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

                                   FORM 10-KSB

      [X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                    For the Fiscal Year Ended: June 30, 2006

      [_]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

             For the Transition Period From __________ to __________

                          Commission File No. 000-29531

                         ADVANCED MEDICAL INSTITUTE INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

                NEVADA                                      88-0409144
    -------------------------------                       ----------------
    (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                       Identification No.)

          Level 1, 204-218 Botany Road
            Alexandria, NSW Australia                          2015
    ----------------------------------------                 ----------
    (Address of principal executive offices)                 (Zip code)

                   Issuer's telephone number: (61) 2 9640 5253

        Securities registered pursuant to Section 12(b) of the Act: none

           Securities registered pursuant to Section 12(g)of the Act:

                               $0.001 Common Stock
                 ----------------------------------------------
                                (Title of Class)

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

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]

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

      State the issuer's revenues for the June 30, 2006 fiscal year:
$30,453,128.

      The average bid and asked price of shares of common stock held by
non-affiliates of the issuer, as of the last 60 days was $1.80 and $0.97
respectively.

      As of June 30, 2006, there were 37,382,450 shares of the issuer's common
stock, $.001 par value, outstanding.

      Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
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                                TABLE OF CONTENTS

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PART I.........................................................................3

Item 1.  Description of Business...............................................3

Item 2.  Description of Property..............................................11

Item 3.  Legal Proceedings....................................................12

Item 4.  Submission of Matters to Vote of Security Holders....................13

PART II.......................................................................14

Item 5.  Market for Common Equity and Related Stockholder Matters and
         Small Business Issuer Purchases  of Equity Securities................14

Item 6.  Management's Discussion and Analysis or Plan of Operation............15

Item 7.  Financial Statements.................................................34

Item 8.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.............................................34

Item 8A. Controls and Procedures..............................................35

Item 8B. Other Information....................................................35

PART III......................................................................36

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a)  of the Exchange Act...................36

Item 10. Executive Compensation...............................................38

Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters......................................42

Item 12. Certain Relationships and Related Transactions.......................43

Item 13. Exhibits.............................................................44

Item 14. Principal Accountant Fees and Services...............................45

Signatures....................................................................47

                                       2
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                                     PART I

Item 1.        Description of Business.

The statements contained in this Form 10-KSB that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These include statements about the Company's expectations, beliefs,
intentions or strategies for the future, which are indicated by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "the Company
believes," "management believes" and similar words or phrases. The
forward-looking statements are based on the Company's current expectations and
are subject to certain risks, uncertainties and assumptions. The Company's
actual results could differ materially from results anticipated in these
forward-looking statements. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements.

Introduction

      We were incorporated under the name of Hawksdale Financial Visions, Inc.
      (sometimes the "Company") on December 6, 1996 under the laws of the State
      of Nevada. We originally had intended to time share a single family
      dwelling house in the Rum Cay area of the Bahamas, offering a one-twelfth
      fractional interest. As at March 31, 1997, all funds raised by the sale of
      shares of $.001 par value common stock ("Common Stock") in order to
      fulfill our initial objective had been expended and we, thereafter, become
      dormant. From March 31, 1997 until January 28, 2005, we were in the
      developmental stage and had no operations and we could be defined as a
      "shell" company, an entity which is generally described as having no or
      nominal operations and with no or nominal assets or assets consisting
      solely of cash and cash equivalents.

      On October 1, 2004, we formed a corporation under the laws of the State of
      Nevada called "Advanced Medical Institute Inc." and on October 5, 2004, we
      acquired one hundred shares of its common stock for cash. On October 15,
      2004, the subsidiary was merged with and into the Company and as a result
      of the merger, the Company's corporate name was changed to "Advanced
      Medical Institute Inc."

      On January 28, 2005, we entered into a Share Exchange Agreement (the
      "Exchange Agreement") with Advanced Medical Institute Pty Limited (renamed
      to AMI Australia Holdings Pty Limited on November 22, 2005), a privately
      owned Australian company ("AMI Australia"), and AMI Australia's
      shareholders, (the "Shareholders"), pursuant to which the parties agreed
      that we would acquire all of the issued and outstanding shares of stock of
      AMI Australia in exchange for the issuance in the aggregate of 14,600,000,
      or 58.4%, of our then issued and outstanding shares of Common Stock (the
      "Shares") to the Shareholders. On March 21, 2005, we closed the
      transaction and issued our Shares, resulting in us acquiring the business
      of AMI Australia (the "Share Exchange"), which is discussed below. As used
      herein, the "Company" shall also mean AMI Australia after the close of the
      Share Exchange when used for events after March 21, 2005, described
      herein.

      On November 17, 2005 (the "Second Closing Date"), we entered into a Share
      Exchange Agreement (the "Second Exchange Agreement") with PE Patent Holdco
      Pty Limited, a privately owned Australian company ("PE Patent Holdco"),
      and PE Patent Holdco's shareholders, (the "PE Shareholders"), pursuant to
      which we acquired all of the issued and outstanding shares of stock of PE
      Patent Holdco in exchange for the issuance in the aggregate of 5,000,000
      of our Shares to the PE Shareholders. The issuance of our shares of common
      stock to the PE Shareholders was exempt from registration under the
      Securities Act pursuant to Section 4(2) and Regulation S. As used herein,
      the "Company" shall also mean PE Patent Holdco after the Second Closing
      Date when used for events after November 17, 2005, described herein. On
      November 22, 2005 ownership of PE Patent Holdco was transferred by us to
      our wholly owned subsidiary AMI Australia Holdings Pty Limited.

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      On November 22, 2005 Advanced Medical Institute Pty Limited was renamed
      AMI Australia Holdings Pty Limited and a new wholly owned subsidiary of
      this entity was incorporated under the name Advanced Medical Institute Pty
      Limited.

      On April 18, 2006 (the "Third Closing Date"), the Company acquired 7% of
      Intelligent Medical Technologies Pty Limited ("IMT") which was previously
      held by third parties in exchange for 1,260,000 shares of the Company.
      These shares were subsequently transferred by the Company to AMI
      Australia. The issuance of our shares of common stock to the IMT
      Shareholders was exempt from registration under the Securities Act
      pursuant to Section 4(2) and Regulation S. As used herein, the "Company"
      shall also mean IMT after the Third Closing Date when used for events
      after April 18, 2006, described herein.

General Business Plan.

      AMI Australia is a company, incorporated and domiciled in Australia. AMI
      Australia was established in February 2001 when it entered into an
      agreement with Health Services for Men and Australian Momentum Health to
      acquire two chains of medical clinics and sales offices which provided
      services relating to the medical treatment of sexual dysfunction. The
      principal activity of AMI Australia continues to be the sale of services
      relating to the medical treatment of sexual dysfunction in Australia and
      New Zealand. For the year ended June 30, 2006, AMI Australia's revenues
      were approximately $30.5 million.

      AMI Australia operates a centralized call center and twenty-two clinics
      and sales offices throughout Australia and New Zealand. On September 4,
      2006, AMI Australia opened a location in Beijing, China. The results of
      operations from China are not reflected in this report.

      AMI Australia is a service provider company which arranges for male
      patients in Australia and New Zealand with sexual dysfunction to be
      provided with medical services, pharmaceuticals and associated clinical
      support services. Its treatment program options include:

      (a)   injections, lozenges, tablets and nasal spray program options for
            the treatment of erectile dysfunction; and

      (b)   injections, lozenges and nasal spray program options for the
            treatment of premature ejaculation.

      AMI Australia changed its marketing focus during fiscal 2005 to target the
      broader market for its premature ejaculation treatment programs while
      continuing to offer and separately market erectile dysfunction treatment
      programs. AMI Australia's concentration on sales within the market for
      those treatment programs has expanded our revenue base. Prior to this
      time, AMI Australia did not directly advertise or market its premature
      ejaculation treatment programs and its sole focus had been on the erectile
      dysfunction market. AMI Australia's erectile dysfunction treatment
      programs predominantly focus on men age 40 and over whereas AMI
      Australia's premature ejaculation treatment programs are targeted at a
      market that includes men from age 18 and over.

      AMI Australia was previously trialing menopause treatments for women.
      Management believes that those treatments were clinically effective,
      however, they did not consider the financial results from those treatments
      to be sufficient to justify the continued focus on that market and it has
      now ceased to provide those treatments. During the fiscal year ended June
      30, 2006, less than 1% of AMI Australia's total revenue was generated by
      treatments for women.

                                       4
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      During March 2006, AMI Australia commenced trialing prostate treatments
      for men with prostate problems. Those treatments generated approximately
      3% of AMI Australia's revenue during the quarter ended June 30, 2006
      ($293,591), however it is too early to assess whether these treatments
      options will contribute significantly to AMI Australia's revenue or
      profitability in the longer term.

      Each of AMI Australia's treatment programs are prescribed by licensed
      Australian and New Zealand doctors and prepared and delivered by an
      Australian or a New Zealand compounding pharmacy in full compliance with
      the respective Australian and New Zealand regulatory requirements. AMI
      Australia's products and services are only available by prescription and
      are sold on an "off-label" basis. AMI Australia's treatment programs are
      generally available in the same manner through both its medical clinics
      and sales offices or through its over-the-phone sales and marketing
      program.

            Since August 1, 2003, AMI Australia has used in its business certain
      intellectual property owned by PE Patent Holdco on a royalty free oral
      license. PE Patent Holdco became a wholly owned subsidiary through a Share
      Exchange Agreement on November 17, 2005 and subsequently became a wholly
      owned subsidiary of AMI Australia on November 22, 2005. These transactions
      are more fully described in the section entitled "Introduction" above.
      This intellectual property consists solely of the rights to use the
      relevant medical formulations in Australia, an Australian innovation
      patent for AMI Australia's premature ejaculation treatment programs
      (Australian Innovation Patent No 2005100183, which is due to expire on
      July 9, 2012) and an Australian standard patent application (Australian
      standard patent application No. 2004222783).

            The Australian innovation patent was issued to Dr. Jack Vaisman, the
      Chief Executive Officer, President and Chairman of the Board of Directors
      of the Company and the Founder, President and Chief Executive Officer of
      AMI Australia, who on July 22, 2005 transferred the patent to PE Patent
      Holdco. The development of the intellectual property underlying the
      patents was undertaken and funded by Dr. Vaisman. The innovation patent,
      titled "Treatment of Premature Ejaculation" relates to various methods of
      treatment delivery via nasal (mucosal) inhalation and topical application
      of certain formulations which are used in AMI Australia's treatment
      programs for premature ejaculation. The patents and associated
      formulations are integral to AMI Australia's premature ejaculation
      treatment programs.

            AMI Australia's nasal spray, injection, lozenge and tablet erectile
      dysfunction treatment programs are not patent protected. This technology
      was developed by AMI Australia and its founder, Dr Jack Vaisman, and in
      connection with predecessor businesses during the last 13 years.

            AMI Australia obtains customers through direct advertising and
      marketing and through its existing customer database which exceeds 300,000
      people.

            Each of the individual medications used in our compound formulations
      are fully approved by the Australian Therapeutic Goods Administration
      ("TGA") and the New Zealand Medicines and Medical Devices Safety Authority
      ("NZ DSA"). Our compound formulations have not been subject to a clinical
      trial program and have not been approved for use by the TGA or NZ DSA for
      over-the-counter sale, but may lawfully be prescribed by accredited
      medical practitioners on an individual prescription basis in Australia and
      New Zealand.

                                       5
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            As part of its treatment programs, AMI Australia arranges for a
      fully licensed Australian or New Zealand pharmacy to fill its patients'
      individual prescriptions and supply medications to those patients.

            AMI Australia's wholly-owned subsidiary, Intelligent Medical
      Technologies Pty Limited ("IMT") was granted the exclusive worldwide right
      and license from Sheiman Ultrasonic Research Foundation Pty Limited
      ("SURF") to exploit and sub-license certain inventions, patents and other
      intellectual property in relation to certain ultrasonic nebulizer
      technology (including Australian Patent No's 693064 and 753817, European
      Patent No's 0 705 145 and 1 071 479 and US Patent No's 5,908,158 and
      6,379,616) within the field of the treatment of sexual dysfunction in men
      and women (including impotence, premature ejaculation and the treatment of
      female sexual arousal disorders). Some of these patents expire in October
      2013, with the remaining patents expiring around 2023.

            IMT's license was a broad based license which included the right to
      manufacture, market, sell and distribute products based on the technology
      and patents within the field of use. IMT also had the option to extend its
      field of use to the treatment of prostate diseases. IMT exercised its
      option to extend its field of use to include prostate diseases on July 15,
      2006 and IMT "terminated" its license with SURF. The termination was
      because of SURF's failure to deliver to the Company information concerning
      updates and advances on the technologies. The termination does not affect
      the Company's rights to use the technology - the only effect is to
      terminate the royalty payment obligations to SURF under the license. As a
      result of terminating the license agreement, IMT retained the right to use
      the technology in its treatment programs to treat sexual dysfunction
      without paying royalties or other fees to SURF.

            IMT applied for four patents in various countries throughout the
      world relating to its ultrasonic nebulizer device in July 2005 and applied
      for three additional patents relating to its device in February 2006. On
      April 18, 2006, AMI Australia acquired the remaining 7% of the outstanding
      shares of IMT, making it a wholly owned subsidiary of AMI Australia.

            IMT acquired its right to use the SURF technology in order to
      develop an ultrasonic nebulizer to deliver medications to patients' lungs
      for the treatment of sexual dysfunction as it believes that this delivery
      system will be more efficient and clinically effective than any other
      alternative treatment program option and will reduce dosage levels and the
      likelihood of side effects.

            IMT has completed development of 15 working prototypes of its
      nebulizer device and is in the process of manufacturing a further 5
      prototypes in connection with its application to list its device with the
      TGA. The ten prototypes which were completed by IMT in the first quarter
      of calendar 2006 are suitable for commercialization and will form the
      basis of its application to list its device with the TGA.

            IMT has received advice from Brandwood Biomed Pty Limited, an
      Australian regulatory expert on TGA requirements that IMT does not need to
      conduct clinical trials to list its device with the TGA and IMT plans to
      complete and file its listing application during calendar 2006. This
      timing schedule is later than originally forecast due to various factors
      including minor refinements to design and unexpected delays in completing
      certain functional tests relating to the device necessary for lodgment of
      the listing application.

                                       6
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      IMT intends to commence a voluntary pharmacokinetic clinical trial in
Australia of a liquid form of a well known medication for the treatment of
erectile dysfunction which is capable of being delivered through the nebulizer
device in order to evidence the effectiveness of the nebulizer in delivering
medications during this calendar year. This study is designed to test the
efficacy of using its patent protected ultrasonic nebulizer device to deliver
drugs used in the treatment of sexual dysfunction. In April, 2006 IMT received
approval from the Queensland Institute of Medical Research Human Research Ethics
Committee to conduct this clinical trial and plans to conduct the trial at the
direction of and under analysis by Q-Pharm, the commercial arm of a leading
Australian university. IMT estimates the cost of this clinical trial to be
approximately $180,000.

      IMT has been spending a large portion of its capital on research and
development activities with financial support from AMI Australia (approximately
$284,000 during fiscal 2005, and approximately $205,000 during fiscal 2006).
IMT has compiled a team of experts to assist it with these research and
development activities. AMI Australia has entered into a distribution agreement
with IMT whereby AMI Australia has the exclusive worldwide distribution rights
of the technology for sexual dysfunction treatments and is entitled to use any
innovations, including those that are in a non-sexual dysfunction field,
developed by it as a result of its research and development in connection with
its nebulizer device. As at June 30, 2006, the IMT research and development into
the efficacy of the nebulizer is still in a development stage and there has been
no income generated by AMI Australia as a result of its agreement with IMT.

      On November 17, 2005, AMI Australia acquired 100% of the outstanding
shares of PE Patent Holdco Pty Limited ("PE Patent Holdco") in exchange for 5
million shares of the Company valued at $1.10 per share. PE Patent Holdco's
assets comprise an Australian innovation patent (Australian Innovation Patent No
2005100183, which is due to expire on July 9, 2012) and an Australian standard
patent application (Australian standard patent application No. 2004222783).

      The patents relate to various methods of treatment delivery via nasal
(mucosal) inhalation and topical application of certain formulations which are
used in AMI Australia's treatment programs for premature ejaculation. The
patents and associated formulations are integral to those treatment programs.

      AMI Australia's nasal spray, injection, lozenge and tablet impotence and
erectile dysfunction treatment programs are not patent protected.

      In acquiring PE Patent Holdco, AMI Australia acquired only the right to
use the Patents and the associated pharmaceutical formulations, treatment
methodologies and dosing manuals in Australia and has no rights to use the
patents or any of the underlying intellectual property in any other country. The
rights to use these patents and the associated pharmaceutical formulations
outside Australia are owned by Worldwide PE Patent Holdco Pty Limited
("Worldwide PE Patent Holdco").

      On September 8, 2006, the Company entered into a Share Exchange Agreement
with Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
Australian company ("Worldwide PE"), and Worldwide PE's shareholders pursuant to
which the Company acquired all of the issued and outstanding shares of stock of
Worldwide PE in exchange for the payment of A$3 million (approximately US$2.5
million) and the issuance in the aggregate of 16,125,000 shares of the Company's
common stock valued at $1.00 per share. The Company funded the cash component of
the purchase price by AMI Australia entering into two secured three year term
loans in the aggregate principal amount of A$3 million with ANZ Nominees Limited
in its capacity as custodian of the Professional Pensions PST. The loan is
secured by a security interest in all of AMI Australia's assets and undertakings
(including its existing equity interests in PE Patent Holdco Pty Limited,
Intelligent Medical Technologies Pty Limited, Advanced Medical Institute (NZ)
Limited and Whygo Video Conferencing Pty Limited). The loans accrues interest at
an annual coupon of 450 basis points above the then Australian Reserve Bank's
current cash rate (currently being an aggregate current interest rate of 10.5%).

                                       7
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      The Company has been actively exploring international expansion into a
range of jurisdictions and recently established subsidiaries in China and Japan.

      The Chinese subsidiary is an indirect wholly owned subsidiary of the
Company and the Chinese entity has formed an alliance with a Beijing hospital
for the purpose of establishing operations and conducting clinical trials for
regulatory purposes. The Company's Chinese subsidiary has obtained regulatory
approval to its proposed advertisements and commenced operations on September 4,
2006. The Company's 75% owned Japanese subsidiary is in the process of
finalizing arrangements in order to open for business.

Competition

We compete with rival treatments such as Viagra, Cialis and Levitra in the
erectile dysfunction field. AMI Australia does not currently have any known
competitors in the Australian or New Zealand premature ejaculation markets.

      Companies of all sizes are engaged in the development and
commercialization of technologies in the erectile dysfunction and premature
ejaculation market segments. Currently, no known alternate premature ejaculation
technology similar to ours has been commercialized. Competition is intense in
the erectile dysfunction segment of our business and includes many large and
small competitors who have greater revenue, more customers and higher levels of
brand recognition than AMI Australia. The efficacy, safety, patients' and
customers' ease of use and cost effectiveness of our products are important
factors for success in our principal businesses. Many of our competitors have
substantially greater financial and other resources, larger research and
development staffs and more experience in the regulatory approval process.
Moreover, potential competitors have or may have intellectual property or other
rights that conflict with patents, license agreements and other intellectual
property rights covering our technologies.

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Significant Subsidiaries of the Company and AMI Australia
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The Company's subsidiaries are AMI Australia, AMI International Pty Limited
("AMI International") and AMI Management Services Pty Limited (formerly known as
Women's Health Foundation Pty Limited).

AMI Australia's subsidiaries are Advanced Medical Institute Pty Limited, PE
Patent Holdco, Worldwide PE, Advanced Medical Institute (NZ) Limited, IMT and
Whygo Video Conferencing Pty Ltd ("Whygo").

AMI International's subsidiaries are AMI China (100% owned) and AMI Japan (75%
owned).

Details of PE Patent Holdco are set forth in the General Business Description
above.

Details of Worldwide PE Patent are set forth in the General Business Description
above and in Item 6 below.

Details of IMT are set forth in the General Business Description above.

AMI International Pty Limited was established to hold the Group's shareholdings
in the Japanese and Chinese companies established to conduct operations in those
jurisdictions.

AMI Management Services Pty Limited provides treasury and management services to
AMI Australia and its subsidiaries.

                                       9
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Advanced Medical Institute (NZ) Limited ("AMI NZ") conducts the group's business
in New Zealand. AMI NZ contributes less than 1% of AMI Australia's consolidated
revenue and AMI Australia holds all of the shares in AMI NZ. AMI NZ was formed
on October 13, 2005.

AMI Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
conferencing services, which facilitates its client by providing video
conferencing rooms across Australia and around the world. Whygo uses some of AMI
Australia clinic facilities and pays room hire fees for the usage. In those
locations where AMI Australia does not have locations, Whygo uses other
facilities. James Matthews, a director of Whygo holds the remaining 50% of the
outstanding shares of Whygo.

