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

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

                         AMENDMENT NO. 2 TO FORM 10-KSB

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                          COMMISSION FILE NO. 000-30486

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

                 FLORIDA                               65-0738251
                 -------                               ----------
     (State or other jurisdiction of      (I.R.S. Employer Identification No.)
      INCORPORATION OR ORGANIZATION)

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

                                 (646) 227-1600
                         (REGISTRANT'S TELEPHONE NUMBER)

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

                     TITLE OF EACH CLASS TO BE REGISTERED: NONE

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

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

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

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

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

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

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

                                YES ____ NO ____

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

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

                           FORWARD-LOOKING STATEMENTS

      This Form 10-KSB  contains  "forward-looking  statements"  relating to the
Registrant  which  represent the  Registrant's  current  expectations or beliefs
including,  but not limited to, statements concerning  Registrant's  operations,
performance,  financial  condition and growth.  For this purpose,  any statement
contained in this Form 10-KSB that are not  statements  of  historical  fact are
forward-looking  statements.  Without  limiting the generality of the foregoing,
words  such  as  "may",   "anticipation",   "intend",  "could",  "estimate",  or
"continue"  or the  negative or other  comparable  terminology  are  intended to
identify  forward-looking  statements.  These statements by their nature involve
substantial  risks and  uncertainties,  such as  credit  losses,  dependence  on
management and key personnel and  variability of quarterly  results,  ability of
Registrant to continue its growth strategy and competition, certain of which are
beyond  the  Registrant's  control.  Should  one  or  more  of  these  risks  or
uncertainties  materialize or should the underlying assumptions prove incorrect,
actual outcomes and results could differ  materially from those indicated in the
forward-looking statements.

                    DISCLOSURE REGARDING THIS AMENDMENT NO. 2

      This  Amendment  No. 2 to the Form 10-KSB for the year ended June 30, 2001
is being filed in response to comments  received by the  Securities and Exchange
Commission.  In accordance with those comments,  the contents of this filing are
effective as of June 30, 2001 and do not  necessarily  reflect the current state
of  Advanced  Communications'  business  and results of  operations.  Interested
persons should refer to Advanced  Communications' Form 10-KSB for the year ended
June 30, 2002 for more current information.

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                                     PART I

ITEM 1.  BUSINESS

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

FINANCIAL CONDITION

      We had net losses of  $19,732,566  and  $5,110,427  during the years ended
June 30, 2001 and 2000, respectively. As of June 30, 2001, we had cash of $6,816
and current  liabilities of $2,438,535.  We do not have sufficient cash or other
assets to meet our current liabilities.  In order to meet those obligations,  we
will need to raise  cash from the sale of  securities  or from  borrowings.  Our
independent auditors have added an explanatory paragraph to their audit opinions
issued in connection  with the years 2001 and 2000 financial  statements,  which
states that our ability to continue as a going concern  depends upon our ability
to resolve  liquidity  problems,  principally by obtaining  capital,  commencing
sales and generating  sufficient  revenues to become profitable.  Our ability to
obtain  additional  funding  will  determine  our ability to continue as a going
concern.  Our  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

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

BUSINESS DESCRIPTION

      We are a party to a license and distribution agreement for SpectruCell,  a
wireless software based communications platform that is being developed to offer
mobile  communications  network  providers the  flexibility  of  processing  and
transmitting  multiple wireless  communication signals through one base station.
The SpectruCell  product,  which is based on the Software  Defined Radio ("SDR")
platform,  is being developed to allow wireless  communication network providers
with the ability to not only direct multiple wireless  frequencies  (AMPS, CDMA,
GSM,  Mobile IP, Voice IP, etc.)  through one base station but will also provide
flexibility for future spectrum upgrades to 3G. The SpectruCell product is being
developed by our affiliated entity,  Advanced Communications  Technologies,  Pty
(Australia),  a development stage company,  which we own a 20% interest in. As a
minority  shareholder  in  Advanced  Communications   (Australia),  we  have  no
management rights in its daily operations or any control over the development of
the SpectruCell product. Our interest in Advanced Communications  (Australia) is
evidenced by a Stock  Purchase  Agreement  and is  reflected by stock  ownership
records  on file  with  the  Australian  Securities  Investment  Commission,  an
Australian government agency. As of June 30, 2001, Advanced  Communications owes
Advanced  Communications  (Australia)  $2,173,167  under  the terms of the Stock
Purchase  Agreement.  Mr. May, a former  officer and  director  and  significant
shareholder  owns 70% of  Advanced  Communications  (Australia)  through  Global
Communications  Technology Pty Ltd., his wholly-owned  company. On or about July
18, 2002, Advanced Communications (Australia) filed for voluntary administration
(bankruptcy)  under  Australia's  insolvency  laws by appointing an  independent
administrator  and receiver to operate and manage its business.  Our license and
distribution  agreement  encompasses a territory comprising North,  Central, and
South America (the "Exclusive  Territory") and is for an indefinite  period.  It
grants us the exclusive right to license,  market and distribute SpectruCell and
other products being developed by Advanced Communications (Australia) throughout
the North,  Central and South  American  territories.  On May 7, 2002,  Advanced
Communications  (Australia)  alleged  that we are in default of the  license and
distribution agreement and issued a notice of termination.

      On May 8, 2002,  the Supreme  Court of Victoria  at  Melbourne,  Australia
granted the Company an interim injunction  restraining  Advanced  Communications
(Australia)  from acting upon or taking any further  steps in reliance  upon the
notice of breach and termination  notice.  On May 27, 2002 and May 28, 2002, the
court held full hearings on the  injunction  application,  took the matter under
advisement and indicated that it would rule on the matter in the near future. On
August 23, 2002, the court issued a  comprehensive  injunction  granting all the
relief  sought by the Company.  Among other  things,  the  injunction  prohibits
Advanced  Communications  (Australia),  directly or indirectly,  from taking any
action in the  Exclusive  Territory  with  respect to  marketing,  distributing,

                                       3

<PAGE>

selling or otherwise  dealing with the  SpectruCell  technology  (including  the
military  applications  thereof),  except  through  and with the  prior  written
consent of the Company.

      We currently  have no other  products for  licensing  and/or  distribution
other than  SpectruCell  and other  products  being  developed  for sale  and/or
license by  Advanced  Communications  (Australia).  SpectruCell  is still  under
development and has not yet been  commercially  tested and we are uncertain when
it will be field-tested. Moreover, given the litigation between the Company, Mr.
May and Advanced Communications  (Australia), we have no reliable information on
the status of the SpectruCell product, when it will be available,  if at all, to
military  users and be field  tested  for  commercial  applications  or for that
matter, the financial cost of completing its development. Under the terms of our
License  Agreement,  we have  limited  rights  to  receive  product  development
information  from Advanced  Communications  (Australia).  Because of the current
litigation  by  the  company   against  Mr.  May  and  Advanced   Communications
(Australia),  information  about the  development of SpectruCell  that otherwise
might be  available to us has been  withheld as well as Advanced  Communications
(Australia)'s ability to finance SpectruCell's completion.  Mr. May, as Chairman
and Chief Executive  Officer of Advanced  Communications  (Australia) on May 27,
2002 made the following  statement  under oath in an affidavit  submitted to the
Supreme  Court of Victoria in  Melbourne,  Australia  "It is important  from the
outset to  understand  that there was no  SpectruCell  product in 1999 and today
there still is no SpectruCell  product as it is clearly still in the development
stage and at least 12 to 18 months from the final product stage.  No formal sale
of the product can be facilitated until the product is in final form".

      While the Company cannot verify the accuracy of Mr. May's sworn affidavit,
we believe  that  based  upon  discussions  with a former  executive  officer of
Advanced   Communications   (Australia),   the  military   applications  of  the
SpectruCell product may be available for license and distribution in 2003, since
these applications are easier and less expensive to produce than the technically
more  sophisticated  commercial  products  being  designed for public  telephone
system use. Moreover based on our discussions with this former executive officer
of Advanced Communications  (Australia), we believe that a prototype product has
been developed  which emulates the partial  functionality  of a cellular  mobile
base station.  The prototype is capable of supporting a single mobile  telephone
call in either the GSM or CDMA 1 protocol.  We understand that the next stage of
development is to connect the call to a fully  functional  model that will allow
development and testing of the interface to a mobile cellular base station.  The
prototype has been available for continuous testing in Melbourne Australia since
the  first  quarter  of  2002  and is  only  suitable  for  laboratory  testing.
Furthermore,  prototype software and hardware have been developed to support the
SpectruCell  prototype of a commercial  product.  We understand that discussions
have been held  with a major US based  semi  conductor  supplier  pursuant  to a
strict confidentiality  agreement,  to evaluate the functionality,  availability
and timing of hardware  that has the  potential to support  SpectruCell  product
development. We have no reliable information whether a third party developer has
been authorized to develop related software applications. However, as previously
described   above,   because  of  the  litigation  with  Mr.  May  and  Advanced
Communications  (Australia),  the  Company  does not have  direct  access to the
licensor's  engineers and product managers to determine with accuracy the degree
of product development.

      We  expect  to  generate   revenue  from  the  licensing,   marketing  and
distribution of the SpectruCell product, if any when it becomes available to us,
under our license agreement.  The license agreement gives us the exclusive right
to market and distribute  SpectruCell in North,  Central and South America.  The
manufacturing  of  SpectruCell  will  be  arranged  by  Advanced  Communications
(Australia). We have not had any meaningful revenues to date. For the year ended
June 30, 2001, we had a net loss of $19,732,566 or $.0.22 per share. At June 30,
2001, we had negative  working capital of $2,421,719 and an accumulated  deficit
of $25,515,955.

LICENSE AGREEMENT

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

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

      We are involved in  litigation in Australia  with Advanced  Communications
(Australia)  regarding  the  license.  On April 26, 2002,  the Supreme  Court of
Victoria  at  Melbourne,  Australia  issued an interim  order  against  Advanced
Communications (Australia) and Mr. May in connection with the ongoing litigation
between us and Advanced Communications (Australia).  The interim order prohibits
Advanced Communications  (Australia) and Mr. May from violating the terms of the

                                       4

<PAGE>

license and distribution agreement.  Based on a press release issued by Advanced
Communications  (Australia),  Advanced Communications (Australia) appeared to be
seeking  to  license  the  SpectruCell  technology  to  another  entity  in  our
territory.  On May 7, 2002,  we received a notice from  Advanced  Communications
(Australia)  alleging  a  breach  of the  license  who also  issued a notice  of
termination  to the Company.  We believed the  allegation  was without merit and
commenced an action to temporarily  enjoin Advanced  Communications  (Australia)
from terminating our rights under the License and Distribution Agreement. On May
8,  2002,  the  Australian  court  extended  its April 26,  2002  order  further
restraining Advanced Communications  (Australia) from "acting upon or taking any
further steps in reliance upon" the notice of breach.

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

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

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

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

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

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

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

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

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<PAGE>

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

      A detailed  discussion  of our  financial  condition  is  contained in the
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations section of this filing.

ADVANCED COMMUNICATIONS (AUSTRALIA) VOLUNTARY ADMINISTRATION

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

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

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

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

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

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

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

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

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<PAGE>

      It is uncertain whether (and unlikely that) the Company's stock investment
in  Advanced  Communications  (Australia)  will  have any  value  following  the
completion of the administration. This will depend on various factors, including
what revenues are generated, if any, by Advanced Communications (Australia) from
its assets  and what its  operating  expenses  are.  It will also  depend on the
outcome  of  the  pending   litigation   between   the   Company  and   Advanced
Communications (Australia) over that stock investment, a portion of the purchase
price on which  remains  unpaid  subject to any setoff  claims and  defenses the
Company  has  thereto.   Apart  from   Advanced   Communications   (Australia)'s
administration   and  the  initiation  of  the  litigation  over  the  Company's
investment in Advanced Communications  (Australia),  the Company has written off
the investment in Advanced Communications (Australia).

      The Company is still the exclusive licensee of the SpectruCell  technology
in North,  South and Central America and the court injunctions  issued on August
23, 2002 in the  litigation  between the  Company  and  Advanced  Communications
(Australia) over  SpectruCell are still in effect.  These  injunctions  prohibit
Advanced  Communications  (Australia),  directly or  indirectly  through a third
party, from taking any action to market, sell, distribute,  etc. the SpectruCell
technology  (including military  applications  thereof) in the territory without
the Company's consent, pending the outcome of the trial in that litigation.

