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EX-32.1 - ADVANCED MEDICAL INSTITUTE INC. | v177658_ex32-1.htm |
EX-32.2 - ADVANCED MEDICAL INSTITUTE INC. | v177658_ex32-2.htm |
EX-31.2 - ADVANCED MEDICAL INSTITUTE INC. | v177658_ex31-2.htm |
EX-31.1 - ADVANCED MEDICAL INSTITUTE INC. | v177658_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
x
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended June 30,
2008
or
¨
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TRANSITION REPORT UNDER
SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from _____________ to ________________
Commission
file number 000-29531
ADVANCED MEDICAL INSTITUTE
INC.
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(Exact
name of registrant as specified in its
charter)
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NEVADA
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88-0409144
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer Identification No.)
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Level 1, 204-218 Botany Road
Alexandria, NSW Australia
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2015
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(Address
of principal executive offices)
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(Zip
Code)
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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
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(Title
of class)
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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 ¨
|
Accelerated
filer ¨
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Non-accelerated
filer ¨
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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 ¨ 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.
EXPLANATORY
NOTE
This
Amendment No. 1 to the Annual Report on Form 10-K for the year ended
June 30, 2008 of Advanced Medical Institute Inc. (the "Company"), originally
filed on October 14, 2008 (the "2008 Annual Report"), is being filed by the
Company to amend:
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·
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Part
II, Item 7 to add an executive overview to Management’s Discussion and
Analysis of Financial Condition and Results of
Operations;
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·
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Part
II, Item 9A to revise the disclosure under Controls and
Procedures;
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·
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the
Company's financial statements to include an audited balance sheet for the
year ended June 30, 2007; and
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·
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Exhibits
31.1 and 31.2 to comply with the language required by Item 601(b)(31) of
Regulation S-K.
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In
addition, pursuant to the Securities and Exchange Commission rules, the Company
is including a currently dated Exhibit 32. This Form 10-K/A does not
otherwise update any exhibits as originally filed in, and does not otherwise
reflect events occurring after the original filing date of, the 2008 Annual
Report.
TABLE OF CONTENTS
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Page
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Part II. | |
Item
7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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3
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Item
9A. Controls and Procedures
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12
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Part IV. | |
Item
15. Exhibits and Financial Statement Schedule
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14
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SIGNATURES
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15
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2
Part
II
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 report on Form
10-K/A 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 report on Form 10-K/A, 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:
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·
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our
ability to attract and retain management, and to integrate and maintain
technical information and management information
systems;
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·
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our
ability to raise capital when needed and on acceptable terms and
conditions;
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·
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the
intensity of competition; and
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·
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general
economic conditions.
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All
written and oral forward-looking statements made in connection with this report
on Form 10-K/A 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” in our 2008 Annual Report for a more detailed
discussion of uncertainties and risks that may have an impact on future
results.
3
Overview
We provide medical and clinical support
services to patients with sexual dysfunction and prostate problems, particularly
for premature ejaculation ("PE") and erectile dysfunction ("ED"). We
have nineteen clinics in Australia, one clinic in each of China and New
Zealand, and two clinics in the United Kingdom.
We
continuously evaluate the performance of our existing markets to determine
whether to exit or continue in the market. As a result, we may decide to exit
certain markets if they do not meet our business goals.
We
believe that we are better positioned than our competitors in the erectile
dysfunction field to meet the needs of our customers because we believe that our
products are efficacious, safe, easy to use and cost-effective. We continuously
research and develop 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.
The
advertisement of our services is a key driver of our revenue and costs. In
addition, given all of our revenue and expenses are denominated in a foreign
currency (particularly the Australian dollar), any appreciation or deprecation
of the U.S. dollar impacts our results of operations when translated into U.S.
dollars.
Summary
highlights for the fiscal year ended June 30, 2008:
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·
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We
increased advertising in fiscal 2008 and this was a major factor in
attracting new patients and contributed to a 36% increase in revenue in
fiscal 2008 compared to fiscal
2007.
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·
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Principally
as a result of the higher revenue, we earned net income of $994,779 in
fiscal 2008 compared with a loss of $1.3 million in fiscal
2007.