Whygo owns proprietary scheduling software, which allows its corporate partners
to login and book rooms anywhere around the world. The source of Whygo's income
is derived from video conferencing rooms to its corporate partners through AMI
Australia and its other channeling partners.

AMI China conducts the group's business in China. AMI China commenced
advertising of its services on September 4, 2006 and is in the early stages of
its operations.

AMI Japan conducts the group's business in Japan. AMI Japan is in an
establishment phase and has yet to advertise its services to the public.

Employees

      As of June 30, 2006, AMI Australia had a total staff of approximately 255
people, of which 175 are full-time and 80 are part-time, working in the areas of
sales and marketing, customer support, product development and back office
functions. Of the 255 people, AMI Australia's staff includes 26 independent
consultants and 48 licensed medical personnel. None of the Company's employees
or staff are members of a union or labor organization.

      None of AMI Australia's subsidiaries have any employees except Whygo which
has three full-time employees and one part-time employee. AMI China has
approximately 10 people staffing its Beijing, China office.

      AMI Australia's core staff include:

      DR. JACOV (JACK) VAISMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR
- Dr. Vaisman has served as the Company's Chief Executive Officer, President and
as a Director since March 21, 2005. Dr. Vaisman is a pioneer in the sexual
dysfunction business in Australia. Since 2001, he has served as the managing
director and chief executive officer of AMI Australia. He is responsible for the
overall management and strategic direction of AMI Australia's impotency
operations. Dr. Vaisman is also currently a consultant to and shareholder in
Yayasan On Clinic, which operates a similar business in Indonesia. From 1993
through 2001, Dr. Vaisman was the founder and director of On Clinic
International in Australia, the predecessor company to AMI Australia. The holder
of a Bachelor of Medicine, a Master of Gynecology and a PhD in Medical Science,
Dr. Vaisman has more than 35 years of experience and expertise in the field of
sexual health care provision and was recently granted an innovation patent in
the field of premature ejaculation treatment by the Australian patent office.

         DILIP SHRESTHA, CHIEF FINANCIAL OFFICER - Mr. Shrestha was appointed as
the Company's Chief Financial Officer on April 7, 2005. Mr. Shrestha has also
served as the chief financial officer of AMI Australia since July 1, 2005. From
2001 to July 1, 2005, Mr. Shrestha was the Financial Controller of AMI
Australia. Prior to that he was an Assistant Accountant, a position held from
1999 until 2001, with Australian Momentum Health Pty Ltd, one of two medical
establishments leading in providing impotency treatment in Australia and a
predecessor company to AMI Australia. Mr. Shrestha holds a Bachelor of Business
Accounting, Master of E-Commerce and a Graduate Diploma of Information System
and E-Commerce.

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      FORHAD (TONY) KHAN, EXECUTIVE VICE PRESIDENT, SECRETARY AND DIRECTOR - Mr.
Khan has served as the Company's Executive Vice President since July 30, 2005,
he has been the Company's Secretary and a Director since March 21, 2005. Mr.
Khan also served as the Chief Operating Officer of AMI Australia since July 1,
2005. From 2001 to July 1, 2005, Mr. Khan was the General Manager of AMI
Australia. Prior to joining AMI Australia, Mr. Khan was the Director and sole
operator of Australian Momentum Health Pty Ltd("AMH"). Mr. Khan was Sales
Manager and then Operations Manager for On Clinic International prior to
establishing AMH. Mr. Khan holds a Masters degree in Commerce and Accounting and
has been involved in the industry for over ten years.

Item 2.        Description of Property.

      As of June 30, 2006, AMI Australia had a leasehold interest in 22
      Australian properties, being the 22 clinics used to operate the business.
      There are no encumbrances over AMI Australia's interest in these
      properties. All of these properties are rented and none of these
      properties are owned. AMI Australia's head office is located at Suite 1,
      Level 1, 204-218 Botany Road, Alexandria New South Wales, Australia. AMI
      Australia's head office houses AMI Australia's corporate head office, its
      centralized call centre and some of AMI Australia's licensed doctors,
      nursing staff and sales and administration staff.

      AMI Australia's clinics and sales offices are located at:

                  New South Wales
                  AMI Direct, Alexandria, Sydney, New South Wales
                  Bondi Junction, Sydney, New South Wales
                  Hurstville, Sydney, New South Wales
                  Parramatta, Sydney, New South Wales
                  Sydney City, Sydney, New South Wales
                  Albury, Regional New South Wales
                  Dubbo, Regional New South Wales
                  Newcastle, Regional New South Wales
                  Tamworth, Regional New South Wales
                  Wollongong, Regional New South Wales

                  Queensland
                  Chermside, North Brisbane, Queensland
                  Upper Mt Gravatt, South Brisbane, Queensland
                  Bundall, Gold Coast, Queensland
                  Cairns, Regional Queensland
                  Townsville, Regional Queensland

                  South Australia
                  Adelaide, South Australia

                  Victoria
                  St Kilda, Melbourne, Victoria
                  Box Hill, Melbourne, Victoria
                  Dandenong, Melbourne, Victoria

                  Western Australia
                  Perth, Western Australia (2 clinics)

                  New Zealand
                  Auckland, North Island, New Zealand

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      In addition, the Company presently occupies office space supplied by our
      registered agent representative in the State of Nevada at 6767 Tropicana
      Avenue, Suite 207, Las Vegas, Nevada 89103. This space is provided to us
      on a rent free basis.

      IMT rents space in Roseberry (Sydney, New South Wales) in connection with
      its research and development activities.

      AMI China leases premises in Beijing, China, which premises house a clinic
      and call center. AMI Japan has signed a long term lease of a clinic in
      Tokyo and is in the process of fitting out those premises.

Item 3.        Legal Proceedings.

      As of June 30, 2006, there was no litigation pending or threatened by or
      against the Company or any of its direct or indirect subsidiaries other
      than AMI Australia. AMI Australia currently is involved in the following
      litigation and administrative matters.

      On July 19, 2004, the Australian Competition and Consumer Commission
      (collectively, the "ACCC") filed a suit against AMI Australia in the
      Federal Court of Australia Sydney Registry. The ACCC claimed that a series
      of advertisements made by AMI Australia involving a celebrity that
      confessed impotence were misleading and deceptive. On August 15, 2006 the
      court rules in favor of the ACCC that the advertisements were misleading
      and deceptive but declined to order corrective advertising or any
      pecuniary penalty other than an order that AMI Australia pay the ACCC's
      costs on a party-party basis. The Company has estimated a cost of
      settlement of $65,709. This matter has therefore concluded.

      On August 24, 2004, AMI Australia initiated a suit against Mr. Mark Ryan,
      a former consultant, two companies which have been competing with our
      business, Dr. Ian Davies, and a third company controlled by Dr. Davies
      (collectively, the "Defendants") in the Federal Court of Australia. AMI
      Australia alleged that certain of the parties breached their
      confidentiality agreement with AMI Australia and misused its intellectual
      property. AMI Australia obtained interim orders in late 2004. On August 4,
      2006 and August 29, 2006 respectively, AMI Australia entered into Deeds of
      Settlement with Dr. Ian Davies and the company controlled by him and Mr.
      Mark Ryan and other parties associated with him pursuant to which each of
      those parties agreed to permanent injunctions restraining them from using
      AMI Australia's intellectual property, to pay an agreed sum to AMI
      Australia, to transfer their sexual dysfunction business to AMI Australia
      and to not compete with AMI Australia for an agreed period, all on a
      without admissions basis.

      On September 27, 2004, Rocco Licastro, a former patient, filed a suit
      against AMI Australia in the District Court of NSW, Sydney Registry. Mr.
      Licastro's claims result from an injection therapy that Mr. Licastro
      claims caused physical injuries. Mr. Licastro is seeking damages including
      medical expenses, but no amount has been specified to date. These
      proceedings are in an early stage. AMI Australia has denied the
      allegations and is vigorously defending this suit.

                                       12
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Item 4.        Submission of Matters to Vote of Security Holders.

      At the Annual Meeting of Shareholders on June 26, 2006, Jack Vaisman, Tony
      Khan, Anatoly Fanshil, Mark Shabshay and Spiro Baramalis were elected to
      serve as directors for a one year term. Also at the Annual Meeting of
      Shareholders, the ratification of the selection of Kabani & Company, Inc.,
      as independent public accountants for the corporation for the fiscal year
      ending June 30, 2007 was approved.

                                       13
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                                     PART II

Item 5.        Market for Common Equity and Related Stockholder Matters and
               Small Business Issuer Purchases of Equity Securities.

      Our Common Stock is listed on the Pink Sheets(R), which is a centralized
      quotation service that collects and publishes market maker quotes for
      over-the-counter securities that is published by the Pink Sheets LLC,
      under the symbol "AVMD.PK". The following sets forth, for the periods
      indicated, the high and low bid price for our Common Stock as reported in
      the Pink Sheets(R). The Pink Sheets is a limited, voluntary reporting
      service and may not include all transactions regarding our Common Stock.
      The quotations set forth below reflect inter-dealer prices, without retail
      mark-up, mark-down or commissions and may not represent actual
      transactions.

Quarter Ending:                 High               Low
2004                            ----               ---

December 31, 2004                  $1.25              $1.25

2005
March 30, 2005                     $1.35              $1.00
June 30, 2005                      $1.35              $1.25
September 30, 2005                 $2.10              $1.35
December 31, 2005                  $2.50              $2.50

2006
March 31, 2006                     $2.50              $2.25
June 30, 2006                      $2.60              $2.00
September 30, 2006
  (through September 19, 2006)     $2.50              $0.80

      As of September 19, 2006 there were 338 shareholders of record.

      We have not paid any stock dividends or cash dividends to date and have no
      plans to pay any stock or cash dividends in the immediate future.

Recent Sales of Unregistered Securities

      On June 29, 2005, the Company entered into a subscription agreement with
      certain non-U.S. persons pursuant to which the Company agreed to issue an
      aggregate of 6,122,450 shares of the Company's common stock for aggregate
      gross proceeds of AU$1 million (US$762,000). The shares have not been and
      will not be registered under the Securities Act, and, if in the future the
      subscriber decides to offer, resell, pledge or otherwise transfer the
      shares, such shares may be offered, resold, pledged or otherwise
      transferred only (A) pursuant to an effective registration statement filed
      under the Act, (B) to non-U.S. persons in an offshore transaction in
      accordance with Rule 903 or Rule 904 of Regulation S of the Act, (C)
      pursuant to the resale limitations set forth in Rule 905 of Regulation S,
      or (D) pursuant to an exemption from registration under the Act provided
      by Rule 144. The net proceeds from the transaction were used for working
      capital and general corporate purposes.

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      On November 16, 2005, the Company entered into a Share Exchange Agreement
      with PE Patent Holdco and PE Patent Holdco's shareholders (the "PE
      Shareholders"), pursuant to which the Company acquired all of the issued
      and outstanding shares of stock of PE Patent Holdco in exchange for the
      issuance in the aggregate of 5,000,000 shares of the Company's common
      stock to the PE Patent Holdco Shareholders. The Company then transferred
      the shares of PE Patent Holdco to its wholly owned subsidiary, AMI
      Australia. As a result, PE Patent Holdco became a wholly-owned subsidiary
      of the Company.

      On April 18, 2006, the Company entered into a Share Exchange Agreement
      with certain shareholders of Intelligent Medical Technologies Pty Limited
      ("IMT"), pursuant to which the Company acquired seven (7) shares of stock
      of IMT, representing 7% of the issued and outstanding shares of common
      stock, in exchange for the issuance in the aggregate of 1,260,000 shares
      of the Company's common stock to the shareholders of IMT. As a result, IMT
      became a wholly-owned subsidiary of the Company.

      On September 8, 2006, the Company entered into a Share Exchange Agreement
      with Worldwide PE and Worldwide PE's shareholders, pursuant to which the
      Company acquired all of the issued and outstanding shares of stock of
      Worldwide PE in exchange for the payment of A$3 million (approximately
      US$2.5 million) and the issuance in the aggregate of 16,125,000 shares of
      the Company's common stock pursuant to Regulation S of the Securities Act
      of 1933, as amended. The Company then transferred the shares of Worldwide
      PE to its wholly owned subsidiary, AMI Australia. As a result, Worldwide
      PE became an indirect wholly-owned subsidiary of the Registrant.

Item 6.        Management's Discussion and Analysis or Plan of Operation.

Plan of Operation.

      From March 31, 1997 until January 28, 2005, we had been in the
      developmental stage and have had no operations and we could be defined as
      a "shell" company, an entity which is generally described as having no or
      nominal operations and with no or nominal assets or assets consisting
      solely of cash and cash equivalents. We were seeking to merge with an
      operating company.

      On October 1, 2004, a holding corporation was formed under the laws of the
      State of Nevada called "Advanced Medical Institute Inc." and on October 5,
      2004, we acquired one hundred shares of its common stock for cash. On
      October 15, 2004, the new corporation was merged with and into us and as a
      result of the merger, the surviving corporation's corporate name was
      changed to "Advanced Medical Institute Inc." We were the surviving
      corporation in the merger and, except for the name change, there was no
      change at that time in our directors, officers, capital structure or
      business.

      On January 28, 2005, we entered into a Share Exchange Agreement with AMI
      Australia and all of the shareholders of AMI Australia, pursuant to which
      the parties agreed that we would acquire 100% of the issued and
      outstanding shares of stock of AMI Australia in exchange for the issuance
      of 14,600,000, or 58.4%, of our then outstanding restricted shares of
      Common Stock to the shareholders of AMI Australia. On March 21, 2005, we
      closed the transaction and issued our shares of Common Stock, resulting in
      AMI Australia becoming our wholly-owned subsidiary.

      On November 17, 2005, we entered into a Share Exchange Agreement with PE
      Patent Holdco Pty Limited, a privately owned Australian company ("PE
      Patent Holdco"), and PE Patent Holdco's shareholders, (the "PE
      Shareholders"), pursuant to which we acquired all of the issued and
      outstanding shares of stock of PE Patent Holdco in exchange for the
      issuance in the aggregate of 5,000,000 of our Shares to the PE
      Shareholders. On November 17, 2005 we closed the transaction and issued
      our shares of Common Stock, resulting in PE Patent Holdco becoming our
      wholly-owned subsidiary. On November 22, 2005 ownership of PE Patent
      Holdco was transferred by us to our wholly owned subsidiary AMI Australia.

                                       15
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      On April 18, 2006, we acquired the remaining 7% of Intelligent Medical
      Technologies Pty Limited ("IMT") which was previously held by third
      parties in exchange for 1,260,000 shares of the Company. These shares were
      subsequently transferred by the Company to AMI Australia. On April 18,
      2006 we closed the transaction and issued our shares of Common Stock,
      resulting in IMT becoming our wholly-owned subsidiary.

      AMI Australia was established in February 2001 when it entered into an
      agreement with On Clinic, Health Services For Men Pty Limited and
      Australian Momentum Health Pty Limited to acquire two chains of medical
      clinics which provide services relating to the treatment of sexual
      dysfunction. AMI Australia operates 22 clinics in Australia and New
      Zealand. For the year ended June 30, 2006, AMI Australia's revenues were
      approximately $30.5 million. AMI Australia is the core revenue generator
      for the Company.

      Our core intellectual property includes: the patent rights held by IMT;
      customer database of more than 300,000 individuals; our Clinic Management
      System (software and hardware) used for customer profile, financial
      history; logistics management; customer relationship management, clinic
      booking system and micro-management and internal control; the Australian
      innovation patent and standard patent application owned by PE Patent
      Holdco; the international patent applications owned by Worldwide PE
      (details of which are set out under Subsequent Event); dosing protocols,
      treatment manuals and methodologies; scripts: call center booking script,
      outbound call booking script, outbound sales script, direct sales (over
      the phone) script, face to face sales script and customer service
      script/proactive call script; marketing and sales collateral including
      copyright in advertisements and general know how, trade secrets, concepts
      and technical information.

Critical Accounting Policies

The accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America. The following are
descriptions of the more significant policies:

Basis of Accounting

The accompanying financial statements are prepared on an accrual basis.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, AMI Australia Holdings Pty Limited, AMI
Management Services Pty Limited ("AMI MS") and AMI International Pty Limited
("AMI International") and their direct and indirect wholly-owned subsidiaries:
Advanced Medical Institute Pty Ltd, PE Patent Holdco Pty Limited ("PE"),
Advanced Medical Institute (NZ) Limited ("AMI NZ") and Intelligent Medical
Technologies Pty Ltd ("IMT") and its 50% owned subsidiary, Whygo Video
Conferencing Pty Ltd ("Whygo") (which owns all of the shares in Whygo Limited, a
UK entity). All significant intercompany accounts and transactions have been
eliminated upon consolidation.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly
liquid investments with maturities of three months or less to be cash
equivalents.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.

Revenue Recognition

Sales are reported as deferred income when the sales contracts are executed and
the term of the contract exceeds three months. Up to three months of medication
is delivered to the patient upon the signing of a contract. Generally the term
of the sales contracts are up to one year, but they can be for longer periods of
time. The deferred income arising from the contracts that exceed three months is
then amortized, on a straight line basis, into income during the approximated
composite remaining medication delivery period. This approximated composite is
an estimate that may vary from period to period.

                                       16
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Income Tax

Income taxes have been provided based upon the tax laws and rates in the
countries in which operations are conducted and income is earned. The income tax
rates imposed by the taxing authorities vary. Taxable income may vary from
pre-tax income for financial accounting purposes. There is no expected
relationship between the provision for income taxes and income before income
taxes because the countries have different taxation rules, which vary not only
to nominal rates but also in terms of available deductions, credits and other
benefits. Deferred tax assets and liabilities are recognized for the anticipated
future tax effects of temporary differences between the financial statement
basis and the tax basis of the Company's assets and liabilities using the
applicable tax rates in effect at year end as prescribed by SFAS 109 "Accounting
for Income Taxes".

Inventories

Inventories are valued at the lower of cost (determined on a first-in first-out
basis) or market. Management compares the cost of inventories with the market
value and allowance is made for writing down our inventories to market value, if
lower. As of June 30, 2006 and 2005 inventory consisted only of finished goods:

Property and Equipment

Equipment placed in service is depreciated over the estimated useful lives of
the assets using the straight line depreciation method.

Property and equipment are carried at the lesser of cost and written down value.
Expenditures for maintenance and repairs are expenses as incurred and
expenditures for major renewals and betterments are capitalized. Assets retired
or sold are removed from the property accounts, with gains or losses on disposal
included in income.

Foreign Currency

As of June 30, 2006, the accounts of AMI Australia and its subsidiaries were
maintained and its financial statements were expressed in Australian Dollars
(AUD). Such financial statements were translated into U.S. Dollars (USD) in
accordance with Statement of Financial Accounts Standards ("SFAS") No. 52,
"Foreign Currency Translation," with the AUD as the functional currency.
According to the Statement, all assets and liabilities were translated at the
current exchange rate, stockholders' equity (deficit) is translated at the
historical rates and income statement items are translated at the average
exchange rate for the period. The resulting translation adjustments are reported
under other comprehensive income in accordance with SFAS No. 130, "Reporting
Comprehensive Income" as a component of shareholders' equity (deficit).

Research and Development Costs

Research and development costs are charged against income from ordinary
activities before income tax as incurred.

Intangible assets

The Company applies the criteria specified in SFAS No. 141, "Business
Combinations" to determine whether an intangible asset should be recognized
separately from goodwill. Intangible assets acquired through business
acquisitions are recognized as assets separate from goodwill if they satisfy
either the "contractual-legal" or "separability" criterion. Per SFAS 142,
intangible assets with definite lives are amortized over their estimated useful
life and reviewed for impairment in accordance with SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-lived Assets." Intangible assets, such as
purchased technology, trademark, customer list, user base and non-compete
agreements, arising from the acquisitions of subsidiaries and variable interest
entities are recognized and measured at fair value upon acquisition. Intangible
assets are amortized over their estimated useful lives from one to ten years.
The Company reviews the amortization methods and estimated useful lives of
intangible assets at least annually or when events or changes in circumstances
indicate that it might be impaired. The recoverability of an intangible asset to
be held and used is evaluated by comparing the carrying amount of the intangible
asset to its future net undiscounted cash flows. If the intangible asset is
considered to be impaired, the impairment loss is measured as the amount by
which the carrying amount of the intangible asset exceeds the fair value of the
intangible asset, calculated using a discounted future cash flow analysis. The
Company uses estimates and judgments in its impairment tests, and if different
estimates or judgments had been utilized, the timing or the amount of the
impairment charges could be different.

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Goodwill, trademarks, patents and other intangible assets determined to have
indefinite useful lives are not amortized. We test such trademarks and other
intangible assets with indefinite useful lives for impairment annually, or more
frequently if events or circumstances indicate that an asset might be impaired.
Goodwill, trademarks, patents and other intangible assets determined to have
definite lives are amortized over their estimated useful lives or the life of
the trademark, patent and other intangible asset, whichever is less.

