**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-K**





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


For
      the
      fiscal year ended June
      30, 2008


or





o
            **TRANSITION
                REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      transition period from _____________ to ________________




Commission
      file number 000-29531




**ADVANCED
      MEDICAL INSTITUTE INC.**


(Exact
      name of registrant as specified 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)




Registrant’s
      telephone number, including area code: (61)
      2-9640-5253


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


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


$0.001
      Common Stock





(Title
      of
      class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes ** ̈** No **x**




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange
      Act. Yes ** ̈**  No **x**




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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K. **x**





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
                accelerated filer**o**
            Accelerated
                filer  **o**Non-accelerated
                filer  **o**
            Smaller
                reporting company**x**





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**





The
      aggregate market value of the voting stock held by non-affiliates of the
      Registrant as of October 10, 2008 was $4,003,500.





The
      number of shares outstanding of the registrant’s common stock at $.001 par value
      as of October 10, 2008 was 53,507,450.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





The
      information required by Part III of Form 10-K is incorporated by reference
      to
      the registrant’s proxy statement filed July 30, 2008 (the “Proxy Statement”).








**ADVANCED
      MEDICAL INSTITUTE INC.**


Annual
      Report on Form 10-K for the Year Ended June 30, 2008




Part
                I
            PageItem
                1. Business
            3Item
                1A. Risk Factors
            8Item
                1B. Unresolved Staff Comments
            18Item
                2. Properties
            18Item
                3. Legal Proceedings
            19Item
                4. Submission of Matters to a Vote of Security Holders
            19Part
                II
            PageItem
                5. Market for Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            20Item
                6. Selected Financial Data
            20Item
                7. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            21Item
                7A. Quantitative and Qualitative Disclosures about Market
                Risk
            29Item
                8. Financial Statements and Supplementary Data
            29Item
                9. Changes in and Disagreements With Accountants on Accounting and
                Financial Disclosure
            29Item
                9A. Controls and Procedures
            29Item
                9B. Other Information
            30Part
                III
            PageItem
                10. Directors, Executive Officers and Corporate Governance
            30Item
                11. Executive Compensation.
            31Item
                12. Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder Matters
            31Item
                13. Certain Relationships and Related Transactions, and Director
                Independence
            31Item
                14. Principal Accounting Fees and Services
            31Part
                IV
            PageItem
                15. Exhibits, Financial Statement
                Schedules
            31Signatures
            35


2




**PART
      I**




This
      report contains certain forward-looking statements and information relating
      to
      Advanced Medical Institute, Inc. (“AMI” or the “Company”) that are based on the
      beliefs and assumptions made by AMI's management, as well as on information
      currently available to the management. When used in this document, the words
      "anticipate", "believe", "estimate", and "expect" and similar expressions,
      are
      intended to identify forward-looking statements. Such statements reflect the
      current views of AMI with respect to future events and are subject to certain
      risks, uncertainties and assumptions. Should one or more of these risks or
      uncertainties materialize, or should underlying assumptions prove incorrect,
      actual results may vary materially from those described herein as anticipated,
      believed, estimated or expected. Certain of these risks and uncertainties are
      discussed in this report under the caption "Risk Factors" in Item 1A. AMI does
      not intend to update these forward-looking statements.




**Item
      1.**  **Description
      of Business.**




History




We
      were
      originally incorporated under the name of Hawksdale Financial Visions, Inc.
      on
      December 6, 1996 under the laws of the State of Nevada. We were involved in
      the
      business of timeshares, but became dormant on March 31, 1997, and, until January
      28, 2005, we were a “blank check” company with nominal assets. On October 15,
      2004, we changed our name to “Advanced Medical Institute Inc.”




On
      March
      21, 2005, we completed a Share Exchange Agreement with Advanced Medical
      Institute Pty Limited, a privately owned Australian company (“AMI Australia”),
      whereby AMI Australia became 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”),
      whereby PE Patent Holdco became our wholly-owned subsidiary.




On
      September 8, 2006, we entered into a Share Exchange Agreement with Worldwide
      PE
      Patent Holdco Pty Limited (ACN 117 157 727), a privately owned Australian
      company (“Worldwide PE”), whereby Worldwide PE became our wholly-owned
      subsidiary.




Business
      Overview




AMI
      is a
      service provider company, which arranges for patients with sexual dysfunction
      and prostate problems in Australia, New Zealand, China and the United Kingdom
      to
      be provided with medical services, pharmaceuticals and associated clinical
      support services.




On
      September 15, 2008, we announced expansion of our operations to the United
      Kingdom where we opened our treatment centers, contracts with independent
      doctors and pharmacies and began airing infomercials throughout the country.




For
      the
      year ended June 30, 2008, AMI’s revenues were approximately $50.6 million.


3




Principal
      Products and Services




AMI
      provides a variety of treatment programs to its customers, via its call center
      and clinics, for the treatment of sexual dysfunction and prostate problems.
      A
      patient is diagnosed by telephone or in person at a clinic, in either case,
      by a
      licensed physician, who sends a prescription directly to a compounding pharmacy
      under contract with AMI to prepare the formulation. The prescription is
      delivered to the patient, or the patient may pick up the prescription at the
      clinic. The patient pays for treatments for a specified treatment period, during
      which the formulations may be varied to best suit the patient’s needs.




Our
      physicians prescribe varying combinations or dosages of medications for erectile
      dysfunction (predominantly phentalomine, apomorphine or a combination of them),
      premature ejaculation (predominantly clomipramine) and prostate problems
      (mixture of medicinal herbs). Our compound formulations have not been subject
      to
      any clinical trial, but may lawfully be prescribed on an individual prescription
      (“off-label”) basis in each country in which we operate.




The
      effectiveness of AMI’s treatment programs depend highly on the delivery system.
      These include:




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




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




(c)  topical
      gels for the treatment of female sexual arousal dysfunction; and




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




New
      Products and Services




On
      July
      29, 2008, AMI announced the development of new transdermal gel used to treat
      premature ejaculation and erectile dysfunction in men, as well as sexual arousal
      dysfunction in women.




Since
      2003, AMI’s subsidiary, Intelligent Medical Technologies Pty Limited (“IMT”) has
      been developing an ultrasonic nebulizer which will deliver drugs to the lungs.
      The group’s intention is to use this delivery system to administer its compound
      formulations. To utilize this delivery system, IMT needs to obtain
      regulatory approval of the nebulizer as a medical device. IMT has been working
      on this process for the last 3 years; however, IMT has not yet completed such
      process.




Sales
      and Marketing




For
      the
      year ended June 30, 2008, the Company spent $17.8 million on advertising,
      including commercials (radio, television and newspapers) and billboards. We
      maintain a website, http://www.amiaustralia.com.au/, where a potential
      patient can submit medical history and information concerning the problem for
      which treatment is sought, prefatory to being contacted by AMI.




AMI’s
      erectile dysfunction treatment programs predominantly focus on men aged 40
      and
      over, whereas AMI’s premature ejaculation treatment programs are targeted at men
      aged 18 and over.


4




Distribution




AMI
      currently operates a centralized call center and 20 clinics throughout Australia
      and New Zealand. AMI has an arrangement with two hospitals in Beijing where
      Chinese patients are treated, and AMI has recently established two clinics
      in
      the United Kingdom to service UK patients. AMI’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 its
      medical clinics and its over-the-phone sales and marketing program.




Intellectual
      Property




The
      Company’s intellectual property consists of an Australian innovation patent for
      AMI’s premature ejaculation treatment programs (Australian Innovation Patent No.
      2005100183, which is due to expire on July 9, 2012) and an Australian standard
      patent application (Australian standard patent application No. 2004222783).
      The
      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’s treatment programs
      for premature ejaculation. The patents and associated formulations are integral
      to AMI’s premature ejaculation treatment programs. AMI’s nasal spray erectile
      dysfunction treatment programs are not patent protected. This technology was
      developed by AMI and its founder, Dr. Jack Vaisman.




AMI’s
      wholly-owned subsidiary, IMT, was granted the exclusive worldwide right and
      license from Sheiman Ultrasonic Research Foundation Pty Limited 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 female sexual arousal disorders). The patents relating to the initial
      concepts underpinning the technology expire in October 2013, with the remaining
      patents relating to extensions of the device expiring around 2023.





IMT
      applied for seven provisional worldwide patents in July 2005 and February
      2006. In September 2006, IMT filed an international (PCT) patent application
      relating to its Nebuliser device based on aspects of these provisional
      applications. The international examination of the PCT application was
      successful, resulting in a clear International Preliminary Report on
      Patentability.  This PCT application has now entered the National Phase in
      the following jurisdictions: Australia, Canada, China, Europe, India, Japan,
      New
      Zealand and the United States, and these national phase patent applications
      are
      currently awaiting examination in the respective patent offices.  Further,
      several Australian Design applications, and a United States Design patent
      application have been made for IMT’s device the subject of the international
      (PCT) patent application.  The Australian Design applications are now
      registered and the United States Design patent application is currently under
      examination.




AMI
      has
      applied for a broad based provisional patent relating to the technology
      underpinning its topical gels on July 29, 2008. This application has yet to
      be
      examined and is at an early stage.




AMI’s
      injection, lozenge and tablet erectile dysfunction and premature ejaculation
      treatment programs are not patent protected. This technology was developed
      by
      AMI and its founder, Dr Jack Vaisman.


