did not include
marketing  rights,  and that these rights were exclusively  reserved to Advanced
Communications (Australia).

The Company disputed these claims and requested the court to expand the existing
injunctions  against Advanced  Communications  (Australia) to include  marketing
rights and military  applications  of  SpectruCell  technology  in the Exclusive
Territory and to continue the existing  injunctions in effect until the trial on
the case.

The marketing and military applications rights were relevant because the Company
had been  contacted  by a major U.S.  defense  contractor  that was bidding on a
large U.S.  Army project that  involved a  SpectruCell-type  component  that the
contractor  wanted the Company to provide for the project.  The Company was also
contacted at this time by another U.S. defense-related company regarding similar
products.  It was also relevant because it had become apparent that the best way
to generate  short term  revenues for  SpectruCell-related  products was through
military  applications  which were easier and less expensive to produce than the
technically  much more  sophisticated  commercial  products  being  designed for
public telephone system use.

The above-mentioned matters were argued before the court at a two-day hearing on
May 27 and 28, 2002. The court took the matters under submission.  On August 23,
2002,  the court  issued its  ruling in which the judge  held that all  activity
related to SpectruCell  in the Exclusive  Territory  pending the trial,  will be
carried out by the Company and not Advanced Communications (Australia).

Based  on  this  conclusion,   the  court  issued  a  comprehensive  preliminary
injunction  granting all the relief  sought by the Company.  Among other things,
the  injunction  prohibits  Advanced  Communications  (Australia),  directly  or
indirectly,  from taking any action in the Exclusive  Territory  with respect to
marketing,  distributing,  selling or  otherwise  dealing  with the  SpectruCell
technology  (including the military  applications  thereof),  except through and
with the prior written consent of the Company.

The court's  order also  prohibited  Advanced  Communications  (Australia)  from
licensing,  marketing,  distributing,  selling  or  otherwise  dealing  with the
SpectruCell technology, including military applications of the product, and from
offering to do any of the  foregoing,  in the  Exclusive  Territory  through any
third party without the Company's prior written consent.  The court's order also
prohibited Advanced  Communications  (Australia) from entering into a license or
sub-license agreement to market, distribute,  sell, provide promotional material
or  otherwise  deal  with  the  SpectruCell   technology,   including   military
applications thereof, in the Exclusive Territory except to the company or at its
request. The court's order also prohibited Advanced  Communications  (Australia)
from  granting any license to any third party to use,  sub-license  or reproduce
the product in the Exclusive Territory, except at the request of the Company.

The  court's  order will  remain in effect  until the trial on the merits in the
case.  Simultaneously  with making the above-described  order,  because Advanced
Communications (Australia)'s administrator indicated that he had no intention of
proceeding with the litigation at this time, the court ordered the proceeding to
be taken off the fast-track "Commercial List" and returned to the regular track.
According to the Company's Australian counsel, this means that the case will not
proceed  to trial for well  over one year.  At the  present  time the  action is
stayed because of the administration proceeding in which Advanced Communications
(Australia) is involved and the above-mentioned injunctions remain in effect.

(V) STAR MULTICARE SERVICES, INC.

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


NOTE 11.    GOING CONCERN
-------------------------

The Company's  consolidated  financial statements for the fiscal year ended June
30, 2002, have been prepared on a going concern basis,  which  contemplates  the
realization of assets and the settlement of liabilities  and  commitments in the
normal course of business.  The Company's net loss of $4,332,693  for the fiscal
year  ended  June  30,  2002,  working  capital  deficiency  of  $3,252,693  and
stockholders'  deficiency  of  $4,940,050,  raise  substantial  doubt  about its
ability to continue as a going concern.

                                      F-19
<PAGE>

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 for the continuation of the Company's operations (See Note 8B).