Long-Lived Assets

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations for a Disposal of a Segment of a
Business." The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with SFAS 144. SFAS 144 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal. Based on its
review, the Company believes that, as of June 30, 2006 there were no significant
impairments of its long-lived assets.

Segment Reporting

Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure
About Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. SFAS
131 has no effect on the Company's consolidated financial statements as the
Company consists of one reportable business segment.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.

RECENT PRONOUNCEMENTS

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
or issued after the beginning of the Company's first fiscal year that begins
after September 15, 2006.

In March 2006, FASB issued SFAS 156 "Accounting for Servicing of Financial
Assets" this Statement amends FASB Statement No. 140, ACCOUNTING FOR TRANSFERS
AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities.

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This Statement:

1. Requires an entity to recognize a servicing asset or servicing liability each
time it undertakes an obligation to service a financial asset by entering into a
servicing contract.

2. Requires all separately recognized servicing assets and servicing liabilities
to be initially measured at fair value, if practicable.

3. Permits an entity to choose "Amortization method" or "Fair value measurement
method" for each class of separately recognized servicing assets and servicing
liabilities.

4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with recognized
servicing rights, without calling into question the treatment of other
available-for-sale securities under Statement 115, provided that the
available-for-sale securities are identified in some manner as offsetting the
entity's exposure to changes in fair value of servicing assets or servicing
liabilities that a servicer elects to subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value in the statement of financial position and
additional disclosures for all separately recognized servicing assets and
servicing liabilities.

This Statement is effective as of the beginning of the Company's first fiscal
year that begins after September 15, 2006. Management believes that this
statement will not have a significant impact on the financial statements.

In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Management is currently
evaluating the effect of this pronouncement on financial statements.

Subsequent Event

      On September 8, 2006, the Company entered into a Share Exchange Agreement
      with Worldwide PE and Worldwide PE's shareholders, pursuant to which the
      Company acquired all of the issued and outstanding shares of stock of
      Worldwide PE in exchange for the payment of A$3 million (approximately
      US$2.5 million) and the issuance in the aggregate of 16,125,000 shares of
      the Company's common stock valued pursuant to Regulation S of the
      Securities Act of 1933, as amended. The Company then transferred the
      shares of Worldwide PE to its wholly owned subsidiary, AMI Australia. As a
      result, Worldwide PE became an indirect wholly-owned subsidiary of the
      Registrant.

      The cash component of the purchase price has been funded by two secured
      three year term loans in the aggregate principal amount of A$3 million to
      AMI Australia by ANZ Nominees Limited in its capacity as custodian of the
      Professional Pensions PST. The loans are secured by a security interest in
      all of AMI Australia's assets and undertakings (including its existing
      equity interests in PE Patent Holdco Pty Limited, Intelligent Medical
      Technologies Pty Limited, Advanced Medical Institute (NZ) Limited and
      Whygo Video Conferencing Pty Limited) and accrues interest at an annual
      coupon of 450 basis points above the then Australian Reserve Bank's
      current cash rate (currently being an aggregate interest rate of 10.5%).

      As a result of acquiring Worldwide PE, along with its previous acquisition
      of rights to use the same intellectual property in Australia when it
      acquired PE Patent Holdco in November 2005, the Company and its
      subsidiaries, hold the right to use, worldwide, the patent applications
      and the associated pharmaceutical formulations, treatment methodologies
      and dosing manuals that have been used in the Australian business.

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      Worldwide PE owns certain intellectual property consisting solely of a
      worldwide PCT patent application (Patent No PCT/AU2004/000931 (WO
      2005/004855 A1)) filed with IP Australia, the subsequent individual
      country applications filed in the United States, the European Union,
      Japan, the People's Republic of China, India and New Zealand made based on
      that PCT patent application and the worldwide (excluding Australia)
      formulation rights for its premature ejaculation programs. Assuming grant
      of a patent is obtained, the patents will expire on July 9, 2024.

      The patent applications were made by Dr. Jack Vaisman, the Chief Executive
      Officer, President and Chairman of the Board of Directors of the Company
      and the Founder, President and Chief Executive Officer of AMI Australia,
      on July 11, 2003. Dr. Vaisman assigned the patent applications to
      Worldwide PE in exchange for 1,000,000 shares of Worldwide PE on November
      17, 2005 at which time Dr. Vaisman granted Avina Investments Limited an
      option to acquire his shareholding in Worldwide PE for A$1.5 million,
      which option was exercised on July 4, 2006.

      The patent applications relate to various methods of treatment delivery
      via nasal (mucosal) inhalation and topical application of certain
      pharmaceutical formulations which are used in AMI Australia's treatment
      programs for premature ejaculation. These formulations have previously
      been used to treat premature ejaculation and other medical conditions.
      Acquisition of the patent applications will give the Registrant and its
      subsidiaries the ability to exploit the patent applications and associated
      technology in connection with the provision of premature ejaculation
      treatment programs in the Territory during the term of the patents and
      will obviate any future obligation for the Registrant or any of its
      subsidiaries to pay royalties to a third party for use of the patents.

      Until May 5, 2006, Dr. Vaisman had served as the sole director of
      Worldwide PE when he resigned and Igor Chalik was appointed as director in
      his place. Nether Dr. Vaisman, nor any other director or officer of the
      Company, AMI Australia or any of the Company's subsidiaries (other than in
      their capacities with the Company) has or will benefit directly or
      indirectly from the Company's purchase of Worldwide PE Patent except as
      stated above. Worldwide PE's assets include the patent applications and
      the right to use and/or license/sub-license the associated pharmaceutical
      formulations, treatment methodologies and dosing manuals in the covered
      jurisdictions.

      Entities controlled by Mr. Richard Doyle, the principal of Doyle Corporate
      Pty Limited, a senior consultant to the Company, received an aggregate of
      A$1,500,000 and 11,000,000 shares of the Company's common stock from the
      transaction in exchange for shares held in Worldwide PE.

      AMI Australia commissioned PKF Corporate Advisers Pty Limited ("PKF") to
      perform an independent valuation of the Patents in connection with the
      proposed acquisition of Worldwide PE and the Board of Directors of the
      Company determined that the aggregate acquisition price of A$24.05 million
      (USD$18.425 million) represented a 4.6% premium to the midpoint of the
      independent valuation provided by PKF.

Currency Conversion

      As of June 30, 2006 and 2005, the accounts of AMI Australia were
maintained, and its financial statements were expressed, in Australian Dollars
(AUD). Such financial statements were translated into US Dollars (USD) in
accordance with Statement of Financial Accounts Standards ("SFAS") No. 52,
"Foreign Currency Translation", with the AUD as the functional currency.
According to the Statement, all assets and liabilities were translated at the
exchange rate (AUD1 = USD0.73010) as of June 30, 2006, stockholder's equity are
translated at the historical rates and income statement items are translated at
the weighted-average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income in accordance with
SFAS No. 130, "Reporting Comprehensive Income".

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The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:

Result of operations:

                                   Three months ended        Twelve months ended
                                        June 30,                  June 30,
                                   2006          2005         2006         2005
                                   ----          ----         ----         ----
      Revenue                       100%          100%         100%        100%

      Cost of Revenue              24.7%         21.2%        26.1%       28.6%

      Gross Profit                 75.3%         78.8%        73.9%       71.4%

      Selling General and
        administrative expenses    67.5%         73.1%        62.9%       66.6%

      Other income and expenses     3.3%        (0.5)%         1.0%        0.3%

      Income before income tax     11.1%          5.2%        12.0%        5.1%

      Income tax expenses           4.2%        (5.6)%         3.9%      (1.3)%

      Net Income                    6.9%         10.8%         8.1%        6.4%

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2006, we had total liabilities of $9,561,389 including unearned
revenue of $3,887,052 and we had a positive net worth of $10,497,919. As of June
30, 2005, we had total liabilities of $4,149,690 including unearned revenue of
$1,803,044 and a positive net worth of $799,801. As at June 30, 2006 our total
current assets were $11,242,040, our total current liabilities were $8,561,342
and our net current assets were $2,680,698.

Our aggregate cash balances as at June 30, 2006 were $1,103,243. We forecast
that we will be able to generate sufficient funds from our business in order to
fund our operations in the ordinary course during the next 12 months. Management
has considered further expansion of our business to markets outside of Australia
and New Zealand, commenced advertising its services in China on September 4,
2006 and is intending to commence operations in Japan on a small scale in the
next few months. In the event that we expand our business outside of our current
markets and our planned expansion into Japan and China, we may need to raise
additional debt or equity funding in order to undertake such expansion. However,
there can be no assurance that we can or will obtain sufficient funds from
operations or from additional financings on terms acceptable to us. If we are
unable to obtain sufficient additional financing, we may not be able to expand
our operations as considered or we could be required to reduce spending and
operations.

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TWELVE MONTHS ENDED JUNE 30, 2006 COMPARED TO TWELVE MONTHS ENDED JUNE 30, 2005

REVENUE. Revenue was $30,453,128 in the twelve months ended June 30, 2006
compared to $15,560,078 in the twelve months ended June 30, 2005, an increase of
$14,893,050 or 95.7%. The increase in revenue in the twelve-month period is
primarily attributable to the increase in the number of customers buying
treatment programs from us during the twelve months ended June 30, 2006 than in
the same period in 2005. We attribute this increase to primarily the following
factors: (1) increased advertising campaigns with improved target marketing in
the premature ejaculation segment; (2) increased brand name recognition; and (3)
effectiveness of our products.

We recognize all expenses on the date they are incurred regardless of whether
they relate to recognized or unearned revenue whereas unearned revenue (which is
generated by current expenses) is unable to be recognized in the current period.

In addition, our unearned revenue during the twelve months ending June 30, 2006
increased by $2,084,008 to $3,887,052 for the twelve months ending June 30, 2006
compared to an increase of $211,580 to $1,803,044 during the prior twelve months
ending June 30, 2005. The increase in unearned revenue in the twelve-month
period is primarily attributed to the increase in the number of patients buying
treatment programs from us during the twelve months ended June 30, 2006 than in
the same period in 2005. We attribute this increase to the following factors:
(1) increased advertising campaigns with improved target marketing in the
premature ejaculation segment; (2) increased brand name recognition; and (3)
effectiveness of our products.

Revenue in AMI Australia's premature ejaculation ("PE") treatment programs has
increased by $10,076,979 or 176% from $5,734,825 and revenue in AMI Australia's
erectile dysfunction ("ED") treatment programs has increased by $4,304,247 or
47% from $9,080,422 in the twelve months ending June 30, 2006, compared to the
twelve months ending June 30, 2005. AMI Australia also generated $293,591 in
revenue from its prostate programs in the twelve months ending June 30, 2006,
compared to nil in the twelve months ending June 30, 2005. The number of
patients in AMI Australia's PE and ED treatment programs increased by 123% and
19% respectively compared to the twelve months ending June 30, 2005.

COST OF REVENUE. Cost of revenue increased to $7,940,836 in the twelve months
ended June 30, 2006 compared to $4,443,899 in the twelve months ended June 30,
2005 primarily as a result of an increase in the number of staff employed by AMI
Australia, which additional staff was needed to service and sell the additional
number of PE, ED and prostate treatment programs that were sold by AMI Australia
during this period. As a percentage of revenue, cost of revenue was 26.1% in the
twelve months ended June 30, 2006 compared to 28.6% in the twelve months ended
June 30, 2005. The decrease in the cost of revenue percentage by 2.5% is
primarily attributable to the growth in AMI Australia's revenue being greater
than the growth in staff costs necessary to service the treatment programs
resulting from that increased revenue.

GROSS PROFIT Gross profit was $22,512,292 in the twelve months ended June 30,
2006 compared to $11,116,179 in the twelve months ended June 30, 2005. As a
percentage of revenue, gross profit increased to 73.9% in the twelve months
ended June 30, 2006 from 71.4% in the twelve months ended June 30, 2005. The
2.5% increase in the gross profit percentage is primarily attributable to the
growth in AMI Australia's revenue and our continued ability to improve margins
due to the increase in total costs being less than the increase in total
revenue. This is primarily attributable to the growth in AMI Australia's revenue
being greater than the growth in staff costs necessary to service the treatment
programs resulting from that increased revenue.

                                       21
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $19,153,393 in the twelve months ended June 30,
2006 compared to $10,356,766 in the twelve months ended June 30, 2005. As a
percentage of revenue, selling, general and administrative expenses decreased to
62.9% in the twelve months ended June 30, 2006 from 66.6% in the twelve months
ended June 30, 2005. The 3.7% decrease as a percentage of revenue was related to
the increase in revenue of AMI Australia exceeding the increase in total costs.
This was partly attributable to greater efforts to control costs which were
implemented by management during the period and AMI Australia increasing
revenues without having to increase its fixed administrative costs.

OTHER INCOME AND EXPENSES. Other income and expenses were $302,782 in the twelve
months ended June 30, 2006 compared to $35,015 in the twelve months ended June
30, 2005. As a percentage of revenues, other income and expenses increased to
1.0% in the twelve months ended June 30, 2006 from 0.2% in the twelve months
ended June 30, 2005. The increase is related to the settlement of legal issues
during the twelve months ended June 30, 2006.

INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES. Income before income tax was
$3,661,681 in the twelve months ended June 30, 2006 compared to $794,428 in the
twelve months ended June 30, 2005. This increase was primarily attributable to
the increase in revenue and decrease in percentage of costs and expenses during
the twelve months ended June 30, 2006. The increase is also attributable to an
increase in our product recognition and recognition of the "AMI" name in
Australia.

Income tax expenses were $1,196,487 in the twelve months ended June 30, 2006
compared to $(204,727) in the twelve months ended June 30, 2005. This increase
is attributable to the increase in income during the twelve months ended June
30, 2006. As a percentage of gross income, income tax expense rose from (1.4)%
to 3.9% which is attributable to the increasing profitability of the Company.
Australian corporate tax is assessed nationally at 30% of net profit before tax.

NET INCOME. Net income was $2,465,194 in the twelve months ended June 30, 2006
compared to $999,155 in the twelve months ended June 30, 2005. This increase is
attributable to the reasons set forth above related to the increase in our gross
profit percentage, while at the same time maintaining our selling, general and
administrative expenses at a nearly consistent level compared to sales.

THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

REVENUE. Revenue was $8,696,717 in the three months ended June 30, 2006 compared
to $5,993,412 in the three months ended June 30, 2005, an increase of $2,703,305
or 45.1%. The increase in revenue in the three-month period is primarily
attributable to the increase in the number of patients buying treatment programs
from us during the three months ended June 30, 2006 than in the same period in
2005. We attribute this increase to the following factors: (1) increased
advertising campaigns with improved target marketing in the premature
ejaculation segment; (2) increased brand name recognition; and (3) effectiveness
of our products.

We recognize all expenses on the date they are incurred regardless of whether
they relate to recognized or unearned revenue whereas unearned revenue (which is
generated by current expenses) is unable to be recognized in the current period.

In addition, our unearned revenue in the three months ending June 30, 2006
increased by $221,136 to $3,887,052 compared to an increase of $240,299 to
$1,803,044 in the three months ending June 30, 2005. The increase in unearned
revenue in the three-month period ended June 30, 2006 is primarily attributable
to the increase in the number of patients buying treatment programs from us than
in the same period in 2005. We attribute this increase to the following factors:
(1) increased advertising campaigns with improved target marketing in the
premature ejaculation segment; (2) increased brand name recognition; and (3)
effectiveness of our products.

                                       23
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Revenue in AMI Australia's PE treatment programs has increased by $1,620,945 or
57% and revenue in AMI Australia's ED treatment programs has increased by
$1,214,141 or 50% in the three months ending June 30, 2006, compared to the
three months ending June 30, 2005. The number of patients in AMI Australia's PE
and ED treatment programs increased by 40% and 33% respectively compared to the
three months ending June 30, 2005.

COST OF REVENUE. Cost of revenue increased to $2,151,752 in the three months
ended June 30, 2006 compared to $1,269,656 in the three months ended June 30,
2005 primarily as a result of an increase in the number of staff employed by AMI
Australia, which additional staff were needed to service and sell the additional
number of PE and ED treatment programs that were sold by AMI Australia during
this period. As a percentage of revenue, cost of revenue was 24.7% in the three
months ended June 30, 2006 compared to 21.2% in the three months ended June 30,
2005. The increase in the cost of revenue percentage by 3.5% is primarily
attributable to the Company hiring additional staff in order to cope with
additional anticipated future expansion of the business both in Australia and
overseas.

GROSS PROFIT. Gross profit was $6,544,965 in the three months ended June 30,
2006 compared to $4,723,756 in the three months ended June 30, 2005. As a
percentage of revenue, gross profit decreased to 75.3% in the three months ended
June 30, 2006 from 78.8% in the three months ended June 30, 2005. The 3.5%
decrease in the gross profit percentage is primarily due to the increase in
total costs being more than the increase in total revenue as a result of the
additional staff costs referred to above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $5,868,135 in the three months ended June 30, 2006
compared to $4,383,309 in the three months ended June 30, 2005. As a percentage
of revenue, selling, general and administrative expenses decreased to 67.5% in
the three months ended June 30, 2006 from 73.1% in the three months ended June
30, 2005. The 5.6% decrease as a percentage of revenue was related to the
increase in revenue of AMI Australia exceeding the increase in total costs. This
was partly attributable to greater efforts to control costs which were
implemented by management during the period and AMI Australia increasing
revenues without having to increase fixed administrative costs.

OTHER INCOME AND EXPENSES. Other income and expenses were $281,625 in the three
months ended June 30, 2006 compared to $(26,462) in the three months ended June
30, 2005. As a percentage of revenue, other income and expenses increased to
3.3% in the three months ended June 30, 2006 from (0.5)% in the three months
ended June 30, 2005. The increase is due to the settlement of legal issue and
government grant received by IMT during the three months ended June 30, 2006.

NET INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES. Income before income tax
was $958,455 in the three months ended June 30, 2006 compared to $313,985 in the
three months ended June 30, 2005. This increase was attributable to the increase
in revenue resulting from additional advertising expenditure during the three
months ended June 30, 2006. The increase is also attributable to an increase in
our product recognition and recognition of the "AMI" name in Australia.

Income tax expenses were $361,551 in the three months ended June 30, 2006
compared to $(336,286) in the three months ended June 30, 2005. This increase is
primarily attributable to the increase in income during the three months ended
June 30, 2006. As a percentage of gross income, income tax expense rose from
(5.6)% to 4.2% which is attributable to the increasing profitability of the
Company. Australian corporate tax is assessed nationally at 30% of net profit
before tax.

                                       24
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NET INCOME. Net income was $596,904 in the three months ended June 30, 2006
compared to $650,271 in the three months ended June 30, 2005. This minor
decrease is attributable to the Company being required to incur income tax
expenses during this quarter, which was not the case in the corresponding
quarter in the prior year.

Accounting Treatment of the AMI Australia Acquisition Transaction

The Share Exchange with AMI Australia has been accounted for as a reverse
acquisition with the Company being the surviving company. Pursuant to the
Exchange Agreement, the Shareholders will exercise control over the Company. The
Share Exchange has been deemed to be a capital transaction where we are treated
as a non-business entity. Therefore, the accounting for the business combination
is identical to that resulting from a reverse merger, except no goodwill or
other intangible assets will be recorded. For accounting purposes, AMI Australia
will be treated as the accounting acquirer and, accordingly, will be presented
as the continuing entity.

Risks Factors Related to Our Business.

In addition to the other information in this annual report, the following
factors should be considered carefully in evaluating the Company's business and
prospects. THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE
EFFECT ON THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR
PROSPECTS, FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY
STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE
DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT
OR STATEMENTS. We are subject to, among others, the following risks:

RISKS ASSOCIATED WITH OUR BUSINESS.

Our business may be adversely effected by competition in the market for the
treatment of sexual dysfunction.

Our business is operating in a competitive market in the erectile dysfunction
("ED") segment and our competitors have significantly greater resources. It is
likely that new competitors will emerge in the short to medium term which may
have an adverse impact on our business.

While we do not have any current known competitors to our premature ejaculation
("PE") business in Australia, New Zealand, China or Japan it is likely that
competitors will emerge in the short to medium term which may have an adverse
impact on our business. There are various PE treatments under development
internationally which may enter the Australian market in the short to medium
term and which could impact on our ability to expand our PE business
internationally.

An inability to respond quickly and effectively to new trends could adversely
impact our competitive position.

Any failure to maintain the level of our technological capabilities or to
respond effectively to technological changes could adversely affect our ability
to retain existing business and secure new business. We will need to constantly
seek out new products and develop new solutions to maintain in our portfolio. If
we are unable to keep current with new trends, our competitors' services,
technologies or products may render us noncompetitive and our services and
products obsolete.