5




Research
      and Development




AMI
      is
      continuously researching and developing new methods of treatment in relation
      to
      the treatment of sexual dysfunction in men and women, including impotence,
      premature ejaculation, reduced male libido and female sexual arousal disorders.




AMI’s
      Chief Executive Officer, Dr. Jack Vaisman, spends 25-35% of his time each year
      researching treatment methods. In addition, the Company has engaged Dr. Jim
      Rowe
      (a leading Australian chemist) to assist the Company to research treatment
      options, and the Company has also engaged various other personnel and
      consultants to assist the Company in its research programs either on a part
      time
      or project-specific basis, including research assistants, patent attorneys
      and
      legal advisors.




Competition




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




AMI’s
      delivery methods have the following advantages over the oral delivery methods
      of
      its competitors:




·
            Elimination
                of gastric and hepatic drug degradation by avoiding metabolism and
                gastro-internal tract;




·
            Faster
                entrance into the bloodstream; and




·
            Fewer
                side effects due to the potential reduced dosage of the
                drug.




Competition
      is intense in the erectile dysfunction segment of our business and includes
      many
      competitors that have greater revenue, more customers and higher levels of
      brand
      recognition than the Company. The Company has smaller competitors in the
      premature ejaculation segment of our business, which have business models
      similar to the Company’s. The efficacy, safety, patients’ 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 staff 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.




6




Significant
      Subsidiaries of the Company and AMI Australia









The
      Company’s subsidiaries are AMI Australia, AMI International Pty Limited and AMI
      Management Services Pty Limited.




AMI
      Australia’s subsidiaries are Advanced Medical Institute Pty Limited, PE Patent
      Holdco, Worldwide PE, Advanced Medical Institute (NZ) Limited, IMT.




AMI
      International’s subsidiaries are AMI China and AMI Clinic Limited.




On
      February 4, 2008, AMI discontinued operations of AMI Japan Kabushiki Gaisya.




AMI
      International Pty Limited was established to hold the Group’s shareholdings in
      the Chinese company established to conduct operations in that
      jurisdiction.




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




Advanced
      Medical Institute (NZ) Limited conducts the group’s business in New Zealand.




Ai
      Te Wei
      (Beijing) Medicine Consulting Company conducts the group’s business in China.


7




During
      September 2006, AMI commenced a not-for-profit division of the Company, AMI-SCI,
      that provides treatment options to men who have sustained a spinal cord injury.
      Details regarding this unit’s services and operations are located at
http://www.rocketlaunch.com.au.




Employees




As
      of
      June 30, 2008, AMI had a total staff of approximately 259 people, of which
      190
      are full-time and 69 are part-time, working in the areas of sales and
      marketing, patient support, product development and back office functions.
      None of the Company’s employees or staff are members of a union or labor
      organization.




Governmental
      Regulation




The
      core
      government regulations affecting the business relate to pharmaceutical
      prescription related regulations, physician related regulations and
      advertising related regulations. As set out above, each of our
      treatments is provided on an individual prescription (“off-label”) basis.
      Our treatments are not available from retail pharmacies over the counter,
      and our treatments are not marketed under a brand name. It is illegal to mass
      produce our medications, and our medications must be prepared in a regulated
      facility to specified standards.




Telephone
      consultation by doctors is legal in Australia and the United Kingdom but
      is unlawful in other markets. Telephone consultation is a core component of
      our business.




Our
      advertisements and marketing are direct to consumers
      and must comply with consumer-based legislation. This legislation
      prohibits false and misleading statements from being made in our advertising
      (amongst other things). Government regulation also restricts the manner in
      which
      our advertising may be undertaken due to our treatments containing prescription
      based medications.





Reports
      to Security Holders




*Annual
      reports* .
      We
      deliver annual reports containing audited financial statements to security
      holders.




*Periodic
      reports and other information* .
      We file
      annual and quarterly reports, current reports, proxy statements, and information
      statements with the SEC.




*Availability
      of Filings* .
      You may
      read and copy any materials we file with the SEC at the SEC’s Public Reference
      Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information
      on the operation of the Public Reference Room by calling the SEC at
      1-800-SEC-0330. Additionally, the SEC maintains an Internet site ( http://www.sec.gov )
      that
      contains reports and proxy and information statements and other information
      regarding issuers that file electronically with the SEC.




**Item
      1A** .  **Risk
      Factors.**




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 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:


8




**Risks
      Related to our Business**




***Our
      business may be adversely affected 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 the United
      Kingdom 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. Changes
      to the costs associated with that advertising or a decrease in the effectiveness
      of that advertising could have a significant adverse impact on the revenue
      and/or profitability of our business.




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




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


9




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




We
      have
      established a joint venture to commence operations in China. 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. 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
      involve 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 patients, 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, New Zealand or the United Kingdom
      and
      likely would need to put such insurance in place in the event that we commence
      operations outside these geographic areas (other than China). We do not have
      liability insurance policies in place covering our operations in China, nor
      do
      we intend to procure such coverage.




***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 the United Kingdom. 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, New Zealand and the United
      Kingdom, incurring additional costs in locating and retaining those
      professionals with expertise in these area. Significant start up
      costs likily would be incurred, and 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 are subject to substantially different
      regulatory regimes, market practices and customs different from
      Australia's, and our initial operations in that jurisdiction have not been
      profitable. There is a risk that our operations there and in other
      international areas will continue to be unprofitable.


10




***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 we expand further
      internationally. Our ability to do business in a similar manner may be adversely
      affected by the expiration of those patents if our competitors utilize such
      technology to compete with our businesses.




Some
      of
      our patent applications have yet to be approved. 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 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 require regulatory approval.***




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.


11




Under
      our
      current business model, our medical formulations are 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, New Zealand and the United Kingdom, 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 the United Kingdom 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 Mr. 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.


12




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.




**Risks
      related to our common stock**




***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.




***Our
      common stock is subject to the “penny stock” rules.***




Because
      our common stock is 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.




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


13


·
            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-K. 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.




**Risks
      associated with doing business in Australia and other foreign
      countries**




***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. None of our executive officers and
      directors are United States residents. Therefore, it may be difficult for an
      investor, 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, our executive officers or directors, 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 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.


14




***We
      may experience an impact due to Australian, New Zealand, Chinese or United
      Kingdom 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  of market saturation, as we continue to treat more
      patients in Australia.




***Potentialintellectual property claim may adversely affect expansion into North
      America.***




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 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.


15




***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 expect capital expenditures to be denominated
      in
      Australian dollars. Our expansion into China and the United Kingdom will also
      expose us to currency fluctuations relating to Chinese Renmimbi and UK Pounds.




***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 protection from
      competition using the 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, our market share,
      pricing power, profitability and prospects as a going concern could be adversely
      affected.




***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 our 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, we
      could lose sales as a result of potential customers being unable or
      unwilling to see a doctor in person. 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.


16




***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 outside Australia before other competitors enter
      the market. Therefore, we must quickly establish recognition of our brand
      outside Australia. 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 we have. We cannot be certain that we
      will have sufficient resources to achieve the early and widespread brand
      recognition that 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 dependent upon advertising and marketing. We might not be
      able
      to use our current model 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 must
      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. We might not be able to use our current model internationally.
      In
      certain countries, we may be subject to state or national laws governing the
      distribution and compounding of pharmaceuticals. We may be required to expend
      substantial unforeseen resources to comply with such regulations. Failure to
      comply with such regulations could cause a significant disruption in our
      business domestically and internationally as it could distract management
      attention and have a material adverse effect on our business and financial
      condition or results of operations.




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




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


17




**Item
                1B.**
            **Unresolved
                Staff Comments.**




Not
                applicable.




**Item
                2.**
            **Properties.**




As
      of
      June 30, 2008, AMI had leasehold interests in 19 Australian properties and
      one
      New Zealand property, being the 20 clinics used to operate the business in
      New
      Zealand and Australia. There are no encumbrances over AMI’s interest in these
      properties. AMI’s principal executive office is located at Suite 1, Level 1,
      204-218 Botany Road, Alexandria New South Wales, Australia. AMI’s principal
      executive office houses AMI’s corporate head office, its centralized call center
      and some of AMI’s licensed doctors, nursing staff and sales and administration
      staff.




AMI’s
      clinics 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




**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





**China**


Shenzhen,
      China




18




**United
      Kingdom**


London,
      England


Twickenham,
      England




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 as our US registered office.




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





As
      of
      June 30, 2008, there was no material litigation pending or threatened by or
      against the Company or any of its direct or indirect subsidiaries.




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




At
      the
      Annual Meeting of Shareholders held on August 19, 2008, Jack Vaisman, Tony
      Khan,
      Anatoly Fanshil and Spiro Baramalis were elected to serve as directors for
      a one
      year term. 33,457,076 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, 2009 was approved. 33,457,076 shares were voted
      in favor of ratification; there were no votes against and no
      abstentions.