      The  Company  believes  that  the  proposed  transfer  of the  SpectruCell
technology to SDR would be a material  breach of the Company's  rights under its
License and Distribution Agreement with Advanced  Communications  (Australia) as
well as a violation of the  above-mentioned  court injunctions  against Advanced
Communications (Australia) regarding SpectruCell. The Company also believes that
Advanced Communications  (Australia) has violated the court injunctions relating
to SpectruCell and continues to do so, by having prohibited contact with parties
in the United States relating to SpectruCell  without the consent or involvement
of the Company.  The Company has recently notified all interested parties of its
position in this regard in order to protect those rights.

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

COMPANY HISTORY

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

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

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

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

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

      On November 10, 1999,  Advanced  Global entered into an agreement with the
shareholders of World IP Incorporated and its wholly-owned foreign subsidiaries,
Sur  Comunicaciones,   S.A.,  a  Chilean  corporation,   and  Acinel,  S.A.,  an
Argentinean corporation,  to acquire a 51% controlling interest in the World IP.
Under the terms of the agreement, 500,000 shares of our restricted common stock,
plus $95,000 in cash was exchanged for 1,020 shares of stock representing 51% of
the then  issued  and  outstanding  shares  of  World.  The  500,000  shares  of
restricted common stock were valued at the trading price on the closing date and
together with the cash  consideration  resulted in a purchase price of $470,000.
World IP provides  wholesale  international  telephone services from the U.S. to
Chile and Argentina.  On October 4, 2000, we notified World's management and its
shareholders  that we intended to rescind the agreement  because we were unable,
after repeated requests, to obtain from World's management financial records and
audited financial statements. Consequently, our management deemed that it was in

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our best interest to unilaterally rescind the agreement.  On October 6, 2000, we
filed suit in the Circuit  Court in and for Palm Beach County,  Florida  against
the  World IP and its  shareholders  for  rescission  of the  agreement  and for
monetary  damages  resulting from such breach.  On January 23, 2002, the parties
entered  into  Settlement  and  Rescission  Agreements  and  a  Stipulation  for
Dismissal  with  Prejudice  (the  "Stipulation")  to  settle  this  matter.  The
Stipulation  states  that the  November  10,  1999,  Agreement  and all  related
transactions,  including  the  issuance of 1,020  shares of World IP to Advanced
Global  and  the  500,000  shares  of  restricted   common  stock  to  World  IP
shareholders,  are rescinded, AB INITIO,  effective November 10, 1999, as though
such transactions never occurred.  Further, as part of the settlement,  Advanced
Communications  issued a total of 320,000  shares of restricted  common stock to
certain shareholders of World IP, which shares are being registered. The Circuit
Court  in and for Palm  Beach  County  issued  an  Order  Approving  Stipulation
approving the  Settlement and Rescission  Agreements  and the  Stipulation.  The
lawsuit was dismissed by a court order dated January 29, 2002.

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

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

      Our 20% interest in Advanced Communications  (Australia) was accounted for
using the equity  method of accounting  and was stated at the amortized  cost of
goodwill and the equity in undistributed earnings since acquisition.  The equity
in  earnings  of  Advanced  Communications  (Australia)  was  adjusted  for  the
amortization of the goodwill, as discussed above. Amortization was computed on a
straight-line  basis over  fifteen  years  until June 30,  2001 at which time we
reassessed  the life of the  goodwill  to be five  years.  The  amortization  of
goodwill  charged to income for each of the fiscal years ended June 30, 2001 and
June 30, 2000 was $1,046,169 and $246,495, respectively.

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

      For  the  fiscal  years  ended  2001  and  2000,  Advanced  Communications
(Australia),  a development stage company, generated no revenue from SpectruCell
sales  as  such   product  was  still  in  the   development   stage.   Advanced
Communications (Australia) received nominal revenue from interest income with no
revenue being generated from operations.

      The components of the investment in Advanced Communications (Australia) at
June 30, 2001 are as follows:

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

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

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<PAGE>

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

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

      The Company is a marketing company whose primary activity is the ownership
of the  SpectruCell  License and  Distribution  Agreement and its  investment in
Advanced  Communications  (Australia),  a development stage company presently in
voluntary  administration under Australia's insolvency laws. The Company expects
to  generate   revenue  from  the   marketing  and   distribution   of  Advanced
Communications (Australia)'s software defined radio based wireless communication
product "SpectruCell" through our license and distribution agreement if and when
such  technology  is field  tested and  brought to market.  The  Company has not
generated any meaningful revenue to date.

ACQUISITIONS

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

      Due  to  the  ongoing   litigation   between  the  Company  and   Advanced
Communications  (Australia),  restrictions  on foreign  ownership  and  Advanced
Communications  (Australia)  voluntary  administration   (bankruptcy)  described
above,  it  is  highly  unlikely  that  the  Company  will  further  pursue  the
acquisition of Advanced Communications (Australia) intellectual property.

      During the year, we were also involved in two  unsuccessful  acquisitions.
On February  28,  2001,  we were the  successful  bidder to purchase  all of the
assets of ORBCOMM Global L.P and related debtors.  ORBCOMM, a partnership formed
by Teleglobe  Holding Corp. and Orbital Sciences  Corporation,  is the owner and
operator  of 30 low earth orbit  satellites,  digital  satellite  communications
systems,   gateway  earth  stations,   control  center  facilities  and  related
equipment,  and  intellectual  property and provides  asset  monitoring,  global
positioning,  communications and other data information  services.  In September
2000,  ORBCOMM filed for Chapter 11  Bankruptcy  protection in the United States
Bankruptcy  Court for the  District  of  Delaware.  On March 9, 2001,  the Court
entered an Order to approve the sale of substantially all of ORBCOMM's assets to

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<PAGE>

us. The  acquisition  of the assets was viewed by us as an opportunity to engage
in a business  that was  synergistic  to the  marketing  and  deployment  of the
SpectruCell technology, and to augment Australon Limited's business of providing
real time remote smart metering and other Lon-works  based services.  The assets
were to be owned by a newly  formed  entity  wholly  owned by our 50% owned U.S.
affiliate,  Australon  USA, Inc. We also entered into a joint venture  agreement
with another bidder to sell a portion of the new entity's equity in return for a
substantial  capital  commitment.  Our joint  venture  partner,  Final  Analysis
Corporation,  subsequently defaulted on its commitment to provide capital to the
new entity.  Because of the extreme time constraints place by the Court on us to
close the transaction,  and the substantial  capital  commitment  needed to turn
ORBCOMM's business around, our management subsequently determined that it was no
longer in our best interest to pursue the purchase of the assets.

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

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

INDUSTRY OVERVIEW

      GROWTH OF THE WIRELESS TELECOM INDUSTRY

      The wireless telecom industry is a rapidly growing business, driven by the
dramatic  increase in wireless  telephone  usage,  as well as strong  demand for
wireless Internet and other data services. U.S. mobile subscribers are projected
to grow to  226.8  million  by 2010 and  generate  revenues  of  $72.8  billion,
according to Analysts  Bakerville (Feb.  2002). In June 2001, EMC World Cellular
Database  stated  that there  were  854.7  million  users of  cellular  services
worldwide.  The demand for wireless  Internet  access and other data services is
accelerating  the  adoption of new  technologies  such as those  embodied in the
emerging  third-generation  (3G) standard.  High-speed  fiber optic networks are
being coupled with broadband  wireless  technologies to deliver enhanced telecom
capabilities and features to new customers and markets.

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

      CHANGES IN THE WIRELESS TELECOM INDUSTRY

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

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

      o    offer PCS service in new geographic markets;

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

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<PAGE>

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

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

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

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

      NEW CHALLENGES FOR WIRELESS CARRIERS AND EQUIPMENT VENDORS

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

      The  changing   environment  is  also  placing   significant   operational
challenges  on  carriers.  Carriers  must make  critical  decisions  about which
geographic  markets to serve and which services and technologies to offer.  They
are  striving  to avoid  the cost  uncertainties  and  considerable  operational
challenges associated with the staffing and process implementation  software for
the  deployment  and  management  of their  networks.  Furthermore,  the rapidly
changing and  increasingly  complex nature of wireless  technologies has made it
difficult for carriers to optimize  employee  training and  utilization for what
are often one-time upgrades for each generation of new technology. Additionally,
networks are being  implemented  with equipment from unrelated  vendors,  posing
system integration challenges. This situation is exacerbated by consolidation in
the industry, which often entails the integration of disparate networks.

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

      CONVENTIONAL WIRELESS COMMUNICATIONS TECHNOLOGY

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

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

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

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the present cellular network environment hundreds of cell sites would have to be
upgraded individually.

      The SpectruCell platform,  which is still under development,  is comprised
of a base hardware  platform and a software  operating  system that controls the
hardware.  The hardware  portion of SpectruCell is being developed to use mainly
commercial off the shelf  components  (COTS) with  proprietary  processing cards
developed by Advanced  Communications  (Australia).  The COTS  hardware  used is
industry standard equipment and sourced from manufacturers  worldwide.  Both the
hardware platform and software operating system are in the development stage.

      THE SPECTRUCELL TECHNOLOGY

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

      As  previously  discussed,  due to  litigation  between  us  and  Advanced
Communications  (Australia)  and  Roger  May,  we have  not been  provided  with
meaningful  and  reliable  information  about  the  status  of  the  SpectruCell
technology and when it will be available, if at all, to military users and field
tested for commercial  applications.  The following discussion about SpectruCell
is a general  description  of the current  technology and should be read in this
context.

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

      We understand that a prototype version of the software suitable to support
the laboratory  operation of a prototype with restricted  functionality has been
developed. We understand that Advanced Communications  (Australia) plans to have
a beta test version of the commercial  version of the software  available at the
end of 2003. While some presales activity may take place during 2003, sales of a
commercial  product are unlikely  before that date.  However,  custom  designed,
specialist,  non-commercial  applications  such as military  applications may be
available by the second quarter, 2003. The current prototype SpectruCell product
can only  support  the CDMA-1 and GSM  protocols.  We believe  that any  planned
development of future product  applications  will focus on the  development of a
product supporting the CDMA 2000 protocol. We have no reliable information when,
if ever,  the  product  will be field  tested,  or by which U.S.  based  network
providers.

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

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

                                       12

<PAGE>

at each cell site. In essence, the SpectruCell architecture provides a basis for
a  paradigm  shift  from  the  conventional  telecommunications  central  office
switching structure for evolving wireless networks.

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

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

      Some of the key applications of the SpectruCell Platform are:

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

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

      o    Network  operators  are expected to be able to install a  SpectruCell
           base  station/switch  into their  existing  2G  networks  and it will
           process their existing customer base while at the same time providing
           an efficient migration path to 2.5G and 3G services with the addition
           of the appropriate SpectruCell software modules.

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

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

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

           o    Radar;

           o    Sonar; and

           o    Military communications.

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

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

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

                                       13

<PAGE>

PATENTS

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

SPECTRUCELL MARKETING ADVANTAGES

      We believe that SpectruCell's  greatest marketing  advantage is its unique
flexibility and open system approach to mobile  communications.  Providers using
SpectruCell will have the ability to expand and utilize  technological  advances
as they occur without making their current network infrastructure redundant.

      We believe that using SpectruCell's  software based operating system on an
existing  network  provider's base station,  will allow the network  provider to
support the following:

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

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

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

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

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

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

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

COMPETITION

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

                                       14

<PAGE>

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

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

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

SALES AND DISTRIBUTION

      We expect to have  independent  distribution  and sales offices located in
California,   New  York  and  Florida  once  SpectruCell  becomes   commercially
available.

GOVERNMENT REGULATION

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

EMPLOYEES AND CONSULTANTS

      As  of  September  30,  2001,  we  have  eight  full  time  employees  and
consultants.  None of our  employees  are covered by any  collective  bargaining
agreement.