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Increases in staffing costs could adversely affect our business.

Our business is labor intensive and we are highly dependent on the provision of
services by highly qualified personnel. These resources are scarce and we may
face competition for these services which could result in increased expenses for
the business. These labor expenses constitute a significant component of our
overall cost of doing business and increases in these expenses may adversely
impact our business.

Increases in advertising expenses and/or decreases in the effectiveness of our
advertising could result in higher expenses with no corresponding increase in
revenue.

Our current business model is significantly reliant upon advertising and changes
to the costs associated with that advertising or a decrease in the effectiveness
of that advertising could have a significant adverse impact on the revenue
and/or profitability of our business.

Increases in cost for pharmaceutical compounds and other chemicals could
adversely affect our business.

We arrange for patients to be provided with medications. Significant increases
in the price of medications or other chemicals used to make the medications
could increase the overall expense of the Company doing business and reduce its
profitability.

We are subject to risks associated with joint ventures and third party
agreements.

We are involved in a joint venture relating to Whygo and have recently
established a joint venture to commence operations in Japan. We are also in the
process of exploring several further joint ventures relating to our potential
offshore expansion. There can be no assurance that we will find a suitable joint
venture partner as a result of our discussions.

Further development of IMT's technology is also dependent on contractual
arrangements with various consultants. In addition, AMI Australia has third
party contractor agreements with its doctors and compounding pharmacies. We may
incur significant costs if issues or disputes arise in relation to those
arrangements and joint ventures and our future operation, growth and expansion
is dependent on the success of those arrangements.

We may be subject to product liability claims which could negatively impact our
profitability.

We arrange for our patients to be treated with pharmaceutical products, which
involves risks such as product contamination or spoilage, product tampering and
other adulteration of pharmaceutical products. We may be subject to liability if
the consumption of any of our products causes injury, illness or death. A
significant product liability judgment against us may negatively impact our
profitability for a period of time depending on product availability,
competitive reaction and consumer attitudes. Even if a product liability claim
is unsuccessful or is not fully pursued, any negative publicity surrounding such
assertion that products provided through our treatment programs caused illness
or injury could adversely affect our reputation with existing and potential
customers and including irreparable harm to our corporate and brand image.

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We have limited business liability insurance coverage.

We have limited business liability insurance coverage for our operations. Any
loss due to business disruption, litigation or natural disaster may exceed or
may be excluded from the insurance coverage we have and could result in
substantial expenses and a diversion of resources. We do not have liability
insurance to cover any operations outside of Australia or New Zealand and likely
would need to put such insurance in place in the event that we commence
operations outside these geographic areas. We do not have liability insurance
policies in place covering our operations in China, nor do we intend to procure
such coverage. We have not yet explored insuring operations in Japan.

We may experience negative results from our plans for expansion.

We may, in the future, acquire new Australian clinic facilities and may expand
our business beyond Australia, New Zealand, China and Japan. Entering into any
expansion transaction entails many risks, any of which could have a negative
impact on our business, including: (a) diversion of management's attention from
other business concerns; (b) failure to integrate the acquired company with our
existing business; (c) additional operating expenses not offset by additional
revenue; and (d) dilution of our stock as a result of issuing equity securities.
Any expansion globally also entails additional risks relating to operating our
business in environments with different legal and regulatory systems and
business customs than those in Australia and New Zealand, incurring additional
costs in locating and retaining those professionals with expertise in these
area. There is also the likelihood that significant start up costs will be
incurred and that it may take time to achieve successful market penetration in
new markets. We may discover that global operations are less profitable than
existing operations and that losses may be incurred. In addition, we have just
commenced operations in China and intend to shortly start operations in Japan,
each of which have substantially different regulatory regimes, market practices
and customs from Australia, the impact of which cannot be determined at the time
of this report.

We may be unable to implement our acquisition or expansion strategy and as a
result, we may be less successful in the future.

We may not be able to identify and acquire companies meeting our acquisition
criteria on terms acceptable to us. Additionally, financing, if needed, to
complete acquisitions may not always be available on satisfactory terms.
Further, our acquisition strategy presents a number of risks to us, including
adverse effects on our earnings after each acquisition, diversion of
management's attention from our core business, failure to retain key acquired
personnel and other risks from unanticipated events or liabilities arising after
each acquisition. Some or all of these risks could have a material adverse
effect on our business, financial condition and results of operations.

We may be adversely affected should certain patents expire or if our
intellectual property becomes widely available.

We are currently exploiting or planning to exploit patented technology in our
existing businesses and intend to continue to exploit such technology if we
expand further internationally. Our ability to do business in a similar manner
may be adversely affected by the expiration of those patents and if our
competitors utilize such technology to compete with our businesses.

Some of our patent applications have yet to be approved by the relevant
regulatory body. The inability to obtain patent protection for our technology or
misappropriation of our intellectual property could adversely affect our
competitive position.

Our success depends on our medication formulations and internally developed
know-how, and related intellectual properties. Management regards this
intellectual property as proprietary and has and will continue to attempt to
protect such intellectual property by seeking patents, copyrights or trademarks
(as appropriate), and by invoking trade secret laws and entering into
confidentiality and nondisclosure agreements with third parties. Despite these
precautions, it may be possible for a third party to obtain, misappropriate and
use our services or intellectual property.

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We may need to resort to litigation in the future to enforce or to protect our
intellectual property rights. In addition, our intellectual property and patents
may be claimed to conflict with or infringe upon the patent, trademark or other
proprietary rights of third parties. If this occurred, we would need to defend
ourselves against such challenges, and such defenses could result in substantial
costs and the diversion of resources which could materially harm our business.

Our products may infringe upon the intellectual property rights of others, which
could cause damages that may increase our costs and negatively affect our
profitability.

Third parties may in the future assert against us misappropriation claims or
claims that we have infringed a patent, copyright, trademark or other
proprietary right belonging to them. Any claim, even if not meritorious, could
result in the expenditure of significant financial and managerial resources and
could negatively affect our profitability.

Our ongoing research and development activities are, and the production and
marketing of our pharmaceutical products and services and medical devices
derived therefrom will be, subject to regulation by numerous governmental
authorities in Australia and elsewhere, principally the Therapeutics Goods
Administration, or "TGA" and the functional equivalent bodies in the United
States, Europe, Asia and elsewhere.

Under our current business model, our medical formulations are able to be
provided through a compounding pharmacy in Australia on an individual
prescription basis. We may need to make variations to our business model to
commence operations in certain jurisdictions outside Australia and New Zealand
and there may be other jurisdictions where we would need to fully comply with
clinical trial requirements.

Our nebulizer medical device is currently undergoing an extensive regulatory
approval process mandated by the TGA prior to marketing and use in Australia
and, to the extent that our nebulizer is marketed internationally, it will
likely have to go through additional regulatory approval by foreign regulatory
agencies. This review process can take considerable time and require substantial
expense. We must obtain regulatory approval from the respective agencies in
countries outside of Australia. We can make no guarantees that such approvals
will be granted.

Delays in obtaining regulatory approvals would adversely affect the development
and commercialization of our nebulizer device. We cannot be certain that we will
be able to obtain the clearances and approvals necessary for manufacturing and
marketing our nebulizer device.

We may have future capital needs for which we will need to access additional
financing. Additional financing could dilute our current stockholders' equity
interests.

We currently anticipate that our available funds and resources, including sales,
will be sufficient to meet our anticipated needs for working capital and capital
expenditures for the next twelve months within Australia and New Zealand. We
also anticipate that we have sufficient funds to expand into China and Japan on
a small scale, however there is a risk that our budgets may be incorrect and
that such finance may prove inadequate or that we may decide to expand more
quickly and into other markets and that we may need to raise additional funds in
the future in order to fund more research and development and more rapid
expansion and to develop new or enhanced products.

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If additional funds are raised through the issuance of equity or debt
securities, our current stockholders may experience dilution and any such
securities may have rights, preferences or privileges senior to those of the
rights of our common stock.

There can be no assurance that additional financing will be available on terms
favorable to us, or at all. If adequate funds are not available or not available
on acceptable terms, we may not be able to fund our expansion, promote our brand
name as we desire, take advantage of unanticipated acquisition opportunities,
develop or enhance products or respond to competitive pressures. Any such
inability could have a material adverse effect on our business, results of
operations and financial condition.

We may not be able to retain our key management or contractors.

We are highly dependent on the services of Dr. Jacov (Jack) Vaisman, Mr. Dilip
Shrestha and Mr. Forhad (Tony) Khan, as well as the other principal members of
our management and scientific staff and the services of Doyle Corporate Pty
Limited and its principal Richard Doyle. The loss of one or more of such persons
could substantially impair ongoing research and development programs. Our
success depends in large part upon our ability to attract and retain highly
qualified personnel. We compete in our hiring efforts with other pharmaceutical
and medical treatment companies and we may have to pay higher salaries to
attract and retain personnel.

Much of our intellectual property has been devised and developed by Dr. Vaisman
and the loss or impairment of his services could significantly affect our
ability to fully exploit our intellectual property or affect our ability to
develop new intellectual property.

Our stock price is highly volatile.

Our stock price has fluctuated significantly. There is a significant risk that
the market price of our common stock could decrease in the future in response to
any of the following factors, some of which are beyond our control:

      o     variations in our quarterly operating results;
      o     general economic slowdowns;
      o     changes in market valuations of similar companies;
      o     sales of large blocks of our common stock;
      o     announcements by us or our competitors of significant contracts,
            acquisitions, strategic partnerships, joint ventures or capital
            commitments; and
      o     fluctuations in stock market prices and volumes, which are
            particularly common among highly volatile securities of
            internationally-based companies.

Potential impact of current litigation

We may be adversely affected as a result of current matters in litigation.

We may be subject to adverse publicity, costs orders and damages if we lose the
legal actions we are currently involved in.

Our common stock may become subject to "penny stock" rules.

Our common stock may become subject to the United States Securities and Exchange
Commission's penny stock rules, broker-dealers may experience difficulty in
completing customer transactions and trading activity in our securities may be
adversely affected.

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Due to the fact that we have net tangible assets of USD5,000,000 or less and our
common stock has a market price per share of less than USD5.00, transactions in
our common stock may be subject to the "penny stock" rules promulgated under the
Securities Exchange Act of 1934. Under these rules, broker-dealers who recommend
such securities to persons other than institutional accredited investors:

      o     must make a special written suitability determination for the
            purchaser;
      o     must receive the purchaser's written agreement to a transaction
            prior to sale;
      o     must provide the purchaser with risk disclosure documents which
            identify certain risks associated with investing in "penny stocks"
            and which describe the market for these "penny stocks" as well as a
            purchaser's legal remedies; and
      o     must obtain a signed and dated acknowledgment from the purchaser
            demonstrating that the purchaser has actually received the required
            risk disclosure document before a transaction in a "penny stock" can
            be completed.

If our common stock becomes subject to these rules, broker-dealers may find it
difficult to effectuate customer transactions and trading activity in our
securities may be adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult to sell our
securities.

Efforts to comply with recently enacted changes in securities laws and
regulations have required substantial financial and personnel resources and we
still may fail to comply.

As directed by the Sarbanes-Oxley Act of 2002, the Securities and Exchange
Commission adopted rules requiring public companies to include a report of
management on the Company's internal controls over financial reporting in their
annual reports on Form 10-KSB. In addition, the public accounting firm auditing
the Company's financial statements must attest to and report on management's
assessment of the effectiveness of the Company's internal controls over
financial reporting.

The formal process of evaluating our internal controls over financial reporting,
which has required the devotion of substantial financial and personnel
resources, is not complete. Given the status of our efforts, coupled with the
fact that guidance from regulatory authorities in the area of internal controls
continues to evolve, uncertainty exists regarding our ability to comply by
applicable deadlines.

We are subject to the risks associated with doing business in Australia and
Asia.

As most of our current operations are conducted in Australia, New Zealand and
Asia the Company is subject to special considerations and significant risks not
typically associated with companies operating in North America and Western
Europe. These include risks associated with, among others, the political,
economic and legal environments and foreign currency exchange. Our results may
be adversely affected by changes in the political and social conditions in
Australia, New Zealand and Asia, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation, among other things.

We are subject to risks associated with the domicile, place of incorporation and
place of residence of AMI Australia and the Company's directors and officers.

AMI Australia is incorporated in Australia. All of our executive officers and
directors are non-residents of the United States. Therefore, it may be difficult
for an investor, or any other person or entity, to enforce a U.S. court judgment
based upon the civil liability provisions of the U.S. federal securities laws in
an Australian court against us or any of those persons or to effect service of
process upon these persons in the United States.

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Additionally, it may be difficult for an investor, or any other person or
entity, to enforce civil liabilities under U.S. federal securities laws in
original actions instituted in Australia. It may be difficult to enforce a
judgment in the United States against us and most of our officers and directors
or to assert U.S. securities laws claims in Australia or serve process on most
of our officers and directors.

We may experience an impact of the United States Foreign Corrupt Practices Act
on our Business.

We are subject to the United States Foreign Corrupt Practices Act, which
generally prohibits United States companies from engaging in bribery or other
prohibited payments to foreign officials for the purpose of obtaining or
retaining business. Foreign companies, including some that may compete with us,
are not subject to these prohibitions. Compliance with the Foreign Corrupt
Practices Act could adversely impact our competitive position and failure to
comply could subject us to penalties and other adverse consequences. We have
attempted to implement safeguards to prevent and discourage non-compliant
conduct by our employees and agents. We can make no assurance, however, that our
employees or other agents will not engage in such conduct for which we might be
held responsible. If our employees or other agents are found to have engaged in
such practices, we could suffer severe penalties and other consequences that may
have a material adverse affect on our business, financial condition and results
of operations.

We may experience an impact due to Australian, New Zealand, Chinese or Japanese
Regulation of the pharmaceutical and/or medical services industry.

We may suffer an adverse impact to our business if the manner in which our
services are provided is required to change due to changes in the relevant
regulatory regimes applicable to those services. This could render our current
business model unlawful or render it uneconomic, adversely impacting our
profitability and prospects.

We may experience a risk of revenue reduction due to a saturation of the
Australian Market.

Australia is a country with a population of approximately 20 million people.
There are a limited number of people who are candidates for our treatments. We
are subject to increased risks or over saturation of market share as we continue
to treat more patients in the Australian market.

Effects of International Sales.

We intend to market our current and future services in most major world markets.
A number of risks are inherent in international transactions. In order for us to
market our services in the U.S., Europe, Australia, Canada, Asia and certain
other foreign jurisdictions, we may have to obtain required regulatory approvals
or clearances and otherwise comply with extensive regulations regarding safety,
manufacturing processes and quality and advertising rules and regulations. There
can be no assurance that we will be able to obtain or maintain regulatory
approvals or clearances in such countries or that it will not be required to
incur significant costs in obtaining or maintaining its foreign regulatory
approvals or clearances.

MedCare Centers of America, Inc. ("MedCare"), a Florida based company, has
contended that in 2000, Dr. Vaisman, acting as an individual, and others
provided MedCare an exclusive license for his ED treatments covering their
application in North America. Were MedCare's rights to prove enforceable as
against the Company, this could severely restrict the growth prospects otherwise
represented by the North American market. Although Dr. Vaisman disputes the
validity of the purported license agreement, he has, nevertheless, served
MedCare with a notice of termination which notice expired on July 22, 2006
without any response from MedCare. It is possible that MedCare may contest this
termination at some time in the future and there can be no guarantee as to the
outcome of this potential dispute. Based, among other things, upon MedCare's
failure to take any steps to exploit the rights it claims to have, its failure
to pay any royalties whatsoever to Dr. Vaisman and its failure to enforce its
purported rights against at least one third party, the Company believes Dr.
Vaisman's letter of termination to be valid. Nonetheless, the Company believes
that if the matter proceeds to litigation and a court ruled in favor of MedCare,
the Company's ability to offer ED treatments in North America may be adversely
affected.

                                       31
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Fluctuations in currency exchange rates may adversely affect the demand for our
services by increasing the price of our services in the currency of the
countries in which the services are marketed.

Our consolidated financial statements are presented in Australian and U.S.
dollars. Fluctuations in the rates of exchange between U.S. dollar and other
foreign currencies may negatively impact our financial condition and results of
operations. As we expand our presence into international markets, we expect the
percentage of both our revenues and expenditures denominated in non-Australian
dollars to increase. For the foreseeable future, we expect our expenditures to
be predominantly denominated in Australian dollars, resulting primarily from our
activities in Australia, and expects capital expenditures to be denominated in
Australian dollars. Our expansion into China and Japan will also expose us to
currency fluctuations relating to Japanese Yen and Chinese Renmimbi.

We may experience a risk of revenue reduction due to currency conversions.

At this time substantially all of our revenue, expenses and capital purchasing
activities are transacted in Australian Dollars. Our revenue, expenses and
capital purchasing activities which are not in Australian Dollars are transacted
in U.S. Dollars, New Zealand Dollars, Euro and Renmimbi. Capital transactions
will always be reported based on the current exchange rates, resulting gains and
losses from historical rates are charged or credited directly to Stockholders'
Equity. Revenues and expenses will be converted using the weighted-average
exchange rates for the periods being reported. Any major fluctuation in the
average exchange rate between the Australian Dollar and the U.S. Dollar during a
period will effect our results of operations reported as reported in U.S.
Dollars.

To the extent future revenue is denominated in foreign currencies, we would be
subject to increased risks relating to foreign currency exchange rate
fluctuations that could have a material adverse affect on our financial
condition and operating results. To date, we have not engaged in any hedging
transactions in connection with our operations.

We are subject to a risk that our current patent applications may not be
granted.

The Company has pending certain patents relating to the treatment of premature
ejaculation. We can make no guarantee that these patents will be granted and, if
the patents are rejected, the intellectual property underlying these patents
will then reside within the public domain and the Company would not have any
patent protection from competition using its intellectual property. While the
Company believes that formulation secrets not contained in the patent
applications will create a barrier to entry, there can be no guarantee that such
a barrier will prove sufficient. In the event that such competition were to
arise, it could adversely affect the Company's market share, pricing power,
profitability and prospects as a going concern.

                                       32
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We are subject to risks associated with our method of patient consultation. We
may experience risks due to dispensing medication through prescriptions written
by our doctors after our over-the-phone consultations.

The Company retains doctors to consult with patients over the phone and to write
prescriptions on the basis of these telephone consultations. Telephone diagnosis
and prescription is widely considered, in many countries including Australia,
appropriate for some ailments but not for others. Telephone diagnosis and
prescription written as a result of such consultation may be deemed unsuitable
either in general or for those treatments that the Company provides and as a
result, the Company has assumed this risk in its current business model. If
over-the-phone diagnosis and prescriptions were prohibited, the Company could be
subject to a substantial increase in costs due to the need for full-time
physicians at each clinic and, further, could result in lost sales as a result
of potential customers being unable or unwilling to see a doctor in person.
Furthermore, such a requirement could significantly impair the Company's future
profitability and prospects as a going concern.

Our current Business Model may not be profitable in international markets.

We have limited experience in operating outside of Australia and New Zealand,
and failure to achieve our overseas expansion strategy may have an adverse
effect on our business growth in the future. Our future growth depends, to a
considerable extent, on our ability to expand our customer base in both the
domestic and overseas markets. We have limited experience with foreign
regulatory environments and market practices, and cannot guarantee that we will
be able to penetrate any overseas market. In connection with our initial efforts
to expand overseas, we may encounter many obstacles, including cultural and
linguistic differences, difficulties in keeping abreast of market, business and
technical developments in foreign jurisdictions, and political and social
disturbances. Failure in the development of overseas markets may have an adverse
effect on our business growth in the future.

We may not achieve the widespread brand recognition necessary to succeed outside
of Australia.

We believe it is imperative to our long term success that we obtain significant
market share for our services before other competitors enter the market.
Therefore, we must quickly establish recognition of our brand. This will require
us to must make substantial expenditures on product development, strategic
relationships and marketing initiatives in new markets. In addition, we must
devote significant resources to ensure that our customers are provided with a
high quality product and a high level of customer service. Many of our potential
competitors may have substantially greater financial, marketing and other
resources and potentially greater access to content and distribution channels
than us. We cannot be certain that we will have sufficient resources to achieve
the early and widespread brand recognition we believe necessary to realize
commercial acceptance of our services.

Regulations in international markets relating to advertising could adversely
affect our business.

Our business model is dependant upon advertising and marketing. Our current
model may not be able to be enacted internationally due to regulatory
requirements in the relevant jurisdictions. In certain countries (including
Australia), advertisers, advertising agencies and companies that engage in
advertising activities are liable for the accuracy of the content of
advertisements and they have to ensure that the advertised products, activities
and services are in full compliance with applicable law. We do not plan to do
business in countries, in which the advertising of our services and/or
pharmaceuticals in the manner we advertise in Australia would be illegal. If we
are found to be in breach of advertising law requirements, we could be subject
to liability and penalties under the respected laws of such country. These
penalties may include fines, confiscation of profits, order to cease the
dissemination of the advertisement and orders to publish an advertisement
correcting the misleading information. Any such action by any relevant
regulatory body, whether or not it is ultimately successful, could distract
management attention and have a material adverse effect on our business and
financial condition or results of operations.

