**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, 2007




o
            **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
              Incorporation
                or Organization)
            
            (I.R.S.
                Employer 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 under Section 12(b) of the Exchange Act: none




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




$0.001
      Common Stock


(Title
      of
      Class)




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





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 o





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




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES o NO x





State
      the
      issuer’s revenues for the June 30, 2007 fiscal year: $39,421,875.





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 $0.12 and $0.15
      respectively.





As
      of
      June 30, 2007, there were 53,507,450 shares of the issuer’s common stock, $.001
      par value, outstanding.





Transitional
      Small Business Disclosure Format (check one): YES o NO x









**TABLE
      OF CONTENTS**


Page**PART
                  I**
              
              
              
              3Item
                  1.
              
              Description
                  of Business.
              
              3Item
                  2.
              
              Description
                  of Property.
              
              12Item
                  3.
              
              Legal
                  Proceedings.
              
              13Item
                  4.
              
              Submission
                  of Matters to Vote of Security Holders.
              
              14**PART
                  II**
              
              
              
              15Item
                  5.
              
              Market
                  for Common Equity and Related Stockholder Matters and Small Business
                  Issuer Purchases of Equity Securities.
              
              15Item
                  6.
              
              Management’s
                  Discussion and Analysis or Plan of Operation.
              
              16Item
                  7.
              
              Financial
                  Statements.
              
              40Item
                  8.
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure.
              
              40Item
                  8A.
              
              Controls
                  and Procedures
              
              40Item
                  8B.
              
              Other
                  Information
              
              40**PART
                  III**
              
              
              
              41Item
                  9.
              
              Directors,
                  Executive Officers, Promoters and Control Persons; Compliance With
                  Section
                  16(a) of the Exchange Act.
              
              41Item
                  10.
              
              Executive
                  Compensation.
              
              43Item
                  11.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters.
              
              47Item
                  12.
              
              Certain
                  Relationships and Related Transactions.
              
              48Item
                  13.
              
              Exhibits.
              
              50Item
                  14.
              
              Principal
                  Accountant Fees and Services.
              
              52Signatures
              
              
              
              53




2




**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.




3




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 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.




In
      2003,
      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 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 IMT’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 worldwide patents relating to its ultrasonic nebulizer device
      in July 2005 and applied for three 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.




IMT
      applied to list its nebulizer with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006. IMT received
      comment letters from the TGA during March 2007 which requires it to provide
      further material in order to advance its application. IMT is in the process
      of
      dealing with the matters raised by the TGA and currently anticipates it will
      submit a revised application later this financial year.




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 AUD3 million (approximately $2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share.




4




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 AUD3 million (approximately $2.46 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 accrue 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 11%).
      As at June 30, 2007 the principal of the loan had been reduced to AUD2.825
      million (approximately $2.4 million) and as at October 5, 2007 the principal
      of
      the loan had been reduced to AUD2.726 million (approximately $2.32
      million).




The
      Company has been actively exploring international expansion and established
      subsidiaries in China and Japan in 2006.




The
      Chinese subsidiary, named Ai Te Wei (Beijing) Medicine Consulting Company (“AMI
      China”), is an indirect, wholly owned subsidiary of the Company and has formed
      an alliance with 2 Beijing hospitals for the purpose of establishing operations
      and conducting clinical trials for regulatory purposes. AMI China has obtained
      regulatory approval to its proposed advertisements and commenced operations
      on
      September 4, 2006. AMI China rents premises from these hospitals and has agreed
      to give persons associated with these hospitals a 20% share of profits from
      AMI
      China’s operations.




The
      Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), is an
      indirect, 75% owned subsidiary of the Company. AMI Japan is also partly owned
      by
      a Japanese individual who has expertise in Japanese marketing and 2 financial
      investors. The Japanese subsidiary commenced operations on October 1, 2006.
      The
      Japanese investor received his shareholding in AMI Japan in consideration for
      assisting with the establishment of AMI Japan and in consideration for assisting
      with the marketing and management of AMI Japan.




The
      Company’s initial operations in China and Japan have not been as successful as
      the company anticipated and the Company has substantially reduced the nature
      and
      scope of its operations in China and Japan. The Company is investigating
      alternative marketing and distribution methods in each of China and Japan but
      intends to expend considerably less on these activities than it spent on its
      operations during the year ended June 30, 2007 until it establishes a successful
      sales and marketing platform for these markets.




On
      May 2,
      2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
      Group Limited, a privately owned company registered in the United Kingdom (“AMI
      UK”). The Option grants AMI UK a right to enter into an exclusive license to use
      Worldwide PE’s intellectual property in the United Kingdom. AMI UK has paid
      Worldwide PE an upfront non-refundable fee of $50,000 to secure an initial
      period of four months to confirm the license which period may be extended for
      a
      further two months by AMI UK paying Worldwide PE a non-refundable extension
      fee
      of $50,000. During this initial six month period, AMI UK may elect to enter
      into
      a License Agreement (the “License”) by paying Worldwide PE an upfront
      non-refundable license fee of $1 million less the upfront fees paid to Worldwide
      PE prior to that date. Terms of the Option and the License have been disclosed
      by the Company on its Current Report on Form 8-K filed with the Securities
      and
      Exchange Commission (the “SEC”) on May 3, 2007.




On
      September 4, 2007 AMI UK exercised its right to extend the option period and
      paid an extension fee of $50,000. Worldwide PE agreed to vary this extension
      period to four months rather than two months.




5




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, New Zealand and Asia, however, AMI Australia also
      provides prostate treatments to patients. For the year ended June 30, 2007,
      AMI
      Australia’s revenues were approximately $39.4 million.




AMI
      Australia operates a centralized call center and twenty clinics and sales
      offices throughout Australia and New Zealand. AMI Australia operates two clinics
      in Beijing, China and one medical center in Tokyo, Japan as well as having
      an
      informal alliance with 3 other medical centers in Osaka, Nagoya and Okinawa.




AMI
      Australia is a service provider company which arranges for male patients in
      Australia, New Zealand, China and Japan with sexual dysfunction and prostate
      problems 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;




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




(c)  an
      oral
      elixir program for the treatment of prostate problems.




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.




During
      September 2006, the Company launched AMI SCI, a not-for-profit, indirect wholly
      owned subsidiary of the Company which aims to provide specialized sexual
      dysfunction treatments to spinal cord victims in Australia.




Each
      of
      AMI Australia's treatment programs are prescribed by licensed Australian, New
      Zealand, Chinese and Japanese doctors and prepared and delivered by an
      Australian, New Zealand, Chinese or Japanese compounding pharmacy in full
      compliance with the relevant 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 on a royalty free oral license. PE Patent 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).




6




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, which is now a wholly owned subsidiary
      of AMI Australia. The development of the intellectual property underlying the
      patents and patent applications was originally 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 14 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.




As
      part
      of its treatment programs, AMI Australia arranges for a fully licensed
      Australian , New
      Zealand, Chinese and Japan 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.




7




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
      applied to list its nebulizer with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006. IMT received
      comment letters from the TGA during March 2007 which requires it to provide
      further material in order to advance its application. IMT is in the process
      of
      dealing with the matters raised by the TGA and currently anticipates it will
      submit a revised application later this financial year.




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 part of its capital on research and development activities
      with
      financial support from AMI Australia (approximately USD182,000 during fiscal
      2007). 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, 2007, 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
      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 AUD3 million (approximately USD2.46
      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 AUD3 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
      accrue 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 11.0%). As at June 30, 2007 the principal of the loan
      had been reduced to AUD2.825 million (approximately USD2.4 million) and as
      at
      October 5, 2007 the principal of the loan had been reduced to AUD2.726 million
      (approximately USD2.32 million).





8




On
      February 12, 2007, the Company entered into a written agreement with the
      Heartcheck Group of companies for a indefinite term, which can be terminated
      at
      any time with not less than twelve months written notice. Under the agreement,
      filed as Exhibit 10.11 hereto, Heartcheck agrees to utilize services provided
      by
      the Company, including the provision of staff and premises. In exchange for
      these services, Heartcheck has agreed to reimburse the Company for all expenses
      associated with the provision of these services and to pay the company a net
      margin on those expenses. The provision of these services and the fees generated
      from this agreement with Heartcheck has contributed to the Company’s net profit
      during the year and quarter ended June 30, 2007 whereas there has been no
      revenue generated by the agreement during past fiscal periods. Heartcheck is
      independently owned from the Company, its subsidiaries and its affiliates and
      it
      operates a business of providing cardiac related medical services in
      Australia.




Competition





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





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 in our primary territories. 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.





9


Significant
      Subsidiaries of the Company and AMI Australia










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.




10




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




Advanced
      Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
      Zealand. AMI NZ contributes 2% 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.




Ai
      Te Wei
      (Beijing) Medicine Consulting Company (“AMI China”) conducts the group’s
      business in China. AMI China commenced advertising of its services on September
      4, 2006.




AMI
      Japan
      Kabushiki Gaisya (“AMI Japan”) conducts the group’s business in Japan. AMI Japan
      commenced advertising of its services on October 1, 2006.




During
      September 2006, AMI commenced a not for profit unit entity named “AMI SCI” which
      provides, as part of its community services program, specialized sexual
      dysfunction treatment programs to spinal cord victims in Australia. Details
      regarding this unit’s services and operations are located at
      rocketlaunch.com.au.




Employees




As
      of
      June 30, 2007, AMI Australia had a total staff of approximately 312 people,
      of
      which 225 are full-time and 87 are part-time, working in the areas of sales
      and
      marketing, customer support, product development and back office functions.
      Of
      the 312 people, AMI Australia’s staff includes 26 independent consultants and 50
      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
      13
      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.




11




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 and
      is a
      fully qualified certified practicing accountant in Australia.




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, 2007, AMI Australia had a leasehold interest in 19 Australian
      properties and one New Zealand property, being the 20 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


Dubbo,
      Regional New South Wales


Hurstville,
      Sydney, New South Wales


Newcastle,
      Regional New South Wales


Parramatta,
      Sydney, New South Wales


Sydney
      City, Sydney, New South Wales


Wollongong,
      Regional New South Wales





**Queensland**


Bundall,
      Gold Coast, Queensland


Cairns,
      Regional Queensland


Kallangur,
      Queensland


Townsville,
      Regional Queensland


Upper
      Mt
      Gravatt, South Brisbane, Queensland




12




**South
      Australia**


Adelaide,
      South Australia





**Victoria**


St
      Kilda,
      Melbourne, Victoria


Mitcham,
      Melbourne, Victoria


Dandenong,
      Melbourne, Victoria





**Western
      Australia**


Perth,
      Western Australia (2 clinics)





**New
      Zealand**


Auckland,
      North Island, New Zealand




In
      addition, the Company presently utilizes office space of our registered agent
      representative in the State of Nevada at 6767 Tropicana Avenue, Suite 207,
      Las
      Vegas, Nevada 89103.




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.




