UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON D.C. 20549









FORM
10-Q




T
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934
              For
      the quarterly period ended December 31,
  2009




or




o
            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  2011
                Australia(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 T    
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  TNo  
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 
      T(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 oNo T





There were 53,507,450
shares of the Registrant’s Common Stock issued and outstanding on February 24,
2010.











TABLE OF
CONTENTS





PagePart
      I.
                  
                  Financial
      Information
                  
                  3Item
      1. Financial Statements (Unaudited)
                  
                  3Unaudited
      Consolidated Balance Sheets as at December 31, 2009 and June 30,
      2009
                  
                  3Unaudited
      Consolidated  Statements of Operations for the Three and Six
      Month Periods Ended December 31, 2009 and 2008
                  
                  4Unaudited
      Consolidated  Statements of Cash Flows for the  Six
      Month Periods Ended December 31, 2009 and 2008
                  
                  5Notes
      to Unaudited Consolidated Financial Statements
                  
                  7Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                  
                  18Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                  
                  23Item
      4T. Controls and Procedures
                  
                  24Part
      II.
                  
                  Other
      Information
                  
                  24Item
      1. Legal Proceedings
                  
                  24Item
      1A. Risk Factors
                  
                  24Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                  
                  24Item
      3. Defaults Upon Senior Securities
                  
                  24Item
      4. Submission of Matters to a Vote of Security Holders
                  
                  24Item
      5. Other Information
                  
                  24Item
      6. Exhibits
                  
                  24SIGNATURES
                  
                  25




2




PART I -   FINANCIAL
INFORMATION




ITEM 1.   FINANCIAL
STATEMENTS




ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE
SHEETS


(UNAUDITED)







As
      atDecember
      31,
                          2009
                        
                        
                        June 30,
                          2009ASSETSCURRENT
      ASSETSCash
      & cash equivalents
                        
                        $
                        218,420
                        
                        
                        $
                        295,245Receivables,
      net
                        
                        
                        22,728,548
                        
                        
                        
                        24,021,361Receivables
      due from related parties
                        
                        
                        348,699
                        
                        
                        
                        428,525Inventory
                        
                        
                        937,433
                        
                        
                        
                        911,405Other
      assets
                        
                        
                        1,147,977
                        
                        
                        
                        1,014,424TOTAL
      CURRENT ASSETS
                        
                        
                        25,381,077
                        
                        
                        
                        26,670,960NON-CURRENT
      ASSETSSecurity
      deposits
                        
                        
                        198,159
                        
                        
                        
                        181,584Property
      and equipment, net
                        
                        
                        1,709,898
                        
                        
                        
                        1,630,979Assets
      related to discontinued operations
                        
                        
                        296,553
                        
                        
                        
                        289,977Deferred
      tax assets
                        
                        
                        281,665
                        
                        
                        
                        678,270Intangible
      assets, net
                        
                        
                        19,651,924
                        
                        
                        
                        18,327,078TOTAL
      NON-CURRENT ASSETS
                        
                        
                        22,138,199
                        
                        
                        
                        21,107,888TOTAL
      ASSETS
                        
                        $
                        47,519,276
                        
                        
                        $
                        47,778,848LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIESUnearned
      revenue
                        
                        $
                        7,146,073
                        
                        
                        $
                        8,003,468Accounts
      payable & accrued expenses
                        
                        
                        17,420,644
                        
                        
                        
                        15,852,436Payables
      due to related parties
                        
                        
                        106,596
                        
                        
                        
                        278,737Interest
      bearing liabilities – current
                        
                        
                        714,853
                        
                        
                        
                        1,083,908Liabilities
      related to discontinued operations
                        
                        
                        4,532
                        
                        
                        
                        4,100TOTAL
      CURRENT LIABILITIES
                        
                        
                        25,392,698
                        
                        
                        
                        25,222,649NON-CURRENT
      LIABILITIESInterest
      bearing liabilities - non-current
                        
                        
                        630,969
                        
                        
                        
                        642,453Payable
      due to related parties
                        
                        
                        5,360,693
                        
                        
                        
                        3,803,131TOTAL
      NON-CURRENT LIABILITIES
                        
                        
                        5,991,662
                        
                        
                        
                        4,445,584TOTAL
      LIABILITIES
                        
                        
                        31,384,360
                        
                        
                        
                        29,668,233Commitments & ContingencySTOCKHOLDERS’
      EQUITYCommon
      stock, par value $0.001 per share,   90,000,000 shares authorized,
      53,507,450 issued and outstanding as at December 31, 2009 and June 30,
      2009
                        
                        
                        53,507
                        
                        
                        
                        53,507Additional
      paid in capital
                        
                        
                        24,149,420
                        
                        
                        
                        24,149,420Other
      comprehensive  loss
                        
                        
                        2,408,921
                        
                        
                        
                        953,945Accumulated
      deficit
                        
                        
                        (10,476,932
                        )
                        
                        
                        (7,046,257
                        )TOTAL
      STOCKHOLDERS’ EQUITY
                        
                        
                        16,134,916
                        
                        
                        
                        18,110,615TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
                        $
                        47,519,276
                        
                        
                        $
                        47,778,848




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
OPERATIONS


(UNAUDITED)




Three
      Months Ended
                  December
      31,
                
                
                Six
      Months Ended
                  December
      31,2009
                
                
                2008
                
                
                2009
                
                
                2008NET
      REVENUE
                
                $
                6,363,028
                
                
                $
                13,210,997
                
                
                $
                20,870,739
                
                
                $
                29,155,445COST
      OF REVENUE
                
                
                (
      2,392,886
                )
                
                
                (2,789,937
                )
                
                
                (5,684,117
                )
                
                
                (6,381,137
                )GROSS
      PROFIT
                
                
                3,970,142
                
                
                
                10,421,060
                
                
                
                15,186,622
                
                
                
                22,774,308SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                (8,025,415
                )
                
                
                (9,800,763
                )
                
                
                (17,800,390
                )
                
                
                (21,554,028
                )OPERATING
      INCOME/(LOSS)
                
                
                (4,055,273
                )
                
                
                620,297
                
                
                
                (2,613,768
                )
                
                
                1,220,280OTHER
      INCOME AND (EXPENSE)Bank
      interest
                
                
                2,262
                
                
                
                8,119
                
                
                
                3,998
                
                
                
                42,729Other
      income (expense)
                
                
                26
                
                
                
                (2,105
                )
                
                
                26
                
                
                
                18,541Interest
      expense
                
                
                (172,497
                )
                
                
                (58,335
                )
                
                
                (326,519
                )
                
                
                (130,080
                )TOTAL
      OTHER EXPENSES
                
                
                (170,209
                )
                
                
                (52,321
                )
                
                
                (322,495
                )
                
                
                (68,810
                )INCOME/(LOSS)
      FROM CONTINUED OPERATIONS
                
                
                (4,225,482
                )
                
