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

                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, 2006

                          Commission File No. 000-30486

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

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

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

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

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

                                      None

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

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

      Check whether the issuer is not required to file reports pursuant to
Section 13 or 15((d) of the Exchange Act. |_|

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

      Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

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

<PAGE>

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

      The issuer's revenue for fiscal year ended June 30, 2006 was $9,183,276.

      The aggregate market value as of September 15, 2006 of the voting common
equity held by non-affiliates is $3,491,222

                         ISSUERS INVOLVED IN BANKRUPTCY
                      PROCEEDING DURING THE PAST FIVE YEARS

      Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Securities Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes |_| No |_|

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

      As of September 15, 2006, there were 4,597,302,006 shares of the Company's
no par value common stock issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

    Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>

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

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                             PAGE
                                                                           --------
<S>        <C>                                                             <C>
PART I

  ITEM 1.  Description of Business......................................       1-5
  ITEM 2.  Description of Property......................................         5
  ITEM 3.  Legal Proceedings............................................       5-6
  ITEM 4.  Submission of Matters to a Vote of Security Holders..........         6

PART II

  ITEM 5.  Market for Common Equity, Related Stockholder Matters and
           Small Business Issuer Purchases of Equity Securities.........       7-8
  ITEM 6.  Management's Discussion and Analysis or Plan of Operation....      8-15
  ITEM 7.  Financial Statements.........................................        15
  ITEM 8.  Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure.....................................        16
  ITEM 8A. Controls and Procedures......................................        16
  ITEM 8B. Other Information............................................        16

PART III

  ITEM 9.  Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act............     17-20
  ITEM 10. Executive Compensation.......................................     20-25
  ITEM 11. Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters...................     25-27
  ITEM 12. Certain Relationships and Related Transactions...............     27-28
  ITEM 13. Exhibits.....................................................     28-33
  ITEM 14. Principal Accountant Fees and Services.......................     33-34

ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2006 AND 2005..........   F-1-F-21
</TABLE>

<PAGE>

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

                           Forward-Looking Statements

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

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

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

            Advanced Communications Technologies, Inc. ("we," "us," "our,"
"ACT," or the "Company") is a public holding company specializing in the
technology aftermarket service and supply chain known as reverse logistics. Our
wholly-owned subsidiary and principal operating unit, Encompass Group
Affiliates, Inc. ("Encompass"), will acquire and operate businesses that provide
repair and end-of-life cycle services for consumer electronics, computers and
peripheral equipment. Encompass owns Cyber-Test, Inc. ("Cyber-Test"), a depot
repair and refurbishment company based in Florida currently our principal
operating business.

            We have chosen to address the overall market from both the end-user
driven product support and repair industry and from the manufacturer-driven
e-Waste recovery industry. While these two industries have different
characteristics, they have significant back-end operational synergies. We view
both markets as essential in order to present a complete outsourced solution to
our clients. Thus, we are focused on becoming a full-service provider of repair,
refurbishment, parts distribution and end-of-life cycling services in the
computer peripheral and consumer electronics markets. To that end we have
entered into several Letters of Intent to acquire businesses that either repair
and refurbish equipment or distribute parts typically used in the repair and
refurbishment process. We intend to provide single source life cycle
professional management services for technology products to businesses and
consumers in the North American market initially, and then on a more worldwide
basis.

            Cyber-Test, a Delaware corporation and wholly owned subsidiary of
Encompass, operates as an independent service organization. From its roots in
the space industry more than 20 years ago, Cyber-Test gained the expertise to
provide board-level repair of technical products to third-party warranty
companies, original equipment manufacturers ("OEMs"), national retailers and
national office equipment dealers. Service options include advance exchange,
depot repair, call center support, parts supply and warranty management.
Cyber-Test's technical competency extends from office equipment and fax machines
to printers, scanners, laptop computers, monitors, multi-function units and
high-end consumer electronics such as PDAs and digital cameras. Cyber-Test plans
to offer repair and exchange services during fiscal 2007 on gaming products
including Sony's PlayStation(TM), Microsoft's X-Box(TM) and Nintendo's Game
Cube(TM) consoles. Services are delivered nationwide through proprietary systems
that feature real-time electronic data interchange ("EDI"), flexible analysis
tools and repair tracking.

The Reverse Logistics Industry

            Reverse Logistics was first implemented in the electronics industry
(computing, office automation, telecommunications process, etc.) in the early
1980s as a result of miniaturization and modularization design, with the repair
of a product or piece of equipment performed in the field (i.e., fix in place).
More recently, the proliferation of large-scale, sophisticated, integrated
digital circuits and circuit boards, carrying built in diagnostics and defined
test points, have led to increased reliability of the subsystems and components,
reducing repair time through the pull-and-replacement of modules rather than
field repair. Therefore, as the value of these components continuously
increases, so does the demand for solutions that monetize and extend the life of
components through repair and reallocation. However, it should be mentioned that
larger high-cost products, not well suited for off-site repair, such as DLP and
LCD televisions, continue to drive demand for a field repair solution.

            According to D.F. Blumberg, a recognized industry statistician, the
consumer electronics and computer / Electronic Data Processing ("EDP") segment
of reverse logistics is expected to be $4.2 billion in 2006 (an 8.8% increase
over 2005) and is forecasted to increase at a 10.6% CAGR over the next four
years, reaching $6.3 billion by 2010. The growth in sales of consumer
electronics and computer and peripheral equipment is driving the need for
reverse logistics and repair services, representing one of the largest
opportunities within the industry. The Consumer Electronics Association ("CEA")
estimated that 2005 sales of consumer electronics and computers and peripheral
equipment were $125.7 billion and $102.9 billion, respectively. There remains
significant opportunity for above average company growth within the industry by
continuing to increase capabilities across the product life cycle.

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


                                       1

<PAGE>

            Electronic equipment discards are among the fastest growing segments
of our nation's waste stream and are increasingly being considered "toxic" waste
when dumped into landfills. Environmental concerns and regulatory momentum are
contributing to rapid growth in the e-Recycle segment of the reverse logistics
industry. Both producers and users of electronic products need a single source
solution that efficiently disassembles this equipment and safely recovers the
components for use in new material manufacturing and properly disposes of
unusable parts and materials.

The Equipment Warranty/Repair Management Industry

            Warranty periods, including product warranties issued by
manufacturers and extended life warranties issued by third-party insurers, and
longer product life cycles demand a maintenance/repair commitment that can
typically support a product for up to ten (10) years. In addition, the industry
relationship among OEMs, the integrator, and the third- and fourth-party service
providers has become more complex. The end-user, or consumer, must have
assurance that products are supported by an after-sales service team capable of
providing preventive maintenance and/or an immediate remedy upon equipment
failure.

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

            o     offer one-stop / turnkey service;

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

            o     offer advance exchange of office equipment computer peripheral
                  products;

            o     offer distribution logistics from call management through
                  delivery; and

            o     demonstrate supply-line parts management logistics
                  efficiencies.

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

Cyber-Test's Products and Services

            Cyber-Test operates within the office equipment and computer
peripheral products repair/warranty management industry, with its primary focus
on facsimile machines, printers, scanners, PDAs, laptop computers, monitors, and
multi-function units. The following describes the individual components that
make up the current Cyber-Test family of products and services.

            Repair and Exchange. Cyber-Test has offered board-level repair of
technical products for more than 20 years, and offers service programs for
equipment dealers, OEMs, extended warranty companies, retail outlets and
end-users. The service programs include:

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

            o     advance exchange of office equipment and computer peripheral
                  products;

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

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


                                       2

<PAGE>

            o     OEM warranty exchange and repair programs;

            o     large volume repair and refurbishment; and

            o     call center technical support.

            Cyber-Test's repair and exchange service is managed by a proprietary
information system designed and developed by the management team of Cyber-Test
with software-tracking that allows customers or the call center function
(whether it is onsite at Cyber-Test's facilities or at the customer's facility)
to track on a real-time basis the repair status of any given unit, including a
date of return delivery to the end-user, while at the same time allowing
Cyber-Test to manage the output volume and quality of the repair process. This
software allows its clients to view their inventory, parts, parts used per unit,
and the status of all equipment on a real-time basis via its secure website.
Clients may also change priorities and accelerate orders directly from this
proprietary, customized web portal. Repair work is principally performed for
OEM's, retailers and TPAs under warranty programs.

            Parts and Sales. Cyber-Test stocks a line of parts, accessories, and
consumables for its in-house repair needs and offers these parts for sale as
well. Cyber-Test stocks over 30,000 parts for printers, facsimile machines,
scanners, laptops, monitors and PDAs. Customer's can view a full listing of
parts at Cyber-Test's website (in the ADVANCEX(TM) section) and, if any part is
not in stock, it can usually be made available in one business day. Cyber-Test's
unique parts ordering system affords the capability to search, order, and buy
parts without an OEM part number, and its search feature will cross-reference to
other OEMs or parts manufacturers that may fit the desired part.

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

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

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

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

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

            Cyber-Test also offers an "Advance Exchange" program, known as
ADVANCEX(TM), which provides same day service to its customers on all products
Cyber-Test repairs. With the ADVANCEX(TM) program, Cyber-Test can ship an
equivalent-to-new ("ETN") replacement product directly to the customer if phone
support fails to correct the problem. The customer then returns the defective
unit to Cyber-Test for repair and refurbishment and subsequent use for another
customer. A special capability of Cyber-Test's proprietary system is that it
allows the OEM to gather failure analysis and failure trends critical to the
release of new products. This information is collected online while Cyber-Test
is providing Level II and III technical support directly to the customer. Its
telephone support achieves a current phone fix-rate of more than 50%, saving
OEMs millions of dollars per year in unnecessary product exchange expenses.
Cyber-Test has a same-day fulfillment up to 5:00 p.m. Eastern Time on all
ADVANCEX(TM) products, and ships approximately 3,500 repaired units per month.
The ADVANCEX(TM) program has resulted in decreased product returns and increased
customer satisfaction.


                                       3

<PAGE>

Competition

            Cyber-Test's business is highly competitive in each area from which
it derives revenue. It competes with some larger and numerous smaller companies
that provide repair services for office equipment and computer peripheral
products, that supply parts and consumables to end-users and other repair
companies of such equipment and products, and with other sellers of new
equipment and resellers of refurbished equipment and products.

            Competition within the office equipment and computer peripheral
products service and repair industry is based on quality of service, depth of
technical know-how, price, availability of parts, speed and accuracy of
delivery, and the ability to tailor specific solutions to customer needs. In the
U.S., there are hundreds of manufacturers of technical products of the type
Cyber-Test repairs, hundreds of independent companies that repair products in a
manner similar to Cyber-Test, as well as hundreds of companies that supply parts
and components for use in repair, and thousands of independent service
technicians that do on-site repair. In addition, there are thousands of
companies that sell technical products that may need repair, and many of these
do their own repair or service work.

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

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

Customers

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

Company History

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

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


                                       4

<PAGE>

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

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

            On June 3, 2004, pursuant to the terms of an asset purchase
agreement dated May 27, 2004, Encompass acquired 100% of the assets and core
business of Cyber-Test, a Delaware corporation.

            On December 30, 2004, we acquired a controlling interest in Pacific
Magtron International Corp. ("PMIC") PMIC engaged in the wholesale distribution
of electronics products, computer components, and computer peripheral equipment
throughout the United States. On May 11, 2005, PMIC and its subsidiaries filed
voluntary petitions to reorganize their businesses under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of Nevada.

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

Employees

            As of June 30, 2006, the Company had 102 full-time employees.

ITEM 2. DESCRIPTION OF PROPERTY

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

            The Company's core operating business, Cyber-Test is located at 448
Commerce Way, Longwood, Florida 32750. This 29,000 square foot office/warehouse
facility has a one-year triple net lease that commenced on August 1, 2004 and
ended on July 31, 2005, and provides for two one-year options at a monthly lease
obligation of $13,900. Cyber-Test has exercised its options and extended its
lease to July 31, 2007.

            The Company's principal operating unit, Encompass was located at
1600 California Circle, Milpitas, California 95035 until September 14, 2006, at
which time it was relocated to our principal executive office at 420 Lexington
Avenue, Suite 2738, New York, New York 10170.

ITEM 3. LEGAL PROCEEDINGS

            The Company has been, and may in the future be, involved as a party
to various legal proceedings, which are incidental to the ordinary course of
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. In the opinion of management, as of June 30, 2006, there were no
threatened or pending legal matters that would have a material impact on the
Company's consolidated results of operations, financial position or cash flows
other than the proceedings described below.


                                       5

<PAGE>

            On May 11, 2005, we filed a complaint in the United States District
Court for the Southern District of New York against Theodore S. Li and Hui
Cynthia Lee, the former officers and principal shareholders of our then
majority-owned subsidiary Pacific Magtron International Corp. ("PMIC"), for the
recovery of damages and costs for securities fraud, breach of contract and other
counts in connection with the Stock Purchase Agreement dated December 10, 2004
among us and Mr. Li and Ms. Lee. On December 8, 2005, defendants answered the
complaint and asserted various defenses to the claims set forth therein.

            In January 2006, Theodore S. Li and Cynthia Lee brought suit against
us and certain of our officers and directors in the California Superior Court,
Santa Clara County. In the complaint, plaintiffs alleged, among other things,
fraud, intentional misrepresentation, breach of contract, breach of implied
covenant of good faith and fair dealing, violation of the California Labor Code,
violation of the Business of Professions Code of California, and defamation.

            In July, 2006, we, PMIC, Mr. Li, Ms. Lee and others entered into a
Mutual Settlement Agreement and Release (the "Settlement Agreement") with
respect to the settlement of the above litigation and other potential claims,
including the termination of their employment contracts, involving us, PMIC,
Encompass, Mr. Li, Ms. Lee, Martin Nielson, our then Executive Vice President,
and Wayne Danson, our Chief Executive Officer. PMIC's entry into the Settlement
Agreement was conditioned on bankruptcy court approval, which was obtained on
August 11, 2006 in connection with confirmation of PMIC's Plan of
Reorganization. Under PMIC's Plan of Reorganization, ACT contributed $50,000 on
behalf of PMIC's stockholders to effectuate the plan of reorganization and a
subsidiary of PMIC merged with an unrelated entity, Herborium, Inc. In
connection with the merger, PMIC changed its name to Herborium Group, Inc. Upon
closing of the merger, the Company paid an aggregate $325,000 in cash to Mr. Li
and Ms. Lee. In addition, Li and Lee received certain shares of common stock of
Herborium Group. If these shares do not have a value of $.10 or greater at the
end of a 150 day lock-up period, the difference will be made up, at our option,
by cash payments from us or delivery of additional 1,750,000 shares of
Herborium/PMIC common stock which would otherwise be issued to our stockholders
under PMIC's Plan of Reorganization. A special stock distribution of shares of
Herborium Group will be made to the holders of our common stock as of the record
date of August 11, 2006 on the basis of a 0.001652911 share of Herborium common
stock for each share of our common stock.

            A more detailed description of the terms of the Settlement Agreement
is contained in our Current Report on Form 8-K filed with the SEC on August 16,
2006.

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

            None.


                                       6

<PAGE>

PART II

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

Price Range Of Common Stock

            Our common stock is currently traded on the Over-the-Counter
Bulletin Board ("OTCBB") under the symbol "ADVC." As of September 15, 2006,
there were 4,597,302,006 common shares issued and outstanding and approximately
509 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
                                   --------   -------
Fiscal Year 2006
Quarter Ended September 30, 2005    $ .0012   $ .0006
Quarter Ended December 31, 2005       .0011     .0003
Quarter Ended March 31, 2006          .0090     .0004
Quarter Ended June 30, 2006           .0022     .0010

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

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

            We did not pay any dividends during fiscal 2006 and have never paid
any dividends on our capital stock. We currently expect that we will retain
future earnings for use in the operation and expansion of our business and do
not anticipate paying any cash dividends in the foreseeable future. Any decision
on the future payment of dividends will depend on our earnings and financial
position at that time and such other factors as our Board of Directors deems
relevant.