**Item
          3.** Legal
          Proceedings **.** ****




As
      of
      June 30, 2007, there was no material litigation pending or threatened by or
      against the Company or any of its subsidiaries except as follows:




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 ruled 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 agreed to pay $94,300
      in full settlement of these costs and partial payment has been made with the
      balance to be paid by January 2008.




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. AMI Australia and Mr. Licastro agreed to settle the claim on
      confidential terms on September 21, 2007.




On
      May
      25, 2007, AMI Australia commenced proceedings in the New South Wales Supreme
      Court against Channel Seven Sydney Pty Limited in respect of certain allegedly
      actionable statements made by Channel Seven. AMI Australia has alleged that
      the
      statements made involve a breach of the doctrine of injurious falsehood and
      that
      it is entitled to be compensated in damages. The proceedings are at an early
      stage.




13




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




At
      the
      Annual Meeting of Shareholders held on June 29, 2007, Jack Vaisman, Tony Khan,
      Anatoly Fanshil and Spiro Baramalis were elected to serve as directors for
      a one
      year term. 30,655,000 shares
      were voted for election of each of the nominees, there were no votes against
      and
      no abstentions.





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, 2008 was approved. 30,655,000 shares
      were voted in favor of ratification, there were no votes against and no
      abstentions.





14





**PART
      II**




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




Our
      Common Stock is listed on the OTC Bulletin Board under the symbol “AVMD.OB”. The
      following sets forth, for the periods indicated, the high and low bid price
      for
      our Common Stock as reported for the prior two fiscal years. The quotations
      set
      forth below may reflect inter-dealer prices, without retail mark-up, mark-down
      or commissions and may not represent actual transactions.




**Quarter
                Ending:**
            
            **High**
            
            **Low****2005**March
                30, 2005
            
            $
            1.35
            
            $
            1.00June
                30, 2005
            
            $
            1.35
            
            $
            1.25September
                30, 2005
            
            $
            2.10
            
            $
            1.35December
                31, 2005
            
            $
            2.50
            
            $
            2.50**2006**March
                31, 2006
            
            $
            2.50
            
            $
            2.25June
                30, 2006
            
            $
            2.60
            
            $
            2.00September
                30, 2006
            
            $
            2.00
            
            $
            0.0001December
                31, 2006
            
            $
            1.10
            
            $
            0.35**2007**March
                31, 2007
            
            $
            0.82
            
            $
            0.52June
                30, 2007
            
            $
            0.75
            
            $
            0.10September
                30, 2007 (through October 11, 2007)
            
            $
            0.24
            
            $
            0.12




As
      of
      October 11, 2007 there were 309 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.




We
      do not
      have any equity compensation plans.




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.




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.




15




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 AUD3 million (approximately USD2.46 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.




16




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.




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 AUD3 million (approximately $2.25
      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 AUD3 million (approximately $2.46 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 accrue 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 11%).
      As at June 30, 2007 the principal of the loan had been reduced to AUD2.825
      million (approximately USD2.4 million) and as at September 5, 2007 the principal
      of the loan had been reduced to AUD2.726 million (approximately USD2.32
      million).




The
      Chinese subsidiary, named Ai Te Wei (Beijing) Medicine Consulting Company (“AMI
      China”), is an indirect, wholly owned subsidiary of the Company and has formed
      an alliance with 2 Beijing hospitals for the purpose of establishing operations
      and conducting clinical trials for regulatory purposes. AMI China has obtained
      regulatory approval to its proposed advertisements and commenced operations
      on
      September 4, 2006. AMI China rents premises from these hospitals and has agreed
      to give persons associated with these hospitals a 20% share of profits from
      AMI
      China’s operations.




The
      Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), is an
      indirect, 75% owned subsidiary of the Company. AMI Japan is also partly owned
      by
      a Japanese individual who has expertise in Japanese marketing and 2 financial
      investors. The Japanese subsidiary commenced operations on October 1, 2006.
      The
      Japanese investor received his shareholding in AMI Japan in consideration for
      assisting with the establishment of AMI Japan and in consideration for assisting
      with the marketing and management of AMI Japan.




The
      Company’s initial operations in China and Japan have not been as successful as
      the company anticipated and the Company has substantially reduced the nature
      and
      scope of its operations in China and Japan. The Company is investigating
      alternative marketing and distribution methods in each of China and Japan but
      intends to expend considerably less on these activities than it spent on its
      operations during the last financial year until it establishes a successful
      sales and marketing platform for these markets.




On
      May 2,
      2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
      Group Limited, a privately owned company registered in the United Kingdom (“AMI
      UK”).




17




The
      Option grants AMI UK a right to enter into an exclusive license to use Worldwide
      PE’s intellectual property in the United Kingdom. AMI UK has paid Worldwide PE
      an upfront non-refundable fee of $50,000 to secure an initial period of four
      months to confirm the license which period may be extended for a further two
      months by AMI UK paying Worldwide PE a non-refundable extension fee of $50,000.
      During this initial six month period, AMI UK may elect to enter into a License
      Agreement (the “License”) by paying Worldwide PE an upfront non-refundable
      license fee of $1 million less the upfront fees paid to Worldwide PE prior
      to
      that date. Terms of the Option and the License have been disclosed by the
      Company on its Current Report on Form 8-K filed with the Securities and Exchange
      Commission (the “SEC”) on May 3, 2007. On September 4, 2007 AMI UK exercised its
      right to extend the option period and paid an extension fee of $50,000.
      Worldwide PE agreed to vary this extension period to four months rather than
      two
      months.




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
      20 clinics in Australia and New Zealand. For the year ended June 30, 2007,
      AMI
      Australia’s revenues were approximately $39.4 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; 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”), Intelligent Medical
      Technologies Pty Ltd (“IMT”), Ai Te Wei (Beijing) Medicine Consulting Company,
      AMI Japan Kabushiki Gaisya (75% owned) 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.




18




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.




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 value. 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, 2007 and 2006 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 reducing balance 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.




Exchange
      Gain (Loss)




During
      the year ended June 30, 2007 and 2006, 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.




19




Foreign
      Currency




As
      of
      June 30, 2007, the accounts of AMI Australia and its subsidiaries were
      maintained and its financial statements were expressed in the local currency
      for
      the jurisdiction in which the entity operated.  Such
      financial statements were translated into the functional currency in Australian
      Dollars (AUD) and thereafter to reporting currency in 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.




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.




20




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.




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 exercise control over the Company. The Share Exchange has been
      deemed to be a capital transaction where the Company is 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.




21




**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 SFAS 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. Management believes that this statement will not
      have
      a significant impact on the financial statement.





In
      March
      2006 FASB issued SFAS No. 156 ‘Accounting for Servicing of Financial Assets’
this Statement amends SFAS 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.
      This Statement:




·
            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.




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




·
            Permits
                an entity to choose ‘Amortization method’ or Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities:




·
            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.




·
            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 is currently evaluating the
      effect of this pronouncement on financial statements.




In
      September 2006, FASB issued SFAS No. 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.





22




In
      September 2006, FASB issued SFAS No. 158 “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This Statement improves financial reporting by
      requiring an employer to recognize the over funded or under funded status of
      a
      defined benefit postretirement plan (other than a multiemployer plan) as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This Statement also improves financial
      reporting by requiring an employer to measure the funded status of a plan as
      of
      the date of its year-end statement of financial position, with limited
      exceptions. An employer with publicly traded equity securities is required
      to
      initially recognize the funded status of a defined benefit postretirement plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after December 15, 2006. An employer without publicly traded equity securities
      is required to recognize the funded status of a defined benefit postretirement
      plan and to provide the required disclosures as of the end of the fiscal year
      ending after June 15, 2007. However, an employer without publicly traded equity
      securities is required to disclose the following information in the notes to
      financial statements for a fiscal year ending after December 15, 2006, but
      before June 16, 2007, unless it has applied the recognition provisions of this
      Statement in preparing those financial statements:




·
            A
                brief description of the provisions of this Statement




·
            The
                date that adoption is required




·
            The
                date the employer plans to adopt the recognition provisions of this
                Statement, if earlier.




The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008.




In
      February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
      years beginning after November 15, 2007. Early adoption is permitted subject
      to
      specific requirements outlined in the new Statement. Therefore, calendar-year
      companies may be able to adopt FAS 159 for their first quarter 2007 financial
      statements.




The
      new
      Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. FAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities.




Subsequent
      Event




On
      September 4, 2007 AMI UK exercised its right to extend its option period in
      relation to its option to license of Worldwide PE’s intellectual property for
      the UK and paid an extension fee of $50,000. Worldwide PE agreed to vary this
      extension period to four months rather than two months.




On
      September 21, 2007, AMI Australia settled proceedings with Mr. Rocco Licastro
      on
      confidential terms in relation to certain district court proceedings filed
      by
      him in relation to physical injuries allegedly suffered by him.




Currency
      Conversion




As
      of
      June 30, 2007 and 2006, 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 = USD0.84880) as
      of
      June 30, 2007, 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”.




23




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




Result
      of operations :





**Three
                months ended**
              **June
                30,**
            
            **Twelve
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenue
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %Cost
                of Revenue
            
            
            26.0
            %
            
            24.7
            %
            
            24.0
            %
            
            26.1
            %Gross
                Profit
            
            
            74.0
            %
            
            75.3
            %
            
            76.0
            %
            
            73.9
            %Selling
                General and administrative expenses
            
            
            87.5
            %
            
            67.5
            %
            
            77.7
            %
            
            62.9
            %Other
                income and expenses
            
            
            0.1
            %
            
            3.3
            %
            
            0.3
            %
            
            1.0
            %Income
                before income tax
            
            
            (13.4
            %)
            
            11.1
            %
            
            (1.4
            %)
            
            12.0
            %Income
                tax expenses
            
            
            (0.7
            %)
            
            4.2
            %
            
            1.9
            %
            
            3.9
            %**Net
                Income**
            
            
            (12.7
            %)
            
            6.9
            %
            
            (3.3
            %)
            
            8.1
            %




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      June 30, 2007, we had total liabilities of $15,245,338 including unearned
      revenue of $5,101,288 and we had a positive net worth of $28,678,386. As of
      June
      30, 2006, we had total liabilities of $9,561,389 including unearned revenue
      of
      $3,887,052 and a positive net worth of $10,497,919. As at June 30, 2007 our
      total current assets were $14,469,036, our total current liabilities were
      $11,312,541 and our net current assets were $3,156,495.




Our
      aggregate cash balances as at June 30, 2007 were $864,481. 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
      expanded our business into China and Japan and is considering further
      international expansion through either establishing new sales clinic operations
      or by licensing the intellectual property for use in territories in which we
      do
      not have clinics such as our recent entry into an Option Agreement with AMI
      UK
      to license our intellectual property for the United Kingdom. Income of $122,765
      that was generated from Heartcheck is also expected to be reinvested into the
      Company to contribute to our ongoing working capital needs.




24




In
      the
      event that we continue to expand our business, we may need to raise 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.




