UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON D.C. 20549







FORM
10-Q




x
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
              For
      the quarterly period ended March 31, 2009oro
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
              For the transition period
      from             
                    to




Commission
File Number: 000-29531





ADVANCED
MEDICAL INSTITUTE INC.


(Exact
Name of Registrant as Specified in Its Charter)





NEVADA
                  
                  88-0409144(State or Other Jurisdiction of
                    Incorporation or Organization)
                  
                  (I.R.S. Employer
      Identification
No.)





Level 4,
Terrace Tower, 80 William Street


Sydney,
NSW


Australia
2000





(Address
of Principal Executive Offices) (Zip Code)




(61) 2
9640 5253





(Registrant’s
Telephone Number, Including Area Code)







(Former
Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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  
o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every, Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
    Yes  o  No  o




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
definition of “large accelerated filer, ” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large accelerated Filer 
      o
                Accelerated Filer 
      o
                Non-Accelerated Filer 
      o
                Smaller Reporting Company 
      x(Do not check if a smaller reporting company)




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





There were 53,507,450
shares of the Registrant’s Common Stock issued and outstanding on May 15,
2009.





TABLE OF
CONTENTS





PagePart
      I.
                    Financial
      Information
                    3Item
      1. Financial Statements
                    3Consolidated Balance
      Sheets (Unaudited) as at March 31, 2009  and June 30,
      2008
                    3Consolidated  Statements
      of Operations (Unaudited) for the Three and Nine Month Periods Ended March
      31, 2009 and 2008
                    4Consolidated  Statements
      of Cash Flows (Unaudited) for the  Nine Month Periods Ended
      March 31, 2009 and 2008
                    5Notes
      to Consolidated Unaudited Financial Statements
                    7Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                    17Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                    22Item
      4T. Controls and Procedures
                    23Part
      II.
                    Other
      Information
                    23Item
      1. Legal Proceedings
                    23Item
      1A. Risk Factors
                    23Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                    23Item
      3. Defaults Upon Senior SecuritiesItem
      4. Submission of Matters to a Vote of Security HoldersItem
      5. Other InformationItem
      6. Exhibits
                    23SIGNATURES
                    24




2




PART I -   FINANCIAL
INFORMATION





ITEM 1.   FINANCIAL STATEMENTS




ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE
SHEETS


(UNAUDITED)





March 31,
                    2009
                  
                  
                  June 30, 2008ASSETSCURRENT
      ASSETSCash
      & cash equivalents
                  
                  $
                  633,712
                  
                  
                  $
                  3,127,029Restricted
      cash
                  
                  
                  142,195
                  
                  
                  
                  -Receivables,
      net
                  
                  
                  19,797,733
                  
                  
                  
                  18,196,314Receivables
      due from related parties
                  
                  
                  1,194,868
                  
                  
                  
                  751,034Inventory
                  
                  
                  722,641
                  
                  
                  
                  468,950Assets
      related to discontinued operation/entities held for
      disposition
                  
                  
                  -
                  
                  
                  
                  408,039Other
      assets
                  
                  
                  601,460
                  
                  
                  
                  701,329TOTAL
      CURRENT ASSETS
                  
                  
                  23,092,609
                  
                  
                  
                  23,652,695NON-CURRENT
      ASSETSSecurity
      deposits
                  
                  
                  154,596
                  
                  
                  
                  124,569Property
      and equipment, net
                  
                  
                  1,554,875
                  
                  
                  
                  1,314,825Assets
      related to discontinued operation
                  
                  
                  368,150
                  
                  
                  
                  128,696Intangible
      assets, net
                  
                  
                  20,720,155
                  
                  
                  
                  30,281,340TOTAL
      NON-CURRENT ASSETS
                  
                  
                  22,797,776
                  
                  
                  
                  31,849,430TOTAL
      ASSETS
                  
                  $
                  45,890,385
                  
                  
                  $
                  55,502,125LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESUnearned
      revenue
                  
                  $
                  5,362,741
                  
                  
                  $
                  6,922,800Accounts
      payable & accrued expenses
                  
                  
                  11,750,024
                  
                  
                  
                  9,874,446Interest
      bearing liabilities – current
                  
                  
                  532,204
                  
                  
                  
                  422,715Liabilities
      related to discontinued operation
                  
                  
                  1,919
                  
                  
                  
                  140,403Income
      taxes payable
                  
                  
                  31,476
                  
                  
                  
                  820,674TOTAL
      CURRENT LIABILITIES
                  
                  
                  17,678,364
                  
                  
                  
                  18,181,038NON-CURRENT
      LIABILITIESInterest
      bearing liabilities - non-current
                  
                  
                  968,659
                  
                  
                  
                  1,523,716Payable
      due to related parties
                  
                  
                  2,272,903
                  
                  
                  
                  -Deferred
      tax liabilities
                  
                  
                  2,146,140
                  
                  
                  
                  2,323,212TOTAL
      NON-CURRENT LIABILITIES
                  
                  
                  5,387,702
                  
                  
                  
                  3,846,928TOTAL
      LIABILITIES
                  
                  
                  23,066,066
                  
                  
                  
                  22,027,966Commitments
      & ContingencySTOCKHOLDERS’
      EQUITYCommon
      stock, par value $0.001 per share,   90,000,000 shares authorized,
        53,507,450 issued and outstanding as at March 31, 2009 and June 30,
      2008
                  
                  
                  53,507
                  
                  
                  
                  53,507Additional
      paid in capital
                  
                  
                  24,149,420
                  
                  
                  
                  24,149,420Other
      comprehensive  loss
                  
                  
                  (2,229,811
                  )
                  
                  
                  6,972,500Retained
      earnings
                  
                  
                  851,203
                  
                  
                  
                  2,298,732TOTAL
      STOCKHOLDERS’ EQUITY
                  
                  
                  22,824,319
                  
                  
                  
                  33,474,159TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
                  $
                  45,890,385
                  
                  
                  $
                  55,502,125




The
accompanying notes are an integral part of these unaudited financial
statements.


3


ITEM 1.   FINANCIAL STATEMENTS
(CONTINUED)





ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF
INCOME




Three
      Month Periods Ended
                
                
                Nine
      Month Periods EndedMarch 31,
                  2009
                  (Unaudited)
                
                
                March 31,
                  2008
                  (Unaudited)
                
                
                March 31,
                  2009
                  (Unaudited)
                
                
                March 31,
                  2008
                  (Unaudited)NET
      REVENUE
                
                $
                13,216,784
                
                
                $
                13,408,468
                
                
                $
                42,377,377
                
                
                $
                36,948,958COST
      OF REVENUE
                
                
                (3,292,213
                )
                
                
                (2,786,301
                )
                
                
                (9,673,420
                )
                
                
                (8,204,757
                )GROSS
      PROFIT
                
                
                9,924,571
                
                
                
                10,622,167
                
                
                
                32,703,957
                
                
                
                28,744,201SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                (12,057,115
                )
                
                
                (9,483,354
                )
                
                
                (33,731,679
                )
                
                
                (25,735,251
                )OPERATING
      INCOME (LOSS)
                
                
                (2,132,544
                )
                
                
                1,138,813
                
                
                
                (1,027,722
                )
                
                
                3,008,950OTHER
      INCOME AND (EXPENSE)Bank
      interest
                
                
                4,681
                
                
                
                26,052
                
                
                
                47,410
                
                
                
                52,267Management
      fee income
                
                
                -
                
                
                
                5,763
                
                
                
                -
                
                
                
                27,480Other
      income (expense)
                
                
                916
                
                
                
                408
                
                
                
                19,457
                
                
                
                7,689Interest
      expense
                
                
                (79,310
                )
                
                
                (66,872
                )
                
                
                (209,390
                )
                
                
                (198,926
                )TOTAL
      OTHER INCOME (EXPENSE)
                
                
                (73,713
                )
                
                
                (34,649
                )
                
                
                (142,523
                )
                
                
                (111,490
                )INCOME
      (LOSS) FROM CONTINUED OPERATIONS
                
                
                (2,206,257
                )
                
                
                1,104,164
                
                
                
                (1,170,245
                )
                
                
                2,897,460DISCONTINUED
      OPERATIONSGain
      on disposal of subsidiary (including income from discontinued
      operation)
                
                
                -
                
                
                
                -
                
                
                
                119,677
                
                
                
                -Loss
      from discontinued operations
                
                
                (68,255
                )
                
                
                (53,436
                )
                
                
                (186,078
                )
                
                
                (406,284
                )Total
      loss from discontinued operations
                
                
                (68,255
                )
                
                
                (53,436
                )
                
                
                (66,401
                )
                
                
                (406,284
                )(LOSS)
      INCOME BEFORE INCOME TAXES
                
                
                (2,274,512
                )
                
                
                1,050,728
                
                
                
                (1,236,646
                )
                
                
                2,491,176INCOME
      TAX BENEFIT (EXPENSE)
                
                
                325,404
                
                
                