                                       33
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Regulations in international markets relating to pharmaceuticals could adversely
affect our business.

Our business model is dependant upon the distribution of pharmaceutical
prescriptions. Our current model may not be enacted internationally. In certain
countries, we may be subject to state or national laws governing the
distribution and compounding of pharmaceuticals. We may be required to expend
substantial unforeseen resources to comply with such regulations. Failure to
comply with such regulations could cause a significant disruption in our
business domestically and internationally as it could distract management
attention and have a material adverse effect on our business and financial
condition or results of operations.

Inability to hire experienced and capable employees or executives in
non-Australian markets could adversely affect our business in such markets.

We rely heavily on the performance of our officers and key employees in
Australia. Any international expansion will be dependent on our ability to
retain and motivate qualified personnel in those markets, especially in
management. If we do not succeed in attracting new qualified employees, our
business could suffer significantly. Competition for qualified personnel is
intense in certain markets, and we may be unable identify, attract, hire, train,
assimilate, or retain a sufficient number of highly skilled managerial,
marketing and technical personnel necessary to implement our business plan
outside of Australia.

Item 7.        Financial Statements.

            Our consolidated financial statements and the notes thereto begin on
      page F-1 of this Annual Report on Form 10-KSB.

Item 8.        Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure.

      On March 29, 2006, the Company accepted the resignation of its principal
      independent accountant, Lichter, Yu & Associates ("Lichter"), which
      resignation also extended to AMI Australia and the Company's other
      subsidiaries effective immediately. The resignation of Lichter as the
      Company's principal independent accountant was accepted and approved by
      the Company's Board of Directors.

      Lichter, engaged by AMI Australia prior to its reverse merger with the
      Company, was engaged by the Company to commence its duties on January 24,
      2005 and resigned as of March 29, 2006 (the "Engagement Period"). In
      connection with the Company's share exchange with AMI Australia, Lichter
      performed an audit of the financial statements of AMI Australia, which is
      now a wholly-owned subsidiary of the Company. Lichter's reports on the
      Company's financial statements for the fiscal year ended June 30, 2005 and
      the subsequent interim period preceding the termination, contained no
      adverse opinion or disclaimer of opinion, nor were they qualified or
      modified as to uncertainty, audit scope or accounting principles, except
      that the reports for both years were qualified as to uncertainty regarding
      the Company's ability to continue as a going concern.

      During the Engagement Period, there were no disagreements between the
      Company and Lichter on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements, if not resolved to Lichter's satisfaction, would have
      caused Lichter to make reference to the subject matter of the disagreement
      in connection with its report, and there were no disagreements between AMI
      Australia and Lichter on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure, which
      disagreements, if not resolved to Lichter's satisfaction, would have
      caused Lichter to make reference to the subject matter of the disagreement
      in connection with its report for AMI Australia.

                                       34
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      On March 29, 2006, the Company engaged Kabani & Company, Inc. ("Kabani")
      to serve as its new principal independent accountant in connection with
      the audit of its financial statements for the year ended June 30, 2006.
      The decision to engage Kabani as the Company's principal independent
      accountants was approved by the Company's Board of Directors on March 29,
      2006.

      During its fiscal year ended December 31, 2004 and June 30, 2005 and in
      the subsequent interim periods prior to the resignation of Lichter,
      neither the Company nor AMI Australia consulted with Kabani concerning (i)
      the application of accounting principles to a specific completed or
      contemplated transaction, or the type of audit opinion that might be
      rendered on the Company's financial statements and no written or oral
      advice was provided by Kabani that was an important factor considered by
      the Company in reaching a decision as to any accounting, auditing or
      financial reporting issue, or (ii) any matter that was either the subject
      of a disagreement or event, as set forth in Item 304(a)(1)(iv) of
      Regulation S-B.

            There were no disagreements with accountants on accounting and
      financial disclosures.

Item 8A. Controls and Procedures.

Evaluation of Disclosure on Controls and Procedures.

      Under the supervision and with the participation of our management,
including the principal executive officer and the principal accounting officer,
we conducted an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period
covered by this report (the "Evaluation Date"). Based on this evaluation, our
principal executive officer and principal accounting officer concluded as of the
Evaluation Date that our disclosure controls and procedures were effective such
that the material information required to be included in our Securities and
Exchange Commission ("SEC") reports is accumulated and communicated to
management (including such officers) as appropriate to allow timely decisions
regarding required disclosure and recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms relating to the
Company, including our consolidated subsidiaries.

Changes in Internal Control Over Financial Reporting.

      There were no changes in our internal controls or in other factors that
could have significantly affected those controls subsequent to the date of our
most recent evaluation.

Item 8B. Other Information.

       None.

                                       35
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                                    PART III

Item 9.        Directors, Executive Officers, Promoters and Control Persons;
               Compliance With Section 16(a) of the Exchange Act.

      Since June 30, 2006, and as of the date hereof our directors and executive
officers are as follows:

                  Name                     Age                Position
                  ----                     ---                --------

           Jacov (Jack) Vaisman             60      Chief Executive Officer,
                                                    President and Director

           Dilip Shrestha                   29      Chief Financial Officer

           Forhad (Tony) Khan               44      Executive Vice President,
                                                    Secretary and Director

           Anatoly Fanshil                  55      Director

           Mark Shabshay(1)                 57      Director

           Spiro Baramilis                  48      Director

      DR. JACOV (JACK) VAISMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR
      - Dr. Vaisman has served as the Company's Chief Executive Officer,
      President and as a Director since March 21, 2005. Dr. Vaisman is a pioneer
      in the sexual dysfunction business in Australia. Since 2001, he has served
      as the managing director and chief executive officer of AMI Australia. He
      is responsible for the overall management and strategic direction of AMI
      Australia's impotency operations. Dr. Vaisman is also currently a
      consultant to and shareholder in Yayasan On Clinic, which operates a
      similar business in Indonesia. From 1993 through 2001, Dr. Vaisman was the
      founder and director of On Clinic International in Australia, the
      predecessor company to AMI Australia. The holder of a Bachelor of
      Medicine, a Master of Gynecology and a PhD in Medical Science, Dr. Vaisman
      has more than 35 years of experience and expertise in the field of sexual
      health care provision and was recently granted an innovation patent in the
      field of premature ejaculation treatment by the Australian patent office.

      DILIP SHRESTHA, CHIEF FINANCIAL OFFICER - Mr. Shrestha was appointed as
      the Company's Chief Financial Officer on April 7, 2005. Mr. Shrestha has
      also served as the chief financial officer of AMI Australia since July 1,
      2005. From 2001 to July 1, 2005, Mr. Shrestha was the Financial Controller
      of AMI Australia. Prior to that he was an Assistant Accountant, a position
      held from 1999 until 2001, with Australian Momentum Health Pty Ltd, one of
      two medical establishments leading in providing impotency treatment in
      Australia and a predecessor company to AMI Australia,. Mr. Shrestha holds
      a Bachelor of Business Accounting, Master of E-Commerce and a Graduate
      Diploma of Information System and E-Commerce.

      FORHAD (TONY) KHAN, EXECUTIVE VICE PRESIDENT, SECRETARY AND DIRECTOR - Mr.
      Khan has served as the Company's Executive Vice President since July 30,
      2005, he has been the Company's Secretary and a Director since March 21,
      2005. Mr. Khan also served as the chief operating officer of AMI Australia
      since July 1, 2005. From 2001 to July 1, 2005, Mr. Khan was the General
      Manager of AMI Australia. Prior to joining AMI Australia, Mr. Khan was the
      Director and sole operator of Australian Momentum Health Pty Ltd. Mr. Khan
      was Sales Manager and then Operations Manager for On Clinic International
      prior to establishing AMH. Mr. Khan holds a Masters degree in Commerce and
      Accounting and has been involved in the industry for over ten years.

                                       36
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      ANATOLY FANSHIL, DIRECTOR - From 1994 through the present, Mr. Fanshil has
      held the position of director of Australian Overseas Shipping Services Pty
      Limited. From 1991 to 1994, Mr. Fanshil was an engineering service manager
      for Australian Ocean Lines. From 1972 through 1991, Mr. Fanshil was
      employed by the Black Sea Shipping Company as an electrical engineer and
      also had oversight over the entire company for the repairs of various
      ships anchored in the seaports of Finland, Greece, Italy and Germany. Mr.
      Fanshil holds a degree in electrical engineering.

      MARK SHABSHAY, DIRECTOR - From 2000 through the present, Mr. Shabshay was
      the owner of a taxi business. From 1990 to 2000, Mr. Shabshay was the
      owner and director of a meat processing factory. Prior to 1999 Mr.
      Shabshay also owned and operated a retail store and taxi business. Mr.
      Shabshay has been the founder, owner and director of several closely held
      companies in Australia during the past 28 years.

      SPIRO BARAMILIS, DIRECTOR - From 1992 through the present, Mr. Baramilis
      has been the owner and Managing Director of Australian International
      Marine Services Pty Limited, a company which provides supplies to marine
      vessels. From 1981 through 1992, Mr. Baramilis was employed by Nautilus
      Trading Pty Ltd (and its predecessor company, Baramilis Marine Pty Ltd), a
      company that supplies vessels with provisions and technical supplies. Mr.
      Baramilis attended Sydney Technical College and was educated in the field
      of mechanical engineering.

      All directors hold office until the next annual stockholders' meeting or
      until their death, resignation, retirement, removal, disqualification, or
      until their successors have been elected and are qualified. Our officers
      serve at the will of the Board of Directors.

      There are no agreements or understandings for any officer or director of
      the Company to resign at the request of another person and none of the
      officers or directors is acting on behalf of or will act at the direction
      of any other person.

      (1) On September 26, 2006 the Company announced that Mr. Mark Shabshay
      resigned as a director. There were no disagreements between Mr. Shabshay
      and the Company on any matter relating to the Company's operations,
      policies or practices that resulted in his resignation.

Compliance With Section 16(a) of Exchange Act

      Based on our review of copies of Forms 3, 4 and 5 filed with the SEC or
      written representations from certain reporting persons, we believe that
      during fiscal year 2004, all officers, directors, and greater than
      ten-percent beneficial owners timely complied with the applicable filing
      requirements of Section 16(a) of the Securities Exchange Act of 1934.

Code of Ethics

      On April 30, 2005, we adopted a code of ethics that applies to our
      officers, employees and directors, including our Chief Executive Officer
      (principal executive officer) and Chief Financial Officer (principal
      financial and accounting officer), and other persons who perform similar
      functions. A copy of our Code of Ethics is filed as Exhibit 14.1 to our
      Annual Report for the fiscal year ended December 31, 2004 on Form 10-KSB.
      Our Code of Ethics is intended to be a codification of the business and
      ethical principles which guide us, and to deter wrongdoing, to promote
      honest and ethical conduct, to avoid conflicts of interest, and to foster
      full, fair, accurate, timely and understandable disclosures, compliance
      with applicable governmental laws, rules and regulations, the prompt
      internal reporting of violations and accountability for adherence to this
      Code.

                                       37
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Audit Committee

      The Board of Directors has adopted an Audit Committee Charter. The Board
      of Directors had appointed each of Anatoly Fanshil, Mark Shabshay and
      Spiro Baramilis to the Audit Committee. Each of Mark Shabshay and Spiro
      Baramilis meets the independence requirements and standards currently
      established by the SEC. An internal review by the Board of Directors has
      determined that Anatoly Fanshil does not meet the independence
      requirements established by the SEC. In addition, the Board of Directors
      has not yet designated a member to serve on the Audit Committee member as
      an "audit committee financial expert" within the meaning of the rules and
      regulations of the SEC because they have not found a qualified independent
      individual who meets the requirements for the position. The Company is
      currently in the process of meeting with independent persons who have the
      qualifications to serve as a director and on the Audit Committee as the
      "audit committee financial expert" for the Audit Committee.

      The Audit Committee assists the Board by overseeing the performance of the
      independent auditors and the quality and integrity of our internal
      accounting, auditing and financial reporting practices. The Audit
      Committee is responsible for retaining (subject to stockholder
      ratification) and, as necessary, terminating, the independent auditors,
      annually reviews the qualifications, performance and independence of the
      independent auditors and the audit plan, fees and audit results, and
      pre-approves audit and non-audit services to be performed by the auditors
      and related fees.

Item 10.       Executive Compensation.

The following tables reflects the cash compensation we paid, as well as certain
other compensation paid or accrued, during each of our last three fiscal years
to the identified persons (the "Named Executive Officers").

                           SUMMARY COMPENSATION TABLE

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

                 Year         Annual Compensation (1)                              Long-term Compensation
-----------------------------------------------------------------------------------------------------------------------
                                                                         Awards              Long-Term
                                                          Restricted      Securities    Incentive
 Name and                                Other Annual       Stock         Underlying    Plan           All Other
principal              Salary    Bonus   Compensation      Award(s)      Options/SARs   Payouts       Compensation
 position                ($)       ($)     ($) (1)           ($)             (#)          ($)           ($) (2)
-----------------------------------------------------------------------------------------------------------------------
Jack Vaisman,    2006   288,920   103,837        27,489           -0-             -           112,563           -0-
CEO (2)
-----------------------------------------------------------------------------------------------------------------------
                 2005   260,000       -0-           -0-           -0-             -                             -0-
-----------------------------------------------------------------------------------------------------------------------
                 2004       -0-       -0-           -0-           -0-             -                             -0-
-----------------------------------------------------------------------------------------------------------------------
Dilip                                                                             -
Shrestha,
CFO (3)          2006    85,999       -0-           -0-           -0-                           7,753           -0-
-----------------------------------------------------------------------------------------------------------------------
                 2005    81,750       -0-           -0-           -0-             -                             -0-
-----------------------------------------------------------------------------------------------------------------------
                 2004       -0-       -0-           -0-           -0-             -                             -0-
-----------------------------------------------------------------------------------------------------------------------
Tony Khan,                                                                        -
Executive
Vice
President (4)    2006   161,378    51,913        27,325           -0-                          12,032           -0-
-----------------------------------------------------------------------------------------------------------------------
                 2005   133,750       -0-           -0-            -0-            -                             -0-
-----------------------------------------------------------------------------------------------------------------------
                 2004       -0-       -0-           -0-            -0-            -                             -0-
-----------------------------------------------------------------------------------------------------------------------

                                       38
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(1) Management has concluded that the aggregate amounts of perquisites and other
personal benefits paid to the named individuals do not exceed the lesser of
$50,000 or 10% of the compensation reported in the table for such individuals.

(2) AMI Australia Holdings Pty Limited ("AMI Australia"), a wholly owned
subsidiary of the Company, has an employment agreement with Dr. Vaisman,
effective as of July 1, 2005 which continues in perpetuity unless earlier
terminated in accordance with the terms of the employment agreement. Pursuant to
his employment agreement, Dr. Vaisman is entitled to receive an annual base
salary of AUD350,000, approximately USD260,000, subject to increases as shall be
determined by the Company's board of directors and management of AMI Australia.
In addition, the annual salary of Dr. Vaisman shall be supplemented by a
discretionary bonus based on the Company achieving certain profit targets during
prescribed periods. In addition to these base and bonus salary components, AMI
Australia will also contribute retirement benefits (superannuation) for Dr.
Vaisman in accordance with Australian legal requirements.

(3) AMI Australia has an employment agreement with Mr. Shrestha whereby he is
entitled to receive an annual base salary of AUD110,000, approximately
USD81,750, subject to increases as shall be determined by the Company's board of
directors and management of AMI Australia. In addition, the annual salary of Mr.
Shrestha shall be supplemented by a bonus based on the Company achieving certain
profit targets during prescribed periods. In addition to these base and bonus
salary components, AMI Australia will also contribute retirement benefits
(superannuation) for Mr. Shrestha in accordance with Australian legal
requirements. On August 9, 2006, Mr. Shrestha's base salary was raised to
AU160,000 (USD121,846).

(4) AMI Australia has an employment agreement with Mr. Khan whereby he is
entitled to receive an annual base salary of AUD180,000, approximately
USD133,750, subject to increases as shall be determined by the Company's board
of directors and management of AMI Australia. In addition, the annual salary of
Mr. Khan shall be supplemented by a bonus based on the Company achieving certain
profit targets during prescribed periods. In addition to these base and bonus
salary components, AMI Australia will also contribute retirement benefits
(superannuation) for Mr. Khan in accordance with Australian legal requirements.
On August 9, 2006, Mr. Khan's base salary was raised to AU210,000 (USD159,923).

                                       39
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                           OPTION/SAR GRANTS DURING 2006 FISCAL YEAR (INDIVIDUAL GRANTS)

---------------------------------------------------------------------------------------------------------------------------------
                                     Individual Grants                                            Potential
                                                                                              Realizable Value
                                                                                              at Assumed Annual    Alternate to
                                                                                               Rates of Stock      (f) And (g):
                                                                                             Price Appreciation     Grant Date
                                                                                               for Option Term        Value
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Grant Date
                                                                                                5%          10%     Present Value
                                                                                              ($)(f)       ($)(g)     $ (h)
---------------------------------------------------------------------------------------------------------------------------------
                            Number of        Percent of Total
                           Securities       Options Granted to    Exercise
                       Underlying Options      Employees in        or Base     Expiration
       Name                 Granted            Fiscal Year         Price          Date
---------------------------------------------------------------------------------------------------------------------------------
Jack Vaisman, CEO               0                    0                0            N/A           -         -            -
---------------------------------------------------------------------------------------------------------------------------------
Dilip Shrestha, CFO             0                    0                0            N/A           -         -            -
---------------------------------------------------------------------------------------------------------------------------------
Tony Khan, Executive
Vice President                  0                    0                0            N/A           -         -            -
---------------------------------------------------------------------------------------------------------------------------------

                AGGREGATED OPTION/SAR EXERCISES DURING 2006 FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES

---------------------------------------------------------------------------------------------------------------------------------
                     Shares                        Number of Securities Underlying
                    Acquired        Value            Unexercised Options/SARs At         Value of Unexercised In-The-Money
                       on          Realized              Fiscal Year-End (#)              Options/SARs At Fiscal Year-End
     Name           Exercise (#)     ($)             Exercisable/Unexercisable             ($) Exercisable/Unexercisable
---------------------------------------------------------------------------------------------------------------------------------
                                                  Exercisable       Unexercisable        Exercisable       Unexercisable
---------------------------------------------------------------------------------------------------------------------------------
Jack Vaisman,
CEO                     0              -                -                  -                   -                  -
---------------------------------------------------------------------------------------------------------------------------------
Dilip
Shrestha, CFO           0              -                -                  -                   -                  -
---------------------------------------------------------------------------------------------------------------------------------
Tony Khan,
Executive
Vice President          0              -                -                  -                   -                  -
---------------------------------------------------------------------------------------------------------------------------------

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                      EQUITY COMPENSATION PLAN INFORMATION

We do not have any equity compensation plans.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL

      As at September 12, 2006, none of our officers and/or directors received
      any compensation for their respective services rendered to the Company,
      nor have they received such compensation in the past. However,
      compensation to officers is paid pursuant to employment contracts with our
      wholly-owned subsidiary, AMI Australia Holdings Pty Limited ("AMI
      Australia"). We have not adopted any retirement, pension, profit sharing,
      stock option or insurance programs or other similar programs for the
      benefit of our directors, officers and/or employees. None of our executive
      officers or directors owned any securities exercisable for or convertible
      into our Common Stock as of May 12, 2006.

      On August 29, 2005, AMI Australia executed an employment agreement with
      Dr. Jacov (Jack) Vaisman, the Company's Chief Executive Officer and
      President and AMI Australia's Chief Executive Officer. The employment
      agreement is effective as of July 1, 2005 and continues in perpetuity
      unless earlier terminated in accordance with the terms of the employment
      agreement. The Board of Directors of the Company approved the employment
      agreement by unanimous written consent on August 29, 2005. Pursuant to his
      employment agreement, Dr. Vaisman is entitled to receive an annual base
      salary of AUD350,000, approximately USD260,000, subject to increases as
      shall be determined by the Company's board of directors and management of
      AMI Australia. In addition, the annual salary of Dr. Vaisman shall be
      supplemented by a bonus based on the Company achieving certain profit
      targets during prescribed periods. In addition to these base and bonus
      salary components, AMI Australia will also contribute retirement benefits
      (superannuation) for Dr. Vaisman in accordance with Australian legal
      requirements.