                                       15

<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

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

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

ITEM 3.  LEGAL PROCEEDINGS

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

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

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

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

      In ADVANCED COMMUNICATIONS  TECHNOLOGIES,  INC. v. ADVANCED COMMUNICATIONS
(AUSTRALIA), On December 6, 2001, Mr. Roger May, as Chairman and Chief Executive
Officer of  Advanced  Communications  (Australia),  sent a letter to the Company
demanding  full  payment of all amounts due under the Stock  Purchase  Agreement
between the Company and Advanced Communications (Australia) (the "Stock Purchase
Agreement).  This  letter was dated six days  after Mr.  May was  removed by the
Board of  Directors of the Company from all  executive  capacities  including as
President and Chief Executive Officer. Mr. May sent additional demand letters on
December 11, 2001,  and December 21, 2001.  These demand  letters  threatened to
exercise the rights  granted to Advanced  Communications  (Australia)  under its
constitutional  documents,  which  include  exercising  Advanced  Communications
(Australia)'s  lien over the  shares  registered  in the name of the  Company or
declaring that those shares be forfeited. The Company believes that it has fully
met its  obligation  under the  Stock  Purchase  Agreement,  which  states  that

                                       16

<PAGE>

payments  are only  required to be paid to Advanced  Communications  (Australia)
from those  funds  remaining  after  deduction  of  reserves  needed for current
operations,  working capital and the development and expansion of its operations
and the operations of its  subsidiaries as determined by its Board of Directors.
At this time,  the Company does not have  sufficient  funds  available to pay to
Advanced Communications (Australia). On January 23, 2002, the Company filed suit
against Advanced  Communications  (Australia) and Roger May in the Supreme Court
of Victoria at Melbourne, Australia to protect its investment.

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

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

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

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

      EntrePort was added as a defendant to the proceedings.

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

      On May 8,  2002,  the court  extended  its April 26,  2002  order  further
restraining Advanced Communications  (Australia) from "acting upon or taking any
further steps in reliance upon" the notice of breach and termination  notice. On

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<PAGE>

May 27, 2002, the court held a full hearing on the injunction application,  took
the matter under  advisement  and indicated  that it would rule on the matter in
the near future.

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

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

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

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

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

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

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

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

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

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<PAGE>

stayed because of the administration proceeding in which Advanced Communications
(Australia) is involved and the above-mentioned injunctions remain in effect.

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

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

      There were no votes submitted during the fiscal year end.

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

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

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

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

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

                                       19

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

      Our  common  stock is  currently  traded on the  National  Association  of
Securities  Dealers  Automated  Quotation System Over the Counter Bulletin Board
("OTCBB")  under the  symbol  "ADVC".  As of  September  30,  2001,  there  were
97,693,489 common shares outstanding and approximately 345 holders of record. We
believe that the number of beneficial  owners is substantially  greater than the
number of record  holders  because a large  portion  of 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
                                                 --------    -------

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

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

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

      We did not pay any  dividends  during  fiscal 2001 and have never paid any
dividends on our capital stock.  We currently  expect that we will retain future
earnings  for use in the  operation  and  expansion  of our  business and do not
anticipate paying any cash dividends in the foreseeable  future. Any decision on
the future  payment of  dividends  will  depend on our  earnings  and  financial
position  at that time and such other  factors as the Board of  Directors  deems
relevant.  See  Item 7,  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations".

RECENT SALES OF UNREGISTERED SECURITIES

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

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

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

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

      In January 2002, Advanced  Communications  entered into the Equity Line of
Credit  Agreement  where  Advanced   Communications   may,  at  its  discretion,
periodically  issue and sell to Cornell Capital Partners,  L.P. shares of common
stock for a total purchase  price of $30 million.  The amount of each advance is
subject to an aggregate  maximum  advance amount of $2 million in any thirty-day
period. Cornell Capital Partners,  L.P. will purchase the shares of common stock
for a 9%  discount  to the  prevailing  market  price of our  common  stock.  In
addition,  Cornell  Capital  Partners is  entitled to retain 3% of each  advance

                                       20

<PAGE>

under the Equity  Line of Credit,  together  with a one-time  commitment  fee of
$740,000,  payable in shares of its common stock. On January 28, 2002, we issued
2,960,000 shares of our restricted common stock to Cornell Capital Partners,  LP
with a  market  value  of  $740,000  as a  commitment  fee for  the $30  million
structured  equity line facility.  Cornell Capital  Partners intends to sell any
shares  purchased under the Equity Line of Credit at the then prevailing  market
price. Additionally,  Westrock Advisors, Inc. was paid a fee of 40,000 shares of
Advanced  Communications'  common stock,  which is equal to $10,000 at a closing
bid of $0.25 on January 10, 2002 for acting as the placement agent.

      In  January  2002,  Advanced  Communications  entered  into  a  Securities
Purchase  Agreement  with Cornell  Capital  Partners,  Eric  Brager,  Mary Ellen
Misiak,  Connie Benesch,  Adam Denish,  Paul Denish,  Dr. Gerald Holland,  Sarah
Kesselbrenner,  David Kesselbrenner,  Joseph Kesselbrenner, Louis Kesselbrenner,
Roger Mischel,  Robert Benson,  Kent Chou, Steve Severance,  Craig Moss and Meir
Levin (collectively, the "Buyers"), where they shall issue and sell to Buyers up
to One Million Dollars of convertible  debentures  Advanced  Communications  has
outstanding  convertible  debentures  with  an  original  principal  balance  of
$1,000,000.  These  debentures are convertible  into shares of common stock at a
price equal to equal to either (a) an amount equal to one hundred twenty percent
(120%) of the  closing bid price of the common  stock as of the closing  date or
$0.40,  whichever is higher,  or (b) an amount equal to eighty  percent (80%) of
the lowest  closing  bid price of the  common  stock for the five  trading  days
immediately preceding the conversion date. If such conversion had taken place at
$0.016  (i.e.,  80% of the  recent  price of  $0.02),  then the  holders  of the
convertible  debentures would have received  62,500,000  shares of common stock.
These  convertible  debentures  accrue  interest  at a rate 5% per  year and are
convertible at the holder's option. These convertible  debentures have a term of
two years. At Advanced  Communications'  option, these debentures may be paid in
cash or  redeemed  at a 20%  premium  prior to  January  2004.  The  convertible
debentures  contain a beneficial  conversion  feature  computed at its intrinsic
value that is the difference  between the conversion price and the fair value on
the  debenture  issuance  date  of the  common  stock  into  which  the  debt is
convertible,  multiplied  by the  number  of  shares  into  which  the  debt  is
convertible at the commitment date. Since the beneficial  conversion  feature is
to be  settled by  issuing  equity,  the  amount  attributed  to the  beneficial
conversion  feature,  of  $250,000,  was  recorded as an interest  expense and a
component of equity on the issuance date.

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

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

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

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

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

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

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

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

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

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

                                       21
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      On October 26, 2000,  50,000  shares having a value of $37,000 were issued
to Simon Sigalos & Spyredes for prior legal services.

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

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

      During  the period of  December  2000 to  September  2001,  pursuant  to a
private placement under Regulation D, Rule 506, Advanced  Communications  issued
4,293,933  shares of common  stock and  4,293,933  warrants  at $.30 per  share.

                                       22

<PAGE>

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

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

      On June 30, 2000,  32,500 shares having a value of $130,000 were issued to
DDInvestor.com, Inc. for consulting services rendered from November 1999 through
May 2000.

      On June 30, 2000, 250,000 shares having a value of $281,250 were issued to
Levinson and Lichtman,  LLP for legal services  rendered  during the fiscal year
ended June 2000.

      On June 13, 2000,  50,000  shares having a value of $65,600 were issued to
Danson Partners, LLC as an employment bonus.

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

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

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

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

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

                                       23

<PAGE>

      On March 24, 2000,  30,000 shares having a value of $87,180 were issued to
Jeremy Norton as an employment bonus.

      On March 24, 2000,  40,000 having a value of $116,240 were issued to Julie
Huston as an employment settlement.

      On March 13, 2000,  50,000  shares having a value of $7,800 were issued to
Michael Finch for past professional services rendered through April 1999.

      On February 14, 2000, 200,000 shares were issued to Richard Cutler for the
acquisition of Smart Investment.

      On February 14, 2000,  400,000  shares having a value of  $1,600,000  were
issued to Richard Cutler for consulting  fees in connection with the acquisition
of Smart Investment.

      On December 1, 1999,  50,000 shares having a value of $157,800 were issued
to Danson Partners, LLC as an employment bonus.

      On November 22, 1999, 50,000 shares having a value of $121,850 were issued
to Gary Bryant for financial advisory services rendered.

      On November 10, 1999, 5,000 shares having a value of $3,750 were issued to
Wendy Hummel for professional services rendered through June 30, 1999.

      On November  10,  1999,  225,740  shares  having a value of $169,305  were
issued to Alberto  Monteiro for the  acquisition  of World IP. These shares were
subsequently rescinded on December 19, 2000.

      On November 10, 1999, 128,310 shares having a value of $96,233 were issued
to  Edwardo  Acosta  for  the   acquisition  of  World  IP.  These  shares  were
subsequently rescinded on December 19, 2000.

      On November 10, 1999,  25,000 shares having a value of $18,750 were issued
to  Nestor  Briceno  for  the   acquisition  of  World  IP.  These  shares  were
subsequently rescinded on December 19, 2000.

      On November 10, 1999,  11,288  shares having a value of $8,466 were issued
to Jesse Fresco for the acquisition of World IP. These shares were  subsequently
rescinded on December 19, 2000.

      On November 10, 1999, 2,850 shares having a value of $2,138 were issued to
Felix Volker for the  acquisition  of World IP.  These shares were  subsequently
rescinded on December 19, 2000.

      On November 10, 1999, 2,138 shares having a value of $1,604 were issued to
Eial Wiznia for the  acquisition  of World IP.  These  shares were  subsequently
rescinded on December 19, 2000.

      On November 10, 1999,  65,670 shares having a value of $49,253 were issued
to Visha Yanez for the  acquisition of World IP. These shares were  subsequently
rescinded on December 19, 2000.

      On November 10, 1999,  39,004 shares having a value of $29,253 were issued
to Pedro Yanez for the  acquisition of World IP. These shares were  subsequently
rescinded on December 19, 2000.

      On October 27, 1999,  112,500 shares having a value of $49,500 were issued
to Levinson and Lichtman, LLP for legal services rendered during fiscal 1999.

      On October 27, 1999,  3,000 shares having a value of $1,200 were issued to
Jeffrey Bennett for past professional services.

      On September  30,  1999,  Advanced  Communications  entered into a secured
convertible  debentures  purchase  agreement  with  AJW  Partners,  LLC  and New
Millennium  Capital  Partners  II,  LLC,  which were  stockholders  of  Advanced
Communications,  whereby  Advanced  Communications  sold $500,000 of 12% Secured
Convertible  Debentures due April 1, 2000,  convertible  into shares of Advanced
Communications'  Common  Stock.  In addition,  on September  30, 1999,  Advanced
Communications   issued  another  convertible  debenture  to  Bank  Insinger  de
Beauford,  N.V. in the amount of $150,000.  The debentures were convertible,  at
the holder's option, into shares of common stock in whole or in part at any time
after the original  issue date.  The number of shares of common  stock  issuable

                                       24

<PAGE>

upon a conversion  was to be  determined by dividing the  outstanding  principal
amount of the  debenture  to be  converted,  plus all accrued  interest,  by the
conversion  price.  The conversion price in effect on any conversion date is 50%
of the  average  of the bid price  during the twenty  trading  days  immediately
preceding the applicable conversion date. The convertible debentures contained a
beneficial  conversion  feature  computed  at its  intrinsic  value which is the
difference  between  the  conversion  price and the fair value on the  debenture
issuance date of the common stock into which the debt is convertible, multiplied
by the number of shares  into which the debt is  convertible  at the  commitment
date.  Since the  beneficial  conversion  feature  is to be  settled  by issuing
equity, the amount attributed to the beneficial conversion feature, of $650,000,
was  recorded as an interest  expense and a component  of equity on the issuance
date during the fiscal year ended June 30, 2000.

      On September 21, 1999, 62,500 shares having a value of $17,500 were issued
to Levinson and Lichtman, LLP past legal services.

      On August 26, 1999,  100,000  shares having a value of $33,000 were issued
to James Rennie as an employment bonus.