Recent Sales Of Unregistered Securities

            On September 13, 2006, the Company sold a total of 340 shares of its
Series A-1 Preferred Stock at $1,000 per share to executive officers, one
employee and one outside investor.

            On October 12, 2005 our Board of Directors approved the issuance of
50,000,000 shares of restricted common stock to two officers of Cyber-Test, Inc
as incentive compensation for fiscal 2006. The shares were valued at $.0007 per
share or $35,000 in the aggregate. The shares were issued to the two executives
on October 19, 2005.

            On October 12, 2005, our Board of Directors approved the issuance of
16,666,667 shares of restricted and escrowed stock to Lisa Welton as the first
traunche of the Earn-Out Stock pursuant to the Purchase Agreement between the
Company and Cyber-Test, Inc. In accordance with Section 3.5.1.3 of the Purchase
Agreement, the stock has been placed in escrow with Eckert Seamans Cherin &
Mellott, LLC until June 2007 when all rights of forfeiture will lapse.

            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 "Securities Act"). These offerings may have
qualified for other exemptions as well. In each instance, the purchaser had
access to sufficient information regarding the Company so as to make an informed
investment decision. More specifically, the Company had a reasonable basis to
believe that each purchaser was an "accredited investor" as defined in
Regulation D under the Securities Act, which information was based on
representations received from such investors, and otherwise had the requisite
sophistication to make an investment in the Company's securities.


                                       7

<PAGE>

Issuer Purchases of Equity Securities

            We did not make any purchases of equity securities during the fiscal
year ended June 30, 2006.

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

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

GENERAL

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

            The Company operated in one business segment, the repair and
refurbishment component of the reverse logistics industry, for the fiscal years
ended June 30, 2006 and 2005. Since PMIC, a computer parts and accessory
distributor, ceased its operations in fiscal 2005 and its results have been
reclassified as discontinued operations, it has not been presented as a second
business segment.

COMPARISON OF THE FISCAL YEAR ENDED JUNE 30, 2006 TO THE FISCAL YEAR ENDED JUNE
30, 2005

FINANCIAL CONDITION

            We incurred a net loss of $574,000 and $736,000 for the years ended
June 30, 2006 and 2005, respectively, and we had a working capital deficiency of
$1,296,000 and $139,000 as of June 30, 2006 and 2005, respectively. Our
consolidated current liabilities increased from $1,839,000 as of June 30, 2005
to $2,959,000 as of June 30, 2006. For the year ended June 30, 2006, we have
funded our ongoing operations from working capital generated by Cyber-Test.
However, these amounts have not been sufficient to fund all of our corporate
overhead. Our ability to continue as a going concern is dependent upon achieving
profitability and generating sufficient cash flows to meet our obligations as
they come due.

            Our Equity Line of Credit facility with Cornell Capital Partners,
L.P. was terminated in fiscal 2006. In April 2006, we engaged Janney Montgomery
Scott, LLC, a Philadelphia-based investment banking firm to assist us in
securing equity and debt financing for the purpose of providing us with funding
for several contemplated acquisitions, retirement of certain debt and preferred
stock, and adequate funding for increased working capital needs and additional
acquisitions.

            Due to the legal matters relating to the PMIC bankruptcy, our legal
and professional expenses increased from $477,000 for the fiscal year ended June
30, 2005 to $862,000 for the year ended June 30, 2006. Our consolidated selling,
general and administrative expenses decreased from $3,849,000 for the year ended
June 30, 2005 to $2,975,000 for the year ended June 30, 2006. The decrease was
primarily due to certain non-recurring compensation expense and promotion
expense incurred in the year ended June 30, 2005 but not in the current year.


                                       8

<PAGE>

            Cyber-Test, our core operating business unit, continued to
experience increases in revenue and profitability in fiscal 2006. Cyber-Test's
sales increased 21% from $7,521,000 for the fiscal year ended June 30, 2005 to
$9,094,000 for the year ended June 30, 2006. Gross profit from Cyber-Test was
35% of sales in the fiscal years ended June 30, 2006 and 2005. Cyber-Test's
operating results reflect, in part, management's successful efforts to increase
sales, and control operating expenses.

            Our independent auditors have added an explanatory paragraph to
their audit opinions issued in connection with the years 2006 and 2005 financial
statements, which states that our ability to continue as a going concern depends
upon our ability to resolve liquidity problems by generating sufficient
operating profits to provide additional working capital. Our ability to obtain
additional funding and pay off our obligations will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Summary of Results Of Operations

            The following table sets forth certain selected financial data as a
percentage of sales for the years ended June 30, 2006 and 2005:

                                                               2006    2005
                                                              -----   -----
Net sales                                                     100.0%  100.0%
Cost of sales                                                  64.9    64.9
                                                              -----   -----
Gross profit                                                   35.1    35.1
Operating expenses                                             42.9    59.2
                                                              -----   -----
                                                               (7.8)  (24.1)
Other income (expenses)                                         1.6    30.1
                                                              -----   -----
Income (loss) from continuing operations                       (6.2)    6.0
Loss from discontinued operations, net of minority interest      --   (15.9)
                                                              -----   -----
Net loss                                                       (6.2)%  (9.9)%
                                                              =====   =====

Net Sales

            Net sales for the fiscal year ended June 30, 2006 amounted to
$9,183,000 as compared to net sales of $7,522,000 for the fiscal year ended June
30, 2005, an increase of $1,661,000, or 22.1%. The increase in net sales in
fiscal 2006 was primarily due to a shift in Cyber-Test's sales mix from its more
traditional core work such as fax machines, printers and multifunction machines
repair work to an increased volume of PDA, Blackberry and laptop repair work.

Cost of sales

            Our cost of sales totaled $5,959,000 for the fiscal year ended June
30, 2006 as compared to $4,879,000 for the fiscal year ended June 30, 2005 an
increase of $1,080,000, or 22.1%. The increase in cost of sales for Cyber-Test
was the result of a comparable increase in gross sales for the year ended June
30, 2006 as compared to 2005. Gross margin was 35.1% for the year ended June 30,
2006, compared to gross margin of 35.1% in 2005.

Operating Expenses

            Operating expenses for the fiscal years ended June 30, 2006 and 2005
were $3,935,000 and $4,450,000, respectively, representing a $515,000 decrease
from the fiscal year ended June 30, 2005. The decrease was primarily
attributable to a decrease in selling, general and administrative expenses of
$873,000, partially offset by an increase of $385,000 in professional and
consulting expenses as compared to the fiscal year ended June 30, 2005.

            Professional and consulting fees increased from $477,000 for the
fiscal year ended June 30, 2005 to $862,000 for the fiscal year ended June 30,
2006. The increase of $385,000 in consolidated professional and consulting fees
in fiscal 2006 was primarily due to the increase in legal fees associated with
the PMIC bankruptcy and litigation.


                                       9

<PAGE>

            Other selling, general and administrative expenses decreased by
$873,000 from $3,849,000 for the year ended June 30, 2005 to $2,975,000 for the
year ended June 30, 2006. The net decrease was due to a decrease in compensation
expense of $586,000, as well as a decrease in promotion expenses of $102,000.
The decrease in compensation expense was primarily due to certain non-recurring
charges for bonus and stock grants to employees, consultants and directors for
the fiscal year ended June 30, 2005.

Other Income and Expenses

            Our other income was $137,000 for the fiscal year ended June 30,
2006 compared to $2,266,000 of income for the prior year. We settled litigation
with two former PMIC's executives for a $325,000 cash payment in exchange for
the cancellation of notes totaling $500,000, plus accrued interest, payable to
the former PMIC's executives. We recorded a gain of $220,000 for this settlement
in the year ended June 30, 2006. Net interest expense decreased by $23,000 to
$83,000 for the fiscal year ended June 30, 2006 from $106,000 for the fiscal
year ended June 30, 2005. This decrease was due to the reduction in
interest-bearing debt in fiscal 2006 compared to fiscal 2005. During the fiscal
year ended June 30, 2005, we realized $2.8 million of debt forgiveness gain
resulting from the favorable judgment against our former CEO and related
entities that allowed us to discharge these obligations. We also realized
$385,000 of investment income from our partnership investment in Yorkville
Advisors, which was offset, in part, by a $191,000 loss on redemption of our
partnership interest. In addition, a one-time charge of $669,000 representing
the complete write-off of our investment in PMIC was recorded in the year ended
June 30, 2005.

Loss from Discontinued Operations, Net of minority Interest

            In fiscal 2005, we included PMIC's loss of $1,195,000 from
operations, net of minority interest, for the period January 1, 2005 through May
11, 2005, the date PMIC filed petitions to reorganize its businesses under
Chapter 11 of the U.S. Bankruptcy Code separately as a loss from discontinued
operations. As of the May 11, 2005 bankruptcy filing, the Company was no longer
able to exercise management control over PMIC's business operations.
Consequently, as of June 30, 2005, the Company accounted for the investment in
PMIC under the cost method of accounting.

LIQUIDITY AND CAPITAL RESOURCES

            The Company incurred a net loss of $574,000 and $736,000 for the
years ended June 30, 2006 and 2005, respectively. The Company had a working
capital deficiency of $1,296,000 and $139,000 as of June 30, 2006 and 2005,
respectively. Our consolidated current liabilities increased from $1,839,000 as
of June 30, 2005 to $2,959,000 as of June 30, 2006. For the year ended June 30,
2006, we have funded our ongoing operations from working capital generated by
Cyber-Test. However, these amounts have not been sufficient to fund all of our
corporate overhead. The Company incurred a substantial amount of legal expenses
during the year ended June 2006. Our professional and consulting fees increased
from $477,000 for the year ended June 30, 2005 to $862,000 for the year ended
June 30, 2006. We also incurred $302,000 of legal, accounting and consulting
costs relating to the potential acquisition of certain targeted businesses for
the year ended June 30, 2006. Consequently, during the fiscal year ended June
30, 2006 our current liabilities and working capital deficit greatly increased.
Additionally, during fiscal 2006 the Company settled litigation with former PMIC
executives for $325,000, which was paid, in full, on September 18, 2006
following the merger described in Item 3 herein.

            On September 13, 2006, we sold 340 shares of our Series A-1
Preferred Stock for proceeds of $340,000. A portion of these proceeds was used
to pay the $325,000 to former PMIC executives. Our existing sources of
liquidity, including cash resources and cash provided by operating activities
will not provide us with sufficient resources to meet our present and the
working capital and cash requirements for the next 12 months. Consequently, we
are actively pursuing but have not yet secured a working capital facility to
provide us with the necessary working capital over the next 12 months. The
Company's ability to continue as a going concern is dependent upon achieving
profitability and generating sufficient cash flows to meet its obligations as
they come due, and obtaining additional equity or debt financing.


                                       10

<PAGE>

            We are pursuing additional capital and debt financing and
acquisition of profitable businesses within our industry. Previously, we had
financed our acquisitions and investments principally with short-term borrowings
through our $30 million Equity Line of Credit with Cornell Capital Partners,
L.P. ("Equity Line"). For the fiscal year ended June 30, 2006, we made no
advances under the Equity Line prior to our termination of the Equity Line. In
April 2006, we engaged Janney Montgomery Scott, LLC, a Philadelphia-based
investment banking firm to assist us in securing an acquisition debt facility
and/or long-term strategic equity investors, for the purpose of providing us
with acquisition funds and funds for ongoing working capital needs and a planned
recapitalization of our common and preferred stock. There can be no assurance
that we will be able to obtain financing to meet working capital needs at
suitable valuations or rates of interest, if at all. In addition, there is no
guarantee that we will be able to secure financing to permit us to pursue
strategic acquisitions and investments.

            Our independent auditors have added an explanatory paragraph to
their audit opinions issued in connection with the years 2006 and 2005 financial
statements, which states that our ability to continue as a going concern depends
upon our ability to resolve liquidity problems by generating sufficient
operating profits to provide additional working capital. Our ability to obtain
additional funding and pay off our obligations will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

            We have total liabilities and contractual obligations of $2,974,000
as of June 30, 2006. These contractual obligations, along with the dates on
which such payments are due, are described below:

                                            Contractual Obligations
                                ----------------------------------------------
                                   Total     1 Year or Less   More Than 1 Year
                                ----------   --------------   ----------------
Notes payable                   $  942,000     $  942,000          $    --
Capitalized lease obligations       39,000         24,000           15,000
                                ----------     ----------          -------
Total Contractual Obligations   $  981,000     $  966,000          $15,000
                                ==========     ==========          =======

Net Cash Provided By (Used In) Operating Activities

            Net cash provided by operating activities was $325,000 for the
fiscal year ended June 30, 2006 compared to net cash used in operating
activities of $876,000 for the year ended June 30, 2005. Cash provided by
operating activities in the year ended June 30, 2006 was principally due to an
increase in accounts payable and accrued expenses of $1,170,000, which was
partially offset by the loss from continuing operations of $574,000 and a
non-cash gain of $220,000 from a litigation settlement.

            Net cash used in operating activities was $876,000 for the fiscal
year ended June 30, 2005. It was principally due to net income from continuing
operations of $460,000, offset by a net non-cash gain of $1,563,000 attributable
to non-cash charges for depreciation, amortization, stock issued for services
loss on partnership redemption and the write off our investment in PMIC and
non-cash gains from a litigation settlement and net partnership income share,
and an increase in accounts payable and accrued expenses of $233,000.

Net Cash Provided By (Used In) Investing Activities

            Net cash used in investing activities of $336,000 for the fiscal
year ended June 30, 2006 was attributable to deferred legal, accounting and
consulting costs of $302,000 relating to several contemplated acquisitions of
certain targeted businesses.

            Net cash provided from investing activities of $2,683,000 for the
year ended June 30, 2005 was attributable to $2,689,000 of net cash
distributions and redemption proceeds from our partnership investment, offset by
fixed assets and investment securities purchases of $286,000.


                                       11

<PAGE>

Net Cash Provided By (Used In) Financing Activities

            Net cash used in financing activities of $69,000 for the fiscal year
ended June 30, 2006 was attributable to principal payments of $104,000 on notes
payable and capital leases, offset by proceeds of $35,000 from a note issued to
our officer/executive.

            Net cash of $2,164,000 used in financing activities for the fiscal
year ended June 30, 2005 was attributable to the repayment of our short-term and
installment notes to Cornell Capital and others in the amount of $2,233,000,
offset by proceeds of $70,000 from a capital lease.

Off-Balance Sheet Arrangements

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

RISKS RELATED TO OUR BUSINESS

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

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

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

            We are a holding company with a limited history of operations. For
the fiscal year ended 2006 and 2005, we incurred an overall net loss of $574,000
and $736,000, respectively. We cannot be sure that we will be profitable in
future years.

We Will Need Additional Capital to Achieve Our Business Plans

            We are seeking capital to fund the transactions with our current
acquisition candidates. Delay in obtaining this funding will delay or inhibit
our progress in achieving our goals. We will likely require additional
investment funds:

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

      o     to acquire the assets or stock of related companies in the reverse
            logistics arena.

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

We Need Additional Capital to Fund our Present Liabilities

            At June 30, 2006, we had a working capital deficit of $1,296,350. It
is unlikely that Cyber-Test's operations will be able to produce sufficient
excess working capital to fund this deficit in the next 12 months. Therefore, we
will be required to raise additional debt or equity funds to pay our present
liabilities. In the event we are not able to raise sufficient funds in
connection with proposed acquisitions, we may not have any sources of capital
available to pay these liabilities.