                
                567,976
                
                
                
                (2,936,263
                )
                
                
                1,151,470DISCONTINUED
      OPERATIONSGain
      on disposal of subsidiary (including income from discontinued
      operation)
                
                
                -
                
                
                
                119,677
                
                
                
                -
                
                
                
                119,677Loss
      from discontinued operations
                
                
                (12,043
                )
                
                
                (138,280
                )
                
                
                (35,377
                )
                
                
                (233,281
                )Total
      loss from discontinued operations
                
                
                (12,043
                )
                
                
                (18,603
                )
                
                
                (35,377
                )
                
                
                (113,604
                )INCOME/(LOSS)
      BEFORE INCOME TAXES
                
                
                (4,237,525
                )
                
                
                549,373
                
                
                
                (2,971,640
                )
                
                
                1,037,866INCOME
      TAX EXPENSE
                
                
                (9,702
                )
                
                
                (162,440
                )
                
                
                (459,035
                )
                
                
                (536,287
                )NET
      INCOME (LOSS)
                
                
                (4,247,227
                )
                
                
                386,933
                
                
                
                (3,430,675
                )
                
                
                501,579Other
      Comprehensive item - Foreign currency translation income
      (loss)
                
                
                275,700
                
                
                
                (4,660,654
                )
                
                
                1,454,976
                
                
                
                (9,515,476
                )Net
      Comprehensive Income (loss)
                
                $
                (3,971,527
                )
                
                $
                (4,273,721
                )
                
                $
                (1,975,699
                )
                
                $
                (9,013,897
                )Earnings
      per common share, basic & diluted
                
                $
                (0.08
                )
                
                $
                0.01
                
                
                $
                (0.06
                )
                
                $
                0.01Weighted
      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


(UNAUDITED)





Six
      Months Ended
                                December
      31,2009
                              
                              
                              2008Cash
      Flows from Operating ActivitiesReceipts
      from Customers
                              
                              $
                              15,562,761
                              
                              
                              $
                              21,177,500Interest
      Received
                              
                              
                              3,998
                              
                              
                              
                              42,729Payment
      to Suppliers & Employees
                              
                              
                              (15,486,520
                              )
                              
                              
                              (21,613,500
                              )Interest
      Paid
                              
                              
                              (92,871
                              )
                              
                              
                              (130,080
                              )Income
      Tax Paid
                              
                              
                              -
                              
                              
                              
                              (101,400
                              )Net
      cash used in operating activities of continued operations
                              
                              
                              (12,632
                              )
                              
                              
                              (624,751
                              )Net
      cash provided by (used in)
    discontinued operations
                              
                              
                              8,376
                              
                              
                              
                              (110,643
                              )Net
      cash used in operating activities
                              
                              
                              (4,256
                              )
                              
                              
                              (735,394
                              )Cash
      Flows from Investing ActivitiesLoans
      to related entities
                              
                              
                              -
                              
                              
                              
                              (1,264,699
                              )Proceeds
      from Sale of Investment
                              
                              
                              -
                              
                              
                              
                              250,368Purchase
      of  Property, Plant & Equipment
                              
                              
                              (12,707
                              )
                              
                              
                              (285,638
                              )Purchase
      of  Intangible Assets
                              
                              
                              (24,948
                              )
                              
                              
                              (34,635
                              )Net
      cash used in investing activities
                              
                              
                              (37,655
                              )
                              
                              
                              (1,334,604
                              )Cash
      Flows From Financing ActivitiesProceeds
      from Borrowings
                              
                              
                              913,920
                              
                              
                              
                              3,529,040Repayment
      of Borrowings
                              
                              
                              (555,463
                              )
                              
                              
                              (2,234,369
                              )Net
      cash provided by financing activities
                              
                              
                              358,457
                              
                              
                              
                              1,294,671Net
      increase (decrease) in cash and cash equivalents
                              
                              
                              316,546
                              
                              
                              
                              (775,327
                              )Effect
      of exchange rate on cash
                              
                              
                              (393,371
                              )
                              
                              
                              (1,017,334
                              )Cash
      and cash equivalents at beginning of period
                              
                              
                              295,245
                              
                              
                              
                              3,127,029Cash
      and cash equivalents at end of period
                              
                              $
                              218,420
                              
                              
                              $
                              1,334,368





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


(UNAUDITED)


(CONTINUED)





Six
      Months Ended
                    December
      31,2009
                  
                  
                  2008Reconciliation
      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
                  
                  $
                  218,420
                  
                  
                  $
                  1,334,368Reconciliation
      of Cash Flow from Operations with Profit from Ordinary Activities after
      Income TaxNet
      Income
                  
                  $
                  (3,430,675
                  )
                  
                  $
                  501,579Non-Cash
      Flows in Profit from Ordinary ActivitiesDepreciation
      and amortization
                  
                  
                  804,790
                  
                  
                  
                  798,927Provision
      for doubtful accounts
                  
                  
                  7,445,091
                  
                  
                  
                  3,170,063Gain
      on disposal of investments
                  
                  
                  -
                  
                  
                  
                  (119,677
                  )Changes
      in Assets and Liabilities(Increase)
      Decrease in inventories
                  
                  
                  72,087
                  
                  
                  
                  (502,992
                  )Increase
      in receivables
                  
                  
                  (3,514,651
                  )
                  
                  
                  (8,611,531
                  )(Decrease)
      Increase in unearned revenue
                  
                  
                  (1,691,398
                  )
                  
                  
                  600,883(Decrease)
      Increase in payables
                  
                  
                  (230,069
                  )
                  
                  
                  3,161,964Increase
      in provisions for compensated absences
                  
                  
                  69,894
                  
                  
                  
                  143,842Increase
      in deferred tax liabilities
                  
                  
                  459,035
                  
                  
                  
                  855,058Increase
      in security deposit
                  
                  
                  3,264
                  
                  
                  
                  (70,096
                  )Decrease
      in income tax payable
                  
                  
                  -
                  
                  
                  
                  (552,771
                  )Net
      cash used in operating activities of continued operations
                  
                  
                  (12,632
                  )
                  
                  
                  (624,751
                  )Net
      cash provided by (used in) operating activities of discontinued
      operations
                  
                  
                  8,376
                  
                  
                  
                  (110,643
                  )Net
      cash used in operating activities
                  
                  $
                  (4,256
                  )
                  
                  $
                  (735,394
                  )Supplemental
      Cash Flow Disclosures:Interest
      paid
                  
                  $
                  92,871
                  
                  
                  $
                  130,080Income
      tax paid
                  
                  $
                  -
                  
                  
                  $
                  233,604Non-Cash
      Investing/Financing Activities:Assets
      acquired under capital leases
                  
                  $
                  -
                  
                  
                  $
                  114,656





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


DECEMBER
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 that arranges for patients with sexual dysfunction and
prostate problems in Australia, New Zealand and the United Kingdom to be
provided with medical services, pharmaceuticals and associated clinical support
services.




