A CONSULTING TEAM INC
GENERAL           Incorporated in 1983, The A Consulting Team, Inc., a New York corporation (the "Company" or "TACT" or the "Registrant") has provided a wide range of information technology ("IT") consulting, custom application development and solutions to Fortune 1000 companies and other large organizations. In August of 1997, TACT became a public company, headquartered in New York, NY. In addition, TACT has an office in Clark, NJ. The Company supports all major computer technology platforms and supports client IT projects by using a broad range of third-party software applications.           The Company's shares are listed on The NASDAQ Capital Market(CM) under the symbol "TACX."  INDUSTRY BACKGROUND           Rapid technological advance, and the wide acceptance and use of the Internet as a driving force in commerce, accelerated the growth of the IT industry through 2001. These advances included more powerful and less expensive computer technology, the transition from predominantly centralized mainframe computer systems to open and distributed computing environments and the advent of capabilities such as relational databases, imaging, software development productivity tools, and web-enabled software. These advances expanded the benefits that users can derive from computer-based information systems and improved the price-to-performance ratios of such systems. As a result, an increasing number of companies were employing IT in new ways, often to gain competitive advantages in the marketplace, and IT services have become an essential component of their long-term growth strategies. The same advances that have enhanced the benefits of computer systems rendered the development and implementation of such systems increasingly complex. In addition, there was a shortage of IT consultants qualified to support these systems. Accordingly, organizations turned to external IT services organizations such as TACT to develop, support and enhance their internal IT systems. However, during 2002 and continuing into 2003 there was a slowdown in IT spending coincident with the general economic slowdown. This resulted in revenue decreases at many IT service companies, however, IT spending increased in 2004 and this trend has continued throughout 2005. Accordingly, the Company will continue to expand its sales and recruiting function in an effort to further increase its revenues in both the short-term and long-term.  STRATEGY           The Company's objective is to continue to provide its clients with high quality, technology-based consulting services in the areas of migrations and conversions of legacy systems, performance optimization, web enhancements, custom development, strategic sourcing and enterprise-wide IT consulting, outsourcing and software solutions. The Company's strategies include the following key components:           Cross-sell Additional Services to Existing Clients. By offering existing clients additional IT consulting services and software, TACT intends to leverage its existing client base. The Company's relationships with current clients provide opportunities to market additional services in current and new geographical markets.           Expand Client Base. The Company is developing additional client relationships in geographic markets where the Company maintains offices (New York, NY and Clark, NJ) through targeted marketing initiatives, participation in local trade shows, user group meetings and conventions and referrals from existing clients.           Acquisitions and Strategic Relationships. On July 19, 2002, the Company consummated the acquisition of all of the issued and outstanding capital stock of International Object Technology, Inc. (IOT). IOT was a privately owned,                                          1   professional services firm that provides data management and business intelligence solutions, technology consulting and project management services.           On April 11, 2005, the Company completed an investment in an offshore joint venture, TACT Global Services Private Limited (TGS), an offshore subsidiary, in order to substantially enhance its offshore presence in its continuing endeavor to stay competitive in the industry.           The Company continuously looks for companies and other organizations that it may acquire or develop other relationships with that are strategic to the Company's business. The Company has established certain acquisition criteria. It is primarily interested in companies and organizations that are (i) established in geographic locations of the Company, or (ii) has a depth of service offerings that the Company finds attractive or (iii) a customer base that the Company can cross sell its services into.           Operational Efficiencies and Cost Reductions. The Company has restructured its operations and reduced its cost structure by migrating to a flexible workforce and reducing corporate and general administrative expenses.  TACT OPERATIONS           CONSULTING. TACT provides a wide range of IT consulting services, including technology infrastructure advisory services and systems architecture design for Fortune 1000 companies and other large organizations. These services account for over 90% of the Company's revenues. The Company's solutions are based on an understanding of each client's enterprise model. The Company's accumulated knowledge may be applied to new projects such as planning, designing and implementing enterprise-wide information systems, database management services, performance optimization, migrations and conversions, strategic sourcing, outsourcing and systems integration.           TACT delivers its IT solutions through TACT Solution Teams composed of Project Managers, Technical Practice Managers and Technical Specialists. These professionals possess the project management skills, technical expertise and industry experience to identify and effectively address a particular client's technical needs in relation to its business objectives. TACT's focus on providing highly qualified IT professionals allows the Company to identify additional areas of the client's business which could benefit from the Company's IT solutions, thereby facilitating the cross-marketing of multiple Company services. The Company keeps its Solution Teams at the forefront of emerging technologies through close interaction with TACT research personnel who identify innovative IT tools and technologies. As a result, management believes that TACT Solution Teams are prepared to anticipate client needs, develop appropriate strategies and deliver comprehensive IT services, thereby allowing the Company to deliver the highest quality IT services in a timely fashion.           A Solution Team is typically deployed from one of the Company's offices in order to provide solutions to its clients by utilizing local resources. Management's experience has been that the presence established by a local office improves the Company's ability to attract local clients, as well as its ability to attract, develop, motivate and retain locally-based IT professionals. The Company's corporate headquarters supports its Clark, NJ office and performs many functions, which allow the office to focus on recruiting, sales and marketing.           Business Process Outsourcing. During 2004 TACT began to provide business process outsourcing services (BPO) to its clients. The Company believes that this is an area where substantial growth opportunities exist. In 2005, the Company experienced only minimal growth in this area and plans on focusing resources on growing this line of business in the future.           SOFTWARE. TACT markets and distributes a number of software products developed by independent software developers. The Company believes its relationships with over 70 software clients throughout the country provide opportunities for the delivery of additional TACT consulting and training services. The software products offered by TACT are developed in the United States, England and Finland and marketed primarily through trade shows, direct mail, telemarketing, client presentations and referrals. Revenue from the sale of software is ancillary to the Company's total revenues.  CLIENTS           The Company's clients consist primarily of Fortune 1000 companies and other large organizations. The Company's clients operate in a diverse range of industries with a concentration in the pharmaceutical, financial services, and automotive industries. Four of the Company's top ten clients measured by revenue for the year ended December 31, 2005 had been clients for over five years. In 2005, three of the Company's largest customers were Pfizer, Chase Mellon and BMW NA,                                          2   who represented 21%, 20% and 15% of revenues respectively. Besides these customers, no other customer represented greater than 10% of the Company's revenues. During 2006, the Company expects that a significant portion of its revenues will continue to come from these clients.           Greater than 99% of all of the Company's revenue is derived from sources within the United States.  NEW TECHNOLOGIES           TACT continuously investigates new technologies developed by third parties to determine their viability and potential acceptance in the Fortune 1000 marketplace. The Company's staff works diligently to identify those "bleeding-edge" technologies that will succeed as "leading-edge" business solutions. TACT personnel are highly qualified in delivering these technical solutions.  SALES AND MARKETING           TACT's marketing strategy is to develop long-term partnership relationships with existing and new clients that will lead to the Company becoming a preferred provider of IT services. The Company seeks to employ a "cross selling" approach where appropriate to expand the number of services utilized by a single client. Other sales and marketing methods include client referrals, networking and attending trade shows. At December 31, 2005, the Company employed 7 sales and marketing personnel. Another marketing resource, which has also served the Company in its recruiting efforts, is the Company's web site at http://www.tact.com. The web site provides information about TACT consulting services and software products to the IT community.  COMPETITION           The market for IT consulting services is intensely competitive. It is affected by rapid technological advances and includes a large number of competitors. The Company's competitors include the current or former consulting divisions of "Big Four" accounting firms, systems consulting and implementation firms, application software development firms, management consulting firms, divisions of large hardware and software companies, offshore outsourcing companies and niche providers of IT services. Many of these competitors have significantly greater financial, technical and marketing resources and greater name recognition than the Company. In addition, the Company competes with its clients' internal resources, particularly when these resources represent an existing cost to the client. Such competition may impose additional pricing pressures on the Company.           The Company believes that the principal competitive factors in the IT services market include breadth of services offered, technical expertise, knowledge and experience in the industry, quality of service and responsiveness to client needs. The Company believes it competes primarily based on its in-depth technical expertise, timely delivery of products and services and quality of service.           A critical component of the Company's ability to compete in the marketplace is its ability to attract, develop, motivate and retain skilled professionals. The Company believes it can compete favorably in hiring such personnel by offering competitive compensation packages and attractive assignment opportunities.  HUMAN RESOURCES           At December 31, 2005, the Company had 90 personnel, of whom 52 were consultants, 7 were recruiting personnel, 7 were sales and marketing personnel, 5 were technical and customer service personnel and 19 were executive, financial and administrative personnel. None of the Company's employees are represented by a labor union, and the Company has never incurred a work stoppage. In addition to the Company's 90 personnel, the Company was utilizing the services of 67 independent contractors at December 31, 2005. These independent contractors act as consultants and they are not employees of the Company. There can be no assurance that the services of these independent contractors will continue to be available to the Company on terms acceptable to the Company.  INTELLECTUAL PROPERTY RIGHTS           The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its proprietary rights and the proprietary rights of third parties from whom the Company licenses intellectual property. The Company has entered into confidentiality agreements with its employees and                                          3   limits distribution of proprietary information. There can be no assurance, however, that the steps taken by the Company in this regard will be adequate to deter misappropriation of proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. In addition, the Company is aware of other users of the term "TACT" and combinations including "A Consulting," which users may be able to restrict the Company's ability to establish or protect its right to use these terms. The Company has in the past been contacted by other users of the term "TACT" alleging rights to the term. However, the Company has completed the application process for protection of certain marks, including "TACT" and "The A Consulting Team."           All ownership rights to software developed by the Company in connection with a client engagement are typically assigned to the client. In limited situations, the Company may retain ownership or obtain a license from its client, which permits the Company or a third party to market the software for the joint benefit of the client and the Company or for the sole benefit of the Company.  SEASONALITY           The Company's business has not been affected by seasonality.
FACTORS THAT COULD AFFECT OPERATING RESULTS           Statements included in Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this document that do not relate to present or historical conditions are "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents that are filed with the SEC. Such forward-looking statements involve risk and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Forward-looking statements may include, without limitation, statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts," "intends," "possible," "expects," "estimates," "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. The Company cautions readers that results predicted by forward-looking statements, including, without limitation, those relating to the Company's future business prospects, revenues, working capital, liquidity, capital needs, interest costs, and income are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements, due to the following factors, among other risks and factors identified from time to time in the Company's filings with the SEC. Among the important factors on which such statements are based are assumptions concerning the anticipated growth of the information technology industry, the continued needs of current and prospective customers for the Company's services, the availability of qualified professional staff, and price and wage inflation.           OPERATING LOSSES           The Company has incurred operating losses in 2005 and 2003. In the year ended December 31, 2005, the Company had an operating loss of $461,000 and net loss of $484,000. In the year ended December 31, 2003, the Company had an operating loss of $42,000 and net loss of $123,000. There is no guarantee that the Company can achieve or sustain profitability on a quarterly or annual basis in the future. If revenues grow slower than anticipated, or if operating expenses exceed expectations or cannot be adjusted accordingly the Company could experience losses and the results of operations and financial condition would be materially and adversely affected.           CAPITAL REQUIREMENTS           The Company may be unable to meet its future capital requirements. The Company may require additional financing in the future in order to continue to implement its product and services development, marketing and other corporate programs. The Company may not be able to obtain such financing or obtain it on acceptable terms. Without additional financing, the Company may be forced to delay, scale back or eliminate some or all of its product and services development, marketing and other corporate programs. If the Company is able to obtain such financing, the terms may contain restrictive covenants that might negatively affect its shares of Common Stock, such as limitations on payments of dividends or, in the                                          4   case of a debt financing, reduced earnings due to interest expenses. Any further issuance of equity securities would likely have a dilutive effect on the holders of its shares of Common Stock. Its business, operating results and financial condition may be materially harmed if revenues do not develop or grow slower than the Company anticipates, if operating expenses exceed the Company's expectations or cannot be reduced accordingly, or if the Company cannot obtain additional financing.           DEPENDENCE ON LIMITED NUMBER OF CLIENTS           The Company derives a significant portion of its revenues from a relatively limited number of clients primarily located in the New York/New Jersey metropolitan area of the United States. Adverse economic conditions affecting this region could have an adverse effect on the financial condition of its clients located there, which in turn could adversely impact its business and future growth. Revenues from its ten most significant clients accounted for a majority of its revenues for each of the three years ended December 31, 2005. In each of the last three years, the Company had at least one customer with revenues exceeding 10% of the Company's revenues. For the year ended December 31, 2005, the Company had three customers which accounted for 21%, 20% and 15% of revenues, respectively. For the year ended December 31, 2004, the Company had two customers which accounted for 20% and 19% of revenues, respectively. For the year ended December 31, 2003, the Company had one customer which represented 28% of revenues. Besides these customers, no other customer represented greater than 10% of the Company's revenues. In any given year, its ten most significant customers may vary based upon specific projects for those clients during that year. There can be no assurance that the Company's significant clients will continue to engage it for additional projects or do so at the same revenue levels. Clients engage the Company on an assignment-by-assignment basis, and a client can generally terminate an assignment at any time without penalties. The loss of any significant customer could have a material adverse effect on the Company's business, results of operations and financial condition. A failure of the Company to develop relationships with new customers could have a material adverse effect on the Company's business, results of operations and financial condition.           PROJECT RISK           The Company's projects entail significant risks. Many of its engagements involve projects that are critical to the operations of its clients' businesses and provide benefits that may be difficult to quantify. The Company's failure or inability to meet a client's expectations in the performance of the Company's services could result in a material adverse change to the client's operations and therefore could give rise to claims against the Company or damage its reputation, adversely affecting its business, results of operations and financial condition.           RAPID TECHNOLOGICAL CHANGE           The Company's business is subject to rapid technological change and is dependent on new solutions. Its success will depend in part on its ability to develop information technology solutions to meet client expectations, and offer software services and solutions that keep pace with continuing changes in information technology, evolving industry standards, changing client preferences and a continuing shift to outsourced solutions by clients. The Company cannot assure you that it will be successful in adequately addressing the outsourcing market or other information technology developments on a timely basis or that, if addressed, the Company will be successful in the marketplace. The Company also cannot assure you that products or technologies developed by others will not render its services uncompetitive or obsolete. Its failure to address these developments could have a material adverse effect on its business, results of operations and financial condition.           POSSIBILITY THAT CUSTOMERS MAY NOT DO BUSINESS WITH THE COMPANY           The Company's existing customers may decide not to continue to do business with the Company, and potential customers may decide not to engage the Company, or may conduct business with the Company on terms that are less favorable than those currently extended, due to the Company's operating losses in two of the past three years. In those events, the Company's net revenues would decrease, and the Company's business would be adversely affected.           BILLING MARGINS           The Company's ability to maintain billing margins is uncertain. It derives revenues primarily from the hourly billing of consultants' services and, to a lesser extent, from fixed-price projects. Its most significant cost is project personnel cost, which consists of consultant salaries and benefits. Thus, its financial performance is primarily based upon billing margin (billable hourly rate less the consultant's hourly cost) and personnel utilization rates (number of days worked by a consultant during a two-week billing cycle divided by the number of billing days in that cycle). The gross margin decreased slightly in 2005 due to the mix of time and material work compared to fixed price projects, and was not affected by the                                          5   consultant utilization rate, which remained at the same level (89% in 2005 and 89% in 2004). The gross margin increased in 2004 due to a higher consultant utilization rate (89% in 2004 compared to 79% in 2003), and higher margin on fixed price contracts. The gross margin decreased in 2003 due to a lower consultant utilization rate (79% in 2003 compared to 81% in 2002). There can be no assurance, however, that the Company's revenues will continue to be billed primarily on a time and materials basis or that the Company's cost containment and workforce rationalization effects will continue to provide positive results. In addition, during the past three years the Company's clients have been adverse to increases in any costs of the Company's services.           MANAGING GROWTH           The Company may have difficulty managing its growth. Its expansion is dependent upon, among other things,           o    its ability to hire and retain consultants as employees or               independent consultants,           o    its ability to identify suitable new geographic markets with               sufficient demand for its services, hire and retain skilled               management, marketing, customer service and other personnel, and               successfully manage growth, including monitoring operations,               controlling costs and maintaining effective quality and service               controls, and           o    if the Company consummates additional acquisitions, its ability               to successfully and profitably integrate any acquired businesses               into its operations.           If the Company's management is unable to manage growth or new employees or consultants are unable to achieve anticipated performance levels, its business, results of operations and financial condition could be materially adversely affected.           FLUCTUATIONS IN QUARTERLY OPERATING RESULTS           The Company's quarterly results of operations are variable. Variations in revenues and results of operations occur from time to time as a result of a number of factors, the size and significance of client engagements commenced and completed during a quarter, the number of business days in a quarter, consultant hiring and utilization rates and the timing of corporate expenditures. The timing of revenues is difficult to forecast because the sales cycle can be relatively long and may depend on such factors as the size and scope of assignments and general economic conditions. A variation in the number of client assignments or the timing of the initiation or the completion of client assignments, particularly at or near the end of any quarter, can cause significant variations in results of operations from quarter to quarter and can result in losses to it. In addition, its engagements generally are terminable by the client at any time without penalties. Although the number of consultants can be adjusted to correspond to the number of active projects, the Company must maintain a sufficient number of senior consultants to oversee existing client projects and to assist with its sales force in securing new client assignments. An unexpected reduction in the number of assignments could result in excess capacity of consultants and increased selling, general and administrative expenses as a percentage of revenues. The Company has also experienced, and may in the future experience, significant fluctuations in the quarterly results of its software sales as a result of the variable size and timing of individual license transactions, competitive conditions in the industry, changes in customer budgets, and the timing of the introduction of new products or product enhancements. In the event that its results of operations for any period are below the expectation of market analysts and investors, the market price of its shares of Common Stock could be adversely affected.           VOLATILITY OF STOCK PRICE           The Company's Common Stock may be subject to wide fluctuations in price in response to variations in quarterly results of operations and other factors, including acquisitions, technological innovations and general economic or market conditions. In addition, stock markets have experienced extreme price and volume trading volatility in recent years. This volatility has had a substantial effect on the market price of many technology companies and has often been unrelated to the operating performance of those companies. This volatility may adversely affect the market price of its Common Stock. Additionally, there can be no assurance that a trading market for the Common Stock will be sustained.           COMPETITION           The market for information technology services includes a large number of competitors, is subject to rapid change and is highly competitive. Its primary competitors include participants from a variety of market segments, including the                                          6   current and former consulting divisions of the "Big Four" accounting firms, interactive advertising agencies, web development companies, systems consulting and implementation firms, application software firms and management consulting firms. Many of these competitors have significantly greater financial, technical and marketing resources and greater name recognition than the Company. In addition, the Company competes with its clients' internal resources, particularly when these resources represent a fixed cost to the client. In the future, such competition may impose additional pricing pressures on the Company. The Company cannot assure you that it will compete successfully with its existing competitors or with any new competitors.           INTELLECTUAL PROPERTY RIGHTS           The Company's business includes the development of custom software applications in connection with specific client engagements. Ownership of such software is generally assigned to the client. The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its proprietary rights and the proprietary rights of third parties from whom the Company license intellectual property. The Company enters into confidentiality agreements with its employees and limits distribution of proprietary information. However, the Company cannot assure you that the steps taken by it in this regard will be adequate to deter misappropriation of proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. The Company is subject to the risk of litigation alleging infringement of third-party intellectual property rights. Any such claims could require it to spend significant sums in litigation, pay damages, develop non-infringing intellectual property or acquire licenses to the intellectual property, which is the subject of the asserted infringement. In addition, the Company is aware of other users of the term "TACT" and combinations including "A Consulting," which users may be able to restrict the Company's ability to establish or protect its right to use these terms. The Company has in the past been contacted by other users of the term "TACT" alleging rights to the term. The Company has completed filings with the U.S. Patent and Trademark Office in order to protect certain marks, including "TACT" and "The A Consulting Team." Our inability or failure to establish rights to these terms or protect our rights may have a material adverse effect on our business, results of operations and financial condition.           GOING CONCERN           The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended December 31, 2005 the Company reported a net loss of $484,000. For the year ended December 31, 2004 the Company reported net income of $1.2 million. For the year ended December 31, 2003, the Company reported a net loss of $123,000. Additionally, the Company has an accumulated deficit of $28 million at December 31, 2005. The Company believes that its continuing focus on cost reductions, together with a number of other operational changes, has resulted in an improved financial condition. There can be no assurance that the Company will be profitable in future years.