                                       12

<PAGE>

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

            Our ability to make payments on the indebtedness we intend to incur
to fund acquisitions will depend on our ability to generate cash from our
operations in the future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Based on our projected level of operations after the
acquisitions, we believe our cash flow from operations will be adequate to meet
our debt service requirements. We cannot provide any assurances, however, that
we will have sufficient cash flow to fund our debt service and other liquidity
needs. We may need to refinance or restructure all or a portion of our
indebtedness on or before maturity. We cannot make any assurances that we will
be able to refinance any of our indebtedness on commercially reasonable terms or
at all. If we cannot service our indebtedness, we may have to take actions such
as selling assets, seeking additional equity or reducing or delaying capital
expenditures, strategic acquisitions, investments and alliances. We cannot make
any assurances that any such actions, if necessary, could be effected on
commercially reasonable terms, or at all.

New Equity Financing Could Dilute Current Stockholders

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

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

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

We And Our Subsidiaries Operate In Competitive Industries

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

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

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

Our Business Could Suffer If There Is A Prolonged Economic Downturn

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


                                       13

<PAGE>

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

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

We Could Be Materially Affected By Turnover Among Our Service Representatives

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

We Have A Working Capital Deficit, Which Means That Our Current Assets On June
30, 2006 Were Not Sufficient To Satisfy Our Current Liabilities On That Date

            We had a working capital deficit of $1,296,350 as of June 30, 2006,
which means that our current liabilities exceeded our current assets by
$1,296,350. 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, 2006 were not sufficient to satisfy all of our current liabilities on
that date.

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

            Our independent auditors have added an explanatory paragraph to
their audit opinions issued in connection with the years 2006 and 2005 financial
statements, which states that our ability to continue as a going concern depends
upon our ability to resolve liquidity problems by generating sufficient
operating profits to provide additional working capital. Our ability to obtain
additional funding and pay off our obligations will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

We Could Fail To Attract Or Retain Key Personnel

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

Risks Related To Our Stock

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

            The issuance of shares upon any future conversion of the outstanding
Series A Convertible Preferred Stock and B Convertible Preferred Stock will have
a dilutive impact on our stockholders. As of June 30, 2006, we have $3,645,000
of outstanding shares of Series A Convertible Preferred Stock and B Convertible
Preferred Stock that are convertible into shares of our common stock. Both the
Series A Convertible Preferred Stock and B Convertible Preferred Stock are
convertible at a price of $0.01 per share or 100% of the average of the three
lowest closing bid prices for the ten trading days immediately preceding the
date of conversion, whichever is lower. If our share price is equal to or
greater than $.01 per share at the time of conversion, the Series A Convertible
Preferred Stock and B Convertible Preferred Stock would be convertible into an
aggregate of 364,500,000 shares of our common stock. In the event the price of
our common stock is less than $.01 per share at the time of conversion, the
number of shares of our common stock issuable would be greater than 364,500,000.
If such conversions had taken place at $0.001, our recent stock price, then
holders of our Series A Convertible Preferred Stock and B Convertible Preferred
Stock would have received 3,645,000,000 shares of our common stock. As a result,
our net income per share could decrease in future periods, and the market price
of our common stock could decline.


                                       14

<PAGE>

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

            The issuance of shares upon the conversion of our Series A
Convertible Preferred Stock could result in a change of control. Cornell Capital
Partners, L.P. holds $2,170,000 of our Series A Convertible Preferred Stock,
which if converted at current prices would result in the issuance of up to
2,170,000,000 shares of our common stock. After such conversions, Cornell
Capital Partners, L.P. would own approximately 9% of our then outstanding shares
of Common Stock, computed based on 5,000,000,000 shares that are currently
authorized to be issued. In such event, Cornell Capital Partners, L.P. would be
a major shareholder and might be able to exercise control of us by electing
directors and increasing the number of authorized shares of common stock that we
could issue or otherwise.

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

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

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

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

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

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

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

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

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

ITEM 7. FINANCIAL STATEMENTS

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


                                       15

<PAGE>

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

            On January 9, 2006, we terminated our relationship with Weinberg &
Co., P.A. ("Weinberg") as the auditor for Advanced Communications Technologies,
Inc. Effective January 11, 2006, we engaged Berenson LLP ("Berenson") to serve
as the independent public accountants to audit our consolidated financial
statements for the fiscal year ending June 30, 2006.

            Weinberg's reports on our consolidated financial statements for the
fiscal years ended June 30, 2004 and 2005 did not contain an adverse opinion or
a disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except that Weinberg's reports on our
consolidated financial statements for the fiscal years ended June 30, 2004 and
2005 did contain a modification paragraph that expressed their substantial doubt
about our ability to continue as a going concern.

            During our past two fiscal years and the interim period through
January 9, 2006, we had no disagreements with Weinberg on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to Weinberg's
satisfaction, would have caused Weinberg to make reference to the subject matter
of the disagreement in connection with its report. During our past two fiscal
years and the interim period through January 9, 2006, Weinberg did not advise us
of any of the matters specified in Item 304(a)(1)(iv)(B) of Regulation S-B.

            During our fiscal years ended June 30, 2004 and June 30, 2005, and
the interim period through January 11, 2006, we had no consultations with
Berenson concerning:

            (a) the application of accounting principles to a specific
transaction or the type of opinion that might be rendered on our financial
statements as to which we received oral advice that was an important factor in
reaching a decision on any accounting, auditing or financial reporting issue; or

            (b) any disagreements, as defined in Item 304(a)(1)(iv) of
Regulation S-B.

            The termination of Weinberg and appointment of Berenson as
independent public accountants was recommended by our Audit Committee and was
unanimously approved by our Board of Directors.

ITEM 8A. CONTROLS AND PROCEDURES

(A) Evaluation Of Disclosure Controls And Procedures

            As of June 30, 2006, we carried out an evaluation, under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Section 240.13a-15(e) or
240.15d-15(e) under the Exchange Act). Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of
the June 30, 2006 fiscal year, our disclosure controls and procedures are
effective in timely alerting him to material information required to be included
in our periodic reports that are filed with the SEC. It should be noted that the
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.

(B) Changes In Internal Control Over Financial Reporting

            There were no changes in the Company's internal control over
financial reporting (as defined in Section 240.13a-15(f) or 240.15d-15(f) of the
Exchange Act) during our fourth fiscal quarter ended June 30, 2006 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 8B. OTHER INFORMATION

            Not applicable.


                                       16

<PAGE>

PART III

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

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

            Our directors and executive officers are as follows:

Name and Address                Age   Position
-----------------------------   ---   --------------------------------------
Wayne I. Danson                 53    President, Chief Executive Officer
420 Lexington Avenue                    and Director
New York, NY 10170

Steven J. Miller                48    Chief Operating Officer
420 Lexington Avenue                  (effective September 25, 2006)
New York, NY 10170

John E. Donahue                 57    Vice President and Chief Financial Officer
420 Lexington Avenue                  (effective September 25, 2006)
New York, NY 10170

Dr. Michael Finch               58    Director
37 Walnut Street
Wellesley, MA 02481

Jonathan J. Lichtman            54    Secretary and Director
120 Palmetto Park Road
Boca Raton, FL 33432

Martin Nielson                  54    Senior Vice President-Acquisitions and
420 Lexington Avenue                    Director
New York, NY 10170                    (Resigned on July 19, 2006)

Randall Prouty                  54    Director
420 Lexington Avenue
New York, NY 10170

Wilbank J. Roche                60    Director
520 South Sepulveda Boulevard
Los Angeles, CA 90049

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


                                       17

<PAGE>

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

            Steven J. Miller, Chief Operating Officer. Mr. Miller has served as
our Chief Operating Officer since September 25, 2006. For the past ten years Mr.
Miller served as Senior Director of Service Operations for N.E.W. Customer
Service Companies, Inc., the nation's largest privately held third party
administrator/reinsurer providing warranty policies for consumer electronic
goods. There, Mr. Miller built and managed the team that developed new service
offerings and currently delivers more than 3 million service events per year,
representing $400 million in claims payments. Prior to this, he was the Director
of North American Service Operations with Sharp Electronics with responsibility
for all North American parts distribution, board level repairs and product
refurbishment operations at Sharp's headquarters in Romeoville, IL. Previously,
for ten years he was responsible for shop and field service as well as parts
inventory and parts sales for several large-market locations for General
Electric/RCA, where he was Area Manager for GE Consumer Services. Mr. Miller is
currently a Board Member of NESDA (National Servicing Dealers Association of
America). He earned his Bachelor's Degree in Business Administration from The
Detroit Institute of Technology.

            John E. Donahue, Vice President and Chief Financial Officer. Mr.
Donahue has served as our Chief Financial Officer since September 25, 2006. Mr.
Donahue served as Vice President and Chief Financial Officer of Online Benefits
Inc., (a privately held HR solutions firm that provides internet based
applications for administering, communicating and presenting HR related
information and data) from August 1999 until joining us. Prior to that, Mr.
Donahue served as an Executive Vice President and Chief Financial Officer of
Lead America, a marketer of insurance products to customers of financial
institutions, Managing Director of Oxbridge Incorporated, a boutique investment
banking firm, Chief Financial Officer at Mast Resources Inc., a merchant bank,
and Chief Financial Officer at Catalyst Energy Corp., a NYSE-listed independent
power producer. Mr. Donahue was with Price Waterhouse from September 1972 to
March 1985, including serving as a Senior Audit Manager. He holds a B.A. in
Economics from Holy Cross College and an MBA from Rutgers University.

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


                                       18

<PAGE>

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

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

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

Other Significant Employees

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

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

Meetings And Committees Of The Board Of Directors

            Our business affairs are managed under the direction of the Board of
Directors. During the fiscal year ended June 30, 2006, our Board of Directors
held two (2) meetings and took action by written consent three (3) times. During
the fiscal year ended June 30, 2006, all of the directors attended all of the
Board of Directors meetings that were held.


                                       19

<PAGE>

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

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

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

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

Audit Committee Financial Expert

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

Corporate Governance

            In April 2004, we established a Code of Business Conduct and Ethics
(the "Code"), applicable to all of our employees, including our principal
executive, accounting and financial officers, which states that we are committed
to the highest standards of legal and ethical conduct. This Code sets forth our
policies with respect to the way we conduct ourselves individually and operate
our business. The provisions of this Code are designed to deter wrongdoing and
to promote honest and ethical conduct among our employees, officers and
directors. The Code is incorporated by reference to Exhibit 14.1 to the
Company's Form 10-KSB filed with the SEC on November 3, 2004. We will satisfy
our disclosure requirement under Item 5.05 of Form 8-K regarding certain
amendments to, or waivers of, any provision of our Code by posting such
information on our corporate website. We will provide a copy of the Code,
without charge, upon request. You may request a copy of the Code by writing to
the Company's corporate office located at 420 Lexington Avenue, Suite 2739, New
York, NY 10170.

Section 16(a) Beneficial Ownership Reporting Compliance

            Section 16(a) of the Exchange requires that our directors and
executive officers and any persons who own more than ten percent of our common
stock file with the SEC initial reports of ownership and reports of changes in
ownership of our common stock and other equity securities. Such persons are
required by SEC regulations to furnish us with copies of all such reports that
they file. To our knowledge, based upon our review of these reports, all Section
16 reports required to be filed by our directors and executive officers during
the fiscal year ended June 30, 2006 were filed on a timely basis.

ITEM 10.  EXECUTIVE COMPENSATION

Summary Compensation Table

            The following table shows all cash compensation accrued and/or paid
by us to our two executive officers, as well as certain other compensation paid
or accrued, for the fiscal years ended June 30, 2006, 2005 and 2004. Mr. Nielson
became an executive officer in June 2004. Other than as set forth herein, no
executive officer's cash salary and bonus exceeded $100,000 in any of the
applicable years. The following information includes the dollar value of base
salaries, bonus awards, the value of restricted shares issued in lieu of cash
compensation and certain other compensation, if any, whether paid or deferred.


                                       20

<PAGE>

<TABLE>
<CAPTION>
                                                                                Long-Term Compensation
                                                                    ----------------------------------------------
                                        Annual Compensation                 Awards          Payouts
                                 --------------------------------   ---------------------   -------
                                                        Other       Restricted                             All
                                                        Annual         Stock     Options/     LTIP        Other
                                  Salary    Bonus    Compensation    Award(s)      SARs     Payouts   Compensation
Name and                         -------   -------   ------------   ----------   --------   -------   ------------
Principal Position        Year     ($)       ($)          ($)           ($)         (#)       ($)          ($)
-----------------------   ----   -------   -------   ------------   ----------   --------   -------   ------------
<S>                       <C>    <C>       <C>         <C>            <C>           <C>        <C>         <C>
Wayne I. Danson,          2006   125,794        --      9,884(2)           --
President, CEO            2005   215,000   125,000     22,476(2)      140,000       --         --          --
                          2004   150,000        --      9,122(1)           --       --         --          --

Martin Nielson,           2006   175,000        --         --              --
Sr. VP-Acquisitions(3)    2005   225,000    15,000         --         125,000(4)    --         --          --
                          2004    16,667    15,000         --              --       --         --          --
</TABLE>

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

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

(3)   Mr. Nielson resigned on July 19, 2006.

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

            Mr. Danson's compensation is paid pursuant to a Services Agreement
among Mr. Danson, Danson Partners, LLC and the Company. As described below under
"Employment Agreements," an annual base fee of $250,000 is payable under the
Services Agreement. During the fiscal year ended June 30, 2006, Mr. Danson and
Danson Partners. LLC deferred payment of $124,206 in fees. This amount has been
accrued on the Company's consolidated balance sheet as of June 30, 2006. Mr.
Danson and Danson Partners, LLC have continued to defer all fees through the
date of filing of this Report.

            We have no stock options, SAR or other bonus arrangements for our
employees and/or directors. During the fiscal year ended June 30, 2006, all
decisions concerning executive compensation were made by our Compensation
Committee.

Employment Agreements

            John E. Donahue and Steven J. Miller

            On September 25, 2006, Advanced Communications Technologies, Inc.
(the "Company") entered into employment agreements with John E. Donahue and
Steven J. Miller pursuant to which Mr. Donahue will serve as the Company's Chief
Financial Officer and Mr. Miller will serve as the Company's Chief Operating
Officer. On that date, Mr. Donahue was also appointed the Company's Assistant
Secretary. Mr. Donahue replaces Wayne I. Danson, who has served as the Company's
Chief Financial Officer since December 1999. Mr. Danson will continue as the
Company's President and Chief Executive Officer.

            Under these employment agreements, Mr. Donahue will receive a base
salary of $250,000 in the first and second years of employment and a base salary
of $275,000 in the optional year, if the Company exercises its option. Mr.
Miller will receive a base salary of $175,000 in the first year of employment,
$200,000 in the second year and $225,000 in the optional year, if the Company
exercises its option. The remaining terms of the employment agreements of Mr.
Donahue and Mr. Miller are identical and are as follows:

            o     Each employment agreement is effective as of September 25,
                  2006 and expires on the second anniversary thereof unless
                  terminated earlier in accordance with its terms. The Company
                  has the option to retain each executive for an additional
                  one-year period.

            o     At the request of the Company's Board of Directors, each
                  executive will serve as a director or officer of any
                  subsidiary of the Company without additional compensation.

            o     Each executive has received an award of 50,000,000 restricted
                  shares of common stock, no par value, of the Company, priced
                  at the closing price per share as of the date of grant, of
                  which (i) 10,000,000 shares shall be vested immediately upon
                  September 25, 2006, (ii) 15,000,000 shares will fully vest on
                  September 26, 2007, and (iii) 25,000,000 shares will fully
                  vest on September 26, 2008; provided, as to each vesting
                  traunche, that the executive is then employed by the Company;
                  and provided further that the number of such shares shall be
                  adjusted accordingly for stock splits, reverse stock splits
                  and other recapitalizations effected by the Company.