19




**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 bids 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**September
                30, 2006
            
            $
            2.00
            
            $
            0.01December
                31, 2006
            
            $
            1.10
            
            $
            0.35March
                31, 2007
            
            $
            0.82
            
            $
            0.52June
                30, 2007
            
            $
            0.75
            
            $
            0.10September
                30, 2007
            
            $
            0.20
            
            $
            0.10December
                31, 2007
            
            $
            0.40
            
            $
            0.101March
                31, 2008
            
            $
            0.39
            
            $
            0.15June
                30, 2008
            
            $
            0.35
            
            $
            0.15




As
      of
      September 15, 2008 there were 319 shareholders of record of our common stock.




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.




**Item
              6.**
            **Selected
                Financial Data.**




Not
      applicable.


20




**Item
              7.**
            **Management’s
                Discussion and Analysis of Financial Condition and****Results
                of Operation.**




*Special
      Note on Forward-Looking Statements.* Some of
      the statements contained in this annual report on Form 10-K that are not
      historical facts are “forward-looking statements” which can be identified by the
      use of terminology such as “estimates,” “projects,” “plans,” “believes,”
“expects,” “anticipates,” “intends,” or the negative or other variations, or by
      discussions of strategy that involve risks and uncertainties. We urge you to
      be
      cautious of the forward-looking statements, that such statements, which are
      contained in this annual report Form 10-K, reflect our current beliefs with
      respect to future events and involve known and unknown risks, uncertainties
      and
      other factors affecting operations, market growth, services, products and
      licenses. No assurances can be given regarding the achievement of future
      results, as actual results may differ materially as a result of the risks we
      face, and actual events may differ from the assumptions underlying the
      statements that have been made regarding anticipated events. Factors that may
      cause actual results, performance or achievements, or industry results, to
      differ materially from those contemplated by such forward-looking statements
      include without limitation:





·
            Our
                ability to attract and retain management, and to integrate and maintain
                technical information and management information
                systems;·
            Our
                ability to raise capital when needed and on acceptable terms and
                conditions;·
            The
                intensity of competition; and·
            General
                economic conditions.





All
      written and oral forward-looking statements made in connection with this annual
      report on Form 10-K that are attributable to us or persons acting on our behalf
      are expressly qualified in their entirety by these cautionary statements. Given
      the uncertainties that surround such statements, you are cautioned not to place
      undue reliance on such forward-looking statements.




Information
      regarding market and industry statistics contained in this report is included
      based on information available to us that we believe is accurate. It is
      generally based on academic and other publications that are not produced for
      purposes of securities offerings or economic analysis. We have not reviewed
      or
      included data from all sources, and we cannot assure you of the accuracy or
      completeness of the data included in this report. Forecasts and other
      forward-looking information obtained from these sources are subject to the
      same
      qualifications and the additional uncertainties accompanying any estimates
      of
      future market size, revenue and market acceptance of products and services.
      We
      have no obligation to update forward-looking information to reflect actual
      results or changes in assumptions or other factors that could affect those
      statements. See “Risk Factors” for a more detailed discussion of uncertainties
      and risks that may have an impact on future results.




**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), AMI Clinic Limited (“AMI UK”) and AMI
      Australia’s 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.


21




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 terms
      of
      the treatment 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 as 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 Statement of Financial Accounting
      Standards (“SFAS”) No. 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, 2008 and 2007 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.


22




Property
      and equipment are carried at the lesser of cost and written down value.
      Expenditures for maintenance and repairs are expensed 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 years ended June 30, 2008 and 2007, 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, 2008, 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 SFAS
      No. 52, “Foreign Currency Translation,” with the AUD as the functional currency.
      According to the SFAS, 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
      lives and reviewed for impairment in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-lived Assets” (“SFAS 144”).
      Intangible assets, such as purchased technology, trademarks, customer lists,
      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.


23




Goodwill,
      trademarks, 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, or other intangible asset, whichever is less.




Long-Lived
      Assets




Effective
      January 1, 2002, the Company adopted 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, 2008
      there were no significant impairments of its long-lived assets.




Segment
      Reporting




SFAS
      No.
      131, “Disclosure About Segments of an Enterprise and Related Information” (“SFAS
      131”) 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 SFAS No. 128, “Earnings per
      share” (“SFAS 128”). SFAS 128 superseded Accounting Principles Board
      Opinion No.15. Net loss per share for all periods presented has been restated
      to
      reflect the adoption of SFAS 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.




24




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, AMI Australia’s  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.




Currency
      Conversion




As
      of the
      years ended June 30, 2008 and 2007, 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 SFAS No. 52, “Foreign Currency Translation” (“SFAS 152”), with
      the AUD as the functional currency. According to SFAS 52, all assets and
      liabilities were translated at the exchange rate (AUD1 = USD0.96150) as of
      June
      30, 2008. Stockholder’s equity is translated at the historical exchange 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”.




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




Result
      of operations :





**Twelve months**
              **ended**
              **June 30,****2008**
            
            **2007**Cost
                of Revenue
            
            
            22.3
            %
            
            24.8
            %Gross
                Profit
            
            
            77.7
            %
            
            75.2
            %Selling
                General and administrative expenses
            
            
            72.4
            %
            
            72.3
            %Other
                income and expenses
            
            
            (0.3
            )%
            
            0.2
            %Discontinued
                operation
            
            
            (0.7
            )%
            
            (4.5
            )%Income
                before income tax
            
            
            4.3
            %
            
            (1.4
            )%Income
                tax expenses
            
            
            2.4
            %
            
            2.1
            %**Net
                Income**
            
            
            1.9
            %
            
            (3.5
            )%




**Liquidity
      and Capital Resources**




As
      of
      June 30, 2008, we had total liabilities of $21,887,563, including unearned
      revenue of $6,922,800, and we had a positive net worth of $33,474,159. As of
      June 30, 2007, we had total liabilities of $14,986,821 including unearned
      revenue of $5,101,288 and a positive net worth of $28,678,386. As at June 30,
      2008 our total current assets were $23,244,656, our total current liabilities
      were $18,040,635 and our net current assets were $5,204,021.


25




Our
      aggregate cash balance as at June 30, 2008 was $3,127,029. We forecast that
      we
      will be able to generate sufficient funds from our business to fund our
      operations in the ordinary course during the next 12 months. Management has
      expanded our business into China and the United Kingdom and is considering
      further international expansion through either establishing new clinic
      operations or by licensing the intellectual property for use in territories
      in
      which we do not have clinics.




In
      the
      event that we continue to expand our business, we may need to raise debt or
      equity funding 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, 2008 COMPARED TO TWELVE MONTHS ENDED JUNE 30,
      2007***




***REVENUE*** **.** Revenue
      was $51,903,527 in the 12 months ended June 30, 2008 compared to $38,156,967
      in
      the 12 months ended June 30, 2007, an increase of $13,746,560 or 36.0%. The
      increase is primarily attributable to the following factors: (1) increased
      effectiveness of advertising campaigns; (2) increased brand name recognition;
      and (3) effectiveness of our products. Part of the increase is also due to
      a
      significant increase in the A$:US$ exchange rate during the relevant
      period.




We
      recognize all expenses on the date they are incurred regardless 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 12 months ended June 30, 2008
      increased by $1,821,512 to $6,922,800 for the 12 months ending June 30, 2007.
      The increase in unearned revenue in the 12-month period is primarily attributed
      to the increase in the number of patients seeking treatment programs from us
      over the same period in 2007. We attribute this increase to the following
      factors: (1) increased advertising campaigns with improved target marketing
      in
      the premature ejaculation segment; (2) increased brand name recognition; and
      (3)
      effectiveness of our products. Part of the increase is also due to a significant
      increase in the A$:US$ exchange rate during the relevant period.




Revenue
      in AMI Australia’s premature ejaculation (“PE”) treatment programs has increased
      by $5,324,396, or 28.5%, to $24,034,165, and revenue in AMI Australia’s erectile
      dysfunction (“ED”) treatment programs has increased by $6,025,771, or 33.0%, to
      $24,302,733, in the 12 months ended June 30, 2008, compared to the 12 months
      ended June 30, 2007. AMI Australia also generated $3,566,629 in revenue from
      its
      prostate programs in the 12 months ended June 30, 2008, compared to $1,320,096
      in the 12 months ended June 30, 2007, an increase of 170.2%.




Revenue
      in our Australian operations was $50,572,312 in the 12 months ended June 30,
      2008, compared to $37,245,631 during the 12 months ended June 30, 2007, an
      increase of $13,326,681, or 35.8%. The increase in revenue is primarily
      attributable to the increase in the number of patients seeking treatment from
      us
      during the 12 months ended June 30, 2008 over the same period in 2007. We
      attribute this increase to the following factors: (1) effectiveness advertising
      campaigns; (2) increased brand name recognition; and (3) effectiveness of our
      products. Part of the increase is also due to a significant increase in the
      A$:US$ exchange rate during the relevant period.


26




Revenue
      in our New Zealand operations was $1,275,681 in the 12 months ended June 30,
      2008, compared to $871,605 during the 12 months ended June 30, 2007, an increase
      of $404,076 or 46.4%. The increase in revenue in the 12-month period is
      primarily attributable to the increase in the number of patients seeking
      treatment from us during the 12 months ended June 30, 2008 over the same period
      in 2007. 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 our Chinese operations was $55,534 in the 12 months ended June 30, 2008,
      compared to $39,730 during the 12 months ended June 30, 2007. The increase
      in
      revenue in the 12-month period is primarily attributable to an increase in
      the
      number of patients seeking treatment from us during the year ended June 30,
      2008
      compared to the same period in 2007.