The Company's executive office is located at 200 Park Avenue South, New York, NY 10003. The Company's executive office is approximately 6,000 square feet and is located in a leased facility with a term expiring in July 31, 2007. The Company also leases approximately 7,000 square feet in a facility in Clark, NJ. The lease on this facility expires on August 31, 2007.
The Company is not involved in any significant legal proceedings.
No matters were submitted to a vote of the Company's security holders during the fourth quarter of the year ended December 31, 2005. The Company plans to hold its 2006 Annual Shareholder Meeting in the second quarter of 2006.                                          7   PART II
PRICE RANGE OF COMMON STOCK           The Company's Common Stock is currently listed on The NASDAQ Capital MarketCM ("NASDAQ") under the symbol "TACX." TACT completed an initial public offering of its Common Stock on August 8, 1997 and was listed on the NASDAQ National Market. Prior to that date, there was no market for the Company's Common Stock. In August 2002, the Company's common stock transitioned to the NASDAQ Capital Market CM.           On January 7, 2004, the Company effected a one-for-four reverse stock split of its common stock. Accordingly, the share and per share data throughout this document have been retroactively adjusted to reflect the reverse stock split.           The following table sets forth the quarterly range of high and low bid prices of the Company's Common Stock since January 1, 2004 as reported by NASDAQ:                  2004                     HIGH      LOW                 ---------------------   -------   ------                 First Quarter           $  4.24   $ 3.24                 Second Quarter             7.40     3.21                 Third Quarter              7.24     4.76                 Fourth Quarter             7.50     5.70                  2005                     HIGH      LOW                 ---------------------   -------   ------                 First Quarter           $ 12.10   $ 5.96                 Second Quarter            15.00     8.00                 Third Quarter             18.75     3.32                 Fourth Quarter             5.00     3.00  DIVIDENDS           The Company has not paid any cash dividends on its Common Stock. However, on January 20, 2005 the Company's Board of Directors authorized a $0.75 dividend on the Company's common stock and preferred stock to shareholders of record as of March 21, 2005. The dividend was contingent upon the consummation of share exchange transaction between the Company and Vanguard Info-Solutions Corporation.           On August 4, 2005, the Company terminated the Share Exchange Agreement with Vanguard Info-Solutions Corporation and its stockholders and the Stock Purchase Agreement with Oak Finance Investments Limited, pursuant to the terms of each agreement. Therefore, the $0.75 dividend was not, and will not, be paid to stockholders.           The Company is prohibited from paying dividends on its stock due to restrictions under the Loan and Security Agreement between the Company and Keltic Financial Partners, L.P. Keltic has consented to the payment of dividends on the Series A and Series B Preferred Stock, provided an event of default does not exist. All previously outstanding Series A and Series B Preferred Stock was converted into common stock in 2005.  HOLDERS           The Company estimates that there were approximately 11 holders of record of the Company's Common Stock as of March 21, 2006. The Company believes that the number of beneficial shareholders exceeds 600.  RECENT SALES OF UNREGISTERED SECURITIES           None.                                          8   EQUITY COMPENSATION PLAN INFORMATION           This information is incorporated by reference from the Company's Proxy Statement for the Annual Meeting of Shareholders to be held in 2006. The Proxy Statement shall be filed with the SEC on or before April 30, 2006.
The following table contains certain financial and operating data and is qualified by the more detailed Consolidated Financial Statements and Notes thereto included herein. The selected financial data in the table is derived from the Company's Consolidated Financial Statements and Notes thereto, which includes financial data from IOT from the date of acquisition on July 19, 2002 and from TGS from the date of acquisition on September 30, 2005. The selected financial data should be read in conjunction with the Financial Statements and Notes thereto and other financial information included herein.                               SELECTED FINANCIAL DATA            (IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PER SHARE DATA)                                                                    YEAR ENDED DECEMBER 31,                                         -----------------------------------------------------------------------                                            2005           2004          2003            2002           2001                                         -----------    -----------   -----------     -----------    -----------       STATEMENT OF OPERATIONS DATA:   Revenues                              $    26,432    $    25,035   $    21,646     $    24,009    $    36,227   (Loss) Income from operations                (461)         1,360           (42)           (130)       (13,472)   Other income (expense):   Gain from extinguishment of debt                -              -             -              49            249   Net (loss) income                            (484)         1,237          (123)            204        (13,651)   Net (loss) income per share     Basic                               $     (0.22)   $      0.57   $     (0.07)(1) $      0.10(1) $     (7.67)(1)     Diluted                             $     (0.22)   $      0.53   $     (0.07)(1) $      0.10(1) $     (7.67)(1)   Weighted average shares used in per    share calculation - basic              2,285,874      2,110,072     2,098,810 (1)   1,923,615(1)   1,779,217 (1)   Weighted average shares used in per    share calculation - diluted            2,285,874      2,312,021     2,098,810 (1)   1,996,672(1)   1,779,217 (1)  BALANCE SHEET DATA   Total assets                          $     8,493    $     8,650   $     7,374     $     8,046    $     8,957   Long-term liabilities                           -             13           231             386             53   Shareholders' equity                        6,205          6,423         5,193           5,325          4,119   Number of shares outstanding at    year end                               2,361,333      2,122,647     2,107,967 (1)   2,096,717(1)   1,779,217 (1)   (1)  All share and per share amounts have been restated to reflect the one for      four reverse stock split of the Company's common stock, which occurred on      January 7, 2004
The following discussion and analysis of significant factors affecting the Company's operating results and liquidity and capital resources should be read in conjunction with the accompanying consolidated financial statements and related notes.                                          9   OVERVIEW           Since 1983, TACT has provided IT services and solutions to Fortune 1000 companies and other large organizations. In 1997, TACT became a public company (NASDAQ Capital Market CM: TACX), headquartered in New York, NY. In addition, TACT has an office in Clark, NJ.           Rapid technological advance, and the wide acceptance and use of the Internet as a driving force in commerce, accelerated the growth of the IT industry through 2001. These advances included more powerful and less expensive computer technology, the transition from predominantly centralized mainframe computer systems to open and distributed computing environments and the advent of capabilities such as relational databases, imaging, software development productivity tools, and web-enabled software. These advances expanded the benefits that users can derive from computer-based information systems and improved the price-to-performance ratios of such systems. As a result, an increasing number of companies were employing IT in new ways, often to gain competitive advantages in the marketplace, and IT services have become an essential component of their long-term growth strategies. The same advances that have enhanced the benefits of computer systems rendered the development and implementation of such systems increasingly complex. In addition, there was a shortage of IT consultants qualified to support these systems. Accordingly, organizations turned to external IT services organizations such as TACT to develop, support and enhance their internal IT systems. However, during 2002 and continuing into 2003 there was a slowdown in IT spending coincident with the general economic slowdown. This resulted in revenue decreases at many IT service companies, however, IT spending increased in 2004 and this trend has continued throughout 2005. Accordingly, the Company will continue to expand its sales and recruiting function in our effort to further increase its revenues in both the short-term and long-term.           TACT is an end-to-end IT solutions and services provider focused on leveraging existing systems and data. The Company's goal is to empower customers through the utilization of technology to reduce costs, improve services and increase revenues. The Company delivers migrations and conversions of legacy systems, web enablement of existing systems, customer development, performance optimization, migrations and conversions, outsourcing, strategic sourcing and enterprise wide IT consulting, and software solutions. In addition, TACT established TACT Global Services Private Limited (TGS), an offshore subsidiary, in order to substantially enhance its offshore presence in its continuing effort to stay competitive in the industry.           Over 61% of the Company's consulting services revenues were generated from the hourly billing of its consultants' services to its clients under time and materials engagements, with the remainder generated under fixed-price engagements for 2005. The Company does not expect that the percentage of fixed fee contracts will vary significantly.           TACT provides clients with enterprise-wide information technology consulting services and software products. TACT solutions cover the entire spectrum of IT needs, including applications, data, and infrastructure. TACT provides complete project life-cycle services--from application and system design, through development and implementation, to documentation and training. Strategic alliances with leading software vendors ensure that TACT solutions are dependable and within the mainstream of industry trends. These partnerships allow TACT to provide a wide variety of business technology solutions such as enterprise reporting solutions, data warehousing, systems strategies, application and database conversions, and application development services.           When TACT is engaged by its clients to implement IT solutions or services it uses its Smart Approach. TACT's Smart Approach is a leading edge set of end-to-end solutions and services that include Strategy, Methodology, Architecture, Resources and Tools. The Strategy is developed together with the client to ensure that the client's goals and objectives are met. The Methodology is a Tried and True TACT Methodology that is followed in order to implement the Strategy. The solutions and services are built on a robust Architecture. Utilize highly qualified TACT Resources and Exploits best-of-breed Tools.           The Company established standard-billing guidelines for consulting services based on the type of service offered. Actual billing rates are determined on a project-by-project basis and may vary from the standard guidelines. The Company typically bills its clients for time and materials services on a semi-monthly basis. Arrangements for fixed-price engagements are made on a case-by-case basis. Consulting services revenues generated under time and materials engagements are recognized as those services are provided. Revenues from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs.           The Company's most significant operating cost is its personnel cost, which is included in cost of revenues. As a result, the Company's operating performance is primarily based upon billing margins (billable hourly rate less the consultant's hourly cost) and consultant utilization rates (number of days worked by a consultant during a semi-monthly billing cycle                                         10   divided by the number of billing days in that cycle). During 2000 and the first half of 2001, the Company's margins were adversely affected by a decrease in billing rates and a reduction in consultant utilization rate; however, gross margins began to improve in the second half of 2001 and have continued to improve through 2005, primarily due to improved utilization rates and decreases in consultant costs. Large portions of the Company's engagements are on a time and materials basis. While most of the Company's engagements allow for periodic price adjustments to address, among other things, increases in consultant costs, during 2003, 2004, and 2005 clients have been adverse to accepting cost increases. TACT also actively manages its personnel utilization rates by constantly monitoring project requirements and timetables. Through the Company's cost containment and work force rationalization efforts TACT's utilization rates began to improve in the second half of 2001 and continued through 2005. As projects are completed, consultants either are re-deployed to new projects at the current client site or to new projects at another client site or are encouraged to participate in TACT's training programs in order to expand their technical skill sets. TACT carefully monitors consultants that are not utilized and has established guidelines for the amount of non-billing time that it allows before a consultant is terminated.           Historically, the Company has also generated revenues by selling software licenses. In addition to initial software license fees, the Company also derives revenues from the annual renewal of software licenses. Revenues from the sale of software licenses are recognized upon delivery of the software to a customer, because future obligations associated with such revenue are insignificant. The revenues from the sales of software is ancillary to the Company's total revenues.           On July 19, 2002, the Company, acquired all of the common stock of International Object Technology, Inc. (IOT) for a combination of deferred cash consideration of $650,000 and 317,500 shares of TACT unregistered Common Stock, which has been retroactively adjusted to reflect the one-for-four reverse stock split that occurred on January 7, 2004 and was valued at $635,000. The acquisition of IOT was accounted for using the purchase method of accounting. Accordingly, the results of operations of IOT are included in the Company's consolidated results of operation from the date of acquisition. The purchase price of the acquisition exceeded the fair market value of the net assets acquired, resulting in the recording of goodwill of $1,181,520 and other identifiable intangibles of $312,000 with the identifiable intangible assets being amortized over a three year period on a straight line basis. IOT was a privately owned, professional services firm that provided data management and business intelligence solutions, technology consulting and project management services. The acquisition increased the depth of the Company's services and solution offerings and provided the Company with cross-selling opportunities.           On April 11, 2005, the Company completed an investment in an offshore joint venture, TACT Global Services Private Limited (TGS), in the amount of $250,000, which represented approximately a 68% ownership. A minority partner invested $100,000 for the remaining 32% ownership. In September 2005, the Company increased its ownership to 100% by repurchasing the minority partners investment for $100,000. The Company has consolidated the results of TGS in its financial statements for the period from September 2005 to December 31, 2005, and recorded the Company's proportionate ownership share of the results of TGS from April 11, 2005 to September 2005.           On January 21, 2005, the Company entered into a Share Exchange Agreement (the "Share Exchange Agreement") with Vanguard Info-Solutions Corporation, a New Jersey corporation ("Vanguard"), the Vanguard shareholders and the authorized representative of the Vanguard shareholders named therein providing for an exchange of 7,312,796 shares of the Company's common stock for all of the issued and outstanding shares of capital stock of Vanguard (the "Share Exchange"). Additionally, on January 21, 2005, the Company entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Oak Finance Investments Limited ("Oak"), a British Virgin Islands company, providing for the sale of between 625,000 and 1,250,000 shares of the Company's common stock to Oak at a cash purchase price of $8.00 per share (the "Share Issuance"). The Company's Chairman and CEO, Mr. Shmuel BenTov also entered into an agreement under which he agreed to sell all of his shares of TACT capital stock to Oak in a separate transaction at $10.25 per share. These transactions required the approval of a majority of TACT's shares of common stock and preferred stock voting as a single class.           On May 5, 2005, the Company announced that its Board of Directors voted to postpone its 2005 annual shareholders' meeting scheduled for May 5, 2005. The Company's Board of Directors had determined that the disclosure in the proxy statement relating to the shareholders' meeting should be amended to describe certain terms and implications of the contemplated financing that Oak intended to enter into in order to finance its commitments relating to the Share Issuance and its purchase of Mr. BenTov's shares of TACT common stock. The Company held its annual shareholders meeting on July 26, 2005 at which time the matters set forth in the proxy statement were approved by the shareholders.           On August 4, 2005, the Company terminated the Share Exchange Agreement with Vanguard Info-Solutions Corporation and its stockholders and the Stock Purchase Agreement with Oak Finance Investments Limited, pursuant to the                                         11   terms of each agreement. The Company's Board of Directors felt that this action was in the best interest of the shareholders, employees and its clients.  CRITICAL ACCOUNTING POLICIES           The methods, estimates and judgments we use in applying our most critical accounting polices have a significant impact on the results we report in our consolidated financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical to us, in that they are important to the portrayal of our financial statements and they require our most difficult, subjective or complex judgments in the preparation of our consolidated financial statements.  Goodwill and Intangible Assets           Goodwill acquired in a purchase and determined to have an indefinite useful life is not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. The Company's goodwill is also evaluated and tested on a periodic basis by an independent third party. If it is determined by the Company that goodwill has been impaired it will be written down at that time.           The Company's useful life of its intangible assets has been evaluated and it was determined that they will be amortized over a three year period.  Revenue Recognition           Consulting revenues are recognized as services are provided. The Company primarily provides consulting services under time and material contracts, whereby revenue is recognized as hours and costs are incurred. Customers for consulting revenues are billed on a weekly, semi-monthly and monthly basis. Revenues from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs. Any anticipated contract losses are estimated and accrued at the time they become known and estimable. Unbilled accounts receivables represent amounts recognized as revenue based on services performed in advance of customer billings. Revenue from sales of software licenses is recognized upon delivery of the software to a customer because future obligations associated with such revenue are insignificant.  