                (496,551
                )
                
                
                (210,883
                )
                
                
                (1,251,804
                )NET
      (LOSS) INCOME
                
                
                (1,949,108
                )
                
                
                554,177
                
                
                
                (1,447,529
                )
                
                
                1,239,372Other
      Comprehensive item - Foreign currency translation income
      (loss)
                
                
                313,165
                
                
                
                1,357,078
                
                
                
                (9,202,311
                )
                
                
                2,358,796Net
      Comprehensive (Loss) Income
                
                $
                (1,635,943
                )
                
                $
                1,911,255
                
                
                $
                (10,649,840
                )
                
                $
                3,598,168Earnings
      (loss) per common share  – continued operations
                
                $
                (0.04
                )
                
                $
                0.02
                
                
                $
                (0.02
                )
                
                $
                0.03Earnings
      (loss) per common share – discontinued operations
                
                $
                (0.00)
                
                
                $
                (0.01)
                
                
                $
                (0.01)
                
                
                $
                (0.01)Earnings
      (loss) per common share – basic & diluted
                
                $
                (0.04)
                
                
                $
                0.01
                
                
                $
                (0.03)
                
                
                $
                0.02Weighted
      average number of shares, basic & diluted
                
                
                53,507,450
                
                
                
                53,507,450
                
                
                
                53,507,450
                
                
                
                53,507,450





The
accompanying notes are an integral part of these unaudited financial
statements.


4


ITEM 1.   FINANCIAL STATEMENTS
(CONTINUED)





ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS





For The Nine
      Month Periods EndedMarch 31,
                  2009
                  (Unaudited)
                
                
                March 31,
                  2008
                  (Unaudited)Cash
      Flows from Operating ActivitiesReceipts
      from Customers
                
                $
                30,808,420
                
                
                $
                31,607,148Interest
      Received
                
                
                47,410
                
                
                
                50,569Payment
      to Suppliers & Employees
                
                
                (33,592,199
                )
                
                
                (27,758,083
                )Interest
      Paid
                
                
                (209,390
                )
                
                
                (198,926
                )Income
      Tax Paid
                
                
                (96,431
                )
                
                
                (86,851
                )Net
      cash (used in) provided by operating activities of continued
      operations
                
                
                (3,042,190
                )
                
                
                3,613,857Net
      cash used in discontinued operations
                
                
                (110,899
                )
                
                
                (448,801
                )Net
      cash (used in) provided by operating activities
                
                
                (3,153,089
                )
                
                
                3,165,056Cash
      Flows from Investing ActivitiesLoans
      to related entities
                
                
                (736,021
                )
                
                
                -Proceeds
      from Sale of Investment
                
                
                238,099
                
                
                
                -Payment
      for Property, Plant & Equipment
                
                
                (700,600
                )
                
                
                (170,526
                )Payment
      for Intangible Assets
                
                
                (54,235
                )
                
                
                (73,181
                )Net
      cash used in investing activities
                
                
                (1,252,757
                )
                
                
                (243,707
                )Cash
      Flows From Financing ActivitiesProceeds
      from Borrowings
                
                
                3,422,131
                
                
                
                -Repayment
      of Borrowings
                
                
                (994,893
                )
                
                
                (500,635
                )Net
      cash provided by (used in) financing activities
                
                
                2,427,238
                
                
                
                (500,635
                )Net
      (decrease) increase in cash and cash equivalents
                
                
                (1,978,608
                )
                
                
                2,420,714Effect
      of exchange rate on cash
                
                
                (514,709
                )
                
                
                (523,532
                )Cash
      and cash equivalents at beginning of period
                
                
                3,127,029
                
                
                
                864,481Cash
      and cash equivalents at end of period
                
                $
                633,712
                
                
                $
                2,761,663





The
accompanying notes are an integral part of these unaudited financial
statements.


5


ITEM 1.   FINANCIAL STATEMENTS
(CONTINUED)





ADVANCED
MEDICAL INSTITUTE, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)





Nine
      Months EndedMarch 31,
                  2009
                  (Unaudited)
                
                
                March 31,
                  2008
                  (Unaudited)Reconciliation
      of Cash & Cash EquivalentsCash
      & cash equivalents at the end of financial period as shown in the
      Statement of Cash Flows is reconciled to the related items in the
      Consolidated Balance Sheets as follows:Cash
      & Cash Equivalents
                
                $
                633,712
                
                
                $
                2,761,663Reconciliation
      of Cash Flow from Operations with Profit from Ordinary Activities after
      Income TaxNet
      Income (loss)
                
                $
                (1,447,529
                )
                
                $
                1,239,372Non-Cash
      Flows in Profit from Ordinary ActivitiesDepreciation
      and amortization
                
                
                1,142,672
                
                
                
                1,317,256Provision
      for doubtful accounts
                
                
                4,579,023
                
                
                
                3,162,216Gain
      on disposal of investments
                
                
                (119,677
                )
                
                
                -Changes
      in Assets and Liabilities(Increase)
      decrease in inventories
                
                
                (423,771
                )
                
                
                85,854Increase
      in receivables
                
                
                (12,285,174
                )
                
                
                (5,808,092
                )Increase
      in unearned revenue
                
                
                480,663
                
                
                
                495,032Increase
      in payables
                
                
                4,981,190
                
                
                
                1,455,696Increase
      in provisions for compensated absences
                
                
                225,536
                
                
                
                148,771Increase
      in deferred tax liabilities
                
                
                497,652
                
                
                
                336,975(Decrease)
      increase in security deposit
                
                
                (71,896
                )
                
                
                1,350(Decrease)
      increase in income tax payable
                
                
                (600,880
                )
                
                
                752,658Net
      cash (used in) provided by operating activities of continued
      operations
                
                
                (3,042,190
                )
                
                
                3,187,088Net
      cash used in operating activities of discontinued
operation
                
                
                (110,899
                )
                
                
                (22,032
                )Net
      cash (used in) provided by operating activities
                
                $
                (3,153,089
                )
                
                $
                3,165,056Supplemental
      Cash Flow Disclosures:Interest
      paid
                
                $
                209,390
                
                
                $
                198,926Income
      tax paid
                
                $
                96,431
                
                
                $
                143,135Non-Cash
      Investing/Financing Activities:Assets
      acquired under capital leases
                
                $
                299,870
                
                
                $
                23,238





The
accompanying notes are an integral part of these unaudited financial
statements.


6


ADVANCED
MEDICAL INSTITUTE INC.


AND
SUBSIDIARIES




NOTES
TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2009





1.
                NATURE
      OF BUSINESS





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 with Advanced Medical Institute
Pty Limited, a privately owned Australian company (“AMI Australia”), whereby AMI
Australia became our wholly-owned subsidiary. On November 17, 2005, we entered
into a Share Exchange Agreement with PE Patent Holdco Pty Limited, a privately
owned Australian company (“PE Patent Holdco”), whereby PE Patent Holdco became
our wholly-owned subsidiary. On September 8, 2006, we entered into a Share
Exchange Agreement with Worldwide PE Patent Holdco Pty Limited (ACN 117 157
727), a privately owned Australian company (“Worldwide PE”), whereby Worldwide
PE became our wholly-owned subsidiary.




Business
Overview




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




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




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





2.
              BASIS
      OF PRESENTATION




The
accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America. In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments, consisting only of normal, recurring adjustments, necessary for
a fair presentation of AMI’s financial position and the results of operations
for the interim periods presented. Notes to the unaudited consolidated financial
statements that would substantially duplicate the disclosures contained in AMI’s
audited consolidated financial statements for its most recent fiscal year have
been omitted.





3.
              RECENT
      PRONOUNCEMENTS





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations” (“SFAS 141R”). The objective of this statement will significantly
change the accounting for business combinations. Under SFAS141R, 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. SFAS141R 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 (“SFAS 160”). 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. SFAS160 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 SFAS160 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”(“SFAS
161”). 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 SFAS133; and how derivative instruments and
related hedged items affect its financial position, financial performance, and
cash flows. SFAS161 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 information. Based on current conditions,
the Company does not expect adoption of SFAS 161 to have a significant impact on
its results of operations or financial position.


7


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 SFAS 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.





On
December 30, 2008 FASB issued FIN 48-3, “Effective Date of FASB Interpretation
No. 48 for Certain Nonpublic Enterprises”. This FSP defers the effective date of
FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes , for certain non-public enterprises as defined in paragraph 289,
as amended, of FASB Statement No. 109, Accounting for Income Taxes ,
including non-public not-for-profit organizations. However, non-public
consolidated entities of public enterprises that apply U. S. GAAP are not
eligible for the deferral. Nonpublic enterprises that have applied the
recognition, measurement, and disclosure provisions of Interpretation 48 in a
full set of annual financial statements issued prior to the issuance of this FSP
also are not eligible for the deferral. This FSP shall be effective upon
issuance. The Company does not believe this pronouncement will impact its
financial statements.