***COST
      OF REVENUE*** **.** Cost of
      revenue increased to $11,504,761 in the 12 months ended June 30, 2008 compared
      to $9,313,044 in the 12 months ended June 30, 2007, primarily as a result of
      an
      increase in doctor consultancy fees and medication costs during the period.
      These additional costs were incurred as a result of the additional treatment
      programs sold during the 12-month period. As a percentage of revenue, cost
      of
      revenue was 22.3% in the 12 months ended June 30, 2008 compared to 24.8% in
      the
      12 months ended June 30, 2007. The decrease in the cost of revenue percentage
      by
      2.5% and is primarily attributable to decrease in expenditures on our
      unprofitable Chinese and discontinued Japanese operations.




***GROSS
      PROFIT.*** Gross
      profit was $40,305,598 in the 12 months ended June 30, 2008, compared to
      $28,699,647in the 12 months ended June 30, 2007. As a percentage of revenue,
      gross profit increased to 77.7% in the 12 months ended June 30, 2008, from
      75.2%
      in the 12 months ended June 30, 2007. The 2.5% increase in the gross profit
      percentage is primarily attributable to decrease in expenditures on our
      unprofitable Chinese and discontinued Japanese operations.




Gross
      profit in our Australian operations was $39,067,551 in the 12 months ended
      June
      30, 2008, compared to $27,932,587 in the 12 months ended June 30, 2007. This
      increase is mainly attributable to an increase in revenue in the business,
      without additional fixed costs being incurred.




Gross
      profit in our New Zealand operations was $1,183,283 in the 12 months ended
      June
      30, 2008, compared to a gross profit of $790,752 in the 12 months ended June
      30,
      2007. This is primarily attributable to an increase in revenue in the business
      without additional fixed costs being incurred.




Gross
      profit in our Chinese operations was $54,764 in the 12 months ended June 30,
      2008, compared to ($23,692) in the 12 months ended June 30, 2007. The principal
      reason is because of an improvement in revenue through sales being
      generated.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $37,597,347 in the 12 months ended
      June
      30, 2008, compared to $27,569,036 in the 12 months ended June 30, 2007. As
      a
      percentage of revenue, selling, general and administrative expenses increased
      to
      72.4% in the 12 months ended June 30, 2008, from 72.3% in the 12 months ended
      June 30, 2007. The percentage change was not material.


27




Selling,
      general and administrative expenses in our Chinese operations were $741,071
      in
      the 12 months ended June 30, 2008, compared to $929,729 in the 12 months ended
      June 30, 2007. Major expenses incurred were staff costs and advertising
      expenses.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $(113,388) in the 12 months ended June 30, 2008,
      compared to $70,585 in the 12 months ended June 30, 2007. As a percentage of
      revenues, other income and expenses decreased to (0.3)% in the 12 months ended
      June 30, 2008, from 0.2% in the 12 months ended June 30, 2007. The decrease
      is
      due to the decrease in the income received by the Company from the Heart Check
      Group and the increase in interest paid on the Company’s secured long term loan.




***NET
      INCOME (LOSS) BEFORE INCOME TAX AND INCOME TAX
      EXPENSES*** **.** Net
      income before income tax was $2,252,458 in the 12 months ended June 30, 2008,
      compared to ($550,831) in the 12 months ended June 30, 2007. This improvement
      is
      due to significant expansion in the Company’s profitable Australian operations
      and the Company's, substantially decreasing expenditures in its unprofitable
      Chinese operations.




Net
      income before income tax in our Australian operations was $4,312,262 in the
      12
      months ended June 30, 2008, compared to $2,452,564 in the 12 months ended June
      30, 2007. This increase is mainly attributable to increased  revenue in
      Australia.




Net
      loss
      before income tax in our New Zealand operations was ($615,443) in the 12 months
      ended June 30, 2008, compared to a net loss ($112,711) in the 12 months ended
      June 30, 2007. This increase is attributable to an increase in advertising
      expenses without as significant an increase in revenue.




Net
      loss
      before income tax in our Chinese operations was ($741,068) in the 12 months
      ended June 30, 2008, compared to ($953,513) in the 12 months ended June 30,
      2007. The principal reason for the reduction in net loss is that we have reduced
      the amount of expenditure into our China operations.




Income
      tax expenses were $1,257,679 in the 12 months ended June 30, 2008, compared
      to
      $769,691 in the 12 months ended June 30, 2007. This increase is attributable
      to
      the increasing profitability of the Company’s Australian business. As a
      percentage of gross income, income tax expense decreased from 2.4% to 2.1%,
      attributable to a lower proportion of expenses being incurred in offshore
      jurisdictions that cannot be offset against Australian income tax expenses.
      Australian corporate tax is assessed nationally at 30% of net profit before
      tax.




***NET
      INCOME (LOSS)*** **.** Net
      income was $994,779 in the 12 months ended June 30, 2008, compared ($1,320,522)
      in the 12 months ended June 30, 2007. The improvement is attributable to
      significant expansion in the Company’s profitable Australian operations and the
      Company substantially decreasing expenditure on its unprofitable Chinese
      operations.




Net
      income in our Australian operations was $3,054,583 in the 12 months ended June
      30, 2008, compared to $1,682,873 in the 12 months ended June 30, 2007. This
      increase is mainly attributable to the increase in revenue in Australia.




Net
      loss
      in our New Zealand operations was ($615,443) in the 12 months ended June 30,
      2008, compared to a net loss ($112,711) in the 12 months ended June 30, 2007.
      This increase is attributable to the increase in advertising
      expenses.


28




Net
      loss
      in our Chinese operations was ($741,068) in the 12 months ended June 30, 2008,
      compared to ($953,513) in the 12 months ended June 30, 2007. The principal
      reason for the decrease in the net loss is because we have reduced the amount
      of
      expenditure into our China operations.




**Item
              7A.**
            **Quantitative
                and Qualitative Disclosures About Market Risk.**





Not
      applicable.




**Item
                8.**
            **Financial
                Statements and Supplementary
                Data.**




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




**Item
                9.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure.**




Not
      applicable.




**Item
                9A(T).**
            **Controls
                and Procedures.**





(a)
      Evaluation of Disclosure Controls and Procedures.




Our
      Chief
      Executive Officer and Chief Financial Officer, (i) are responsible for
      establishing and maintaining adequate internal control over financial reporting
      of the Company and (ii) have evaluated the
      effectiveness of our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) or 15d-15(f) under the 1934 Act as of the end of the period
      covered by this Annual Report ("Evaluation Date"). Based on such evaluation,
      our
      Chief Executive Officer and Chief Financial Officer have concluded that, as
      the
      Evaluation Date, our disclosure controls and procedures are effective in
      alerting them on a timely basis to material information relating to us required
      to be included in our reports filed or submitted under the 1934 Act, except
      as
      discussed below.




The
      management of the Company is responsible for establishing and maintaining
      adequate internal control over financial reporting, as required by
      Sarbanes-Oxley (SOX) Section 404A. The Company's internal control over financial
      reporting is a process designed under the supervision of the Company's Chief
      Executive Officer and Chief Financial Officer to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of the
      Company's financial statements for external purposes in accordance with U.S.
      generally accepted accounting principles (GAAP)




As
      of
      June 30, 2008, management assessed the effectiveness of the Company's internal
      control over financial reporting based on the criteria for effective internal
      control over financial reporting established in Internal Control--Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission ("COSO”) and SEC guidance on conducting such assessments. Based on
      that evaluation, they concluded that, during the period covered by this report,
      such internal controls and procedures were not effective to detect the
      inappropriate application of US GAAP rules as more fully described below. This
      was due to deficiencies that existed in the design or operation of our internal
      control over financial reporting that adversely affected our internal controls
      and that may be considered to be material weaknesses.


29




The
      matters involving internal controls and procedures that the Company's management
      considered to be material weaknesses under the standards of the Public Company
      Accounting Oversight Board were : (1) lack of a functioning audit committee
      and
      lack of majority of outside directors on the Company's board of directors,
      resulting in ineffective oversight in the establishment and monitoring of
      required internal controls and procedures, and, (2) inadequate segregation
      of
      duties consistent with control objectives. The aforementioned material
      weaknesses were identified by the Company's Chief Financial Officer in
      connection with the audit of our financial statements as of June 30, 2008 and
      communicated to our management.




Management
      believes that the material weaknesses set forth in items (1) and (2) above
      did
      not have an effect on the Company's financial results. However, management
      believes that the lack of a functioning audit committee and lack of a majority
      of outside directors on the Company's board of directors could result in
      ineffective oversight in the establishment and monitoring of required internal
      controls and procedures. Management's goals are to have a functional audit
      committee and a majority of outside directors on the Company's board of
      directors when funds are available.




This
      Annual Report does not include an attestation report of the Company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by the Company's registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management's report
      in this Annual Report.




(b)
      Changes in Internal Controls.




In
      addition, no change in our internal control over financial reporting (as defined
      in Rules 13a-15 or 15d-15 under the 1934 Act) occurred during the fourth quarter
      of the year ended June 30, 2008, that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.




**Item
              9B.**
            **Other
                Information.**




None.