Allowance for Doubtful Accounts           The Company monitors its accounts receivable balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company uses its historical experience to accurately determine its accounts receivable reserve. The Company's allowance for doubtful accounts is an estimate based on specifically identified accounts as well as general reserves. The Company evaluates specific accounts where it has information that the customer may have an inability to meet its financial obligations. In these cases, management uses its judgment, based on the best available facts and circumstances, and records a specific reserve for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. These specific reserves are reevaluated and adjusted as additional information is received that impacts the amount reserved. The Company also establishes a general reserve for all customers based on a range of percentages applied to aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, the Company's estimate of the recoverability of amounts due the Company could be reduced or increased by a material amount. Such a change in estimated recoverability would be accounted for in the period in which the facts that give rise to the change become known.  Valuation of Deferred Tax Assets           Deferred tax assets are reduced by a valuation allowance when, in the opinion of the Company, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assesses the recoverability of deferred tax assets at least annually based upon the Company's ability to generate sufficient future taxable income and the availability of effective tax planning strategies.                                         12   RESULTS OF OPERATIONS           The following table sets forth the percentage of revenues of certain items included in the Company's Statements of Operations:                                                   YEAR ENDED DECEMBER 31,                                            -----------------------------------                                               2005         2004         2003                                            ---------    ---------    ---------          Revenues                              100.0%       100.0%       100.0%          Cost of revenues                       70.5%        69.3%        73.1%                                            ---------    ---------    ---------          Gross profit                           29.5%        30.7%        26.9%          Operating expenses                     31.3%        25.2%        27.1%                                            ---------    ---------    ---------          (Loss)/Income from operations          (1.8)%        5.4%         (.2)%                                            ---------    ---------    ---------          Gain from extinguishment of debt        0.0%         0.0%         0.0%                                            ---------    ---------    ---------          Net (loss) income                      (1.8)%        4.9%         (.6)%                                            =========    =========    =========  COMPARISON OF YEAR ENDED DECEMBER 31, 2005 TO YEAR ENDED DECEMBER 31, 2004           REVENUES. Revenues of the Company increased by $1.4 million or 5.6% from $25 million for the year ended December 31, 2004 to $26.4 million for the year ended December 31, 2005. The increase was primarily attributable to industry wide increased spending in the IT industry and an increase in fixed price projects, as a result of increased marketing efforts by the Company.           Software licensing revenues increased by $125,000 or 9.3% from $1.3 million in 2004 to $1.5 million in 2005. Software sales are expected to remain ancillary to the Company's total revenues in future years.           GROSS PROFIT. The resulting gross profit for 2005 increased by $127,000 or 1.7% from $7.7 million in 2004 to $7.8 million in 2005. As a percentage of total revenue, gross margin for the year decreased from 30.7% in 2004 to 29.5% in 2005. Gross margin decreased slightly primarily due to the mix of time and material work compared to fixed price projects.           OPERATING EXPENSES. Operating expenses are comprised of Selling, General and Administrative ("SG&A") expenses and depreciation and amortization costs. Operating expenses increased by $1.9 million, or 30.9% from $6.3 million in 2004 to $8.3 million in 2005. The costs associated with the terminated transaction with Vanguard, represented $1.2 million of this increase. The balance of the increase, $786,000 or 12.4% was primarily attributable to costs of $190,000 related to Sarbanes-Oxley consulting services, an increase of $467,000 in payroll and related costs, and a stock compensation expense in the amount of $134,000 which were partially offset by a decrease in depreciation and amortization expenses.           TAXES. Taxes in 2005 were $16,000 compared to $99,000 in 2004. The decrease in income taxes was attributable to the decrease in income before income taxes from income of $1.3 million in 2004 to a loss of ($468,000) in 2005.           NET(LOSS)/INCOME. As a result of the above, the Company had a net loss of ($484,000) in 2005 compared to net income of $1.2 million in 2004.  COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003           REVENUES. Revenues of the Company increased by $3.4 million or 15.7% from $21.6 million for the year ended December 31, 2003 to $25 million for the year ended December 31, 2004. The increase was primarily attributable to an industry wide increase in IT spending in 2004 and increased marketing efforts by the Company.           Software licensing revenues decreased by $348,000 or 20.5% from $1.7 million in 2003 to $1.3 million in 2004. Software sales are expected to remain ancillary to the Company's total revenues in future years.           GROSS PROFIT. The resulting gross profit for 2004 increased by $1.9 million or 32% from $5.8 million in 2003 to $7.7 million in 2004. As a percentage of total revenue, gross margin for the year increased from 26.9% in 2003 to 30.7% in 2004.                                         13   Gross margin increased primarily due to increased consultant utilization rates (89% in 2004 compared to 79% in 2003) and an increase in revenues coming from fixed price contracts, which have higher gross margins.           OPERATING EXPENSES. Operating expenses are comprised of Selling, General and Administrative ("SG&A") expenses and depreciation and amortization costs. Operating expenses increased by $455,000, or 7.8% from $5.9 million in 2003 to $6.3 million in 2004. The increase was primarily attributable to an increase of $430,000 in payroll and related costs due to increases in recruiting and sales staffs, $150,000 of costs associated with the proposed transaction with Vanguard and an increase in bad debt expenses of $105,000 which were partially offset by a decrease in depreciation and amortization expenses.           TAXES. Taxes in 2004 were $99,000 compared to $24,000 in 2003. The increase in income taxes was attributable to the increase in income before income taxes from a loss of ($100,000) in 2003 to income of $1.3 million in 2004. The Company's effective tax rate is low due to the utilization of net operating loss carry forwards.           NET INCOME/(LOSS). As a result of the above, the Company had net income of $1.2 million in 2004 compared to a net loss of ($123,000) in 2003.  LIQUIDITY AND CAPITAL RESOURCES           The Company has a line of credit of $4.0 million with Keltic Financial Partners, LP, (Keltic) based on the Company's eligible accounts receivable balances. The line of credit has certain financial covenants, which the Company must meet on a quarterly basis. There was no outstanding balance at December 31, 2005 or 2004. On March 23, 2004, the line of credit was amended and restated to include the following: an extension to June 2007, the removal of the guarantee of the Chief Executive Officer and less restrictive financial covenants. On March 23, 2005, the agreement was restated and amended, again. Included in the restated and amended agreement is Keltic's consent for the proposed transaction with Vanguard Info-Solutions Corporation, (as defined in more detail in the Definitive Proxy Statement filed on June 27, 2005), which transaction was terminated on August 4, 2005 and a waiver to certain financial covenants that the Company failed to comply with in the first quarter ending March 31. The Company failed to comply with these covenants for the second and third quarters ended June 30 and September 30, 2005, respectively. Accordingly, a waiver was obtained from Keltic. On December 1, 2005, the agreement was further amended to reset the EBITDA covenant effective October 1, 2005. The line of credit bears interest at a variable rate based on prime plus 1.75% and the rate was 9.00% at December 31, 2005.           The Company is prohibited from paying dividends on its common stock due to restrictions under the restated and amended Loan and Security Agreement with Keltic Financial Partners, L.P. Keltic has consented to the payment of dividends on the Series A and Series B Preferred Stock, provided an event of default does not exist.           The Series A and Series B Preferred Stock was fully converted into common stock during 2005. As result, there are no outstanding shares of Series A or Series B Preferred Stock as of December 31, 2005.           On August 4, 2005, the Company terminated the Share Exchange Agreement with Vanguard Info-Solutions Corporation and its stockholders and the Stock Purchase Agreement with Oak Finance Investments Limited, pursuant to the terms of each agreement. The Company's Board of Directors felt that this action was in the best interest of the shareholders, employees and its clients.           The Company acquired 51% of ownership interest in T3 Media as a result of several investments in 1998 and 1999, Due to deterioration in performance and market conditions for T3 Media's services, the operations of T3 Media ceased in the second quarter of 2001. T3 Media had entered into a series of capital lease obligations, which the Company had guaranteed to finance its expansion plans, covering leasehold improvements, furniture and computer-related equipment. The amount outstanding under such leases was approximately $291,000 at December 31, 2005 and 2004. The Company continues the process of negotiating buy-outs on these leases.           The Company's cash balances were approximately $2.2 million at December 31, 2005 and $2.5 million at December 31, 2004. Net cash used in operating activities in 2005 was approximately ($142,000) compared to net cash provided by operating activities of $1.2 million in 2004 and net cash used in operating activities of ($88,000) in 2003.           The Company's accounts receivable, less allowance for doubtful accounts, at December 31, 2005 and December 31, 2004 were $4.4 million and $4.1 million, respectively, representing 53 and 55 days of sales outstanding, respectively. The                                         14   accounts receivable at December 31, 2005 and 2004 included $435,000 and $260,000 of unbilled revenue respectively. The Company has provided an allowance for doubtful accounts at the end of each of the periods presented. After giving effect to this allowance, the Company does not anticipate any difficulty in collecting amounts due.           For the twelve months ended December 31, 2005, the Company had revenues from three customers, which represented 21%, 20% and 15% of revenues. For the year ended December 31, 2004, the Company had revenues from two customers, which represented 20% and 19% of revenues, respectively. No other customer represented greater than 10% of the Company's revenues for such periods.           The Company has written down its minority investment in Methoda Computer Ltd. during the third quarter of 2002 from $500,000 to $368,000. In January of 2004, the Company sold approximately 75 percent of its investment in Methoda for $200,000 in cash and $81,000 payable over the next twenty months. The remaining investment has a carrying value of $87,000. Methoda Computer Ltd. is a methodology provider and knowledgebase for IT management and software engineering based in Israel.           Net cash used in investing activities was approximately ($96,000), for the year ended December 31, 2005. Net cash provided by investing activities was approximately $44,000, and cash used in investing activities was approximately ($10,000), for the years ended December 31, 2004 and 2003, respectively. In each of the three years, this represented additions to property and equipment of ($93,000), ($168,000), and ($23,000) respectively.           On July 19, 2002, the Company acquired all of the Common Stock of IOT for a combination of cash consideration of $650,000 through debt financing and 317,500 shares of TACT unregistered Common Stock, which has been retroactively adjusted to reflect the one-for-four reverse stock split that occurred on January 7, 2004 and was valued at $635,000.           The cash consideration of $650,000 was paid as follows and is reflected as a repayment of long-term debt: $140,000 on September 2, 2002; $210,000 on April 1, 2003; $100,000 on April 1, 2004 and $200,000 on January 2, 2005. The excess of the purchase price over the estimated fair value of the net identifiable assets acquired totaled $1,494,000 and was allocated as follows; $312,000 to intangible assets which is being amortized on a straight line basis over thirty six months, and $1,182,000 to goodwill. The three majority shareholders of IOT received employment agreements for a three-year period at an annual salary of $160,000 per year each. During the second quarter of 2003, one of the former IOT principals left the Company, a buyout of his contract was negotiated and a portion of the intangible asset was written down ($23,000). From the date of acquisition through the end of year 2002, the Company recorded revenue attributed to IOT in the amount of $1,689,000. The Company recorded revenue attributable to the IOT acquisition in the amount of $2,771,000 and $4,154,000 for the years ended December 31, 2005 and 2004, respectively.           Net cash used in financing activities was approximately ($98,000) in 2005, ($202,000) in 2004, and ($267,000) in 2003.           On August 12, 2002, the Company issued 530,304 shares of Series A Preferred Stock to Shmuel BenTov in exchange for $350,000.64. On November 12, 2002, the Company issued 41,311 shares of Series B Preferred Stock to Mr. Yossi Vardi in exchange for $27,265.26. The Company relied upon the exemption from registration set forth in Section 4(2) of the Securities Act, relating to sales by an issuer not involving a public offering, in issuing the stock to Shmuel BenTov and Yossi Vardi. Based upon discussions with and representations made by the investors, the Company reasonably believed that such investors were accredited and sophisticated investors. Mr. BenTov and Mr. Vardi had access to information on the Company necessary to make an informed investment decision. The shares of Series A and Series B Preferred Stock are convertible into Common Stock on a 4:1 basis, which reflects the Company's one-for-four reverse stock split that occurred on January 7, 2004 and are subject to further adjustment for stock splits, consolidations and stock dividends. In addition, the shares of Series A and Series B Preferred Stock are entitled to a 7% cumulative dividend payable semi-annually. The Company has also agreed to grant "piggyback" registration rights to Mr. BenTov and Mr. Vardi for the shares of Common Stock issuable upon conversion of the Series A and Series B Preferred Stock. The Company used the proceeds from the sale of Series A and Series B Preferred Stock for general working capital purposes.           The Series A and Series B Preferred Stock was fully converted into common stock during 2005. As result, there are no outstanding shares of Series A or Series B Preferred Stock as of December 31, 2005           In the years ended, 2005, 2004 and 2003, the Company did not sell any other equity securities.                                         15            In 2005, 56,032 shares of Common Stock were issued pursuant to the exercise of options issued under the Company's stock option plan. In 2004 and 2003, 14,688 and 11,250 shares of Common Stock, which have been retroactively adjusted to reflect the one-for-four reverse stock split that occurred on January 7, 2004, were issued pursuant to the exercise of options issued under the Company's stock option plan. No other shares of Common Stock were issued pursuant to the exercise of options issued under the Company's stock option plan.           The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the years ended December 31, 2005, 2004, and 2003, the Company reported a net loss of ($484,000), a net income of $1.2 million and, a net loss of ($123,305), respectively. Additionally, the Company has an accumulated deficit of ($28,278,152) as of December 31, 2005. The Company actively manages its personnel utilization rates and is constantly monitoring project requirements and timetables.           In management's opinion, cash flows from operations and borrowing capacity combined with cash on hand will provide adequate flexibility for funding the Company's working capital obligations for the next twelve months. There may be circumstances that would accelerate its use of liquidity resources, including but not limited to, its ability to implement a profitable business model, and its initiatives to acquire or develop other relationships that are strategic to the Company's business. If this occurs, the Company, may from time to time, incur additional indebtedness or issue, in public or private transactions, equity or debt securities. However, there can be no assurance that suitable debt or equity financing will be available to the Company.  OFF-BALANCE SHEET ARRANGEMENTS           The Company did not have any "Off Balance Sheet Arrangements" in 2005, 2004, and 2003.  CONTRACTUAL OBLIGATIONS           The Company has the following contractual obligations as of December 31, 2005:                                                        PAYMENTS DUE BY PERIOD                              ------------------------------------------------------------------                                            LESS THAN 1       1 - 3          3 - 5     MORE THAN  CONTRACTUAL OBLIGATIONS        TOTAL         YEAR           YEARS          YEARS      5 YEARS - --------------------------   -----------   -----------     ----------   -----------   ---------       LONG TERM OBLIGATIONS Automobile Loan              $    13,478   $    13,478     $        -   $         -   $       - Employment Contracts             746,250       386,250(1)     360,000             -           -  CAPITAL LEASE OBLIGATIONS Capital Lease - Short Term       290,517       290,517              -             -           -  OPERTATING LEASES Rent                             499,763       308,663        191,100             -           -                              -----------   -----------     ----------   -----------   --------- TOTAL                        $ 1,550,008   $   998,908     $  551,100   $         -   $       -                              ===========   ===========     ==========   ===========   =========   (1)  Due to the resignation of the Company's Chief Financial Officer, effective      February 17, 2006, the employment contract with the Company was terminated.      Therefore, the Company's Contractual Obligations for Employment Contracts      for Less Than 1 Year have been adjusted to reflect Mr. Falcone's salary      through February 17, 2006 of $26,250 as opposed to $192,500 that would have      been due had he not resigned.                                         16   RECENT ACCOUNTING PRONOUNCEMENTS           See page F-12 of the consolidated financial statements for a discussion of the impact of recent accounting standards.  INFLATION           The Company has not suffered material adverse affects from inflation in the past. However, a substantial increase in the inflation rate in the future may adversely affect customers' purchasing decisions, may increase the costs of borrowing, or may have an adverse impact on the Company's margins and overall cost structure.
The Company has not entered into market risk sensitive transactions required to be disclosed under this item.
See financial statements on pages F-1 through F-21 of this Annual Report on Form 10-K.
None.