For our
fiscal year ended June 30, 2009, AMI’s revenues were approximately $53.4
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.




7




3.
            RECENT
      PRONOUNCEMENTS





In June
2009, the FASB issued SFAS No.167, Consolidation of Variable Interest
Entities , which changes the consolidation rules as they relate to
variable interest entities. Specifically, the new standard makes significant
changes to the model for determining who should consolidate a variable interest
entity, and also addresses how often this assessment should be performed. This
standard will be effective for us on July 1, 2010. We do not expect the adoption
will have a material impact on our consolidated financial
statements.





In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which
amends Accounting Standards Codification ( “ ASC ” ) Topic 820, Measuring Liabilities at Fair
Value , which provides additional guidance on the measurement of
liabilities at fair value. Specifically, when a quoted price in an active
market for the identical liability is not available, the new standard requires
that the fair value of a liability be measured using one or more of the
valuation techniques that should maximize the use of relevant observable inputs
and minimize the use of unobservable inputs. In addition, an entity is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of a
liability. This standard became effective for us on October 1,
2009.





In
October 2009, the FASB issued ASU 2009-13, which amends ASC Topic 605, Revenue Recognition, to
require companies to allocate revenue in multiple-element arrangements based on
an element’s estimated selling price if vendor-specific or other third-party
evidence of value is not available. ASU 2009-13 is effective beginning July 1,
2010. Earlier application is permitted. The Company is currently evaluating both
the timing and the impact of the pending adoption of the ASU on its consolidated
financial statements.





In
October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue
Arrangements”, now codified under FASB ASC Topic 605, “Revenue Recognition”,
(“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an
arrangement using estimated selling prices of the delivered goods and services
based on a selling price hierarchy. The amendments eliminate the residual method
of revenue allocation and require revenue to be allocated using the relative
selling price method. ASU 2009-13 should be applied on a prospective basis for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, with early adoption permitted.
Management is currently evaluating the potential impact of ASU2009-13 on our
financial statements.




In
October, 2009, the FASB issued ASU 2009-15, “Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance or Other Financing”,
now codified under FASB ASC Topic 470 “Debt”, (“ASU 2009-15”), and provides
guidance for accounting and reporting for own-share lending arrangements issued
in contemplation of a convertible debt issuance. At the date of issuance, a
share-lending arrangement entered into on an entity’s own shares should be
measured at fair value in accordance with Topic 820 and recognized as an
issuance cost, with an offset to additional paid-in capital. Loaned shares are
excluded from basic and diluted earnings per share unless default of the
share-lending arrangement occurs. The amendments also require several
disclosures including a description and the terms of the arrangement and the
reason for entering into the arrangement. The effective dates of the amendments
are dependent upon the date the share-lending arrangement was entered into and
include retrospective application for arrangements outstanding as of the
beginning of fiscal years beginning on or after December 15, 2009. Management is
currently evaluating the potential impact of ASU 2009-15 on our financial
statements.




In
December, 2009, under FASB ASC Topic 860, “Transfers and Servicing.” New
authoritative accounting guidance under ASC Topic 860, “Transfers and
Servicing,” amends prior accounting guidance to enhance reporting about
transfers of financial assets, including securitizations, and where companies
have continuing exposure to the risks related to transferred financial assets.
The new authoritative accounting guidance eliminates the concept of a
“qualifying special-purpose entity” and changes the requirements for
derecognizing financial assets. The new authoritative accounting guidance also
requires additional disclosures about all continuing involvements with
transferred financial assets including information about gains and losses
resulting from transfers during the period. The new authoritative accounting
guidance under ASC Topic 860 will be effective January 1, 2010 and is not
expected to have a significant impact on the Company’s financial
statements.




8




4.
            INTANGIBLE
      ASSETS





The
Company applies the criteria specified in SFAS No. 141 (ASC 805), “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 (ASC
350), intangible assets with definite lives are amortized over their estimated
useful life and reviewed for impairment in accordance with SFAS No. 144
(ASC 360), “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 and other intangible assets determined to have indefinite useful
lives are not amortized.  We test such trademarks and other intangible
assets with indefinite useful lives for impairment annually, or more frequently
if events or circumstances indicate that an asset might be
impaired.  Goodwill, trademarks, patents and other intangible assets
determined to have definite lives are amortized over their estimated useful
lives or the life of the trademark, patent and other intangible asset, whichever
is less.





Impairment
is determined by assessing the recoverable amount of the cash-generating unit
(group of cash-generating units), to which the intangible asset relates. When
the recoverable amount of the cash-generating unit (group of cash-generating
units) is less than the carrying amount, an impairment loss is
recognised.





9





At
December 31, 2009 and June 30, 2009, intangibles were as follows:




Intangibles
                              
                              
                              Gross Carrying
                                Amount
                              
                              
                              Accumulated
                                Amortization
                              
                              
                              Impairment
                                Loss
                              
                              
                              Net Carrying
                                Amount
                                December
      31,
                                2009
                              
                              
                              Net Carrying
                                Amount
                                June 30, 2009Amortized
      intangibles:Australian
      Patents
                              
                              
                              $
                              5,897,631
                              
                              
                              $
                              (1,300,369
                              )
                              
                              $
                              -
                              
                              
                              $
                              4,597,262
                              
                              
                              $
                              4,284,773Worldwide
      Patents
                              
                              
                              
                              4,465,496
                              
                              
                              
                              (801,847
                              )
                              
                              
                              (1,529,300
                              )
                              
                              
                              2,134,349
                              
                              
                              
                              2,011,523Intellectual
      Property
                              
                              
                              
                              18,068,593
                              
                              
                              
                              (3,143,153
                              )
                              
                              
                              (5,505,488
                              )
                              
                              
                              9,419,952
                              
                              
                              
                              8,865,082Computer
      Software
                              
                              
                              
                              552,826
                              
                              
                              
                              (389,180
                              )
                              
                              
                              -
                              
                              
                              
                              163,646
                              
                              
                              
                              158,883Unamortized
      intangibles:Intellectual
      Property
                              
                              
                              
                              3,336,715
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              3,336,715
                              
                              
                              
                              3,006,817$
                              32,321,261
                              
                              
                              $
                              (5,634,549
                              )
                              
                              $
                              (7,034,788
                              )
                              
                              $
                              19,651,924
                              
                              
                              $
                              18,327,078





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
Holdco.





The
exchange rate used at June 30, 2009 was A$1.00 = US$0.8048, and the rate
used at December 31, 2009 was A$1.00 = US$0.8931. The strengthening Australian
dollar against the U.S. dollar from June 30 to December 31, 2009 caused the net
book value of intangible assets to increase, notwithstanding the 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 Holdco, and indefinite life to the
intellectual property that arose from IMT.