**PART
      III**




**Item
                10.**
            **Directors,
                Executive Officers and Corporate
                Governance.**




The
      information appearing in the Proxy Statement under the caption ELECTION OF
      DIRECTORS — Management; Compliance with Section 16(a) of Exchange Act; Code of
      Ethics; and Board and Committee Meetings – Audit
      Committee,
      is incorporated herein by reference.


30




**Item
              11.**
            **Executive
                Compensation.**




The
      information appearing in the Proxy Statement under the caption EXECUTIVE
      COMPENSATION is incorporated herein by reference.




**Item
              12.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**




The
      information appearing in the Proxy Statement under the caption SECURITY
      OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS is incorporated herein
      by
      reference.




**Item
                13.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence.**




The
      information appearing in the Proxy Statement under the caption CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, and the third and fourth sentences
      of
      the first paragraph under the caption ELECTION OF DIRECTORS — Board
      and
      Committee Meetings – Audit
      Committee
      is incorporated herein by reference.




**Item
                14.**
            **Principal
                Accounting Fees and
                Services.**




The
      information appearing in the Proxy Statement under the caption RATIFICATION
      OF
      THE APPOINTMENT OF THE INDEPENDENT PUBLIC ACCOUNTANTS is incorporated herein
      by
      reference.




**PART
      IV**




**Item
                15.**
            **Exhibits
                Financial Statement Schedules.**





(a)
      The
      following are filed with this report:





(1)
      The
      financial statements listed on the Financial Statements Table of
      Contents





(2)
      Not
      applicable





(3)
      The
      exhibits referred to below, which include the following managerial contracts
      or
      compensatory plans or arrangements:





·
            Employment
                Agreement between AMI Australia and Forhad (Tony) Khan dated July
                30,
                2005


·
            Employment
                Agreement between AMI Australia and Dilip Shrestha dated July 30,
                2005


·
            Employment
                Agreement between AMI Australia and Jacov (Jack) Vaisman dated July
                30,
                2005





(b)
      The
      exhibits listed on the Exhibit Index are filed as part of this report.




(c)
      Not
      applicable.


31




**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).




32




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 (incorporated herewith by reference to Exhibit 10.11 to Advanced
                Medical Institute Inc.’s Annual Report on Form 10-KSB, filed with the
                Securities and Exchange Commission on October 15,
                2007).




33




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).10.13
            
            Share
                Sale Agreement, dated as of April 30, 2008 (incorporated
                herewith by reference to Exhibit 10.13 to Advanced Medical Institute
                Inc.’s Annual Report on Form 10-KSB, filed with the Securities and
                Exchange Commission on October 15, 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 Pursuant to 18 U.S.C. 1350 (Section 906 of
              the
              Sarbanes-Oxley Act of 2002).32.2
            
            Certification
                of the Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section
                906
                of the Sarbanes-Oxley Act of 2002).




34


**SIGNATURES**
  Pursuant
        to the requirements of Section 12 of the Securities Exchange Act of 1934,
        the
        Company has duly caused this Form 10-K to be signed on its behalf by the
        undersigned, thereunto duly authorized.
  ADVANCED
                  MEDICAL INSTITUTE INC.Date:
                  October 14, 2008
              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 14, 2008
              By:
              /s/
                  Jacov (Jack) VaismanJacov
                  (Jack) Vaisman
                Chief
                  Executive Officer and PresidentDate:
                  October 14, 2008
              By:
              /s/
                  Dilip ShresthaDilip
                  Shrestha
                Chief
                  Financial OfficerDate:
                  October 14, 2008
              By:
              /s/
                  Forhad (Tony) KahnForhad
                  (Tony) Kahn
                Executive
                  Vice President and SecretaryDate:
                  October 14, 2008
              By:
              /s/
                  Anatoly FanshilAnatoly
                  Fanshil
                DirectorDate:
                  October 14, 2008
              By:
              /s/
                  Spiro BaramilisSpiro
                Baramilis
                Director
  35


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**FINANCIAL
      REPORT**


**FOR
      THE YEARS ENDED JUNE 30, 2008 AND 2007**


F-1


**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 30,2008
            F-4Consolidated
                Statements of Operations for the years ended June 30, 2008 and
                2007
            F-5Consolidated
                Statements of Stockholders’ Equity for the years ended June 30, 2008 and
                2007
            F-6Consolidated
                Statements of Cash Flows for the years ended June 30, 2008 and
                2007
            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, 2008, and
      the related consolidated statements of operations, stockholders’ equity, and
      cash flows for the years ended June 30, 2008 and 2007. 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, 2008, and the results of its operations
      and
      its cash flows for the years ended June 30, 2008 and 2007 in conformity with
      accounting principles generally accepted in the United States of
      America.




/s/
      Kabani & Company, Inc.


CERTIFIED
      PUBLIC ACCOUNTANTS




Los
      Angeles, California




October
      2, 2008




F-3




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**CONSOLIDATED
      BALANCE SHEET**


**AS
      AT JUNE 30, 2008**




**Notes****CURRENT
                ASSETS**Cash
                & cash equivalent
            
            
            
            
            $
            3,127,029Receivables,
                net
            
            
            
            
            
            18,196,314Receivables
                due from related parties
            
            
            12
            
            
            751,034Inventory
            
            
            
            
            
            468,950Other
                assets
            
            
            3
            
            
            701,329**TOTAL
                CURRENT ASSETS**
            
            
            
            
            
            23,244,656**NON-CURRENT
                ASSETS**Security
                deposits
            
            
            
            
            
            124,569Property,
                plant and equipment, net
            
            
            4
            
            
            1,314,825Net
                assets held for disposition
            
            
            11
            
            
            396,332Intangible
                assets, net
            
            
            2
            
            
            30,281,340**TOTAL
                NON-CURRENT ASSETS**
            
            
            
            
            
            32,117,066**TOTAL
                ASSETS**
            
            
            
            
            $
            55,361,722**CURRENT
                LIABILITIES**Unearned
                revenue
            
            
            
            
            $
            6,922,800Accounts
                payables & accrued expenses
            
            
            6
            
            
            9,874,446Interest
                bearing liabilities – current
            
            
            5
            
            
            422,715Income
                taxes payable
            
            
            
            
            
            820,674**TOTAL
                CURRENT LIABILITIES**
            
            
            
            
            
            18,040,635**NON-CURRENT
                LIABILITIES**Interest
                bearing liabilities – non current
            
            
            5
            
            
            1,523,716Deferred
                tax liabilities
            
            
            14
            
            
            2,323,212**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            
            
            
            3,846,928**TOTAL
                LIABILITIES**
            
            
            
            
            
            21,887,563**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
            
            
            16
            
            
            6,972,500Retained
                earnings
            
            
            
            
            
            2,298,732**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            
            
            
            33,474,159**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            
            
            
            $
            55,361,722




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, 2008 AND 2007**





**2008**
            
            **2007****NET
                REVENUES**
            
            $
            51,903,527
            
            $
            38,156,967**COST
                OF REVENUES**
            
            
            11,597,929
            
            
            9,457,320**GROSS
                PROFIT**
            
            
            40,305,598
            
            
            28,699,647**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            37,597,347
            
            
            26,925,368**Impairment
                loss**
            
            
            -
            
            
            643,668**TOTAL
                SELLING, GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            37,597,347
            
            
            27,569,036**OPERATING
                INCOME**
            
            
            2,708,251
            
            
            1,130,611**OTHER
                INCOME AND EXPENSE**Rental
                income
            
            
            -
            
            
            14,722Bank
                interest
            
            
            92,499
            
            
            49,172Sundry
                income
            
            
            23,779
            
            
            88,272Management
                fee income
            
            
            33,813
            
            
            122,765Interest
                expense
            
            
            (263,479
            )
            
            (204,806
            )**TOTAL
                OTHER INCOME AND EXPENSE**
            
            
            (113,388
            )
            
            70,585INCOME
                FROM CONTINUED OPERATIONS BEFORE INCOME TAXES
            
            
            2,594,863
            
            
            1,201,196INCOME
                TAX EXPENSE
            
            
            (1,257,679
            )
            
            (769,691
            )INCOME
                FROM CONTINUED OPERATIONS
            
            
            1,337,184
            
            
            431,505**LOSS
                FROM DISCONTINUED OPERATIONS**
            
            
            (342,405
            )
            
            (1,752,027
            )NET
                INCOME (LOSS)
            
            
            994,779
            
            
            (1,320,522
            )Other
                Comprehensive item – Foreign currency translation income
            
            
            3,800,994
            
            
            3,375,989**Net
                Comprehensive Income**
            
            **$**
            **4,795,773**
            
            **$**
            **2,055,467**Earnings
                (loss) per share, continued operations
            
            $
            0.03
            
            $
            0.01Earnings
                (loss) per share, discontinued operations
            
            
            (0.01
            )
            
            (0.04
            )**Earnings
                (loss) per share, basic & diluted**
            
            **$**
            **0.02**
            
            **$**
            **(0.03**
            **)****Weighted
                average number of shares outstanding, basic**
            
            
            **53,507,450**
            
            
            **50,346,964**




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, 2008 AND 2007**





**Additional**
            
            **Other****Common
                Stock**
            
            **Paid-In**
            
            **Comprehensive**
            
            **Retained****Shares**
            
            **Amount**
            
            **Capital**
            
            **Income
                (Loss)**
            
            **Earnings**
            
            **Total****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
                income, 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
            