Evaluation of disclosure controls and procedures. The Company's Chief Executive Officer and principal financial officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in the Securities and Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, had concluded that our disclosure controls and procedures were effective and designed to ensure information required to be disclosed was recorded, processed, summarized and reported within time periods specified in the SEC's rules and forms.           Changes in internal controls. There were no changes in the Company's internal control over financial reporting that occurred during our fourth fiscal quarter of 2005 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
None.  PART III
The following section sets forth information as to each director and executive officer of TACT, including his or her age, present principal occupation, other business experience during the last five years, directorships in other publicly-held companies, membership on committees of the Board of Directors and period of service with TACT.           Shmuel BenTov, 51, is the founder of TACT and has been the Chairman of the Board and Chief Executive Officer of the Company since its establishment in 1983. Mr. BenTov received a B.Sc. in Economics and Computer Science in 1979                                         17   from the Bar-Ilan University in Israel. From 1979 to 1983, Mr. BenTov was a consultant Database Administrator and then an Account Manager with Spiridellis & Associates. From 1972 to 1979, Mr. BenTov served with the Israeli Defense Forces as a Programmer, Analyst, Project Manager, Database Administrator and Chief Programmer.           Steven S. Mukamal, 65, has been a director of the Company since August 1997. Mr. Mukamal is the Chairman of the Compensation Committee as well as a member of the Audit Committee and the Nominating Committee. Mr. Mukamal received a B.A. in 1962 from Michigan State University and a J.D./L.L.B. in 1965 from Brooklyn Law School. Since 1965, he has been a member and senior partner of the law firm Barst & Mukamal LLP. Mr. Mukamal specializes in the areas of immigration and nationality law, consular law and real estate and debt restructuring.           Reuven Battat, 49, has been a director of the Company since August 1997. Mr. Battat is a member of the Compensation Committee, the Audit Committee and the Nominating Committee. In 2003, Mr. Battat became the Chief Executive Officer of Actimize, LTD, a provider of enterprise technology solutions for mitigating operational risk. Mr. Battat was the President and Chief Executive Officer of ProcureNet Inc., a provider of internet business to government and business to business solutions and services, from 2000 through 2003. Mr. Battat was the Senior Vice President and General Manager of Global Marketing for Computer Associates International, Inc. and from 1995 through 1999. Mr. Battat was responsible for Computer Associates' worldwide marketing activities and long-term planning of product development in new and emerging markets.           William Miller, 68, has been a director of the Company since July 2002. Mr. Miller is the Chairman of the Audit Committee, as well as a member of the Nominating Committee. Mr. Miller is a private investor. He is a Certified Public Accountant and an Attorney. He was affiliated for eight years with Cantor Fitzgerald, an Investment Banking Firm, as Executive Vice President responsible for corporate finance, real estate, and retail sales. Subsequent to that he was with Telerate, a computer information services company.           Rabin K. Dhoble, 44, has been a director of the company since February 2006. Mr. Dhoble received his B.A. in Marketing in 1984 from Temple University. Mr. Dhoble is currently the President of Diversified Agency Services Healthcare, Omnicom. Since 1998, he has been a senior executive within the healthcare communications practice of Diversified Agency Services, the specialty communications unit of Omnicom Group. Mr. Dhoble specializes in the development of business strategies and the management of cross-functional teams that support the global commercialization of biotechnology and pharmaceutical brands.  AUDIT COMMITTEE           The Company's Audit Committee is comprised of three independent directors as follows: Mr. William Miller, Chairman, Mr. Steven S. Mukamal and Mr. Reuven Battat. Mr. William Miller, Chairman of the Audit Committee, is considered an "audit committee financial expert" as defined in Regulation S-K, Item 401(h)(2).  AUDIT COMMITTEE FINANCIAL EXPERT           The Board of Directors has affirmatively determined that the Company has at least one Audit Committee Financial Expert as defined by Section 407 of the Sarbanes-Oxley Act of 2002 serving on our audit committee. The directors have determined that Mr. William Miller is independent, as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934 and has all of the following five attributes due to his experience overseeing and assessing the performance of companies with respect to the preparation and evaluation of financial statements:           o    An understanding of GAAP and financial statements;           o    The ability to assess the general application of such principles               in connection with the accounting for estimates, accruals and               reserves;           o    Experience preparing, auditing, analyzing or evaluating financial               statements that present a breadth and level of complexity of               accounting issues that are generally comparable to the breadth               and complexity of issues that can reasonably be expected to be               raised by the Company's financial statements, or experience               actively supervising one or more persons engaged in such               activities;           o    An understanding of internal controls and procedures for               financial reporting; and           o    An understanding of audit committee functions.                                         18   NOMINATING COMMITTEE           The Company's Nominating Committee is comprised of three independent directors as follows: Mr. Reuven Battat, Chairman, Mr. William Miller and Mr. Steven S. Mukamal.  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE           Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, executive officers and certain beneficial owners of the Company's equity securities (the "Section 16 Reporting Persons") to file with the SEC reports regarding their ownership and changes in ownership of the Company's equity securities. The Company believes that, during the fiscal year 2005, its Section 16 Reporting Persons complied with all Section 16(a) filing requirements, except that (i) Stephen Mukamal reported seven transactions late on a Form 4 filed in 2005, (ii) Reuven Battat reported two transactions late on a Form 4 filed in 2005, (iii) Richard D. Falcone reported one transaction late on a Form 4 filed in 2005, and (iv) William Miller reported six transactions late on a Form 4 filed in 2005. In making this statement, the Company has relied upon examination of the copies of Forms 3, 4 and 5 provided to the Company and the written representations of the Section 16 Reporting Persons.  CODE OF ETHICS           The Board of Directors has adopted a code of ethics designed, in part, to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with or submit to the Securities and Exchange Commission and in the Company's other public communications, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations of the code to an appropriate person or persons, as identified in the code and accountability for adherence to the code. The code of ethics applies to all directors, executive officers and employees of the Company. The Company will provide a copy of the code to any person without charge, upon request to Ms. Jeannie Lovastik, Human Resources Generalist by calling 732-499-8228 or writing to Ms. Lovastik's attention at The A Consulting Team, Inc., 77 Brant Avenue, Suite 320, Clark, NJ, 07066.           The Company intends to disclose any amendments to or waivers of its code of ethics as it applies to directors or executive officers by filing them on Form 8-K.
The information required by this item is incorporated by reference to the Company's Proxy Statement for its 2006 Annual Meeting of Shareholders, which will be filed with the SEC on or before April 30, 2006.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2006 Annual Meeting of Shareholders, which will be filed with the SEC on or before April 30, 2006.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2006 Annual Meeting of Shareholders, which will be filed with the SEC on or before April 30, 2006.                                         19
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2006 Annual Meeting of Shareholders, which will be filed with the SEC on or before April 30, 2006.  PART IV
THE A CONSULTING TEAM, INC.  The following consolidated financial statements and financial statement schedule of The A Consulting Team, Inc. are included in Item 8:     Consolidated Balance Sheets...............................................................................F-4  Consolidated Statements of Operations and Comprehensive Income............................................F-5  Consolidated Statements of Shareholders' Equity...........................................................F-6  Consolidated Statements of Cash Flows.....................................................................F-7  Notes to Consolidated Financial Statements................................................................F-8  The following consolidated financial statement schedule of The A Consulting Team, Inc. is included  in Item 15(c): Schedule II - Valuation and Qualifying Accounts...........................................S-1   All other schedules for which provision is made in the applicable accounting regulation of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.                                         F-1                REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  Board of Directors The A Consulting Team, Inc.  We have audited the accompanying consolidated balance sheet of The A Consulting Team, Inc. and Subsidiaries, (the "Company") as of December 31, 2005, and the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Company for the years ended December 31, 2004, and 2003 were audited by other auditors whose report, dated February 24, 2005, expressed an unqualified opinion on those statements.  We conducted our audit in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.  In our opinion, the 2005 financial statements referred to above present fairly, in all material respects, the financial position of The A Consulting Team, Inc. and Subsidiaries as of December 31, 2005, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.  Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole for 2005. The Schedule II listed in the index of financial statements is presented for purposes of additional analysis and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements for 2005 taken as a whole.  /s/ Mercadien, P.C., Certified Public Accountants   Hamilton, New Jersey February 15, 2006                                         F-2                REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  Board of Directors The A Consulting Team, Inc.  We have audited the accompanying consolidated balance sheet of The A Consulting Team, Inc. and Subsidiaries, (the "Company") as of December 31, 2004 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2004. These financial statement are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of The A Consulting Team, Inc. and Subsidiaries as of December 31, 2004, and the consolidated results of their operations, and their cash flows for each of the two years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.  Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule II listed in the index of financial statements is presented for purposes of additional analysis and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.  /s/ GRANT THORNTON LLP   New York, New York February 24, 2005                                         F-3                              THE A CONSULTING TEAM, INC.                            CONSOLIDATED BALANCE SHEETS                                                                    DECEMBER 31,      DECEMBER 31,                                                                     2005              2004                                                                --------------    --------------    ASSETS CURRENT ASSETS:   Cash and cash equivalents                                    $    2,156,867    $    2,493,104   Accounts receivable- less allowance for    doubtful accounts of $320,804 at December 31, 2005,    and $296,828 at December 31, 2004                                3,918,371         3,810,759   Unbilled receivables                                                434,563           260,000   Prepaid expenses and other current assets                           160,414           139,704                                                                --------------    --------------     Total current assets                                            6,670,214         6,703,568   Investments, net                                                     87,059            87,059   Property and equipment, net                                         480,845           556,896   Goodwill                                                          1,140,964         1,140,964   Intangibles, net                                                          -            34,667   Deposits and other assets                                           114,363           126,363                                                                --------------    --------------     TOTAL ASSETS                                               $    8,493,444    $    8,649,515                                                                ==============    ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:   Accounts payable and accrued expenses                        $    1,764,647    $    1,666,160   Capital lease obligation                                            290,517           290,517   Deferred revenue                                                    220,005                 -   Deferred income taxes                                                     -            22,500   Current portion of long-term debt                                    13,479           233,962                                                                --------------    --------------     Total current liabilities                                       2,288,648         2,213,139   Other long-term liabilities                                               -            13,479                                                                --------------    --------------     TOTAL LIABILITIES                                          $    2,288,648    $    2,226,617                                                                --------------    -------------- SHAREHOLDERS' EQUITY:   Preferred stock, $.01 par value; 2,000,000 shares    authorized; no shares issued and outstanding as    of December 31, 2005, and 571,615 shares issued and    outstanding as of December 31, 2004                                      -             5,716   Common stock, $.01 par value; 30,000,000 shares    authorized; 2,361,333 issued and outstanding as    of December 31, 2005, and 2,122,647 issued and    outstanding as of December 31, 2004                                 23,614            21,227   Paid-in capital                                                  34,462,262        34,181,206   Accumulated other comprehensive loss- foreign    currency translation                                                (2,927)                -   Accumulated deficit                                             (28,278,152)      (27,785,251)                                                                --------------    --------------   Total shareholders' equity                                        6,204,797         6,422,898                                                                --------------    -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     $    8,493,444    $    8,649,514                                                                ==============    ==============             See accompanying notes to consolidated financial statements.                                         F-4                              THE A CONSULTING TEAM, INC.          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME                                                            YEAR ENDED DECEMBER 31,                                            ------------------------------------------------                                                 2005             2004             2003                                            --------------   --------------   --------------     Revenues                                   $   26,431,967   $   25,035,167   $   21,645,763 Cost of revenues                               18,631,523       17,361,526       15,829,442                                            --------------   --------------   -------------- Gross profit                                    7,800,444        7,673,640        5,816,321 Operating expenses:   Selling, general and administrative           8,057,416        5,952,343        5,105,462   Depreciation and amortization                   203,678          360,859          752,609                                            --------------   --------------   --------------                                                 8,261,095        6,313,202        5,858,071                                            --------------   --------------   -------------- (Loss)/income from operations                    (460,651)       1,360,438          (41,750)                                            --------------   --------------   -------------- Interest income                                    17,611            8,664            8,379 Interest expense                                  (24,724)         (33,313)         (66,433)                                            --------------   --------------   -------------- Interest (expense), net                            (7,113)         (24,649)         (58,055)                                            --------------   --------------   -------------- (Loss)/income before income taxes                (467,764)       1,335,789          (99,805) Provision for income taxes                         16,240           99,085           23,500                                            --------------   --------------   -------------- Net (loss) income                          $     (484,004)  $    1,236,705   $     (123,305) Other comprehensive loss - foreign  currency adjustment                               (2,927)               -                -                                            --------------   --------------   -------------- Comprehensive (loss) income                $     (486,931)  $    1,236,705   $     (123,305)                                            ==============   ==============   ============== Net (loss) income per share   Basic                                    $        (0.22)  $         0.57   $        (0.07)                                            ==============   ==============   ==============   Diluted                                  $        (0.22)  $         0.53   $        (0.07)                                            ==============   ==============   ==============             See accompanying notes to consolidated financial statements.                                         F-5                              THE A CONSULTING TEAM, INC.                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                                              Preferred Stock             Common Stock (*)          Additional    Accumulated                                        ----------------------    ---------------------------     Paid-In       Other Comp                                         Shares       Amount         Shares         Amount        Capital          Loss                                        --------    ----------    ------------   ------------   ------------   ------------        Balance, December 31, 2002              571,615    $    5,716       2,096,709   $     20,967   $ 34,143,440   $          -   Net loss                                    -             -               -              -              -              -   Preferred dividend                          -             -               -              -              -              -   Exercise of employee stock options          -             -          11,250            113         18,188              -                                        --------    ----------    ------------   ------------   ------------   ------------ Balance, December 31, 2003              571,615    $    5,716       2,107,959   $     21,080   $ 34,161,628   $          -   Net income                                  -             -               -              -              -              -   Preferred dividend                          -             -               -              -              -              -   Exercise of employee stock options          -             -          14,688            147         19,578              -                                        --------    ----------    ------------   ------------   ------------   ------------ Balance, December 31, 2004              571,615    $    5,716       2,122,647   $     21,227   $ 34,181,206   $          -   Net loss                                    -             -               -              -              -              -   Preferred dividend                          -             -               -              -              -              -   Conversion of Preferred Stock        (571,615)       (5,716)        142,903          1,429              -              -   Restricted stock issuance                   -             -          30,000            300              -              -   Exercise of employee stock options          -             -          65,783            658        281,056              -   Foreign exchange translation                -             -               -              -              -         (2,927)                                        --------    ----------    ------------   ------------   ------------   ------------ Balance, December 31, 2005                    -    $        -       2,361,333   $     23,614   $ 34,462,262   $     (2,927)                                        ========    ==========    ============   ============   ============   ============                                               Accumulated                                                Deficit           Total                                            --------------   --------------    Balance, December 31, 2002                 $  (28,845,025)  $    5,325,098   Net loss                                       (123,305)        (123,305)   Preferred dividend                              (26,776)         (26,776)   Exercise of employee stock options                    -           18,301                                            --------------   -------------- Balance, December 31, 2003                 $  (28,995,106)  $    5,193,318   Net income                                    1,236,705        1,236,705   Preferred dividend                              (26,850)         (26,850)   Exercise of employee stock options                    -           19,725                                            --------------   -------------- Balance, December 31, 2004                 $  (27,785,251)  $    6,422,898   Net loss                                       (484,004)        (484,004)   Preferred dividend                               (8,897)          (8,897)   Conversion of Preferred Stock                         -           (4,287)   Restricted stock issuance                             -              300   Exercise of employee stock options                    -          281,714   Foreign exchange translation                          -           (2,927)                                            --------------   -------------- Balance, December 31, 2005                 $  (28,278,152)  $    6,204,797                                            ==============   ==============   * Adjusted for the January 7, 2004 reverse stock split (See Note 1)            See accompanying notes to consolidated financial statements.                                         