                                       21

<PAGE>

            o     For each fiscal year or portion thereof during the term of
                  each employment agreement, the Company may pay to each
                  executive an annual performance bonus, in cash, options to
                  purchase shares of common stock and/or restricted shares of
                  common stock, in an amount determined at the sole discretion
                  of the Compensation Committee. In addition, the Company may
                  grant cash bonuses, options to purchase shares of common stock
                  and/or restricted shares of common stock to each executive,
                  with a vesting schedule and other terms established by the
                  Compensation Committee, in its sole discretion.

            o     The Company is obligated to provide a $1,000,000 term life
                  insurance policy on each executive and to insure each
                  executive under a $2,000,000 key man life insurance policy.

            o     Each employment agreement contains restrictive covenants
                  prohibiting the executive from competing with the Company or
                  soliciting the Company's employees or customers for another
                  business during the term of the agreement and for a period of
                  two years after termination or the end of the employment term.

            o     The Company may terminate each employment agreement for
                  "cause" as defined therein or in the event that the respective
                  executive becomes "Permanently Disabled" as defined therein.
                  Each executive may terminate his agreement for "Good Reason"
                  as defined therein. Each employment agreement automatically
                  terminates upon the respective executive's death.

            o     In the event that the Company terminates the executive's
                  employment without cause, the Company will pay to the
                  executive (i) any accrued base salary and reimbursement for
                  business expenses incurred prior to the termination date and
                  any accrued unpaid bonus for the current and prior fiscal
                  years (the "Accrued Payments") and (ii) a severance payment
                  equal to the additional amount of base salary which would have
                  been payable to the executive during the six-month period
                  immediately following the termination date (the "Severance
                  Payment"), which Severance Payment will be payable in cash to
                  the executive in a lump sum no later than 30 days after the
                  termination date; notwithstanding the foregoing, if such
                  Severance Payment exceeds the exempt amount under Section 409A
                  of the Internal Revenue Code (the "Code") for an involuntary
                  separation pay arrangement, any amount in excess of the exempt
                  amount for involuntary separation pay arrangements will be
                  paid to the executive in a lump sum on the first business day
                  of the seventh month following the termination date. If it is
                  determined that the payment of the amount in excess of the
                  exempt amount in this manner nonetheless violates Code Section
                  409A, then such provision shall be deemed void and all such
                  Severance Payments will be paid to the executive in a lump sum
                  on the first business day of the seventh month following the
                  termination date.

            o     In the event that the executive terminates the employment
                  agreement for Good Reason, the Company will pay the executive
                  the Accrued Payments and the Severance Payments in a lump-sum
                  on the first business day of the seventh month following the
                  termination date.

            o     In the event that (i) within three months prior to a "Change
                  in Control" (as defined in the employment agreement), the
                  Company terminates the agreement without cause (including the
                  Company's refusal or failure to exercise the option period),
                  or (ii) within three months prior to, or twelve months
                  following a Change in Control, the executive terminates the
                  agreement with Good Reason due to (a) a reduction in base
                  salary or (b) the Company is a party to a merger or
                  consolidation in which it is not the surviving entity, and the
                  surviving or new entity does not undertake to assume and
                  perform the Company's obligations under the agreement, the
                  Severance Payment will be increased to an amount which, when
                  added to the base salary paid to the executive from the date
                  of Change of Control to the termination date, if any, equals
                  299% of the amount of base salary which would have been
                  payable to the executive during the twelve-month period
                  immediately following the termination date (the "Change in
                  Control Benefit"). In addition, upon such a termination, all
                  unvested stock options or stock awards held by the executive
                  shall immediately become accelerated and vested. Any payment
                  due in the foregoing events shall be paid in a lump sum on the
                  first business day of the seventh month following the last to
                  occur of the termination or Change in Control.


                                       22

<PAGE>

            o     In the event that within twelve months following a Change in
                  Control, the Company terminates the employment agreement
                  without cause (including the Company's refusal or failure to
                  exercise the option period), the Severance Payment shall be
                  increased to an amount which equals the Change in Control
                  Benefit. Any payment due in such event will be paid in a lump
                  sum no later than 30 days following the termination. In
                  addition, upon such a termination, all unvested stock options
                  or stock awards held by the executive shall immediately become
                  accelerated and vested.

            Danson Services Agreement

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

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

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

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


                                       23

<PAGE>

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

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

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

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

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

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

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

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

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

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


                                       24

<PAGE>

            On June 24, 2004 the Company entered into a two-year employment
agreement, as amended effective June 1, 2005, with Mr. Martin Nielson, our
former Senior Vice President, Acquisitions. Mr. Nielson's employment contract
expired by its terms on June 23, 2006. Under the terms of the employment
agreement Mr. Nielson was entitled to earn up to 50,000,000 shares of our
restricted stock valued at $.01 per share to vest over a two year period. On
July 1, 2005, 12,500,000 shares of restricted common stock vested and were
issued to Mr. Nielson. Under the terms of a general release and settlement
agreement with Mr. Nielson entered into on July 19, 2006, the unvested portion
of the common stock grant or 37,500,000 shares valued at $375,000 was forfeited
by Mr. Nielson.

Compensation Of Directors

            Our directors did not receive any cash or stock compensation for
their services as a director in fiscal 2006, but were reimbursed for all of
their out-of-pocket expenses incurred in connection with the rendering of
services as a director. Each of the independent directors is entitled to $25,000
in cash compensation, payable $6,250 per quarter of services rendered. In fiscal
2006, our independent directors did not receive any cash compensation from the
Company. In fiscal 2005, each of the independent directors received $18,750 in
cash compensation, payable $6,250 per quarter of service. Messer. Prouty
received an additional $5,000 for serving as Chairman of the Compensation
Committee. As of June 30, 2006, each independent director is owed $31,250, or
$125,000 in the aggregate, for director services rendered for the year ended
June 30, 2006 and for the three months ended June 30, 2005. On June 29, 2005,
each independent director received 75,000,000 shares of common stock having a
value of $52,500 as compensation for prior services rendered. The stock grants
were made under the Company's 2005 Stock Plan. Each independent director entered
into a Lock-Up Agreement with the Company with respect to such stock grant.

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

            The following table contains information about the beneficial
ownership of our common stock as of September 15, 2006 for:

            o     any person, who at June 30, 2006 owned more than five percent
                  (5%) of our common stock;

            o     each of our directors;

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

            o     all directors and executive officers as a group.

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

            Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community property
laws where applicable, the persons named in the table below have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The percentage of beneficial ownership is based on
4,597,302,006 shares of common stock outstanding as of September 15, 2006.


                                       25

<PAGE>

                                                      Common Stock
                                                   Beneficially Owned
                                             -----------------------------
Name/Title                                       Number        Percent (1)
------------------------------------------   -------------     -----------
Wayne I. Danson, President, CEO & Director     210,158,832(2)       4.57%
John E. Donahue, VP & Chief Financial
  Officer                                                0(5)      00.00%
Steven J. Miller, Chief Operating Officer                0(5)      00.00%
Jonathan J. Lichtman, Secretary & Director     105,710,334(3)       2.30%
Dr. Michael Finch, Director                     75,591,334          1.64%
Randall Prouty, Director                        88,527,080          1.93%
Wilbank Roche, Director                         93,507,143          2.03%
David G. Boshart                               532,585,003(4)      11.58%
                                             -------------        ------
  Total                                      1,106,079,726        24.06.%
                                             =============        ======
All Executive Officers and Directors as a
  Group (7) persons)                           573,494,723         12.47%
                                             =============        ======

----------
(1)   Percentage of outstanding shares is based on 4,597,302,006 shares of
      common stock outstanding as of September 15, 2006, together with shares
      deemed beneficially owned by each shareholder. Beneficial ownership is
      determined in accordance with the rules of the Securities and Exchange
      Commission and generally includes voting or investment power with respect
      to securities.

(2)   Includes 39,808,832 shares beneficially owned by Mr. Danson's affiliated
      entity and spouse. Includes 31,500,000 shares held by Mr. Danson's adult
      children. Mr. Danson has no beneficial ownership in these shares.

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

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

(5)   On September 27, 2006 pursuant to their employment contracts, Messrs.
      Donahue and Miller were each issued 10,000,000 shares of restricted common
      stock.

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


                                       26

<PAGE>

Existing Stock Compensation Plans

            The following table sets forth information as of June 30, 2006
regarding our existing compensation plans and individual compensation
arrangements pursuant to which our equity securities are authorized for issuance
to employees or non-employees (such as directors, consultants and advisors) in
exchange for consideration in the form of services:

<TABLE>
<CAPTION>
                                                                                               Number of securities
                                                                                              remaining available for
                                         Number of securities to be     Weighted-average       future issuance under
                                           issued upon exercise of      exercise price of    equity compensation plans
                                            outstanding options,      outstanding options,     (excluding securities
             Plan Category                   warrants and rights       warrants and rights   reflected in column (a))
--------------------------------------   --------------------------   --------------------   -------------------------
                                                     (a)                       (b)                      (c)
<S>                                                   <C>                       <C>                 <C>
Equity compensation plans approved by
  security holders                                    0                         0                             0
Equity compensation plans not approved
  by security holders (1)                             0                         0                   200,000,000(2)
                                                    ---                       ---                   -----------
Total                                                 0                         0                   200,000,000
                                                    ===                       ===                   ===========
</TABLE>

----------
(1)   Pursuant to the terms of Mr. Nielson's employment agreement, Mr. Nielson
      is entitled to receive 50,000,000 shares of the Company's restricted
      common stock, priced at $.01 per share, of which (i) 12,500,000 shares
      vested on July 1, 2005; and (ii) 37,500,000 shares would fully vest on
      July 1, 2006, provided that Mr. Nielson was then employed by the Company.
      The 12,500,000 shares were issued to Mr. Nielson on July 1, 2005. The
      employment contract with Mr. Nielson expired on June 23, 2006 and the
      unvested 37,500,000 shares were forfeited. The terms of Mr. Nielson's
      employment agreement are discussed in more detail under Part III - Item
      10. Executive Compensation - Employment Agreements.

(2)   Pursuant to the Company's 2005 Stock Plan, 200,000,000 shares of the
      Company's common stock remain available for issuance as incentive stock
      options or as nonqualified stock options. A description of the 2005 Stock
      Plan is set forth in Note 12(E) of the Notes to Consolidated Financial
      Statements included in this Annual Report on Form 10-KSB.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            Jonathan J. Lichtman, Secretary and a director of the Company, is a
partner at Levinson & Lichtman, LLP, a law firm in Boca Raton, FL that the
Company retained to provide legal services during fiscal years 2006 and 2005.
The Company paid Levinson & Lichtman, LLP, $1,538 and $45,705 in fiscal 2006 and
2005, respectively, for legal services rendered. As of June 30, 2006, the
Company had no amounts owed to Levinson & Lichtman, LLP.

            Wilbank Roche, a director of the Company, is a partner at Roche &
Holt, a law firm in Los Angeles, CA that the Company retained to provide legal
services during fiscal years 2006 and 2005. The Company paid Roche & Holt $2,513
and $31,177 during fiscal 2006 and 2005, respectively, for legal services
rendered. As of June 30, 2006, the Company owed $1,100 to Roche & Holt.

            During the fiscal year ended June 30, 2005, the Company paid Mr.
Prouty $20,073 in cash for past services rendered. There was no payment made to
Mr. Prouty in fiscal 2006. As of June 30, 2006, the Company had no amounts owed
to Mr. Prouty.

            The Company, through a license agreement effective December 1, 2004
with Danson Partners, LLC ("DPL"), a party related to our chief executive
officer, occupies a 499 square foot office facility at 420 Lexington Avenue, New
York, NY 10170, having a monthly lease obligation of $1,478, as adjusted
annually. The Company's license agreement is on a month-to-month basis and is at
fair market rental. Under the Danson Service Agreement, the Company paid
$135,678 in fiscal 2006 to DPL for the services and expenses of Mr. Danson. As
of June 30, 2006, the Company owed DPL $257,617 for services and reimbursable
expenses.


                                       27

<PAGE>

            On April 24, 2006, the Company issued an unsecured promissory note
to Mr. Wayne Danson, our Chief Executive Officer, for proceeds of $35,000. The
note bears interest at 10% per annum. Payments of principal and accrued interest
are due on October 24, 2006.

ITEM 13. EXHIBITS

Exhibit No.   Description                       Location (1)
-----------   -------------------------------   -------------------------------
2.1           Asset Purchase Agreement dated    Incorporated by reference to
              May 27, 2004, by and between      Exhibit 10.1 to the Company's
              Cyber-Test, Inc., a Delaware      Form 8-K filed with the SEC on
              corporation, and Cyber-Test,      June 18, 2004
              Inc., a Florida corporation.

2.2           Stock Purchase Agreement, dated   Incorporated by reference to
              as of December 10, 2004, among    Exhibit 2.14.1 to the Company's
              Advanced Communications           Form 8-K filed with the SEC on
              Technologies, Inc., Theodore S.   December 14, 2004
              Li and Hui Cynthia Lee.

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

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

3(I)(c)       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 with the SEC on
                                                February 9, 2000

3(I)(d)       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

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

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

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

3(I)(h)       Eighth Amendment to Articles of   Incorporated by reference to
              Incorporation                     Exhibit 3.1 to the Company's
                                                Form 8-K filed with the SEC on
                                                September 19, 2006

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


                                       28

<PAGE>

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

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

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

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

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

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

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

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

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

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


                                       29

<PAGE>

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

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

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

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

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

4.16          Investment Agreement dated        Incorporated by reference to
              September 8, 2006 by and          Exhibit 4.1 to the Company's
              between Advanced Communications   Form 8-K filed with the SEC on
              Technologies, Inc. and the        September 19, 2006
              Series A-1 Preferred
              Stockholders

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

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

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


                                       30

<PAGE>

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

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

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

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

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

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

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

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

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

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


                                       31

<PAGE>

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

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

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

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

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

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

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

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

10.22*        January 1, 2005 Amendment to      Incorporated by reference to
              Employment Agreement by and       Exhibit 10.22 to the Company's
              among Encompass Group             Form 10-KSB filed with the SEC
              Affiliates, Inc., Advanced        on October 3, 2005
              Communications Technologies,
              Inc. and Martin Nielson.


                                       32

<PAGE>

10.23*        Employment Agreement dated        Incorporated by reference to
              September 21, 2006 between        Exhibit 10.23 to the Company's
              Advanced Communications           Form 8-K filed with the SEC on
              Technologies, Inc. and John E.    September 29, 2006
              Donahue

10.24*        Employment Agreement dated        Incorporated by reference to
              September 8, 2006 between         Exhibit 10.23 to the Company's
              Advanced Communications           Form 8-K filed with the SEC on
              Technologies, Inc. and Steven     September 29, 2006
              J. Miller

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

21            Subsidiaries of Advanced          Provided herewith
              Communications Technologies,
              Inc.

31.1          Certification by Chief            Provided herewith
              Executive Officer pursuant to
              Sarbanes-Oxley Section 302

31.2          Certification by Chief            Provided herewith
              Financial Officer pursuant to
              Sarbanes-Oxley Section 302

32.1          Certification by Chief            Provided herewith
              Executive Officer pursuant to
              18 U.S.C. Section 1350

32.2          Certification by Chief            Provided herewith
              Financial Officer pursuant to
              18 U.S.C. Section 1350

*     Management contract or management compensatory plan or arrangement.