Computer
software was assigned a 3-year life.




Amortization
expense from continuing operations for the three months ended December 31, 2009
and 2008 were $664,753 and $714,611, respectively. The Company expects the
amortization expenses for the next five fiscal years to be as
follows:




Fiscal
      Year Ending June 30,
                  
                  Annual Amount2011
                  
                  $
                  1,330,0002012
                  
                  $
                  1,330,0002013
                  
                  $
                  1,330,0002014
                  
                  $
                  1,330,0002015
                  
                  $
                  1,330,000




5.
            OTHER
      ASSETS




Following
is the summary of other current assets as of December 31, 2009 and June 30,
2009.





December
      31
                    
                    
                    June 30Bank guarantees
                    
                    $
                    224,235
                    
                    
                    $
                    206,863Advances
      and prepayments
                    
                    
                    8,988
                    
                    
                    
                    42,640Other
      receivables
                    
                    
                    10,137
                    
                    
                    
                    9,134Other
      debtors
                    
                    
                    904,617
                    
                    
                    
                    755,787Total
                    
                    $
                    1,147,977
                    
                    
                    $
                    1,014,424




10





6.
            PROPERTY,
      PLANT AND EQUIPMENT





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





December
      31
                                        
                                        
                                        June 30Leasehold
      improvements
                                        
                                        $
                                        649,009
                                        
                                        
                                        $
                                        590,908Less:
      Accumulated depreciation
                                        
                                        
                                        105,088
                                        
                                        
                                        
                                        62,258543,921
                                        
                                        
                                        
                                        528,650Motor
      Vehicles
                                        
                                        
                                        83,489
                                        
                                        
                                        
                                        75,235Less:
      Accumulated Depreciation
                                        
                                        
                                        47,045
                                        
                                        
                                        
                                        38,96636,444
                                        
                                        
                                        
                                        36,269Office
      Furniture & Equipment
                                        
                                        
                                        1,399,153
                                        
                                        
                                        
                                        1,217,911Less:
      Accumulated Depreciation
                                        
                                        
                                        400,160
                                        
                                        
                                        
                                        289,911998,993
                                        
                                        
                                        
                                        928,000Computer
      Hardware
                                        
                                        
                                        461,667
                                        
                                        
                                        
                                        413,800Less:
      Accumulated Depreciation
                                        
                                        
                                        371,246
                                        
                                        
                                        
                                        315,63590,421
                                        
                                        
                                        
                                        98,165Low
      Value Pooled Fixed Assets
                                        
                                        
                                        196,700
                                        
                                        
                                        
                                        173,057Less:
      Accumulated Depreciation
                                        
                                        
                                        156,581
                                        
                                        
                                        
                                        133,16240,119
                                        
                                        
                                        
                                        39,895Total
      Property, Plant and Equipment, net
                                        
                                        $
                                        1,709,898
                                        
                                        
                                        $
                                        1,630,979





Included
in property, plant and equipment are assets of approximately $543,555 and
$489,814, as of December 31, 2009 and June 30, 2009, 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 $146,255 and $102,469 as of December
31, 2009 and June 30, 2009, respectively.





7.
            INTEREST
      BEARING LIABILITIES





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





December
      31
                      
                      
                      June 30Current,
      as of the period endedCapitalized
      lease liability
                      
                      $
                      191,796
                      
                      
                      $
                      165,533Secured
      loan (1)
                      
                      
                      523,057
                      
                      
                      
                      918,375$
                      714,853
                      
                      
                      $
                      1,083,908Non-current,
      as of the period endedCapitalized
      lease liability
                      
                      $
                      137,888
                      
                      
                      $
                      212,720Secured
      loan (1)
                      
                      
                      493,081
                      
                      
                      
                      429,733Total
      non-current
                      
                      $
                      630,969
                      
                      
                      $
                      642,453




(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 six months ended December 31, 2009 was
5.26%. On each rollover date 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 December 31, 2009, the total outstanding under the
facility was A$1,640,994.





The
interest bearing liabilities require monthly payments of principal and interest
at a per annum interest rate ranging from 5.26% to 14.17%. Interest expense on
the interest bearing liabilities amounted to $326,519 and $130,080 for the six
month periods ended December 31, 2009 and 2008, respectively.





11




8.
              ACCOUNTS PAYABLE
      AND ACCRUED EXPENSES


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




December
      31
                  
                  
                  June 30Bank
      overdraft
                  
                  $
                  570,696
                  
                  
                  $
                  481,319Accounts
      payable
                  
                  
                  9,005,760
                  
                  
                  
                  8,642,972Accrued
      salaries
                  
                  
                  617,342
                  
                  
                  
                  480,436Accrued
      professional fees
                  
                  
                  42,422
                  
                  
                  
                  60,360Other
      current liabilities
                  
                  
                  1,342,674
                  
                  
                  
                  1,087,589Accrued
      DDR medication cost
                  
                  
                  1,479,867
                  
                  
                  
                  1,259,512Accrued
      DDR sales commission
                  
                  
                  1,570,070
                  
                  
                  
                  1,377,818Accrued
      DDR collection fee
                  
                  
                  1,570,070
                  
                  
                  
                  1,377,818Provision
      for patient refund
                  
                  
                  80,379
                  
                  
                  
                  120,720Accrued
      compensated absences
                  
                  
                  1,141,364
                  
                  
                  
                  963,892Total
                  
                  $
                  17,420,644
                  
                  
                  $
                  15,852,436





9.
            LEGAL
      PROCEEDINGS





As of
December 31, 2009, there was no litigation pending or threatened by or against
the Company or any of its direct or indirect subsidiaries other than AMI
Australia. AMI Australia currently is involved in the following litigation and
administrative matters:




On
October 25, 2006, Bade Medical Institute Pty Limited, Mr. David Wade, Mr. Buddy
Beani and others (collectively “Bade”) applied for Trade Mark No. 114322021 in
respect of the words “AMI Nasal Spray.” AMI Australia lodged an objection to the
registration of that application with IP Australia on June 21, 2007 and that
application was subsequently refused.  On December 13, 2007, AMI
Australia commenced proceedings in the Federal Court of Australia Sydney
Registry against Bade alleging Bade was infringing upon AMI Australia’s
trademarks and other intellectual property rights. On December 19, 2007, Bade
consented to orders that Bade transfer ownership of certain domain names and
telephone numbers to AMI Australia and consented to orders that Bade would not
use certain names which contained the word AMI.  Bade appears to have
ceased operation since the orders were obtained and has transferred the required
names to AMI Australia. AMI subsequently applied for final orders and damages
against Bade and final hearing of this matter concluded on September 2,
2009.  On December 4, 2009 the court found in favor of AMI Australia.
The court allowed AMI Australia’s application, held that Bade contravened
sections 52 an 53 of the Trade Practices Act and passing off, held that AMI
Australia was entitled to a remedy of $220,000 from Bade, awarded costs in favor
of AMI Australia and held that Mr and Mrs Wade were liable to pay interest to
AMI Australia on the amount awarded to AMI Australia. Mr & Mrs Wade appealed
this decision on January 27, 2010 and Dr Beani appealed this decision on January
29, 2010. The core claim in the appeal is that Mr Wade was medically unfit to
give evidence in the matter and this fundamentally affected their
defence.