            
            28,678,386Other
                comprehensive income
            
            
            -
            
            
            -
            
            
            -
            
            
            3,800,994
            
            
            -
            
            
            3,800,994Net
                loss, June 30, 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            994,779
            
            
            994,779**Balance
                June 30, 2008**
            
            
            53,507,450
            
            $
            53,507
            
            $
            24,149,420
            
            $
            6,972,500
            
            $
            2,298,732
            
            $
            33,474,159




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, 2008 AND 2007**




**2008**
            
            **2007****Cash
                Flows from Operating Activities**Receipts
                from customers
            
            $
            43,664,868
            
            $
            32,399,025Interest
                received
            
            
            89,200
            
            
            48,898Interest
                paid
            
            
            (263,482
            )
            
            (577,480
            )Payment
                to suppliers & employees
            
            
            (39,119,615
            )
            
            (30,495,606
            )Income
                tax paid
            
            
            (214,786
            )
            
            (234,127
            )**Net
                cash provided by operating activities of continued
                operations**
            
            
            4,156,185
            
            
            1,140,710**Net
                cash (used in) provided by
                discontinued operation**
            
            
            (609,639
            )
            
            73,517**Net
                cash provided by operating activities**
            
            
            3,546,546
            
            
            1,214,227**Cash
                Flows from Investing Activities**Payment
                for property, plant & equipment
            
            
            (346,712
            )
            
            (284,654
            )Purchase
                of intangible assets
            
            
            (93,819
            )
            
            (2,349,477
            )**Net
                cash used in investing activities**
            
            
            (440,531
            )
            
            (2,634,131
            )**Cash
                Flows From Financing Activities**Proceeds
                from borrowings
            
            
            -
            
            
            2,357,760Repayment
                of borrowings
            
            
            (869,468
            )
            
            (228,461
            )**Net
                cash (used in) provided by financing activities**
            
            
            (869,468
            )
            
            2,129,299Net
                increase in cash and cash equivalent
            
            
            2,236,547
            
            
            709,395Effect
                of exchange rate changes on cash and cash equivalent
            
            
            153,099
            
            
            (1,075,255
            )Cash
                & cash equivalent at beginning of year
            
            
            737,383
            
            
            1,103,243**Cash
                & cash equivalent at end of year**
            
            **$**
            **3,127,029**
            
            **$**
            **737,383**





NON-CASH
      INVESTING & FINANCING ACTIVITY:


1)
      Assets
      acquired under capital leases $48,740


2)
      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,
      2006.




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, 2008 AND 2007**




**June 30, 2008**
            
            **June 30, 2007****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
            
            $
            3,127,029
            
            $
            737,383**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                Income (Loss)**
            
            
            994,779
            
            
            (1,320,522
            )**Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:**Depreciation
                and amortization expense
            
            
            1,795,148
            
            
            1,339,003Provision
                for doubtful debt
            
            
            4,917,980
            
            
            4,696,994Impairment
                loss
            
            
            -
            
            
            643,668**Changes
                in Assets and Liabilities**Increase
                in current inventories
            
            
            (152,377
            )
            
            (29,926
            )Increase
                in receivables
            
            
            (9,202,808
            )
            
            (6,409,081
            )Increase
                in deferred tax liabilities
            
            
            580,143
            
            
            436,182Increase
                in unearned revenue
            
            
            1,066,787
            
            
            539,141Increase
                in payables
            
            
            3,312,121
            
            
            971,516Decrease
                (Increase) in rental deposit received
            
            
            2,959
            
            
            (5,972
            )Increase
                in provisions for compensated absences
            
            
            397,768
            
            
            133,601Increase
                in income tax payable
            
            
            462,528
            
            
            146,106**Net
                cash provided by operating activities of continued
                operations**
            
            
            **4,175,028**
            
            
            **1,140,710****Net
                cash used in operating activities of discontinued
                operation**
            
            
            **(609,639**
            **)**
            
            **73,517****Cash
                Flows Provided by Operating Activities**
            
            **$**
            **3,565,389**
            
            **$**
            **1,214,227**




See
      accompanying notes to the financial statements.


F-8


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2008 AND 2007**




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




We
      were
      originally incorporated under the name of Hawksdale Financial Visions, Inc.
      on
      December 6, 1996 under the laws of the State of Nevada. We were involved in
      the
      business of timeshares, but became dormant on March 31, 1997, and until January
      28, 2005, we were a “blank check” company with nominal assets. On October 15,
      2004, we changed our name to “Advanced Medical Institute Inc.”




On
      March
      21, 2005, we completed a Share Exchange Agreement (the “Exchange Agreement”)
      with Advanced Medical Institute Pty Limited, a privately owned Australian
      company (“AMI Australia”), whereby AMI Australia became our wholly owned
      subsidiary.




On
      November 17, 2005 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”), whereby PE Patent Holdco became our
      wholly-owned subsidiary.




On
      September 8, 2006, we entered into a Share Exchange Agreement (the “Third
      Exchange Agreement”) with Worldwide PE Patent Holdco Pty Limited (ACN 117 157
      727), a privately owned Australian company (“Worldwide PE”), whereby Worldwide
      PE became our wholly owned subsidiary.




Business
      Overview




AMI
      is a
      service provider company, which arranges for patients with sexual dysfunction
      and prostate problems in Australia, New Zealand, China and the United Kingdom
      to
      be provided with medical services, pharmaceuticals and associated clinical
      support services.




On
      September 15, 2008, we announced expansion of our operations to the United
      Kingdom where we opened up our treatment centers, contracts with independent
      doctors and pharmacies and begun airing infomercials throughout the country.




For
      the
      year ended June 30, 2008, AMI’s revenues were approximately $51.9 million.




Principal
      Products and Services




AMI
      provides a variety of treatment programs to its customers, via its call center
      and clinics, for the treatment of sexual dysfunction and prostate problems.
      A
      patient is diagnosed by telephone or in person at a clinic, in either case,
      by a
      licensed physician, who sends a prescription directly to a compounding pharmacy
      under contract with AMI to prepare the formulation. The prescription is
      delivered to the patient, or the patient may pick up the prescription at the
      clinic. The patient pays for treatments for a specified treatment period, during
      which the formulations may be varied to best suit the patient’s needs.




Our
      physicians prescribe varying combinations or dosages of medications for erectile
      dysfunction (predominantly phentalomine, apomorphine or a combination of them),
      premature ejaculation (predominantly clomipramine) and prostate problems
      (mixture of medicinal herbs). Our compound formulations have not been subject
      to
      any clinical trial, but may lawfully be prescribed on an individual prescription
      (“off-label”) basis in each country in which we operate.


F-9




The
      effectiveness of AMI’s treatment programs depend highly on the delivery system.
      These include:


(a)
              injections,
                  nasal spray, lozenges, tablets and gels for the treatment of erectile
                  dysfunction;
  (b)
              injections,
                  nasal spray, lozenges and gels for the treatment of premature
                  ejaculation;
  (c)
                topical
                    gels for the treatment of female sexual arousal dysfunction;
                    and
  (d)
              an
                  oral elixir for the treatment of prostate
                  problems.




New
      Products and Services




On
                July 29, 2008, AMI announced the development of new transdermal gel
                used
                to treat premature ejaculation and erectile dysfunction in men as
                well as
                sexual arousal dysfunction in women.




Since
                2003, AMI’s subsidiary, Intelligent Medical Technologies Pty Limited
                (“IMT”) has been developing an ultrasonic nebulizer which will deliver
                drugs to the lungs. The group’s intention is to use this delivery system
                to administer its compound formulations. In order to utilize this
                delivery
                system IMT needs to obtain regulatory approval of the nebulizer as
                a
                medical device. IMT has been working on this process for the last
                3 years
                however IMT has not yet completed such process.




Distribution




AMI
                currently operates a centralized call center and 20 clinics offices
                throughout Australia and New Zealand. AMI has an arrangement with
                two
                hospitals in Beijing where Chinese patients are treated, and AMI
                has
                recently established 2 clinics in the United Kingdom to service UK
                patients. AMI’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 its medical clinics
                and
                its over-the-phone sales and marketing program.




Subsidiaries
      of the Company




Following
      are the significant Subsidiaries of the Company and AMI
      Australia


F-10







The
                Company’s subsidiaries are AMI Australia, AMI International Pty Limited
                and AMI Management Services Pty
                Limited.




AMI
                Australia’s subsidiaries are Advanced Medical Institute Pty Limited, PE
                Patent Holdco, Worldwide PE, Advanced Medical Institute (NZ) Limited,
                IMT.




AMI
                International’s subsidiaries are AMI China and AMI Clinic Limited.




On
                February 4, 2008, AMI discontinued operations of AMI Japan Kabushiki
                Gaisya .




AMI
                International Pty Limited was established to hold the Group’s
                shareholdings in the Chinese company established to conduct operations
                in
                that jurisdiction.




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




Advanced
                Medical Institute (NZ) Limited conducts the group’s business in New
                Zealand.




Ai
                Te Wei (Beijing) Medicine Consulting Company conducts the group’s business
                in China.




During
                September 2006, AMI commenced a not-for-profit division of the Company,
                AMI-SCI that provides treatment options to men who have sustained
                a spinal
                cord injury.