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

            Our independent auditors, Berenson LLP, has billed us (a) $43,853
for the audit of the Company's annual consolidated financial statements for the
fiscal years ended June 30, 2006 and the review of the Company's Forms 10-KSB
for the fiscal year ended June 30, 2006 and (b) a total of $29,883 for the
reviews of our consolidated financial statements included in the Company's Forms
10-QSB for the quarters ended December 31, 2005 and March 31, 2006.

            The aggregate fees billed for professional services rendered by
Weinberg & Company, P.A., the Company's prior independent auditors, were (a)
$106,520 for the audit of the Company's annual consolidated financial statements
for the fiscal year ended June 30, 2005 and the reviews of the consolidated
financial statements included in the Company's Forms 10-QSB for the fiscal year
ended June 30, 2005 and (b) $14,745 for the review of the financial statements
included in the Company's Forms 10-QSB for the quarter ended September 30, 2005.


                                       33

<PAGE>

Audit-Related Fees

            For the fiscal year ended June 30, 2006, the aggregate fees billed
for professional services rendered by our independent auditors, Berenson LLC,
was $2,160 related to correspondence with the Securities and Exchange Commission
for audit related matters.

            The aggregate fees billed for professional services rendered by our
prior independent auditors, Weinberg & Company, P.A., was $1,500 related to the
filing of our Form 8-K and $12,785 in connection with due diligence services for
PMIC and Cyber-Test, Inc. for the fiscal years ended June 30, 2006 and 2005,
respectively.

Tax Fees

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

All Other Fees

            Other than the services described above, the aggregate fees billed
for services rendered by Berenson LLP was $121,863 for the fiscal year ended
June 30, 2006. These fees were related to the audits and due diligence services
for acquiring certain business targets.

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

            All engagements of our independent auditor to perform any audit
services and non-audit services were approved by the Audit Committee in
accordance with its normal functions. During the fiscal years ended June 30,
2006 and 2005, no audit services or non-audit services were approved by the
Audit Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X. The Board
of Directors and the Audit Committee are in the process of creating a policy to
pre-approve all audit services and all non-audit services that our independent
auditor will perform for us under applicable federal securities regulations. As
permitted by the applicable regulations, we anticipate that the Audit
Committee's policy will utilize a combination of specific pre-approval on a
case-by-case basis of individual engagements of our independent auditor and
general pre-approval of certain categories of engagements up to predetermined
dollar thresholds that will be reviewed annually by the Audit Committee.


                                       34

<PAGE>

                                   SIGNATURES

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

                                      ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.


                                      By: /s/ Wayne I. Danson
                                          --------------------------------------
                                      Name: Wayne I. Danson
                                      Title: President and Chief Executive
                                               Officer
                                      Date: October 12, 2006

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

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


/s/ Wayne I. Danson
------------------------------
Wayne I. Danson                  President and Chief Executive Officer (Principal
                                 Executive Officer)
                                 and Director                                       October 12, 2006


/s/ John E. Donahue
------------------------------
John E. Donahue                  Vice President and Chief Financial Officer
                                 (Principal Accounting Officer)                     October 12, 2006


/s/ Jonathan Lichtman
------------------------------
Jonathan Lichtman, Esq.          Secretary and Director                             October 12, 2006


/s/ Dr. Michael Finch
------------------------------
Dr. Michael Finch                Director                                           October 12, 2006


/s/ Randall Prouty
------------------------------
Randall Prouty                   Director                                           October 12, 2006


/s/ Wilbank J. Roche
------------------------------
Wilbank J. Roche, Esq.           Director                                           October 12, 2006
</TABLE>


                                       35

<PAGE>

                                  EXHIBIT INDEX

Exhibit No.   Description                       Location (1)
-----------   -----------                       ------------
2.1           Asset Purchase Agreement dated    Incorporated by reference to
              May 27, 2004, by and between      Exhibit 10.1 to the Company's
              Cyber-Test, Inc., a Delaware      Form 8-K filed with the SEC on
              corporation, and Cyber-Test,      June 18, 2004
              Inc., a Florida corporation.

2.2           Stock Purchase Agreement, dated   Incorporated by reference to
              as of December 10, 2004, among    Exhibit 2.14.1 to the Company's
              Advanced Communications           Form 8-K filed with the SEC on
              Technologies, Inc., Theodore S.   December 14, 2004
              Li and Hui Cynthia Lee.

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

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

3(I)(c)       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 with the SEC on
                                                February 9, 2000

3(I)(d)       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

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

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

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

3(I)(h)       Eighth Amendment to Articles of   Incorporated by reference to
              Incorporation                     Exhibit 3.1 to the Company's
                                                Form 8-K filed with the SEC on
                                                September 19, 2006

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

4.16          Investment Agreement dated        Incorporated by reference to
              September 8, 2006 by and          Exhibit 4.1 to the Company's
              between Advanced Communications   Form 8-K filed with the SEC on
              Technologies, Inc. and the        September 19, 2006
              Series A-1 Preferred
              Stockholders

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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


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

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

10.22*        January 1, 2005 Amendment to      Incorporated by reference to
              Employment Agreement by and       Exhibit 10.22 to the Company's
              among Encompass Group             Form 10-KSB filed with the SEC
              Affiliates, Inc., Advanced        on October 3, 2005
              Communications Technologies,
              Inc. and Martin Nielson.

10.23*        Employment Agreement dated        Incorporated by reference to
              September 21, 2006 between        Exhibit 10.23 to the Company's
              Advanced Communications           Form 8-K filed with the SEC on
              Technologies, Inc. and John E.    September 29, 2006
              Donahue

10.24*        Employment Agreement dated        Incorporated by reference to
              September 8, 2006 between         Exhibit 10.23 to the Company's
              Advanced Communications           Form 8-K filed with the SEC on
              Technologies, Inc. and Steven     September 29, 2006
              J. Miller

<PAGE>

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

21            Subsidiaries of Advanced          Provided herewith
              Communications Technologies,
              Inc.

31.1          Certification by Chief            Provided herewith
              Executive Officer pursuant to
              Sarbanes-Oxley Section 302

31.2          Certification by Chief            Provided herewith
              Financial Officer pursuant to
              Sarbanes-Oxley Section 302

32.1          Certification by Chief            Provided herewith
              Executive Officer pursuant to
              18 U.S.C. Section 1350

32.2          Certification by Chief            Provided herewith
              Financial Officer pursuant to
              18 U.S.C. Section 1350

*     Management contract or management compensatory plan or arrangement.

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

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006


                                        i

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES

                                    CONTENTS

PAGE   F-1-F1a  REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

PAGE     F-2    CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2006 AND 2005

PAGE     F-3    CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE
                  30, 2006 AND 2005

PAGE     F-4    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR
                  THE YEARS ENDED JUNE 30, 2006 AND 2005

PAGE     F-5    CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE
                  30, 2006 AND 2005

PAGES F6 - F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       ii

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheet of Advanced
Communications Technologies, Inc., and Subsidiaries as of June 30, 2006 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the 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
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the financial position of Advanced
Communications Technologies, Inc. and Subsidiaries as of June 30, 2006, and the
results of their operations and their cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1(B) to
the consolidated financial statements, the Company had a net loss of $573,841
and had a working capital deficiency of $1,296,350 at June 30, 2006. These
matters raise substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 1(B). The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Berenson LLP


New York, New York

August 30, 2006, except for notes 5(B), 9, 10(E), 12(B), 15(c) and 16(B) as to
which the date is September 25, 2006.


                                      F-1

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

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

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the financial position and the results of the
operations and cash flows of Advanced Communications Technologies, Inc. and
Subsidiaries for the year ended June 30, 2005 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 1(B) to
the consolidated financial statements, the Company had a net loss of $735,833
for the year ended June 30, 2005 and had a working capital deficiency of
$139,363 at June 30, 2005. These matters raise substantial doubt about its
ability to continue as a going concern. Management's plans in regards to these
matters are also described in Note 1(B). The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

WEINBERG & COMPANY, P.A.


Boca Raton, Florida
September 23, 2005


                                      F-1a

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                 June 30,
                                                                                       ---------------------------
                                                                                           2006           2005
                                                                                       ------------   ------------
<S>                                                                                    <C>            <C>
ASSETS
  Current Assets
    Cash and cash equivalents                                                          $    756,093   $    836,876
    Accounts receivable, net of allowance for doubtful accounts of $4,634
    and $4,723 at June 30, 2006 and 2005, respectively                                      372,273        364,285
    Replacement parts and equipment                                                         414,425        367,453
    Prepaid expenses and other current assets                                               119,961        130,605
                                                                                       ------------   ------------
  Total Current Assets                                                                    1,662,752      1,699,219
                                                                                       ------------   ------------
  Property and equipment, net                                                               228,361        259,764
                                                                                       ------------   ------------
  Other Assets
    Other assets                                                                              7,601             --
    Deferred acquisition costs                                                              301,921             --
    Licensed intangibles and rights                                                         400,000        400,000
    Goodwill                                                                              2,624,388      2,611,055
                                                                                       ------------   ------------
  Total Other Assets                                                                      3,333,910      3,011,055
                                                                                       ------------   ------------
TOTAL ASSETS                                                                           $  5,225,023   $  4,970,038
                                                                                       ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
  Current Liabilities
    Current portion of notes payable and capitalized lease obligation                  $    965,909   $  1,020,028
    Accounts payable and accrued expenses                                                 1,993,193        818,554
                                                                                       ------------   ------------
  Total Current Liabilities                                                               2,959,102      1,838,582
  Long-term notes and loans payable, less current portion                                    15,340        205,367
                                                                                       ------------   ------------
TOTAL LIABILITIES                                                                         2,974,442      2,043,949
                                                                                       ------------   ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value, 25,000 shares authorized:
    Series A convertible preferred stock, $.01 par value, 3,585 and 4,200 shares
      issued and outstanding at June 30, 2006 and 2005, respectively
      (liquidation value of $3,585,000 and $4,200,000 as of June 30, 2006 and 2005,
  respectively)                                                                                  36             42
    Series B convertible preferred stock, $.01 par value, 60 and 100 shares issued
      and outstanding at June 30, 2006 and 2005, respectively (liquidation value of
      $60,000 and $100,000 as of June 30, 2006 and 2005, respectively)                            1              1
  Common stock, no par value, 5,000,000,000 shares authorized,
      4,167,927,006 and 3,151,773,731 shares issued and outstanding at June 30, 2006
      and 2005, respectively                                                             30,455,040     29,751,907
  Additional paid in capital                                                              4,397,037      5,426,831
  Deferred commitment and equity financing fees, net of accumulated amortization                 --        (25,000)
  Deferred compensation, net of amortization of $500,000 and $250,000 at
      June 30, 2006 and 2005, respectively                                                       --       (250,000)
  Accumulated deficit                                                                   (32,601,533)   (31,977,692)
                                                                                       ------------   ------------
  Total Stockholders' Equity                                                              2,250,581      2,926,089
                                                                                       ------------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $  5,225,023   $  4,970,038
                                                                                       ============   ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                       F-2

<PAGE>

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

<TABLE>
<CAPTION>
                                                                             For The Years Ended June 30,
                                                                           -------------------------------
                                                                                2006             2005
                                                                           --------------   --------------
<S>                                                                        <C>              <C>
NET SALES                                                                  $    9,183,276   $    7,521,723
COST OF SALES                                                                   5,959,085        4,879,081
                                                                           --------------   --------------
GROSS PROFIT                                                                    3,224,191        2,642,642
                                                                           --------------   --------------
OPERATING EXPENSES
    Depreciation and amortization                                                  98,420          124,175
    Professional and consulting fees                                              861,534          476,718
    Other selling, general and administrative expenses                          2,975,366        3,848,642
                                                                           --------------   --------------
TOTAL OPERATING EXPENSES                                                        3,935,320        4,449,535
                                                                           --------------   --------------
Loss From Continuing Operations before Other Income (Expenses)                   (711,129)      (1,806,893)
                                                                           --------------   --------------
OTHER INCOME AND (EXPENSES)
    Litigation settlement                                                         220,083        2,847,511
    Loss on partnership redemption                                                     --         (191,292)
    Distributable share of partnership income                                          --          385,233
    Write-off of investment in Pacific Magtron International Corp.                     --         (668,834)
    Interest expense, net                                                         (82,795)        (106,184)
                                                                           --------------   --------------
TOTAL OTHER INCOME, NET                                                           137,288        2,266,434
                                                                           --------------   --------------
INCOME (LOSS) FROM CONTINUING OPERATIONS                                   $     (573,841)  $      459,541
LOSS FROM DISCONTINUED OPERATIONS, NET OF MINORITY INTEREST                            --       (1,195,374)
                                                                           --------------   --------------
NET LOSS                                                                   $     (573,841)  $     (735,833)
                                                                           ==============   ==============
Earnings (loss) per share:
    Basic and diluted income (loss) per share from continuing operations   $           --   $           --
                                                                           ==============   ==============
    Basic and diluted loss per share from discontinued operations          $           --   $           --
                                                                           ==============   ==============
    Net basic and diluted loss per share                                   $           --   $           --
                                                                           ==============   ==============
Weighted average number of shares
  outstanding during the year - basic and dilutive                          3,514,362,488    2,072,211,255
                                                                           ==============   ==============
</TABLE>

           See accompanying notes to consolidated financial statements


                                       F-3

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

<TABLE>
<CAPTION>
                                           COMMON STOCK          PREFERRED STOCK   ADDITIONAL
                                   ---------------------------   ---------------     PAID IN
                                       SHARES         AMOUNT     SHARES   AMOUNT     CAPTIAL
                                   -------------   -----------   ------   ------   ----------
<S>                                <C>             <C>           <C>        <C>    <C>
BALANCE AT JUNE 30, 2004           1,994,365,845   $28,745,253   4,500      $45    $4,056,455
Reversal of escrowed stock
  issued to pay short term debt     (162,999,640)           --      --       --            --
Stock issued in partial payment
  of short term note                 172,881,526       100,000      --       --            --
Stock issued in exchange for
  services                           505,000,000       357,500      --       --            --
Stock issued on conversion of
  Series B preferred stock           400,000,000       200,000    (200)      (2)     (199,998)
Deferred compensation                 12,500,000       125,000      --       --       375,000
Amortization of deferred
  compensation                                --            --      --       --            --
Adjustment to reflect the effect
  of a change in accounting from
  the equity method to the cost
  method for the investment in
  Pacific Magtron
International Corp. ("PMIC")                  --            --      --       --     1,195,374
Amortization of deferred
  commitment & financing fees                 --        (5,872)     --       --            --
Stock issued for convertible
  debt and accrued interest          230,026,000       230,026      --       --            --
Net loss for the year                         --            --      --       --            --
                                   -------------   -----------   -----      ---    ----------
BALANCE AT JUNE 30, 2005           3,151,773,731    29,751,907   4,300       43     5,426,831
Stock issued on conversion of
  Series A preferred stock           885,994,544       614,800    (615)      (6)     (614,794)
Stock issued on conversion of
  Series B preferred stock            63,492,064        40,000     (40)      --       (40,000)
Escrow of Contingent stock            16,666,667        13,333      --       --            --
Stock issued for executive bonus      50,000,000        35,000      --       --            --
Amortization of deferred
  compensation                                                                       (375,000)
Amortization of deferred
  commitment & financing fees
Accrued distribution of
  Herborium Inc.'s common shares
  to shareholders
Net loss for the year
                                   -------------   -----------   -----      ---    ----------
BALANCE AT JUNE 30, 2006           4,167,927,006   $30,455,040   3,645      $37    $4,397,037
                                   =============   ===========   =====      ===    ==========