      On August 26, 1999, 60,000 shares having a value of $19,800 were issued to
Wall Street Interview for advertising and promotional services.

      On August 26, 1999, 50,000 shares having a value of $16,500 were issued to
Levinson and Lichtman, LLP for past legal services.

      On August 26, 1999, 50,000 shares having a value of $16,500 were issued to
Simon Sigalos & Spyredes for past legal services.

      On August 26, 1999,  500,000 shares having a value of $165,000 were issued
to Jack Hakoopian for past professional services.

      On August 26, 1999,  15,000 shares having a value of $4,950 were issued to
James Stubler for past professional services.

      On August 26, 1999,  15,000 shares having a value of $4,950 were issued to
Mark Stevenson for past professional services.

      On August 26, 1999, 50,000 shares having a value of $16,500 were issued to
Randy Ownings for past professional services.

      On August 26, 1999,  30,000 shares having a value of $9,900 were issued to
Harbor Office Resource for the purchase of office furniture.

      On August 23, 1999,  500,000 shares having a value of $180,000 were issued
to Gary Bryant for financial advisory services.

      On August 10, 1999, 62,500 shares having a value of $20,938 were issued to
Levinson and Lichtman, LLP for past legal services.

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

                                       25

<PAGE>

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

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

ITEM 6.  SELECTED FINANCIAL DATA

                                              FOR THE YEARS ENDED JUNE 30,
                                         --------------------------------------
                                            2001          2000          1999
                                         ----------   -----------   -----------

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


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

                                       26

<PAGE>

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

      The following  discussion should be read in conjunction with our financial
statements and the related notes and the other financial  information  appearing
elsewhere in this report.

OVERVIEW

      We are a  marketing  company  whose  primary  focus is the  licensing  and
distribution of a product for the wireless  telecommunications industry known as
SpectruCell.   SpectruCell  is  being   developed  by  Advanced   Communications
Technologies  (Australia),  a  development  stage  company  which  we  own a 20%
interest  in and are a party  to a  License  &  Distribution  Agreement  with to
license,  market  and  distribute  the  SpectruCell  product to  commercial  and
military  customers  in the  North,  South  and  Central  Americas.  No sales of
SpectruCell have been made by Advanced  Communications  (Australia) or us. Since
inception in April 1999, our efforts have been principally devoted to describing
and  marketing  the  to-  be  developed  SpectruCell  technology  to  U.S  based
customers, building an infrastructure of marketing, technical and administrative
support staff to support our future sales and licensing  efforts at such time as
SpectruCell  becomes  available to the military and commercial  marketplaces and
raising  capital.  Since  inception  through  June 30, 2001,  we have  sustained
cumulative net losses of $25,515,955,  including  non-cash charges in the amount
of $15,971,518  for the write-off of our  investment in Advanced  Communications
(Australia).  In addition,  a non-cash  charge of $126,750 was incurred from the
realized loss on the decline in marketable securities.  Our losses have resulted
primarily from  expenditures  incurred in connection with costs  associated with
unsuccessful   acquisitions,   office   infrastructure  costs  and  general  and
administrative  expenses.  From  inception  through  June  30,  2001,  the  cost
associated with unsuccessful  acquisitions  amounted to $961,340 and general and
administrative  costs  amounted to  $8,456,347.  From  inception  we have earned
$50,000 in revenues from the sale of international  wholesale  telephone minutes
and effective July 1, 2001, we terminated this business.

      Since  inception,  the  Company has had limited  resources,  has  incurred
cumulative net operating  losses of $25,515,955 and expects to incur  additional
losses  until the  SpectruCell  product is  available  for sale to military  and
commercial  customers.  We  currently do not have any  marketing or  promotional
employees  or  engineers  to market and sell  SpectruCell.  Moreover,  given the
litigation between the Company, Mr. May and Advanced Communications (Australia),
we have no reliable  information  on the status of the  SpectruCell  product and
when it will be available,  if at all, to military users and be field tested for
commercial  applications.  Under the  terms of our  License  Agreement,  we have
limited rights to receive  product  development  information  from the licensor.
Moreover,   given  Advanced  Communications   (Australia)  precarious  financial
position and their voluntary  administration under Australia's  insolvency laws,
it is uncertain  whether our licensor  will remain in business,  be able to work
out its debts with its creditors and raise the capital necessary to complete the
development  of  the  product  or  alternatively   whether  the  rights  to  the
intellectual property will be sold to a third party. If the rights are sold to a
third  party,  we  believe  that our  rights  under our  Exclusive  License  and
Distribution   Agreement   will  remain  in  place.   Our  future   success  and
survivability  depend  on this  single  product  being  available  for  sales to
military and commercial  customers.  In the interim, in order for us to continue
operating, we will require additional funding.

      Assuming that the SpectruCell product will be developed and made available
to us for sales in our Exclusive  Territory,  we believe that we will need funds
to re-build our marketing and sales team,  hire qualified  engineers and pay our
debts which include $844,205 of accounts payable and accrued expenses,  $200,750
of convertible  debentures and other  obligations of $3,566,747.  Our plans with
regard  to  these   matters   include   continuing  to  minimize  the  company's
infrastructure  costs while seeking  additional capital through the draw down of
our Equity Line of Credit Facility and from other sources until such time as the
SpectruCell  product  becomes  available to us for license and  distribution  to
military and commercial  customers.  Although we continue to pursue these plans,
there  is no  assurance  that we  will be  successful  in  obtaining  sufficient
financing on terms acceptable to us. The financial statements do not include any
adjustments that might result from the outcome of this  uncertainty.  Unless the
company is able to activate its Equity Line of Credit  Facility  within the near
future or seek other sources of capital,  management  will be unable to continue
operating the company.

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

      On  September  7,  2002,  the Letter of Intent  between  the  Company  and
Advanced Communications  (Australia) expired. The Letter of Intent which was for
a  one-year  period,  gave  us the  right  to  acquire  all of the  intellectual
property,  including the worldwide  rights (other than the rights to territories
that we currently possess) for the licensing and distribution of the SpectruCell

                                       27

<PAGE>

product (the "IP  Rights").  The Letter of Intent  included  various  conditions
precedent  to the transfer of the IP Rights  including,  but not limited to, the
raising  of  $80  million  in the  U.S  capital  markets,  appropriate  U.S  and
Australian government regulatory approvals,  approval of both Board of Directors
and shareholders,  appropriate financial,  technical and legal due diligence and
definitive agreements.

      Due to the  ongoing  litigation,  restrictions  on foreign  ownership  and
Advanced Communications (Australia) voluntary administration (bankruptcy), it is
highly unlikely that the Company will further pursue the acquisition of Advanced
Communications (Australia) intellectual property.

SIGNIFICANT ACCOUNTING POLICIES

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

NEW ACCOUNTING PRONOUNCEMENTS

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

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

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

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

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

                                       28

<PAGE>

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

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

      The following summarizes our operations for both fiscal years:

                                                  FOR THE YEARS ENDED JUNE 30,
                                                 ------------------------------
                                                       2001         2000
                                                 -------------   --------------

Consolidated Statement of
  Operations Data:
Revenue                                           $     50,000             --
Cost of Revenue                                         57,310             --
                                                 -------------   --------------

Gross Profit (Loss)                                    (7,310)             --
Selling, General and
Administrative Expenses                              2,283,412      4,384,691
                                                 -------------   --------------

Operating Profit (Loss)                            (2,290,722)    (4,384,691)
Loss from Investment Writedown                     (3,571,654)       (85,818)
Loss from Impairment of Goodwill                  (12,399,864)             --
Total Other (Expense) Income                         (422,157)      (666,491)
Extraordinary Gain                                      23,000        277,068
                                                 -------------   --------------

(Loss) before Depreciation and
  Amortization                                    (18,681,397)    (4,859,932)
Depreciation and Amortization                      (1,051,169)      (250,495)
                                                 -------------   --------------

Net Income (Loss)                                 (19,732,566)    (5,110,427)
Earnings (Loss) per share                               $(.22)         $(.07)

REVENUE

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

OPERATING EXPENSES

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

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

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

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

                                       29

<PAGE>

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

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

      EXTRAORDINARY GAIN

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

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

      REVENUE

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

      OPERATING EXPENSES

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

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

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

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

                                       30

<PAGE>

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

      EXTRAORDINARY GAINS (LOSSES)

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

LIQUIDITY AND CAPITAL RESOURCES

      OVERVIEW

      Since our inception,  we have financed our operations  through the private
sales of common stock and  convertible  debentures and from unsecured loans from
an entity  controlled  by Mr.  Roger May, a former  officer and  director of our
company  and a  significant  shareholder.  As of June 30,  2001,  we have raised
approximately  $2,900,000  before  offering  costs  through  the  sale of  these
securities  and have  borrowed  $796,000 from an entity wholly owned by Mr. May.
These loans are non-interest bearing, are unsecured,  and have no fixed date for
repayment.  Advanced Communications does not believe that the loans are due upon
demand.  However,  the actual repayment terms are not known with any specificity
since the terms are not contained in a written  document.  At June 30, 2001, our
principal  source of liquidity  was $6,816 of cash and cash  equivalents  and we
have no credit  facilities  in place.  On January 10,  2002,  we entered into an
Equity Line of Credit Agreement with Cornell Capital Partners,  L.P. Pursuant to
the Equity  Line of Credit,  we may,  at our  discretion,  periodically  sell to
Cornell Capital Partners shares of common stock for a total purchase price of up
to $30.0 million. For each share of common stock purchased under the Equity Line
of Credit, Cornell Capital Partners will pay 91% of the lowest closing bid price
of our common stock on the  Over-the-Counter  Bulletin Board or other  principal
market on which our common stock is traded for the 5 days immediately  following
the notice date. Cornell Capital Partners is a private limited partnership whose
business  operations  are  conducted  through  its  general  partner,  Yorkville
Advisors, LLC. Further, Cornell Capital Partners will retain a fee of 3% of each
advance  under the  Equity  Line of Credit as a fee.  In  addition,  we  engaged
Westrock Advisors, Inc., a registered broker-dealer,  to advise us in connection
with the Equity  Line of  Credit.  For its  services,  Westrock  Advisors,  Inc.
received 40,000 shares of our common stock. The effectiveness of the sale of the
shares under the Equity Line of Credit is conditioned  upon us  registering  the
shares of common stock with the Securities and Exchange  Commission.  Our Equity
Line of Credit is not yet effective and the company has not drawn down any funds
from this facility. Except for the Equity Line of Credit, we have no commitments
for capital.

      We  anticipate  that our cash  needs  over the next 12 months  consist  of
general  working  capital needs of $1,200,000  plus the repayment of outstanding
current  indebtedness  of  $2,438,535.  These  obligations  include  outstanding
convertible  debentures  in the amount of $200,750,  a note payable to Grassland
Capital in the amount of $118,530,  accounts payable and accrued expenses in the
amount  of  $844,205,   accrued  compensation  of  $479,050  and  an  unsecured,
non-interest-bearing  loan  payable  to an entity  wholly-owned  by Roger May, a
former  officer and  director  and a  significant  shareholder  in the amount of
$796,000.  In  addition,  we  have a note  payable  to  Advanced  Communications
(Australia)  in the amount of $2,173,167 at June 30, 2001 that is the subject of
a  pending  lawsuit  by  us  against  Roger  May  and  Advanced   Communications
Technologies,  Pty  (Australia).  As of June 30, 2001, we had a working  capital
deficiency of  $2,421,719.  We  anticipate  that our cash needs over the next 12
months will come primarily  from the sale of securities or loans,  including the
Equity Line of Credit.

                                       31

<PAGE>

      As discussed  above,  Advanced  Communications  has total  liabilities  of
$4,611,702  as of  June  30,  2001.  Included  in  that  total  are  contractual
obligations of $3,336,652.  These contractual obligations,  along with the dates
in which such payments are due, are described below:

================================================================================
                                      PAYMENTS DUE BY PERIOD
                          ======================================================
CONTRACTUAL OBLIGATIONS                  1 YR       2-3      4-5         AFTER
                             TOTAL       OR LESS    YEARS    YEARS       5 YEARS
================================================================================
Notes Payable             $2,291,697   $  118,530     --   $2,173,167*        --
================================================================================
Convertible Debentures       200,750      200,750     --            --        --
================================================================================
Accounts Payable &
Accrued Expenses             844,205      844,205     --            --        --
================================================================================
Total Contractual Cash
Obligations               $3,336,652   $1,163,485     --  $2,173,167 *        --
================================================================================

      * The Company has no fixed date for  repayment  of this  obligation.  This
obligation is only to be repaid after the Company raises  sufficient  capital to
repay the obligation,  but only after deducting reserves for current operations,
working capital and the expansion of its operations.