***TWELVE
      MONTHS ENDED JUNE 30, 2007 COMPARED TO TWELVE MONTHS ENDED JUNE 30,
      2006***




***REVENUE*** **.** Revenue
      was $39,421,875 in the twelve months ended June 30, 2007 compared to $30,453,128
      in the twelve months ended June 30, 2006, an increase of $8,968,747 or 29.5%.
      The increase in revenue in the twelve-month period is primarily attributable
      to
      the number of customers buying treatment programs from us increased to 56,368
      people in the twelve months ended June 30, 2007 compared to 42,017 people during
      the twelve months ended June 30, 2006. We attribute this increase to primarily
      the following factors: (1) increased effectiveness of advertising campaigns;
      (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, 2007
      increased by $1,214,236 to $5,101,288 for the twelve months ending June 30,
      2007, compared to the twelve months ending June 30, 2006. 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, 2007 than in the same period in 2006. We attribute
      this increase to the following factors: (1) increased effectiveness of
      advertising campaigns; (2) increased brand name recognition; and (3)
      effectiveness of our products.




Revenue
      in AMI Australia’s premature ejaculation (“PE”) treatment programs has increased
      by $2,915,589 or 19% to $15,794,180 and revenue in AMI Australia’s erectile
      dysfunction (“ED”) treatment programs has increased by $4,907,264 or 37% to
      $13,369,698 in the twelve months ending June 30, 2007, compared to the twelve
      months ending June 30, 2006. AMI Australia also generated $1,320,096 in revenue
      from its prostate programs in the twelve months ending June 30, 2007, compared
      to $326,246 in the twelve months ending June 30, 2006. The number of patients
      in
      AMI Australia’s PE and ED treatment programs increased by 29% and 40%
      respectively compared to the twelve months ending June 30, 2006.




Revenue
      in our Australian operations was $38,350,328 in the twelve months ended June
      30,
      2007 compared to $30,218,926 during the twelve months ended June 30, 2006,
      an
      increase of $8,131,402 or 26.9%. The increase in revenue in the twelve-month
      period is primarily attributable to the increase in the number of patients
      buying treatment programs from us during the twelve months ended June 30, 2007
      than in the same period in 2006. We attribute this increase to the following
      factors: (1) effectiveness advertising campaigns; (2) increased brand name
      recognition; and (3) effectiveness of our products.




Revenue
      in our New Zealand operations was $871,605 in the twelve months ended June
      30,
      2007 compared to $119,124 during the twelve months ended June 30, 2006, an
      increase of $752,481 or 6,316.8%. The increase in revenue in the twelve-month
      period is primarily attributable to the increase in the number of patients
      buying treatment programs from us during the twelve months ended June 30, 2007
      than in the same period in 2006. We attribute this increase to the following
      factors: (1) increased effectiveness of advertising campaigns; (2) increased
      brand name recognition; and (3) effectiveness of our products.




25




Revenue
      in our Chinese operations was $39,730 in the twelve months ended June 30, 2007
      compared to zero during the twelve months ended June 30, 2006. The China
      operation (AMI China) started to operate in this financial year.




Revenue
      in our Japanese operations was $149,860 in the twelve months ended June 30,
      2007
      compared to zero during the twelve months ended June 30, 2006. The Japan
      operation (AMI Japan) was established in this financial year.




***COST
      OF REVENUE*** **.** Cost of
      revenue increased to $9,457,320 in the twelve months ended June 30, 2007
      compared to $7,940,836 in the twelve months ended June 30, 2006 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 24.0% in the twelve
      months ended June 30, 2007 compared to 26.1% in the twelve months ended June
      30,
      2006. The decrease in the cost of revenue percentage by 2.1% 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 $29,964,555 in the twelve months ended June 30, 2007 compared to
      $22,512,292 in the twelve months ended June 30, 2006. As a percentage of
      revenue, gross profit increased to 76.0% in the twelve months ended June 30,
      2007 from 73.9% in the twelve months ended June 30, 2006. The 2.1% 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.




Gross
      profit in our Australian operations was $29,037,284 in the twelve months ended
      June 30, 2007 compared to $22,281,137 in the twelve months ended June 30, 2006.
      This increase is mainly attributable 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.




Gross
      profit in our New Zealand operations was $790,752 in the twelve months ended
      June 30, 2007 compared to a gross profit of $116,077 in the twelve months ended
      June 30, 2006. This is primarily attributable to the growth in AMI Australia’s
      revenue being greater than the growth in cost of sales necessary to service
      the
      treatment programs resulting from that increased revenue.





Gross
      profit in our Chinese operations was ($63,423) in the twelve months ended June
      30, 2007 compared to zero in the twelve months ended June 30, 2006. The
      principal reason is because the Chinese operation was established in this
      year.





Gross
      profit in our Japan operations was $149,860 in the twelve months ended June
      30,
      2007 compared to zero in the twelve months ended June 30, 2006. The principal
      reason is because the Japanese operation was established in this year.




26




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $30,614,356 in the twelve months ended
      June 30, 2007 compared to $19,153,393 in the twelve months ended June 30, 2006.
      As a percentage of revenue, selling, general and administrative expenses
      increased to 77.7% in the twelve months ended June 30, 2007 from 62.9% in the
      twelve months ended June 30, 2006. The principal reason for the 14.8% increase
      in these expenses as a percentage of revenue is because, firstly, we spent
      $2,768,482 establishing and operating our China and Japan operations during
      the
      period. Funds which were used to establish operations in China and Japan have
      not been capitalized because management believes that the initial results of
      operations and speculative nature of the market may indicate that the locations
      may not result in profitability in the longer term. This is also attributable
      to
      the provision for impairment loss of $643,668 and amortization of $798,778
      on
      the patent that is held by Worldwide PE Patent Holdco.




Selling,
      general and administrative expenses in our Chinese operations were $929,730
      in
      the twelve months ended June 30, 2007 compared to zero expense in the twelve
      months ended June 30, 2006. Major expenses incurred were staff costs and
      advertising expenses.




Selling,
      general and administrative expenses in our Japanese operations were $1,838,752
      in the twelve months ended June 30, 2007 compared to zero expense in the twelve
      months ended June 30, 2006. Major expenses incurred were staff costs and
      advertising expenses.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $98,970 in the twelve months ended June 30, 2007
      compared to $302,782 in the twelve months ended June 30, 2006. As a percentage
      of revenues, other income and expenses decreased to 0.3% in the twelve months
      ended June 30, 2007 from 1.0% in the twelve months ended June 30, 2006. The
      reason for the decrease is attributed to the Company having favorable legal
      settlements from the lawsuit against Mr. Mark  Ryan
      in
      the prior year but no equivalent favorable legal settlements in the current
      period.




***NET
      INCOME (LOSS) BEFORE INCOME TAX AND INCOME TAX
      EXPENSES*****.**Net loss
      before income tax was ($550,831) in the twelve months ended June 30, 2007
      compared to $3,661,681 in the twelve months ended June 30, 2006. The reason
      for
      this decrease is that although the Company has increased its income in Australia
      it has incurred significant losses as a result of the operations in China and
      Japan. Moreover, it is also attributable to the impairment loss in the value
      of
      the patent that is held by Worldwide PE Patent Holdco. The value of the patent
      has been impaired as a result of the performance of the China and Japan
      operations and as a result of a delay in the Company’s move into the US
      market.




Net
      income before income tax in our Australian operations was $2,467,470 in the
      twelve months ended June 30, 2007 compared to $3,861,158 in the twelve months
      ended June 30, 2006. This decrease is mainly attributable to the loss that
      was
      incurred by Worldwide PE Patent Holdco Worldwide PE Patent Holdco was
      established in the financial year 2007 and it incurred a loss of $1,343,711
      in
      the twelve months ended June 30, 2007. The loss in Worldwide PE Patent is mainly
      attributable to the provision for impairment loss of $643,668 on the patent
      and
      the amortization of patent amounted to $798,778.




Net
      loss
      before income tax in our New Zealand operations was ($112,711) in the twelve
      months ended June 30, 2007 compared to a net loss ($168,814) in the twelve
      months ended June 30, 2006. This increase is attributable to ongoing
      establishment costs in relation to these operations.





Net
      loss
      before income tax in our Chinese operations was ($953,513) in the twelve months
      ended June 30, 2007 compared to zero in the twelve months ended June 30, 2006.
      The principal reason for the net loss is because the Chinese operation was
      not
      able to effectively gain significant numbers of customers.




27





Net
      loss
      before income tax in our Japan operations was ($1,688,390) in the twelve months
      ended June 30, 2007 compared to zero in the twelve months ended June 30, 2006.
      The principal reason for the net loss is because the Japanese operation was
      not
      able to effectively gain significant numbers of customers.




Income
      tax expenses were $769,691 in the twelve months ended June 30, 2007 compared
      to
      $1,196,487 in the twelve months ended June 30, 2006. This decrease is
      attributable to the decrease in net income during the twelve months ended June
      30, 2007 however tax did not decrease to zero as the Company is unable to offset
      its international losses against its Australian profits. As a percentage of
      gross income, income tax expense decreased from 3.9% to 1.9% which is
      attributable to the decreasing profitability of the Company. Australian
      corporate tax is assessed nationally at 30% of net profit before tax.




***NET
      INCOME (LOSS)*** **.** Net loss
      was ($1,320,522) in the twelve months ended June 30, 2007 compared to $2,465,194
      in the twelve months ended June 30, 2006. The reason for this is that although
      the Company has increased its income in Australia it has incurred significant
      losses as a result of the operations in China and Japan. As set out above,
      during the twelve months ended June 30, 2007, the Company has been unable to
      offset its Australian profits against those international losses. Moreover,
      it
      is also attributable to the impairment loss of the patent that is held by
      Worldwide PE Patent Holdco.




Net
      income in our Australian operations was $1,697,779 in the twelve months ended
      June 30, 2007 compared to $2,665,207 in the twelve months ended June 30, 2006.
      This decrease is mainly attributable to the loss that was incurred by Worldwide
      PE Patent Holdco Worldwide PE Patent Holdco was established in the financial
      year 2007 and it incurred a loss of $1,101,647 in the twelve months ended June
      30, 2007. The loss in Worldwide PE Patent is mainly attributable to the
      provision for impairment loss of $643,668 on the patent and the amortization
      of
      patent amounted to $798,778.




Net
      loss
      in our New Zealand operations was ($112,711) in the twelve months ended June
      30,
      2007 compared to a net loss ($168,814) in the twelve months ended June 30,
      2006.
      This increase is attributable to ongoing establishment costs in relation to
      these operations.





Net
      loss
      in our Chinese operations was ($953,513) in the twelve months ended June 30,
      2007 compared to zero in the twelve months ended June 30, 2006. The principal
      reason for the net loss is because the Chinese operation was not able to
      effectively gain significant numbers of customers due to the sales and marketing
      activities in the market not being sufficiently effective.





Net
      loss
      in our Japan operations was ($1,688,390) in the twelve months ended June 30,
      2007 compared to zero in the twelve months ended June 30, 2006. The principal
      reason for the net loss is because the Japanese operation was not able to
      effectively gain significant numbers of customers due to the sales and marketing
      activities in the market not being sufficiently effective.