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|
·
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We
seek to fund our operations mostly from cash generated by our business. We
are not highly leveraged; our interest bearing debt was $1.5 million at
June 30, 2008.
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4
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.
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.
5
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 Statement of Financial Accounts Standards (“SFAS”) 109 “Accounting for Income
Taxes.”
Inventories
Inventories
are valued at the lower of cost (determined on a first-in first-out basis) or
market value. Management compares the cost of inventories with the
market value and allowance is made for writing down our inventories to market
value, if lower. As of June 30, 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.
Property
and equipment are carried at the lesser of cost and written down
value. Expenditures for maintenance and repairs are expenses as
incurred and expenditures for major renewals and betterments are
capitalized. Assets retired or sold are removed from the property
accounts, with gains or losses on disposal included in income.
Exchange Gain
(Loss)
During
the 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 Statement of Financial Accounting 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.
6
Intangible
assets
The
Company applies the criteria specified in SFAS No. 141, “Business
Combinations” to determine whether an intangible asset should be recognized
separately from goodwill. Intangible assets acquired through business
acquisitions are recognized as assets separate from goodwill if they satisfy
either the “contractual-legal” or “separability” criterion. Per SFAS 142,
intangible assets with definite lives are amortized over their estimated useful
life and reviewed for impairment in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-lived Assets.” Intangible
assets, such as purchased technology, trademark, customer list, user base and
non-compete agreements, arising from the acquisitions of subsidiaries and
variable interest entities are recognized and measured at fair value upon
acquisition. Intangible assets are amortized over their estimated useful lives
from one to ten years. The Company reviews the amortization methods and
estimated useful lives of intangible assets at least annually or when events or
changes in circumstances indicate that it might be impaired. The recoverability
of an intangible asset to be held and used is evaluated by comparing the
carrying amount of the intangible asset to its future net undiscounted cash
flows. If the intangible asset is considered to be impaired, the impairment loss
is measured as the amount by which the carrying amount of the intangible asset
exceeds the fair value of the intangible asset, calculated using a discounted
future cash flow analysis. The Company uses estimates and judgments in its
impairment tests, and if different estimates or judgments had been utilized, the
timing or the amount of the impairment charges could be different.
Goodwill,
trademarks, patents and other intangible assets determined to have indefinite
useful lives are not amortized. We test such trademarks and other
intangible assets with indefinite useful lives for impairment annually, or more
frequently if events or circumstances indicate that an asset might be
impaired. Goodwill, trademarks, patents and other intangible assets
determined to have definite lives are amortized over their estimated useful
lives or the life of the trademark, patent and other intangible asset, whichever
is less.
Long-Lived
Assets
Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144”), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal. Based on its review, the Company believes
that, as of June 30, 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.
7
Basic and Diluted Earnings
Per Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings per share.” SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all
periods presented has been restated to reflect the adoption of SFAS No. 128.
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.
Accounting Treatment of the
AMI Australia Acquisition Transaction
The Share
Exchange with AMI Australia has been accounted for as a reverse acquisition with
the Company being the surviving company. Pursuant to the Exchange
Agreement, the Shareholders exercise control over the Company. The
Share Exchange has been deemed to be a capital transaction where the Company is
treated as a non-business entity. Therefore, the accounting for the
business combination is identical to that resulting from a reverse merger,
except no goodwill or other intangible assets will be recorded. For
accounting purposes, AMI Australia will be treated as the accounting acquirer
and, accordingly, will be presented as the continuing entity.
Currency
Conversion
As of
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 Statement of Financial Accounts Standards (“SFAS”) No.
52, “Foreign Currency Translation,” with the AUD as the functional
currency. According to the Statement, all assets and liabilities were
translated at the exchange rate (AUD1 = USD0.96150) as of June 30, 2008,
stockholder’s equity are translated at the historical rates and income statement
items are translated at the weighted-average exchange rate for the
period. The resulting translation adjustments are reported under
other comprehensive income in accordance with SFAS No. 130, “Reporting
Comprehensive Income.”