On June
12, 2009, AMI Australia obtained an interlocutory injunction from the Supreme
Court of New South Wales preventing Fairfax Media Publications Limited
(“Fairfax”) from publishing information which AMI Australia alleges was
disclosed to Fairfax in breach of a duty of confidence owed to AMI
Australia.  Final hearing of this matter commenced on October 26, 2009
but was unable to be concluded by October 28, 2009, the final scheduled date for
the hearing of the matter. The court has ordered AMI Australia to lodge
written submissions by March 10, 2009, with final oral submissions to be heard
on March 19, 2009. AMI Australia’s interlocutory injunction has been extended
until that date.




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:




December
      31Due
      during the period ended,2011
                      
                      
                      536,3612012
                      
                      
                      454,0782013
                      
                      
                      360,6212014
                      
                      
                      310,5442015
                      
                      
                      302,3572016
                      
                      
                      302,357$
                      2,266,318




12





Rent paid
for the six month periods ended December 31, 2009 and 2008 were $698,405 and
$582,435, respectively.





11.
            DISCONTINUED
      OPERATION





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 unsatisfactory operating results.





Loss from
the discontinued operation of AMI Japan during the period ended December 31,
2009 was $24,615.





The
capital contributed to AMI Japan of $211,311 has been classified as assets
pending sale on the accompanying consolidated balance sheet as of December 31,
2009.





Following
is the summary of net assets held as of December 31 and June 30,
2009:




December
      31
                            
                            
                            June 30AssetsCash
      and cash equivalents
                            
                            $
                            742
                            
                            
                            $
                            1,704Other
      current assets
                            
                            
                            90,644
                            
                            
                            
                            84,005Property,
      Plant & Equipment, net
                            
                            
                            123,439
                            
                            
                            
                            126,552Intangible
      assets
                            
                            
                            994
                            
                            
                            
                            3,837Total
      Assets
                            
                            
                            215,819
                            
                            
                            
                            216,098LiabilitiesAccounts
      payable and accrued expense
                            
                            
                            4,508
                            
                            
                            
                            4,078Total
      Liabilities
                            
                            
                            4,508
                            
                            
                            
                            4,078Net
      Assets Held for disposal
                            
                            $
                            211,311
                            
                            
                            $
                            212,020




The
components of loss from operations related to the entity held for disposal for
the periods ended December 31, 2009 and 2008 are shown below.





December
      31,
                          2009
                        
                        
                        December
      31,
                          2008Net
      sales
                        
                        $
                        65,278
                        
                        
                        $
                        38,034Operating
      expensesSelling,
      general and administrative
                        
                        
                        89,893
                        
                        
                        
                        173,409Total
      operating expenses
                        
                        
                        89,893
                        
                        
                        
                        173,409Loss
      from operations
                        
                        
                        (24,615
                        )
                        
                        
                        (135,375
                        )Non-operating
      income (expenses)Other
      income
                        
                        
                        -
                        
                        
                        
                        17,516Interest
      income
                        
                        
                        -
                        
                        
                        
                        35Net
      Loss before income tax
                        
                        
                        (24,615
                        )
                        
                        
                        (117,824
                        )Provision
      for income tax
                        
                        
                        -
                        
                        
                        
                        -Net
      loss from entity held for disposal
                        
                        $
                        (24,615
                        )
                        
                        $
                        (117,824
                        )


13




AMI
China





AMI China
was a fully owned subsidiary of the Company.





During
the second half of the last financial year, the operation of AMI China was wound
down and discontinued due to unsatisfactory operating results.





Loss from
the discontinued operation of AMI China during the period ended December 31,
2009 was US$10,762.





The
capital contributed to AMI Japan of US$80,712 has been classified as assets
pending sale on the accompanying consolidated balance sheet as of December 31,
2009.





Following
is the summary of net assets held as of December 31 and June 30,
2009:





December
      31
                          
                          
                          June 30AssetsCash
      and cash equivalents
                          
                          $
                          13,511
                          
                          
                          $
                          13,121Other
      current assets
                          
                          
                          45,365
                          
                          
                          
                          39,532Property,
      Plant & Equipment, net
                          
                          
                          21,858
                          
                          
                          
                          21,226Total
      Assets
                          
                          
                          80,734
                          
                          
                          
                          73,879LiabilitiesAccounts
      payable and accrued expense
                          
                          
                          24
                          
                          
                          
                          22Total
      Liabilities
                          
                          
                          24
                          
                          
                          
                          22Net Assets Held for
      disposal
                          
                          $
                          80,710
                          
                          
                          $
                          73,857







The
components of loss from operations related to the entity held for disposal for
the periods ended December 31, 2009 and 2008 are shown below.





2009
                      
                      
                      2008Net
      sales
                      
                      $
                      -
                      
                      
                      $
                      5,148Operating
      expensesSelling,
      general and administrative
                      
                      
                      10,762
                      
                      
                      
                      (120,606
                      )Total
      operating expenses
                      
                      
                      10,762
                      
                      
                      
                      (120,606
                      )Net
      loss before income tax
                      
                      
                      (10,762
                      )
                      
                      
                      (115,458
                      )Provision
      for Income tax
                      
                      
                      -
                      
                      
                      
                      -Net
      loss from entity held for disposal
                      
                      $
                      (10,762
                      )
                      
                      $
                      (115,458
                      )




14





12.
            RELATED
      PARTY TRANSACTIONS





December
      31,
                        2009
                      
                      
                      June
      30,
                        2009Related
      party transactions comprised of the following:Prostate
      Health Clinic Pty. Ltd. (an AU co.)Relationship:
      Under common management control by Jack VaismanReceivable
      from this related party
                      
                      
                      1,908
                      
                      
                      
                      1,719Loan
      to affiliate in Indonesia
                      
                      
                      346,791
                      
                      
                      
                      426,806Receivable
      due from related parties - current
                      
                      $
                      348,699
                      
                      
                      $
                      428,525Peter
      RileyRelationship:
      Director of AMI UKPayable
      to this related party
                      
                      
                      70,872
                      
                      
                      
                      73,513Jacov
      VaismanRelationship:
      Director of AMI Inc.Payable
      to this related party
                      
                      
                      -
                      
                      
                      
                      173,032Tony
      KhanRelationship:
      Executive Vice President of AMI Inc.Payable
      to this related party
                      
                      
                      35,724
                      
                      
                      
                      32,192Payable
      due to related parties - current
                      
                      $
                      106,596
                      
                      
                      $
                      278,737Secare
      Health Centre Pty LimitedRelationship:
      Under common management control by Jack VaismanPayable
      to this related party – non current
                      
                      $
                      5,360,693
                      
                      
                      $
                      3,803,131





Total
receivables due from related parties included in the Company’s balance sheets
were $348,699 and $428,525, as of December 31, 2009 and June 30, 2009,
respectively.