      Our financial  statements  have been  prepared on a going  concern  basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business; and as a consequence, the financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and  classification of liabilities that
might be necessary  should we be unable to continue as a going concern.  We have
experience net operating  losses and negative cash flows since inception and, as
of June 30, 2001, we had an  accumulated  deficit of  $25,515,955.  Cash used in
operations  for the years  ended  June 30,  2001 and 2000 was $  $1,479,999  and
$777,526,  respectively.  At June 30,  2001,  our only source of  liquidity  was
$6,816 of cash. Such conditions raise  substantial doubt that we will be able to
continue as a going concern for a reasonable  period of time. Unless we are able
to raise  additional  capital  through  the  issuance  of  stock or  convertible
debentures  or  commence  drawing  down on our Equity  Line of Credit once it is
declared  effective  by the SEC, we will be unable to continue  our  operations.
Because we believe that the  SpectruCell  product will not be available for sale
to the military  market until 2003 (and the commercial  market beyond 2003),  we
will have no source of revenue until then.  Consequently,  unless we are able to
raise  additional  capital  through  our  Equity  Line of Credit  or from  other
sources,  we will be unable to  continue  as a going  concern.  Considering  the
depressed state of the private and public capital  markets,  we believe that our
only reasonable chance of raising  additional capital is through our Equity Line
of Credit  with  Cornell  Capital  Partners,  L.P.,  once and if it is  declared
effective.

      Our future results of operations involve a significant number of risks and
uncertainties.  The  worldwide  market for  telecommunications  products such as
those that are under development by Advanced Communications (Australia) has seen
a dramatic  reduction  in capital  spending  in 2001 and the first six months of
2002 as  compared  to the late 1990's and 2000.  It is  uncertain  as to when or
whether market conditions will improve.  Moreover, given Advanced Communications
(Australia)  precarious  financial  position and their voluntary  administration
under  Australia's  insolvency  laws, it is uncertain  whether our licensor will
remain in business,  be able to work out its debts with its  creditors and raise
the  capital   necessary  to  complete  the   development   of  the  product  or
alternatively  whether the rights to the intellectual property will be sold to a
third party. If the rights are sold to a third party, we believe that our rights
under our Exclusive License and Distribution Agreement will remain in place. Our
future success and  survivability  depend on this single product being available
for sales to  military  and  commercial  customers.  In order for us to continue
operating in the interim, we will require additional funding.

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

                                       32

<PAGE>

NET CASH USED IN OPERATING ACTIVITIES

      Net cash used in operating  activities  was $1,479,999 and $777,526 in the
fiscal  years  ended June 30,  2001 and 2000,  respectively.  The use of cash by
operating  activities  was  principally  the  result of net losses  during  both
reporting.

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

      We used net cash of $247,608  and  $242,125  during the fiscal years ended
June 30, 2001 and 2000,  respectively,  for the repayment of our loan payable to
Advanced  Communications   (Australia).   As  of  June  30,  2001,  the  balance
outstanding  to  Advanced  Communications  (Australia)  on the loan  payable  is
$2,173,167. During the fiscal years ended June 30, 2001 and 2000, we used $8,411
and $6,335, respectively, to purchase office equipment and furniture.

NET CASH PROVIDED BY FINANCING ACTIVITIES

      Net cash provided by financing activities for the year ended June 30, 2000
was $1,013,050  and was due to the receipt of $488,050 of net proceeds  received
from the sale of 12% secured convertible  debentures in September 1999, $273,500
received from the private  placement of equity  securities  that commenced April
1999 and ended July 1999 and $251,500 of net loan proceeds  received from Global
Communications Technologies,  Pty, an entity wholly owned by Roger May, a former
officer and director of the company.

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

CAPITAL RESOURCES

      On January 10, 2002, we executed various financing agreements with Cornell
Capital Partners,  LP whereby Cornell and certain other investors purchased from
us $1 million of two-year Convertible  Debentures and Cornell entered into a $30
million Equity Line of Credit.  Pursuant to the Convertible Debenture financing,
we received $564,000 net of financing and closing costs and the repayment of the
$325,000  ninety-day  note. The debentures are convertible into shares of common
stock at a price  equal to equal to either  (a) an amount  equal to one  hundred
twenty  percent  (120%) of the closing  bid price of the common  stock as of the
closing  date or $0.40,  whichever  is higher,  or (b) an amount equal to eighty
percent  (80%) of the lowest  closing bid price of the common stock for the five
trading days  immediately  preceding the conversion date. If such conversion had
taken  place at $0.0128  (i.e.,  80% of the recent  price of  $0.016),  then the
holders of the convertible  debentures would have received  78,125,000 shares of
common  stock  leaving no stock  available to be issued under the Equity Line of
Credit.  These convertible  debentures accrue interest at a rate 5% per year and
are convertible at the holder's option. These convertible debentures have a term
of two years. At our option, these debentures may be paid in cash or redeemed at
a 20% premium prior to January 2004.  The issuance of shares upon  conversion of
the  Debentures  or  pursuant  to the Equity Line of Credit will have a dilutive
impact on our existing stockholders. As a result, our net income per share could
decrease  in future  periods,  and the market  price of our common  stock  could
decline.  In  addition,  the lower our stock  price is the more shares of common
stock we will  have to issue  upon  conversion  of the  debentures  or under the
Equity  Line of  Credit.  If our  stock  price  were  lower,  then our  existing
stockholders  would  experience  greater  dilution.  The convertible  debentures
contain a beneficial  conversion feature computed at its intrinsic value that is
the difference  between the conversion price and the fair value on the debenture
issuance date of the common stock into which the debt is convertible, multiplied
by the number of shares  into which the debt is  convertible  at the  commitment
date.  Since the  beneficial  conversion  feature  is to be  settled  by issuing
equity, the amount attributed to the beneficial conversion feature, of $250,000,
was recorded as an interest  expense for the fiscal year ended June 30, 2002 and
a component of equity on the issuance date.

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

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<PAGE>

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

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

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

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

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

      The Company's predecessor,  MFI was obligated to pay $150,000 to Grassland
Capital Group (the "Payee")  pursuant to a convertible  promissory note.  During
December  1997, MFI issued 75,000 of its common shares to settle the amounts due
to the Payee.  However,  a dispute arose as to whether the Payee  authorized the
issuance of the shares.  The Payee filed a suit during  December 1997 to enforce
the convertible  promissory  note. Total interest payable was $84,507 as of June
30, 2000 resulting in the total principal and accrued  interest  payable at June

                                       34

<PAGE>

30, 2000 of $234,507.  In June 2000, the parties agreed to settle the matter for
a payment of $200,000.  This resulted in a gain on extinguishment of debt in the
amount of $34,507. Advanced Communications made a payment of $50,000 by June 30,
2000. The $150,000 remainder was to be paid with proceeds from the 75,000 shares
of stock and any remaining  balance to be paid by Advanced  Communications.  The
revised  obligation was to be paid by August 14, 2000.  Advanced  Communications
defaulted on this revised  payment  obligation and a judgment  against  Advanced
Communications was entered.  In October 2000,  Advanced  Communications sold the
75,000  shares of stock in the open  market  on  behalf  of the Payee  realizing
$41,802,  which it remitted in partial  repayment of its outstanding debt. As of
June 30, 2001, Advanced  Communications'  remaining balance and accrued interest
on this obligation was $118,530. An additional $4,206 of interest was accrued on
this note and on October 19, 2001 Advanced Communications paid the obligation in
full. On October 24, 2001 Advanced Communications received notice from the court
that its judgment has been satisfied.

EQUITY LINE OF CREDIT

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

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

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

      We cannot predict the actual number of shares of common stock that will be
issued  pursuant to the Equity  Line of Credit,  in part,  because the  purchase
price of the shares will fluctuate based on prevailing  market conditions and we
have not determined the total amount of advances we intend to draw. Nonetheless,
we can  estimate  the number of shares of our  common  stock that will be issued
using certain  assumptions.  Assuming we issued the maximum  number of shares of
common stock being  registered  at a recent price of $0.016 per share,  we would
issue 70,000,000  shares of common stock to Cornell Capital  Partners,  L.P. for
gross  proceeds  of  $1,120,000  (or  $1,086,400  after  deducting  the 3% to be
retained by Cornell),  or  $28,880,000  less than is available  under the Equity
Line of Credit. These shares would represent 38% of our outstanding common stock
upon issuance. We are registering 70,000,000 shares of common stock for the sale
under the Equity Line of Credit and the conversion of  debentures.  Accordingly,
we would need to register  additional  shares of common  stock in order to fully
utilize  the $30.0  million  available  under the  Equity  Line of Credit at the
current price of $0.016 per share.  In addition,  we would be required to obtain
the approval of our shareholders to increase the number of authorized  shares of
common stock.  Pursuant to our Articles of  Incorporation,  we are authorized to
issue up to 200,000,000  shares of common stock. At a recent price of $0.016 per
share,  we would be required to issue  1,875,000,000  shares of common  stock in
order to fully  utilize  the $30.0  million  available.  We would be required to
obtain a vote of at  least a  majority  of the  outstanding  shares  in order to
increase our authorized  shares of common stock for this purpose.  Our inability
to obtain such approval would prohibit us from increasing our authorized  shares
of common stock and from issuing any additional  shares under the Equity Line of
Credit or to otherwise raise capital from the sale of capital stock.

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<PAGE>

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

         Purchase            $0.0040       $0.0080      $0.0120       $0.0160
         Price:

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

         Total
         Outstanding(2): 186,227,622   186,227,622  186,227,622   186,227,622

         Percent
         Outstanding(3):       37.6%         37.6%        37.6%         37.6%

         Maximum
         Proceeds(4):       $280,000      $560,000     $840,000    $1,120,000

______________________

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

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

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

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

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

RISKS RELATED TO OUR BUSINESS

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

      We have  historically  lost money. In the fiscal years ended June 30, 2001
and 2000, we had a net loss of  ($19,732,566)  and  ($5,110,427)  or ($0.22) and
($.07) per share, respectively.  Future losses are likely to occur. Accordingly,
we may  experience  significant  liquidity  and cash flow  problems  because our
operations  are not  profitable.  No  assurances  can be  given  that we will be
successful in reaching or maintaining profitable operations.

      WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS

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

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<PAGE>

the company is able to activate  its Equity Line of Credit  Facility  within the
near  future or seek other  sources  of  capital,  management  will be unable to
continue operating the company.

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

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit  opinions  issued in  connection  with the years  2001 and 2000  financial
statements, which states that our ability to continue as a going concern depends
upon our  ability  to  resolve  liquidity  problems,  principally  by  obtaining
capital,   commencing  sales  and  generating   sufficient  revenues  to  become
profitable.  Our ability to obtain additional funding will determine our ability
to continue as a going  concern.  Our  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.

      WE HAVE A WORKING CAPITAL DEFICIT,  WHICH MEANS THAT OUR CURRENT ASSETS ON
      JUNE 30, 2001 WERE NOT  SUFFICIENT TO SATISFY OUR CURRENT  LIABILITIES  ON
      THAT DATE

      We had a working capital deficit of $2,421,719 as of June 30, 2001,  which
means that our current  liabilities  exceeded our current  assets by $2,421,719.
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, 2001 were
not sufficient to satisfy all of our current liabilities on that date.

      OUR FUTURE DEPENDS UPON THE MARKET ACCEPTANCE OF A SINGLE PRODUCT

      We intend to market and distribute a single product called SpectruCell. To
date, we have not had any revenue from the sale of this product.  Our success is
completely  dependent on the  telecommunication  industry's  acceptance  of this
product,  in such quantities that we can generate  sufficient  revenues and cash
flow to finance our operations.  We may need to overcome  substantial hurdles to
obtain  such  market  acceptance,  including  convincing  the  telecommunication
industry of the  necessity of such product and  encouraging  companies and other
entities to offer incentives to use our product. No assurances can be given that
the market will accept our product.