The
following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
8
Result of
operations:
Twelve months
ended
June 30,
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||||||||
2008
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2007
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|||||||
Revenue
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100 | % | 100 | % | ||||
Cost
of Revenue
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22.3 | % | 24.8 | % | ||||
Gross
Profit
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77.7 | % | 75.2 | % | ||||
Selling
General and administrative expenses
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72.4 | % | 72.3 | % | ||||
Other
income and expenses
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(0.3 | )% | 0.2 | % | ||||
Discontinued
operation
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(0.7 | )% | (4.5 | )% | ||||
Income
before income tax
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4.3 | % | (1.4 | )% | ||||
Income
tax expenses
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2.4 | % | 2.1 | % | ||||
Net
Income
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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.
Our
aggregate cash balances as at June 30, 2008 were $3,127,029. We
forecast that we will be able to generate sufficient funds from our business in
order to fund our operations in the ordinary course during the next 12
months. Management has expanded our business into China and the
United Kingdom and is considering further international expansion through either
establishing new sales clinic operations or by licensing the intellectual
property for use in territories in which we do not have clinics.
In the
event that we continue to expand our business, we may need to raise debt or
equity funding in order to undertake such expansion. However, there
can be no assurance that we can or will obtain sufficient funds from operations
or from additional financings on terms acceptable to us. If we are
unable to obtain sufficient additional financing, we may not be able to expand
our operations as considered or we could be required to reduce spending and
operations.
TWELVE
MONTHS ENDED JUNE 30, 2008 COMPARED TO TWELVE MONTHS ENDED JUNE 30,
2007
REVENUE. Revenue was
$51,903,527 in the twelve months ended June 30, 2008 compared to $38,156,967 in
the twelve months ended June 30, 2007, an increase of $13,746,560 or
36.0%. The increase in revenue in the twelve-month period is
primarily attributable to the following factors: (1) increased effectiveness of
advertising campaigns; (2) increased brand name recognition; and (3)
effectiveness of our products. Part of the increase is also due to a
significant increase in the A$:US$ exchange rate during the relevant
period.
9
We
recognize all expenses on the date they are incurred regardless of whether they
relate to recognized or unearned revenue whereas unearned revenue (which is
generated by current expenses) is unable to be recognized in the current
period.
In
addition, our unearned revenue during the twelve months ending June 30, 2008
increased by $1,821,512 to $6,922,800 for the twelve months ending June 30,
2007, compared to the twelve months ending June 30, 2007. The
increase in unearned revenue in the twelve-month period is primarily attributed
to the increase in the number of patients seeking treatment programs from us
over the same period in 2007. We attribute this increase to the following
factors: (1) increased advertising campaigns with improved target marketing in
the premature ejaculation segment; (2) increased brand name recognition; and (3)
effectiveness of our products. Part of the increase is also due to a
significant increase in the A$: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 twelve months ending June 30, 2008, compared to the twelve
months ending June 30, 2007. AMI Australia also generated $3,566,629
in revenue from its prostate programs in the twelve months ending June 30, 2008,
compared to $1,320,096 in the twelve months ending June 30, 2007, an increase of
170.17%.
Revenue
in our Australian operations was $50,572,312 in the twelve months ended June 30,
2008 compared to $37,245,631 during the twelve months ended June 30, 2007, an
increase of $13,326,681 or 35.8%. The increase in revenue in the
twelve-month period is primarily attributable to the increase in the number of
patients seeking treatment from us during the twelve months ended
June 30, 2008 over the same period in 2007. We attribute this
increase to the following factors: (1) effectiveness advertising campaigns; (2)
increased brand name recognition; and (3) effectiveness of our
products. Part of the increase is also due to a significant increase
in the A$:US$ exchange rate during the relevant period.
Revenue
in our New Zealand operations was $1,275,681 in the twelve months ended June 30,
2008 compared to $871,605 during the twelve months ended June 30, 2007, an
increase of $404,076 or 46.4%. The increase in revenue in the
twelve-month period is primarily attributable to the increase in the number of
patients seeking treatment from us during the twelve 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 twelve months ended June 30, 2008
compared to $39,730 during the twelve months ended June 30, 2007. The
increase in revenue in the twelve-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 twelve months ended June 30, 2008 compared to
$9,313,044 in the twelve 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 twelve months ended June
30, 2008 compared to 24.8% in the twelve 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.