F-6                              THE A CONSULTING TEAM, INC.                       CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                           YEAR ENDED DECEMBER 31,                                                            ------------------------------------------------                                                                 2005             2004             2003                                                            --------------   --------------   --------------     CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss)income                                           $     (484,005)  $    1,236,705   $     (123,305) Adjustments to reconcile net (loss)income to  net cash (used in)   provided by operating activities, net of    acquired assets:   Depreciation and amortization                                   203,679          360,859          752,609   Deferred income taxes                                           (22,500)         (22,500)         (22,500)   Provision for doubtful accounts                                  35,000          145,000           40,000   Amortization of deferred financing cost                          12,000           10,000                -   Compensation expense for stock issued - to non-employees        133,200                -                -   Changes in operating assets and liabilities:     Accounts receivable                                          (142,611)        (532,488)        (386,383)     Unbilled receivables                                         (174,563)        (126,395)        (133,605)     Prepaid expenses and other current assets                     (20,709)         (53,150)           3,668     Accounts payable and accrued expenses                          98,487          223,431         (218,907)     Deferred revenue                                              220,005                -                -                                                            --------------   --------------   -------------- Net cash (used in) provided by operating activities              (142,017)       1,241,460          (88,422)  CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment                                (92,962)        (168,127)         (23,487) Proceeds from sale of investment                                        -          250,450                - Deposits                                                                -          (38,489)          13,259                                                            --------------   --------------   -------------- Net cash (used in) provided by investing activities               (92,962)          43,834          (10,228)  CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from conversion of stock options                         144,527           19,726           18,300 Payment of deferred financing cost                                      -          (40,000)               - Dividend paid to Preferred Shareholders                            (8,897)         (26,850)         (23,140) Repayment of long-term debt                                      (233,962)        (154,690)        (261,715)                                                            --------------   --------------   -------------- Net cash (used in) financing activities                           (98,332)        (201,814)        (266,554)                                                            --------------   --------------   -------------- Effect of foreign currency exchange rate changes on  cash and cash equivalents                                         (2,927)               -                -                                                            --------------   --------------   -------------- Net (decrease) increase in cash and cash equivalents             (336,237)       1,083,481         (365,205) Cash and cash equivalents at beginning of period                2,493,104        1,409,623        1,774,828                                                            --------------   --------------   -------------- Cash and cash equivalents at end of period                 $    2,156,867   $    2,493,104   $    1,409,623                                                            ==============   ==============   ==============  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest                   $       24,724   $       33,313   $       66,433                                                            ==============   ==============   ============== Cash paid during the period for income taxes               $       18,863   $       99,085   $       48,457                                                            ==============   ==============   ==============             See accompanying notes to consolidated financial statements.                                         F-7                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  1.   SIGNIFICANT ACCOUNTING POLICIES       Description of Business and Basis of Presentation           The A Consulting Team, Inc. (the "Company" or "TACT") was incorporated on February 16, 1983, in the State of New York and provides information technology consulting, custom application development services and solutions to Fortune 1000 companies. The Company's customers are primarily located in the New York/New Jersey metropolitan area.           The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the years ended December 31, 2005, 2004, and 2003, the Company reported a net loss of $484,004, net income of $1,236,705 and a net loss of $123,305, respectively. Additionally, the Company has an accumulated deficit of $28,278,152 as of December 31, 2005. The Company has implemented a plan whereby it is actively managing its personnel utilization rates and is constantly monitoring project requirements and timetables.           In management's opinion, cash flows from operations and borrowing capacity combined with cash on hand will provide adequate flexibility for funding the Company's working capital obligations for the next twelve months. There may be circumstances that would accelerate its use of liquidity resources, including but not limited to, its ability to implement a profitable business model, which may include further restructuring charges. If this occurs, the Company, may from time to time, incur additional indebtedness or issue, in public or private transactions, equity or debt securities. However, there can be no assurance that suitable debt or equity financing will be available to the Company.       Reverse Stock Split           On January 7, 2004, the Company effected a one-for-four reverse stock split of its common stock in order to regain compliance with NASDAQ's minimum bid price requirement to remain listed on the NASDAQ Capital MarketCM. All share and per share amounts used in the Company's financial statements and notes thereto have been retroactively restated to reflect the one-for-four reverse stock split.       Principles of Consolidation           The consolidated financial statements include the accounts of The A Consulting Team, Inc., its 100% owned subsidiary International Object Technology, Inc. (IOT) from its date of acquisition on July 19, 2002 and its 51% owned subsidiary, T3 Media, Inc., which ceased operations in 2001, from its date of acquisition in 1999 and its 100% owned subsidiary TACT Global Services from its date of acquisition on September 30, 2005. All material inter-company accounts and transactions have been eliminated.       Use of Estimates           The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.       Earnings Per Share           The Company calculates earnings per share in accordance with Financial Accounting Standards Board (FASB) Statement No. 128, Earnings Per Share. Basic earnings per share is calculated by dividing net earnings available to common shares by weighted average common shares outstanding. Diluted earnings per share is calculated similarly, except that it includes the dilutive effect of the assumed exercise of securities except when it is anti-dilutive, including the effect of shares issuable under the Company's incentive plans. All share and per share amounts used in the Company's financial statements and notes thereto have been retroactively restated to reflect the one-for-four reverse stock split, which occurred on January 7, 2004.                                         F-8                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS       Cash Equivalents           The Company considers all highly liquid financial instruments with original maturity of three months or less when purchased to be cash equivalents.       Fair Value of Financial Instruments           The carrying value of financial instruments (principally consisting of cash, cash equivalents, accounts receivable, long term debt and capital leases) approximates fair value because of their short maturities.       Property and Equipment           Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to ten years.       Long-Lived Assets           The Company adopted the provisions of FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets " effective January 1, 2002. When impairment indicators are present, the Company reviews the carrying value of its assets in determining the ultimate recoverability of their unamortized values using analyses of future undiscounted cash flows expected to be generated by the assets. If such assets are considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeded its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell.       Goodwill and Intangible Assets           The Company adopted the provisions of FASB Statement No. 142, "Goodwill and Other Intangible Assets," (SFAS No. 142) effective January 1, 2002. SFAS No. 142 required that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment using the guidance for measuring impairment set forth in this statement. As prescribed under SFAS 142, the Company had an evaluation done of its goodwill and intangible assets, which was performed by an independent third party. The Company tested for impairment using the guidance for measuring impairment set forth in SFAS No. 142 and it was determined by the Company with the results from the independent third party that there was no impairment at December 31, 2005, 2004 and 2003.           In accordance with SFAS No. 142, the following are changes in the carrying amount of goodwill for the year ended December 31, 2005, 2004 and 2003:                                                 2005             2004             2003                                         --------------   --------------   --------------     Balance as of January 1,                $    1,140,964   $    1,140,964   $    1,181,520 Goodwill acquired during the year                    -                -                - Reclass of reduction in reserve for  acquisition costs                                   -                -          (40,556)                                         --------------   --------------   -------------- Balance as of December 31,              $    1,140,964   $    1,140,964   $    1,140,964                                         ==============   ==============   ==============                                          F-9                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           The following summarizes the carrying amounts of acquired intangible assets and related amortization:                                                               YEAR ENDED DECEMBER 31                                                  ------------------------------------------------                                                       2005             2004             2003                                                  --------------   --------------   --------------     Amortized intangible assets   Employee Contracts- gross carrying amount      $      312,000   $      312,000   $      312,000 Less accumulated amortization                          (312,000)        (277,333)        (208,000)                                                  --------------   --------------   -------------- Unamortized intangible assets                    $            -   $       34,667   $      104,000                                                  ==============   ==============   ============== Amortization expense   For the year ended 12/31/03                    $            -   $            -   $      156,000   For the year ended 12/31/04                    $            -   $       69,333   $            -   For the year ended 12/31/05                    $       34,667   $            -   $            - Estimated amortization expense:   For the year ended 12/31/06                    $            -   $            -   $            -            During 2005, the Company recorded amortization of intangible assets of $34,667. As part of the purchase price of IOT (See Note 2), the Company recorded intangible assets pertaining to certain employment contracts. The cost of these employment contracts were being amortized over the three year period of the assets estimated useful life. During 2005, the Company recorded amortization expense of $34,667 and completed the amortization of these contracts.       Revenue Recognition           Consulting revenues are recognized as services are provided. The Company primarily provides consulting services under time and material contracts, whereby revenue is recognized as hours and costs are incurred. Customers for consulting revenues are billed on a weekly, semi-monthly and monthly basis. Revenues from fixed fee contracts are recorded when work is performed on the basis of the proportionate performance method, which is based on costs incurred to date relative to total estimated costs. Any anticipated contract losses are estimated and accrued at the time they become known and estimable. Unbilled accounts receivables represent amounts recognized as revenue based on services performed in advance of customer billings. Revenue from sales of software licenses is recognized upon delivery of the software to a customer because future obligations associated with such revenue are insignificant.       Accounts Receivable and Allowance for Doubtful Accounts           Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. The Company monitors its accounts receivable balances on a monthly basis to ensure that they are collectible. On a quarterly basis, the Company uses its historical experience to accurately determine its accounts receivable reserve. The Company's allowance for doubtful accounts is an estimate based on specifically identified accounts as well as general reserves. The Company evaluates specific accounts where it has information that the customer may have an inability to meet its financial obligations. In these cases, management uses its judgment, based on the best available facts and circumstances, and records a specific reserve for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. These specific reserves are reevaluated and adjusted as additional information is received that impacts the amount reserved. The Company also establishes a general reserve for all customers based on a range of percentages applied to aging categories. These percentages are based on historical collection and write-off experience. If circumstances change, the Company's estimate of the recoverability of amounts due the company could be reduced or increased by a material amount. Such a change in estimated recoverability would be accounted for in the period in which the facts that give rise to the change become known.                                        F-10                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS       Segment Information           The disclosure of segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" is not required as the Company operates in only one business segment.       Stock-Based Compensation           The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS 123. During 2005, the Company recorded $133,200 of such related expenses.           At December 31, 2005, the Company has stock based compensation plans with employees, which are described more fully in Note 12. As permitted by SFAS No. 123, "Accounting for Stock Based Compensation", the Company accounts for stock-based compensation arrangements with employees in accordance with provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". Compensation expense for stock options issued to employees is based on the difference on the date of grant, between the fair value of the Company's stock and the exercise price of the option. No stock based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock at the date of grant.           The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock based compensation:                                                                 Year ended December 31,                                                  ------------------------------------------------                                                       2005             2004             2003                                                  --------------   --------------   --------------     Net (loss) income, as reported                   $     (484,000)  $    1,237,000   $     (123,000) Deduct: Total stock based compensation  expense determined under fair  value based method for all awards                       (3,000)         (20,000)         (85,000)                                                  --------------   --------------   --------------   Pro forma net inome (loss)                     $     (487,000)  $    1,217,000   $     (208,000)                                                  ==============   ==============   ==============  Earnings per share:   Basic - as reported                            $        (0.22)  $         0.57   $        (0.07)                                                  ==============   ==============   ==============   Basic - pro forma                              $        (0.21)  $         0.57   $        (0.06)                                                  ==============   ==============   ==============   Diluted - as reported                          $        (0.22)  $         0.53   $        (0.07)                                                  ==============   ==============   ==============   Diluted - pro forma                            $        (0.21)  $         0.53   $        (0.06)                                                  ==============   ==============   ==============            The fair value of options at the date of grant was estimated using the Black-Scholes model with the following assumptions:                                                   2005       2004       2003                                                --------   --------   -------- Expected life (years)                              4.00       4.00       4.00 Risk free interest rate                            4.50%      3.00%      3.00% Expected volatility                                0.95       0.96       0.83 Expected dividend yield                            0.00       0.00       0.00 Weighted average fair value per option         $   4.83   $   3.53   $   0.80                                        F-11                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           The weighted average fair value of options granted by the Company was $4.83 in 2005, $3.53 in 2004, and $.80 in 2003.       Recent Accounting Pronouncements           In December 2004, the Financial Accounting Standards Board issued Statement 123 (revised 2004), Share Based Payment (Statement 123 (R) ). This Statement requires that the costs of employee share based payments be measured at fair value on the awards' grant date using an option-pricing model and recognized in the financial statements over the requisite service period. This Statement does not change the accounting for stock ownership plans, which are subject to American Institute of Certified Public Accountants SOP 93-6, "Employer's Accounting for Employee Stock Ownership Plans." Statement 123 (R) supersedes Opinion 25, Accounting for Stock Issued to Employees and its related interpretations, and eliminates the alternative to use Opinion 25's intrinsic value method of accounting, which the Company is currently using. Statement 123 (R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement 123 (R). The second method is the modified retrospective application, which requires that the Company restates prior period financial statements. The modified retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of this statement. The Company has determined that it will adopt the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement 123 (R).  2.   ACQUISITIONS           On April 11, 2005, the Company completed an investment in an offshore joint venture, TACT Global Services Private Limited (TGS), in the amount of $250,000, which represented approximately a 68% ownership. A minority partner invested $100,000 for the remaining 32% ownership. In September 2005, the Company increased its ownership to 100% by purchasing the minority partners investment for $100,000. The Company has consolidated the results of TGS in its financial statements for the period from September 2005 to December 31, 2005, and recorded the Company's proportionate ownership share of the results of TGS from April 11, 2005 to September 2005.           On July 19, 2002, the Company consummated the acquisition of all of the issued and outstanding capital stock of IOT, a New Jersey corporation, pursuant to a Stock Purchase Agreement dated as of June 28, 2002 among TACT, IOT and the holders of all of the issued and outstanding capital stock of IOT (the "IOT Stockholders"). TACT acquired all of the issued and outstanding capital stock of IOT from the IOT Stockholders in exchange for an aggregate of three hundred seventeen thousand five hundred (317,500) shares of unregistered TACT Common Stock, which has been retroactively adjusted to reflect the one-for-four reverse stock split that occurred on January 7, 2004, and was valued at $635,000 (the "Acquisition Shares") and the obligation to make certain deferred cash payments of six hundred fifty thousand ($650,000) in the aggregate (the "Deferred Payments"). The Acquisition Shares were issued by TACT to the IOT Stockholders at the closing of the acquisition. Subject to the terms and conditions of the Stock Purchase Agreement, the Deferred Payments were payable as follows: (i) an aggregate of $140,000 on or before September 2, 2002, (ii) an aggregate of $210,000 on or before April 1, 2003, (iii) an aggregate of $100,000 on or before April 1, 2004, and (iv) an aggregate of $200,000 on or before January 2, 2005. The consideration paid by TACT for the acquisition of IOT was determined through arms-length negotiation by the management of TACT and a majority of the IOT Stockholders. The acquisition was accounted for under the purchase method of accounting for business combinations and operations of IOT has been included from the date of acquisition. The purchase price of the acquisition exceeded the fair market value of the net assets acquired, resulting in the recording of goodwill of $1,181,520. The three majority shareholders of IOT received employment agreements for a three-year period at an annual salary of $160,000 per year each. For the year ended December 31, 2005, the amortization expense for the intangible asset was $34,667.                                        F-12                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           IOT was a privately owned, professional services firm that provides data management and business intelligence solutions, technology consulting and project management services. IOT operates as a wholly owned subsidiary of TACT. The acquisition was made to increase the depth of the Company's services and solutions offerings and provide the Company with significant cross-selling opportunities.           