The
      above
      discussion of results exclude those entities which have no or what management
      deems insignificant operations such as the Whygo videoconferencing entities
      which are partly owned by AMI Australia.




***THREE
      MONTHS ENDED JUNE 30, 2007 COMPARED TO THREE MONTHS ENDED JUNE 30,
      2006***




***REVENUE*** **.** Revenue
      was $9,708,421 in the three months ended June 30, 2007 compared to $8,696,717
      in
      the three months ended June 30, 2006, an increase of $1,011,704 or 11.6%. 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, 2007 than in the same period in 2006. We attribute
      this increase to the following factors: (1) increased effectiveness of
      advertising campaigns; (2) increased brand name recognition; and (3)
      effectiveness of our products.




28




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, 2007
      increased by $237,936 to $5,101,288 compared to an increase of $221,136 to
      $3,887,052 in the three months ending June 30, 2006. The increase in unearned
      revenue in the three-month period ended June 30, 2007 is primarily attributable
      to the increase in the number of patients buying treatment programs from us
      than
      in the same period in 2006. We attribute this increase to the following factors:
      (1) increased effectiveness of advertising campaigns; (2) increased brand name
      recognition; and (3) effectiveness of our products.




Revenue
      in AMI Australia’s PE treatment programs has increased by $459,007 or 10% and
      revenue in AMI Australia’s ED treatment programs has increased by $552,220 or
      15% in the three months ending June 30, 2007, compared to the three months
      ending June 30, 2006. The number of patients in AMI Australia’s PE treatment
      programs has increased by 2,434 people or 35% and number of patients in AMI
      Australia’s ED treatment programs has increased by 921 people or 16% in the
      three months ending June 30, 2007, compared to the three months ending June
      30,
      2006.




***COST
      OF REVENUE*** **.** Cost of
      revenue increased to $2,526,368 in the three months ended June 30, 2007 compared
      to $2,151,752 in the three months ended June 30, 2006 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 26.0% in the three months ended
      June
      30, 2007 compared to 24.7% in the three months ended June 30, 2006. The increase
      in the cost of revenue percentage by 1.3% is primarily attributable to the
      Company hiring additional staff in order to cope with the number of orders
      received during this period as compared with the number of orders in the prior
      corresponding period.




***GROSS
      PROFIT.*** Gross
      profit was $7,181,053 in the three months ended June 30, 2007 compared to
      $6,544,965 in the three months ended June 30, 2006. As a percentage of revenue,
      gross profit decreased to 74.0% in the three months ended June 30, 2007 from
      75.3% in the three months ended June 30, 2006. The 1.3% 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 $7,840,354 in the three months
      ended June 30, 2007 compared to $5,868,135 in the three months ended June 30,
      2006. As a percentage of revenue, selling, general and administrative expenses
      increased to 87.5% in the three months ended June 30, 2007 from 67.5% in the
      three months ended June 30, 2006. The principal reason for the 19.9% increase
      in
      these expenses as a percentage of revenue is attributable to expansion of
      business into China and Japan. Moreover, it is also attributable to the
      impairment loss and amortization expenses on the patents that are held by
      Worldwide PE Patent Holdco. The value of the patent has been impaired as a
      result of the performance of the China and Japan operations and as a result
      of a
      delay in the Company’s move into the US market.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $526 in the three months ended June 30, 2007 compared
      to $281,625 in the three months ended June 30, 2006. As a percentage of revenue,
      other income and expenses decreased to 0.1% in the three months ended June
      30,
      2007 from 3.3% in the three months ended June 30, 2006. The reason for the
      decrease is attributed to the Company having favorable legal settlements from
      the lawsuit against Mr. Mark  Ryan
      in
      the prior year but no equivalent favorable legal settlements in the current
      period.




29




***NET
      INCOME (LOSS) BEFORE INCOME TAX AND INCOME TAX
      EXPENSES*** **.** Net loss
      before income tax was ($1,301,443) in the three months ended June 30, 2007
      compared to $958,455 in the three months ended June 30, 2006. This decrease
      was
      attributable to the impairment loss of $643,668 and amortization of $798,778
      on
      the patent that is held by Worldwide PE Patent Holdco and the increase in
      selling, general and administrative expenses.




Income
      tax expenses were ($65,861) in the three months ended June 30, 2007 compared
      to
      $361,551 in the three months ended June 30, 2006. This decrease is primarily
      attributable to the tax payments by Worldwide PE Patent Holdco which was
      established in the financial year 2007. As a percentage of gross income, income
      tax expense reduced from 4.2% to (0.6%) which is attributable to the decreasing
      profitability of the Company. Australian corporate tax is assessed nationally
      at
      30% of net profit.




***NET
      INCOME (LOSS)*** **.** Net loss
      was ($1,235,582) in the three months ended June 30, 2007 compared to
      $596,904 **** in
      the
      three months ended June 30, 2006. The decrease is due to the reason set forth
      above.




Net
      loss
      in our Australian operations was ($916,363) in the three months ended June
      30,
      2007 compared to the net income of $762,608 in the three months ended June
      30,
      2006. This decrease is attributable to the amortization and impairment loss
      on
      the patent that is held by Worldwide PE Patent and the increase in selling,
      general and administrative expenses.




Net
      loss
      in our New Zealand operation was ($230,355) in the three months ended June
      30,
      2007 compared to a net loss ($134,505) in the three months ended June 30, 2006.
      The increase in loss is mainly due to the increase in patient refunds and
      cancellation of programs which led to a decrease in net sales in the three
      months ended June 30, 2007. The operation was established in financial year
      2006
      so the amount of patient refund and DDR cancellation is less.





Net
      loss
      in our Chinese operations was ($176,171) in the three months ended June 30,
      2007
      compared to zero in the three months ended June 30, 2006. The principal reason
      for the net loss is because the Chinese operation was not able to effectively
      gain significant numbers of customers due to the sales and marketing activities
      in the market not being sufficiently effective.





Net
      income in our Japan operations was $125,885 in the three months ended June
      30,
      2007 compared to zero in the three months ended June 30, 2006. The principal
      reason for the net income is due to the reimbursement of certain Japan
      operations’ expenses by Worldwide PE Patent Holdco. At the end of the financial
      year 2007, Worldwide PE Patent Holdco has agreed with our Japan operations
      to
      reimburse certain portion of expenses when our Japan operation using the patent
      to explore the market in Japan. The reimbursement of expenses relating to the
      whole 12 months ended June 30, 2007 was done at the end of the year so this
      led
      to a net income in the three months ended June 30, 2007.





The
      above
      discussion of results exclude those entities which have no or what management
      deems insignificant operations such as the Whygo videoconferencing entities
      which are partly owned by AMI Australia.




30




**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 significant 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.




***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.




31




***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 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 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.




***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
      have and may in the future 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. Our operations in China
      and
      Japan are subject to substantially different regulatory regimes, market
      practices and customs from Australia, and our initial operations in those
      jurisdictions have not been profitable. There is a risk that our operations
      in
      those and other international areas will continue to be
      unprofitable.




32




***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.




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.




33




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 continue to operate in China
      and Japan on the present 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.




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 operations. 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.




34




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:




·
            variations
                in our quarterly operating results;




·
            general
                economic slowdowns;




·
            changes
                in market valuations of similar
                companies;




·
            sales
                of large blocks of our common
                stock;




·
            announcements
                by us or our competitors of significant contracts, acquisitions,
                strategic
                partnerships, joint ventures or capital commitments;
                and





·
            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 due to legal
      costs being incurred or judgments being given against us.




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.




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:




·
            must
                make a special written suitability determination for the
                purchaser; 
 ·
              must
                  receive the purchaser’s written agreement to a transaction prior to
                  sale;


·
            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 
 35
  ·
              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 our internal controls over financial reporting in their annual
      reports on Form 10-KSB. In addition, the public accounting firm auditing our
      financial statements must attest to and report on management’s assessment of the
      effectiveness of our 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
      we
      are 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 our 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.




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.




36




***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 22 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 internationally . 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 us, 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, we believe Dr. Vaisman’s letter of termination
      to be valid. Nonetheless, we believe that if the matter proceeds to litigation
      and a court ruled in favor of MedCare, our ability to offer ED treatments in
      North America may be adversely affected.




***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.




37




***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.***




We
      have
      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 we 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 our market share, pricing power, profitability and prospects as a going
      concern.




***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.***




We
      retain
      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 we provide and as a result, we have assumed this
      risk
      in its current business model. If over-the-phone diagnosis and prescriptions
      were prohibited, we 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
      our
      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.




38




One
      of
      our core expansion activities is our license arrangement with AMI UK. This
      arrangement is dependent on AMI UK securing expansion capital and, while the
      initial feedback has been positive and AMI UK has paid substantial funds to
      us,
      there remains a risk that AMI UK may be unsuccessful in their capital raising
      and subsequent business establishment activities and that we may therefore
      not
      earn further upfront or ongoing royalty payments from AMI UK.




***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.




***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.




39




***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 busi ness
      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**.**




The
      firm
      of Kabani & Company, Inc. has served as our independent auditors since March
      29, 2006 when it replaced Lichter, Yu & Associates. 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.




40





**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
            
            61
            
            Chief
                Executive Officer, President and DirectorDilip
                Shrestha
            
            30
            
            Chief
                Financial OfficerForhad
                (Tony) Khan
            
            45
            
            Executive
                Vice President, Secretary and DirectorAnatoly
                Fanshil
            
            56
            
            DirectorSpiro
                Baramilis
            
            49
            
            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 and
      is a
      fully qualified certified practicing accountant in Australia.




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.




41




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.




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. Mr.
      Baramalis has not had a direct or indirect material interest in any transaction
      or series of transaction since the beginning of the Company’s last fiscal year,
      or any currently proposed transaction or series of similar transactions to
      which
      the Company or any of its subsidiaries was or is to be a party, in which the
      amount involved exceeds $60,000.




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.




No
      director or executive officer is related to any other director or executive
      officer by blood or marriage.




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 2007, 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.




Audit
      Committee




The
      Board
      of Directors has adopted an Audit Committee Charter. The Board of Directors
      had
      appointed each of Anatoly Fanshil and Spiro Baramilis to the Audit Committee.
      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.




42




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 the fiscal year ended June 30, 2006
      to the identified persons (the “Named Executive Officers”).




**SUMMARY
      COMPENSATION TABLE**




Name
            
            Salary
            
            Warrant
                and Option Awards (1)
            
            Non-Equity
                Incentive Plan Compensation (2)
            
            All
                Other Compensation
            
            TotalJack
                Vaisman,
              Chief
                Executive Officer
            
            $
            288,920
            (3)
            
            0
            
            
            0
            
            $
            243,889
            (4)
            $
            532,809Dilip
                Shrestha,
              Chief
                Financial Officer
            
            $
            85,999
            (5)
            
            0
            
            
            0
            
            $
            7,753
            (6)
            $
            93,752Tony
                Khan,
              Executive
                Vice President
            
            $
            161,378
            (7)
            
            0
            
            
            0
            
            $
            99,571
            (8)
            $
            260,949




43




Warrant
      and option awards are valued based on a Black-Scholes option pricing model
      as
      used in the Company’s consolidated financial statements pursuant to Statement of
      Accounting Standards No. 123R, “Share-based Payment.” The Black-Scholes option
      pricing model reflects certain assumptions regarding variable factors such
      stock
      price volatility and the term of the option. Stock options have value to the
      recipient only as a result of appreciation in the price of the Company’s common
      stock.