10
GROSS
PROFIT. Gross profit was $40,305,598 in the twelve months ended June 30,
2008 compared to $28,699,647in the twelve months ended June 30,
2007. As a percentage of revenue, gross profit increased to 77.7% in
the twelve months ended June 30, 2008 from 75.2% in the twelve 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 twelve months ended
June 30, 2008 compared to $27,932,587 in the twelve 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 twelve months ended
June 30, 2008 compared to a gross profit of $790,752 in the twelve 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 twelve months ended June 30,
2008 compared to ($23,692) in the twelve 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 twelve months ended June 30,
2008 compared to $27,569,036 in the twelve months ended June 30,
2007. As a percentage of revenue, selling, general and administrative
expenses increased to 72.4% in the twelve months ended June 30, 2008 from 72.3%
in the twelve months ended June 30, 2007. The percentage change was
not material.
Selling,
general and administrative expenses in our Chinese operations were $741,071 in
the twelve months ended June 30, 2008 compared to $929,729 in the twelve 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 twelve months ended June 30, 2008 compared to
$70,585 in the twelve months ended June 30, 2007. As a percentage of
revenues, other income and expenses decreased to (0.3)% in the twelve months
ended June 30, 2008 from 0.2% in the twelve 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 twelve months ended June 30, 2008 compared to
($550,831) in the twelve months ended June 30, 2007. This improvement
is due to significant expansion in the Company’s profitable Australian
operations and the Company, substantially decreasing expenditures in its
unprofitable Chinese operations.
Net
income before income tax in our Australian operations was $4,312,262 in the
twelve months ended June 30, 2008 compared to $2,452,564 in the twelve months
ended June 30, 2007. This increase is mainly attributable to increase
in revenue in Australia.
11
Net loss
before income tax in our New Zealand operations was ($615,443) in the twelve
months ended June 30, 2008 compared to a net loss ($112,711) in the twelve
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 twelve months
ended June 30, 2008 compared to ($953,513) in the twelve months ended June 30,
2007. The principal reason for the reduction in net loss is because
we have reduced the amount of expenditure into our China
operations.
Income
tax expenses were $1,257,679 in the twelve months ended June 30, 2008 compared
to $769,691 in the twelve 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% which is attributable to a lower proportion of expenses being
incurred in offshore jurisdictions which are unable to 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 twelve months ended June 30, 2008 compared ($1,320,522) in the
twelve months ended June 30, 2007. The reason for this 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 twelve months ended
June 30, 2008 compared to $1,682,873 in the twelve 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 twelve months ended June 30,
2008 compared to a net loss ($112,711) in the twelve months ended June 30,
2007. This increase is attributable to the increase in advertising
expenses.
Net loss
in our Chinese operations was ($741,068) in the twelve months ended June 30,
2008 compared to ($953,513) in the twelve 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
9A(T). Controls
and Procedures.
(a)
Disclosure Controls and Procedures.
Our management, with the participation
of our principal executive officer and principal financial officer has evaluated
the effectiveness of our disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15(d) – 15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the
period covered by this report. Based on such evaluation, our principal
executive officer and principal financial officer have concluded that, as of the
end of such period, our disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by us in reports we file or submit under the Exchange
Act and are effective in ensuring that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is accumulated and
communicated to management, including our principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding
disclosure.
12
(b)
Internal Control Over Financial Reporting
The management of the Company is
responsible for establishing and maintaining adequate internal control over
financial reporting, as required by Sarbanes-Oxley Section 404A. The Company's
internal control over financial reporting is a process designed under the
supervision of the Company's principal executive officer and prinicpal
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.
The matters involving controls over
financial reporting 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 principal 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 although its
disclosure controls and procedures are effective, 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.
(c)
Changes in Internal Controls.
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.
13
PART
IV
Item
15. Exhibits
Financial Statement Schedules.