On October 2, 1998, the Company made an investment in web integrator T3 Media of $3 million, in return for non-voting convertible preferred stock. On June 23, 1999, the Company converted its preferred stock into 30% common stock ownership and increased its ownership interest to approximately 51% by an additional investment in T3 Media's common stock of $370,000. The acquisition of T3 Media was accounted for using the purchase method of accounting. Accordingly, the results of operations of T3 Media are included in the Company's consolidated results of operations from the date of acquisition. The excess of the purchase price over the estimated fair value of the net identifiable assets acquired totaled $4.0 million and was recorded as goodwill and was being amortized using the straight-line method over 7 years. During 2000, the Company wrote-off the net carrying value of the goodwill which amounted to $3.1 million. T3 Media ceased operations in the second quarter of 2001. During 2003, the Company reversed approximately $113,000, in accounts payable relating to T-3 Media, resulting in a reduction in SG&A expenses.  3.   INVESTMENTS           The Company invested approximately $2,000,000 and $300,000 in Always-On Software, Inc. during 2000 and 1999, respectively, and the Company invested $500,000 in Methoda Computers Ltd. during 2000. Due to the deteriorating conditions of the software application services ("ASP") market and deteriorating cash reserves, Always-On Software, Inc. ceased operations in July 2001. As a result, the Company wrote-down virtually all of its investment of $2.3 million to reflect the impairment in the value of its investment in the second quarter of 2001. In the fourth quarter of 2001, Always-On Software Inc. merged with Veracicom, Inc. and the Company received warrants in this transaction. In the third quarter of 2002, the Company wrote off the remainder of its investment in Always-On Software, Inc. in the amount of $18,000. The Company also wrote down its investment in Methoda Computer Ltd. in that same period in the amount of $132,000.           In January of 2004, the Company sold approximately 75 percent of its investment in Methoda for $200,000 in cash and $81,000 payable over the next twenty months, which was fully satisfied in 2005. The remaining investment had a carrying value of $87,000 as of December 31, 2005 and 2004.                                        F-13                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  4.   NET INCOME (LOSS) PER SHARE           The following table sets forth the computation of basic and diluted net income (loss) per share for the years ended December 31, 2005, 2004 and 2003.                                                                  YEAR ENDED DECEMBER 31,                                                      ------------------------------------------                                                          2005           2004           2003                                                      ------------   ------------   ------------     NUMERATOR FOR BASIC NET (LOSS) INCOME PER SHARE   Net (loss) income                                  $   (484,004)  $  1,236,705   $   (123,305)   Preferred Dividend                                        8,897         26,850         26,776                                                      ------------   ------------   ------------   Net (loss) income available to    common stockholders                               $   (492,901)  $  1,209,855   $   (150,081)                                                      ============   ============   ============ NUMERATOR FOR DILUTED NET (LOSS) INCOME PER SHARE   Net (loss) income available to common    stockholders & assumed conversion                 $   (492,901)  $  1,236,705   $   (150,081)                                                      ============   ============   ============ DENOMINATOR:   Denominator for basic (loss) income before    extraordinary item and net loss per share    - weighted-average shares                            2,285,874      2,110,072      2,098,810   Effect of dilutive securities:   Preferred shares                                              -        142,903              -   Employee stock options                                        -         59,046              -                                                      ------------   ------------   ------------   Denominator for diluted earnings (loss) per    share - adjusted weighted-average shares             2,285,874      2,312,021      2,098,810                                                      ============   ============   ============  BASIC EARNINGS (LOSS) INCOME PER SHARE:                                                      ------------   ------------   ------------   Net (loss) income                                  $      (0.22)  $       0.57   $      (0.07)                                                      ============   ============   ============  DILUTED EARNINGS (LOSS) INCOME PER SHARE:                                                      ------------   ------------   ------------   Net (loss) income                                  $      (0.22)  $       0.53   $      (0.07)                                                      ============   ============   ============            During the year ended December 31, 2004 there were 159,140 options, that were excluded from the computation of diluted earnings per share, because the options were not vested or the exercise price was in excess of the fair market value. All options and warrants outstanding during 2005 and 2003 (see Notes 13) were not included in the computation of net loss per share because the effect would be antidilutive.                                        F-14                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  5.   PROPERTY AND EQUIPMENT           Property and equipment, at cost, consists of the following:                                                                DECEMBER 31,                                                    -------------------------------                                                         2005             2004                                                    --------------   --------------    Equipment and leaseholds                           $    5,585,602   $    5,516,985 Software                                                  990,845          972,879 Furniture and fixtures                                  1,113,650        1,107,272 Automobiles                                               158,769          158,769                                                    --------------   --------------                                                         7,848,866        7,755,905 Less accumulated depreciation and amortizat             7,368,021        7,199,009                                                    --------------   --------------                                                    $      480,845   $      556,896                                                    ==============   ==============   6.   CREDIT ARRANGEMENT           The Company has a line of credit of $4.0 million with Keltic Financial Partners, LP, (Keltic) based on the Company's eligible accounts receivable balances. The line of credit has certain financial covenants, which the Company must meet on a quarterly basis. There was no outstanding balance at December 31, 2005 or 2004. On March 23, 2004, the line of credit was amended and restated to include the following: an extension to June 2007, the removal of the guarantee of the Chief Executive Officer and less restrictive financial covenants. On March 23, 2005, the agreement was restated and amended, again. Included in the restated and amended agreement is Keltic's consent for the proposed transaction with Vanguard Info-Solutions Corporation, (as defined in more detail in the Definitive Proxy Statement filed on June 27, 2005), which transaction was terminated on August 4, 2005 and a waiver to certain financial covenants that the Company failed to comply with in the first quarter ending March 31. The Company failed to comply with these covenants for the second and third quarters ending June 30 and September 30, 2005, respectively. Accordingly, a waiver was obtained from Keltic. On December 1, 2005, the agreement was further amended to reset the EBITDA covenant effective October 1, 2005. The line of credit bears interest at a variable rate based on prime plus 1.75% and the rate was 9.00% at December 31, 2005.           The Company is prohibited from paying dividends on its common stock due to restrictions under the restated and amended Loan and Security Agreement with Keltic Financial Partners, L.P. Keltic has consented to the payment of dividends on the Series A and Series B Preferred Stock, provided an event of default does not exist.           As of December 31, 2005, The Series A and Series B Preferred Stock was fully converted into common stock during 2005. As result, there are no outstanding shares of Series A or Series B Preferred Stock as of December 31, 2005.  7.   CONTRACTUAL OBLIGATIONS AND COMMITMENTS           The Company has the following commitments as of December 31, 2005, and is comprised of short term obligations of an automobile loan and employment contracts. In addition, there is a capital lease obligation and operating lease obligation as well. The automobile loan is payable in monthly installments of $1,262 including interest at 6%. As of December 31, 2005, the loan matures as follows: 2006 - $13,478. The employment contracts are payable as follows: 2006 - $386,250, 2007-$360,000. One of the Company's subsidiaries, T3 Media, which ceased operations in 2001, had entered into a series of capital lease obligations, which the Company had guaranteed. The Company continues the process of negotiating buy-outs on these leases. The Company has two operating leases for its corporate headquarters located in NY and its branch office in NJ. The annual amounts due for both locations are as follows: 2006 - $308,663 and 2007 - $191,100.           As of December 31, 2005, the Company does not have any "Off Balance Sheet Arrangements".                                        F-15                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           The Company's contractual obligations at December 31, 2005, are comprised of the following:                                                               PAYMENTS DUE BY PERIOD                                  --------------------------------------------------------------------------                                                     LESS THAN 1         1 - 3          3 - 5     MORE THAN   CONTRACTUAL OBLIGATIONS            TOTAL             YEAR             YEARS          YEARS      5 YEARS - -----------------------------    --------------   --------------   --------------   ----------   ----------       LONG TERM OBLIGATIONS Automobile Loan                  $       13,478   $       13,478   $            -   $        -   $        - Employment Contracts                    746,250          386,250(1)       360,000            -            -  CAPITAL LEASE OBLIGATIONS Capital Lease - Short Term              290,517          290,517                -            -            -  OPERTATING LEASES Rent                                    499,763          308,663          191,100            -            -                                  --------------   --------------   --------------   ----------   ---------- TOTAL                            $    1,550,008   $      998,908   $      551,100   $        -   $        -                                  ==============   ==============   ==============   ==========   ==========   (1)  Due to the resignation of the Company's Chief Financial Officer, effective      February 17, 2006, the employment contract with the Company was terminated.      Therefore, the Company's Contractual Obligations for Employment Contracts      for Less Than 1 Year have been adjusted to reflect Mr. Falcone's salary      through February 17, 2006 of $26,250 as opposed to $192,500 that would have      been due had he not resigned.  8.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES           Accounts payable and accrued expenses consists of the following:                                            December 31,                                 -------------------------------                                      2005             2004                                 --------------   --------------  Accounts payable               $      467,864   $      490,818  Payroll                               484,745          533,065  Bonuses                                59,956          108,956  Other accrued expenses                752,081          533,321                                 --------------   --------------                                 $    1,764,647   $    1,666,160                                 ==============   ==============  9.   INCOME TAXES           The Company accounts for income taxes using the liability method in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").           Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.                                        F-16                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           Deferred tax assets and (liabilities) consist of the following:                                               DECEMBER 31,                                    -------------------------------                                         2005             2004                                    --------------   -------------- Licensing revenues                 $      (50,000)  $      (53,000) Accounts receivable reserve               128,000          119,000 Depreciation and amortization             214,000          201,000 Investments                               928,000          928,000 Other                                      50,000           29,000 Accounting method change                        -          (22,500) Net operating losses                    4,675,000        4,439,000                                    --------------   --------------                                         5,945,000        5,640,500 Valuation allowance                    (5,945,000)      (5,663,000)                                    --------------   --------------                                    $            -   $      (22,500)                                    ==============   ==============           The deferred tax liability at December 31, 2004 relates to the change in accounting methods for tax purposes arising from the IOT acquisition.           Internal Revenue Code Section 382 places a limitation on the utilization of Federal net operating loss and other credit carry-forwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percentage point change in ownership occurs. Accordingly, the actual utilization of the net operating loss carry-forwards and other deferred tax assets for tax purposes may be limited annually under Code Section 382 to a percentage (currently about four and a half percent) of the fair market value of the Company at the time of any such ownership change.           For the year ended December 31, 2005, approximately $588,000 of federal and $598,000 of state net operating losses were generated. As a result, at December 31, 2005, the Company has federal net operating loss carry forwards of approximately $10.8 million which will begin to expire in 2020. In addition, the Company has state net operating loss carry forward of approximately $17 million remaining which will expire 2009 to 2013. The full utilization of the deferred tax assets in the future is dependent upon the Company's ability to generate taxable income; accordingly, a valuation allowance of an equal amount has been established. During the year ended December 31, 2005, the valuation allowance increased by $282,000 and during the years ended December 31, 2004 and 2003, the valuation allowance decreased by $1,592,000 and $69,000, respectively.           Significant components of the provision for income taxes are as follows:                                       YEAR ENDED DECEMBER 31,                            ------------------------------------------                                2005           2004           2003                            ------------   ------------   ------------ Current:   Federal                  $          -   $     35,625   $          -   State and local                38,740         85,960         46,000                            ------------   ------------   ------------     Total Current          $     38,740   $    121,585   $     46,000                            ------------   ------------   ------------ Deferred:   Federal                             -         (5,625)       (19,125)   State and local               (22,500)       (16,875)        (3,375)                            ------------   ------------   ------------     Total Deferred              (22,500)       (22,500)       (22,500)                            ------------   ------------   ------------ Total                      $     16,240   $     99,085   $     23,500                            ============   ============   ============                                        F-17                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           A reconciliation between the federal statutory rate and the effective income tax rate for the years ended December 31, 2005, 2004, and 2003.                                           2005       2004       2003                                        --------   --------   -------- Federal statutory rate                    (34.0)%     34.0%     (34.0)% State and local taxes net  of federal tax benefit                     2.3        5.7       45.6 Non-deductible expenses                   (25.1)       5.4        4.8 Carryback of losses for which no  benefit was   previously recorded                                               - Change in valuation allowance             60.27     (37.68)      7.15                                        --------   --------   -------- Total                                      3.47%      7.42%     23.55%                                        ========   ========   ========  10.  RETIREMENT PLAN           The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code for its employees. Participants can make elective contributions subject to certain limitations. Under the plan, the Company can make matching contributions on behalf of all participants. There were no such contributions made by the Company in 2005, 2004 and 2003.  11.  CONCENTRATION OF CREDIT RISK           Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and accounts receivable. The Company maintains its cash balances on deposit with a limited number of financial institutions in amounts which may exceed federally insured limits. Historically, the Company has not experienced any related cash-in-bank losses. For the year ended December 31, 2005, the Company had three customers which accounted for 21%, 20% and 15% of revenues, respectively. For the year ended December 31, 2004, the Company had two customers which accounted for 20% and 19% of revenues, respectively. For the year ended December 31, 2003, the Company had one customer which represented 28% of revenues. Besides these customers, no other customer represented greater than 10% of the Company's revenues. Four customers represented approximately 10%, 15%, 15% and 23% of accounts receivable as of December 31, 2005, three customers represented approximately 10%, 14% and 17% of accounts receivable as of December 31, 2004, and three customers represented approximately 10%, 13% and 15% of accounts receivable as of December 31, 2003.  12.  LEASES           The Company leases office space under non-cancelable operating leases. The future minimum payments for all non-cancelable operating leases as of December 31, 2005 are as follows:           2006                                      308,663          2007                                      191,100                                                -----------          Total minimum future lease payments   $   499,763                                                ===========           Office leases are subject to escalations based on increases in real estate taxes and operating expenses. Rent expense for the years ended December 31, 2005, 2004, and 2003, was approximately $301,042, $299,121and $340,000, respectively.                                        F-18                              THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           In 2001, T3 Media stopped paying its capital lease obligations. The Company was a guarantor of the majority of these obligations and is continuing the process of negotiating buy-outs of the remaining leases. For the year ended December 31, 2005, $290,517 of T3 Media's capital lease obligations remained outstanding.  13.  STOCK OPTION PLAN           The Company adopted a Stock Option Plan (the "Plan") that provides for the grant of stock options that are either "incentive" or "non-qualified" for federal income tax purposes. The Plan provided for the issuance of up to a maximum of 150,000 shares of common stock. On May 27, 1998, the shareholders approved and ratified an increase to the Plan from 150,000 to 225,000 shares of common stock, on May 24, 2001, the shareholders approved and ratified an increase to the Plan from 225,000 to 300,000 shares of common stock and on July 26, 2005, the shareholders approved and ratified an increase to the Plan from 300,000 to 1,200,000 shares of common stock (subject to adjustment pursuant to customary anti-dilution provisions).           The exercise price per share of a stock option is established by the Executive Compensation Committee of the Board of Directors in its discretion, but may not be less than the fair market value of a share of common stock as of the date of grant. The aggregate fair market value of the shares of common stock with respect to which "incentive" stock options are exercisable for the first time by an individual to whom an "incentive" stock option is granted during any calendar year may not exceed $100,000. Stock options generally vest over a period between 1 to 4 years.           Stock options, subject to certain restrictions, may be exercisable any time after full vesting for a period not to exceed ten years from the date of grant and terminate upon the date of termination of employment. Such period is to be established by the Company in its discretion on the date of grant.           Information with respect to options under the Company's Plan (adjusted for reverse stock split that occurred on January 7, 2004) is as follows:                                                              WEIGHTED                                             NUMBER OF       AVERAGE                                              SHARES      EXERCISE PRICE                                           ------------   --------------      Balance - January 1, 2003                 249,154   $         6.58         Granted during 2003                      1,000             1.81         Exercised during 2003                  (11,250)            1.63         Forfeitures during 2003                (80,383)           13.75                                           ------------      Balance - December 31, 2003               158,521             3.27         Granted during 2004                    154,750             4.61         Exercised during 2004                  (14,688)            1.34         Forfeitures during 2004                (43,020)            4.94                                           ------------      Balance - December 31, 2004               255,563             3.91         Granted during 2005                     15,750             4.67         Exercised during 2005                  (56,032)            2.19         Forfeitures during 2005                 (9,188)            5.64                                           ------------      Balance - December 31, 2005               206,093   $         4.36                                           ============           At December 31, 2005, 2004, and 2003, 105,937, 96,657, and 83,959, respectively, were exercisable with weighted average exercise prices of $4.28, $3.56, and $4.78, respectively.                                        