<CAPTION>
                                                     DEFFERED
                                                  COMMITMENT AND
                                   ACCUMULATED        EQUITY         DEFERRED
                                     DEFICIT      FINANCING FEES   COMPENSATION      TOTAL
                                   ------------   --------------   ------------   ----------
<S>                                <C>               <C>            <C>           <C>
BALANCE AT JUNE 30, 2004           $(31,241,859)     $(135,432)     $       --    $1,424,462
Reversal of escrowed stock
  issued to pay short term debt              --             --              --            --
Stock issued in partial payment
  of short term note                         --             --              --       100,000
Stock issued in exchange for
  services                                   --             --              --       357,500
Stock issued on conversion of
  Series B preferred stock                                                                --
Deferred compensation                        --             --        (500,000)           --
Amortization of deferred
  compensation                               --                        250,000       250,000
Adjustment to reflect the effect
  of a change in accounting from
  the equity method to the cost
  method for the  investment in
  Pacific Magtron                                                                         --
International Corp. ("PMIC")                                --              --     1,195,374
Amortization of deferred
  commitment & financing fees                --        110,432              --       104,560
Stock issued for convertible
  debt and accrued interest                  --             --              --       230,026
Net loss for the year                  (735,833)            --              --      (735,833)
                                   ------------      ---------      ----------    ----------
BALANCE AT JUNE 30, 2005            (31,977,692)       (25,000)       (250,000)    2,926,089
Stock issued on conversion of
  Series A preferred stock                                                  --            --
Stock issued on conversion of
  Series B preferred stock
Escrow of Contingent stock                                                  --        13,333
Stock issued for executive bonus                                            --        35,000
Amortization of deferred
  compensation                                                         250,000      (125,000)
Amortization of deferred
  commitment & financing fees                           25,000                        25,000
Accrued distribution of
  Herborium Inc.'s common shares
  to shareholders                       (50,000)                                     (50,000)
Net loss for the year                  (573,841)                                    (573,841)
                                   ------------     ----------      ----------    ----------
BALANCE AT JUNE 30, 2006           $(32,601,533)    $       --        $     --    $2,250,581
                                   ============     ==========      ==========    ==========
</TABLE>

           See accompanying notes to consolidated financial statements


                                       F-4

<PAGE>

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

<TABLE>
<CAPTION>
                                                                    For the Years Ended June 30,
                                                                    ----------------------------
                                                                         2006          2005
                                                                      ----------   -----------
<S>                                                                   <C>          <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATIONS:
Net loss                                                              $ (573,841)  $  (735,833)
                                                                      ----------   -----------
Adjustments to reconcile net loss to net cash provided by (used
  in) operating activities:
  Depreciation and amortization                                           98,420       124,175
  Amortization of deferred compensation                                 (125,000)      250,000
  Allowance for doubtful accounts                                            (89)           --
  Stock issued in payment of accrued interest                                 --        40,526
  Stock issued for services                                               35,000       357,500
  Debt discount expense                                                       --        36,977
  Litigation settlement                                                 (220,083)   (2,847,511)
  Loss on partnership redemption                                              --       191,292
  Distributive share of partnership income                                    --      (385,233)
  Write-off of investment in Pacific Magtron International Corp.              --       668,834
Changes in operating assets and liabilities:
(Increase) decrease in assets:
  Accounts receivables                                                    (7,899)       36,462
  Deferred Costs and other receivables                                        --       (37,252)
  Replacement parts and equipment                                        (46,972)      (16,490)
  Prepaid expense and other assets                                        (4,457)       12,011
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses                                1,169,722       233,235
                                                                      ----------   -----------
Net cash provided by (used in) continuing operations                     324,801    (2,071,307)
Net cash used in discontinued operations                                      --     1,195,374
                                                                      ----------   -----------
Net cash provided by (used in) operating activities                      324,801      (875,933)
                                                                      ----------   -----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Partnership distributions                                                     --       280,000
Purchase of business/fixed assets                                        (42,017)     (193,945)
Proceeds from partnership redemption                                          --     2,688,940
Deferred acquisition costs                                              (301,921)           --
Sale of investment securities                                              7,500            --
Purchase of investment securities                                             --       (91,618)
                                                                      ----------   -----------
Net cash provided by (used in) investing activities                     (336,438)    2,683,377
                                                                      ----------   -----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of promissory note                                 35,000            --
Principal payments on notes payable and capitalized lease               (104,146)   (2,233,416)
Proceeds from capitalized lease                                               --        69,678
                                                                      ----------   -----------
Net cash used in financing activities                                    (69,146)   (2,163,738)
                                                                      ----------   -----------
Net decrease in cash and cash equivalents                                (80,783)     (356,294)
Cash and cash equivalents at beginning of year                           836,876     1,193,170
                                                                      ----------   -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                              $  756,093   $   836,876
                                                                      ==========   ===========
</TABLE>

           See accompanying notes to consolidated financial statements


                                       F-5

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

NOTE 1. BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES

      (A)   Organization

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

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

            Encompass, with our wholly-owned subsidiary Cyber-Test as its
platform, seeks to become a leader in the reverse logistics industry through the
acquisition of assets and companies in that industry, and then instilling
sustainable growth skills as a core competency. Encompass is focused on
eliminating the risks associated with environmental compliance in the e-Recycle
industry by repairing, refurbishing, sorting and selling old components to
specialized processors such as smeltering plants.

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

            Pacific Magtron International Corp. ("PMIC") together with its
wholly-owned subsidiaries Pacific Magtron, Inc. ("PMI"), Pacific Magtron (GA),
Inc. ("PMIGA") and Live Warehouse, Inc. ("LW"), was our 62% majority-owned
subsidiary that was acquired as of December 30, 2004 (See Note 9). PMIC's
principal business consisted of the importation and wholesale distribution of
electronics products, computer components, and computer peripheral equipment
throughout the United States. LW sold consumer computer products through the
Internet and distributed certain computer products to resellers. On May 11, 2005
(the "Petition Date"), PMIC, PMI, PMIGA and LW filed voluntary petitions to
reorganize their businesses under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Southern District of Nevada,
(the "Bankruptcy Court"). The Bankruptcy Court is jointly administering these
cases as "In re: Pacific Magtron International Corp., et al., Case
No.BK-S-05-14326 LBR". Because PMIC was unsuccessful in reaching an agreement
with one of its secured creditors, on June 23, 2005 it ceased all business
activities except those necessary to liquidate its remaining assets.

            On June 21, 2006, PMIC and LW filed the Fourth Amended Plans of
Reorganization for PMIC and LW (collectively, the "Plan"). On August 11, 2006
(the "Confirmation Date"), the Court entered an order (Docket No. 910)
("Confirmation Order") approving and confirming the Plan, including the Mutual
Settlement Agreement and Release (the "Settlement Agreement") among the Company,
ACT and two terminated executives (See Notes 9 and 15(B)). The effective date of
the Plan was September 18, 2006.

      (B)   Basis of Accounting

            The Company's consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business. The Company incurred
a net loss of $573,841 and $735,833 for the years ended June 30, 2006 and 2005,
respectively. The Company had a working capital deficiency of $1,296,350 and
$139,363 as of June 30, 2006 and 2005, respectively. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon it
achieving profitability and generating sufficient cash flows to meet its
obligations as they come due. Management is pursuing additional capital and debt
financing and acquisition of profitable businesses. However, there is no
assurance that these efforts will be successful. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


                                      F-6

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

      (C)   Financial Statement Presentation And Principles Of Consolidation

            The consolidated financial statements include the Company and all of
its wholly-owned subsidiaries. All significant inter-company transactions have
been eliminated in consolidation. The Company consolidates all majority-owned
and controlled subsidiaries, uses the equity method of accounting for
investments in which the Company is able to exercise significant influence, and
uses the cost method for all other investments. In accordance with ARB51 and
FAS94, the Company's consolidated financial statements include the consolidated
financial results of PMIC, a majority-owned and controlled company, and its
wholly-owned subsidiaries, PMI, PMIGA and LW for the period January 1, 2005
through May 11, 2005, the date PMIC and its subsidiaries filed voluntary
petitions to reorganize their businesses under Chapter 11 of the U.S. Bankruptcy
Code.

            Due to the bankruptcy filing of PMIC and its subsidiaries on May 11,
2005, and as of that date, the Company was no longer able to exercise management
control over PMIC's business or operations. Effective May 11, 2005, the Company
accounted for its investment in PMIC under the cost method of accounting. At
June 30, 2005, the Company wrote off its entire investment in PMIC. Effective
June 30, 2005, PMIC ceased its operations except for liquidating its assets. The
financial results of PMIC are reclassified as discontinued operations in the
accompanying consolidated financial statements.

      (D)   Use of Estimates

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

      (E)   Allowance For Doubtful Accounts

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

      (F)   Long-Lived Assets

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


                                      F-7

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

      (G)   Goodwill

            In accordance with SFAS No. 141, the Company allocates the purchase
price of its acquisitions to the tangible assets, liabilities and intangible
assets acquired based on their estimated fair values. The excess purchase price
over those fair values is recorded as "Goodwill". The fair value assigned to
intangible assets acquired is based on valuations prepared by management using
certain estimates and assumptions or the values negotiated at arms-length
between the Company and the seller of the acquired assets. In accordance with
SFAS No. 142, goodwill and purchased intangibles with indefinite lives acquired
after June 30, 2001 are not amortized, but will be reviewed periodically for
impairment. Purchased intangibles with finite lives will be amortized on a
straight-line basis over their respective useful lives. As of June 30, 2006,
these intangible assets were not impaired.

      (H)   Replacement Parts and Equipment

            Replacement parts and equipment consist primarily of repair parts
and used machines that are held for repair exchange, and are stated at the lower
of weighted average cost or market. The weighted average cost of replacement
parts and equipment approximates the first-in, first-out ("FIFO") method.
Management performs periodic assessments to determine the existence of obsolete,
slow-moving and non-usable replacement parts and equipment and records necessary
provisions to reduce such replacement parts and equipment to net realizable
value.

      (I)   Earnings (Loss) Per Share

            Basic earnings (loss) per share is computed by dividing income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect the
potential dilution of securities, using the treasury stock method that could
share in the earnings of an entity. During the fiscal years ended June 30, 2006
and 2005, shares of common stock that could have been issued upon conversion of
convertible debt were excluded from the calculation of diluted earnings (loss)
per share, as their effect would have been anti-dilutive.

      (J)   Property and Equipment

            Property and equipment are stated at cost. Assets are depreciated
using the straight-line method based on the following estimated useful lives:

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

            Maintenance and repairs are charged to expense when incurred.

      (K)   Warranty Reserve

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

      (L)   Fair Value of Financial Instruments

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

      (M)   Revenue Recognition

            The Company recognizes the majority of its revenue from the exchange
of refurbished computer equipment and related products upon delivery of goods to
a common carrier for delivery to the customer. In addition, revenue for the
repair of customer owned equipment is recognized upon completion of the repair.
The Company assumes the risk of loss due to damage or loss of products during
shipment. The Company is reimbursed by the common carriers for shipping damage
and lost products. The Company includes shipping costs in cost of sales. Total
shipping costs included in cost of sales for the years ended June 30, 2006 and
2005 were approximately $1,469,000 and $929,000, respectively. The Company also
sells extended warranty and product maintenance contracts. Revenue from these
contracts is deferred and recognized as income on a straight-line basis over the
life of the contract, which is typically for a period of one year. Service
warranty and product maintenance revenue represented less than 5% of the
Company's total revenue for fiscal 2006 and 2005.


                                      F-8

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

      (N)   Income Taxes

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

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

      (O)   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.

      (P)   Investment in Unconsolidated Partnership

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

      (Q)   Recent Accounting Pronouncements

            On June 7, 2005, the FASB issued Statement No. 154, "Accounting
Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting
Changes," and Statement No. 3, "Reporting Accounting Changes in Interim
Financial Statements." Statement 154 changes the requirements for the accounting
for and reporting of a change in accounting principle. Previously, most
voluntary changes in accounting principles required recognition of a cumulative
effect adjustment within net income of the period of the change. Statement 154
requires retrospective application to prior periods' financial statements,
unless it is impracticable to determine either the period-specific effects or
the cumulative effect of the change. Statement 154 is effective for accounting
changes made in fiscal years beginning after December 15, 2005; however, the
Statement does not change the transition provisions of any existing accounting
pronouncements. The Company does not believe adoption of Statement 154 will have
a material effect on the Company's financial position, results of operations, or
cash flows.

            In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 157 - Fair Value Measurements
("SFAS157"). SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles ("GAAP"), and expands
disclosures about fair value measurements.

            Prior to SFAS 157, there were different definitions of fair value
and limited guidance for applying those definitions in GAAP. Moreover, that
guidance was dispersed among the many accounting pronouncements that require
fair value measurements. SFAS 157 clarifies that the exchange price is the price
in an orderly transaction between market participants to sell the asset or
transfer the liability in the market in which the reporting entity would
transact for the asset or liability, that is, the principal or most advantageous
market for the asset or liability.


                                      F-9

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

            This Statement is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years. The Company is currently evaluating the impact, if any, that SFAS
157 will have on its financial position, results of operations and cash flows.

NOTE 2. DISCONTINUED OPERATIONS

            Effective June 30, 2005, PMIC ceased its operations except for
liquidating its assets. For financial statement reporting purposes, the
operating results of PMIC are reclassified as discontinued operations. The
operating results of PMIC for the fiscal year ended June 30, 2005 were as
follows:

Net sales                            $10,701,000
Net loss, net of minority interest   $(1,195,374)

NOTE 3. PROPERTY AND EQUIPMENT

            The following is a summary of property and equipment as of June 30,
2006 and 2005:

                                            2006        2005
                                          --------   ---------
Computer, office equipment and fixtures   $204,249   $$135,494
Machinery and equipment                     59,277      23,731
Leasehold improvements                      58,952     121,236
                                          --------   ---------
                                           322,478     280,461
Less: Accumulated depreciation              94,117      20,697
                                          --------   ---------
Property and equipment, net               $228,361   $ 259,764
                                          ========   =========

Depreciation expense for the years ended June 30, 2006 and 2005 was $73,420 and
$19,615, respectively.

NOTE 4. INVESTMENT IN UNCONSOLIDATED PARTNERSHIP

            On January 14, 2004, the Company's wholly-owned subsidiary, Hudson
Street, purchased a minority interest in Yorkville Advisors Management LLC,
("Yorkville"), a privately-owned investment management partnership and the
portfolio manager of Cornell Capital Partners, L.P., for a purchase price of
$2,625,000. During the fiscal year ended June 30, 2005, Hudson Street received
$280,000 of cash distributions from this investment and recorded $385,233 as its
distributive share of partnership net earnings.

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

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


                                      F-10

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

NOTE 5. LITIGATION SETTLEMENT

(A) On February 5, 2004, the Company filed suit in Superior Court, Orange
County, California, against Advanced Communications (Australia), Roger May,
Global Communications Technologies Limited and Global Communications
Technologies Pty Ltd to recover damages incurred as a result of wrongful actions
of such defendants against the Company and to clarify the status of the
Company's obligations to such defendants under various agreements and other
arrangements, from which the Company believed it had been relieved as a result
of such wrongful actions. In May and August 2004, the court entered default
judgments in favor of the Company and against all of the above defendants. On
October 22, 2004, the court held a hearing to determine the amount the Company
was entitled to recover against the defendants in the action. In November 2004,
the court entered a judgment in favor of the Company in the approximate amount
of $8 million. The Company offset against the judgment approximately $2,847,000
of debt carried on its balance sheet as owing to one or more of the defendants
and the Company recognized a gain in that amount.