On
January 12, 2009 FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment guidance in
EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue to be Held
by a Transferor in Securitized Financial Assets,” to achieve more consistent
determination of whether an other-than-temporary impairment has occurred. The
FSP also retains and emphasizes the objective of an other-than-temporary
impairment assessment and the related disclosure requirements in FASB Statement
No. 115, Accounting for
Certain Investments in Debt and Equity Securities , and other related
guidance. The FSP is shall be effective for interim and annual reporting periods
ending after December 15, 2008, and shall be applied prospectively.
Retrospective  application to a prior interim or  annual
reporting period is not permitted. The Company does not believe this
pronouncement will impact its financial statements.





4.
              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
recognized.


8


At March
31, 2009 and June 30, 2008, intangibles consist of the following:




Intangibles
                
                Gross Carrying
                  Amount
                
                
                Accumulated
                  Amortization
                
                
                Impairment
                  Loss
                
                
                Net Carrying
                  Amount
                  March 31,
                  2009
                  (Unaudited)
                
                
                Net Carrying
                  Amount
                  June 30, 2008Amortized
      intangibles:Australian
      Patents
                
                $
                4,513,527
                
                
                $
                (814,244
                )
                
                $
                -
                
                
                $
                3,699,283
                
                
                $
                5,458,430Worldwide
      Patents
                
                $
                3,417,497
                
                
                $
                (490,292
                )
                
                $
                (559,787
                )
                
                $
                2,367,418
                
                
                $
                3,534,861Intellectual
      Property
                
                
                14,003,904
                
                
                
                (1,939,271
                )
                
                
                -
                
                
                
                12,064,633
                
                
                
                17,510,605Computer
      Software
                
                
                386,185
                
                
                
                (251,205
                )
                
                
                -
                
                
                
                134,980
                
                
                
                185,180Unamortized
      intangibles:Intellectual
      Property
                
                
                2,453,841
                
                
                
                -
                
                
                
                -
                
                
                
                2,453,841
                
                
                
                3,592,264$
                24,774,954
                
                
                $
                (3,495,012
                )
                
                $
                (559,787
                )
                
                $
                20,720,155
                
                
                $
                30,281,340





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





The
exchange rate used for the period ended June 30, 2008
was A$:US$ 1:0.96150, and the rate used for the period ended March 31,
2009 was A$:US$ 1:0.68350. The rate change caused the decrease in the net book
value of intangible assets in addition to accumulated amortization.




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 operations for the nine months ended March 31, 2009 and
2008 were $1,015,435 and $1,193,432, respectively. The Company expects the
amortization expenses for the next five years to be as follows:




Year Ending March
      31,
                    
                    Annual Amount2010
                    
                    $
                    1,354,0002011
                    
                    $
                    1,354,0002012
                    
                    $
                    1,354,0002013
                    
                    $
                    1,354,0002014
                    
                    $
                    1,354,000




5.
              OTHER
      ASSETS




Following
is the summary of other assets as of March 31, 2009 and June 30,
2008.





March 31
                  
                  
                  June 30Bank guarantees
                  
                  $
                  79,799
                  
                  
                  $
                  112,256Advances
      and prepayments
                  
                  
                  35,075
                  
                  
                  
                  23,220Other
      receivables
                  
                  
                  13,875
                  
                  
                  
                  67,305Other
      debtors
                  
                  
                  472,711
                  
                  
                  
                  498,548Total
                  
                  $
                  601,460
                  
                  
                  $
                  701,329




9





6.
              PROPERTY,
      PLANT AND EQUIPMENT





Property,
plant and equipment comprised of the following as of March 31, 2009 and June 30,
2008:





March 31
                    (Unaudited)
                  
                  
                  June 30Leasehold
      improvements
                  
                  $
                  687,858
                  
                  
                  $
                  557,408Less:
      Accumulated depreciation
                  
                  
                  103,078
                  
                  
                  
                  118,234584,780
                  
                  
                  
                  439,174Motor
      Vehicles
                  
                  
                  63,895
                  
                  
                  
                  89,884Less:
      Accumulated Depreciation
                  
                  
                  31,279
                  
                  
                  
                  36,31632,616
                  
                  
                  
                  53,568Office
      Furniture & Equipment
                  
                  
                  988,090
                  
                  
                  
                  803,398Less:
      Accumulated Depreciation
                  
                  
                  172,271
                  
                  
                  
                  177,720815,819
                  
                  
                  
                  625,678Computer
      Hardware
                  
                  
                  343,451
                  
                  
                  
                  462,013Less:
      Accumulated Depreciation
                  
                  
                  256,443
                  
                  
                  
                  318,14187,008
                  
                  
                  
                  143,872Low
      Value Pooled Fixed Assets
                  
                  
                  143,095
                  
                  
                  
                  188,491Less:
      Accumulated Depreciation
                  
                  
                  108,443
                  
                  
                  
                  135,95834,652
                  
                  
                  
                  52,533Total
      Property, Plant and Equipment, net
                  
                  $
                  1,554,875
                  
                  
                  $
                  1,314,825





Included
in property and equipment are assets of approximately $415,989 and $163,348, as
of March 31, 2009 and June 30, 2008, that are leased under non-cancellable
leases and accounted for as capital leases, which expire through October 2013.
The accumulated depreciation included in the property and equipment for these
leases is approximately $71,919 and $68,284 as of March 31, 2009 and June 30,
2008.





7.
              INTEREST
      BEARING LIABILITIES





Interest
bearing liabilities comprised of the following as of March 31, 2009 and June 30,
2008:





March 31
                  
                  
                  June 30Current,
      as of the period endedCapitalized
      lease liability
                  
                  $
                  139,034
                  
                  
                  $
                  45,037Secured
      loan (1)
                  
                  
                  393,170
                  
                  
                  
                  377,678$
                  532,204
                  
                  
                  $
                  422,715Non-current,
      as of the period endedCapitalized
      lease liability
                  
                  $
                  216,909
                  
                  
                  $
                  26,061Secured
      loan (1)
                  
                  
                  751,750
                  
                  
                  
                  1,497,655Total
      non-current
                  
                  $
                  968,659
                  
                  
                  $
                  1,523,716




(1) The
Company borrowed A$2.4 million from St George Bank Limited in December 2008
comprising a A$1.9 million term facility and a A$500,000 overdraft facility. The
loan is secured by a first ranking 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 and Advanced
Medical Institute (NZ) Limited). The term facility is a commercial bill
acceptance/discount facility whereby the Company regularly discounts bills with
the bank at the prevailing interest rate plus a margin of 1.65%. The average
all-up cost of this facility during the period was 5.36%. On each rollover the
interest rate is reset.    The loan is due for repayment in
December 2011, however the Company is required to make principal repayments of
A$50,000 per month during each month of the term.  As at March 31,
2009, the total outstanding under the facility was A$2,175,084.





The
interest bearing liabilities require monthly payments of principal and interest
at a per annum interest rate ranging from 5.5% to 14.30%. Interest expense on
the interest bearing liabilities amounted to $209,390 and $198,926 for the nine
month periods ended March 31, 2009 and 2008, respectively.


10


8.   ACCOUNTS PAYABLE AND ACCRUED
EXPENSES




Accounts
payable and accrued expenses as of March 31, 2009 and June 30, 2008 are
summarized as follows:




March 31
                
                
                June 30Accounts
      payable
                
                $
                6,468,343
                
                
                $
                4,195,940Accrued
      salaries
                
                
                445,268
                
                
                
                611,049Accrued
      professional fees
                
                
                86,258
                
                
                
                62,305Accrued
      legal fee
                
                
                -
                
                
                
                89,083Other
      current liabilities
                
                
                462,158
                
                
                
                290,800Accrued
      DDR medication cost
                
                
                1,054,641
                
                
                
                1,204,760Accrued
      DDR sales commission
                
                
                1,153,748
                
                
                
                1,204,760Accrued
      DDR collection fee
                
                
                1,153,748
                
                
                
                1,204,760Provision
      for patient refund
                
                
                129,865
                
                
                
                182,685Accrued
      compensated absences
                
                
                795,995
                
                
                
                828,304Total
                
                $
                11,750,024
                
                
                $
                9,874,446




9.
              LEGAL
      PROCEEDINGS





AMI
Australia and Others v Bade Medical Institute and Others - Federal Court
Proceedings NSD. 2448 of 2007





On
December 13, 2007, Advanced Medical Institute and AMI Australia
(collectively "AMI")  commenced proceedings by way of an Application
in the Federal Court of Australia against Bade Medical Institute Pty Limited,
World Wide Internet Services, Mr David Wade, Ms Georgina Wade and Dr Buddy Beani
(collectively "Bade") alleging that Bade had infringed 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
appears to have ceased operation since the orders were obtained and has now been
deregistered.