F-19                              THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           The following table summarizes the status of the stock options outstanding and exercisable at December 31, 2005:                              STOCK OPTIONS OUTSTANDING - -------------------------------------------------------------------------------                                                                     NUMBER OF                      WEIGHTED                      WEIGHTED-          STOCK EXERCISE PRICE       AVERAGE        NUMBER OF      REMAINING         OPTIONS     RANGE         EXERCISE PRICE    OPTIONS     CONTRACTUAL LIFE   EXERCISABLE - ---------------   --------------   ----------   ----------------   ------------   $0.00 - $4.80   $        2.735      132,593       5.4 years            80,062   $4.80 - $9.60   $        5.903       63,750       4.5 years            16,125  $9.60 - $14.40   $        9.620          750       4.6 years               750 $14.40 - $19.20   $       15.504        8,000       3.9 years             8,000 $24.00 - $28.80   $       28.000          500       3.0 years               500 $28.80 - $33.60   $       30.000          500       2.8 years               500                                    ----------                      ------------                                       206,093                           105,937                                    ==========                      ============           At December 31, 2005, the Company had 1,200,000 shares of Common Stock reserved in connection with the Stock Option Plan.  14.  IMPAIRMENT OF ASSETS AND RESTRUCTURING CHARGES           The Company began to restructure its operations in 2000 and has continued to restructure its operations through 2002. The restructuring was completed in the first quarter of 2003.           At December 31, 2005 and 2004, the Company had no restructuring charge liability.  15.  EMPLOYMENT AGREEMENT OF CHIEF EXECUTIVE OFFICER           The Company has entered into an employment agreement with Shmuel BenTov, its Chairman, Chief Executive Officer and President, which terminates on December 31, 2007. The contract calls for a salary of $360,000 per year. His employment agreement contains non-competition, non-disclosure and non-solicitation covenants. It also contains an annual bonus, subject to the approval of the non-employee members of the Company's Executive Compensation Committee and further subject to the Company meeting certain financial performance criteria, in an amount to be determined by the non-employee members of the Committee. In the event that he is terminated by the Company, he is to receive severance pay that is two times his then annual salary and is payable within 30 days of the termination.  16.  SALES AND CONVERSION OF PREFERRED SHARES           In 2002, the Company issued 530,304 shares of Series A Preferred Stock and 41,311 shares of Series B Preferred Stock. The shares of Series A and Series B Preferred Stock are convertible into Common Stock on a 4:1 basis, which reflects the Company's one-for-four reverse stock split that occurred on January 7, 2004 and are subject to further adjustment for stock splits, consolidations and stock dividends. In addition, the shares of Series A and B Preferred Stock are entitled to a 7% cumulative dividend payable semi-annually. The Company has also agreed to grant "piggyback" registration rights to the Preferred Stockholders for the shares of Common Stock issuable upon conversion of the Series A and Series B Preferred Stock. The Series A and Series B Preferred Stock carries a liquidation preference in that the Series A and Series B shareholders are paid before any other class of stock.           As of December 31, 2005, the Series A and Series B Preferred Stock was fully converted into common stock during 2005. As result, there are no outstanding shares of Series A or Series B Preferred Stock as of December 31, 2005.                                        F-20                             THE A CONSULTING TEAM, INC.                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  17.  QUARTERLY RESULTS (UNAUDITED)           The following is a summary of the quarterly results of operations for the years ended December 31, 2005 and 2004.                                                                        QUARTER ENDED                                       --------------------------------------------------------------------- (in thousands, except per share          MARCH 31,          JUNE 30,       SEPTEMBER 30,      DECEMBER 31, amounts)                                   2005              2005              2005              2005 - -----------------------------------   ---------------   ---------------   ---------------   ---------------      Revenues                              $         6,115   $         6,704   $         6,858   $         6,755 Gross profit                                    1,875             1,783             1,900             2,242 (Loss) income from operations                    (257)             (543)              133               206 Net (loss) income                                (259)             (546)              118               203 Net (loss) income per share-basic  and dilutive                         $         (0.12)  $         (0.24)  $          0.05   $          0.09                                                                        QUARTER ENDED                                       ---------------------------------------------------------------------                                          MARCH 31,          JUNE 30,       SEPTEMBER 30,      DECEMBER 31,                                            2004              2004              2004              2004                                       ---------------   ---------------   ---------------   ---------------      Revenues                              $         5,801   $         6,347   $         6,585   $         6,302 Gross profit                                    1,682             1,907             2,098             1,986 Income (loss) from operations                     275               337               398               351 Net income (loss)                                 220               298               370               349 Net income (loss) per share-basic  and dilutive                         $          0.10   $          0.14   $          0.16   $          0.16                                         F-21                              THE A CONSULTING TEAM, INC.                   SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS                    COL. A                     COL. B                COL. C                COL. D         COL. E - -------------------------------------   ------------   ---------------------------   ----------     -----------                                                                 ADDITIONS                                                        ---------------------------                                                           (1)             (2)                                                        ----------   --------------                                          BALANCE AT    CHARGED TO     CHARGED TO                    BALANCES AT                                         BEGINNING OF   COSTS AND    OTHER ACCOUNTS   DEDUCTIONS       END OF              DESCRIPTION                   PERIOD       EXPENSES       DESCRIBE       DESCRIBE        PERIOD - -------------------------------------   ------------   ----------   --------------   ----------     -----------       Reserves and allowances deducted from  asset accounts: For the year ended December 31, 2005   Allowance for doubtful accounts       $    296,828   $   35,000   $            -   $  (11,024)(a) $   320,804 For the year ended December 31, 2004   Allowance for doubtful accounts       $    305,290   $  145,000   $            -   $ (153,462)(b) $   296,828 For the year ended December 31, 2003   Allowance for doubtful accounts       $    380,472   $   40,000   $            -   $ (115,182)(c) $   305,290   (a) Uncollectible accounts written off during 2005.  (b) Uncollectible accounts written off during 2004.  (c) Uncollectible accounts written off during 2003.                                         S-1                                     EXHIBIT INDEX  Exhibit Number      Description of Exhibits - ---------   --------------------------------------------------------------------   2.1       Stock Purchase Agreement dated as of June 28, 2002 among the             Registrant, International Object Technology, Inc. and the             Stockholders of International Object Technology, Inc. incorporated             by reference to Exhibit 2.1 to the Form 8-K, as previously filed             with the SEC on July 12, 2002.    3.1       Restated Certificate of Incorporation of the Registrant,             incorporated by reference to Exhibit 3.1 to the Form 10Q for the             period ended June 30, 2001, as previously filed with the SEC on             August 10, 2001.    3.2.1     Certificate of Amendment of the Certificate of Incorporation of the             Registrant dated August 8, 2002 incorporated by reference to Exhibit             3.2 to the Form 10-Q for the period ended June 30, 2001, as             previously filed with the SEC on August 14, 2002.    3.2.2     Certificate of Amendment of the Certificate of Incorporation of the             Registrant dated November 12, 2002, incorporated by reference to             Exhibit 3.2.2 to the Form 10-Q for the period ended September 30,             2002, as previously filed with the SEC on November 14, 2002.    3.2.3     Certificate of Amendment of the Certificate of Incorporation of the             Registrant dated January 5, 2004, incorporated by reference to             Exhibit 3.2.3 to the Form 8-K dated January 8, 2004, as previously             filed with the SEC on January 8, 2004.    3.3       Amended and Restated By-Laws of the Registrant, incorporated by             reference to Exhibit 3.3 to the Registration Statement on Form SB-2             as previously filed with the SEC on August 6, 1997.    3.4       Amendment No. 1 to the Amended and Restated Bylaws of the Registrant             incorporated by reference to Exhibit 3.4 to the Form 10-Q for the             period ended June 30, 2003, as previously filed with the SEC on             August 14, 2003.    4.1       Specimen Common Stock Certificate, incorporated by reference to             Exhibit 4 to the Registration Statement on Form SB-2 as previously             filed with the SEC on July 23, 1997.    4.2       Registration Rights Agreement dated as of July 19, 2002 among the             Registrant and those persons listed on Schedule I attached thereto,             incorporated by reference to Exhibit 4.1 to the Form 8-K dated July             19, 2002, as previously filed by the SEC on July 25, 2002.    10.1.1    Stock Option and Award Plan of the Registrant and Form of             Nonqualified Stock Option Agreement, incorporated by reference to             Exhibit 10.1 to the Registration Statement on Form SB-2 as             previously filed with the SEC on August 6, 1997.    10.1.2    Amendment to the Stock Option and Award Plan of the Registrant,             incorporated by reference to Post-Effective Amendment No. 1 to the             Registration Statement on Form S-8 as previously filed with the SEC             on June 25, 1998.    10.1.3    Amendment No. 2 to the Stock Option and Award Plan of the             Registrant, incorporated by reference to Exhibit C to the             Registrant's 2001 Proxy Statement on Schedule 14A, as previously             filed with the SEC on April 30, 2001.      10.2      Amended and restated Loan and Security Agreement between the             Registrant and Keltic Financial Partners, LP, dated March 23, 2004,             incorporated by reference to Exhibit 10.2 to the Form 10-K for the             year ended December 31, 2003, as previously filed with the SEC on             March 29, 2004.    10.2.1    First Modification to the March 23, 2004 Amended and Restated Loan             and Security Agreement, incorporated by reference to the Form 10-Q             for the first quarter ended March 31, 2005, as previously filed with             the SEC on May 12, 2005.    10.2.2    Amendment dated December 1, 2005 to the March 23, 2004 Amended and             Restated Loan and Security Agreement    10.3      Employment Agreement, dated December 1, 2005, between the Registrant             and Shmuel BenTov, incorporated by reference to Exhibit 10.1 to the             Form 8-K dated December 12, 2005, as previously filed with the SEC             on December 15, 2005.    10.4      Form of S Corporation Termination, Tax Allocation and             Indemnification Agreement, incorporated by reference to Exhibit 10.4             to the Registration Statement on Form SB-2, as previously filed with             the SEC on August 6, 1997.    10.5      Letter of Undertaking from the Registrant and Shmuel BenTov,             incorporated by reference to Exhibit 10.9 to the Registration             Statement on Form SB-2, as previously filed with the SEC on July 23,             1997.    10.6      Shmuel BenTov Letter Commitment, dated March 29, 2001, incorporated             by reference to Exhibit 10.10 to the Form 10-K for the fiscal year             ended December 31, 2000, as previously filed with the SEC on             April 2, 2001.    10.7      Form of Indemnification Agreement between the Registrant and each of             its Directors and its Chief Executive Officer, incorporated by             reference to Exhibit 10.12 to the Form 10-Q for the period ended             September 30, 2003 as filed with the SEC on November 11, 2003.    23.1      Consent of Grant Thornton, LLP    23.2      Consent of Mercadien, P.C., Certified Public Accountants    31.1      Certification of Chief Executive Officer pursuant to Section 302 of             Sarbanes-Oxley Act of 2002.    31.2      Certification of Principal Financial Officer pursuant to Section 302             of Sarbanes-Oxley Act of 2002.    32.1      Certification of the Chief Executive Officer, pursuant to 18 U.S.C.             Section 1350, as adopted pursuant to Section 906 of the             Sarbanes-Oxley Act of 2002.    32.2      Certification of the Principal Financial Officer, pursuant to 18             U.S.C. Section 1350, as adopted pursuant to Section 906 of the             Sarbanes-Oxley Act of 2002.    EX-10.2.2 2 b412458ex10-22.txt EXHIBIT 10.2.2                                                                      EXHIBIT 10.2.2                                                                  December 1, 2005  THE A CONSULTING TEAM, INC. 200 Park Avenue South Suite 1501 New York, New York 10003      Attn: Shmuel BenTov  INTERNATIONAL OBJECT TECHNOLOGY, INC. 67 Walnut Street Suite 308 Clark, New Jersey 07060      Attn: Shmuel BenTov            Re:  RESTATED AND AMENDED LOAN AND SECURITY AGREEMENT DATED AS OF                MARCH 23, 2004, BY AND BETWEEN THE A CONSULTING TEAM, INC.,                INTERNATIONAL OBJECT TECHNOLOGY, INC., AND KELTIC FINANCIAL                PARTNERS, LP AS HERETOFORE AMENDED BY THE FOLLOWING:                 (a)  a letter modification dated as of March 23, 2005                 (b)  an instrument of modification dated as of July 26, 2005 and                     entitled "Waiver to the Revolving Loan Agreement"  Dear Mr. BenTov:       THE A CONSULTING TEAM, INC. ("TACT"), INTERNATIONAL OBJECT TECHNOLOGY, INC. ("IOT") and KELTIC FINANCIAL PARTNERS, LP ("KELTIC") are parties to a certain Restated and Amended Loan and Security Agreement dated as of March 23, 2004 (the "2004 LOAN AGREEMENT"), as heretofore amended by the following instruments of modification:       (a)  a letter modification dated as of March 23, 2005 (the "FIRST           MODIFICATION"); and       (b)  an instrument of modification dated as of July 26, 2005 and entitled           "Waiver to the Revolving Loan Agreement" (the "SECOND MODIFICATION").       The 2004 Loan Agreement as heretofore amended by the aforementioned First Modification and Second Modification is hereinafter called the "LOAN AGREEMENT".       TACT AND IOT HAVE REQUESTED THAT KELTIC AGAIN MODIFY THE LOAN AGREEMENT IN THE FOLLOWING THREE RESPECTS:    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 2 December 1, 2005       (1)  KELTIC WAIVE FOR ONLY THE CALENDAR QUARTER ENDING SEPTEMBER 30, 2005,           THE EBITDA COVENANT REQUIREMENT SET FORTH IN SECTION 15.23 OF THE LOAN           AGREEMENT (said EBITDA covenant requirement for the calendar quarter           ending June 30, 2005, having been waived by the Second Modification).       (2)  KELTIC RESET THE EBITDA COVENANT REQUIREMENT SET FORTH IN SECTION           15.23 OF THE LOAN AGREEMENT TO $25,000, EFFECTIVE AS AT THE TEST DATE           OF DECEMBER 31, 2005, AND THEREAFTER FOR THE REMAINDER OF THE TERM OF           THE LOAN AGREEMENT.       (3)  KELTIC MAKE CLEAR THAT THE CONSENT PROVIDED IN SECTION 15.21 OF THE           LOAN AGREEMENT (ALLOWING TACT AND IOT TO MAKE INVESTMENTS IN PERSONS,           FIRMS OR CORPORATIONS IN THE COMBINED AGGREGATE AMOUNT OF UP TO           $500,000 IF, AMONG OTHER THINGS, TACT AND IOT ARE IN COMPLIANCE WITH           THE CORE EBITDA COVENANT SET FORTH IN SECTION 15.23 FOR TWO           CONSECUTIVE QUARTERS) IS NOT ADVERSELY EFFECTED BY THE FAILURE OF TACT           AND IOT TO COMPLY WITH THE EBITDA COVENANT REQUIREMENT SET FORTH IN           SECTION 15.23 OF THE LOAN AGREEMENT FOR THE CALENDAR QUARTERS ENDING           JUNE 30, 2005 AND SEPTEMBER 30, 2005, KELTIC'S WAIVER OF THE EBITDA           COVENANT REQUIREMENT SET FORTH IN SECTION 15.23 OF THE LOAN AGREEMENT           FOR BOTH SUCH CALENDAR QUARTERS BEING DEEMED COMPLIANCE WITH SUCH           COVENANT FOR PURPOSES OF SECTION 15.21.       In honor of such requests, Keltic agrees to, and does hereby, do each of the following:       (1)  KELTIC HEREBY WAIVES FOR THE CALENDAR QUARTER ENDING SEPTEMBER 30,           2005, THE EBITDA COVENANT REQUIREMENT SET FORTH IN SECTION 15.23 OF           THE LOAN AGREEMENT (said EBITDA covenant requirement for the calendar           quarter ending June 30, 2005, having been waived by the Second           Modification).       (2)  KELTIC HEREBY RESETS THE EBITDA COVENANT REQUIREMENT SET FORTH IN           SECTION 15.23 OF THE LOAN AGREEMENT BY THE DELETION OF THE EXISTING           SECTION 15.23, EFFECTIVE AS AT OCTOBER 1, 2005 AND BY THE SUBSTITUTION           OF THE FOLLOWING THEREFOR (it being intended to reset the EBITDA           covenant requirement set forth in Section 15.23 of the Loan Agreement           to $25,000, effective as at the test date of December 31, 2005, and           thereafter for the remainder of the term of the Loan Agreement):                 15.23 CORE EBITDA. Shall maintain Core EBITDA of no less than                $25,000, tested quarterly at the end of each calendar quarter,                commencing with the calendar quarter ending December 31, 2005.    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 3 December 1, 2005       (3)  KELTIC HEREBY MAKES CLEAR THAT THE CONSENT PROVIDED IN SECTION 15.21           OF THE LOAN AGREEMENT (ALLOWING TACT AND IOT TO MAKE INVESTMENTS IN           PERSONS, FIRMS OR CORPORATIONS IN THE COMBINED AGGREGATE AMOUNT OF UP           TO $500,000 IF, AMONG OTHER THINGS, TACT AND IOT ARE IN COMPLIANCE           WITH THE CORE EBITDA COVENANT SET FORTH IN SECTION 15.23 FOR TWO           CONSECUTIVE QUARTERS) IS NOT ADVERSELY EFFECTED BY THE FAILURE OF TACT           AND IOT TO COMPLY WITH THE EBITDA COVENANT REQUIREMENT SET FORTH IN           SECTION 15.23 OF THE LOAN AGREEMENT FOR THE CALENDAR QUARTERS ENDING           JUNE 30, 2005 AND SEPTEMBER 30, 2005, KELTIC'S WAIVER OF THE EBITDA           COVENANT REQUIREMENT SET FORTH IN SECTION 15.23 OF THE LOAN AGREEMENT           FOR BOTH SUCH CALENDAR QUARTERS BEING DEEMED COMPLIANCE WITH SUCH           COVENANT FOR PURPOSES OF SECTION 15.21.       The effectiveness of the aforesaid waiver and amendment is subject to the payment of a $15,000 modification fee (payable $5,000 upon acceptance of this letter by TACT and IOT) and $10,000 on January 1, 2006 (it being also understood that such fee also compensates Keltic for its services performed with respect to Keltic's consent to the transaction described in the First Modification which was not consummated by TACT and IOT).       The effectiveness of the aforesaid waiver and amendment is also subject to confirmation and acceptance by TACT and IOT of the above terms and conditions (and acceptance by TACT and IOT of this letter by their execution of a copy hereof will be deemed such confirmation and acceptance). The effectiveness of the aforesaid waiver and amendment is also subject to acceptance by TACT and IOT of the additional terms and conditions set forth below (and acceptance by TACT and IOT of this letter by their execution of a copy hereof will be deemed such confirmation and acceptance):            (1)  THIS WAIVER RELATES ONLY TO THE EBITDA COVENANT REQUIREMENT SET                FORTH IN SECTION 15.23 OF THE LOAN AGREEMENT AND ONLY THE                CALENDAR QUARTER ENDING SEPTEMBER 30, 2005 (said EBITDA covenant                requirement for the calendar quarter ending June 30, 2005, having                been waived by the Second Modification).            (2)  THIS AMENDMENT RELATES ONLY TO (1) THE EBITDA COVENANT                REQUIREMENT SET FORTH IN SECTION 15.23 OF THE LOAN AGREEMENT                PROSPECTIVELY FOR ALL PERIODS ENDING ON DECEMBER 31, 2005 AND                THEREAFTER (2) THE CLARIFICATION OF SECTION 15.21 OF THE LOAN                AGREEMENT THAT KELTIC'S WAIVER OF THE EBITDA COVENANT REQUIREMENT                SET FORTH IN SECTION 15.23 OF THE LOAN AGREEMENT FOR THE CALENDAR                QUARTERS ENDING JUNE 30, 2005 AND SEPTEMBER 30, 2005, BEING                DEEMED COMPLIANCE WITH SUCH COVENANT FOR PURPOSES OF SECTION                15.21.    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 4 December 1, 2005            (3)  This letter will be deemed a modification of the Loan Agreement                and the obligations of TACT and IOT hereunder will be considered                a continuing covenant of the Loan Agreement.            (4)  All of the Loan Documents described and defined in the Loan                Agreement shall be deemed to be amended in manner consistent                hereto and conforming herewith.            (5)  TACT and IOT agree that there exist no offsets, defenses,                set-offs, deductions, recoupments or counterclaims against any                sums owing under the Loan Agreement.            (6)  Shmuel BenTov, in his capacity as Validity/Support Guarantor                pursuant to the terms of a certain instrument of validity and                support dated March 23, 2004, and entitled "Validity and Support                Agreement", must confirm to Keltic that such instrument continues                in full force and effect and is not impaired or otherwise                lessened or adversely affected by the waiver and amendment                granted by this letter.            (7)  TACT and IOT must pay for the services of Keltic's counsel who                was engaged to review the Loan Agreement and to assist in the                preparation of this letter. Such fees have been estimated to be                $1,870.       If TACT and IOT are in agreement with the terms and conditions of this letter, please execute and have Shmuel BenTov (in his aforesaid capacity as Validity/Support Guarantor) execute the enclosed copy of this letter and return it to me no later than December 10, 2005.                                            