Non-equity
      incentive plan compensation represents amounts paid as an incentive bonus.




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
      AU$350,000, approximately US$260,000, 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. The amount of bonus
      paid during the fiscal year ended June 30, 2006 was $103,837 and the amount
      of
      superannuation paid was $112,563.




The
      Company paid AU$36,759 for Dr. Vaisman’s automobile and all auto maintenance and
      operating expenses, which aggregated $27,489. All above amounts were paid on
      behalf of Dr. Vaisman under the terms of his employment agreement.




AMI
      Australia has an employment agreement with Mr. Shrestha whereby he is entitled
      to receive an annual base salary of AU$110,000, approximately US$81,750, 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. The amount of bonus paid during the fiscal
      year ended June 30, 2006 was zero and the amount of superannuation paid was
      $7,753.




AMI
      Australia has an employment agreement with Mr. Khan whereby he is entitled
      to
      receive an annual base salary of AU$180,000, approximately US$133,750, 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.
      The amount of bonus paid during the fiscal year ended June 30, 2006 was $51,913
      and the amount of superannuation paid was $12,032.




The
      Company paid AU$36,539 for Mr. Khan’s automobile and all auto maintenance and
      operating expenses, which aggregated $27,325. All above amounts were paid on
      behalf of Mr. Khan under the terms of his employment agreement. The Company
      also
      paid $8,301 in educational expenses on behalf of Mr. Khan.




Other
      than bonuses set forth in individual employment agreements, the Company has
      not
      adopted a formal bonus plan. To date, no bonuses have been paid pursuant to
      this
      understanding.




44


**OPTION/SAR
      GRANTS DURING 2007 FISCAL YEAR (INDIVIDUAL GRANTS)**


**Potential****Realizable
                    Value at****Assumed
                  Annual**
              
              **Alternate****Rates
                  of**
              
              **to****Stock
                  Price**
              
              **(f)
                  And (g):****Appreciation
                  for**
              
              **Grant****Individual
                  Grants**
              
              
              
              
              
              **Option
                  Term**
              
              ******Date****Value****Name**
              
              **Number
                  of Securities Underlying Options Granted**
              
              **Percent
                  of Total Options Granted to Employees in Fiscal
                  Year**
              
              **Exercise**
                **or
                  Base**
                **Price**
              
              **Expiration
                  Date**
              
              5%
                    ($)(f)
              
              10%
                    ($)(g)
              
              Grant
                        DatePresentValue
                    $ (h)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 2007 FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR
      VALUES**




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





45




**EQUITY
      COMPENSATION PLAN INFORMATION**




We
      do not
      have any equity compensation plans.




**EMPLOYMENT
      CONTRACTS AND TERMINATION OF EMPLOYMENT**




As
      of
      October 10, 2007, 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 June 30, 2007.




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).




46




**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 October 11, 2007, 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.





**Name
                and Address of Beneficial Owner**
            
            **Shares
                Beneficially Owned (1)**
            
            **Percent
                of Class**Jacov
                (Jack) Vaisman
              Unit
                131,18-34 Waverley Street, Bondi Junction NSW 2022
                Australia
            
            
            10,250,000
            
            
            19.16
            %Huntleigh
                Investment Fund Limited
              49
                Micoud Street, Castries, St. Lucia
            
            
            5,104,105
            (2)
            
            9.54
            %Forhad
                (Tony) Khan
              Suite
                4, Level 1, 26/3 Wolesly Grove, Zetland NSW 2017 Australia
            
            
            250,000
            
            
            *Dilip
                Shrestha
              18/30
                Mary Street, Lidcambe NSW 2141 Australia
            
            
            0
            
            
            *Anatoly
                Fanshil
              22/2
                Ocean Street, Bondi Junction NSW 2026 Australia
            
            
            900,000
            
            
            1.68
            %Spiro
                Baramilis
              12
                Merton Street, Kogarah Bay NSW 2217 Australia
            
            
            0
            
            
            *Geissler
                Holdings Limited
              1
                Raffles Place #21-01 OUB Centre, Singapore 048616
            
            
            8,850,000
            (3)
            
            16.54
            %




47




**Name
                and Address of Beneficial Owner**
            
            
            **Shares
                Beneficially Owned (1)**
            
            
            **Percent
                of Class**RRD
                Investments Pty Limited
              65
                Prospect Road, Summer Hills, NSW 2130, Australia
            
            
            3,400,000
            (4)
            
            6.35
            %All
                Directors and Officers (5 people)
            
            
            12,400,000
            
            
            23.17
            %







*
      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)  Information
      obtained from Schedule 13D filed with the SEC on December 13, 2005.




(3)  Information
      obtained from Schedule 13D filed with the SEC on September 14,
      2006.




(4)    Information
      obtained from Schedule 13D filed with the SEC on September 14, 2006.




There
      were no agreements in place for payments to any officers in the event of a
      change-in-control of the Company.




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




Parties
      are considered to be related if one party has the ability, directly or
      indirectly, to control the other party or exercise significant influence over
      the other party in making financial and operational decisions. Parties are
      also
      considered to be related if they are subject to common control or common
      significant influence.




Since
      August 1, 2003, AMI Australia has used in its business certain of the
      intellectual property consisting solely of an Australian innovation patent
      for
      its premature ejaculation programs (which patent is due to expire on July 9,
      2012) and an Australian standard patent application (Australian standard patent
      application No. 2004222783). Provisional applications for the patents 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 with final patent applications being
      made on March 2, 2005 and July 9, 2004 respectively. The Australian innovation
      patent was issued to Dr Vaisman on July 2, 2005 who on October 28, 2005 assigned
      the patent to PE in exchange for 1,249,999 shares of PE. Since October 28,
      2005,
      the patents have been orally licensed by AMI Australia from PE Patent Holdco
      Pty
      Limited on a short-term royalty free arrangement. Dr. Vaisman sold 1,250,000
      shares of PE (100% of his shares) on October 31, 2005 for an aggregate of
      $500,000. Until November 14, 2005, Dr. Vaisman served as the sole director
      of PE
      when he resigned and Igor Chalik was appointed as director in his
      place.




48




From
      May
      4, 2005, AMI Australia had held 93% of the issued and outstanding ordinary
      shares of IMT. One of the shareholders of IMT was Mr. Anatoly Fanshil. Mr.
      Fanshil, a director of the company, excused himself from all discussions and
      he
      agreed to abstain from voting for or against the Acquisition. Jack Vaisman
      is
      also the sole director of IMT. Other than Mr. Fanshil, neither Dr. Vaisman,
      nor
      any other director or officer of Advanced Medical Institute Inc., AMI Australia
      or any of the Registrant’s subsidiaries (other than in their capacities with
      Advanced Medical Institute Inc.) has or will benefit directly or indirectly
      from
      the Acquisition.




On
      November 16, 2005, Advanced Medical Institute Inc. entered into a Share Exchange
      Agreement with PE Patent Holdco Pty Limited (ACN 116 786 737), a privately
      owned
      Australian company (“PE”), and PE’s shareholders, pursuant to which Advanced
      Medical Institute Inc. 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
      Advanced Medical Institute Inc.’s shares of common stock to the shareholders of
      PE. As a result, PE became a wholly-owned subsidiary of Advanced Medical
      Institute Inc. The purchase price for 100% of PE was an aggregate of 5 million
      shares of Advanced Medical Institute Inc.’s common stock valued at $1.10 per
      share.




On
      April
      18, 2006, Advanced Medical Institute Inc. entered into a Share Exchange
      Agreement with certain shareholders of Intelligent Medical Technologies Pty
      Limited, a privately owned Australian company (“IMT”), pursuant to which
      Advanced Medical Institute Inc. 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 of the Registrant’s
      shares of common stock to the shareholders of IMT (the “Acquisition”). As a
      result, IMT became a wholly-owned subsidiary of the Advanced Medical Institute
      Inc. The purchase price for 7% of IMT was an aggregate of 1,260,000 shares
      of
      Advanced Medical Institute Inc.’s common stock valued at $1.40 per
      share.




On
      September 8, 2006, Advanced Medical Institute Inc. 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
      AUD3
      million (approximately USD2.25 million) and the issuance in the aggregate of
      16,125,000 shares of the Company’s common stock valued at USD1.00 per share. As
      a result, Worldwide PE became a wholly-owned subsidiary of Advanced Medical
      Institute Inc.




49




**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).




50




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).10.11
            
            Consulting
                Agreement between the Company and the Heartcheck Group dated February
                12,
                2007 filed herewith.10.12
            
            Option
                Agreement between Worldwide PE Patent Holdco Pty Limited and AMI
                Group
                Limited dated May 2, 2007 (incorporated herewith by reference to
                Exhibit
                10.1 to Advanced Medical Institute Inc.’s Current Report on Form 8-K dated
                May 2, 2007 and filed with the Securities and Exchange Commission
                on May
                3, 2007).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.




51




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, 2007.




**AUDIT
      FEES FOR FISCAL YEAR ENDED JUNE 30, 2007**




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 Kabani & Company, Inc., for the fiscal year ended June
      30, 2007 was $78,500.




**AUDIT
      RELATED FEES FOR FISCAL YEAR ENDED JUNE 30, 2007**




Audit
      fees consist of fees billed for professional services rendered for the audit
      of
      our financial statements.. The total fees billed for Kabani & Company, Inc.,
      during the fiscal year ended June 30, 2007 was $0.




**TAX
      FEES FOR FISCAL YEAR ENDED JUNE 30, 2007**




There
      were no tax fees billed by Kabani & Company, Inc., for the fiscal year ended
      June 30, 2007.




**ALL
      OTHER FEES FOR FISCAL YEAR ENDED JUNE 30, 2007**




There
      were no other accounting fees billed by Kabani & Company, Inc., for the
      fiscal year ended June 30, 2007.