      The  inability  of Advanced  Communications  (Australia)  to complete  the
development  of our proposed  product and prove its  features and  functionality
will jeopardize our ability to continue operations.

      Our  proposed  product  is  under  development  and  is  not  commercially
available.   The  features  and   functionality   of  our  proposed  product  is
commercially unproven. The success of Advanced  Communications is dependent upon
the ability of Advanced Communications  (Australia) to successfully complete the
development,  and to prove the features and  functionality  of our product.  The
inability to timely complete such development or to prove to potential customers
our product's features and functionality,  such that we can generate sales, will
jeopardize our ability to continue operations. Such testing and functionality is
outside   our  control  and  we  are   dependent   on  Advanced   Communications
(Australia)'s efforts to complete these tasks.

      OUR FUTURE DEPENDS UPON THE FINANCIAL STABILITY OF ADVANCED COMMUNICATIONS
      (AUSTRALIA)

      We are dependent upon Advanced  Communications  (Australia) completing the
development and testing of SpectruCell.  Advanced Communications  (Australia), a
development  stage  company with no sales is presently  insolvent  and filed for
voluntary  administration  on  July  18,  2002  under  the  insolvency  laws  of
Australia.  If  Advanced   Communications   (Australia)  does  not  successfully
reorganize  its  obligations  and  raise  sufficient  capital  to  complete  the
development of  SpectruCell,  we will have no product to generate sales from and
our ability to continue operating will be in significant jeopardy.

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

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

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<PAGE>

the  financial  markets  could cause the price of our common  stock to fluctuate
substantially.

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

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

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

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

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

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

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

      WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

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

      FUTURE SALES BY OUR  STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND
      OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS

      Sales of our common stock in the public  market  following  this  offering
could lower the market  price of our common  stock.  Sales may also make it more
difficult for us to sell equity securities or  equity-related  securities in the
future at a time and price that our  management  deems  acceptable or at all. Of
the  97,693,489  shares of common stock  outstanding  as of  September  30, 2001
32,240,998 shares are, or will be, freely tradable without  restriction,  unless
held by our "affiliates."  The remaining  65,452,491 shares of common stock held
by existing  stockholders  are "restricted  securities" and may be resold in the
public market only if registered or pursuant to an exemption from  registration.
Some of these shares may be resold under Rule 144.

      In addition, we have issued warrants to purchase up to 6,440,900 shares of
common stock and debentures  convertible into 10,000,000  shares of common stock
(assuming a conversion price of $0.10 per share).

      EXISTING  STOCKHOLDERS WILL EXPERIENCE  SIGNIFICANT DILUTION FROM THE SALE
      OF SHARES UNDER THE EQUITY LINE OF CREDIT

      The sale of shares  pursuant  to the  Equity  Line of  Credit  will have a
dilutive impact on our stockholders. As a result, our net income per share could
decrease  in future  periods,  and the market  price of our common  stock  could
decline.  In  addition,  for a given  advance,  we will  need to issue a greater
number of shares of common  stock  under the Equity  Line of Credit as our stock
price  declines.  If our stock price is lower,  then our  existing  stockholders
would experience greater dilution.

                                       38

<PAGE>

      THE  INVESTOR  UNDER  THE  EQUITY  LINE OF  CREDIT  WILL PAY LESS THAN THE
      THEN-PREVAILING MARKET PRICE OF OUR COMMON STOCK

      The  common  stock to be issued  under the Equity  Line of Credit  will be
issued  at a 9%  discount  to  the  lowest  closing  bid  price  for  the 5 days
immediately  following  the notice date of an advance.  These  discounted  sales
could cause the price of our common stock to decline.

      THE SELLING  STOCKHOLDERS  INTEND TO SELL THEIR  SHARES OF COMMON STOCK IN
      THE PUBLIC MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE

      The selling  stockholders  intend to sell the shares of common stock being
registered in this offering in the public market. Such sales may cause our stock
price to decline.

      THE SALE OF OUR STOCK  UNDER OUR  EQUITY  LINE OF CREDIT  COULD  ENCOURAGE
      SHORT  SALES BY THIRD  PARTIES,  WHICH  COULD  CONTRIBUTE  TO THE  FURTHER
      DECLINE OF OUR STOCK PRICE

      The significant  downward pressure on the price of our common stock caused
by the sale of  significant  amounts of common  stock  under the Equity  Line of
Credit could encourage  short sales by third parties.  Such an event could place
further downward pressure on the price of our common stock.

      OUR COMMON STOCK HAS BEEN  RELATIVELY  THINLY TRADED AND WE CANNOT PREDICT
      THE EXTENT TO WHICH A TRADING MARKET WILL DEVELOP

      Before this  offering our common stock has traded on the  Over-the-Counter
Bulletin Board. Our common stock is thinly traded compared to larger more widely
known companies in our industry. Thinly traded common stock can be more volatile
than common stock  trading in an active  public  market.  We cannot  predict the
extent to which an active  public market for the common stock will develop or be
sustained after this offering.

      THE PRICE YOU PAY IN THIS  OFFERING  WILL  FLUCTUATE  AND MAY BE HIGHER OR
      LOWER THAN THE PRICES PAID BY OTHER PEOPLE PARTICIPATING IN THIS OFFERING

      The price in this offering will fluctuate  based on the prevailing  market
price of the common stock on the Over-the-Counter  Bulletin Board.  Accordingly,
the price you pay in this  offering  may be higher or lower than the prices paid
by other people participating in this offering.

ACQUISITIONS

      None.

SUBSEQUENT EVENTS

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

ITEM 8.  FINANCIAL STATEMENTS

      The  financial  statements of Advanced  Communications  are submitted as a
separate section of this Form 10-KSB on pages F-1 through F-19.

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

      None.

                                       39

<PAGE>

                                    PART III

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

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

      Our current directors and officers are as follows:

      NAME AND ADDRESS                   AGE          POSITION
      ------------------------------   -------        --------------------------
      Wayne I. Danson                     48          President, Chief Financial
      420 Lexington Ave.                              Officer and Director
      New York, NY 10170

      Jonathan J. Lichtman                49          Director
      120 Palmetto Park Road
      Boca Raton, FL 33432

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

      Randall Prouty                      49          Chairman of the Board of
      420 Lexington Avenue                            Directors and Director
      New York, NY  10170

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

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

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

      WAYNE I. DANSON,  PRESIDENT,  CHIEF  FINANCIAL  OFFICER AND DIRECTOR.  Mr.
Danson has served as Advanced  Communications'  Chief  Financial  Officer  since
December 1, 1999,  and  President  since  April 30,  2002,  and was  appointed a
Director on January 3, 2000. Mr. Danson is the Managing  Director and Founder of
Danson Partners,  LLC, a financial  advisory firm  specializing in middle market
companies in the real estate and technology industries.  Prior to forming Danson
Partners,  LLC from  August  1996 to April 1999 Mr.  Danson  was  co-head of and
Managing  Director of  PricewaterhouseCoopers  LLP's Real Estate Capital Markets
Group.  Prior to  joining  PricewaterhouseCoopers,  from 1988  through  1995 Mr.
Danson was a Managing Tax Partner  with Kenneth  Leventhal & Company in New York
and Washington D.C., where he was also Kenneth Leventhal's  National Director of
its International  and Debt Restructure Tax Practices.  Prior to his involvement

                                       40

<PAGE>

with Kenneth  Leventhal,  Mr. Danson was a Managing  Director with Wolper Ross &
Co., Ltd. in New York, a closely held financial services company specializing in
financial tax, pension consulting, designing financial instruments and providing
venture  capital and  investment  banking  services.  Mr. Danson  graduated with
honors from  Bernard M. Baruch  College with a BBA in  Accounting  and an MBA in
Taxation.  He is a certified public accountant and a member of the AICPA and the
New York State Society of CPAs.

      JONATHAN J. LICHTMAN,  DIRECTOR.  Mr. Lichtman was appointed a Director of
Advanced  Communications on November 9, 1999 and is currently a partner with the
Boca  Raton law firm of  Levinson  &  Lichtman,  LLP,  where he  specializes  in
structuring  corporate  and  partnership   transactions  including  real  estate
syndications.  Mr.  Lichtman is also currently a general partner of several real
estate  partnerships in New York,  North Carolina and Florida.  Prior to forming
Levinson and Lichtman LLP, from 1988 to 1998, Mr.  Lichtman was an attorney with
English,  McCaughan and O'Bryan,  PA, where he performed legal work for domestic
and international  clients as well as real estate  partnerships and development.
Mr.  Lichtman  obtained his J.D.  degree,  cum laude,  from Syracuse  University
College  of Law and his LLM  degree in  taxation  from the  University  of Miami
School of Law.  He is also a  certified  public  accountant  and is  licensed to
practice law in Florida and New York.

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

      RANDALL  PROUTY,  CHAIRMAN OF THE BOARD OF  DIRECTORS  AND  DIRECTOR.  Mr.
Prouty,  a co-founder of Advanced  Communications  and Director  since March 10,
1997 and was  appointed  Chairman of the Board on November 30,  2001.  Since May
1999,  Mr. Prouty has been the President  and CEO of World  Associates,  Inc., a
publicly traded development stage company.  He is also the sole owner of Bristol
Capital,  Inc.  (successor to Bristol Realty Corp.) from 1984 to present, a firm
active in consulting and business  development work for companies seeking access
to  capital  markets,  and  through  which  he is  incubating  other  e-business
ventures.  Mr. Prouty is a licensed real estate and mortgage broker in the State
of Florida.

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

      Our former directors and officers are as follows:

      ROGER T. MAY. Mr. May, was the former Chief Executive Officer, Chairman of
the Board and Director of the Company,  from March 10, 1997 until his removal as
Chief  Executive  Officer and Chairman of the Board of the Directors,  effective
November 30,  2001.  On March 14,  2002,  Mr. May resigned as a Director.  He is
currently  the Chief  Executive  Officer  and  Chairman of the Board of Advanced
Communications   (Australia).   In  1991  he  founded  the  nationwide   central
reservation system known as Independent  Reservation Services Ltd. ("IRSL").  In
1997  Mr.  May  negotiated  the  sale  of  IRSL  to a  Florida  public  company,
Teleservices   International  Group.  In  1987,  Mr.  May  began  his  focus  on
telecommunications,  first establishing  nationwide  distribution networks for a
private network and then marketing  discounted  telecommunications  products and
associated services to the hospitality industry. He established successful joint
ventures with Cable & Wireless, and relationships with Rochester Telephone, Bell
Atlantic,  Frontier Communications and others. Mr. May moved to Los Angeles from
Australia in 1980 to capitalize on export  incentive  allowances  offered by the
Australian  government.  He began  operating a wool  exporting  company and then
purchased  a franchise  for  International  Business  Exchange,  Inc.,  a barter

                                       41

<PAGE>

exchange company. Mr. May began his marketing career in Australia in 1969, where
he was a General Manager for Australia's largest General Motors dealership.

      ALLEN ROBERTS. Mr. Roberts was a former Director of the Company, from July
10, 2001 until his  resignation  on March 14, 2002. Mr. Roberts is currently the
President  and Chief  Executive  Officer  of  Australon  Enterprises  Pty Ltd, a
publicly traded company listed on the Australian  Stock Exchange and a 66% owned
subsidiary  of  Advanced  Communications   (Australia).  He  was  formerly  Vice
President-Mergers & Acquisitions for Advanced  Communications  (Australia) where
he was  responsible  for and  directly  involved in the Gawler  Gold,  Data Link
Technologies  Pty, LTD,  Victoria  Communications  and Simoco  Australia Pty Ltd
acquisitions.  Prior  to  this,  Mr.  Roberts  was the  sole  shareholder  of an
Australian  based  financial   consulting   company   specializing  in  mergers,
acquisitions and capital markets activities.  Previously,  he was Head of Credit
for the Bank of  Melbourne  where he reported to the  Managing  Director and the
Bank's Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

      In a board  meeting  held on May 15 2001,  both an audit and  compensation
committee  was  established.  The  audit  committee  will  report  to the  board
regarding the appointment of our independent public  accountants,  the scope and
results of our annual  audits,  compliance  with our  accounting  and  financial
policies and  management's  procedures and policies  relative to the adequacy of
our internal  accounting  controls.  The audit committee is comprised of Messrs.
Prouty and Finch.  The  compensation  committee of the board of  directors  will
review and make recommendations to the board regarding our compensation policies
and all forms of  compensation  to be provided  to our  executive  officers.  In
addition,  the compensation  committee will review bonus and stock  compensation
arrangements  for all of our other  employees.  The  compensation  committee  is
comprised of Messrs. Roche and Prouty.