Total
payables due to related parties included in the Company’s balance sheets were
$5,467,289 as of December 31, 2009 and $4,081,868 as of June 30,
2009.





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





15





Payables
to related parties are as follows:





The
Company borrowed A$1.0 million from Secare Health Centre Pty Limited (“Secare”)
in November 2008.  Secare is controlled by the Company’s chief
executive officer and founder, Jack Vaisman. The Company subsequently borrowed a
further A$4,631,489 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 bears interest at a rate of 10% per annum.  No repayment of
this loan has been made as at December 31, 2009.  The loan is due for
repayment in December 2011.





13.
            INCOME
      TAXES





Total
income tax expense for the six months ended December 31, 2009 and 2008 amounted
to $459,035 and $536,287, respectively. For the six month period ended December
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  as well as the impact of
timing and past operating profits (losses) on these matters.





December
      31, 2009
                        
                        U.S.
                        
                        
                        State
                        
                        
                        International
                        
                        
                        TotalCurrent
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        255,932
                        
                        
                        $
                        255,932Deferred
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        203,103
                        
                        
                        $
                        203,103Total
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        459,035
                        
                        
                        $
                        459,035





December
      31, 2008
                        
                        U.S.
                        
                        
                        State
                        
                        
                        International
                        
                        
                        TotalCurrent
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        423,816
                        
                        
                        $
                        423,816Deferred
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        112,471
                        
                        
                        $
                        112,471Total
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        536,287
                        
                        
                        $
                        536,287





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





December 31,2009
                            
                            
                            2008Federal
      statutory tax rate
                            
                            
                            34
                            %
                            
                            
                            34
                            %Decrease
      in rate resulting from:Non-US
      income taxed at different rates
                            
                            
                            (1
                            )%
                            
                            
                            (1
                            )%33
                            %
                            
                            
                            33
                            %Temporary
      Difference
                            
                            
                            21
                            %
                            
                            
                            5
                            %Effective
      Tax Rate
                            
                            
                            54
                            %
                            
                            
                            38
                            %




Deferred
tax liability arises due to the following temporary differences:





December
      31,
                                      2009
                                    
                                    
                                    Future tax
                                      rate %
                                    
                                    
                                    Deferred tax
                                      liability
                                    
                                    
                                    June 30,2009
                                    
                                    
                                    Future tax
                                      rate %
                                    
                                    
                                    Deferred tax
                                      liabilityOwing by
      patients via ACFC
                                    
                                    $
                                    (35,268,470
                                    )
                                    
                                    
                                    30
                                    %
                                    
                                    $
                                    (10,580,541
                                    )
                                    
                                    $
                                    (28,861,821
                                    )
                                    
                                    
                                    30
                                    %
                                    
                                    $
                                    (8,658,546
                                    )Provision
      DDR cancellation
                                    
                                    
                                    19,708,930
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    5,912,679
                                    
                                    
                                    
                                    16,788,933
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    5,036,680Provision
      un-dispensed DDR medications
                                    
                                    
                                    1,479,867
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    443,960
                                    
                                    
                                    
                                    1,259,512
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    377,854Accrued
      ACFC collection and commission
                                    
                                    
                                    3,140,140
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    942,042
                                    
                                    
                                    
                                    2,755,635
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    826,691Provision
      for patient refund
                                    
                                    
                                    80,380
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    24,114
                                    
                                    
                                    
                                    120,720
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    36,216Unutilized
      tax losses
                                    
                                    
                                    7,038,387
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    2,111,516
                                    
                                    
                                    
                                    5,663,851
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    1,699,155Amortization
      of patents
                                    
                                    
                                    (2,631,617
                                    )
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    (789,485
                                    )
                                    
                                    
                                    (2,083,987
                                    )
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    (625,196
                                    )Impairment
      loss
                                    
                                    
                                    6,303,340
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    1,891,002
                                    
                                    
                                    
                                    5,680,134
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    1,704,040Other
      miscellaneous
                                    
                                    
                                    1,087,927
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    326,378
                                    
                                    
                                    
                                    937,806
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    
                                    281,354Total
                                    
                                    $
                                    938,884
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    $
                                    281,665
                                    
                                    
                                    $
                                    2,260,783
                                    
                                    
                                    
                                    30
                                    %
                                    
                                    $
                                    678,248





16





14.
            OTHER
      COMPREHENSIVE INCOME (LOSS)





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





Accumulated
                        Other
                        Comprehensive
                        IncomeBalance
      at June 30, 2008
                      
                      $
                      6,972,500Change
      for year ended June 30, 2009
                      
                      
                      (6,018,555
                      )Balance
      at June 30, 2009
                      
                      
                      953,945Change
      for six months ended December 31, 2009
                      
                      
                      1,454,976Balance
      at December 31, 2009
                      
                      $
                      2,408,921





The
change for the six months ended December 31, 2009 is primarily attributable to
the appreciation in the Australian dollar against the US dollar from the closing
rate of A$:US$ 1:0.80480 as at June 30, 2009 to A$:US$ 1:0.89310 as at
December 31, 2009.




17


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





The
following discussion should be read in conjunction with the Company's financial
statements and the notes to those financial statements appearing elsewhere in
this quarterly report on Form 10-Q as well as  the Company’s annual
report on Form 10-K for the year ended June 30, 2009.





Preliminary
Note Regarding Forward-Looking Statements




The
statements contained in this quarterly report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. These include statements about
the our expectations, beliefs, intentions or strategies for the future and may
be indicated by words or phrases such as “anticipate,” “expect,” “intend,”
“plan,” “will,” “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 that could cause our
actual results in future periods to differ materially from those projected or
contemplated in the forward-looking statements.  All forward-looking
statements included in this document are based on information available to us on
the date of this quarterly report and we assume no obligation to update any
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 that arranges for patients with sexual dysfunction and
prostate problems in Australia, New Zealand and the United Kingdom to be
provided with medical services, pharmaceuticals and associated clinical support
services.  Principal treatments are for premature ejaculation ("PE")
and erectile dysfunction ("ED").




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




Our
discussion and analysis of financial condition and results of operations 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.





The
following critical accounting policies have been used in the preparation of our
consolidated financial statements:





Revenue
Recognition.    Sales are recorded as unearned revenue
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 unearned revenue 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.