F-11




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**J** **UNE
      30, 2008**




**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”). All significant inter-company accounts and
      transactions have been eliminated upon consolidation.




The
      Company is planning to to dispose off its 50% owned subsidiary, Whygo Video
      Conferencing Pty Ltd (“Whygo”) (which owns all of the shares in Whygo Limited, a
      UK entity) in the subsequent period and re-classed the assets of Whygo as ‘Net
      Assets held for disposition’ in the accompanied financial
      statements.




The
      Company also re-classed assets of its 75% owned subsidiary AMI Japan, which
      was
      discontinued during the reporting period, to ‘Assets held for
      disposition’.




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.




F-12




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. Advertising expense is $17.9
      million in financial year 2008 and $13.0 million in financial year 2007.




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. Allowance for bad debt is $14.2
      million in financial year 2008.




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, 2008 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.


F-13


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2008**




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




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, 2008 and 2007, 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, 2008, 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. Research and development costs are $0.2 million in
      financial year 2008 and $0.2 million in financial year 2007.


F-14


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**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.





At
      June
      30, 2008, intangibles consist of the following:





**Intangibles**
            
            **Gross Carrying**
              **Amount**
            
            **Accumulated**
              **Amortization**
            
            **Impairment****Loss**
            
            **Net**Recorded
                in prior yearAmortized
                intangibles:Patents
            
            $
            11,156,809
            
            $
            (1,376,049
            )
            $
            (787,469
            )
            $
            8,993,291Intellectual
                Properties
            
            
            19,427,611
            
            
            (1,917,006
            )
            
            -
            
            
            17,510,605Computer
                Software
            
            
            473,174
            
            
            (287,994
            )
            
            -
            
            
            185,180Unamortized
                intangibles:Intellectual
                Properties
            
            
            3,592,264
            
            
            -
            
            
            -
            
            
            3,592,264$
            34,649,859
            
            $
            (3,581,049
            )
            $
            (787,469
            )
            $
            30,281,340




F-15





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.





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, 2008 and 2007
      was
      $1,795,148 and $1,339,737 respectively. The Company expects the amortization
      expenses for the next five years to
      be as follows:





**Year Ending June 30,**
            
            **Annual Amount**2009
            
            $
            1,618,0002010
            
            $
            1,618,0002011
            
            $
            1,618,0002012
            
            $
            1,618,0002013
            
            $
            1,618,000




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, 2008 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-16





**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**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
      Pronoucements





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.




F-17





**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2008**




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





Recent
      Pronoucements **(Continued)**





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.





In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations”. The objective of this statement will significantly change the
      accounting for business combinations. Under Statement 141R, an acquiring entity
      will be required to recognize all the assets acquired and liabilities assumed
      in
      a transaction at the acquisition date fair value with limited exceptions.
      Statement 141 applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. The Company does not expect
      the
      adoption of SFAS No. 141R to have a material impact on the consolidated
      financial statements.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements-An Amendment of ARB No. 51". The objective
      of
      this statement is to establish new accounting and reporting standards for the
      Noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. Statement 160 is effective for fiscal years, and interim periods
      within those fiscal years, beginning on or after December 15, 2008. The Company
      does not expect the adoption of SFAS No. 160 to have a material impact on the
      consolidated financial statements.





In
      March,
      2008, the Financial Accounting Standards Board (“FASB”) issued FASB Statement
      No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The
      new standard is intended to improve financial reporting about derivative
      instruments and hedging activities by requiring enhanced disclosures to enable
      investors to better understand their effects on an entity’s financial position,
      financial performance, and cash flows. It is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15, 2008,
      with early application encouraged. The new standard also improves transparency
      about the location and amounts of derivative instruments in an entity’s
      financial statements; how derivative instruments and related hedged items are
      accounted for under Statement 133; and how derivative instruments and related
      hedged items affect its financial position, financial performance, and cash
      flows. FASB Statement No. 161 achieves these improvements by requiring
      disclosure of the fair values of derivative instruments and their gains and
      losses in a tabular format. It also provides more information about an entity’s
      liquidity by requiring disclosure of derivative features that are credit
      risk-related. Finally, it requires cross-referencing within footnotes to enable
      financial statement users to locate important. Based on current conditions,
      the
      Company does not expect the adoption of SFAS 161 to have a significant impact
      on
      its results of operations or financial position.




F-18




In
      May
      2008, FASB issued SFASB No.162, “The Hierarchy of Generally Accepted Accounting
      Principles”. The pronouncement mandates the GAAP hierarchy reside in the
      accounting literature as opposed to the audit literature. This has the practical
      impact of elevating FASB Statements of Financial Accounting Concepts in the
      GAAP
      hierarchy. This pronouncement will become effective 60 days following SEC
      approval. The Company does not believe this pronouncement will impact its
      financial statements.




In
      May
      2008, FASB issued SFASB No. 163, “Accounting for Financial Guarantee Insurance
      Contracts-an interpretation of FASB Statement No. 60”. The scope of the
      statement is limited to financial guarantee insurance (and reinsurance)
      contracts. The pronouncement is effective for fiscal years beginning after
      December 31, 2008. The Company does not believe this pronouncement will impact
      its financial statements.




F-19


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**




**JUNE
      30, 2008**




**3.**
            **OTHER
                ASSETS**




Following
      is the summary of other assets as of June 30, 2008





Bank
                guarantees
            
            $
            112,256Advances
                and prepayments
            
            
            23,220Other
                receivables
            
            
            67,305Other
                debtors
            
            
            498,548Total
            
            $
            701,329




**4.**
            **PROPERTY,
                PLANT AND EQUIPMENT**




**June 30, 2008**Leasehold
                improvements at cost
            
            $
            557,408Less:
                Accumulated depreciation
            
            
            118,234439,174Motor
                Vehicles
            
            
            89,884Less:
                Accumulated Depreciation
            
            
            36,31653,568Office
                Furniture & Equipment
            
            
            803,398Less:
                Accumulated Depreciation
            
            
            177,720625,678Computer
                Hardware – at Cost
            
            
            462,013Less:
                Accumulated Depreciation
            
            
            318,141143,872Low
                Value Pooled Fixed Assets
            
            
            188,491Less:
                Accumulated Depreciation
            
            
            135,95852,533**Total
                Property, Plant and Equipment**
            
            **$**
            **1,314,825**




Depreciation
      expenses were $176,718 and $156,162 for the fiscal years ended June 30, 2008
      and
      2007, respectively.




Included
      in property and equipment is approximately $163,348 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 $68,284.


F-20


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**5.**
            **INTEREST
                BEARING LIABILITIES**




**June 30, 2008****Current,
                as of the period ended June 30**Capitalized
                lease liability
            
            $
            45,037Secured
                loan 2008
            
            
            377,678**$**
            **422,715****Non-current,
                due during the year ended June 30:**Capitalized
                lease liability
            
            $
            26,061Secured
                Loan
            
            
            1,497,655Total
                non-current
            
            **$**
            **1,523,716**




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 $263,479 and $204,806 for the fiscal years ended June 30, 2008
      and
      2007, 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 principal of the loan is due to mature in September
      2009.





Obligation
      under capital lease will expire during the period from September 2010 to April
      2013.




**6.**
            **ACCOUNTS
                PAYABLE AND ACCRUED
                EXPENSES**




Accounts
      payable and accrued expenses as of June 30, 2008 are summarized as
      follows:




AmountJune 30, 2008Accounts
                payable
            
            $
            4,195,940Accrued
                salaries
            
            
            611,049Accrued
                professional fees
            
            
            62,305Accrued
                legal fee
            
            
            89,083Other
                current liabilities
            
            
            290,800Accrued
                DDR medication cost
            
            
            1,204,760Accrued
                DDR sales commission
            
            
            1,204,760Accrued
                DDR collection fee
            
            
            1,204,760Provision
                for patient refund
            
            
            182,685Accrued
                compensated absences
            
            
            828,304Total
            
            $
            9,874,446




F-21




**7.**
            **LAWSUITS**




As
      of
      June 30, 2008, there was no litigation pending or threatened by or against
      the
      Company or any of its direct or indirect subsidiaries other than AMI Australia.
      AMI Australia currently is involved in the following litigation and
      administrative matters:




On
      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.




On
      October 25, 2006, Bade Medical Institute Pty Limited, Mr. David Wade, Mr. Buddy
      Beani and others (collectively “Bade”) applied for Trade Mark No. 114322021 in
      respect of the words “AMI Nasal Spray”. AMI Australia lodged an objection to the
      registration of that application with IP Australia on June 21, 2007. On December
      13, 2007, AMI Australia commenced proceedings in the Federal Court of Australia
      Sydney Registry against Bade alleging Bade was infringing upon AMI Australia’s
      trademarks and other intellectual property rights. On December 19, 2007, Bade
      consented to orders that Bade transfer ownership of certain domain names and
      telephone numbers to AMI Australia and consented to orders that Bade would
      not
      use certain names which contained the word AMI. Bade appear to have ceased
      operation since the orders were obtained and has transferred the required names
      to AMI Australia.