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

RESIGNATIONS

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

                                       42

<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

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

<TABLE>
<CAPTION>
                                     ANNUAL COMPENSATION                        LONG-TERM COMPENSATION
                       ------------------------------------------------   -----------------------------------
                                                                                   AWARDS         PAYOUTS
                                                                          --------------------  -------------
                                                              OTHER       RESTRICTED    OPTION
                                                             ANNUAL         STOCK          S/     LTIP     ALL OTHER
NAME AND                          SALARY        BONUS     COMPENSATION     AWARD(S)       SARS   PAYOUTS  COMPENSATION
PRINCIPAL POSITION      YEAR       ($)           ($)           ($)           ($)         (#)       ($)         ($)
---------------------------------------------------------------------------------------------------------------------------
<S>                     <C>    <C>            <C>                 <C>            <C>       <C>      <C>          <C>
Roger May, CEO          2001   $197,500(1)    $50,000(1)          --             --        --       --           --

CEO                     2000   $120,000(1)         --             --             --        --       --           --

Wayne I. Danson,        2001   $235,931(2)         --             --      $167,500(2)      --       --           --

CFO                     2000   $ 50,000(3)         --             --      $223,400(4)      --       --           --
</TABLE>

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

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

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

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

EMPLOYMENT AGREEMENTS

      On November 29, 1999, we entered into an employment  agreement with Danson
Partners, LLC to provide the functions customarily provided by a Chief Financial
Officer. As compensation for these services,  we paid $5,000 monthly in advance,
plus  100,000  restricted  shares  of  common  stock.  Starting  April 1,  2000,
compensation for these services  increased to $10,000 per month. On September 1,
2000,  we entered  into  another  one-year  consulting  agreement  with Wayne I.
Danson,  the Chief Financial  Officer. A signing bonus of 75,000 shares of stock
was issued,  valued at $67,500.  This contract  expired August 31, 2001, but was
orally  extended to December 31, 2001.  As  compensation,  Mr.  Danson  receives
$10,000 per month in cash and $10,000 per month in stock.  Effective  January 1,
2002,   Mr.   Danson   agreed  to  orally  extend  his  contract  with  Advanced
Communications through December 31, 2003, at a monthly rate of $12,500.

      Effective July 1, 2000,  Advanced  Communications  and Mr. May, our former
Chief Executive Officer, entered into an oral employment agreement that entitled
Mr. May to receive $15,000 per month and a bonus of $50,000.  Effective December
1, 2000, Mr. May's  compensation  increased to $17,500 per month. As of June 30,
2001, the Company owed Mr. May $479,050 in accrued compensation. On November 30,
2001,  Mr.  May was  terminated  as  Advanced  Communications'  Chief  Executive
Officer.  The  Compensation  Committee  of the Board of  Directors  reviewed the
nature and extent of Mr.  May's past  services  to  Advanced  Communications  to
determine how much of Mr. May's prior  services are more  properly  allocable to
Advanced Communications  (Australia). At Advanced Communications' March 26, 2002
Board of Director's  meeting,  the Board of Directors  unanimously  approved the
recommendation  of the Compensation  Committee to reduce Mr. May's prior accrued


                                       43
<PAGE>

compensation  by $394,361  representing  services Mr. May performed for Advanced
Communications (Australia), leaving a balance of $172,183 at June 30, 2002.

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

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

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

      o    each of our directors;

      o    the named executive officers; and

      o    all directors and executive officers as a group.

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

      Beneficial  ownership is determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to securities.  Except as indicated by footnote,  and subject
to community  property  laws where  applicable,  the persons  named in the table
below have sole voting and investment power with respect to all shares of common
stock  shown as  beneficially  owned  by  them.  The  percentage  of  beneficial
ownership  is based on  97,693,489  shares of  common  stock  outstanding  as of
September 30, 2001.

                                        NUMBER OF
                                          SHARES             PERCENTAGE
                                       BENEFICIALLY           OF SHARES
                                          OWNED              OUTSTANDING
                                     ------------------     -------------
     Roger May                       24,482,000  (1)(2)         25.1%
     Nancy Needham                    7,168,454  (3)*           7.34%
     E.R. DuPont                      2,751,335  (4)*            2.8%
     Wayne Danson                       974,316  (5)             1.0%
     Jonathan J. Lichtman             1,047,500  (6)             1.1%
     Dr. Michael Finch                  100,000  **
     Randall Prouty                     774,500  **
     Wilbank J. Roche                    50,000  **
     Allen Roberts                      100,000  (7)**
     All Officers and Directors
     as a Group                      27,528,316                 28.2%

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

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

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

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

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

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

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

                                       44

<PAGE>

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

**    Less than 1%.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Effective   April  30,  2002,   Mr.  Gary  Ivaska   resigned  as  Advanced
Communications' Chief Executive Officer.  Advanced Communications and Mr. Ivaska
have settled all outstanding  amounts  otherwise due him for his prior services.
Under the terms of the Ivaska Agreement, Advanced Communications is obligated to
pay Mr.  Ivaska  $40,000  at the rate of  $10,000  per  month  for  four  months
commencing on May 31, 2002.

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

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

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

      On  January  15,  2002,  Advanced   Communications   moved  its  corporate
headquarters from Irvine to El Segundo,  California.  The lease has a three-year
term commencing on January 1, 2002. As of August 1, 2002, the Company  relocated
its principal  executive  office from  California to 420 Lexington  Avenue,  New
York, NY 10170 within the office facility of Danson  Partners,  LLC, a privately
owned company that employs our President and Chief Financial Officer. No rent or
facility use fee is charged to the Company by Danson Partners, LLC.

      On January 23, 2002, Advanced  Communications  filed suit against Advanced
Communications  (Australia)  and Roger May in the  Supreme  Court at  Melbourne,
Victoria,  Australia,  and on that date the court  issued an interim  injunction
order effectively enjoining and prohibiting Advanced Communications  (Australia)
from "transferring,  dealing with, charging, diminishing,  mortgaging, assigning
or disposing of" the Company's stock in Advanced Communications (Australia). The
interim  injunction  was  extended,  although  the court order had already  been
extended twice, it was again extended on April 26, 2002 by the court on February
20, 2002, until a final determination is made at trial.  ACT-Australia  declined
to contest the court  orders  sought by Advanced  Communications.  ACT-Australia
filed its Answer to the suit and the parties are currently  conducting discovery
of material documents. On May 7, 2002, Advanced Communications received a notice
alleging a breach from Advanced Communications (Australia) stating that Advanced
Communications  had  breached its  obligation  under the License  Agreement.  In
addition, on May 7, 2002, Advanced Communications (Australia) sent a termination
notice  formally  terminating  the License  Agreement.  Advanced  Communications
believes that the notice of breach and the termination  notice are without merit
and it has taken the necessary legal actions to prevent Advanced  Communications
(Australia) from terminating its rights under the License  Agreement.  On May 8,
2002, the court extended its April 26, 2002 order further  restraining  Advanced
Communications  (Australia)  from  "acting  upon or taking any further  steps in
reliance upon" the notice of breach and termination  notice. On May 27, 2002 and
May 28, 2002 the court held full hearings on the  injunction  application,  took
the matter under  advisement  and indicated  that it would rule on the matter in
the  near  future.  On  August  23,  2002,  the  court  issued  a  comprehensive
preliminary  injunction  granting all the relief  sought by the  Company.  Among
other things,  the injunction  prohibits  Advanced  Communications  (Australia),
directly or indirectly,  from taking any action in the Exclusive  Territory with

                                       45

<PAGE>

respect to  marketing,  distributing,  selling  or  otherwise  dealing  with the
SpectruCell  technology  (including the military applications  thereof),  except
through and with the prior  written  consent of the Company.  In  addition,  the
ruling  granted the Company a  preliminary  injunction  until trial  prohibiting
Advanced Communications (Australia) from "transferring,  dealing with, charging,
diminishing,  mortgaging,  assigning or disposing  of" Advanced  Communications'
stock in Advanced Communications (Australia).

      Through a family trust  established in Australia,  Mr. May, an officer and
director of the company until November 30, 2001 and March 14, 2002  respectively
and a principal  shareholder  of our  company,  indirectly  owns a 70%  majority
interest in Advanced Communications  (Australia). We own 20% of the common stock
of Advanced  Communications  (Australia).  Advanced  Communications  (Australia)
filed for  protection  under  Australia's  insolvency  law on July 18,  2002 and
appointment an independent  administrator and receiver to manage and operate its
business. Our interest in Advanced Communications  (Australia) is evidenced by a
Stock  Purchase  Agreement and is reflected by stock  ownership  records on file
with the Australian Securities Investment  Commission,  an Australian government
agency.

      As of  June  30,  2001  and  2000,  Advanced  Communications  owed  Global
Communications  Technologies  Pty Ltd,  a  wholly-owned  entity of Roger  May, a
former  officer  and  director of the  Company  and a  significant  shareholder,
$796,000   and   $251,500   respectively,   for  funds   advanced   to  Advanced
Communications  to provide  working  capital and for the repayment of certain of
Advanced  Communications'  obligations.  This loan is  non-interest  bearing and
unsecured.  This  loan does not have a  scheduled  date of  repayment.  Advanced
Communications does not believe that the loans are due upon demand. However, the
actual  repayment terms are not known with any  specificity  since the terms are
not contained in a written document.

      In April 2000,  our company  acquired  20% of the common stock of Advanced
Communications  (Australia).  The purchase price of the  investment  amounted to
$19,350,000, and was comprised of a note payable for $7,500,000 and the issuance
of 5,000,000 shares of restricted common stock valued at $11,850,000. The shares
issued were valued at the average  quoted  trading price during the  acquisition
period.  Our interest in Advanced  Communications  (Australia) is evidenced by a
Stock  Purchase  agreement and is reflected by stock  ownership  records on file
with the Australian Securities Investment  Commission,  an Australian government
agency.  As of  June  30,  2001,  we  owe  Advanced  Communications  (Australia)
$2,173,167  under the terms of the Stock Purchase  Agreement.  The fair value of
the investment at the  acquisition  date was  determined to be  $3,657,472.  The
excess of the purchase price over the fair value of the investment in the amount
of $15,692,528 was accounted for as goodwill. Mr. May is a principal shareholder
of our company and Advanced Communications  (Australia).  Through June 30, 2001,
we repaid $5,326,833 of our obligation to Advanced  Communications  (Australia),
in part by the issuance of 6,597,000 shares of restricted  common stock having a
value of  $4,527,100.  The balance of our repayments was in the form of $247,608
of cash and the offset of  $552,125  of funds  previously  advanced  to Advanced
Communications  (Australia).  Advanced Communications is currently in litigation
with  Advanced  Communications  (Australia)  regarding the attempt by Mr. May to
lien and transfer the company's  shares in the affiliate for alleged  nonpayment
of  the  company's   obligations  as  well  as  to  terminate  our  License  and
Distribution Agreement.

      On  September  1, 2000,  Mr.  Danson  entered  into a one-year  consulting
agreement  with our company for the period  September 1, 2000 through August 31,
2001. Under the terms of the consulting  agreement,  Mr. Danson received $10,000
per month in cash and $10,000 per month in stock for his services.  Mr. Danson's
agreement expired on August 31, 2001. Mr. Danson has agreed to orally extend his
consulting agreement with Advanced Communications through December 31, 2003 at a
monthly rate of $12,500.

      On  December  13,  2001,  Advanced  Communications  entered  into a 90-day
$325,000  Promissory  Note (the "Note") with Cornell Capital  Partners,  LP. The
Note had an  interest  rate of 12% and was  secured  by a  Guaranty  and  Pledge
Agreement  executed  by Mr.  Danson,  Mr.  Lichtman  and  Mr.  Prouty.  Advanced
Communications realized $269,000 of net proceeds after financing costs and legal
fees.  The Note was repaid on  January  14,  2002 with  proceeds  from  Advanced
Communications' $1 million 5% Convertible Debenture.