(B) On August 11, 2006, the United States Bankruptcy Court for the District of
Nevada approved the settlement agreement among ACT, PMIC, Encompass, the
Company's officers and two former terminated executives ("Terminated
Executives") of PMIC (See Notes 10(E) and 15(B)). Among other terms of the
settlement agreement, the Company paid the Terminated Executives $325,000 in
cash on September 18, 2006. The remaining balance on the promissory notes
totaling $175,000 plus accrued interest in the amount of $45,083 were cancelled
on September 18, 2006. The Company recorded income from this litigation
settlement of $220,083 in fiscal 2006.

NOTE 6. ACQUISITION OF CYBER-TEST, INC.

            On June 2, 2004, Encompass acquired the business and assets of
Cyber-Test, Inc., a Florida-based, electronic equipment repair company.
Cyber-Test became the core operating business of Encompass and accounted for
this acquisition using the purchase method of accounting in accordance with the
provisions of SFAS 141. Under the terms of the Asset Purchase Agreement between
Cyber-Test and Encompass, Encompass acquired all of the operating assets,
tangible and intangible property, rights and licenses, goodwill and business of
Cyber-Test, for a total purchase price of $3,498,469 consisting of $3,000,000 in
cash, and a $498,469 three-year 6% unsecured installment note. The Company also
incurred $399,571 of capitalized transaction costs, inclusive of $125,000 of
broker fees, for a total acquisition cost of $3,898,040.

            This acquisition has been accounted for by the purchase method of
accounting and, accordingly, the operating results have been included in the
Company's consolidated results of operations from the date of acquisition. The
Company acquired net tangible assets valued at $1,286,985. The excess of the
consideration given over the fair value of net assets acquired has been recorded
as goodwill of $2,611,055. During fiscal 2006, the Company issued and
transferred 16,666,667 shares of its common stock, at its fair value of $13,333,
into escrow for the Earn-Out Shares pursuant to the Asset Purchase Agreement.
The Company recorded the value of the shares issued as an addition to goodwill.
The Company accounts for the purchased goodwill in accordance with the
provisions of SFAS 142.

            Under the terms of the Asset Purchase Agreement between Cyber-Test
and Encompass, the seller, Ms. Welton, of Cyber-Test is entitled to receive
16,666,667 shares (the "Earn-Out Shares") of the Company's common stock provided
that Cyber-Test achieves certain revenues and EBIDTA milestones (the
"Milestones") in each of the fiscal years ended June 30, 2005, 2006 and 2007. In
the event that Cyber-Test does not achieve the Milestones during any such fiscal
year, the Earn-Out Shares shall be forfeited unless the Board of Directors at
its discretion grants these shares. In the event that Ms. Welton's employment
with the Company is terminated, for any reason, other than by the Company
without "cause" or due to death or disability of Ms. Welton, prior to the
expiration of the employment agreement, the Earn-Out Shares shall be forfeited
entirely. As of June 30, 2006, the Company has issued and transferred 16,666,667
shares of its common stock, at its fair value of $13,333, into escrow for the
year ended June 30, 2005.


                                      F-11

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

NOTE 7. DEFERRED ACQUISITION COSTS

            The Company incurred certain legal, accounting and consulting costs
relating to acquiring certain targeted businesses. The acquisition of the
identified businesses is expected to be completed in fiscal 2007. Upon the
closing of the acquisition, these legal, accounting and consulting costs will be
capitalized as transaction costs of the acquired businesses. As of June 30,
2006, the Company has capitalized $301,921 of these acquisition costs.

NOTE 8. LICENSED INTANGIBLES

            On May 27, 2004, Encompass entered into an Agreement with Hy-Tech
Technology Group, Inc and Hy-Tech Computer Systems, Inc (collectively "Hy-Tech")
to license and use on an exclusive, worldwide, royalty-free, perpetual,
non-terminable and irrevocable right basis, various intangible assets of Hy-Tech
including its customer lists and corporate web addresses. The Company recorded
$400,000 for these licensed intangibles. The licensed intangibles will be
amortized over a 5-year period using the straight-line method beginning from the
closing date of certain planned acquisitions that are expected to close in
fiscal 2007. The Company anticipates amortization expense associated with the
licensed intangibles to be approximately $80,000 annually over a five year
period following closing, subject to a change in the estimated useful life.

NOTE 9. PACIFIC MAGTRON INTERNATIONAL CORP. AND SUBSIDIARIES

            On December 30, 2004, we completed the acquisition of 6,454,300
shares of the common stock of Pacific Magtron International Corp. ("PMIC") (the
"PMIC Shares") for the aggregate purchase price of $500,000 from Theodore S. Li
and Hui Cynthia Lee (collectively, the "Stockholders") pursuant to the terms of
a Stock Purchase Agreement, dated December 10, 2004, among the Company, Mr. Li
and Ms. Lee (the "Stock Purchase Agreement"). The total purchase price of
$500,000 consisted of two one-year 6% secured notes (See Note 10 (E)). The
Company also incurred $168,834 of capitalized transaction costs for a total
acquisition cost of $668,834. The PMIC Shares represented 61.56% of the
currently issued and outstanding common stock of PMIC. PMIC was primarily
engaged in the business of distributing computer peripheral products, such as
components and multimedia and systems networking products, through its
wholly-owned subsidiaries. PMIC's common stock trades on the Over the Counter
Bulletin Board, and separately files periodic reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended. The
Company accounted for this acquisition using the purchase method of accounting
in accordance with the provisions of SFAS 141.

            On May 11, 2005, PMIC and its subsidiaries filed voluntary petitions
to reorganize their businesses under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Southern District of Nevada.
On April 12, 2006, the Company and Theodore S. Li and Hui "Cynthia" Lee entered
into a binding letter agreement with respect to the settlement of the litigation
proceedings among the Company, PMIC, Encompass, the Company's officers and Mr.
Li and Ms. Lee. On August 11, 2006, the settlement agreement became effective
upon the entry of the order (the Confirmation Order") of the United States
Bankruptcy Court for the District of Nevada ("the "Court"), which is jointly
administering the voluntary petitions filed by PMIC and its wholly-owned
subsidiaries to reorganize their businesses under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Proceedings") (see Note 15(B)) for the
terms of the settlement agreement). On that date, the Court confirmed the Fourth
Amended Plans of Reorganization of PMIC and its wholly-owned subsidiary,
LiveWarehouse, Inc. (collectively, the "Plan"), which incorporates the terms of
the settlement agreement.

            Pursuant to the confirmed and effective Plan, PMIC effected a
reverse merger with Herborium, Inc., a provider of proprietary, natural and
complimentary botanical healthcare products, on September 18, 2006 and become
the surviving operating entity post-merger. The Company has contributed $50,000
on behalf of PMIC's shareholders to effectuate the Plan. The existing stock of
PMIC was canceled, and new stock was issued. With respect to the Company's
equity interest in PMIC, new stock was issued directly to the Company's
shareholders, representing approximately an 8% interest in Herborium. The
Company has recorded a charge to accumulated deficit for the $50,000
contribution to effectuate the Plan.

            As of June 30, 2005, our entire investment of $668,834 in PMIC had
been written off and is included in other income and (expenses) in the Company's
consolidated statement of operations.


                                      F-12

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

NOTE 10. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Notes payable and capital lease obligations consist of the following at June 30,
2006 and 2005:

                                                       2006         2005
                                                    ---------   -----------
12% Note Payable (A)                                $  57,832   $    57,832
Note Payable to Shareholder (B)                        35,000            --
Note Payable to Cornell Capital (C)                   275,000       275,000
6% Unsecured Note (D)                                 249,236       332,314
Payable to former PMIC's shareholders (E)             325,000       500,000
Capitalized Lease (F)                                  39,181        60,249
                                                    ---------   -----------
Total notes Payable and capital lease obligations     981,249     1,225,395
Less: current portion                                (965,909)   (1,020,028)
                                                    ---------   -----------
Notes payable and capital lease obligations,
  less current portion                              $  15,340   $   205,367
                                                    =========   ===========

(A) 12% Note Payable

            On November 14, 2002, the Company settled its litigation with the
noteholder plaintiffs by agreeing to release the plaintiffs' stock from
restriction and issued a three-year unsecured 8% promissory note in the
principal amount of $173,494 to reimburse the plaintiffs for their legal costs.
The note is payable in three equal annual installments of principal and
interest, the first of which was due on December 1, 2003 with additional
installments due on December 1, 2004 and December 1, 2005. On December 2, 2005,
the Company entered into an Extension Agreement extending the maturity date of
the note to February 28, 2006 and effective December 1, 2005, increasing the
interest rate to 12% from 8%. On March 6, 2006 and August 1, 2006, the parties
agreed to again extend the maturity date of the note to May 31, 2006 and
September 30, 2006, respectively. As of June 30, 2006, the outstanding amount of
the note was $57,832.

(B) Note Payable to Officer/Shareholder

            On April 24, 2006, the Company issued an unsecured promissory note
to an officer/shareholder of the Company for proceeds of $35,000. The note bears
interest at 10% per annum. Payments of principal and accrued interest are due on
October 24, 2006.

(C) Note Payable to Cornell Capital Partners, L.P.

            During January 2004, the Company entered into a six-month unsecured
promissory note with Cornell Capital Partners, L.P. in the amount of $3,000,000,
of which the net proceeds of $2,829,000 were used to purchase its minority
interest in the Yorkville Advisors partnership. Under the terms of the
promissory note, the Company agreed to repay the note either in cash or through
the net proceeds to be received by the Company under its Equity Line of Credit
facility over a 24-week period commencing February 23, 2004. The Company repaid
$625,000 of the note from proceeds on the issuance of 517,000,360 shares of
common stock under its Equity Line of Credit facility during fiscal 2004. During
the fiscal year ended June 30, 2005, the Company repaid a total of $2,100,000 of
principal on the note, of which $100,000 was repaid by issuing 172,881,526
shares of common stock and $2,000,000 was repaid in cash leaving an unpaid
balance of $275,000. On February 10, 2005, the note was modified, extended to
June 30, 2005, and bears interest at a rate of 10%. The remaining balance of the
note has not been paid when due and is currently in default.

(D) 6% Unsecured Note Payable

            Pursuant to the terms of the Cyber-Test acquisition, on June 2, 2004
the Company issued a three-year 6% unsecured installment note in the amount of
$498,469 to the shareholders of Cyber-Test as part of the purchase of the
Cyber-Test assets. The note matures on June 2, 2007, and is payable in three
equal annual installments of $166,156 plus accrued interest. During the fiscal
year ended June 30, 2005, principal amount of $166,156 plus $9,970 of accrued
interest were paid. During the fiscal year ended June 30, 2006, principal amount
of $83,078 plus $10,004 of accrued interest were paid. As of June 30, 2006, the
outstanding principal balance of the note was $249,236.


                                      F-13

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

(E) Payable to Former PMIC's Shareholders

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

            Under the terms of the Stock Purchase Agreement, the Company paid
the purchase price for the PMIC Shares by delivering two convertible promissory
notes (the "Notes") in the principal amounts of $166,889 and $333,111 to Mr. Li
and Ms. Lee, respectively (See Note 9). The Notes matured on December 29, 2005
and bore interest at 6.0% per annum. The holders of the Notes, at their option,
could convert into shares of common stock of the Company at a conversion price
per share of $0.01. The Company's payment obligations under the Notes were
secured by the PMIC Shares.

            On August 11, 2006, the United States Bankruptcy Court for the
District of Nevada approved the settlement agreement among PMIC, the Company,
Encompass, the Company's officers and Mr. Li and Ms. Lee (See Note 15(B)).
Pursuant to the settlement agreement, the Company paid Mr. Li and Ms. Lee
$325,000 in cash on September 18, 2006 in full payment of the promissory notes.

(F) Capital Lease Obligations

            The Company leases a telephone system and related software under an
agreement that is classified as a capital lease. The cost of equipment purchase
was $69,678 and is included in the accompanying balance sheet as property,
plant, and equipment at June 30, 2006. Accumulated amortization of the leased
equipment was $17,420 as of June 30, 2006. Amortization of assets under capital
leases is included in depreciation and amortization expense.

            The future minimum lease payments required under the capital lease
and the present value of the net minimum lease payments as of June 30 2006, are
as follows:

                                                        Year Ending
                                                          June 30,     Amount
                                                        -----------   --------
                                                            2007      $ 27,392
                                                            2008        15,978
                                                                      --------
Total minimum lease payments                                            43,370
Less: Amount representing interest                                      (4,189)
                                                                      --------
Present value of net minimum lease payments                             39,181
Less: Current maturities of capital lease obligations                  (23,841)
                                                                      --------
Long-term capital lease obligations                                   $ 15,340
                                                                      ========


                                      F-14

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

Total future maturities of long-term debt, including capital lease obligations,
as of June 30, 2006 are as follows:

     Date        Amount
-------------   --------
June 30, 2007    965,909
June 30, 2008     15,340
                --------
  Total         $981,249
                ========

NOTE 11. CONVERTIBLE DEBENTURE

(A) 10% Secured Convertible Debenture Due November 2004

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

            On November 22, 2004, the outstanding 10% secured convertible
debenture in the amount of $187,500 plus accrued interest of $38,588 held by
Cornell Capital Partners, L.P. matured. On November 22, 2004 and December 27,
2004, Cornell Capital Partners, L.P. elected to convert, at $.001 per share,
$10,000 and $100,000 of principal and $2,000 of accrued interest, respectively,
into 112,000,000 shares of common stock. On May 12, 2005, Cornell Capital
Partners, L.P. converted the $77,500 plus $40,526 of accrued interest at $.001
per share into 118,026,000 shares of common stock. At June 30, 2006, no amount
remains owed to Cornell Capital Partners, L.P. on the convertible debenture.

NOTE 12. STOCKHOLDERS' EQUITY

(A) Equity Line of Credit Facility

            In July 2003, the Company entered into a $30 million Equity Line of
Credit facility with Cornell Capital Partners, LP. Pursuant to the Equity Line
of Credit, the Company may, at its discretion, periodically issue and sell to
Cornell Capital Partners, LP shares of common stock for a total purchase of $30
million. The Equity Line of Credit facility has been terminated in fiscal 2006.

(B) Preferred Stock

            o     Series A Convertible Preferred Stock

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


                                      F-15

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

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

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

            At June 30, 2005, no preferred shares have been converted into
common stock. During fiscal 2006, 615 shares of Series A Preferred Shares were
converted into 885,994,544 shares of the Company's common stock.

            o     Series A-1 Convertible Preferred Stock

            On September 13, 2006, the Company amended its articles of
incorporation to authorize the issuance of up to 1,000 shares of $0.01 par value
Series A-1 Preferred Convertible Preferred Stock. The Series A-1 Preferred
generally ranks junior to the Series A Convertible Preferred Stock and the
Series B Convertible Preferred Stock (collectively "the Senior Stock") and is
senior to the Company's common stock and all series of preferred stock other
than the Senior Stock. Subject to certain adjustments, the Series A-1 Preferred
is convertible into shares of Common Stock at a conversion price of (a) $0.01
per share, or (b) eighty percent (80%) of the average of the three (3) lowest
closing bid prices of the Common Stock for the ten (10) trading days immediately
preceding the date of conversion, whichever is lower. The Company may redeem the
shares of Series A-1 Preferred at any time, upon notice to the holders, for a
price equal to 120% of the amount paid per share (the "Liquidation Amount"),upon
the Company's receipt of an aggregate of $35,000,000 through any combination of
debt and equity investments and financing facilities. Upon such event, the
holders may exercise the right to convert their shares of Series A-1 Preferred
into shares of the Company's common stock. The Series A-1 Preferred does not
have any voting rights.