      On June 21, 2005, AMI Australia executed employment agreements with Forhad
      (Tony) Khan, the Company's Executive Vice President and Secretary and AMI
      Australia's Chief Operating Officer, and Dilip Shrestha, the Company's and
      AMI Australia's Chief Financial Officer. Each of these employment
      agreements is effective as of July 1, 2005 and continues in perpetuity
      unless earlier terminated in accordance with the terms of the respective
      employment agreements. The Board of Directors of the Company approved the
      employment agreements by unanimous written consent on July 30, 2005.

      Pursuant to his employment agreement, Mr. Shrestha is entitled to receive
      an annual base salary of AUD110,000, approximately USD81,750, subject to
      increases as shall be determined by the Company's board of directors and
      management of AMI Australia. In addition, the annual salary of Mr.
      Shrestha shall be supplemented by a bonus based on the Company achieving
      certain profit targets during prescribed periods. In addition to these
      base and bonus salary components, AMI Australia will also contribute
      retirement benefits (superannuation) for Mr. Shrestha in accordance with
      Australian legal requirements. On August 9, 2006, Mr. Shrestha's base
      salary was raised to AU160,000 (USD121,846).

      Pursuant to his employment agreement, Mr. Khan is entitled to receive an
      annual base salary of AUD180,000, approximately USD133,750, subject to
      increases as shall be determined by the Company's board of directors and
      management of AMI Australia. In addition, the annual salary of Mr. Khan
      shall be supplemented by a bonus based on the Company achieving certain
      profit targets during prescribed periods. In addition to these base and
      bonus salary components, AMI Australia will also contribute retirement
      benefits (superannuation) for Mr. Khan in accordance with Australian legal
      requirements. On August 9, 2006, Mr. Khan's base salary was raised to
      AU210,000 (USD159,923).

                                       41
```

----

```
                            COMPENSATION OF DIRECTORS

DIRECTORS' FEES. Directors receive no compensation for serving on the Board of
Directors, but are reimbursed for any out-of-pocket expenses, if any, incurred
in attending board meetings.

                                 INDEMNIFICATION

The Company's Certificate of Incorporation limits the liability of its directors
for monetary damages arising from a breach of their fiduciary duty as directors,
except to the extent otherwise required by the Revised Statutes of the State of
Nevada. Such limitation of liability does not affect the availability of
equitable remedies such as injunctive relief or rescission.

The Company's Bylaws provide that the Company shall indemnify its directors and
officers to the fullest extent permitted by Nevada law, including in
circumstances in which indemnification is otherwise discretionary under Nevada
law. The Company has entered into indemnification agreements with its officers
and directors containing provisions that may require the Company, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.

Item 11.       Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters.

      The following table sets forth, as of September 1, 2006, certain
      information concerning the beneficial ownership of our Common Stock by (i)
      each stockholder known by us to own beneficially five percent or more of
      our outstanding common stock; (ii) each director; (iii) each executive
      officer; and (iv) all of our executive officers and directors as a group,
      and their percentage ownership and voting power.

                                        Shares Beneficially
 Name and Address of Beneficial Owner        Owned (1)          Percent of Class
-------------------------------------- ----------------------- -----------------

Jacov (Jack) Vaisman (2)                   10,250,000                    27.35%

Huntleigh Investment Fund Limited
49 Micoud Street
Castries, St. Lucia                         5,104,105 (3)                13.65%

Forhad (Tony) Khan (2)                        250,000                         *

Dilip Shrestha (2)                                  0                         *

Anatoly Fanshil (2)                           900,000                      2.4%

Mark Shabshay (2)(4)                                0                         *

Spiro Baramilis (2)                                 0                         *

All Directors and Officers (6 people)      11,400,000                    30.49%

                                       42
```

----

```
-------------
* Less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to the shares shown. Except as indicated by footnote and
subject to community property laws where applicable, to our knowledge, the
stockholders named in the table have sole voting and investment power with
respect to all common stock shares shown as beneficially owned by them. A person
is deemed to be the beneficial owner of securities that can be acquired by such
person within 60 days upon the exercise of options, warrants or convertible
securities (in any case, the "Currently Exercisable Options"). Each beneficial
owner's percentage ownership is determined by assuming that the Currently
Exercisable Options that are held by such person (but not those held by any
other person) have been exercised and converted. The persons named in the table
have sole voting and investment power with respect to all shares of common
stock.

(2) The address of the beneficial owner is c/o AMI Australia Holdings Pty
Limited, Level 1, 204-218 Botany Road, Alexandria, NSW, Australia 2015.

(3) Based on information reported by Hunteigh Investment Fund Limited on
Schedule 13G dated January 7, 2005 filed with the Securities and Exchange
Commission on December 13, 2006.

(4) On September 26, 2006 the Company announced that Mr. Mark Shabshay resigned
as a director. There were no disagreements between Mr. Shabshay and the Company
on any matter relating to the Company's operations, policies or practices that
resulted in his resignation.

Item 12.       Certain Relationships and Related Transactions.

      Throughout our history, certain members of the Board of Directors,
      shareholders and general management have made loans to AMI Australia to
      cover certain ordinary business expenses.

                                       43
```

----

```
Item 13.       Exhibits.

Exhibit
Number      Description

2.1         Share Exchange Agreement, dated January 28, 2005 (incorporated
            herewith by reference to Exhibit 2.1 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated March 21, 2005 and filed
            with the Securities and Exchange Commission on March 28, 2005).

2.2         Share Exchange Agreement, dated November 16, 2005 (incorporated
            herewith by reference to Exhibit 2.2 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated November 16, 2005 and filed
            with the Securities and Exchange Commission on November 17, 2005).

2.3         Share Exchange Agreement, dated April 18, 2006 (incorporated
            herewith by reference to Exhibit 2.2 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated April 18, 2006 and filed
            with the Securities and Exchange Commission on April 19, 2006).

3.1         Certificate of Incorporation of Advanced Medical Institute Inc.
            (incorporated herewith by reference to Exhibit 3.1 to Advanced
            Medical Institute Inc.'s Registration Statement on Form 10-SB filed
            with the Securities and Exchange Commission on February 16, 2000).

3.2         By-laws of Advanced Medical Institute Inc. (incorporated herewith by
            reference to Exhibit 3.2 to Advanced Medical Institute Inc.'s
            Registration Statement on Form 10-SB filed with the Securities and
            Exchange Commission on February 16, 2000).

10.1        Subscription Agreement, dated June 29, 2005 (incorporated herewith
            by reference to Exhibit 10.1 to Advanced Medical Institute Inc.'s
            Current Report on Form 8-K dated June 29, 2005 and filed with the
            Securities and Exchange Commission on June 30, 2005).

10.2        Employment Agreement between AMI Australia and Forhad (Tony) Khan
            (incorporated herewith by reference to Exhibit 10.2 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated July 30,
            2005 and filed with the Securities and Exchange Commission on August
            1, 2005).

10.3        Employment Agreement between AMI Australia and Dilip Shrestha
            (incorporated herewith by reference to Exhibit 10.3 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated July 30,
            2005 and filed with the Securities and Exchange Commission on August
            1, 2005).

10.4        Employment Agreement between AMI Australia and Jacov (Jack) Vaisman
            (incorporated herewith by reference to Exhibit 10.4 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated August 29,
            2005 and filed with the Securities and Exchange Commission on August
            30, 2005).

10.5        Consultant Agreement between AMI Australia and Doyle Corporate Pty
            Limited (incorporated herewith by reference to Exhibit 10.1 to
            Advanced Medical Institute Inc.'s Current Report on Form 8-K dated
            April 24, 2006 and filed with the Securities and Exchange Commission
            on April 24, 2006).

10.6        Share Exchange Agreement dated as of September 8, 2006 (incorporated
            herewith by reference to Exhibit 10.1 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated September 8, 2006 and filed
            with the Securities and Exchange Commission on September 11, 2006).

10.7        Loan Agreement between AMI Australia and ANZ Nominees Limited as
            Custodian for the Professional Pension PST - Super dated September
            8, 2006 (incorporated herewith by reference to Exhibit 10.2 to
            Advanced Medical Institute Inc.'s Current Report on Form 8-K dated
            September 8, 2006 and filed with the Securities and Exchange
            Commission on September 11, 2006).

                                       44
```

----

```
10.8        Loan Agreement between AMI Australia and ANZ Nominees Limited as
            Custodian for the Professional Pension PST - Pension dated September
            8, 2006 (incorporated herewith by reference to Exhibit 10.3 to
            Advanced Medical Institute Inc.'s Current Report on Form 8-K dated
            September 8, 2006 and filed with the Securities and Exchange
            Commission on September 11, 2006).

10.9        Fixed and Floating Charge Agreement between AMI Australia and ANZ
            Nominees Limited as Custodian for the Professional Pension PST -
            Super dated September 8, 2006 (incorporated herewith by reference to
            Exhibit 10.4 to Advanced Medical Institute Inc.'s Current Report on
            Form 8-K dated September 8, 2006 and filed with the Securities and
            Exchange Commission on September 11, 2006).

10.10       Fixed and Floating Charge Agreement between AMI Australia and ANZ
            Nominees Limited as Custodian for the Professional Pension PST -
            Pension dated September 8, 2006 (incorporated herewith by reference
            to Exhibit 10.5 to Advanced Medical Institute Inc.'s Current Report
            on Form 8-K dated September 8, 2006 and filed with the Securities
            and Exchange Commission on September 11, 2006).

14.1        Code of Ethics (incorporated herewith by reference to Exhibit 14.1
            to Advanced Medical Institute Inc.'s Annual Report on Form 10-KSB
            for the period ended December 31, 2004 filed with the Securities and
            Exchange Commission on May 31, 2005).

16.1        Letter of Lichter, Yu & Associates relating to its resignation of
            independent public accountants for Advanced Medical Institute, Inc.
            (incorporated herewith by reference to Exhibit 16.1 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated March 29,
            2006 and filed with the Securities and Exchange Commission on March
            31, 2006).

31.1        Certification of Chief Executive Officer pursuant to Rule
            13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as
            adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2        Certification of the Principal Financial Officer pursuant to Rule
            13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as
            adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1        Certification of Chief Executive Officer and the Principal Financial
            Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the
            Sarbanes-Oxley Act of 2002).

Item 14.       Principal Accountant Fees and Services.

The firm of Kabani & Company, Inc. has served as our independent auditors since
March 29, 2006 when it replaced Lichter, Yu & Associates. The Board of Directors
has appointed Kabani & Company, Inc. to continue as our independent auditors for
the fiscal year ending June 30, 2006.

AUDIT FEES FOR FISCAL YEAR ENDED JUNE 30, 2005

Audit fees consist of fees billed for professional services rendered for the
audit of our financial statements and the review or audit of the interim
statements. The total fees billed for Lichter, Yu & Associates for the fiscal
year ended June 30, 2005 was $83,390 and applicable for the fiscal year ended
December 31, 2004 was $60,390.

                                       45
```

----

```
AUDIT RELATED FEES FOR FISCAL YEAR ENDED JUNE 30, 2005

Audit fees consist of fees billed for professional services rendered for the
audit of our financial statements and the review or audit of the interim
statements. The total fees billed for Lichter, Yu & Associates during the fiscal
year ended June 30, 2006 was $22,040.

TAX FEES FOR FISCAL YEAR ENDED JUNE 30, 2005

There were no tax fees billed by Lichter, Yu & Associates for the fiscal year
ended June 30, 2005.

ALL OTHER FEES FOR FISCAL YEAR ENDED JUNE 30, 2006

There were no other accounting fees billed by Lichter, Yu & Associates for the
fiscal year ended June 30, 2005.

AUDIT FEES FOR PERIOD FROM MARCH 29, 2006 THROUGH JUNE 30, 2006

Audit fees billed to the Company by Kabani & Company, Inc. for its review of the
financial statements included in the Company's Quarterly Reports on Form 10-QSB
filed with the Securities and Exchange Commission for the period from March 29,
2006 through June 30, 2006 totaled approximately $49,500.

AUDIT-RELATED FEES FROM MARCH 29, 2006 THROUGH JUNE 30, 2006

There were no audit-related fees to billed by Kabani & Company, Inc. for the
fiscal year ended June 30, 2006.

TAX AND OTHER FEES FROM MARCH 29, 2006 THROUGH JUNE 30, 2006

There were no tax or other accruing fees billed by Kabani & Company, Inc. for
the fiscal year ended June 30, 2006.

PRE-APPROVAL OF SERVICES.

The Audit Committee pre-approves all services, including audit services,
provided by our independent accountants. For audit services, the independent
auditor provides the board with an engagement letter outlining the scope of the
audit services proposed to be performed during the year, which must be formally
accepted by the board before the audit commences. Until the Company finds an
independent director to serve as financial expert of the Audit Committee (as
described in Item 9 herein), the entire Board of Directors will perform the
duties of the Audit Committee.

                                       46
```

----

```
                                   SIGNATURES

      Pursuant to the requirements of Section 12 of the Securities Exchange Act
      of 1934, the Company has duly caused this Form 10-KSB to be signed on its
      behalf by the undersigned, thereunto duly authorized.

                                            ADVANCED MEDICAL INSTITUTE INC.

Date:  September 26, 2006                   By:   /s/ Jacov (Jack) Vaisman
                                                  ------------------------
                                                  Jacov (Jack) Vaisman
                                                  Chief Executive Officer
                                                  and President

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

Date:  September 26, 2005                   By:   /s/ Jacov (Jack) Vaisman
                                                  ------------------------
                                                  Jacov (Jack) Vaisman
                                                  Chief Executive Officer
                                                  and President

Date:  September 26, 2005                   By:   /s/ Dilip Shrestha
                                                  ------------------
                                                  Dilip Shrestha
                                                  Chief Financial Officer

Date:  September 26, 2005                   By:   /s/ Forhad (Tony) Kahn
                                                  ----------------------
                                                  Forhad (Tony) Kahn
                                                  Executive Vice President
                                                  and Secretary

Date:  September 26, 2005                   By:   /s/ Anatoly Fanshil
                                                  -------------------
                                                  Anatoly Fanshil
                                                  Director

Date:  September 26, 2005                   By:   /s/ Spiro Baramilis
                                                  -------------------
                                                  Spiro Baramilis
                                                  Director

                                       47
```

----

```
                                  Exhibit Index

Exhibit
Number   Description
------   -----------

2.1         Share Exchange Agreement, dated January 28, 2005 (incorporated
            herewith by reference to Exhibit 2.1 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated March 21, 2005 and filed
            with the Securities and Exchange Commission on March 28, 2005).

2.2         Share Exchange Agreement, dated November 16, 2005 (incorporated
            herewith by reference to Exhibit 2.2 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated November 16, 2005 and filed
            with the Securities and Exchange Commission on November 17, 2005).

2.3         Share Exchange Agreement, dated April 18, 2006 (incorporated
            herewith by reference to Exhibit 2.2 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated April 18, 2006 and filed
            with the Securities and Exchange Commission on April 19, 2006).

3.1         Certificate of Incorporation of Advanced Medical Institute Inc.
            (incorporated herewith by reference to Exhibit 3.1 to Advanced
            Medical Institute Inc.'s Registration Statement on Form 10-SB filed
            with the Securities and Exchange Commission on February 16, 2000).

3.2         By-laws of Advanced Medical Institute Inc. (incorporated herewith by
            reference to Exhibit 3.2 to Advanced Medical Institute Inc.'s
            Registration Statement on Form 10-SB filed with the Securities and
            Exchange Commission on February 16, 2000).

10.1        Subscription Agreement, dated June 29, 2005 (incorporated herewith
            by reference to Exhibit 10.1 to Advanced Medical Institute Inc.'s
            Current Report on Form 8-K dated June 29, 2005 and filed with the
            Securities and Exchange Commission on June 30, 2005).

10.2        Employment Agreement between AMI Australia and Forhad (Tony) Khan
            (incorporated herewith by reference to Exhibit 10.2 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated July 30,
            2005 and filed with the Securities and Exchange Commission on August
            1, 2005).

10.3        Employment Agreement between AMI Australia and Dilip Shrestha
            (incorporated herewith by reference to Exhibit 10.3 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated July 30,
            2005 and filed with the Securities and Exchange Commission on August
            1, 2005).

10.4        Employment Agreement between AMI Australia and Jacov (Jack) Vaisman
            (incorporated herewith by reference to Exhibit 10.4 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated August 29,
            2005 and filed with the Securities and Exchange Commission on August
            30, 2005).

10.5        Consultant Agreement between AMI Australia and Doyle Corporate Pty
            Limited (incorporated herewith by reference to Exhibit 10.1 to
            Advanced Medical Institute Inc.'s Current Report on Form 8-K dated
            April 24, 2006 and filed with the Securities and Exchange Commission
            on April 24, 2006).
```

----

```
10.6        Share Exchange Agreement dated as of September 8, 2006 (incorporated
            herewith by reference to Exhibit 10.1 to Advanced Medical Institute
            Inc.'s Current Report on Form 8-K dated September 8, 2006 and filed
            with the Securities and Exchange Commission on September 11, 2006).

10.7        Loan Agreement between AMI Australia and ANZ Nominees Limited as
            Custodian for the Professional Pension PST - Super dated September
            8, 2006 (incorporated herewith by reference to Exhibit 10.2 to
            Advanced Medical Institute Inc.'s Current Report on Form 8-K dated
            September 8, 2006 and filed with the Securities and Exchange
            Commission on September 11, 2006).

10.8        Loan Agreement between AMI Australia and ANZ Nominees Limited as
            Custodian for the Professional Pension PST - Pension dated September
            8, 2006 (incorporated herewith by reference to Exhibit 10.3 to
            Advanced Medical Institute Inc.'s Current Report on Form 8-K dated
            September 8, 2006 and filed with the Securities and Exchange
            Commission on September 11, 2006).

10.9        Fixed and Floating Charge Agreement between AMI Australia and ANZ
            Nominees Limited as Custodian for the Professional Pension PST -
            Super dated September 8, 2006 (incorporated herewith by reference to
            Exhibit 10.4 to Advanced Medical Institute Inc.'s Current Report on
            Form 8-K dated September 8, 2006 and filed with the Securities and
            Exchange Commission on September 11, 2006).

10.10       Fixed and Floating Charge Agreement between AMI Australia and ANZ
            Nominees Limited as Custodian for the Professional Pension PST -
            Pension dated September 8, 2006 (incorporated herewith by reference
            to Exhibit 10.5 to Advanced Medical Institute Inc.'s Current Report
            on Form 8-K dated September 8, 2006 and filed with the Securities
            and Exchange Commission on September 11, 2006).

14.1        Code of Ethics (incorporated herewith by reference to Exhibit 14.1
            to Advanced Medical Institute Inc.'s Annual Report on Form 10-KSB
            for the period ended December 31, 2004 filed with the Securities and
            Exchange Commission on May 31, 2005).

16.1        Letter of Lichter, Yu & Associates relating to its resignation of
            independent public accountants for Advanced Medical Institute, Inc.
            (incorporated herewith by reference to Exhibit 16.1 to Advanced
            Medical Institute Inc.'s Current Report on Form 8-K dated March 29,
            2006 and filed with the Securities and Exchange Commission on March
            31, 2006).

31.1        Certification of Chief Executive Officer pursuant to Rule
            13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as
            adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2        Certification of the Principal Financial Officer pursuant to Rule
            13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as
            adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1        Certification of Chief Executive Officer and the Principal Financial
            Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the
            Sarbanes-Oxley Act of 2002).
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                                FINANCIAL REPORT

                    FOR THE YEAR ENDED JUNE 30, 2006 AND 2005
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.

                                AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

                                TABLE OF CONTENTS

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS              F-2 - F-3
--------------------------------------------------------------------------------

FINANCIAL STATEMENTS

   Consolidated Balance Sheet                                                F-4

   Consolidated Statements of Income                                         F-5

   Consolidated Statements of Stockholders' Equity                           F-6

   Consolidated Statements of Cash Flows                                     F-7

   Notes to Consolidated Financial Statements                                F-9
--------------------------------------------------------------------------------

                                      F-1
```

----

```
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Advanced Medical Institute, Inc.

We have audited the accompanying statements of financial position of Advanced
Medical Institute, Inc. and its subsidiaries (the "Company") as of June 30, 2005
and 2004, and the related statements of income, changes in stockholders' equity,
and cash flows for each of the years in the two-year period ended June 30, 2005.
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 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Medical Institute,
Inc. as of June 30, 2005 and 2004, and the results of its operations and its
cash flows for each of the years in the two-year period ended June 30, 2005 in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Lichter, Yu & Associates

Lichter, Yu & Associates

August 30, 2005

                                      F-2
```

----

```
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Advanced Medical Institute, Inc.

We have audited the accompanying consolidated balance sheet of Advanced Medical
Institute, Inc. and its subsidiaries (the "Company") as of June 30, 2006, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the year ended June 30, 2006. 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.

We conducted our audit of these statements 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provide a reasonable basis for our opinion.

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

/s/ Kabani & Company, Inc.
CERTIFIED PUBLIC ACCOUNTANTS

Los Angeles, California

September 10, 2006.