      Jonathan J. Lichtman,  Assistant  Secretary and a director of the Company,
is a partner at Levinson & Lichtman,  LLP, a law firm in Boca Raton, FL that the
Company  retained to provide  legal  services  during the fiscal  years 2001 and
2000. The Company has paid Levinson & Lichtman,  LLP $186,000 in stock for legal
services  rendered  during fiscal 2001. No cash was paid to Levinson & Lichtman,
LLP during fiscal 2001.  During  fiscal 2000,  the Company has paid Levinson and
Lichtman, LLP $13,741 and $385,688 in the form of cash and stock,  respectively,
for legal services rendered.

      Wilbank Roche, a director of the Company,  is a partner at Roche & Holt, a
law firm in Los Angeles, CA that the Company retained to provide legal services.
During the  fiscal  years  2001 and 2000,  Roche & Holt was paid $0 and  $26,635
respectively, for legal services rendered.

                                       46

<PAGE>

      Dr.  Michael  Finch,  a director of the  Company,  has been issued  50,000
shares of restricted  common stock having a value of $7,800 for  engineering and
software design consulting services rendered to the Company during fiscal 2000.

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

      (a)   Financial Statements:

            (i)   Registrant.

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

            (i)   None.

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

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

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

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

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

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

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

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

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

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

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

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

                                       47

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       48

<PAGE>

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

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

10.18     Letter of Intent dated September 7,    Incorporated by reference to
          2001 re: Purchase of Advanced          Exhibit 10.18 to the Company's
          Communications (Australia)             Amendment to Form 10-QSB for
                                                 the quarter ended December 6,
                                                 2002 filed on August 6, 2002

            (ii)  Reports on Form 8-K.

                  None.

                                       49

<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on December 9, 2002.


                                 ADVANCED COMMUNICATIONS TECHNOLOGIES,
                                 INC.

                                 By:/s/ Wayne I. Danson
                                    ------------------------
                                    Name:  Wayne I. Danson
                                    Title: President and Chief Executive Officer


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

SIGNATURE                      TITLE                            DATE
---------                      -----                            ----

/s/ Wayne I. Danson
--------------------                                            December 9, 2002
Wayne I. Danson                President (Principal
                               Executive Officer),
                               Chief Financial Officer
                               (Principal Accounting
                               Officer) and Director

/s/ Jonathan Lichtman
---------------------                                           December 9, 2002
Jonathan Lichtman              Secretary and Director

/s/ Randall Prouty
---------------------                                           December 9, 2002
Randall Prouty                 Chairman of the Board
                               and Director

/s/ Dr. Michael Finch
---------------------                                           December 9, 2002
Dr. Michael Finch              Director

/s/ Wilbank Roche
---------------------                                           December 9, 2002
Wilbank Roche                  Director

                                       50

<PAGE>

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

In  connection   with   Amendment  No.  2  to  the  Annual  Report  of  Advanced
Communications Technologies,  Inc. (the "Company") on Form 10-KSB for the period
ended June 30, 2001, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"),  the undersigned,  in the capacities and on the date
indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act of  2002,  that  to his
knowledge:

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

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


BY:    /s/ Wayne I. Danson
       -------------------------------
Name:  Wayne I. Danson, President and
        Chief Financial Officer

                                       51

<PAGE>

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

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

            1.    he has reviewed the report;

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

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

            4.    he and the other certifying officers:

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

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

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

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

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

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

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

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



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

                                       52

<PAGE>

           ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                               AS OF JUNE 30, 2001

                                       53

<PAGE>

            ADVANCED COMMUNICATIONS TECHNOLOGIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2001

                          INDEX TO FINANCIAL STATEMENTS

                                                                 PAGE(S)
                                                                 -------

Independent Auditor's Report                                         F-1

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

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

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

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

Notes to Consolidated Financial Statements                           F-7

                                       54

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

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

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Advanced
Communications Technologies,  Inc., and Subsidiaries as of June 30, 2001 and the
related consolidated  statements of operations,  changes in stockholders' equity
(deficiency)  and cash flows for the years ended June 30,  2001 and 2000.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly  in  all  material   respects,   the   financial   position  of  Advanced
Communications Technologies,  Inc. and Subsidiaries as of June 30, 2001, and the
results of their  operations  and their cash flows for the years  ended June 30,
2001 and 2000 in conformity with accounting principles generally accepted in the
United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 14 to
the consolidated  financial  statements,  the Company's  significant net loss of
$19,732,566  for the year ended June 30, 2001, a working  capital  deficiency of
$2,421,719,  and a  stockholders'  deficiency of $2,569,792,  raise  substantial
doubt about its ability to continue as a going  concern.  Management's  plans in
regards  to these  matters  are also  described  in Note  14.  The  accompanying
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

WEINBERG & COMPANY, P.A.

Boca Raton, Florida
October 19, 2001

                                       F-1

<PAGE>

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

                                     ASSETS

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

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

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

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

LONG-TERM LIABILITIES
  Note payable to affiliate                                2,173,167
                                                        ------------
TOTAL LIABILITIES                                          4,611,702
                                                        ------------

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


          See accompanying notes to consolidated financial statements

                                      F-2

<PAGE>

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

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

          See accompanying notes to consolidated financial statements

                                      F-3

<PAGE>

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


          See accompanying notes to consolidated financial statements

                                      F-4

<PAGE>

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

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

          See accompanying notes to consolidated financial statements

                                      F-5

<PAGE>

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

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

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

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

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

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

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

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

          See accompanying notes to consolidated financial statements

                                      F-6

<PAGE>

NOTE 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

         (A) Organization

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

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

         (B) Principles of Consolidation

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

         (C) Use of Estimates

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

         (D) Fair Value of Financial Instruments

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

         (E) Marketable Securities

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

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

         (F) Property and Equipment

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

         (G) Long-Lived Assets

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

                                        7

<PAGE>

         (H) Income Taxes

         Deferred tax assets and  liabilities  are recognized for the future tax
         consequences   attributable   to  differences   between  the  financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases.  Deferred tax assets and liabilities are measured
         using  enacted  tax rates  expected  to apply to taxable  income in the
         years in which those temporary differences are expected to be recovered
         or settled.  The effect on  deferred  tax assets and  liabilities  of a
         change in tax rates is recognized in income in the period that includes
         the enactment date.

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

         (I) Comprehensive Income

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

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

         (J) Revenue Recognition

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

         (K) Concentration of Credit Risk

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

         (L) Loss Per Share

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

                                       8

<PAGE>

         (M) New Accounting Pronouncements

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

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

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

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

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

NOTE 2  DUE FROM UNCONSOLIDATED AFFILIATE

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

NOTE 3  LOSS FROM INVESTMENT IN UNCONSOLIDATED AFFILIATE

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

         The  Company's  20%  interest in ACT-AU,  was  accounted  for using the
         equity  method of accounting  and was stated at the  amortized  cost of
         Goodwill and the equity in  undistributed  earnings since  acquisition.
         The equity in earnings of ACT-AU was adjusted for the  amortization  of
         the  Goodwill  as  discussed  above.  Amortization  was  computed  on a

                                       9

<PAGE>

         straight-line  basis over fifteen years.  The  amortization of Goodwill
         charged  to  income  for the  year  ended  June  30,  2001 and 2000 was
         $1,046,169 and $246,495 respectively.

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

                                               JUNE 30, 2001      JUNE 30, 2000
                                               -------------      -------------

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

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

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

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

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

                                       INVESTMENT      GOODWILL       TOTAL
                                      ------------   ------------  -------------
        At acquisition                $ 3,657,472    $ 15,692,528  $ 19,350,000
        Investment loss                (3,657,472)             --    (3,657,472)
        Amortization of goodwill              --       (1,292,664)   (1,292,664)
        Impairment of goodwill                --      (12,399,864)  (12,399,864)
                                      ------------   ------------  -------------

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

NOTE 4  REALIZED LOSS ON DECLINE IN MARKETABLE SECURITIES

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

                                       10

<PAGE>

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

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

NOTE 6   ACCRUED COMPENSATION

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

NOTE 7  NOTES AND LOAN PAYABLE

         (A) Note Payable

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

         (B) Note Payable to affiliate

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

                        SHARES OF COMMON
                              DATE             STOCK ISSUED          VALUE
                    ------------------------  --------------    -------------
                    September 2000              5,000,000        $ 3,500,000
                    October 2000(1)               460,000            460,000
                    June 2001                   1,137,000            567,100
                                              --------------    -------------
                                                6,597,000        $ 4,527,100
                                              ==============    =============

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

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

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

         (C) Loan Payable to Shareholder

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

                                       11

<PAGE>

NOTE 8   CONVERTIBLE DEBENTURES

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

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

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

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

         (A) Private Placement

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

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

         The  fair  market  value of the  warrants,  aggregating  $275,454,  was
         estimated  on the grant date  using the  Black-Scholes  option  pricing
         model as  required  under FASB 123 with the  followingweighted  average
         assumptions:  expected dividend yield 0%, volatility 49.84%,  risk-free
         interest rate 4.22%, expected option life 2 years. At June 30, 2001, no
         warrants  have been  exercised.  Such amounts have been netted  against
         proceeds received from the issuance of shares in the previous quarter.

         (B) Stock Issued For Services

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

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

                                       12

<PAGE>

         (C) Stock Issued For Extinguishment of Debt

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

         (D) Stock Retired

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

NOTE 10  RELATED PARTIES

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

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

         (C) Legal Counsel

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

NOTE 11  EXECUTIVE EMPLOYMENT AGREEMENTS

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

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

NOTE 12  UNSUCCESSFUL PROPOSED ACQUISITIONS

         (A) ORBCOMM Global L.P.

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

         The  assets  were to be owned  by a newly  formed  entity  owned by the
         Company's  50% owned U.S.  affiliate,  Australon  USA, Inc. The Company
         also entered into a joint venture agreement with another bidder to sell
         a  portion  of the new  entity's  equity in  return  for a  substantial
         capital  commitment.  The Company's joint venture partner  subsequently
         defaulted  on its  commitment  to provide  capital  to the new  entity.
         Because  of the  extreme  time  constraints  place by the  Court on the
         Company  to  close  the  transaction,   and  the  substantial   capital
         commitment needed to turn ORBCOMM's business around, Company management
         subsequently  determined  that it was no longer in the  Company's  best
         interest to pursue this  acquisition.  In the  unsuccessful  attempt to
         acquire the assets of ORBCOMM,  the Company incurred  expenses totaling
         $835,375 which are included in the Company's  Income  Statement for the
         year ended June 30, 2001. Of this amount,  the Company  incurred a loss


                                       13
<PAGE>

         in the amount of $425,000 relating to a non-refundable bid deposit made
         in connection  with the proposed  acquisition.  The balance of expenses
         were  included in  professional  fees  totaling  $395,151  and in other
         selling and administrative expenses totaling $15,224.

         (B) Beneventure Capital, LLC

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

NOTE 13  COMMITMENTS AND CONTINGENCIES

         (A) Lease Agreements

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

         (B) Legal Matters

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

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

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

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

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

NOTE 14  GOING CONCERN

         The Company's consolidated financial statements for the year ended June
         30,  2001  have  been  prepared  on  a  going  concern   basis,   which
         contemplates   the   realization   of  assets  and  the  settlement  of
         liabilities  and  commitments  in the normal  course of  business.  The
         Company's  significant  net loss of $19,732,566 for the year ended June
         30,  2001,  a  working   capital   deficiency  of  $2,421,719,   and  a
         stockholders'  deficiency of $2,569,792,  raise substantial doubt about
         its ability to continue as a going concern.

         The ability of the Company to continue as a going  concern is dependent
         on the Company's ability to raise additional  capital and implement its
         business plan.  Management  anticipates that the issuance of securities
         will  generate  sufficient  resources  to  assure  continuation  of the
         Company's operations (See Note 9A and 15).

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

                                       14

<PAGE>

NOTE 15  SUBSEQUENT EVENTS

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

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


                                       15