(a) The
following are filed with this report:
(1) The
financial statements listed on the Financial Statement’s 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.
14
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date:
March 25, 2010
|
ADVANCED
MEDICAL INSTITUTE INC.
|
|
By:
|
/s/
Jacov (Jack) Vaisman
|
|
Jacov
(Jack) Vaisman
|
||
Chief
Executive Officer and
President
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date:
March 25, 2010
|
By:
|
/s/
Jacov (Jack) Vaisman
|
Jacov
(Jack) Vaisman
|
||
Chief
Executive Officer and President
|
||
(Principal
Executive Officer)
|
||
Date:
March 25, 2010
|
By:
|
/s/
Dilip Shrestha
|
Dilip
Shrestha
|
||
Chief
Financial Officer
|
||
(Principal
Accounting Officer)
|
||
Date:
March 25, 2010
|
By:
|
/s/
Forhad (Tony) Kahn
|
Forhad
(Tony) Kahn
|
||
Executive
Vice President and Secretary
|
||
15
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).
|
16
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 10K-SB, filed with the Securities and
Exchange Commission on October 15,
2007).
|
17
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 10.1 to Advanced Medical Institute Inc.’s
Current Report or Form 8-K dated April 30, 2008 and filed with the
Securities and Exchange Commission on May 5,
2008).
|
|
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 and 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 Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
Certification
of the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
32.2
|
Certification
of the Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
18
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-3
|
FINANCIAL
STATEMENTS
|
|
Consolidated
Balance Sheet as at June 30,2008
|
F-4
|
Consolidated
Statements of Operations for the years ended June 30, 2008 and
2007
|
F-5
|
Consolidated
Statements of Stockholders’ Equity for the years ended June 30, 2008 and
2007
|
F-6
|
Consolidated
Statements of Cash Flows for the years ended June 30, 2008 and
2007
|
F-7
|
Notes
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 SHEETS
|
June
30, 2008
|
June
30, 2007
|
|||||||||
Notes
|
|||||||||||
CURRENT
ASSETS
|
|
||||||||||
Cash
& cash equivalent
|
$ | 3,127,029 | $ | 864,481 | |||||||
Receivables,
net
|
18,196,314 | 12,158,950 | |||||||||
Receivables
due from related parties
|
12
|
751,034 | 1,453 | ||||||||
Inventory
|
468,950 | 269,707 | |||||||||
Other
assets
|
3
|
701,329 | 1,174,445 | ||||||||
TOTAL
CURRENT ASSETS
|
23,244,656 | 14,469,036 | |||||||||
NON-CURRENT
ASSETS
|
|||||||||||
Security
deposits
|
124,569 | 191,702 | |||||||||
Property,
plant and equipment, net
|
4
|
1,314,825 | 1,045,917 | ||||||||
Net
assets held for disposition
|
11
|
396,332 | - | ||||||||
Intangible
assets, net
|
2
|
30,281,340 | 28,217,069 | ||||||||
TOTAL
NON-CURRENT ASSETS
|
32,117,066 | 29,454,688 | |||||||||
TOTAL
ASSETS
|
$ | 55,361,722 | 43,923,724 | ||||||||
CURRENT
LIABILITIES
|
|||||||||||
Unearned
revenue
|
$ | 6,922,800 | $ | 5,101,288 | |||||||
Accounts
payables & accrued expenses
|
6
|
9,874,446 | 5,808,271 | ||||||||
Payables
due to related parties
|
- | 4,932 | |||||||||
Interest
bearing liabilities – current
|
5
|
422,715 | 72,044 | ||||||||
Income
taxes payable
|
820,674 | 326,006 | |||||||||
TOTAL
CURRENT LIABILITIES
|
18,040,635 | 11,312,541 | |||||||||
NON-CURRENT
LIABILITIES
|
|||||||||||
Rental
deposit received
|
- | 6,833 | |||||||||
Interest
bearing liabilities – non current
|
5
|
1,523,716 | 2,424,362 | ||||||||
Deferred
tax liabilities
|
14
|
2,323,212 | 1,501,602 | ||||||||
TOTAL
NON-CURRENT LIABILITIES
|
3,846,928 | 3,932,797 | |||||||||
TOTAL
LIABILITIES
|
21,887,563 | 15,245,338 | |||||||||
COMMITMENTS
& CONTINGENCIES
|
- | - | |||||||||
STOCKHOLDERS’
EQUITY
|
|||||||||||
Common
stock, par value $0.001 per share, 90,000,000 shares authorized,
53,507,450 issued and outstanding as of June 30, 2008 and
2007
|
53,507 | 53,507 | |||||||||
Additional
paid in capital
|
24,149,420 | 24,149,420 | |||||||||
Other
comprehensive income
|
16
|
6,972,500 | 3,171,506 | ||||||||
Retained
earnings
|
2,298,732 | 1,303,953 | |||||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
33,474,159 | 28,678,386 | |||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 55,361,722 | $ | 43,923,724 |
See
accompanying notes to the financial statements.