On
      April
      10, 2008, a subpoena was served on Bade requiring the production of, amongst
      other things, its bank records. However, despite the subpoena being stood over
      on 9 occasions, it was never sufficiently answered by Bade. As Bade failed
      to
      properly respond to the subpoena, AMI Australia has had to issue Subpoenas
      to
      third parties to attain the evidence it requires to quantify its
      damages.





As
      these
      proceedings were commenced by way of Application, on August 8, 2008, AMI
      Australia filed and served a statement of claim so that it can file for default
      or summary judgment if Bade fails to file and serve defences or if Bade fails
      to
      file and serve defences that reasonably answer AMI Australia’s
      case.





On
      September 16, 2008 the matter was listed for further directions and orders
      were
      made that:


-  the
      matter be fixed for hearing on December 17-19, 2008;


-  Bade
      file
      and serve any defences upon which they propose to rely by September 20, 2008
      (no
      such defences have been received to date other than a defence by Georgina Wade)
      and file certain affidavits by September 20, 2008 and November 5, 2008;
      and


-  The
      Company file affidavits in reply by December 9, 2008.


F-22


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**8.**
            **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, 2008**Due
                during the period ended June 30:2009
            
            $
            689,5762010
            
            
            293,2682011
            
            
            125,2902012
            
            
            43,964**$**
            **1,152,098**




Total
      rent expense under these operating lease was approximately $1,085,779 and
      $1,733,041 during the years ended June 30, 2008 and 2007,
      respectively.




**9.**
            **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.




**10.**
            **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-23




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.


Un-Audited Pro Forma Consolidated Financial Information
              
              June 30,
                2007Net
                  revenue
              
              $
              39,421,485Operating
                  income (loss)
              
              $
              (846,042
              )Net
                  income (loss)
              
              $
              (1,593,376
              )Earnings/(loss) per
                  share - basic
              
              $
              (0.03
              )




**11.**
            **DISCONTINUED
                OPERATION/ASSETS HELD FOR
                DISPOSITION**





***Whygo
      Video Conferencing Pty Limited***




On
      April
      30, 2008, AMI Australia Holdings Pty Limited, a wholly owned subsidiary of
      Advanced Medical Institute Inc., entered into a Share Sale Agreement with Mr.
      James Matthews pursuant to which AMI Australia agreed to sell its 50% interest
      in Whygo Video Conferencing Pty Limited (ACN 105 732 492), a privately owned
      Australian company in exchange for the payment of A$330,000 (approximately
      US$305,000) to Mr. Matthews.


F-24




A$236,700
      has been received up to Oct 7, 2008 with further installments due on June 30,
      2009. Ownership of shares will be transferred after full settlement has been
      done.





Following
      is the summary of net assets held for disposition as of June
      30:





**Assets
                :-**Cash
                and cash equivalents
            
            $
            30,032Accounts
                receivable, net
            
            
            208,678Other
                receivable
            
            
            56,788Other
                current assets
            
            
            2,560Property,
                Plant & Equipment, net
            
            
            2,103Total
                Assets
            
            
            300,161**Liabilities
                :-**Accounts
                payable and accrued expense
            
            
            139,554Total
                Liabilities
            
            
            139,554**Net
                Assets Held for disposal**
            
            **$**
            **160,607**




The
      components of loss from operations related to the entity held for disposal
      for
      the year ended June 30, 2008 are shown below.





**Net
                sales**
            
            $
            943,939Operating
                expensesSelling,
                general and administrative
            
            
            836,758Total
                operating expenses
            
            
            836,758**Profit
                from operations**
            
            
            107,181
            )Non-operating
                income (expenses) :-Other
                income
            
            
            25,805Interest
                income
            
            
            798**Net
                profit before income tax**
            
            
            133,784
            )Provision
                for Income tax
            
            
            (167
            )**Net
                profit from entity held for disposal**
            
            $
            133,617
            )




***AMI
      Japan Kabushiki Gaisya***





AMI
      Japan
      Kabushiki Gaisya (“AMI Japan”) was an indirect 75% owned subsidiary of the
      Company. AMI Japan had formed an alliance with a Japanese party with expertise
      in marketing in the Japanese market and two financial investors. AMI Japan
      commenced operations on October 1, 2006.





On
      or
      about February 4, 2008, the operation of AMI Japan was wound down and
      discontinued due to unsatisfied operating result.




F-25




Loss
      from
      the discontinued operation of AMI Japan during the period ended June 30, 2008
      was US$476,022.





The
      capital contributed to AMI Japan of US$235,725 has been classified as assets
      pending sale on the accompanying consolidated balance sheet as of June 30,
      2008.





Following
      is the summary of net assets held as of June 30:





**Assets
                :-**Cash
                and cash equivalents
            
            $
            34,288Other
                current assets
            
            
            75,693Property,
                Plant & Equipment, net
            
            
            117,950Intangible
                assets
            
            
            8,643Total
                Assets
            
            
            236,574**Liabilities
                :-**Accounts
                payable and accrued expense
            
            
            849Total
                Liabilities
            
            
            849**Net
                Assets Held for disposal**
            
            **$**
            **235,725**




The
      components of loss from operations related to the entity held for disposal
      for
      the year ended June 30, 2008 are shown below.





**Net
                sales**
            
            $
            77,092Operating
                expensesSelling,
                general and administrative
            
            
            553,425Total
                operating expenses
            
            
            553,425**Loss
                from operations**
            
            
            (476,333
            )Non-operating
                income (expenses) :-Other
                income
            
            
            218Interest
                income
            
            
            93**Net
                Loss before income tax**
            
            
            (476,022
            )Provision
                for Income tax
            
            
            -**Net
                loss from entity held for disposal**
            
            $
            (476,022
            )




F-26


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**12.**
            **RELATED
                PARTY TRANSACTIONS**





**June 30, 2008*****Advanced
                Medical Institute of the United States, Inc.***Relationship:Under common management control by Jack VaismanReceivable
                from this related party
            
            $
            151,074***Prostate
                Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                from this related party
            
            
            1,850***Loan
                to affiliate in Indonesia***
            
            
            598,110***Total:***
            
            $
            751,034




Total
                receivables from related parties included in the Company’s balance sheet
                was $152,924 as of June 30, 2008.Receivables
                from related parties are unsecured, interest-free and are due on
                demand.




**13.**
            **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 since been received from the
      carrier. No settlement has since 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-27






**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**14.**
            **INCOME
                TAXES**




Total
      Federal and State income tax expense for the fiscal years ended June 30, 2008
      and 2007 amounted to $1,257,679 and $769,691, respectively. For the fiscal
      years
      ended June 30, 2008 and 2007 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.





U.S.
            
            State
            
            International
            
            TotalJune 30, 2008Current
            
            $
            0
            
            $
            0
            
            $
            821,610
            
            $
            821,610Deferred
            
            $
            0
            
            $
            0
            
            $
            436,069
            
            $
            436,069Total
            
            $
            0
            
            $
            0
            
            $
            1,257,679
            
            $
            1,257,679




U.S.
            
            State
            
            International
            
            TotalJune
                30, 2007Current
            
            $
            0
            
            $
            0
            
            $
            154,849
            
            $
            154,849Deferred
            
            $
            0
            
            $
            0
            
            $
            614,842
            
            $
            614,842Total
            
            $
            0
            
            $
            0
            
            $
            769,691
            
            $
            769,691





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





June
              30,
              2008
            
            June
              30,
              2007Federal
                statutory tax rate
            
            
            34
            %
            
            34
            %Increase
                (decrease) in rate resulting from:Non
                US income taxed at different rates
            
            
            (1
            )%
            
            (1
            )%33
            %
            
            33
            %Temporary
                Difference
            
            
            31
            
            
            15
            %Effective
                Tax Rate
            
            
            64
            %
            
            48
            %




F-28


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2008**




Deferred
      tax liability arises due to the following temporary differences.





June 30,
              2008
            
            Future tax
              rate %
            
            Deferred tax
              liabilityOwing
                to patients via ACFC
            
            $
            24,444,765
            
            
            30
            %
            $
            7,333,430Provision
                DDR cancellation
            
            
            (13,746,000
            )
            
            30
            %
            
            (4,123,800
            )Provision
                un-dispensed DDR medications
            
            
            (1,253,000
            )
            
            30
            %
            
            (375,900
            )Accrued
                ACFC collection and commission
            
            
            (2,506,000
            )
            
            30
            %
            
            (751,800
            )Provision
                for patient refund
            
            
            (190,000
            )
            
            30
            %
            
            (57,000
            )Amortization
                of patents
            
            
            714,329
            
            
            30
            %
            
            214,299Other
                miscellaneous
            
            
            279,946
            
            
            30
            %
            
            83,983Total
            
            $
            7,744,040
            
            
            30
            %
            $
            2,323,212




F-29




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**




**NOTES
      TO THE FINANCIAL STATEMENT**


**JUNE
      30, 2008**




**15.**
            **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, 2006 ,
      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.




**16.**
            **OTHER
                COMPREHENSIVE INCOME**




Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity, at June 30, 2008are as
      follows:





*Accumulated Other*
              *Comprehensive Income*Balance
                at June 30, 2006
            
            $
            (204,483
            )Change
                for 2006
            
            
            3,375,989Balance
                at June 30, 2007
            
            $
            3,171,506Change
                for 2008
            
            
            3,800,994Balance
                at June 30, 2008
            
            $
            6,972,500




F-30