**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.




52


**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:
                October 15, 2007
            By:
            /s/
              Jacov (Jack) VaismanJacov
              (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:
                  October 15, 2007
            By:
            /s/
              Jacov (Jack) VaismanJacov
                (Jack) Vaisman
              Chief
                Executive Officer and President




Date:
                    October 15, 2007
            By:
            /s/
              Dilip ShresthaDilip
                  Shrestha
                Chief
                  Financial Officer




Date:
                      October 15, 2007
            By:
            /s/
              Forhad (Tony) KahnForhad
                  (Tony) Kahn
                  Executive
                    Vice President and
                    Secretary




Date:
                        October 15, 2007
            By:
            /s/
              Anatoly FanshilAnatoly
                    Fanshil
                  Director




Date:
                          October 15, 2007
            By:
            /s/
              Spiro BaramilisSpiro
                    Baramilis
                    Director




53


**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).10.11
            
            Consulting
                Agreement between the Company and the Heartcheck Group dated February
                12,
                2007, filed herewith.10.12
            
            Option
                Agreement between Worldwide PE Patent Holdco Pty Limited and AMI
                Group
                Limited dated May 2, 2007 (incorporated herewith by reference to
                Exhibit
                10.1 to Advanced Medical Institute Inc.’s Current Report on Form 8-K dated
                May 2, 2007 and filed with the Securities and Exchange Commission
                on May
                3, 2007).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 YEARS ENDED JUNE 30, 2007 AND 2006**





**ADVANCED
      MEDICAL INSTITUTE INC.**




**AND
      SUBSIDIARIES**




**FINANCIAL
      STATEMENTS**




**TABLE
      OF CONTENTS**





REPORTS
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            
            F-3FINANCIAL
                STATEMENTSConsolidated
                Balance Sheet as at June 30,2007
            
            
            F-4Consolidated
                Statements of Operations for the years ended June 30, 2007 and
                2006
            
            
            F-5Consolidated
                Statements of Stockholders’ Equity for the years ended June 30, 2007 and
                2006
            
            
            F-6Consolidated
                Statements of Cash Flows for the years ended June 30, 2007 and
                2006
            
            
            F-7Notes
                to Consolidated Financial Statements
            
            
            F-9




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, 2007, and
      the related consolidated statements of operations, stockholders’ equity, and
      cash flows for the years ended June 30, 2007 and 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 audits.




We
      conducted our audits 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
      audits 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, 2007, and the results of its operations
      and
      its cash flows for the years ended June 30, 2007 and 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
      30, 2007


F-3




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEET**


**AS
      AT JUNE 30, 2007**




**Notes**
            
            **June
                30, 2007****CURRENT
                ASSETS**Cash
                & cash equivalent
            
            
            
            
            $
            864,481Receivables,
                net
            
            
            
            
            
            12,158,950Receivables
                due from related parties
            
            
            9
            
            
            1,453Inventory
            
            
            
            
            
            269,707Other
                assets
            
            
            
            
            
            1,174,445**TOTAL
                CURRENT ASSETS**
            
            
            
            
            
            14,469,036**NON-CURRENT
                ASSETS**Security
                deposits
            
            
            
            
            
            191,702Property,
                plant and equipment, net
            
            
            3
            
            
            1,045,917Intangible
                assets, net
            
            
            
            
            
            28,217,069**TOTAL
                NON-CURRENT ASSETS**
            
            
            
            
            
            29,454,688**TOTAL
                ASSETS**
            
            
            
            
            $
            43,923,724**CURRENT
                LIABILITIES**Unearned
                revenue
            
            
            
            
            $
            5,101,288Accounts
                payables & accrued expenses
            
            
            
            
            
            5,808,271Payables
                due to related parties
            
            
            9
            
            
            4,932Interest
                bearing liabilities - current
            
            
            4
            
            
            72,044Income
                taxes payable
            
            
            
            
            
            326,006**TOTAL
                CURRENT LIABILITIES**
            
            
            
            
            
            11,312,541**NON-CURRENT
                LIABILITIES**Rental
                deposit received
            
            
            
            
            
            6,833Interest
                bearing liabilities - non current
            
            
            4
            
            
            2,424,362Deferred
                tax liabilities
            
            
            
            
            
            1,501,602**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            
            
            
            3,932,797**TOTAL
                LIABILITIES**
            
            
            
            
            
            15,245,338**COMMITMENTS
                & CONTINGENCIES**
            
            
            
            
            
            -**STOCKHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share,90,000,000
                shares authorized,53,507,450
                issued and outstanding
            
            
            
            
            
            53,507Additional
                paid in capital
            
            
            
            
            
            24,149,420Other
                comprehensive income
            
            
            
            
            
            3,171,506Retained
                earnings
            
            
            
            
            
            1,303,953**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            
            
            
            28,678,386**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            
            
            
            $
            43,923,724




See
      accompanying notes to the financial statements.


F-4


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED JUNE 30, 2007 AND 2006**


**June
                30, 2007**
            
            **June
                30, 2006****NET
                REVENUES**
            
            $
            39,421,875
            
            $
            30,453,128**COST
                OF REVENUES**
            
            
            (9,457,320
            )
            
            (7,940,836
            )**GROSS
                PROFIT**
            
            
            29,964,555
            
            
            22,512,292**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            (29,970,688
            )
            
            (19,153,393
            )**Impairment
                loss**
            
            
            (643,668
            )
            
            -**TOTAL
                SELLING, GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            (30,614,356
            )
            
            (19,153,393
            )**OPERATING
                INCOME**
            
            
            (649,801
            )
            
            3,358,899**OTHER
                INCOME AND EXPENSE**Rental
                income
            
            
            14,722
            
            
            24,074Bank
                interest
            
            
            51,320
            
            
            25,960Other
                interest income
            
            
            -
            
            
            -Legal
                settlement
            
            
            -
            
            
            269,219Sundry
                income
            
            
            114,969
            
            
            52,733Management
                fee income
            
            
            122,765Interest
                expense
            
            
            (204,806
            )
            
            (1,277
            )Minority
                interest
            
            
            -
            
            
            (67,927
            )**TOTAL
                OTHER INCOME AND EXPENSE**
            
            
            98,970
            
            
            302,782**INCOME
                (LOSS) BEFORE INCOME TAXES**
            
            
            (550,831
            )
            
            3,661,681INCOME
                TAX EXPENSE
            
            
            (769,691
            )
            
            (1,196,487
            )NET
                INCOME (LOSS)
            
            
            (1,320,522
            )
            
            2,465,194Other
                Comprehensive item - Foreign currency translation income
                (loss)
            
            
            3,375,989
            
            
            (31,076
            )**Net
                Comprehensive Income**
            
            **$**
            **2,055,467**
            
            **$**
            **2,434,118****Earnings
                (loss) per share, basic**
            
            **$**
            **(0.03**
            **)**
            **$**
            **0.07****Weighted
                average number of shares outstanding, basic**
            
            
            **50,346,964**
            
            
            **34,509,339**




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, 2007 AND 2006**





**Additional**
            
            **Other****Common
                Stock**
            
            **Paid-In**
            
            **Comprehensive**
            
            **Retained****Shares**
            
            **Amount**
            
            **Capital**
            
            **(Income)
                Loss**
            
            **Earnings**
            
            **Total****Balance
                June 30, 2005**
            
            
            31,122,450
            
            $
            31,122
            
            $
            782,805
            
            $
            (173,407
            )
            $
            159,281
            
            $
            799,801Issuance
                of stock
            
            
            6,360,000
            
            
            6,360
            
            
            7,257,640
            
            
            -
            
            
            -
            
            
            7,264,000Other
                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
            
            
            10,497,919Issuance
                of stock
            
            
            16,025,000
            
            
            16,025
            
            
            16,108,975
            
            
            -
            
            
            -
            
            
            16,125,000Other
                comprehensive income
            
            
            -
            
            
            -
            
            
            -
            
            
            3,375,989
            
            
            -
            
            
            3,375,989Net
                loss, June 30, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,320,522
            )
            
            (1,320,522
            )**Balance
                June 30, 2007**
            
            
            53,507,450
            
            $
            53,507
            
            $
            24,149,420
            
            $
            3,171,506
            
            $
            1,303,953
            
            $
            28,678,386




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, 2007 AND 2006**




**June
                30, 2007**
            
            **June
                30, 2006****Cash
                Flows from Operating Activities**Receipts
                from customers
            
            $
            33,536,006
            
            $
            24,267,828Interest
                received
            
            
            51,045
            
            
            25,960Interest
                paid
            
            
            (204,804
            )
            
            (1,277
            )Payment
                to suppliers & employees
            
            
            (32,565,285
            )
            
            (22,859,643
            )Income
                tax paid
            
            
            (234,127
            )
            
            (222,780
            )Receipts
                from government grant
            
            
            -
            
            
            31,991**Net
                cash provided by operating activities**
            
            
            582,835
            
            
            1,242,079**Cash
                Flows from Investing Activities**Payment
                for property, plant & equipment
            
            
            (397,494
            )
            
            (302,030
            )Purchase
                of intangible assets
            
            
            (2,335,839
            )
            
            (105,464
            )Repayment
                from related entities
            
            
            -
            
            
            16,315Dividend
                payment
            
            
            (39,296
            )
            
            -Payment
                for security deposit
            
            
            -
            
            
            (15,509
            )**Net
                cash used in investing activities**
            
            
            (2,772,629
            )
            
            (406,688
            )**Cash
                Flows From Financing Activities**Collection
                of note receivable
            
            
            -
            
            
            150,771Proceeds
                from borrowings
            
            
            2,357,760
            
            
            -Repayment
                of borrowings
            
            
            (228,461
            )
            
            (152,951
            )**Net
                cash provided by (used in) financing activities**
            
            
            2,129,299
            
            
            (2,180
            )Net
                (decrease) increase in cash and cash equivalent
            
            
            (60,495
            )
            
            833,211Effect
                of exchange rate changes on cash and cash equivalent
            
            
            (178,267
            )
            
            (25,929
            )Cash
                & cash equivalent at beginning of year
            
            
            1,103,243
            
            
            295,961**Cash
                & cash equivalent at end of year**
            
            **$**
            **864,481**
            
            **$**
            **1,103,243**NON-CASH
                INVESTING & FINANCING ACTIVITY:1)
                The Company issued 16,125,000 shares to the shareholders of Worldwide
                PE
                Patent Holdco Pty Limited as part of acquisition of that entity on
                September 8, 20062)
                Assets acquired under capital leases $24,930




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, 2007 AND 2006**




**June
                30, 2007**
            
            **June
                30, 2006****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
            
            $
            864,481
            
            $
            1,103,243**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                    Income (Loss)**
            
            
            (1,320,522
            )
            
            2,533,121**Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:**Depreciation
                and amortization expense
            
            
            1,339,737
            
            
            299,703Provision
                for doubtful debt
            
            
            4,696,994
            
            
            1,767,870Impairment
                loss
            
            
            643,668
            
            
            -**Changes
                in Assets and Liabilities**(Decrease)
                Increase in current inventories
            
            
            (29,926
            )
            
            14,773Increase
                in receivables
            
            
            (6,393,582
            )
            
            (9,140,470
            )Increase
                in deferred tax liabilities
            
            
            436,182
            
            
            907,528Increase
                in unearned revenue
            
            
            539,141
            
            
            2,211,932Minority
                interest
            
            
            (33,662
            )
            
            -Increase
                in payables
            
            
            527,005
            
            
            2,570,155Decrease
                in rental deposit received
            
            
            (73,562
            )
            
            -Increase
                in provisions for compensated absences
            
            
            133,601
            
            
            8,241Increase
                in income tax payable
            
            
            117,761
            
            
            69,226**Cash
                Flows Provided by Operating Activities**
            
            **$**
            **582,835**
            
            **$**
            **1,242,079**




See
      accompanying notes to the financial statements.