F-4
ADVANCED
MEDICAL INSTITUTE INC.
AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED JUNE 30, 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
|
- | 14,722 | ||||||
Bank
interest
|
92,499 | 49,172 | ||||||
Sundry
income
|
23,779 | 88,272 | ||||||
Management
fee income
|
33,813 | 122,765 | ||||||
Interest
expense
|
(263,479 | ) | (204,806 | ) | ||||
TOTAL
OTHER INCOME AND EXPENSE
|
(113,388 | ) | 70,585 | |||||
INCOME
FROM CONTINUED OPERATIONS BEFORE INCOME TAXES
|
2,594,863 | 1,201,196 | ||||||
INCOME
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 | $ | 0.01 | ||||
Earnings
(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 | $ | 10,497,919 | ||||||||||||
Issuance
of stock
|
16,025,000 | 16,025 | 16,108,975 | - | - | 16,125,000 | ||||||||||||||||||
Other
comprehensive income
|
- | - | - | 3,375,989 | - | 3,375,989 | ||||||||||||||||||
Net
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 | 28,678,386 | ||||||||||||||||||
Other
comprehensive income
|
- | - | - | 3,800,994 | - | 3,800,994 | ||||||||||||||||||
Net
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 | $ | 32,399,025 | ||||
Interest
received
|
89,200 | 48,898 | ||||||
Interest
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
|
- | 2,357,760 | ||||||
Repayment
of borrowings
|
(869,468 | ) | (228,461 | ) | ||||
Net
cash (used in) provided by financing activities
|
(869,468 | ) | 2,129,299 | |||||
Net
increase in cash and cash equivalent
|
2,236,547 | 709,395 | ||||||
Effect
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 | 1,339,003 | ||||||
Provision
for doubtful debt
|
4,917,980 | 4,696,994 | ||||||
Impairment
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 | 436,182 | ||||||
Increase
in unearned revenue
|
1,066,787 | 539,141 | ||||||
Increase
in payables
|
3,312,121 | 971,516 | ||||||
Decrease
(Increase) in rental deposit received
|
2,959 | (5,972 | ) | |||||
Increase
in provisions for compensated absences
|
397,768 | 133,601 | ||||||
Increase
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.
|
|
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;
|
F-9
|
(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
JUNE
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 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.
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.”
F-12
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 year
|
||||||||||||||||
Amortized
intangibles:
|
||||||||||||||||
Patents
|
$ | 11,156,809 | $ | (1,376,049 | ) | $ | (787,469 | ) | $ | 8,993,291 | ||||||
Intellectual
Properties
|
19,427,611 | (1,917,006 | ) | - | 17,510,605 | |||||||||||
Computer
Software
|
473,174 | (287,994 | ) | - | 185,180 | |||||||||||
Unamortized
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
|
$ | 1,618,000 | ||
2010
|
$ | 1,618,000 | ||
2011
|
$ | 1,618,000 | ||
2012
|
$ | 1,618,000 | ||
2013
|
$ | 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
Pronouncements
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 Pronouncements
(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.