On April
10, 2008, a subpoena was served on Bade requiring the production of, among
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 answer 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 8 August 2008, AMI
Australia filed and served a statement of claim so that it could file for
default or summary judgment if Bade failed 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 this matter was listed for further directions
and orders were made that:


1.
            The
      matter be fixed for hearing on December
  17-19, 2008.2.
            Bade
      to file and serve any Defences upon which they propose to rely by
      September 20 2008 (Defences were filed on September 10, 2008, September
      11, 2008 and October 1, 2008).3.
            AMI
      Australia to file and serve any Affidavits upon which they propose to
      rely by November 5, 2008 (Affidavits were served on 10 and 25 November
      2008).4.
            Bade
      are to file and serve any Affidavits in reply by December 9, 2008
      (Affidavits were served on September 15, 2009, September 29, 2008 and
      September 30, 2008)





On
December 17, 2008 the matter was listed for hearing, however, it was adjourned
later the same day on the basis that:


(a)
            The
      Fifth Respondent, Georgina Wade, did not appear and was not
      legally represented; and(b)
            AMI
      Australia required Ms. Wade's attendance for
      cross-examination.





The Court
made the following orders at the adjourned hearing:


1.
            The
      hearing dates for the present proceeding of December 17-19, 2008 be
      vacated.2.
            The
      hearing of the proceeding be adjourned to April 8-9,
      2009.3.
            Any
      such further evidence as AMI Australia may wish to rely upon is
      to be filed and served by 15 January 2009.4.
            Any
      Notice of Motion seeking leave for the Fourth Respondent, David Wade, to
      appear for and defend the proceeding on the part of the Fifth
      Respondent, Ms. Wade, together with any Affidavits in support, is to
      be filed and served by January 29, 2009.5.
            Any
      such further evidence as may be relied upon by Bade is to be filed and
      served by February 23, 2009.6.
            Liberty
      to apply by any party reserved on 2 days notice in
  writing.





On
January 15, 2009, AMI Australia served the balance of the evidence it intends to
rely upon.





The
Fourth Respondent, Mr Wade, did not serve any notice of motion in accordance
with Order 4 above. Further, Bade did not serve any further
evidence.





On April
8 and 9, 2009, Ms Wade produced medical reports in which she informed the Court
that she was medically unfit to trial.  The Court adjourned the
hearing to June 1 and 2, 2009.





AMI's
evidence is complete and the matter is ready for final hearing.





Trade
Mark Dispute with Bade Medical Institute - "AMI Nasal Spray"





On
October 25, 2006, 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 21 June 2007 and filed all evidence
upon which it relies by 19 March 2008.





Bade was
to file and serve all evidence in answer to AMI Australia's opposition on or by
21 June 2008, but failed to do so.





On 8
August 2008, AMI Australia filed written submissions supporting the evidence it
has already filed.


11


On
January 7, 2009, IP Australia decided that AMI Australia had not
established a ground of opposition under the Trade Marks Act 1995 and directed
that the subject trade mark may proceed to registration after one month from the
date of the decision unless AMI Australia files
an appeal.




On January
28, 2009, AMI Australia filed a Notice of Appeal with the Federal Court of
Australia in respect of IP Australia's decision described above. Owing
to a failure by Bade to appear at several Federal Court directions hearings, its
voluntary de-registration from ASIC’s Company Register and with the consent of
the Registrar of Trademarks, on 1 April 2009 the registration of Bade’s
trademark was refused by order of the Court and AMI’s appeal was
allowed.






10.
              LEASE
      COMMITMENTS




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




March 31Due
      during the period ended,2010
                  
                  $
                  554,5202011
                  
                  
                  378,6392012
                  
                  
                  328,3542013
                  
                  
                  265,8572014
                  
                  
                  231,3982015
                  
                  
                  231,3982016
                  
                  
                  173,548$
                  2,163,714





Rent paid
for the Nine Month Periods Ended March 31, 2009 and 2008 were $790,711 and
$785,104, respectively.





11.
              DISCONTINUED
      OPERATION





Whygo
Video Conferencing Pty Limited





On April
30, 2008, AMI Australia Holdings Pty Limited, a wholly owned subsidiary of
Advanced Medical Institute Inc., entered 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 (US$258,192) by Mr.
Matthews.




Consideration
has been fully settled as at March 31, 2009 and the ownership of Whygo is
considered to be disposed.





Gain on
disposal is shown below:





December 31Consideration
                      
                      $
                      258,192Discount
      on early repayment
                      
                      
                      (7,824
                      )Total
      money received
                      
                      
                      250,368Net
      book value of Whygo as at March 31, 2009
                      
                      
                      (130,691
                      )Gain
      on disposal (including income of $15,181 from discontinued
      operations)
                      
                      $
                      119,677




12


The
components of income from operations related to the entity held for disposal for
the period ended March 31, 2009 are shown below.




December 31Net
      sales
                    
                    $
                    433,331Operating
      expensesSelling,
      general and administrative
                    
                    
                    442,154Loss
      from operations
                    
                    
                    (8,823
                    )Non-operating
      income (expenses) :-Other
      income
                    
                    
                    23,633Interest
      income
                    
                    
                    371Net
      profit
                    
                    $
                    15,181




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 results.


13


Loss from
the discontinued operation of AMI Japan during the period ended March 31, 2009
was $186,078.





The
capital contributed to AMI Japan of $366,231 has been classified as assets
pending sale on the accompanying consolidated balance sheet as of March 31,
2009.





Following
is the summary of assets and liabilities of discontinued operations as of March
31:





Assets
      :-Cash
      and cash equivalents
                              
                              $
                              817Other
      current assets
                              
                              
                              12,089Security
      deposits
                              
                              
                              82,516Property,
      Plant & Equipment, net
                              
                              
                              127,790Intangible
      assets
                              
                              
                              144,938Total
      Assets
                              
                              $
                              368,150Liabilities
      :-Accounts
      payable and accrued expense
                              
                              $
                              1,919




The
components of loss from operations related to the entity held for disposal for
the period ended March 31, 2009 are shown below.




Net
      sales
                          
                          $
                          121,318Operating
      expensesSelling,
      general and administrative
                          
                          
                          (325,404
                          )Total
      operating expenses
                          
                          
                          (325,404
                          )Loss
      from operations
                          
                          
                          (204,086
                          )Non-operating
      income (expenses) :-Other
      income
                          
                          
                          17,966Interest
      income
                          
                          
                          42Net
      Loss before income tax
                          
                          
                          (186,078
                          )Provision
      for Income tax
                          
                          
                          -Net
      loss from entity held for disposal
                          
                          $
                          (186,078
                          )





12.
              RELATED
      PARTY TRANSACTIONS





March 31,
                  2009
                
                
                June 30, 2008Related
      party transactions comprised of the following:Advanced
      Medical Institute of the United States, Inc.Relationship:
      Under common management control by Jack VaismanReceivable
      from this related party
                
                $
                751,049
                
                
                $
                151,074Prostate
      Health Clinic Pty. Ltd. (an AU co.)Relationship:
      Under common management control by Jack VaismanReceivable
      from this related party
                
                
                1,315
                
                
                
                1,850Peter
      RileyRelationship:
      Director of AMI UKReceivable
      from this related party
                
                
                32,460
                
                
                
                1,850Loan
      to affiliate in Indonesia
                
                
                410,044
                
                
                
                598,110Receivable
      due form related parties - current
                
                $
                1,194,868
                
                
                $
                751,034Secare
      Health Centre Pty LimitedRelationship:
      Under common management control by Jack VaismanPayable
      to this related party – non current
                
                $
                2,272,903
                
                
                $
                -





Total
receivables due from related parties included in the Company’s statement of
financial position were $1,194,868 and $751,034, as of March 31, 2009 and June
30, 2008, respectively.




Total
payables due to related parties included in the Company’s statement of financial
position were $2,272,903 as of March 31, 2009 and $Nil as of June 30,
2008.





Receivables
from related parties are unsecured, interest-free, and due on
demand.


14


Payables
to related parties are as follows:


Secare
Health Centre Pty Ltd: Unsecured, interest charge at 10% per annum, and due for
repayment in December 2011.





The
Company borrowed a further A$1 million from Secare Health Centre Pty Limited
(“Secare”) in December 2008.  Secare is controlled by the company’s
chief executive officer and founder, Jack Vaisman and the Company has
subsequently borrowed a further A$2,263,966 from Secare. The loan is secured by
a second ranking 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 and Advanced Medical
Institute (NZ) Limited). The loan attracts an interest cost of 10% per
annum.  No repayment of this loan has been made up to March 31,
2009.  The loan is due for repayment in December 2011.





Interest
expense on the loan borrowed from Secare amounted to $51,127 and $Nil for the
nine month periods ended March 31, 2009 and 2008, respectively.




13.
              INCOME
    TAXES





Total
income tax expense for the nine months ended March 31, 2009 and 2008 amounted to
$210,883 and $1,251,804, respectively. For the nine month periods ended March
31, 2009 and 2008 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.





March
      31, 2009
                          
                          U.S.
                          