18




Long-lived
Assets.   Effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 144 (ASC 360), “Accounting for
the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and
reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
for a Disposal of a Segment of a Business.” The Company periodically evaluates
the carrying value of long-lived assets to be held and used in accordance with
SFAS 144 (ASC 360). SFAS 144 (ASC 360) requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
market value of the long-lived assets. Loss on long-lived assets to be disposed
of is determined in a similar manner, except that fair market values are reduced
for the cost of disposal.




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




Results of
operations:




Three
      Months ended
                    December
      31,
                  
                  
                  Six
      Months ended
                    December
      31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Revenue
                  
                  
                  100
                  %
                  
                  
                  100
                  %
                  
                  
                  100
                  %
                  
                  
                  100
                  %Cost
      of revenue
                  
                  
                  37.6
                  %
                  
                  
                  21.1
                  %
                  
                  
                  27.2
                  %
                  
                  
                  21.9
                  %Gross
      profit
                  
                  
                  62.4
                  %
                  
                  
                  78.9
                  %
                  
                  
                  72.8
                  %
                  
                  
                  78.1
                  %Selling,
      general and administrative expenses
                  
                  
                  126.1
                  %
                  
                  
                  74.2
                  %
                  
                  
                  85.3
                  %
                  
                  
                  73.9
                  %Other
      income and expenses
                  
                  
                  (2.7
                  )%
                  
                  
                  0.5
                  %
                  
                  
                  (1.5
                  )%
                  
                  
                  0.2
                  %Discontinued
      operation
                  
                  
                  (0.2
                  )%
                  
                  
                  (1.0
                  )%
                  
                  
                  (0.2
                  )%
                  
                  
                  (0.8
                  )%Income
      before income tax
                  
                  
                  (66.6
                  )%
                  
                  
                  4.2
                  %
                  
                  
                  (14.2
                  )%
                  
                  
                  3.6
                  %Income
      tax expenses
                  
                  
                  0.1
                  %
                  
                  
                  1.3
                  %
                  
                  
                  2.2
                  %
                  
                  
                  1.9
                  %Net
      income
                  
                  
                  (66.7
                  )%
                  
                  
                  2.9
                  %
                  
                  
                  (16.4
                  )%
                  
                  
                  1.7
                  %




19




LIQUIDITY
AND CAPITAL RESOURCES




We manage
our cash so we are able to meet the obligations of our business, while
maintaining financial liquidity and flexibility. We forecast, analyze and monitor our
cash flows to enable prudent investment management and financing within the
confines of our financial strategy.





Our
primary sources of liquidity are cash and cash flows from operations. Our
aggregate cash balances as at December 31, 2009 were $218,420 and our net
receivables were approximately $22.7 million. Our receivables are due on average
within 90-180 days. Our accounts payable have increased from $15.8 million at
June 30, 2009 to $17.4 million at December 31, 2009.





Net cash
used in operating activities was $(4,256) in the six months ended December 31,
2009, compared to $(735,394) in the six months ended December 31, 2008,
representing a decrease of $721,138 or  98%.  The decrease in net
cash used in operating activities was commensurate with the decrease in fewer
patients purchasing our programs as a result of difficult economic conditions
and a reduction in the advertising and promotion of our programs in Australia
during the six months ended December 31, 2009.





Net cash
used in investing activities was $(937,655) for the six months ended December
31, 2009, compared to $(1,334,604) for the six months ended December 31, 2008.
This increase results primarily from a reduction on funding invested into our UK
operation.





Net cash
provided by financing activities was $358,457 for the six months ended December
31, 2009, compared to $1,294,671 for the six months ended December 31, 2008.
This decrease is attributable to the reduction in new loans obtained during the
six months ended December 31, 2009.  We obtained a term facility of
A$1.9 during the six months ended December 31, 2008.





We
forecast that we will be able to generate sufficient funds from our business in
order to fund our operations in the ordinary course during the next 12 months.
However, there is some uncertainty associated with this
forecast.  This forecast is based on the positive cash flow from
operating activities over the past six months. If our actual results over the
next six months are materially worse than the forecast, then it is possible that
we would need to raise funds through borrowings or capital raisings. In such
event, there could be no assurance as to whether we could obtain any such
financing or, if successful, what the terms might be.




In the
event that we were to expand our business, we would need to raise debt or equity
in order to finance any expansion.  However, there can be no assurance
that we could obtain sufficient funds from operations or from additional
financing. Our access to
additional financing will depend on a variety of factors such as market
conditions, the general availability of credit, the overall availability of
credit to our industry, our credit capacity, as well as the possibility that
lenders could develop a negative perception of our long- or short-term financial
prospects. If a combination of these factors were to occur, our internal sources
of liquidity may prove to be insufficient, and in such case, we may not be able
to successfully obtain additional financing on favorable terms.This could restrict our
ability to: (1) acquire new businesses or enter new markets,
(2) service our existing debt, (3) make necessary capital investments,
and (4) make other expenditures necessary for the ongoing conduct of our
business.





We
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.





We
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 5.26%. 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 December 31,
2009, the total outstanding under the facility was A$1,640,994.




We
borrowed A$1 million from Secare Health Centre Pty Limited (“Secare”) in
December 2008.  Secare is controlled by our chief executive officer
and founder, Jack Vaisman and the Company has subsequently borrowed a further
A$4,631,489 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
bears interest at 10% per annum.   The loan is due for repayment in
December 2011.




The loans
referred to above were provided to repay the ANZ facility, to fund expansion
into the United Kingdom and to meet operational expenses.





20





RESULTS
OF OPERATIONS





SIX
MONTHS ENDED DECEMBER 31, 2009 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2008





Revenue.
Revenue was $20,870,739 in the six months ended December 31, 2009, compared to
$29,155,445 in the six months ended December 31, 2008, representing a decrease
of $8,284,706, or  28%.  This decrease in revenue was
primarily due to  an increase in the  provision for doubtful
accounts from $3,170,063 to $7,445,091 for the six months ended December 31,
2009 that mostly related to  our UK operations.


Our
unearned revenue as at December 31, 2009 was $7,146,073 compared to $8,003,468
as at June 30, 2009. The gross decrease in unearned revenue from the six months
ended December 31, 2008 to the six months ended December 31, 2009 was $857,395,
or a decrease of 10.7%. The decrease in unearned revenue at December 31, 2009 is
primarily attributed to fewer patients seeking new treatments  during
the quarter ended December 31, 2009.