                                      F-3
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                               AS AT JUNE 30, 2006

                                               Notes        June 30, 2006

CURRENT ASSETS
Cash & cash equivalent                                      $    1,103,243
Receivables, net                                                 9,892,761
Receivables due from related parties              9                 41,847
Inventory                                                          204,189
                                                            --------------

TOTAL CURRENT ASSETS                                            11,242,040
                                                            --------------

NON-CURRENT ASSETS
Security deposits                                                   98,973
Property, plant and equipment, net                3                635,662
Intangible assets, net                                           8,082,633
                                                            --------------

TOTAL NON-CURRENT ASSETS                                         8,817,268
                                                            --------------

TOTAL ASSETS                                                $   20,059,308
                                                            ==============

CURRENT LIABILITIES
Unearned revenue                                            $    3,887,052
Accounts payables & accrued expenses                             4,246,783
Payables due to related parties                   9                  2,535
Capital lease obligations - current               4                 63,067
Provision for compensated absences                                 190,748
Income taxes payable                                               171,157
                                                            --------------

TOTAL CURRENT LIABILITIES                                        8,561,342
                                                            --------------

NON-CURRENT LIABILITIES
Rental deposit received                                              3,815
Capital lease obligations - non current           4                 71,342
Deferred tax liabilities                                           886,409
Minority interests                                                  38,481
                                                            --------------

TOTAL NON-CURRENT LIABILITIES                                    1,000,047
                                                            --------------

TOTAL LIABILITIES                                                9,561,389
                                                            --------------

STOCKHOLDERS' EQUITY
Common stock, par value $0.001 per share,
  90,000,000 shares authorized,
  37,482,450 issued and
   outstanding                                                      37,482
Additional paid in capital                                       8,040,445
Other comprehensive loss                                          (204,483)
Retained earnings                                                2,624,475
                                                            --------------

TOTAL STOCKHOLDERS' EQUITY                                      10,497,919
                                                            --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $   20,059,308
                                                            ==============

               See accompanying notes to the financial statements.

                                      F-4
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

                                                  June 30, 2006    June 30, 2005

NET REVENUES                                       $ 30,453,128    $ 15,560,078

COST OF REVENUES                                     (7,940,836)     (4,443,899)
                                                   ------------    ------------

GROSS PROFIT                                         22,512,292      11,116,179
                                                   ------------    ------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES        (19,153,393)    (10,356,766)
                                                   ------------    ------------

OPERATING INCOME                                      3,358,899         759,413

OTHER INCOME AND EXPENSE
Rental income                                            24,074          59,734
Bank interest                                            25,960           7,970
Other interest income                                         -           1,468
Legal settlement                                        269,219               -
Sundry income                                            52,733           8,439
Provision for doubtful debt written back                      -          15,116
Interest expense                                         (1,277)        (20,826)
Minority interest                                       (67,927)        (36,886)
                                                   ------------    ------------

TOTAL OTHER INCOME AND EXPENSE                          302,782          35,015
                                                   ------------    ------------

NET INCOME BEFORE INCOME TAXES                        3,661,681         794,428

INCOME TAX EXPENSE                                   (1,196,487)        204,727
                                                   ------------    ------------

NET INCOME                                            2,465,194         999,155

Other Comprehensive item - Foreign currency
translation loss                                        (31,076)       (118,503)
                                                   ------------    ------------

Net Comprehensive Income                           $  2,434,118    $    880,652
                                                   ============    ============

Net income per share, basic                        $       0.07    $       0.04
                                                   ============    ============

Weighted average number of shares                    34,509,339      25,034,014
                                                   ============    ============

               See accompanying notes to the financial statements.

                                      F-5
```

----

```

                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

                                                            Additional       Other
                                    Common Stock             Paid-In      Comprehensive     Retained
                                Shares         Amount        Capital          Loss           Earnings         Total
                             ------------   ------------   ------------    ------------    ------------    ------------

Balance June 30, 2004          25,000,000   $     25,000   $     (6,074)   $    (54,904)   $   (839,874)   $   (875,852)
Issuance of stock               6,122,450          6,122        755,878               -               -         762,000
Recapitalization as result
of merger                               -              -         33,001               -               -          33,001
Other comprehensive income              -              -              -        (118,503)              -        (118,503)
Net income, June 30, 2005               -              -              -               -         999,155         999,155
                             ------------   ------------   ------------    ------------    ------------    ------------

Balance June 30, 2005          31,122,450   $     31,122   $    782,805    $   (173,407)   $    159,281    $    799,801
Issuance of stock               6,360,000          6,360      7,257,640               -               -       7,264,000
Other comprehensive income              -              -              -         (31,076)              -         (31,076)
Net income, June 30, 2006               -              -              -               -       2,465,194       2,465,194
                             ------------   ------------   ------------    ------------    ------------    ------------

Balance June 30, 2006          37,482,450   $     37,482   $  8,040,445    $   (204,483)   $  2,624,475    $ 10,497,919
                             ============   ============   ============    ============    ============    ============

               See accompanying notes to the financial statements.

                                      F-6
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

                                               June 30, 2006   June 30, 2005

Cash Flows from Operating Activities

Receipts from customers                        $ 24,267,828    $ 14,501,070
Interest received                                    25,960           7,571
Interest paid                                        (1,277)        (20,826)
Payment to suppliers & employees                (22,859,643)    (15,473,456)
Income tax paid                                    (222,780)              -
Receipts from government grant                       31,991               -
                                               ------------    ------------

Net cash provided by (used in)
operating activities                              1,242,079        (985,641)
                                               ------------    ------------

Cash Flows from Investing Activities

Proceeds from sale of property, plant &
equipment                                                 -           2,687
Payment for property, plant & equipment            (302,030)        (91,400)
Purchase of intangible assets                      (105,464)              -
Repayment from related entities                      16,315         320,233
(Payment) Refund for security deposit               (15,509)            797
                                               ------------    ------------

Net cash  (used in)  provided  by  investing
activities                                         (406,688)        232,317
                                               ------------    ------------

Cash Flows From Financing Activities
Issue of shares                                           -         762,922
Collection of note receivable                       150,771               -
Proceeds from borrowings                                  -         101,121
Repayment of borrowings                            (152,951)         (6,554)
                                               ------------    ------------

Net cash  (used in)  provided  by  financing
activities                                           (2,180)        857,489
                                               ------------    ------------

Net increase in cash and cash equivalent            833,211         104,165
Effect of exchange  rate changes on cash and
                                                                    (25,929)
Cash & cash equivalent at beginning of year         295,961         172,984
                                               ------------    ------------

Cash & cash equivalent at end of year          $  1,103,243    $    295,961
                                               ============    ============

               See accompanying notes to the financial statements.

                                      F-7
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                            STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

                                                    June 30, 2006  June 30, 2005

Reconciliation of Cash

Cash at the end of financial year as shown in the
Statement of Cash Flows is reconciled to the
related items in the Statement of Financial
Position as follows:

Cash                                                $ 1,103,243    $   295,961
                                                    ===========    ===========

Reconciliation of Cash Flow from Operations with
Profit from Ordinary Activities after Income Tax
Net Income                                            2,533,121        999,155

Non-Cash Flows in Profit from Ordinary Activities
Loss on sale of non-current assets                            -          6,764
Depreciation and amortization expense                   299,703         96,029
Provision for doubtful debt                           1,767,870        462,274

Changes in Assets and Liabilities
Decrease (Increase) in current inventories               14,773       (150,729)
Increase in receivables                              (9,140,470)    (1,479,608)
Increase in intangible assets                                 -       (965,395)
Increase in deferred tax liabilities                    907,528              -
Increase in unearned revenue                          2,211,932         45,903
Increase in payables                                  2,570,155        206,692
Increase in rental deposit received                           -          3,949
Increase in provisions for compensated absences           8,241        111,341
Increase (Decrease) in income tax payable                69,226       (353,834)
Increase in outside equity interest                           -         31,818
                                                    -----------    -----------

Cash Flows (Used in) Provided by Operating
Activities                                          $ 1,242,079    $  (985,641)
                                                    ===========    ===========

               See accompanying notes to the financial statements.

                                      F-8
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
                             JUNE 30, 2006 AND 2005

1.    NATURE OF BUSINESS

      Advanced Medical Institute, Inc. (formerly Hawksdale Financial Visions,
      Inc.) (the "Company") was organized December 6, 1996 under the laws of the
      State of Nevada and was previously in the development stage through March
      21, 2005.

      On March 21, 2005 the Company completed a Stock Exchange Agreement with
      Advanced Medical Institute Pty Ltd (renamed as "AMI Australia Holdings Pty
      Limited" on November 22, 2005) ("AMI Australia"). As a result of the
      exchange agreement, the reorganization was treated as an acquisition by
      the accounting acquiree that is being accounted for as a recapitalization
      and as a reverse merger by the legal acquirer for accounting purposes.
      Pursuant to the recapitalization, all capital stock shares and amounts and
      per share data have been retroactively restated. Accordingly, the
      financial statements include the following:

      (1)   The balance sheet consists of the net assets of the accounting
            acquirer at historical cost and the net assets of the legal acquirer
            at historical cost.
      (2)   The statements of operations include the operations of the
            accounting acquirer for the period presented and the operations of
            the legal acquirer from the date of the merger.

      AMI Australia is a company limited by shares, incorporated and domiciled
      in Australia. The principal activity of AMI Australia is the medical
      treatment of sexual dysfunction in Australia and New Zealand. AMI
      Australia is a service provider company which arranges for patients with
      sexual dysfunction to be provided with medical services, pharmaceuticals
      and associated support services. AMI Australia operates a centralized call
      center and twenty-two clinics and sales offices throughout Australia and
      New Zealand. On October 1, 2004, we formed a corporation under the laws of
      the State of Nevada called "Advanced Medical Institute Inc." and on
      October 5, 2004, we acquired one hundred shares of its common stock for
      cash. On October 15, 2004, the subsidiary was merged with and into the
      Company and as a result of the merger, the Company's corporate name was
      changed to "Advanced Medical Institute Inc."

      On November 17, 2005, AMI Australia acquired 100% of the outstanding
      shares of PE Patent Holdco Pty Limited ("PE") in exchange for 5 million
      shares of the Company valued at $1.10 per share. PE's assets comprise an
      Australian innovation patent (Australian Innovation Patent No 2005100183,
      which is due to expire on July 9, 2012) and an Australian standard patent
      application (Australian standard patent application No. 2004222783).

      The patents relate to various methods of treatment delivery via nasal
      (mucosal) inhalation and topical application of certain formulations which
      are used in AMI Australia's treatment programs for premature ejaculation.
      The patents and associated formulations are integral to those treatment
      programs.

      AMI Australia's nasal spray, injection, lozenge and tablet impotence and
      erectile dysfunction treatment programs are not patent protected.

      In acquiring PE, AMI Australia acquired only the right to use the Patents
      and the associated pharmaceutical formulations, treatment methodologies
      and dosing manuals in Australia and has no rights to use the patents or
      any of the underlying intellectual property in any other country.

      Subsidiaries of AMI Australia

      The Company's subsidiaries are AMI Australia, AMI International Pty
      Limited and AMI Management Services Pty Limited (formerly known as Women's
      Health Foundation Pty Limited).

      AMI Australia's subsidiaries are Advanced Medical Institute Pty Limited,
      PE Patent Holdco, Advanced Medical Institute (NZ) Limited, IMT and Whygo
      Video Conferencing Pty Ltd ("Whygo").

      PE Patent Holdco Pty Limited ("PE") licenses intellectual property to AMI
      Australia on a short-term royalty free arrangement. This intellectual
      property consists solely of an Australian innovation patent for its
      premature ejaculation programs (Australian Innovation Patent No
      2005100183, which is due to expire on July 9, 2012) and an Australian
      standard patent application (Australian standard patent application No.
      2004222783).

                                      F-9
```

----

```
      On April 18, 2006, the Company acquired the remaining 7% of Intelligent
      Medical Technologies Pty Limited ("IMT") which was previously held by
      third parties in exchange for 1.26 million shares of the Company. These
      shares were subsequently transferred by the Company to AMI Australia. As
      of March 31, 2006, the Company owned 93% of IMT.

      IMT was granted the exclusive worldwide right from Sheiman Ultasonic
      Research Foundation Pty Limited ("SURF") to exploit and sub-license
      certain inventions, patents and other intellectual property in relation to
      certain ultrasonic nebulizer technology within the field of the treatment
      of sexual dysfunction in men and women (including impotence, premature
      ejaculation and the treatment of female sexual arousal disorders) and the
      treatment of prostate diseases. Some of these patents expire in October
      2013, with the remaining patents expiring around 2023. IMT's rights are
      broadly based and include the right to manufacture, market, sell and
      distribute products based on the technology and patents within the field
      of use. IMT applied for 4 worldwide patents relating to its ultrasonic
      nebulizer device in July 2005 and applied for 3 further worldwide patents
      relating to its device on February 10, 2006.

      IMT acquired this license in order to develop an ultrasonic nebulizer to
      deliver medications to patients' lungs for the treatment of sexual
      dysfunction as it believes that this delivery system will be more
      efficient and clinically effective than any other alternative treatment
      option and will reduce dosage levels and the likelihood of side effects.

      Advanced Medical Institute (NZ) Limited ("AMI NZ") conducts the group's
      business in New Zealand. AMI NZ contributes less than 1% of AMI
      Australia's consolidated revenue and AMI Australia holds all of the shares
      in AMI NZ. AMI NZ was formed on October 13, 2005.

      AMI Australia holds 50% of the outstanding shares of Whygo. Whygo provides
      video conferencing services, which facilitates its client by providing
      video conferencing rooms across Australia and around the world. Whygo uses
      some of AMI Australia clinic facilities and pays room hire fees for the
      usage. In those locations where AMI Australia does not have locations,
      Whygo uses other facilities. James Matthews, a director of Whygo holds the
      remaining 50% of the outstanding shares of Whygo.

      Whygo owns proprietary scheduling software, which allows its corporate
      partners to login and book rooms anywhere around the world. The source of
      Whygo's income is derived from video conferencing rooms to its corporate
      partners through AMI Australia and its other channeling partners.

                                      F-10
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
                                  JUNE 30, 2006

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The accounting and reporting policies of the Company conform to accounting
      principles generally accepted in the United States of America. The
      following are descriptions of the more significant policies:

      Basis of Accounting

      The accompanying financial statements are prepared on an accrual basis.

      Principles of Consolidation

      The consolidated financial statements include the accounts of the Company
      and its wholly owned subsidiaries, AMI Australia Holdings Pty Limited, AMI
      Management Services Pty Limited ("AMI MS") and AMI International Pty
      Limited ("AMI International") and their direct and indirect wholly-owned
      subsidiaries: Advanced Medical Institute Pty Ltd, PE Patent Holdco Pty
      Limited ("PE"), Advanced Medical Institute (NZ) Limited ("AMI NZ") and
      Intelligent Medical Technologies Pty Ltd ("IMT") and its 50% owned
      subsidiary, Whygo Video Conferencing Pty Ltd ("Whygo") (which owns all of
      the shares in Whygo Limited, a UK entity). All significant intercompany
      accounts and transactions have been eliminated upon consolidation.

      Concentration of Credit Risk

      Financial instruments that potentially subject the Company to
      concentrations of credit risk are cash, accounts receivable and other
      receivables arising from its normal business activities. The Company
      places its cash in what it believes to be credit-worthy financial
      institutions. The Company has a diversified customer base. The Company
      controls credit risk related to accounts receivable through credit
      approvals, credit limits and monitoring procedures. The Company routinely
      assesses the financial strength of its customers and, based upon factors
      surrounding the credit risk, establishes an allowance, if required, for
      uncollectible accounts and, as a consequence, believes that its accounts
      receivable credit risk exposure beyond such allowance is limited.

      Cash Equivalents

      For purposes of the statement of cash flows, the Company considers all
      highly liquid investments with maturities of three months or less to be
      cash equivalents.

      Use of Estimates

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect certain reported amounts and disclosures.
      Accordingly, actual results could differ from those estimates.

      Revenue Recognition

      Sales are reported as deferred income when the sales contracts are
      executed and the term of the contract exceeds three months. Up to three
      months of medication is delivered to the patient upon the signing of a
      contract. Generally the term of the sales contracts are up to one year,
      but they can be for longer periods of time. The deferred income arising
      from the contracts that exceed three months is then amortized, on a
      straight line basis, into income during the approximated composite
      remaining medication delivery period. This approximated composite is an
      estimate that may vary from period to period.

      Advertising Expense

      Advertising costs are charged to expense as they are incurred.

                                      F-11
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
                                  JUNE 30, 2006

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Income Tax

      Income taxes have been provided based upon the tax laws and rates in the
      countries in which operations are conducted and income is earned. The
      income tax rates imposed by the taxing authorities vary. Taxable income
      may vary from pre-tax income for financial accounting purposes. There is
      no expected relationship between the provision for income taxes and income
      before income taxes because the countries have different taxation rules,
      which vary not only to nominal rates but also in terms of available
      deductions, credits and other benefits. Deferred tax assets and
      liabilities are recognized for the anticipated future tax effects of
      temporary differences between the financial statement basis and the tax
      basis of the Company's assets and liabilities using the applicable tax
      rates in effect at year end as prescribed by SFAS 109 "Accounting for
      Income Taxes".

      Inventories

      Inventories are valued at the lower of cost (determined on a first-in
      first-out basis) or market. Management compares the cost of inventories
      with the market value and allowance is made for writing down our
      inventories to market value, if lower. As of June 30, 2006 and 2005
      inventory consisted only of finished goods:

      Property and Equipment

      Equipment placed in service is depreciated over the estimated useful lives
      of the assets using the straight line depreciation method.

      Property and equipment are carried at the lesser of cost and written down
      value. Expenditures for maintenance and repairs are expenses as incurred
      and expenditures for major renewals and betterments are capitalized.
      Assets retired or sold are removed from the property accounts, with gains
      or losses on disposal included in income.

      Employee Entitlements

      Contributions are made to an employee superannuation fund and are charged
      as expenses when incurred.

      Exchange Gain (Loss)

      During the fiscal year ended June 30, 2006 and 2005, the transactions of
      AMI Australia were denominated in foreign currency and were recorded in
      Australian Dollars (AUD) at the rates of exchange in effect when the
      transactions occur. Exchange gains and losses are recognized for the
      different foreign exchange rates applied when the foreign currency assets
      and liabilities are settled.

      Foreign Currency

      As of June 30, 2006, the accounts of AMI Australia and its subsidiaries
      were maintained and its financial statements were expressed in Australian
      Dollars (AUD). Such financial statements were translated into U.S. Dollars
      (USD) in accordance with Statement of Financial Accounts Standards
      ("SFAS") No. 52, "Foreign Currency Translation," with the AUD as the
      functional currency. According to the Statement, all assets and
      liabilities were translated at the current exchange rate, stockholders'
      equity (deficit) is translated at the historical rates and income
      statement items are translated at the average exchange rate for the
      period. The resulting translation adjustments are reported under other
      comprehensive income in accordance with SFAS No. 130, "Reporting
      Comprehensive Income" as a component of shareholders' equity (deficit).

       Research and Development Costs

      Research and development costs are charged against income from ordinary
      activities before income tax as incurred.

                                      F-12
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
                                  JUNE 30, 2006

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Intangible assets

      The Company applies the criteria specified in SFAS No. 141, "Business
      Combinations" to determine whether an intangible asset should be
      recognized separately from goodwill. Intangible assets acquired through
      business acquisitions are recognized as assets separate from goodwill if
      they satisfy either the "contractual-legal" or "separability" criterion.
      Per SFAS 142, intangible assets with definite lives are amortized over
      their estimated useful life and reviewed for impairment in accordance with
      SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived
      Assets." Intangible assets, such as purchased technology, trademark,
      customer list, user base and non-compete agreements, arising from the
      acquisitions of subsidiaries and variable interest entities are recognized
      and measured at fair value upon acquisition. Intangible assets are
      amortized over their estimated useful lives from one to ten years. The
      Company reviews the amortization methods and estimated useful lives of
      intangible assets at least annually or when events or changes in
      circumstances indicate that it might be impaired. The recoverability of an
      intangible asset to be held and used is evaluated by comparing the
      carrying amount of the intangible asset to its future net undiscounted
      cash flows. If the intangible asset is considered to be impaired, the
      impairment loss is measured as the amount by which the carrying amount of
      the intangible asset exceeds the fair value of the intangible asset,
      calculated using a discounted future cash flow analysis. The Company uses
      estimates and judgments in its impairment tests, and if different
      estimates or judgments had been utilized, the timing or the amount of the
      impairment charges could be different.