Very truly yours,                                            KELTIC FINANCIAL PARTNERS, LP                                           BY: KELTIC FINANCIAL SERVICES LLC                                               its general partner                                                 By: /s/ Robert N.Laughlin                                                   ------------------------------                                                   Robert N. Laughlin,                                                   Managing Member    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 5 December 1, 2005                       CONSENT OF THE A CONSULTING TEAM, INC.,                     AND INTERNATIONAL OBJECT TECHNOLOGY, INC.       Each of THE A CONSULTING TEAM, INC., and INTERNATIONAL OBJECT TECHNOLOGY, INC., hereby agrees to the terms and conditions of the above letter as of December 1, 2005.  ATTEST:                                    THE A CONSULTING TEAM, INC.   /s/ Richard Falcone                        By: /s/ Shmuel BenTov - --------------------------                     --------------------------------- Richard Falcone, Secretary                     Shmuel BenTov, Chief Executive                                                Officer  ATTEST:                                    INTERNATIONAL OBJECT TECHNOLOGY, INC.   /s/ Richard Falcone                        By: /s/ Shmuel BenTov - --------------------------                     --------------------------------- Richard Falcone, Secretary                     Shmuel BenTov, Chief Executive                                                Officer    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 6 December 1, 2005                 CONSENT OF VALIDITY/SUPPORT GUARANTOR SHMUEL BENTOV       The undersigned hereby certifies on and as of December 1, 2005, as follows:       1.   (a)  The undersigned acknowledges that THE A CONSULTING TEAM, INC. ("TACT"), INTERNATIONAL OBJECT TECHNOLOGY, INC. ("IOT") and KELTIC FINANCIAL PARTNERS, LP ("KELTIC") are parties to a certain Restated and Amended Loan and Security Agreement dated as of March 23, 2004 (the "2004 LOAN AGREEMENT"), as heretofore amended by the following instruments of modification:                 (1)  a letter modification dated as of March 23, 2005 (the "FIRST                     MODIFICATION"); and                 (2)  an instrument of modification dated as of July 26, 2005 and                     entitled "Waiver to the Revolving Loan Agreement" (the                     "SECOND MODIFICATION").            (b)  The 2004 Loan Agreement as so amended by the First Modification and the Second Modification is hereinafter collectively called the "LOAN AGREEMENT".       2.   The undersigned is the "VALIDITY/SUPPORT GUARANTOR" named in the Loan Agreement.       3.   In his capacity as Validity/Support Guarantor and pursuant to the terms of a certain instrument of validity and support dated March 23, 2004, and entitled "Validity and Support Agreement" (hereinafter the "VALIDITY AND SUPPORT AGREEMENT"), the undersigned has made certain representations and covenants and given certain warranties relating to TACT, IOT, the Loan Agreement and the Collateral as defined in and given to Keltic thereunder.    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 7 December 1, 2005       4.   (a)  By this Consent, the undersigned hereby acknowledges that the Loan Agreement has been modified by that certain letter modification of even date herewith (hereinafter the "THIRD MODIFICATION -DECEMBER 2005 LETTER AMENDMENT") provided by Keltic to TACT and IOT and accepted by TACT and IOT.            (b)  The undersigned acknowledges receipt of an executed copy of the Third Modification -December 2005 Letter Amendment.            (c)  The undersigned hereby consents to all the terms and conditions of the Third Modification -December 2005 Letter Amendment and the performance by TACT and IOT of their joint and several obligations thereunder.            (d)  The undersigned hereby specifically acknowledges and consents to the following terms and conditions of the Third Modification -December 2005 Letter Amendment:                 (1)  Keltic's waiver of the EBITDA covenant requirement set forth                     in SECTION 15.23 of the Loan Agreement for the calendar                     quarter ending September 30, 2005 (said EBITDA covenant                     requirement for the calendar quarter ending June 30, 2005,                     having been waived by the Second Modification).                 (2)  Keltic's resetting of the EBITDA covenant requirement set                     forth in Section 15.23 of the Loan Agreement by the deletion                     of the existing Section 15.23, effective as at October 1,                     2005 and by the substitution of the following in its place                     (it being intended to reset the EBITDA covenant requirement                     set forth in Section 15.23 of the Loan Agreement to $25,000,                     effective as at the test date of December 31, 2005, and                     thereafter for the remainder of the term of the Loan                     Agreement):                          15.23 CORE EBITDA. Shall maintain Core EBITDA of no less                         than $25,000, tested quarterly at the end of each                         calendar quarter, commencing with the calendar quarter                         ending December 31, 2005.    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 8 December 1, 2005                 (3)  Keltic's making clear that the consent provided in Section                     15.21 of the Loan Agreement (allowing TACT and IOT to make                     investments in persons, firms or corporations in the                     combined aggregate amount of up to $500,000 if, among other                     things, TACT and IOT are in compliance with the Core EBITDA                     covenant set forth in Section 15.23 for two consecutive                     quarters) is not adversely effected by the failure of TACT                     and IOT to comply with the EBITDA covenant requirement set                     forth in Section 15.23 of the Loan Agreement for the                     calendar quarters ending June 30,2005 and September 30,                     2005, Keltic's waiver of the EBITDA covenant requirement set                     forth in Section 15.23 of the Loan Agreement for the                     calendar quarters ending June 30, 2005, and September 30,                     2005 being deemed compliance with such covenant for purposes                     of Section 15.21.       5.   The undersigned agrees that his obligations under the Validity and Support Agreement continue unchanged and all the undersigned's representations, covenants and warranties thereunder are herein re-affirmed and restated.       6.   (a)  The undersigned further agrees that all references in the Validity and Support Agreement to the term "LOAN AGREEMENT" shall be deemed to be references to the Loan Agreement as now amended by the Third Modification - -December 2005 Letter Amendment and by any other amendments made from time to time hereafter.            (b)  The undersigned further agrees that all references in any Loan Document (as such term is defined in the Loan Agreement) to any other Loan Document shall include therein all extensions, modifications, refinancings, renewals, substitutions, replacements and/or redatings of the applicable Loan Document, whether now or hereafter made or effected.    THE A CONSULTING TEAM, INC. INTERNATIONAL OBJECT TECHNOLOGY, INC. Page 9 December 1, 2005       7.   The undersigned additionally agrees that:            (a)  All provisions of the Validity and Support Agreement are hereby reaffirmed and given again in this Consent as if each provision was herein set forth at length.            (b)  None of the provisions hereof or of the Third Modification - -December 2005 Letter Amendment in any way impairs or lessens his joint and several liability as set forth in the Validity and Support Agreement.            (c)  None of the provisions of the Third Modification -December 2005 Letter Amendment in any way impairs or lessens any security given by him to secure the Validity and Support Agreement.            (d)  All other Loan Documents defined in the Loan Agreement are deemed to be amended so as to be in conformity herewith.       IN WITNESS WHEREOF, SHMUEL BENTOV has executed this Consent as of the date first above written.  WITNESS:   /s/ Richard Falcone                                   /s/ Shmuel BenTov - --------------------                                  -------------------------- Richard Falcone                                       Shmuel BenTov                           CERTIFICATION REGARDING DIRECTORS'                    RESOLUTIONS OF THE A CONSULTING TEAM, INC.       The undersigned Richard Falcone, being Secretary of THE A CONSULTING TEAM, INC., a New York corporation, does hereby certify that the following is a true copy of resolutions duly and unanimously adopted by the Board of Directors of THE A CONSULTING TEAM, INC., at a meeting of said directors held on December 1, 2005, and that the same are in full force and effect.       "RESOLVED, that THE A CONSULTING TEAM, INC., be and hereby is authorized to      execute that certain letter agreement (hereinafter called the "THIRD      MODIFICATION -DECEMBER 2005 LETTER AMENDMENT") which amends that certain      Restated and Amended Loan and Security Agreement dated as of March 23, 2004      by and among THE A CONSULTING TEAM, INC., INTERNATIONAL OBJECT TECHNOLOGY,      INC. and KELTIC FINANCIAL PARTNERS, LP, as heretofore amended by a letter      modification dated as of March 23, 2000, and an instrument of modification      dated as of July 26, 2005 and entitled "Waiver to the Revolving Loan      Agreement"; and be it       "FURTHER RESOLVED, that Shmuel BenTov, as president of THE A CONSULTING      TEAM, INC., and acting alone and without the need for co-execution by any      other officer of THE A CONSULTING TEAM, INC., whether attesting otherwise,      be and he hereby is authorized to execute and deliver the aforesaid THIRD      MODIFICATION -DECEMBER 2005 LETTER AMENDMENT and any and all other      documents and to perform all other actions for and on behalf of THE A      CONSULTING TEAM, INC., which may be necessary to effectuate the intent of      the foregoing resolution."       IN WITNESS WHEREOF, I have hereunto set my hand as of December 1, 2005.                                                         /s/ Richard Falcone                                                       --------------------------                                                       Richard Falcone, Secretary                           CERTIFICATION REGARDING DIRECTORS'               RESOLUTIONS OF INTERNATIONAL OBJECT TECHNOLOGY, INC.       The undersigned Richard Falcone, being Secretary of INTERNATIONAL OBJECT TECHNOLOGY, INC., a New Jersey corporation, does hereby certify that the following is a true copy of resolutions duly and unanimously adopted by the Board of Directors of INTERNATIONAL OBJECT TECHNOLOGY, INC., at a meeting of said directors held on December 1, 2005, and that the same are in full force and effect.       "RESOLVED, that INTERNATIONAL OBJECT TECHNOLOGY, INC., be and hereby is      authorized to execute that certain letter agreement (hereinafter called the      "THIRD MODIFICATION -DECEMBER 2005 LETTER AMENDMENT") which amends that      certain Restated and Amended Loan and Security Agreement dated as of March      23, 2004 by and among THE A CONSULTING TEAM, INC., INTERNATIONAL OBJECT      TECHNOLOGY, INC. and KELTIC FINANCIAL PARTNERS, LP, as heretofore amended      by a letter modification dated as of March 23, 2000, and an instrument of      modification dated as of July 26, 2005 and entitled "Waiver to the      Revolving Loan Agreement"; and be it       "FURTHER RESOLVED, that Shmuel BenTov, as president of INTERNATIONAL OBJECT      TECHNOLOGY, INC., and acting alone and without the need for co-execution by      any other officer of INTERNATIONAL OBJECT TECHNOLOGY, INC., whether      attesting otherwise, be and he hereby is authorized to execute and deliver      the aforesaid THIRD MODIFICATION -DECEMBER 2005 LETTER AMENDMENT and any      and all other documents and to perform all other actions for and on behalf      of INTERNATIONAL OBJECT TECHNOLOGY, INC., which may be necessary to      effectuate the intent of the foregoing resolution."       IN WITNESS WHEREOF, I have hereunto set my hand as of December 1, 2005.                                                        /s/ Richard Falcone                                                       --------------------------                                                       Richard Falcone, Secretary    EX-23.1 3 b412458ex23-1.txt EXHIBIT 23.1                                                                        EXHIBIT 23.1              CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  We have issued our report dated February 24, 2005, accompanying the consolidated financial statements and Schedule II included in the Annual Report of The A Consulting Team, Inc. and Subsidiaries on Form 10-K for the year ended December 31, 2005. We hereby consent to the incorporation by reference of said report in the Registration Statements of The A Consulting Team, Inc. and Subsidiaries on Form S-3 (Nos. 333-38330, effective June 1, 2000, 333-42744, effective August 1, 2000, 333-51084, effective December 1, 2000 and 333-116227, effective June 23, 2004) and on Form S-8 (No. 333-42145, effective December 12, 1997) as amended on June 24, 1998.  /s/ GRANT THORNTON LLP New York, New York March 24, 2006    EX-23.2 4 b412458ex23-2.txt EXHIBIT 23.2                                                                        EXHIBIT 23.2              CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  We consent to the incorporation by reference in the Registration Statement (Nos. 333-38330, effective June 1, 2000, 333-42744, effective August 1, 2000, 333-51084, effective December 1, 2000 and 333-116227, effective on June 23, 2004) on Form S-3 and on Form S-8 (No. 333-42145, effective December 12, 1997 as amended on June 24, 1998) of The A Consulting Team, Inc. and Subsidiaries of our report dated February 15, 2006 relating to our audit of the consolidated financial statements, and Schedule II, which appear in the Annual Report on Form 10-K of The A Consulting Team, Inc. and Subsidiaries for the year ended December 31, 2005.   /s/ Mercadien P.C., Certified Public Accountants Hamilton, New Jersey March 23, 2006    EX-31.1 5 b412458ex31-1.txt EXHIBIT 31.1                                                                        EXHIBIT 31.1                      CERTIFICATION OF CHIEF EXECUTIVE OFFICER  I, Shmuel BenTov, the principal executive officer of The A Consulting Team, Inc., certify that:  1.   I have reviewed this annual report on Form 10-K of The A Consulting Team,      Inc.;  2.   Based on my knowledge, this annual report does not contain any untrue      statement of a material fact or omit to state a material fact necessary 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      this annual report;  3.   Based on my knowledge, the financial statements, and other financial      information included in this annual report, fairly present in all material      respects the financial condition, results of operations and cash flows of      the registrant as of, and for, the periods presented in this annual report;  4.   As the registrant's certifying officer I am responsible for establishing      and maintaining disclosure controls and procedures (as defined in Exchange      Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:       a)   designed such disclosure controls and procedures, or caused such           disclosure controls and procedures to be designed under my           supervision, to ensure that material information relating to the           registrant, including its consolidated subsidiaries, is made known to           me by others within those entities, particularly during the period in           which this report is being prepared;       b)   evaluated the effectiveness of the registrant's disclosure controls           and procedures and presented in this report my conclusions about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this report based on such evaluation; and       c)   disclosed in this report any change in the registrant's internal           control over financial reporting that occurred during the registrant's           most recent fiscal quarter (the registrant's fourth fiscal quarter in           the case of an annual report) that has materially affected, or is           reasonably likely to materially affect, the registrant's internal           control over financial reporting; and  5.   As the registrant's certifying officer I have disclosed, based on my most      recent evaluation of internal control over financial reporting, to the      registrant's auditors and the audit committee of the registrant's board of      directors (or persons performing the equivalent functions):       a)   all significant deficiencies and material weaknesses in the design or           operation of internal control over financial reporting which are           reasonably likely to adversely affect the registrant's ability to           record, process, summarize and report financial information; and       b)   any fraud, whether or not material, that involves management or other           employees who have a significant role in the registrant's internal           control over financial reporting.  Date: March 29, 2006                                                  /s/ Shmuel BenTov                                                ---------------------------------                                                Shmuel BenTov                                                Chairman, Chief Executive Officer                                                and President    EX-31.2 6 b412458ex31-2.txt EXHIBIT 31.2                                                                        EXHIBIT 31.2                    CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER  I, Shmuel BenTov, the principal financial officer of The A Consulting Team, Inc., certify that:  1.   I have reviewed this annual report on Form 10-K of The A Consulting Team,      Inc., the registrant;  2.   Based on my knowledge, this annual report does not contain any untrue      statement of a material fact or omit to state a material fact necessary 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      this annual report;  3.   Based on my knowledge, the financial statements, and other financial      information included in this annual report, fairly present in all material      respects the financial condition, results of operations and cash flows of      the registrant as of, and for, the periods presented in this annual report;  4.   As the registrant's certifying officer I am responsible for establishing      and maintaining disclosure controls and procedures (as defined in Exchange      Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:       a)   designed such disclosure controls and procedures, or caused such           disclosure controls and procedures to be designed under my           supervision, to ensure that material information relating to the           registrant, including its consolidated subsidiaries, is made known to           me by others within those entities, particularly during the period in           which this report is being prepared;       b)   evaluated the effectiveness of the registrant's disclosure controls           and procedures and presented in this report my conclusions about the           effectiveness of the disclosure controls and procedures, as of the end           of the period covered by this report based on such evaluation; and       c)   disclosed in this report any change in the registrant's internal           control over financial reporting that occurred during the registrant's           most recent fiscal quarter (the registrant's fourth fiscal quarter in           the case of an annual report) that has materially affected, or is           reasonably likely to materially affect, the registrant's internal           control over financial reporting; and  5.   As the registrant's certifying officer I have disclosed, based on my most      recent evaluation of internal control over financial reporting, to the      registrant's auditors and the audit committee of the registrant's board of      directors (or persons performing the equivalent functions):       a)   all significant deficiencies and material weaknesses in the design or           operation of internal control over financial reporting which are           reasonably likely to adversely affect the registrant's ability to           record, process, summarize and report financial information; and       b)   any fraud, whether or not material, that involves management or other           employees who have a significant role in the registrant's internal           control over financial reporting.  Date: March 29, 2006                                                       /s/ Shmuel BenTov                                                      ---------------------------                                                      Shmuel BenTov                                                      Principal Financial Officer    EX-32.1 7 b412458ex32-1.txt EXHIBIT 32.1                                                                        EXHIBIT 32.1                    CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER                        PURSUANT TO 18 U.S.C. SECTION 1350           In connection with the accompanying Annual Report on Form 10-K of The A Consulting Team, Inc. for the year ended December 31, 2005, I, Shmuel BenTov, the principal executive officer of The A Consulting Team, Inc., hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:           (1)  such Annual Report on Form 10-K for the year ended December 31,               2005 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 such Annual Report on Form 10-K for               the year ended December 31, 2005 fairly presents, in all material               respects, the financial condition and results of operations of The               A Consulting Team, Inc., on a consolidated basis.           This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-K.   March 29, 2006                                 /s/ Shmuel BenTov Date                                           ---------------------------------                                         Name:  Shmuel BenTov                                         Title: Chairman, Chief Executive Officer                                                and President   A signed original of this written statement required by ss. 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.    EX-32.2 8 b412458ex32-2.txt EXHIBIT 32.2                                                                        EXHIBIT 32.2                    CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER                        PURSUANT TO 18 U.S.C. SECTION 1350           In connection with the accompanying Annual Report on Form 10-K of The A Consulting Team, Inc. for the year ended December 31, 2005, I, Shmuel BenTov, the principal financial officer of The A Consulting Team, Inc., hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:           (1)  such Annual Report on Form 10-K for the year ended December 31,               2005 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 such Annual Report on Form 10-K for               the year ended December 31, 2005 fairly presents, in all material               respects, the financial condition and results of operations of The               A Consulting Team, Inc., on a consolidated basis.           This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-K.   March 29, 2006                                       /s/ Shmuel BenTov Date                                                 ---------------------------                                               Name:  Shmuel BenTov                                               Title: Principal Financial Officer   A signed original of this written statement required by ss. 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.    -----END PRIVACY-ENHANCED MESSAGE-----