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-18
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
June 30, 2008
|
June 30, 2007
|
|||||||
Bank
guarantees
|
$ | 112,256 | $ | 84,917 | ||||
Advances
and prepayments
|
23,220 | 57,397 | ||||||
Other
receivables
|
67,305 | 106,100 | ||||||
Other
debtors
|
498,548 | 544,185 | ||||||
Total
|
$ | 701,329 | 381,856 |
4. PROPERTY,
PLANT AND EQUIPMENT
June
30, 2008
|
June
30, 2007
|
|||||||
Leasehold
improvements at cost
|
$ | 557,408 | $ | 541,746 | ||||
Less:
Accumulated depreciation
|
118,234 | 74,746 | ||||||
|
439,174 | 467,000 | ||||||
Motor
Vehicles
|
89,884 | 50,334 | ||||||
Less:
Accumulated Depreciation
|
36,316 | 26,708 | ||||||
53,568 | 23,626 | |||||||
Office
Furniture & Equipment
|
803,398 | 474,426 | ||||||
Less:
Accumulated Depreciation
|
177,720 | 99,363 | ||||||
625,678 | 375,063 | |||||||
Computer
Hardware – at Cost
|
462,013 | 357,854 | ||||||
Less:
Accumulated Depreciation
|
318,141 | 220,420 | ||||||
143,872 | 137,434 | |||||||
Low
Value Pooled Fixed Assets
|
188,491 | 142,171 | ||||||
Less:
Accumulated Depreciation
|
135,958 | 99,375 | ||||||
52,533 | 42,796 | |||||||
Total
Property, Plant and Equipment
|
$ | 1,314,825 | $ | 1,045,917 |
Depreciation
expenses were $176,718 and $156,162 for the fiscal years ended June 30, 2008 and
2007, respectively.
F-19
ADVANCED
MEDICAL INSTITUTE INC.
AND
SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENT
JUNE
30, 2008
June 30, 2008
|
June 30, 2007
|
|||||||
5. INTEREST
BEARING LIABILITIES
|
||||||||
Current,
as of the period ended June 30
|
||||||||
Capitalized
lease liability
|
$ | 45,037 | $ | 72,044 | ||||
Secured
loan 2008
|
377,678 | - | ||||||
$ | 422,715 | 72,044 | ||||||
Non-current,
due during the year ended June 30:
|
||||||||
Capitalized
lease liability
|
$ | 26,061 | $ | 25,220 | ||||
Secured
Loan
|
1,497,655 | 2,399,142 | ||||||
Total
non-current
|
$ | 1,523,716 | 2,424,362 |
The
interest bearing liabilities require monthly payments of principal and interest
at a per annum interest rate ranging from 7.4% to 13.8%. Obligations
under the notes are secured by the financed assets included in property and
equipment.
Interest
expenses were $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 and 2007 are
summarized as follows:
Amount
|
||||||||
June
30, 2008
|
June
30, 2007
|
|||||||
Accounts
payable
|
$ | 4,195,940 | $ | 1,714,756 | ||||
Accrued
salaries
|
611,049 | 443,806 | ||||||
Accrued
professional fees
|
62,305 | 30,557 | ||||||
Accrued
legal fee
|
89,083 | - | ||||||
Other
current liabilities
|
290,800 | 102,000 | ||||||
Provision
for DDR medication cost
|
- | 887,845 | ||||||
Provision
for DDR sales commission
|
- | 828,428 | ||||||
Provision
for DDR collection fee
|
- | 828,428 | ||||||
Accrued
DDR medication cost
|
1,204,760 | - | ||||||
Accrued
DDR sales commission
|
1,204,760 | 211,709 | ||||||
Accrued
DDR collection fee
|
1,204,760 | |||||||
Provision
for patient refund
|
182,685 | 84,880 | ||||||
Accrued
legal case settlement
|
- | 250,396 | ||||||
Accrued
payroll tax
|
- | 59,416 | ||||||
Accrued
compensated absences
|
828,304 | 366,050 | ||||||
Total
|
$ | 9,874,446 | $ | 5,808,271 |
F-20
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-21
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
|
$ | 689,576 | ||
2010
|
293,268 | |||
2011
|
125,290 | |||
2012
|
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-22
A summary
of Worldwide PE Patent Holdco Pty Ltd., assets acquired, liabilities assumed and
consideration paid for is as follows:
Amount
|
||||
Current
assets
|
$
|
-
|
||
Patent
|
18,383,100
|
|||
|
||||
$
|