      Goodwill, trademarks, patents and other intangible assets determined to
      have indefinite useful lives are not amortized. We test such trademarks
      and other intangible assets with indefinite useful lives for impairment
      annually, or more frequently if events or circumstances indicate that an
      asset might be impaired. Goodwill, trademarks, patents and other
      intangible assets determined to have definite lives are amortized over
      their estimated useful lives or the life of the trademark, patent and
      other intangible asset, whichever is less.

      Long-Lived Assets

      Effective January 1, 2002, the Company adopted Statement of Financial
      Accounting Standards No. 144, "Accounting for the Impairment or Disposal
      of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting
      and reporting for the impairment or disposal of long-lived assets and
      supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
      Assets and for Long-Lived Assets to be Disposed Of," and the accounting
      and reporting provisions of APB Opinion No. 30, "Reporting the Results of
      Operations for a Disposal of a Segment of a Business." The Company
      periodically evaluates the carrying value of long-lived assets to be held
      and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be
      generated by those assets are less than the assets' carrying amounts. In
      that event, a loss is recognized based on the amount by which the carrying
      amount exceeds the fair market value of the long-lived assets. Loss on
      long-lived assets to be disposed of is determined in a similar manner,
      except that fair market values are reduced for the cost of disposal. Based
      on its review, the Company believes that, as of June 30, 2006 there were
      no significant impairments of its long-lived assets.

      Segment Reporting

      Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
      "Disclosure About Segments of an Enterprise and Related Information"
      requires use of the "management approach" model for segment reporting. The
      management approach model is based on the way a company's management
      organizes segments within the company for making operating decisions and
      assessing performance. Reportable segments are based on products and
      services, geography, legal structure, management structure, or any other
      manner in which management disaggregates a company. SFAS 131 has no effect
      on the Company's consolidated financial statements as the Company consists
      of one reportable business segment.

                                      F-13
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
                                  JUNE 30, 2006

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Basic and Diluted Earnings Per Share

      Earnings per share is calculated in accordance with the Statement of
      financial accounting standards No. 128 (SFAS No. 128), "Earnings per
      share". SFAS No. 128 superseded Accounting Principles Board Opinion No.15
      (APB 15). Net loss per share for all periods presented has been restated
      to reflect the adoption of SFAS No. 128. Basic net loss per share is based
      upon the weighted average number of common shares outstanding. Diluted net
      loss per share is based on the assumption that all dilutive convertible
      shares and stock options were converted or exercised. Dilution is computed
      by applying the treasury stock method. Under this method, options and
      warrants are assumed to be exercised at the beginning of the period (or at
      the time of issuance, if later), and as if funds obtained thereby were
      used to purchase common stock at the average market price during the
      period.

RECENT PRONOUNCEMENTS

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
or issued after the beginning of the Company's first fiscal year that begins
after September 15, 2006.

In March 2006, FASB issued SFAS 156 "Accounting for Servicing of Financial
Assets" this Statement amends FASB Statement No. 140, ACCOUNTING FOR TRANSFERS
AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities.

                                      F-14
```

----

```

This Statement:

1. Requires an entity to recognize a servicing asset or servicing liability each
time it undertakes an obligation to service a financial asset by entering into a
servicing contract.

2. Requires all separately recognized servicing assets and servicing liabilities
to be initially measured at fair value, if practicable.

3. Permits an entity to choose "Amortization method" or "Fair value measurement
method" for each class of separately recognized servicing assets and servicing
liabilities.

4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with recognized
servicing rights, without calling into question the treatment of other
available-for-sale securities under Statement 115, provided that the
available-for-sale securities are identified in some manner as offsetting the
entity's exposure to changes in fair value of servicing assets or servicing
liabilities that a servicer elects to subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing liabilities
subsequently measured at fair value in the statement of financial position and
additional disclosures for all separately recognized servicing assets and
servicing liabilities.

This Statement is effective as of the beginning of the Company's first fiscal
year that begins after September 15, 2006. Management believes that this
statement will not have a significant impact on the financial statements.

In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Management is currently
evaluating the effect of this pronouncement on financial statements.

                                                            June 30, 2006

      3.    PROPERTY, PLANT AND EQUIPMENT

         Land and Buildings

         Leasehold improvements at cost                     $     297,454
         Less: Accumulated depreciation                            42,501
                                                            -------------
                                                                  254,953
                                                            -------------

         Motor Vehicles                                            43,295
         Less: Accumulated Depreciation                            18,283
                                                            -------------
                                                                   25,012
                                                            -------------

         Office Furniture & Equipment                             233,213
         Less: Accumulated Depreciation                            53,273
                                                            -------------
                                                                  179,940
                                                            -------------

         Computer Hardware - at Cost                              271,615
         Less: Accumulated Depreciation                           132,906
                                                            -------------
                                                                  138,709
                                                            -------------

         Low Value Pooled Fixed Assets                            105,481
         Less: Accumulated Depreciation                            68,433
                                                            -------------
                                                                   37,048
                                                            -------------

         Total Property, Plant and Equipment                $     635,662
                                                            =============

         Depreciation expenses were $113,059 and $96,029 for the fiscal
                years ended June 30, 2006 and 2005, respectively.

                                      F-15
```

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```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT
                                  JUNE 30, 2006

                                                                June 30, 2006

      4.    CAPITAL LEASE OBLIGATIONS

         Current, as of the period ended June 30
         Capitalized lease liability                                   63,067
         Unsecured loan                                                     -
                                                                -------------
                                                                       63,067
                                                                -------------

         Non-current, due during the year ended June 30:
         Capitalized lease liability
         2006                                                               -
         2007                                                          58,108
         2008                                                          13,234
                                                                -------------

         Total non-current                                             71,342
                                                                =============

            The interest bearing liabilities require monthly payments of
            principal and interest at a per annum interest rate ranging from
            7.4% to 13.8%. Obligations under the notes are secured by the
            financed assets included in property and equipment.

5.    LAWSUITS

            As of June 30, 2006, there were no litigation pending or threatened
            by or against the Company or any of its direct or indirect
            subsidiaries other than AMI Australia. AMI Australia currently is
            involved in the following litigation and administrative matters.

            On July 19, 2004, the Australian Competition and Consumer Commission
            (collectively, the "ACCC") filed a suit against AMI Australia in the
            Federal Court of Australia Sydney Registry. The ACCC claimed that a
            series of advertisements made by AMI Australia involving a celebrity
            that confessed impotence were misleading and deceptive. On August
            15, 2006 the court rule in favor of the ACCC that the advertisements
            were misleading and deceptive but declined to order corrective
            advertising or any pecuniary penalty other than an order that AMI
            Australia pay the ACCC's costs on a party-party basis. The Company
            has estimated a cost of settlement of $65,709 which is accrued as of
            June 30, 2006. This matter has therefore concluded.

            On August 24, 2004, AMI Australia initiated a suit against Mr. Mark
            Ryan, a former consultant, two companies which have been competing
            with us, Dr. Ian Davies, and a third company controlled by Dr.
            Davies (the "Defendants") in the Federal Court of Australia. AMI
            Australia alleged that certain of the parties breached their
            confidentiality agreement with AMI Australia and misused its
            intellectual property. AMI Australia obtained interim orders in late
            2004. On August 4, 2006 and August 29, 2006 respectively, AMI
            Australia entered into Deeds of Settlement with Dr. Ian Davies and
            the company controlled by him and Mr. Mark Ryan and other parties
            associated with him pursuant to which each of those parties agreed
            to permanent injunctions restraining them from using AMI Australia's
            intellectual property, to pay an agreed sum to AMI Australia, to
            transfer their sexual dysfunction business to AMI Australia and to
            not compete with AMI Australia for an agreed period, all on a
            without admissions basis.

            On September 27, 2004, Rocco Licastro, a former patient, filed a
            suit against AMI Australia in the District Court of NSW, Sydney
            Registry. Mr. Licastro's claims result from an injection therapy
            that Mr. Licastro claims caused physical injuries. Mr. Licastro is
            seeking damages including medical expenses, but no amount has been
            specified to date. These proceedings are in an early stage. AMI
            Australia has denied the allegations and is vigorously defending
            this suit.

                                      F-16
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                        NOTES TO THE FINANCIAL STATEMENT
                                  JUNE 30, 2006

6.    LEASE COMMITMENTS

            The Company is party to long-term, non-cancelable operating lease
            agreements for administrative offices and clinic locations. The
            future aggregate minimum annual lease payments arising from these
            lease agreements are as follows:

                                                              June 30, 2006

            Due during the period ended June 30:
            2006                                                          -
            2007                                                    524,119
            2008                                                    393,408
            2009                                                    269,496
            2010                                                     52,156
                                                                -------------

                                                                  1,239,179
                                                                =============

7.    CONCENTRATIONS

            Sales Markets - 99% of the Company's revenues arise from Australian
            customers.

            Suppliers - Although the Company has access to a variety of
            suppliers, the majority of the Company's products that are obtained
            for resale are purchased from a limited number of suppliers.

            Concentration of Credit Risk - Financial instruments that
            potentially subject the Company to credit risk consist of uninsured
            cash deposited in the bank and large receivables that are sometimes
            due from a limited number of debtors. The Company extends credit to
            a variety of related parties.

8.    STOCK EXCHANGE AGREEMENT

            On March 21, 2005 (the "Closing Date"), Advanced Medical Institute
            Inc. (a Nevada, USA company) ("AMI USA") consummated the
            transactions contemplated by that certain Share Exchange Agreement
            dated as of January 28, 2005 (the "Exchange Agreement") by and among
            AMI USA, Advanced Medical Institute Pty Limited (since renamed AMI
            Australia Holdings Pty Limited), a privately owned Australian
            company ("AMI Australia"), and AMI Australia's shareholders (the
            "Shareholders"), pursuant to which AMI USA acquired all of the
            issued and outstanding shares of stock of AMI Australia in exchange
            for the issuance in the aggregate of 14,600,000 of AMI USA's shares
            of common stock (the "Shares") to the Shareholders. The issuance of
            AMI USA's shares of common stock to the Shareholders was exempt from
            registration under the Securities Act of 1933, as amended
            ("Securities Act") pursuant to Section 4(2) and Regulation S.

            Following the Closing Date, AMI Australia became a wholly-owned
            subsidiary of AMI USA, and upon the issuance of the Shares, the
            Shareholders became the owners of approximately 58.4% of all of AMI
            USA's then issued and outstanding stock.

            On November 17, 2005 (the "Second Closing Date"), AMI USA
            consummated the transactions contemplated by that certain Share
            Exchange Agreement dated as of November 17, 2005 (the "Second
            Exchange Agreement") by and among AMI USA, PE Patent Holdco Pty
            Limited, a privately owned Australian company ("PE"), and PE's
            shareholders, (the "PE Shareholders"), pursuant to which AMI USA
            acquired all of the issued and outstanding shares of stock of PE in
            exchange for the issuance in the aggregate of 5,000,000 of AMI USA's
            shares of common stock to the PE Shareholders. The issuance of AMI
            USA's shares of common stock to the PE Shareholders was exempt from
            registration under the Securities Act pursuant to Section 4(2) and
            Regulation S.

                                      F-17
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                        NOTES TO THE FINANCIAL STATEMENT
                                  JUNE 30, 2006

8.    STOCK EXCHANGE AGREEMENT (Continued)

            At the time of the transaction PE's major asset was an Australian
            Innovation Patent for treatment programs that are used in our
            business and an application for an Australian standard patent for
            treatment programs that are used in our business. PE had no other
            significant assets or operations.

            As a result of the transaction, PE became a wholly-owned subsidiary
            of AMI USA, and upon the issuance of the Second Shares, the PE
            Shareholders became the owners of approximately 13.85% of all of AMI
            USA's issued and outstanding stock.

            On April 18, 2006 (the "Third Closing Date"), AMI USA acquired the
            remaining 7% of Intelligent Medical Technologies Pty Limited ("IMT")
            which was previously held by third parties in exchange for 1.26
            million shares of AMI USA. These shares were subsequently
            transferred by AMI USA to AMI Australia. The issuance of AMI USA's
            shares of common stock to the IMT Shareholders was exempt from
            registration under the Securities Act pursuant to Section 4(2) and
            Regulation S.

                                                                   June 30, 2006

9.       RELATED PARTY TRANSACTIONS

         Forhad (Tony) Khan
         Relationship: Director of the parent entity
         Payable to this related                                          $2,535

         Jack Vaisman  (an AU citizen)
         Relationship: Director of the parent entity
         Director salary                                                $489,975
         Receivable from this related party                               $7,119
         Payable to this related party                                         -

         James Matthew  (an AU citizen)
         Relationship: Director of the subsidiary
         Director salary                                                 $43,559
         Receivable from this related party                                    -

            Prostate Health Clinic Pty. Ltd. (an AU co.)
            Relationship: Under common management control by Jack Vaisman
            Receivable from this related party                            $1,095

         Total Health Screening Pty. Ltd. (an AU co.)
         Relationship: Affiliated with a director of the parent entity
         Rental revenue received from this entity                         $2,150
         Payable to this related party                                         -

         Zinalda Vaisman  (an AU citizen)
         Relationship: Director's wife
         Salary                                                          $44,812

         Dragon Enterprises Ltd.
         Relationship: This entity is a shareholder of the Company
         Receivable from this related party                              $33,633
                                                                         =======

                                      F-18
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                        NOTES TO THE FINANCIAL STATEMENT
                                  JUNE 30, 2006

9.    RELATED PARTY TRANSACTIONS (Continued)

            Total receivables from related parties included in the Company's
            balance sheet was $41,847 and $220,995 as of June 30, 2006 and June
            30, 2005, respectively.

            Total payables to related parties included in the Company's balance
            sheet was $2,535 and $20,262 as of June 30, 2006 and June 30, 2005,
            respectively.

            Receivables from, and payables to, related parties are unsecured,
            interest-free and have no fixed repayment term.

10.   CONTINGENT LIABILITY

            A dispute with a previous telecommunication carrier over billing in
            the amount of $122,924 arose in 2002. Since the time that AMI
            Australia filed a counter claim of $550,904 against the carrier in
            2003, no correspondence has been received, from the carrier. No
            settlement has been reached, but in the opinion of the Company's
            directors, the $122,924 will not be paid. The financial statements
            do not include any adjustments that might result from the outcome of
            this uncertainty.

11.   INVESTING TRANSACTIONS

            On April 18, 2006 AMI Australia purchased an addition 7% of
            Intelligent Medical Technologies Pty. Ltd., thereafter owning 100%
            of IMT. (See note 13 for details)

12.   INCOME TAXES

            Total Federal and State income tax expense for the fiscal years
            ended June 30, 2006 and 2005 amounted to $1,196,487 and $(204,727),
            respectively. For the fiscal years ended June 30, 2006 and 2005
            there is a difference of 1% and 34% between the federal statutory
            tax rate and the effective tax rate.

                                      F-19
```

----

```

                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES
                        NOTES TO THE FINANCIAL STATEMENT

The following is a reconciliation of income tax expense:

2006                                         U.S.          International         Total
                                          ------------    ------------------------------------
Current                                            $0           $1,196,487         $1,196,487
Deferred                                            0           $   34,284         $   34,284
                                          ------------    ------------------------------------
     Total                                         $0           $1,230,771         $1,230,771
                                          ============    ====================================

2005                                         U.S.          International         Total
                                          ------------    ------------------------------------
Current                                            $0            ($204,727)         ($204,727)
Deferred                                            0             $ 53,614           $ 53,614
                                          ------------    ------------------------------------
     Total                                         $0            ($151,113)         ($151,113)
                                          ============    ====================================

Reconciliation of the differences
between the statutory U.S. Federal
income tax rate and the effective rate
is as follows:

                                                 2006               2005
                                              ------------    -----------------

Federal statutory tax rate                            34%                  34%
Increase (decrease) in rate resulting from:
Non US income taxed at different rates                -1%                 -34%
                                              ------------    -----------------

Effective tax rate                                    33%                   0%
                                              ============    =================

                                      F-20
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                        NOTES TO THE FINANCIAL STATEMENT
                                  JUNE 30, 2006

13.   STOCK

            On October 28, 2004 the officers and directors of the Company
            surrendered for cancellation 1,450,000 shares of common stock.

            On November 8, 2004 the Company issued a stock dividend of 15 shares
            for each share outstanding on November 8, 2004.

            All prior year information has been adjusted to reflect the stock
            cancellation and the stock dividend.

            On May 25, 2005 the Company's Articles of Incorporation were amended
            to increase the number of authorized shares of the capital stock of
            the Company to 100,000,000. The Company designated 90,000,000 shares
            as Common Stock and 10,000,000 shares as Preferred Stock.

            On June 29, 2005 the Company entered into a subscription agreement
            with certain non-U.S. persons pursuant to which the Company issued
            an aggregate of 6,122,450 shares of common stock for aggregate gross
            proceeds of $762,000.

            On November 17, 2005, the Company entered into a share exchange
            agreement with PE Patent Holdco Pty Limited ("PE"), pursuant to
            which the Company acquired all of the issued and outstanding shares
            of stock of PE in exchange for the issuance in the aggregate of
            5,000,000, or 13.85%, of the Company's issued shares of Common Stock
            to the shareholders of PE.

            On April 18, 2006, the Company entered into a share exchange
            agreement with certain non-US persons pursuant to which the Company
            acquired the remaining 7% of Intelligent Medical Technologies Pty
            Limited ("IMT") which was previously held by those persons in
            exchange for 1,260,000 or 3.37% of the Company's issued shares of
            Common Stock.

            All prior year information has been adjusted to reflect the stock
            cancellation and the stock dividend.

                                      F-21
```

----

```
14.   OTHER COMPREHENSIVE INCOME

            Balances of related after-tax components comprising accumulated
            other comprehensive income (loss), included in stockholders' equity,
            at June 30, 2006 are as follows:

                                             Foreign Currency Translation     Accumulated Other Comprehensive
                                                      Adjustment                          Income
                                          ------------------------------------------------------------------
            Balance at June 30, 2004                             $  (54,904)              $  (54,904)

            Change for 2005                                        (118,503)                (118,503)

                                       ---------------------------------------------------------------------
            Balance at June 30, 2005                             $ (173,407)              $ (173,407)

            Change for 2006                                         (31,076)                 (31,076)

                                       ---------------------------------------------------------------------
            Balance at June 30, 2006                             $ (204,483)              $ (204,483)
                                       =====================================================================

                                      F-22
```

----

```
                         ADVANCED MEDICAL INSTITUTE INC.
                                AND SUBSIDIARIES

                        NOTES TO THE FINANCIAL STATEMENT
                                  JUNE 30, 2006

15.   SUBSEQUENT EVENTS (Unaudited)

            The Company has been actively exploring international expansion and
            recently established subsidiaries in China and Japan.

            The Chinese subsidiary is an indirect wholly owned subsidiary of the
            Company and the Chinese entity has formed an alliance with a Beijing
            hospital for the purpose of establishing operations and conducting
            clinical trials for regulatory purposes. The Company's Chinese
            subsidiary has obtained regulatory approval for its proposed
            advertisements and commenced operations in Beijing, China on
            September 4, 2006.

            The Japanese subsidiary will be 75% owned by the Company with the
            remaining 25% being owned by companies controlled by Yoshi Mitsumata
            (10%), Hersey Kaye Montelibano (10%) and Karuna Consulting Services
            Pty Limited (5%). The Japanese subsidiary has obtained regulatory
            approval for its proposed advertisements and intends to commence
            operations during this calendar year. Mr. Mitsumata's shareholding
            has been issued in consideration for him organizing regulatory
            approval for its advertisements and establishing arrangements with a
            range of Japanese advertisers. Each of the other shareholders have
            agreed to provide funding to the Japanese subsidiary in proportion
            to funding provided by the Company in consideration for their
            respective shareholdings.

            On September 8, 2006, the Company entered into a Share Exchange
            Agreement with Worldwide PE Patent and Worldwide PE's shareholders,
            pursuant to which the Company acquired all of the issued and
            outstanding shares of stock of Worldwide PE in exchange for the
            payment of A$3 million (approximately US$2.5 million) and the
            issuance in the aggregate of 16,125,000 shares of the Company's
            common stock valued pursuant to Regulation S of the Securities Act
            of 1933, as amended. The Company then transferred the shares of
            Worldwide PE to its wholly owned subsidiary, AMI Australia. As a
            result, Worldwide PE became an indirect wholly-owned subsidiary of
            the Registrant.

            The cash component of the purchase price is being funded by two
            secured three year term loans in the aggregate principal amount of
            A$3 million to AMI Australia by ANZ Nominees Limited in its capacity
            as custodian of the Professional Pensions PST. The loan is to be
            secured by a security interest in all of AMI Australia's assets and
            undertakings (including its existing equity interests in PE Patent
            Holdco Pty Limited, Intelligent Medical Technologies Pty Limited,
            Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing
            Pty Limited) and accrues interest at an annual coupon of 450 basis
            points above the then Australian Reserve Bank's current cash rate
            (being an aggregate current interest rate of 10.5% as at the date of
            the agreement).

                                      F-23
```