                          
                          State
                          
                          
                          International
                          
                          
                          TotalCurrent
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          (370,994
                          )
                          
                          $
                          (370,994
                          )Deferred
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          581,877
                          
                          
                          $
                          581,877Total
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          210,883
                          
                          
                          $
                          210,883





March
      31, 2008
                        
                        U.S.
                        
                        
                        State
                        
                        
                        International
                        
                        
                        TotalCurrent
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        826,629
                        
                        
                        $
                        826,629Deferred
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        425,175
                        
                        
                        $
                        425,175Total
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        1,251,804
                        
                        
                        $
                        1,251,804





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




March 31,
                        2009
                      
                      
                      June 30,
                        2008Federal
      statutory tax rate
                      
                      
                      34
                      %
                      
                      
                      34
                      %Increase
      (decrease) in rate resulting from:Non
      US income taxed at different rates
                      
                      
                      (1
                      )%
                      
                      
                      (1
                      )%33
                      %
                      
                      
                      33
                      %Temporary
      Difference
                      
                      
                      10.36
                      %
                      
                      
                      108
                      %Income
      tax benefit
                      
                      
                      (26.31
                      )
                      
                      
                      -Effective
      Tax Rate
                      
                      
                      17.05
                      %
                      
                      
                      141
                      %




Deferred
tax liability arises due to the following temporary differences:





March 31,
                            2009
                          
                          
                          Future tax
                            rate %
                          
                          
                          Deferred tax
                            liability
                          
                          
                          June 30, 2008
                          
                          
                          Future tax
                            rate %
                          
                          
                          Deferred tax
                            liabilityOwing by
      patients via ACFC
                          
                          $
                          24,715,766
                          
                          
                          
                          30
                          %
                          
                          $
                          7,414,730
                          
                          
                          $
                          24,444,765
                          
                          
                          
                          30
                          %
                          
                          $
                          7,333,430Provision
      DDR cancellation
                          
                          
                          (13,447,863
                          )
                          
                          
                          30
                          %
                          
                          
                          (4,034,359
                          )
                          
                          
                          (13,746,000
                          )
                          
                          
                          30
                          %
                          
                          
                          (4,123,800
                          )Provision
      un-dispensed DDR medications
                          
                          
                          (1,054,641
                          )
                          
                          
                          30
                          %
                          
                          
                          (316,392
                          )
                          
                          
                          (1,253,000
                          )
                          
                          
                          30
                          %
                          
                          
                          (375,900
                          )Accrued
      ACFC collection and commission
                          
                          
                          (2,307,496
                          )
                          
                          
                          30
                          %
                          
                          
                          (692,249
                          )
                          
                          
                          (2,506,000
                          )
                          
                          
                          30
                          %
                          
                          
                          (751,800
                          )Provision
      for patient refund
                          
                          
                          (129,865
                          )
                          
                          
                          30
                          %
                          
                          
                          (38,960
                          )
                          
                          
                          (190,000
                          )
                          
                          
                          30
                          %
                          
                          
                          (57,000
                          )Amortization
      of patents
                          
                          
                          1,647,825
                          
                          
                          
                          30
                          %
                          
                          
                          494,348
                          
                          
                          
                          714,329
                          
                          
                          
                          30
                          %
                          
                          
                          214,299Unutilised
      loss
                          
                          
                          (1,758,712
                          )
                          
                          
                          30
                          %
                          
                          
                          (527,613
                          )
                          
                          
                          -
                          
                          
                          
                          30
                          %
                          
                          
                          -Other
      miscellaneous
                          
                          
                          (511,214
                          )
                          
                          
                          30
                          %
                          
                          
                          (153,365
                          )
                          
                          
                          279,946
                          
                          
                          
                          30
                          %
                          
                          
                          83,983Total
                          
                          $
                          7,153,800
                          
                          
                          
                          30
                          %
                          
                          $
                          2,146,140
                          
                          
                          $
                          7,744,040
                          
                          
                          
                          30
                          %
                          
                          $
                          2,323,212





15




14.
              OTHER COMPREHENSIVE INCOME
      (LOSS)





Balances
of related after-tax components comprising accumulated other comprehensive
income (loss), included in stockholders’ equity, at March 31, 2009 and June 30,
2008 are as follows:





Accumulated
                            Other
                            Comprehensive
                            IncomeBalance
      at June 30, 2007
                          
                          $
                          3,171,506Change
      for year ended June 30, 2008
                          
                          
                          3,800,994Balance
      at June 30, 2008
                          
                          $
                          6,972,500Change
      for nine months ended March 31, 2009
                          
                          
                          (9,202,311
                          )Balance
      at March 31, 2009
                          
                          $
                          (2,229,811
                          )





The
change for nine months ended March 31, 2009 is primarily attributable to the
depreciation in Australian dollar against the US dollar from the closing rate of
A$:US$ 1:0.96150 for the year ended June 30, 2008 to A$:US$ 1:0.68350
for the nine-month period ended March 31, 2009.





15.
              ACQUISITIONS





On July
3, 2008, the Company entered a Share Exchange Agreement with AMI Clinic Limited,
a privately owned company in the United Kingdom (“AMI UK”), and AMI UK’s
shareholders pursuant to which the Company acquired all of the issued and
outstanding shares of stock of AMI UK without any consideration.





On August
14, 2008, the Company entered a Share Exchange Agreement with Australian
Lifestyle Clinic Pty Limited (ACN 128 711 615), a privately owned Australian
company (“Australian Lifestyle”), and Australian Lifestyle’s shareholders
pursuant to which the Company acquired all of the issued and outstanding shares
of stock of Australian Lifestyle without any consideration.





Both the
entities acquired by the Company were dormant with no significant assets and
liabilities.





16




ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





THE
FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED JUNE 30, 2008.





Preliminary
Note Regarding Forward-Looking Statements




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




Overview




We were
originally incorporated under the name of Hawksdale Financial Visions, Inc. on
December 6, 1996 under the laws of the State of Nevada. We were involved in the
business of timeshares, but became dormant on March 31, 1997, and until January
28, 2005, we were a “blank check” company with nominal assets. On October 15,
2004, we changed our name to “Advanced Medical Institute Inc.” On March 21,
2005, we completed a Share Exchange Agreement with Advanced Medical Institute
Pty Limited, a privately owned Australian company (“AMI Australia”), whereby AMI
Australia became our wholly-owned subsidiary. On November 17, 2005, we entered
into a Share Exchange Agreement with PE Patent Holdco Pty Limited, a privately
owned Australian company (“PE Patent Holdco”), whereby PE Patent Holdco became
our wholly-owned subsidiary. On September 8, 2006, we entered into a Share
Exchange Agreement with Worldwide PE Patent Holdco Pty Limited (ACN 117 157
727), a privately owned Australian company (“Worldwide PE”), whereby Worldwide
PE became our wholly-owned subsidiary.




Business
Overview




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




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





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




Our
discussion and analysis of financial condition and results is based upon our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate our estimates, including those related to accounts receivable
reserves, provisions for impairment losses of affiliated companies and other
intangible assets, income taxes and contingencies. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.





We
believe the following critical accounting policies reflect our more significant
estimates and assumptions used in the preparation of our consolidated financial
statements:





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 medication is delivered to the patient upon the signing of a
contract. Generally the terms 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.




ALLOWANCE
FOR DOUBTFUL ACCOUNTS   We evaluate the collectibility of our
trade receivables based on a combination of factors. We regularly analyze our
significant customer accounts, and, when we become aware of a specific
customer’s inability to meet its financial obligations to us, such as in the
case of bankruptcy filings or deterioration in the customer’s ability to pay for
our services, we record a specific reserve for bad debt to reduce the related
receivable to the amount we reasonably believe is collectible. The allowances
are calculated based on detailed review of certain individual customer accounts,
historical rates and an estimation of the overall economic conditions affecting
our customer base. We review a customer’s credit history with the Company before
extending credit. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.





17




INCOME
TAXES   We record a valuation allowance to reduce our deferred
tax assets to the amount that is more likely than not to be realized. We have
considered future market growth, forecasted earnings, future taxable income, and
prudent and feasible tax planning strategies in determining the need for a
valuation allowance.





CONTINGENCIES   We
may be subject to certain asserted and unasserted claims encountered in the
normal course of business. It is our belief that the resolution of these matters
will not have a material adverse effect on our financial position or results of
operations; however, we cannot provide assurance that damages that result in a
material adverse effect on our financial position or results of operations will
not be imposed in these matters. We account for contingent liabilities when it
is probable that future expenditures will be made, and such expenditures can be
reasonably estimated.