18,383,100
|
|||
Consideration
paid
|
||||
Cash
|
$
|
2,258,100
|
||
Common
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,
2007
|
|||
Net
revenue
|
$ | 39,421,485 | ||
Operating
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-23
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
|
$
|
30,032
|
||
Accounts
receivable, net
|
208,678
|
|||
Other
receivable
|
56,788
|
|||
Other
current assets
|
2,560
|
|||
Property,
Plant & Equipment, net
|
2,103
|
|||
Total
Assets
|
300,161
|
|||
Liabilities
:-
|
||||
Accounts
payable and accrued expense
|
139,554
|
|||
Total
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
|
$
|
943,939
|
||
Operating
expenses
|
||||
Selling,
general and administrative
|
836,758
|
|||
Total
operating expenses
|
836,758
|
|||
Profit
from operations
|
107,181
|
)
|
||
Non-operating
income (expenses) :-
|
||||
Other
income
|
25,805
|
|||
Interest
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-24
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
|
$
|
34,288
|
||
Other
current assets
|
75,693
|
|||
Property,
Plant & Equipment, net
|
117,950
|
|||
Intangible
assets
|
8,643
|
|||
Total
Assets
|
236,574
|
|||
Liabilities
:-
|
||||
Accounts
payable and accrued expense
|
849
|
|||
Total
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
|
$
|
77,092
|
||
Operating
expenses
|
||||
Selling,
general and administrative
|
553,425
|
|||
Total
operating expenses
|
553,425
|
|||
Loss
from operations
|
(476,333
|
)
|
||
Non-operating
income (expenses) :-
|
||||
Other
income
|
218
|
|||
Interest
income
|
93
|
|||
Net
Loss before income tax
|
(476,022
|
)
|
||
Provision
for Income tax
|
-
|
|||
Net
loss from entity held for disposal
|
$
|
(476,022
|
)
|
F-25
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 Vaisman
|
||||
Receivable
from this related party
|
$ | 151,074 | ||
Prostate
Health Clinic Pty. Ltd. (an AU co.)
|
||||
Relationship:
Under common management control by Jack Vaisman
|
||||
Receivable
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 and $1,453 as of June 30, 2008 and 2007.
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-26
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.
June
30, 2008
|
U.S.
|
State
|
International
|
Total
|
||||||||||||
Current
|
$ | 0 | $ | 0 | $ | 821,610 | $ | 821,610 | ||||||||
Deferred
|
$ | 0 | $ | 0 | $ | 436,069 | $ | 436,069 | ||||||||
Total
|
$ | 0 | $ | 0 | $ | 1,257,679 | $ | 1,257,679 | ||||||||
June
30, 2007
|
U.S.
|
State
|
International
|
Total
|
||||||||||||
Current
|
$ | 0 | $ | 0 | $ | 154,849 | $ | 154,849 | ||||||||
Deferred
|
$ | 0 | $ | 0 | $ | 614,842 | $ | 614,842 | ||||||||
Total
|
$ | 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,
2007
|
|||||||||||||||
Federal
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-27
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
liability
|
||||||||||
Owing
to patients via ACFC
|
$ | 24,444,765 | 30 | % | $ | 7,333,430 | ||||||
Provision
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 | % | 214,299 | ||||||||
Other
miscellaneous
|
279,946 | 30 | % | 83,983 | ||||||||
Total
|
$ | 7,744,040 | 30 | % | $ | 2,323,212 |
F-28
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 share exchange Agreement with
Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
which the Company acquired all of the issued and outstanding shares of stock of
Worldwide PE in exchange for the payment of A$3 million (approximately $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
|
3,375,989 | |||||
Balance
at June 30, 2007
|
$ | 3,171,506 | ||||
Change
for 2008
|
3,800,994 | |||||
Balance
at June 30, 2008
|
$ | 6,972,500 |
F-29