            On September 13, 2006, the Company sold 340 shares of Series A-1
Preferred Stock at a $1,000 per share. In connection with the sale of Series A-1
Preferred Stock, the Company received aggregate gross proceeds of $340,000 as
follows: (a) $290,000 from officers of the Company; and (b) $50,000 from an
outside investor. In addition to the rights applicable to all holders of Series
A-1 Preferred, the holders of Series A-1 Preferred Stock were granted certain
piggyback registration rights in the event that the shares of Series A-1
Preferred are converted into shares of common stock.

            o     Series B Convertible Preferred Stock

            In conjunction with the Company's license of certain intangible
assets, the Company issued 300 shares of nonvoting Series B Convertible
Preferred Stock (the "Series B Preferred Shares") having a liquidation value of
$1,000 per share. The Series B Preferred Shares have the same terms and
privileges as the Series A Preferred Shares, but are junior to the Series A
Preferred Shares in the event of a liquidation of the Company, and are
convertible, in whole or in part, on or after June 23, 2005 into shares of
common stock on the same terms as the Series A Preferred Shares. On June 23,
2005, holders of 200 shares of Series B Convertible Preferred stock elected to
convert $200,000 of preferred stock at a price of $.0005 per share into
400,000,000 shares of common stock. During fiscal 2006, 40 shares of Series B
Preferred Shares were converted into 63,492,064 shares of the Company's common
stock. At June 30, 2006, 60 shares of Series B Convertible Preferred stock
remain outstanding.

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

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

(D) Stock Issued For Convertible Debt

            During the fiscal year ended June 30, 2005, the Company issued
230,026,000 shares of common stock valued at $187,500 and $42,526 of principal
and accrued interest, respectively, in full payment on the 10% secured
convertible debt. No amount remains owed to Cornell Capital Partners, L.P. on
the convertible debenture as of June 30, 2006.


                                      F-16

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

(E) Stock Issued Under 2005 Stock Plan

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

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

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

            Pursuant to the terms of a Services Agreement between Mr. Wayne I.
Danson, Danson Partners, LLC and the Company, (See Note 15(C)), on June 29, 2005
Mr. Danson received a share bonus of 200,000,000 restricted, fully vested shares
of the Company's Common Stock (the "Stock Bonus"). These shares had a value of
$140,000 and together with the Stock Grants above, have an aggregate value of
$350,000 that was charged to earnings as compensation expense for the fiscal
year ended June 30, 2005.

(F) Stock Issued For Services

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

(G) Performance Bonuses

            In connection with the employment agreements with two executives of
Cyber-Test, the Company agreed to set aside for the payment of cash bonuses an
amount equal to 10% of net income of Cyber-Test during such fiscal years. For
each fiscal year, the Company shall pay to each executive an annual performance
bonus, in cash and/or restricted stock of the Company, equal to a portion of the
Cyber-Test bonus pool, as determined by the Compensation Committee, in its sole
discretion. During fiscal 2006, the Company issued a total of 50,000,000 shares
of the Company's common stock valued at $35,000 to the executives for
performance bonuses.


                                      F-17

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

NOTE 13. INCOME TAXES

            There was no income tax benefit or expense recorded for the years
ended June 30, 2006 and 2005. The following summarizes the differences between
the income tax (benefit) expense and the amount computed by applying the federal
income tax rate of 34% in fiscal 2006 and 2005 to income before income taxes:

                                                 2006        2005
                                                 ----        ----

Federal income tax benefit at statutory rate   $ 195,000   $ 250,000
Change in deferred tax assets                     48,000     (91,000)
Non-taxable income and expenses                       --    (412,000)
Change in valuation allowance                   (243,000)    253,000
                                               ---------   ---------
Federal income tax benefit (expense)           $      --   $      --
                                               =========   =========

            The Company recorded a valuation allowance for its net deferred tax
assets, including its federal and state net operating loss for the years ended
June 30, 2006 and 2005. There was no tax benefit recorded relating to the
increase in deferred tax assets.

            As of June 30, 2006, the Company had total net operating loss
carryforwards (NOL) available to offset future federal taxable income of
approximately $31,000,000 expiring in the fiscal years from 2016 through 2025.
As of June 30, 2006, the Company also had approximately $4,000,000 of capital
loss carryforwards, expiring in fiscal 2008 and 2010 that could be used to
offset future federal taxable income. As of June 30, 2006, the Company had NOLs
available to offset future Florida, New York and California taxable income of
approximately $25,000,000, $17,000,000 and $11,000,000, respectively. The
Florida NOL expires from fiscal 2019 through 2026 and the New York NOL expires
from fiscal 2023 through 2026.

            Deferred tax assets and liabilities as of June 30, 2006 were
comprised of the following:

Deferred tax assets (liabilities):
Capital loss carryover               $  1,352,000
Net operating loss carryover           13,446,000
Property and equipment                   (198,000)
                                     ------------
                                       14,600,000
Valuation allowance                   (14,600,000)
                                     ------------
Net deferred tax assets              $         --
                                     ============

            Realization of the Company's deferred tax assets is dependent upon
future income in specific tax jurisdictions. The Company has evaluated all
significant available positive and negative evidence, the existence of losses in
the recent years and forecast of future taxable income (loss) in determining the
need for a valuation allowance. At June 30, 2006 and 2005, the Company recorded
a 100% valuation allowance against the net deferred tax assets to reduce them to
zero.

NOTE 14. MAJOR CUSTOMERS

            During the fiscal year ended June 30, 2006 and 2005, Cyber-Test
sales to two customers accounted for approximately 90% and 83% of its sales,
respectively. As of June 30, 2006, accounts receivable from two major customers
aggregated $303,000, or 81% of accounts receivable.

NOTE 15. COMMITMENTS AND CONTINGENCIES

(A) Operating Lease Commitments

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


                                      F-18

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

            Cyber-Test leases a 29,000 square foot office/warehouse facility
under a one-year triple net lease that commenced on August 1, 2004 and ends on
July 31, 2005, and carries two one-year options at a monthly lease obligation of
$13,900. Cyber-Test exercised its one-year options and extended its lease to
July 31, 2007. The lease is renewable on a year-to-year basis by providing
written notice 60 days prior to the expiration of the then current term.

(B) Legal Matters

            The Company has been, and may in the future be involved as, a party
to various legal proceedings, which are incidental to the ordinary course of its
business. Management regularly analyzes current information and, as necessary,
provides accruals for probable liabilities on the eventual disposition of these
matters. In the opinion of management, as of June 30, 2006, there were no
threatened or pending legal matters that would have a material impact on the
Company's consolidated results of operations, financial position or cash flows.

            On May 11, 2005, we filed a complaint in the United States District
Court for the Southern District of New York against Theodore S. Li and Hui
Cynthia Lee, the former officers and principal shareholders of our then
majority-owned subsidiary Pacific Magtron International Corp. ("PMIC"), for the
recovery of damages and costs for securities fraud, breach of contract and other
counts in connection with the Stock Purchase Agreement dated December 10, 2004
among us and Mr. Li and Ms. Lee. On December 8, 2005, defendants answered the
complaint and asserted various defenses to the claims set forth therein.

            In January 2006, Theodore S. Li and Cynthia Lee brought suit against
us and certain of our officers and directors in the California Superior Court,
Santa Clara County. In the complaint, plaintiffs alleged, among other things,
fraud, intentional misrepresentation, breach of contract, breach of implied
covenant of good faith and fair dealing, violation of the California Labor Code,
violation of the Business of Professions Code of California, and defamation.

            In July, 2006, we, PMIC, Mr. Li, Ms. Lee and others entered into a
Mutual Settlement Agreement and Release (the "Settlement Agreement") with
respect to the settlement of the above litigation and other potential claims,
including the termination of their employment contracts, involving us, PMIC,
Encompass, Mr. Li, Ms. Lee, Martin Nielson, our then Executive Vice President,
and Wayne Danson, our Chief Executive Officer. PMIC's entry into the Settlement
Agreement was conditioned on bankruptcy court approval, which was obtained on
August 11, 2006 in connection with confirmation of PMIC's Plan of
Reorganization. Under PMIC's Plan of Reorganization, ACT contributed $50,000 on
behalf of PMIC's stockholders to effectuate the plan of reorganization and a
subsidiary of PMIC merged with an unrelated entity, Herborium, Inc. In
connection with the merger, PMIC changed its name to Herborium Group, Inc. Upon
closing of the merger, the Company paid an aggregate $325,000 in cash to Mr. Li
and Ms. Lee. To the extent permissible, PMIC will reimburse ACT for this payment
using available cash or other assets remaining in the PMIC bankruptcy estate
after final distribution under the Plan. We currently do not expect PMIC to
contribute more than $25,000 to this reimbursement, and may not contribute any
amount. In addition, Li and Lee received certain shares of common stock of
Herborium Group. If these shares do not have a value of $.10 or greater at the
end of a 150 day lock-up period, the difference will be made up, at our option,
by cash payments from us or delivery of additional 1,750,000 shares of
Herborium/PMIC common stock which would otherwise be issued to our stockholders
under PMIC's Plan of Reorganization and has been escrowed. A special stock
distribution of shares of Herborium Group will be made to the holders of our
common stock as of the record date of August 11, 2006 on the basis of a
0.001652911 share of Herborium common stock for each share of our common stock.

            A more detailed description of the terms of the Settlement Agreement
is contained in our Current Report on Form 8-K filed with the SEC on August 16,
2006.


                                      F-19

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

(C) Executive Employment Contracts

On June 7, 2005, the Company entered into a Services Agreement with Wayne I.
Danson and Danson Partners, LLC, a limited liability company of which Mr. Danson
is a principal ("DPL"). Under the Services Agreement, effective as of January 1,
2005 and expiring on the second anniversary thereof unless earlier terminated in
accordance with its terms, the Company will pay DPL an annual base fee of
$250,000 for, among other services, Mr. Danson to serve as the Company's
President, Chief Executive Officer and Chief Financial Officer (through
September 25, 2006). DPL is also entitled to (i) a cash bonus of $250,000, of
which $125,000 has not been paid as of the date of this report, and (ii) a share
bonus of 200,000,000 fully vested shares of the Company's Common Stock issued
contemporaneously with the execution of the Services Agreement. The Company may
grant cash bonuses, restricted shares of Common Stock, or options to DPL in
consideration for Mr. Danson's services, with a vesting schedule and other terms
established by the Company's Compensation Committee in its sole discretion.
Neither Mr. Danson nor DPL receives consideration for Mr. Danson's service as a
director of the Company.

            On September 25, 2006, the Company entered into two separate,
two-year employment agreements with a Chief Operating Officer and Chief
Financial Officer, with each agreement having a one-year option at the Company's
election. Under the terms of the agreements, the Company is obligated to pay
aggregate base salaries of $400,000 in the first year, $425,000 in the second
year and $450,000 in the option year. Further, an aggregate of 100,000,000
restricted shares of the Company's common stock were awarded at the closing
price per share at the date of grant, September 25, 2006, of which 20% vested
immediately, with 30% and 50% to vest on September 26, 2007 and September 26,
2008, respectively, subject to continued employment.

            On June 3, 2004, we entered into a three-year employment agreement
with Lisa Welton and Thomas Sutlive ("Cyber-Test Executives"). In accordance
with the terms of the Cyber-Test Executives' employment agreements, the
Cyber-Test Executives are entitled to a total of $230,000 annual salaries and
incentive bonuses determined at the discretion of our Compensation Committee
based on their contribution to our overall performance as well as a bonus based
on the overall separate business and financial performance of Cyber-Test.

NOTE 16. RELATED PARTIES

(A) Legal Counsel

            Certain of the Company's legal counsel are stockholders and
directors of the Company. The Company has paid these attorneys, for current and
prior legal services, an aggregate of $4,051 and $76,882 during the fiscal years
2006 and 2005, respectively. At June 30, 2006, the Company owed $1,100 to these
attorneys.

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

            Per terms of the Service Agreement, DPL, for current and prior
executive and financial services, was paid $362,476 in cash and $140,000 in
stock during the fiscal year 2005. Payments made to DPL in fiscal 2006 amounted
to $135,700. At June 30, 2006 and 2005, the Company owed $257,600 and $0,
respectively, to DPL for compensatory services.

            The Company, through a license agreement effective December 1, 2004
with DPL, occupies an office facility having a monthly lease obligation of
$1,478, as adjusted annually. See Note 15(A).

            On April 24, 2006, the Company issued an unsecured promissory note
to the Company's President for loan proceeds of $35,000. See Note 10(B). On
September 18, 2006, the Company received $50,000 from this executive for the
purchase of our Series A-1 Preferred Stock.

(C) Independent Directors

            Certain of the Company's independent directors were contracted to
provide business services to the Company. The Company paid these independent
directors, for current and prior business services, an aggregate of $23,406 in
cash during the fiscal year 2005. There was no payment made to these directors
in fiscal 2006. At June 30, 2006, the Company owed these independent directors a
total of $125,000 for director services rendered during the year ended June 30,
2006 and for the three months ended June 30, 2005.


                                      F-20

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               AS OF JUNE 30, 2006

NOTE 17. SEGMENT INFORMATION

            The Company applies Statement of Financial Accounting Standards No.
131 "Disclosures about Segments of an Enterprise and Related Information". For
the fiscal year ended June 30, 2006 and 2005, the Company primarily operated in
one segment - Cyber-Test, Inc., a repair and depot exchange of office and
consumer electronics. During fiscal 2006, the Company also operated Encompass
Electronics Recovery, an electronic asset recovery and distribution center. For
the year ended June 30, 2006, the Company's asset recovery and distribution
services business had less than 1% of the total revenue and accordingly, the
financial results have not been separately reported as a business segment.
Pacific Magtron International Corp. ceased its operations in fiscal 2005 and its
financial results have been reclassified as discontinued operations.

NOTE 18. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION

            The following are the payments made during the fiscal years ended
June 30, 2006 and 2005 for income taxes and interest:

                 2006      2005
                 ----      ----
Income taxes   $    --   $    --
Interest       $16,328   $19,481

      During the fiscal year ended June 30, 2006 and 2005, the Company issued
certain common shares for consideration other than cash.

      Fiscal Year Ended June 30, 2006:

      (1)   The Company issued and transferred 16,666,667 shares of common stock
            valued at $13,333 into an escrow relating to the Earn-Out Shares.
            See Note 6.

      (2)   The Company issued a total of 50,000,000 shares of common stock
            valued at $35,000 to Ms. Welton and Mr. Sutlive for performance
            bonuses. See Note 12(G).

      (3)   615 shares of Series A Preferred Shares and 40 shares of Series B
            Preferred Shares were converted into 885,994,544 shares and
            63,492,064 shares, respectively, of the Company's common stock. See
            Note 12(B).

      Fiscal Year Ended June 30, 2005:

      (1)   The Company issued 230,026,000 shares of common stock in full
            payment of $187,500 of principal and $42,526 of accrued interest on
            the 10% Secured Convertible Debenture.

      (2)   The Company issued 172,881,526 shares of common stock valued at
            $100,000 in partial repayment of its short-term promissory note.

      (3)   The Company issued 5,000,000 shares of common stock valued at $7,500
            for professional services.

      (4)   The Company issued 400,000,000 shares of common stock valued at
            $200,000 to various Series B Convertible Preferred shareholders upon
            conversion of their shares.

      (5)   The Company issued 500,000,000 shares of common stock valued at
            350,000 to certain officers and directors as compensation.

      (6)   The Company issued 12,500,000 shares of common stock as the earned
            portion of deferred compensation.


                                ~ end of filing ~


                                      F-21