F-8


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007 AND 2006**




**1.**  **NATURE
      OF BUSINESS**





Advanced
      Medical Institute Inc. (formerly Hawksdale Financial Visions, Inc.) (the
“Company”) was organized on 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, New Zealand, China and Japan. 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
      medical centers and sales offices throughout Australia and New Zealand. AMI
      China, a wholly owned subsidiary of the Company, operates 2 medical centers
      in
      Beijing, China and AMI Japan, a 75% subsidiary of the Company, operates a clinic
      in Tokyo, Japan as well as having an informal referral arrangement with 3
      medical clinics in Osaka, Nagoya and Okinawa.




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) (collectively, the “Patents”).




The
      patents and patent applications 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.




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.





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 AUD3 million (approximately USD2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share.





F-9


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 AUD3 million (approximately USD2.55 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 accrue 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 11%).
      The Company has been meeting its interest payment obligations under these loans
      and has pre-paid approximately AUD274,000 in principal as at the date of this
      filing.





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





The
      Chinese subsidiary, named AI Te Wei (Beijing) Medicine Consulting Company,
      is an
      indirect wholly owned subsidiary of the Company and the Chinese entity has
      formed an alliance with 2 Beijing hospitals 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
      Japanese subsidiary, named AMI Japan Kabushiki Gaisya, is an indirect 75% owned
      subsidiary of the Company. The Japanese subsidiary has formed an alliance with
      a
      Japanese party with expertise in marketing in the Japanese market and two
      financial investors. The Japanese subsidiary commenced operations on October
      1,
      2006.




On
      May 2,
      2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
      Group Limited, a privately owned company registered in the United Kingdom (“AMI
      UK”).




The
      Option grants AMI UK a right to enter into an exclusive license to use Worldwide
      PE’s intellectual property in the United Kingdom. AMI UK has paid Worldwide PE
      an upfront non-refundable fee of $50,000 to secure an initial period of four
      months to confirm the license which period may be extended for a further two
      months by AMI UK paying Worldwide PE a non-refundable extension fee of $50,000.
      During this initial six month period, AMI UK may elect to enter into a License
      Agreement (the “License”) by paying Worldwide PE an upfront non-refundable
      license fee of $1 million less the upfront fees paid to Worldwide PE prior
      to
      that date. Terms of the Option and the License have been disclosed by the
      Company on its Current Report on Form 8-K filed with the Securities and Exchange
      Commission (the “SEC”) on May 3, 2007. On September 4, 2007 AMI UK exercised its
      right to extend the option period and paid an extension fee of $50,000.




Subsidiaries
      of AMI Australia




The
      Company’s direct 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 direct subsidiaries are Advanced Medical Institute Pty Limited, PE
      Patent Holdco Pty Limited (“PE
      Patent”) ,
      Worldwide PE Patent Holdco Pty Limited (“Worldwide
      PE”) ,
      Advanced Medical Institute (NZ) Limited, IMT and Whygo Video
      Conferencing Pty Ltd (“Whygo”) .




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




Details
      of PE Patent Holdco are set forth in the Nature of Business description above.





Details
      of Worldwide PE are set forth in the Nature of Business description above.




Details
      of IMT are set forth in the Nature of Business description above.




AMI
      International Pty Limited was established to hold the Group’s ownership
      interests in the Japanese and Chinese companies established to conduct
      operations in those countries.




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


F-10


Advanced
      Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
      Zealand. AMI NZ contributed 2.20% of AMI Australia’s consolidated revenue during
      the year ended June 30, 2007 (excluding other income).




AMI
      Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
      conferencing services across Australia and in
      various locations around
      the world. 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 around the world. The source of Whygo’s income is derived
      from renting video conferencing rooms to its corporate partners through AMI
      Australia and its other channeling partners. Whygo contributed 2.8% of AMI
      Australia’s consolidated revenue during the year ended June 30, 2007 (excluding
      other income).




AWIT
      Beijing Medicine Consulting Company (“AMI China”) conducts the Company’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
      Kabushiki Gaisya (“AMI Japan”) conducts the Company’s business in Japan. AMI
      Japan commenced advertising of its services on October 1, 2006 and is in the
      early stages of its operations.




During
      September 2006, AMI commenced a not for profit unit entity named “AMI SCI” which
      provides, as part of its community services program, specialized sexual
      dysfunction treatment programs to spinal cord victims in Australia. This unit
      is
      in its early stages of development and details regarding its services and
      operation are located at rocketlaunch.com.au.





On
      February 12, 2007, the Company entered into a written agreement with the
      Heartcheck Group of companies for an indefinite term, which can be terminated
      at
      any time with not less than twelve months written notice. Under the agreement,
      Heartcheck agrees to utilize services provided by the Company, including the
      provision of staff and premises. In exchange for these services, Heartcheck
      has
      agreed to reimburse the Company for all expenses associated with the provision
      of these services and to pay the company a net margin on those expenses. The
      provision of these services and the fees generated from this agreement with
      Heartcheck has contributed to the Company’s other income during the year ended
      June 30, 2007 whereas there had been no revenue generated by the agreement
      during past fiscal periods. Heartcheck is independently owned from the Company,
      its subsidiaries and its affiliates and it operates a business of providing
      cardiac related medical services in Australia. ****


F-11


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**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:




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.




Unearned
      Revenue




Unearned
      revenue arises from programs that exceed three months. The maximum program
      length is twelve months while the average program length purchased by each
      individual patient is four & half months. The Company made estimate of
      unearned revenue based on the average program length less three months for
      which
      medication is provided and revenue is recognized.




Advertising
      Expense




Advertising
      costs are charged to expense as they are incurred.


F-12


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**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”.




Accounts
      Receivable




Accounts
      receivable are sales for the year, net of sales refund, cancellation, unearned
      revenue and provision for doubtful debt. The Company estimates provision for
      doubtful debts based on the historical results.




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, 2007 inventory consisted only of finished goods:




Property
      and Equipment




Property
      & Equipment placed in service is depreciated over the estimated useful lives
      of the assets using the diminishing value 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, 2007 and 2006, 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, 2007, the accounts of AMI Australia and its subsidiaries were
      maintained and its financial statements were expressed in the local currency
      for
      the jurisdiction in which the entity operated. Such financial statements were
      translated into the functional currency in Australian Dollars (AUD) and
      thereafter to reporting currency in 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-13




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**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.





Impairment
      is determined by assessing the recoverable amount of the cash-generating unit
      (group of cash-generating units), to which the intangible asset relates. When
      the recoverable amount of the cash-generating unit (group of cash-generating
      units) is less than the carrying amount, an impairment loss is recognised.
      During the year ended June 30, 2007 the Company impaired $695,167 of Worldwide
      PE Patent and recorded impairment loss in the accompanied financial
      statements.





At
      June
      30, 2007, intangibles consist of the following:





**Intangibles**
            
            **Gross
                Carrying****Amount**
            
            **Accumulated****Amortization**
            
            **Impairment****Loss**
            
            **Net**Amortized
                intangibles:Patents
            
            $
            9,849,090
            
            $
            (674,397
            )
            $
            (695,167
            )
            $
            8,479,526Intellectual
                Properties
            
            
            15,972,882
            
            
            (774,787
            )
            
            -
            
            
            15,198,095Computer
                Software
            
            
            337,766
            
            
            (185,053
            )
            
            -
            
            
            152,713Unamortized
                intangibles:Intellectual
                Properties
            
            
            4,386,735
            
            
            -
            
            
            -
            
            
            4,386,735$
            30,546,473
            
            $
            (1,634,237
            )
            $
            (695,167
            )
            $
            28,217,069





The
      Company assigned an 18 year life to the patents that are held by Worldwide
      PE
      Patent, a 19 year life to the patents that are held by PE Patent.




F-14




For
      intellectual property, the company assigned an 18 year life to the intellectual
      property that arose from Worldwide PE Patent, a 19 year life to the intellectual
      property that arose from PE Patent, and indefinite life to the intellectual
      property that arose from IMT.





Computer
      software was assigned as having a 3 year life.





Amortization
      expense from continuing operation for the year ended June 30, 2007 and 2006
      was
      $1,163,444 and $215,913 respectively. The Company expects the amortization
      expenses for the next five years to be as follows:





**Year
                Ending June 30,**
            
            **Annual
                Amount**2008
            
            $
            1,504,0002009
            
            $
            1,504,0002010
            
            $
            1,504,0002011
            
            $
            1,504,0002012
            
            $
            1,504,000




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-15





**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**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 SFAS 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. Management believes that this statement will not
      have
      a significant impact on the financial statement.





In
      March
      2006 FASB issued SFAS No. 156 ‘Accounting for Servicing of Financial Assets’
this Statement amends SFAS 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.
      This Statement:




·
            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.




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




·
            Permits
                an entity to choose ‘Amortization method’ or Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities:




·
            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.




·
            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 is currently evaluating the
      effect of this pronouncement on financial statements.


F-16





**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





**RECENT
      PRONOUNCEMENTS** **(Continued)**





In
      September 2006, FASB issued SFAS No. 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.





In
      September 2006, FASB issued SFAS No. 158 “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This Statement improves financial reporting by
      requiring an employer to recognize the over funded or under funded status of
      a
      defined benefit postretirement plan (other than a multiemployer plan) as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This Statement also improves financial
      reporting by requiring an employer to measure the funded status of a plan as
      of
      the date of its year-end statement of financial position, with limited
      exceptions. An employer with publicly traded equity securities is required
      to
      initially recognize the funded status of a defined benefit postretirement plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after December 15, 2006. An employer without publicly traded equity securities
      is required to recognize the funded status of a defined benefit postretirement
      plan and to provide the required disclosures as of the end of the fiscal year
      ending after June 15, 2007. However, an employer without publicly traded equity
      securities is required to disclose the following information in the notes to
      financial statements for a fiscal year ending after December 15, 2006, but
      before June 16, 2007, unless it has applied the recognition provisions of this
      Statement in preparing those financial statements:




·
            A
                brief description of the provisions of this Statement




·
            The
                date that adoption is required




·
            The
                date the employer plans to adopt the recognition provisions of this
                Statement, if earlier.




The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008. Management is currently evaluating
      the effect of this pronouncement on financial statements.





In
      February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
      years beginning after November 15, 2007. Early adoption is permitted subject
      to
      specific requirements outlined in the new Statement. Therefore, calendar-year
      companies may be able to adopt FAS 159 for their first quarter 2007 financial
      statements.




The
      new
      Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. FAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities. Management is currently evaluating the effect of this pronouncement
      on financial statements.