LONG-LIVED
ASSETS   We periodically assesses the need to record impairment
losses on long-lived assets, such as property, plant and equipment, goodwill and
purchased intangible assets, used in operations and its investments, when
indicators of impairment are present indicating the carrying value may not be
recoverable. An impairment loss is recognized when estimated undiscounted future
cash flows expected to result from the use of the asset plus net proceeds
expected from disposition of the asset (if any) are less than the carrying value
of the asset. When impairment is identified, the carrying amount of the asset is
reduced to its estimated fair value. Goodwill is no longer amortized, and
potential impairment of goodwill and purchased intangible assets with indefinite
useful lives are evaluated using the specific guidance provided by SFAS No. 142
and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets.” This impairment analysis is performed at least annually. For
investments in affiliated companies that are not majority-owned or controlled,
indicators of value generally include revenue growth, operating results, cash
flows and other measures. Management then determines whether there has been a
permanent impairment of value based upon events and circumstances that have
occurred since acquisition. It is reasonably possible that the impairment
factors evaluated by management will change in subsequent periods, given that
the Company operates in a volatile environment. This could result in material
impairment charges in future periods.





CURRENCY
CONVERSION   As of March 31, 2009 and 2008, the accounts of AMI
Australia were maintained, and its financial statements were expressed, in
Australian Dollars (A$). Such financial statements were translated into US
Dollars (US$) in accordance with Statement of Financial Accounts Standards
(“SFAS”) No. 52, “Foreign Currency Translation”, with the Australian
Dollar as the functional currency. In accordance with the Statement, all
assets and liabilities were translated at the exchange rate (A$1 = US$0.68350)
as of March 31, 2009, 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:




Results of
operations:




Three
                      Months
                      ended
                      March
                      31,
                    
                    
                    Three
                      Months
                      ended
                      March
                      31,
                    
                    
                    Nine
                      Months
                      ended
                      March
                      31,
                    
                    
                    Nine
                      Months
                      ended
                      March
                      31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Revenue
                    
                    
                    100
                    %
                    
                    
                    100
                    %
                    
                    
                    100
                    %
                    
                    
                    100
                    %Cost
      of revenue
                    
                    
                    24.9
                    %
                    
                    
                    20.8
                    %
                    
                    
                    22.8
                    %
                    
                    
                    22.2
                    %Gross
      profit
                    
                    
                    75.1
                    %
                    
                    
                    79.2
                    %
                    
                    
                    77.2
                    %
                    
                    
                    77.8
                    %Selling,
      general and administrative expenses
                    
                    
                    91.2
                    %
                    
                    
                    70.7
                    %
                    
                    
                    79.6
                    %
                    
                    
                    69.7
                    %Other
      income and expenses
                    
                    
                    (0.6
                    )%
                    
                    
                    (0.3
                    )%
                    
                    
                    (0.3
                    )%
                    
                    
                    (0.3
                    )%Discontinued
      operation
                    
                    
                    (0.5
                    )%
                    
                    
                    (0.4
                    )%
                    
                    
                    (0.2
                    )%
                    
                    
                    (1.1
                    )%Income
      before income tax
                    
                    
                    (17.2
                    )%
                    
                    
                    7.8
                    %
                    
                    
                    (2.9
                    )%
                    
                    
                    6.7
                    %Income
      tax expenses
                    
                    
                    (2.5
                    )%
                    
                    
                    3.7
                    %
                    
                    
                    0.5
                    %
                    
                    
                    3.3
                    %Net
      income
                    
                    
                    (14.7
                    )%
                    
                    
                    4.1
                    %
                    
                    
                    (3.4
                    )%
                    
                    
                    3.4
                    %





LIQUIDITY
AND CAPITAL RESOURCES





As of
March 31, 2009, we had total liabilities of $23,066,065, including unearned
revenue of $5,362,741, and we had a positive net worth of $22,824,320. As of
June 30, 2008, we had total liabilities of $22,027,966, including unearned
revenue of $6,922,800, and we had a positive net worth of $33,474,159.  
The predominant reason for the significant reduction in the net worth of the
Company between June 30, 2008 and March 31, 2009 is due to a significant
deterioration in the A$ exchange rate as compared to the US$ exchange
rate.




18




Our
aggregate cash balances as at March 31, 2009 were $633,712, our inventory was
$722,641, and our net receivables were approximately $19.8 million. These
receivables are due on average within 90-180 days. We forecast that we will be
able to generate sufficient funds from our business to fund our operations in
the ordinary course during the next 12 months. Our forecast is based on our
analysis that the net cash outflow for the Company in the nine months ended
March 31, 2009 is mainly attributable to significant ineffective advertising
expenses incurred in our Australian operation during January and February 2009
(which ineffective advertising has since been addressed) as well as cash used
for the establishment of UK operations.  As set out above, the
previous ineffective advertising in our Australian operation was addressed
during March 2009 and is no longer an issue.  Secondly, the
establishment of our UK operations has now largely been completed, with the
operating performance and cash flow of our UK operations having improved
substantially in the past few months such that the operations are now cash flow
break even or cash flow positive.  Therefore, we forecast our
operating cash flow will be positive and that we will have sufficient funds
available to meet expenses from our operations in the normal
course.





The
Company borrowed A$3 million from ANZ Nominees Limited in its capacity as
custodian of the Professional Pensions PST in September 2006.  The
outstanding balance of this loan was fully repaid in December 2008 using funds
from the St George facility discussed below.





The
Company borrowed A$2.4 million from St George Bank Limited in December 2008
comprising a A$1.9 million term facility and a A$500,000 overdraft facility. The
loan is secured by a first ranking 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 and Advanced
Medical Institute (NZ) Limited). The term facility is a commercial bill
acceptance/discount facility whereby the Company regularly discounts bills with
the bank at the prevailing interest rate plus a margin of 1.65%. The average
all-up cost of this facility during the period was 5.36%. On each rollover the
interest rate is reset.    The loan is due for repayment in
December 2011, however the Company is required to make principal repayments of
A$50,000 per month during each month of the term.  As at March 31,
2009, the total outstanding under the facility was A$2,175,084.





The
Company borrowed a further A$1 million from Secare Health Centre Pty Limited
(“Secare”) in December 2008.  Secare is controlled by the company’s
chief executive officer and founder, Jack Vaisman and the Company has
subsequently borrowed a further A$2,263,966 from Secare. The loan is secured by
a second ranking 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 and Advanced Medical
Institute (NZ) Limited). The loan attracts an interest cost of 10% per
annum.  No repayment of this loan has been made up to March 31,
2009.  The loan is due for repayment in December 2011.





In the
event that we continue to expand our business, we may need to raise additional
debt or equity funding in order to undertake such expansion. However, there can
be no assurance that we can or will obtain sufficient funds from operations or
from additional financings on terms acceptable to us. If we are unable to obtain
sufficient additional financing, we may not be able to expand our operations as
considered or we could be required to reduce spending and
operations.




RESULTS
OF OPERATIONS





NINE
MONTHS ENDED MARCH 31, 2009 COMPARED TO NINE MONTHS ENDED MARCH 31,
2008





Revenue.
Revenue was $42,377,377 in the nine months ended March 31, 2009, compared to
$36,948,958 in the nine months ended March 31, 2008, an increase of $5,428,419,
or 14.7%. We attribute this increase primarily to the following factors: (1)
expansion into the U.K.; (2) increased effectiveness of advertising campaigns;
(3) increased brand name recognition; and (4) effectiveness of our
products.




Our
unearned revenue as at March 31, 2009 was $5,362,741 compared to $6,031,782 as
at March 31, 2008. The gross decrease in unearned revenue from the nine months
ended March 31, 2008 to the nine months ended March 31, 2009 was $669,041, or a
decrease of 11.1%. The decrease in the nine-month period ended March 31, 2009 is
primarily attributable to the depreciation in Australian dollar against the US
dollar from the closing rate of A$:US$ 1:0.91780 for the nine-month period
ended March 31, 2008 to A$:US$ 1:0.68350 for the nine-month period ended
March 31, 2009.  Our unearned revenue in Australian dollars was
A$7,846,000 in the nine months ended March 31, 2009, compared to A$6,572,000 in
the nine months ended March 31, 2008, an increase of 19.4%.  We
attribute this increase to the following factors: (1) increased advertising
campaigns with improved target marketing in the premature ejaculation segment;
(2) increased brand name recognition; and (3) effectiveness of our
products.




Revenue
in our premature ejaculation (PE) treatments has increased by $5,616,176 or
31.6% to $23,412,099, and revenue in our erectile dysfunction (ED) treatments
increased by $325,514 or 1.9% to $17,829,444, in the nine months ended March 31,
2009, compared to the nine months ended March 31, 2008. The numbers of patients
in AMI Australia’s PE treatments and ED treatments are stable compared to the
nine months ending March 31, 2008. We attribute the increase in revenue in our
PE treatments and ED treatments to the increase in the number of sales per
patient, along with the higher sales price of the treatment programs sold.
Revenue in AMI Australia’s prostate treatments has decreased by $766,485 or
44.6%, to $953,418, in the nine months ended March 31, 2009, compared to the
nine months ended March 31, 2008. We attribute the predominant reason for the
decrease in revenue in our prostate treatments to decreases in the number of
patients. The number of patients in AMI Australia’s prostate treatments
decreased by 1,165 compared to the nine months ended March 31,
2008.