Based on the Company's loss from operations, working capital deficiency and
stockholders' deficiency, there is doubt regarding its ability to continue as a
going concern. Of the $4,332,693 loss incurred during the fiscal year ended June
30, 2002, $3,229,439 was non-cash, a major portion of which was a non-recurring
charge for the impairment of a long-lived asset. Cash required by operations
amounted to $1,103,254. The Company raised $1,459,206 by issuing stock and debt.
Management is of the opinion that funds for the next fiscal year can be obtained
by issuing additional stock and debt. Management anticipates that future
operations will generate sufficient cash to offset operating expense.

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

<PAGE>

NOTE 12.    SUBSEQUENT EVENTS
-----------------------------

(A) ACT - AUSTRALIA LITIGATION  (SEE NOTE 10(B)(IV))
----------------------------------------------------

In July 2002, Advanced Communications (Australia) entered into an administrative
insolvency proceeding in Australia.  As a result of this insolvency  proceeding,
the  Company's  stock  interest in Advanced  Communications  (Australia)  became
worthless.  Further,  the  SpecruCell  technology  will  be  transferred  by the
receiver to an entity owned and controlled by Mr. Roger May. The plan of company
arrangement  was approved at a meeting held on September  26, 2002.  The Company
voted  against  the plan.  Shortly  after the plan of  company  arrangement  was
adopted, Advanced Communications  (Australia) filed a motion with the Australian
Court to terminate  the Court's  injunctions  against it  regarding  the interim
License  Agreement.  Advanced  Communications  (Australia)  sent a letter to the
Company purportedly  terminating the interim License Agreement on the basis that
Advanced Communications (Australia) is insolvent, as determined under Australian
law, and this insolvency  constitutes an irreparable  event of default under the
interim License Agreement.

On  September  7, 2002,  a  September  7, 2001 Letter of Intent that the Company
entered into with  ACT-Australia  to acquire all of the  intellectual  property,
including the worldwide  rights (other than the rights to  territories  that the
Company currently possess) for the licensing and distribution of the SpectruCell
product expired.

In October 2002, the Company withdrew from the Australia  litigation against Mr.
May  and  Advanced  Communications  (Australia).  The  effect  of the  Company's
decision to withdraw from the Australia  litigation is that the interim  License
Agreement  has  been  terminated  and the  existing  injunctions  issued  by the
Australia Court have been lifted.

In  November  2002,  Advanced  Communications  (Australia)  issued a  Notice  of
Termination to the Company stating that the April 2000 Stock Purchase  Agreement
is  terminated   immediately  due  to  Advanced   Communications   (Australia)'s
insolvency.  The effect of the Notice of  Termination is to cancel the Company's
stock interest in Advanced Communications (Australia).

Consistent   with  the  Company's   decision  to  withdraw  from  the  Australia
litigation,  it  has  not  challenged  the  termination  of the  Stock  Purchase
Agreement.  The  Company  has  written  off its entire  investment  in  Advanced
Communications (Australia).

(B) CORNELL CAPITAL PARTNERS, LP
--------------------------------

In November 2002, the Company  entered into a Securities  Purchase  Agreement to
Cornell  Capital  Partners,  LP whereby it agreed to issue and sell  $250,000 of
secured convertible debentures. These secured convertible debentures have a term
of two years and are convertible into shares of common stock at a price equal to
$.001 per share  commencing  on December 31,  2002.  These  secured  convertible
debentures  accrue interest at a rate of 10% per year and are convertible at the
holder's option. At the Company's  option,  these debentures may be paid in cash
or redeemed at a 20% premium on or before December 15, 2002 and at a 50% premium
after  December  15, 2002 and prior to November  2004.  In  connection  with the
Securities Purchase Agreement,  the Company entered into a Security Agreement in
favor of Cornell Capital  Partners,  L.P. whereby it granted a security interest
in  all of its  assets  as  security  for  its  obligations  under  the  secured
convertible debenture.

The convertible  debentures contain a beneficial  conversion feature computed at
its intrinsic value that 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  $250,000,  was  recorded as an interest  expense and a
component of equity on the issuance date.






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