F-17





**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




2.OTHER
      ASSETS




Following
      is the summary of other assets as of June 30, 2007





Bank
                guarantees
            
            $
            84,917Advances
                and prepayments
            
            
            57,397Other
                receivables
            
            
            106,100Other
                debtors
            
            
            544,185Loan
                to affiliates
            
            
            381,856Total
            
            $
            1,174,455




**June
                30, 2007****3.****PROPERTY,
                PLANT AND EQUIPMENT**Leasehold
                improvements at cost
            
            $
            541,746Less:
                Accumulated depreciation
            
            
            74,746467,000Motor
                Vehicles
            
            
            50,334Less:
                Accumulated Depreciation
            
            
            26,70823,626Office
                Furniture & Equipment
            
            
            474,426Less:
                Accumulated Depreciation
            
            
            99,363375,063Computer
                Hardware - at Cost
            
            
            357,854Less:
                Accumulated Depreciation
            
            
            220,420137,434Low
                Value Pooled Fixed Assets
            
            
            142,171Less:
                Accumulated Depreciation
            
            
            99,37542,796**Total
                Property, Plant and Equipment**
            
            **$**
            **1,045,917**




F-18




Depreciation
      expenses were $156,162 and $113,059 for the fiscal years ended June 30, 2007
      and
      2006, respectively.





Included
      in property and equipment is approximately $188,678 of assets, which are leased
      under non-cancelable leases and accounted for as capital leases, which expire
      through January 2009. The accumulated depreciation included in the property
      and
      equipment for these leases is approximately $80,729.


F-19


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**June
                30, 2007****4.****INTEREST
                BEARING LIABILITIES****Current,
                as of the period ended June 30**Capitalized
                lease liability
            
            
            72,044**72,044****Non-current,
                due during the year ended June 30:**Capitalized
                lease liability2007
            
            
            -2008
            
            
            25,22025,220Secured
                Loan
            
            
            2,399,142Total
                non-current
            
            
            **2,424,362**




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.




Interest
      expenses were $204,806 and $1,277 for the fiscal years ended June 30, 2007
      and
      2006, respectively.




Obligations
      under the notes are secured by the financed assets included in property and
      equipment. The secured loan is secured over all of AMI Australia’s assets and
      undertakings. The future aggregate payments arising from this loan is as
      follows:


Due
                  during the year ended June 30,2008
              
              $
              263,4162009
              
              
              293,8442010
              
              
              327,0362011
              
              
              363,9782012
              
              
              404,8242013
              
              
              450,8202014
              
              
              295,224$
              2,399,142
  F-20




**5.
      ACCOUNTS PAYABLE AND ACCRUED EXPENSES**




Accounts
      payable and accrued expenses as of June 30, 2007 are summarized as
      follows:


AmountJune
                  30, 2007Accounts
                  payable
              
              $
              1,714,756Accrued
                  salaries
              
              
              443,806Accrued
                  professional fees
              
              
              30,557Other
                  current liabilities
              
              
              102,000Provision
                  for DDR medication cost
              
              
              887,845Provision
                  for DDR sales commission
              
              
              828,428Provision
                  for DDR collection fee
              
              
              828,428Provision
                  for patient refund
              
              
              84,880Accrued
                  legal case settlement
              
              
              250,396Accrued
                  DDR sales commission
              
              
              211,709Accrued
                  payroll tax
              
              
              59,416Accrued
                  compensated absences
              
              
              366,050Total
              
              $
              5,808,271




**6.**  **LAWSUITS**




As
      of
      June 30, 2007, 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 ruled 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 agreed to pay $94,300
      in full settlement of these costs and partial payment has been made with the
      balance to be paid by January 2008.




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. AMI Australia and Mr. Licastro agreed to settle the claim on
      confidential terms on September 21, 2007 with all payments made in full
      settlement of the claim fully accrued as at June 30, 2007.




On
      May
      25, 2007, AMI Australia commenced proceedings in the New South Wales Supreme
      Court against Channel Seven Sydney Pty Limited in respect of certain allegedly
      actionable statements made by Channel Seven. AMI Australia has alleged that
      the
      statements made involve a breach of the doctrine of injurious falsehood and
      that
      it is entitled to be compensated in damages.  The
      proceedings are at an early stage.


F-21


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**7.**  **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, 2007**Due
                during the period ended June 30:2008
            
            **$**
            704,6902009
            
            
            524,2192010
            
            
            223,0372011
            
            
            91,5432012
            
            
            37,337**$**
            **1,580,826**




Total
      rent expense under these operating lease was approximately $1,733,041 and
      $1,143,332 during the years ended June 30, 2007 and 2006,
      respectively.




**8.**  **CONCENTRATIONS**




Sales
      Markets - 97% 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.




**9.**  **STOCK
      EXCHANGE AGREEMENT**




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 AUD3 million (approximately USD2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share. These shares were subsequently
      transferred by the Company to AMI Australia. The issuance of our shares of
      common stock to the Worldwide 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 Worldwide PE when used for events after September
      8, 2006, described herein.




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 AUD3 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 loan 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 11%).


F-22


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**





A
      summary
      of Worldwide PE Patent Holdco Pty Ltd., assets acquired, liabilities assumed
      and
      consideration paid for is as follows:


AmountCurrent
                  assets
              
              $
              -Patent
              
              
              18,383,100$
              18,383,100Consideration
                  paidCash
              
              $
              2,258,100Common
                  Stock
              
              
              16,125,000$
              18,383,100





The
      following un-audited pro forma consolidated financial information for the years
      ended June 30, 2007 and 2006, as presented below, reflects the results of
      operations of the Company assuming the acquisition occurred on July 1, 2006
      and
      2005 respectively, and after giving effect to the purchase accounting
      adjustments. These pro forma results have been prepared for information purposes
      only and do not purport to be indicative of what operating results would have
      been had the acquisitions actually taken place on July 1, 2006 and 2005
      respectively, and may not be indicative of future operating
      results.




Years
                ended June 30Un-Audited
              Pro Forma Consolidated Financial
              Information
            
            2007
            
            2006(UN-AUDITED
                AND IN U.S. DOLLARS)Net
                revenue
            
            $
            39,421,485
            
            $
            30,453,128Operating
                income (loss)
            
            $
            (846,042
            )
            $
            3,203,787Net
                income (loss)
            
            $
            (1,593,376
            )
            $
            2,310,082Earnings/(loss) per
                share - basic
            
            $
            (0.03
            )
            $
            0.07




F-23


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**





**June
                30, 2007****10.****RELATED
                PARTY TRANSACTIONS*****Forhad
                (Tony) Khan***Relationship:
                Director of the parent entityPayable
                to this related party
            
            $
            2,947***Jack
                Vaisman (an AU citizen)***Relationship:
                Director of the parent entityDirector
                salary
            
            $
            285,336***James
                Matthew (an AU citizen)***Relationship:
                Director of the subsidiaryDirector
                salary
            
            $
            44,158Payable
                to this related party
            
            
            1,985***Prostate
                Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                from this related party
            
            $
            1,453***Zinalda
                Vaisman (an AU citizen)***Relationship:
                Director’s wifeSalary
            
            $
            58,037




Total
        receivables from related parties included in the Company’s balance sheet was
        $1,453 as of June 30, 2007.
  Total
          payables to related parties included in the Company’s balance sheet was $4,932
          as of June 30, 2007.
  Receivables
            from, and payables to, related parties are unsecured, interest-free and
            have no
            fixed repayment term.




**11.**  **CONTINGENT
      LIABILITY**




A
      dispute
      with a previous telecommunication carrier over billing in the amount of $122,924
      arose in 2002. AMI Australia responded with a counterclaim of $550,904 against
      the carrier in 2003 and 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. Similarly, the Company has not been actively pursuing
      the amount it claims is owed to it under the counterclaim. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.


F-24


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**12.**  **INCOME
      TAXES**




Total
      Federal and State income tax expense for the fiscal years ended June 30, 2007
      and 2006 amounted to $769,691 and $1,196,487, respectively. For the fiscal
      years
      ended June 30, 2007 and 2006 there is a difference of 1% between the Australian
      federal statutory tax rate and the effective tax rate. This difference is due
      to
      the domicile of operating profits and losses in the Group as well as the impact
      of timing and past operating profits (losses) on these matters.


The
                  following is a reconciliation of income tax
                  expense:
  2007
              
              U.S.
              
              International
              
              TotalCurrent
              
              $
              0
              
              $
              154,849
              
              $
              154,849Deferred
              
              
              0
              
              $
              614,842
              
              $
              614,842Total
              
              $
              0
              
              $
              769,691
              
              $
              769,6912006
              
              
              U.S.
              
              
              International
              
              
              TotalCurrent
              
              $
              0
              
              $
              1,196,487
              
              $
              1,196,487Deferred
              
              
              0
              
              $
              34,284
              
              $
              53,614Total
              
              $
              0
              
              $
              1,230,771
              
              $
              1,250,101
 Reconciliation
          of the differences between the statutory U.S. Federal income tax rate and
          the
          effective rate is as follows:
  2007
              
              2006Federal
                  statutory tax rate
              
              
              34
              %
              
              34
              %Increase
                  (decrease) in rate resulting fromNon
                  US income taxed at different rates
              
              
              -1
              %
              
              -1
              %Effective
                  tax rate
              
              
              33
              %
              
              33
              %


F-25


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**




Deferred
      tax liability arises due to the following temporary differences.





June
                30, 2007
            
            Future
                tax rate %
            
            Deferred
                tax liabilityOwing
                to patients via ACFC
            
            $
            13,998,454
            
            
            30
            %
            $
            4,199,536Provision
                DDR cancellation
            
            
            (7,265,728
            )
            
            30
            %
            
            (2,179,718
            )Provision
                un-dispensed DDR medications
            
            
            (887,845
            )
            
            30
            %
            
            (266,354
            )Accrued
                ACFC collection and commission
            
            
            (1,656,858
            )
            
            30
            %
            
            (497,057
            )Provision
                for patient refund
            
            
            (84,880
            )
            
            30
            %
            
            (25,464
            )Amortization
                of patents
            
            
            985,277
            
            
            30
            %
            
            295,583Other
                miscellaneous
            
            
            (83,080
            )
            
            30
            %
            
            (24,924
            )Total
            
            $
            5,005,340
            
            
            30
            %
            $
            1,501,602




F-26


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**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.




On
      September 8, 20 06,
      the
      Company entered into a s hare e xchange
      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 $2.25 million) and the issuance in the aggregate of
      16,125,000 shares of the Company’s common stock valued at $1.00 per
      share.




**13.**  **OTHER
      COMPREHENSIVE INCOME**




Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity, at June 30, 2007 are as
      follows:




*Accumulated
                Other Comprehensive Income*Balance
                at June 30, 2005
            
            $
            (173,407
            )Change
                for 2006
            
            
            (31,076
            )Balance
                at June 30, 2006
            
            $
            (204,483
            )Change
                for 2007
            
            
            3,375,989Balance
                at June 30, 2007
            
            $
            3,171,506


F-27




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2007**




**14.**  **SUBSEQUENT
      EVENTS (UNAUDITED)**




On
      September 4, 2007 AMI UK exercised its right to extend its option period in
      relation to its option to license of Worldwide PE’s intellectual property for
      the UK and paid an extension fee of $50,000. Worldwide PE agreed to vary this
      extension period to four months rather than two months.




On
      September 21, 2007, AMI Australia settled proceedings with Mr. Rocco Licastro
      on
      confidential terms in relation to certain district court proceedings filed
      by
      him in relation to physical injuries allegedly suffered by him.




F-28