Revenue
in our Australian operations was $34,377,403 in the nine months ended March 31,
2009, compared to $35,934,473 in the nine months ended March 31, 2008. Compared
to the same period in the previous year, there is a decrease of $1,557,070, or
4.3%, in the nine months ended March 31, 2009. The decrease in the nine-month
period ended March 31, 2009 is primarily attributable to the depreciation in the
Australian dollar against the US dollar from the average rate of
A$:US$ 1:0.88084 for the nine-month period ended March 31, 2008 to
A$:US$ 1:0.74406 for the nine-month period ended March 31,
2009.  Revenue in Australian dollars was A$46,202,461 in the nine
months ended March 31, 2009, compared to A$40,795,687 in the nine months ended
March 31, 2008, an increase of 13.25%.  We attribute this increase to
the following factors: (1) increased advertising campaigns with improved target
marketing in the premature ejaculation segment; (2) increased brand name
recognition; and (3) effectiveness of our products.





Revenue
in our UK operations was $7,158,088 in the nine months ended March 31, 2009,
compared to $Nil in the nine months ended March 31, 2008.  Our UK
operation started its business activities in September 2008.





19





Revenue
in our Chinese operation was $5,137 in the nine months ended March 31, 2009,
compared to $38,720 during the nine months ended March 31, 2008. The decrease of
$33,583, or 86.7%, in revenue in the nine months ended March 31, 2009 is
primarily attributable to the decrease in the number of patients buying
treatments from us during the 2009 period.




Cost of
Revenue. Cost of revenue was $9,673,420 in the nine months ended March
31, 2009, compared to $8,204,757 in the nine months ended March 31, 2008. The
increase in cost of revenue was attributable to an increase in the medication
cost incurred by AMI Australia and AMI’s UK operation. As a percentage of
revenue, cost of revenue was 22.8% in the nine months ended March 31, 2009,
compared to 22.2% in the nine months ended March 31, 2008. The increase in the
nine months ended March 31, 2009 is primarily attributable to the establishment
of the UK operations. The Company’s UK operations started its business
activities in September 2008.  The initial stage of UK operation led
to a high percentage of cost of revenue due to the operation being a start up
business.  Its revenue shows a growing pace following the increase in
its brand name recognition.




Gross
Profit. Gross profit was $32,703,957 in the nine months ended March 31,
2009, compared to $28,744,201 in the 2008 comparable period. As a percentage of
revenue, gross profit decreased to 77.2% in the quarter ended March 31, 2009
from 77.87% in the 2008 quarter. The 0.6% decrease in the gross profit
percentage in 2009 is primarily attributable to the high percentage of cost of
revenue in our UK operation.




Selling, General
and Administrative Expenses. Selling, general and administrative expenses
were $33,731,679 in the nine months ended March 31, 2009, compared to
$25,735,251 in the nine months ended March 31, 2008. As a percentage of revenue,
selling, general and administrative expenses increased to 79.6% in the nine
months ended March 31, 2009 from 69.7% in the nine months ended March 31, 2008.
The increase in the nine months ended March 31, 2009 is primarily attributable
to the establishment of UK operations as well as the expenditure on ineffective
advertising in Australia in January and February, which expenditure has now been
ceased. The Company’s UK operations started its business activities in September
2008.  The initial stage of UK operations led to a high percentage of
selling, general and administrative expenses compared to revenue due to the
operation being a start up business.  Its revenue shows a growing pace
following the increase in its brand name recognition.





Selling,
general and administrative expenses in our Chinese operations were $159,109 in
the nine months ended March 31, 2009, compared to $579,300 in the nine months
ended March 31, 2008. Major expenses were staff costs.




Other
Income. Other income and expenses were ($142,523) in the nine months
ended March 31, 2009, compared to ($111,490) in the nine months ended March 31,
2008. As a percentage of revenue, other income and expenses was (0.3%) in both
the nine months ended March 31, 2009 and the nine months ended March 31,
2008.





Net (Loss) Income
Before Income Tax and Income Tax Expenses.Net (loss) income before
income tax was ($1,236,646) in the nine months ended March 31, 2009, compared to
$2,491,176 in the nine months ended March 31, 2008. The decrease is attributable
to the increase in selling, general and administrative expenses and the
establishment of the UK operation.




Income
tax expenses were $210,883 in the nine months ended March 31, 2009 compared to
$1,251,804 in the nine months ended March 31, 2008. As a percentage of revenue,
income tax expense decreased to 0.5% in the nine months ended March 31, 2009
from 3.3% in the nine months ended March 31, 2008. This decrease is attributable
to the increase in selling, general and administrative expenses and the
establishment of the UK operations.




Net (Loss)
Income. Net (loss) income was ($1,447,529) in the nine months ended March
31, 2009, compared to $1,239,372 in the nine months ended March 31, 2008. This
decrease in the 2009 quarter compared to the 2008 quarter is attributable to the
increase in selling, general and administrative expenses and the establishment
of the UK operations.




Net
income in our Australian operations was $474,814 in the nine months ended March
31, 2009, compared to $2,639,514 in the nine months ended March 31, 2008, a
decrease of 82%. The decrease is predominantly attributable to the decrease in
the net income of our Australian operation, which was primarily the result of
the depreciation in Australian dollar against the US dollar from the average
rate of A$:US$ 1:0.88084 for the nine-month period ended March 31, 2008 to
A$:US$ 1:0.74406 for the nine-month period ended March 31,
2009.  Whilst there was a decline in Australian dollar earnings, the
decline was much lower in Australian dollar terms with the extent of the
decrease being distorted by the significant deterioration of the Australian
dollar against the US dollar in this period.





Net loss
in our UK operations was ($1,186,963) in the nine months ended March 31, 2009,
compared to $Nil in the nine months ended March 31, 2008.





Net loss
in our Chinese operations was ($154,062) in the nine months ended March 31,
2009, compared to ($541,530) in the nine months ended March 31, 2008. The
decrease is due to the reduction in operations.





Net loss
in our Japanese operations, which were discontinued during the 2008 period, was
($186,078) in the nine months ended March 31, 2009, compared to ($428,313) in
the nine months ended March 31, 2008. The decrease in the loss resulted from the
reduction of expenditures due to the discontinuation of the Japanese
operations.





The above
discussions of results exclude those entities which have no, or what management
deems insignificant operations.





20




THREE
MONTHS ENDED MARCH 31, 2009 COMPARED TO THREE MONTHS ENDED MARCH 31,
2008





Revenue.
Revenue was $13,216,784 in the three months ended March 31, 2009, compared to
$13,408,468 in the three months ended March 31, 2008, a decrease of $191,684, or
1.4%.  The decrease in the three-month period ended March 31, 2009 is
primarily attributable to the depreciation in Australian dollar against the US
dollar from the rate of A$:US$ 1:0.90271 for the three-month period ended
March 31, 2008 to A$:US$ 1:0.65648 for the three-month period ended March
31, 2009.  Revenue in Australian dollars was A$19,208,950 in the three
moths ended March  31, 2009 compared to A$14,389,885 in the three
months ended March 31, 2008, an increase of A$4,819,065 or 33.5%.  We
attribute this increase primarily to the following factors: (1) expansion into
the UK; (2) increased effectiveness of advertising campaigns; (3) increased
brand name recognition; and (4) effectiveness of our products.




Our
unearned revenue as at March 31, 2009 was $5,362,741 compared to $6,031,782 as
at March 31, 2008. The gross decrease in unearned revenue from the three months
ended March 31, 2008 to the three months ended March 31, 2009 was $669,041, or a
decrease of 11.1%. The decrease in the three-month period ended March 31, 2009
is primarily attributable to the depreciation in Australian dollar against the
US dollar from the closing rate of A$:US$ 1:0.91780 for the nine-month
period ended March 31, 2008 to A$:US$ 1:0.68350 for the nine-month period
ended March 31, 2009.  Our unearned revenue in Australian dollars was
A$7,846,000 in the three months ended March 31, 2009, compared to A$6,572,000 in
the three months ended March 31, 2008, an increase of 19.4%.  We
attribute this increase to the following factors: (1) increased advertising
campaigns with improved target marketing in the premature ejaculation segment;
(2) increased brand name recognition; and (3) effectiveness of our
products.




Revenue
in our PE treatments has increased by $2,319,082 or 38.4% to $8,363,549, and
revenue in our ED treatments decreased by $2,213,891 or 32.3% to $4,637,471, in
the three months ended March 31, 2009, compared to the three months ended March
31, 2008. The numbers of patients in our PE treatments are stable compared to
the three months ending March 31, 2008. We attribute the increase in revenue in
our PE treatments to the increase in the number of sales per patient along with
the higher sales price of the treatment programs sold. Revenue in our prostate
treatments has decreased by $338,459 or 64.3%, to $187,728, in the three months
ended March 31, 2009, compared to the three months ended March 31, 2008. We
attribute the decrease in revenue in our prostate treatments to decreases in the
number of patients. The number of patients in our ED  treatments
decreased by 340 compared to the three months ended March 31, 2008. We attribute
the decrease in revenue in our ED treatments to the decrease in the number of
patients as well as the depreciation in Australian dollar against the US
dollar.




Revenue
in our Australian operations was $9,235,373 in the three months ended March 31,
2009, compared to $12,989,944 in the three months ended March 31, 2008. Compared
to the same period in the previous year, there is a decrease of $3,754,571, or
28.9%, in the three months ended March 31, 2009. The decrease in the three-month
period ended March 31, 2009 is primarily attributable to the depreciation in
Australian dollar against the US dollar from the rate of A$:US$ 1:0.90271
for the three-month period ended March 31, 2008 to A$:US$ 1:0.65648 for the
three-month period ended March 31, 2009.  Revenue in Australian
dollars was A$14,067,965 in the three months ended March 31, 2009 compared to
A$14,389,885 in the three months ended March 31, 2008, a decrease of A$321,920
or 2.3%.





Revenue
in our UK operations was $3,653,464 in the three months ended March 31, 2009,
compared to $Nil in the three months ended March 31, 2008.  The
Company’s UK operation started its business activities in September
2008.




Cost of
Revenue. Cost of revenue was $3,292,213 in the three months ended March
31, 2009, compared to $2,786,301 in the three months ended March 31, 2008. The
increase in cost of revenue was attributable to an increase in the medication
cost incurred by AMI Australia and AMI’s UK operation. As a percentage of
revenue, cost of revenue was 24.9% in the three months ended March 31, 2009,
compared to 20.8% in the three months ended March 31, 2008.  The
increase in the three months ended March 31, 2009 is primarily attributable to
the establishment of UK operations. The Company’s UK operations started its
business activities in September 2008.  The initial stage of UK
operation led to a high percentage of cost of revenue due to the operation being
a start up business.  The UK operations  revenue shows a
growing pace following the increase in its brand name recognition.




Gross
Profit. Gross profit was $9,924,571 in the three months ended March 31,
2009, compared to $10,622,167 in the 2008 comparable period. As a percentage of
revenue, gross profit increased to 75.1% in the quarter ended March 31, 2009
from 79.2% in the 2008 quarter. The 4.1% decrease in the gross profit percentage
in 2009 is primarily attributable to the high percentage of cost of revenue in
our UK operation.




Selling, General
and Administrative Expenses. Selling, general and administrative expenses
were $12,051,251 in the three months ended March 31, 2009, compared to
$9,483,354 in the three months ended March 31, 2008. As a percentage of revenue,
selling, general and administrative expenses increased to 91.2% in the three
months ended March 31, 2009 from 70.7% in the three months ended March 31, 2008.
The increase in the three months ended March 31, 2009 is primarily attributable
to the establishment of our UK operations as well as the expenditure on
ineffective advertising in Australia in January and February, which expenditure
has now been ceased. The Company’s UK operation started its business activities
in September 2008.  The initial stage of UK operations led to a high
percentage of selling, general and administrative expenses compared to revenue
due to the start up nature of the operation.  Its revenue shows a
growing pace following the increase in its brand name recognition.




Other
Income. Other income and expenses were ($73,713) in the three months
ended March 31, 2009, compared to ($142,523) in the three months ended March 31,
2008. As a percentage of revenue, other income and expenses was (0.6%) in the
three months ended March 31, 2009 and (0.3%) in the three months ended March 31,
2008.  The 0.3% decrease in the other income and expenses in 2009 is
primarily attributable to the decrease in bank interest income, following the
decrease in bank balance.





21




Net (Loss) Income
Before Income Tax and Income Tax Expenses.Net (loss) income before
income tax was ($2,274,512) in the three months ended March 31, 2009, compared
to $1,050,728 in the three months ended March 31, 2008. This decrease was
primarily attributable to the increase in selling, general and administrative
expenses in the three months ended March 31, 2009.




Income
tax  (benefit) expenses were ($325,404) in the three months ended
March 31, 2009 compared to $496,551 in the three months ended March 31, 2008. As
a percentage of revenue, income tax expense decreased to (2.5%) in the three
months ended March 31, 2009 from 3.7% in the three months ended March 31, 2008.
This decrease is attributable to the increase in selling, general and
administrative expenses , and the depreciation in Australian dollar against the
US dollar from the average rate of A$:US$ 1:0.88084 for the nine-month
period ended March 31, 2008 to A$:US$ 1:0.74406 for the nine-month period
ended March 31, 2009.




Net (Loss)
Income. Net (loss) income was ($1,949,108) in the three months ended
March 31, 2009, compared to $554,177 in the three months ended March 31, 2008.
This decrease in the 2009 quarter compared to the 2008 quarter is attributable
to the increase in selling, general and administrative expenses and the
depreciation in Australian dollar against the US dollar from the average rate of
A$:US$ 1:0.88084 for the nine-month period ended March 31, 2008 to
A$:US$ 1:0.74406 for the nine-month period ended March 31,
2009.




Net
(loss) income in our Australian operations was ($762,832) in the three months
ended March 31, 2009, compared to $828,846 in the three months ended March 31,
2008. The decrease is primarily attributable to the increase in selling, general
and administrative expenses in the three months ended March 31,
2009.





Net
income in our UK operations was ($1,149,658) in the three months ended March 31,
2009, compared to $Nil in the three months ended March 31, 2008.





Net loss
in our Japanese operations, which were discontinued during the 2008 period, was
($68,255) in the three months ended March 31, 2009, compared to ($168,741) in
the three months ended March 31, 2008. The decrease in the loss resulted from
the reduction of expenditures due to the discontinuation of the Japanese
operations.





The above
discussions of results exclude those entities which have no or what management
deems insignificant operations.





OFF-BALANCE SHEET
ARRANGEMENTS





We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a material current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.





ITEM 3.   QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





As
a “smaller reporting company” the Company is not required to provide this
information.




22




ITEM
4(T).   CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures





Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, the Company
conducted an evaluation of the effectiveness, as of the end of the period
covered by this report, of our disclosure controls and procedures, as such term
is defined in Exchange Act Rule 13a-15(e).  Based on this evaluation,
our principal executive officer and principal financial officer have concluded
that, as of such date, the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in our
Exchange Act reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.





Our
Annual Report on Form 10-K for the year ended June 30, 2008 stated that our
disclosure controls and procedures were ineffective because of material
weaknesses in our internal control over financial reporting. Upon further review
and evaluation, management has concluded that those material weaknesses (i.e.,
the lack of a functioning audit committee and inadequate segregation of duties
consistent with control objectives) do not adversely impact our disclosure
controls and procedures. Accordingly, we plan to file appropriate amendments to
that Annual Report and subsequently filed quarterly reports.





Changes
in internal controls over financial reporting




Not
applicable.




PART II -
OTHER INFORMATION





ITEM 1.   LEGAL PROCEEDINGS.




Please
see Note 8 to our financial statements above.




ITEM 1A.   RISK FACTORS




There
have been no material changes in our business, operations or prospects that
would require a change to the Risk Factor disclosure included in our most recent
Annual Report on Form 10-K for the year ended June 30, 2008 that have not
already been disclosed.





ITEM 6.   EXHIBITS.




The
following exhibits are filed as part of this report:





Exhibit Number
                  
                  Description10.1
                  
                  Facility
      Agreement with St. George Bank Limited, dated October 22,
    200810.2
                  
                  Amendment
      to Facility Agreement with St. George Bank Limited, dated November 21,
      200810.3
                  
                  Loan
      Agreement with Secare Health Centre Pty Limited, dated December 4,
      200831.1
                  
                  Certification
      of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
                  
                  Certification
      of the Chief Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                  
                  Certification
      of Chief Executive Officer and the Chief Financial Officer Pursuant to 18
      U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
    2002).





23




SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




Date:
      May 15, 2009
              By:
              /s/ 
      Jacov (Jack) VaismanJacov
      (Jack) VaismanChief
      Executive Officer




Date:
      May 15, 2009
              By:
              /s/
      Dilip ShresthaDilip
      ShresthaChief
      Financial Officer
                (Principal
      Financial Officer)





24




Exhibit
Index





Exhibit Number
                  
                  Description10.1
                  
                  Facility
      Agreement with St. George Bank Limited, dated October 22,
    200810.2
                  
                  Amendment
      to Facility Agreement with St. George Bank Limited, dated November 21,
      200810.3
                  
                  Loan
      Agreement with Secare Health Centre Pty Limited, dated December 4,
      200831.1
                  
                  Certification
      of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
                  
                  Certification
      of the Chief Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                  
                  Certification
      of Chief Executive Officer and the Chief Financial Officer Pursuant to 18
      U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
    2002).





25