Revenue
in our PE treatments has decreased by $4,209,424 or 26.8% to $11,513,709, and
revenue in our ED treatments decreased by $3,351,738 or 26.8% to $9,165,652, in
the six months ended December 31, 2009, compared to the six months ended
December 31, 2008. We attribute the decrease in revenue in our PE and ED
treatments to the decrease in the number of patients and the significant
provision for doubtful debt on our UK operation. Revenue in our prostate
treatments has decreased by $545,345 or 71.2%, to $220,345, in the six months
ended December 31, 2009, compared to the six months ended December 31, 2008. We
attribute the decrease in revenue in our prostate treatments to decreases in the
number of patients.




Revenue
in our Australian operations was $20,372,971 in the six months ended December
31, 2009, compared to $25,142,030 in the six months ended December 31, 2008.
Compared to the same period in the previous year, there is a decrease of
$4,769,059, or 18.9%, in the six months ended December 31, 2009. The decrease in
the six-month period ended December 31, 2009 is primarily attributable to the
decrease in the number of patients purchasing our programs which is due to
difficult economic condition and a reduction in the advertising and promotion of
our programs in Australia during the relevant period.




Cost of
Revenue. Cost of revenue was $5,684,117 in the six months ended December
31, 2009, compared to $6,381,137 in the six months ended December 31, 2008. The
decrease in cost of revenue was attributable to a decrease in the medication
cost incurred by AMI Australia. As a percentage of revenue, cost of revenue was
27.2% in the six months ended December 31, 2009, compared to 21.9% in the six
months ended December 31, 2008.  We attribute this increase primarily
to the decrease in revenue during the relevant period being more than the
decrease in related staff costs such as salaries of doctors, sales consultants
and customer services.




Gross Profit. Gross profit was
$15,186,622 in the six months ended December 31, 2009, compared to $22,774,308
in the 2008 comparable period. As a percentage of revenue, gross profit
decreased to 72.8% in the quarter ended December 31, 2009 from 78.1% in the 2008
quarter. We attribute this decrease primarily to the increase in the percentage
of cost of revenue to revenue during the relevant period.





Selling, General
and Administrative Expenses. Selling, general and administrative expenses
were $17,800,390 in the six months ended December 31, 2009, compared to
$21,554,028 in the six months ended December 31, 2008, representing a decrease
of $3.7 million or 17%. This decrease was primarily due to less advertising. As
a percentage of revenue, selling, general and administrative expenses increased
to 85.3% in the six months ended December 31, 2009 from 73.9% in the six months
ended December 31, 2008. We attribute this increase primarily to the decrease in
revenue during the six months ended December 31, 2009being more than the
decrease in selling, general and administrative expenses.




Other Income and
(Expenses). Other income and expenses was net expenses of $322,495 in the
six months ended December 31, 2009, compared to other net income of $50,867 in
the six months ended December 31, 2008. As a percentage of revenue, other income
and expenses was (1.5%) in the six months ended December 31, 2009 and 0.2% in
the six months ended December 31, 2008.  The 1.7% decrease in the
other income and expenses in six months ended December 31, 2009 is primarily
attributable to the increase in interest expenses that resulted from additional
borrowings and higher interest rates on our Australian dollar borrowings.




21




Net Income Before
Income Tax and Income Tax Expenses. Net income before income tax was
($2,971,640) in the six months ended December 31, 2009, compared to $1,037,866
in the six months ended December 31, 2008. The decrease is primarily
attributable losses generated in our UK operations in the six months ended
December 31, 2009.




Income
tax expenses were $459,035 in the six months ended December 31, 2009 compared to
$536,287 in the six months ended December 31, 2008. As a percentage of revenue,
income tax expense increased to 2.9% in the six months ended December 31, 2009
from 1.9% in the six months ended December 31, 2008. The increase is primarily
attributable to the decrease in revenue in the six months ended December 31,
2009.




Net
Income. Net income was ($3,430,675) in the six months ended December 31,
2009, compared to $501,579 in the six months ended December 31, 2008. The
decrease in net income is primarily attributable to losses generated in our UK
operations for the six months ended December 31, 2009.




Net
income in our Australian operations was $1,050,550 in the six months ended
December 31, 2009, compared to $1,237,646 in the six months ended December 31,
2008. The decrease is primarily attributable to the decrease in revenue in AMI
Australia in the six months ended December 31, 2009.





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





Revenue.
Revenue was $6,363,028 in the three months ended December 31, 2009, compared to
$13,210,997 in the three months ended December 31, 2008, a decrease of
$6,847,969, or  52%.   We attribute this decrease primarily
to the decrease in the number of patients purchasing our programs which is due
to difficult economic conditions and a reduction in the advertising and
promotion of our programs in Australia during the relevant period and the
significant provision for doubtful debt on our UK operation.




Our
unearned revenue as at December 31, 2009 was $7,146,073 compared to $8,003,468
as at June 30, 2009. The gross decrease in unearned revenue from the three
months ended December 31, 2008 to the three months ended December 31, 2009 was
$857,395, or a decrease of 10.7%. The decrease in unearned revenue in the
three-month period is primarily attributed to fewer new patients during
the quarter ended December 31, 2009.




Revenue
in our PE treatments has decreased by $4,700,957 or 77.8% to $1,343,510, and
revenue in our ED treatments decreased by $1,963,126 or 28.7% to $4,888,236, in
the three months ended December 31, 2009, compared to the three months ended
December 31, 2008. We attribute the decrease in revenue in our PE and ED
treatments to the decrease in the number of patients and the significant
provision for doubtful debt on our UK operation. Revenue in our prostate
treatments has decreased by $409,302 or 77.8%, to $116,885, in the three months
ended December 31, 2009, compared to the three months ended December 31, 2008.
We attribute the decrease in revenue in our prostate treatments to decreases in
the number of patients.




Revenue
in our Australian operations was $8,697,719 in the three months ended December
31, 2009, compared to $9,734,524 in the three months ended December 31, 2008.
Compared to the same period in the previous year, there is a decrease of
$1,036,805, or 10.6%, in the three months ended December 31, 2009. The decrease
in the three-month period ended December 31, 2009 is primarily attributable to
the decrease in the number of patients purchasing our programs which is due to
difficult economic condition and a reduction in the advertising and promotion of
our programs in Australia during the relevant period.




Cost of
Revenue. Cost of revenue was $2,392,886 in the three months ended
December 31, 2009, compared to $2,789,937 in the three months ended December 31,
2008. The decrease in cost of revenue was attributable to a decrease in the
medication cost incurred by AMI Australia. As a percentage of revenue, cost of
revenue was 37.6% in the three months ended December 31, 2009, compared to 21.1%
in the three months ended December 31, 2008.  We attribute this
increase primarily to the decrease in revenue during the relevant period being
more than the decrease in related staff costs such as salaries of doctors, sales
consultants and customer services.




Gross
Profit. Gross profit was $3,970,142 in the three months ended December
31, 2009, compared to $10,421,060 in the 2008 comparable period. As a percentage
of revenue, gross profit decreased to 62.4% in the quarter ended December 31,
2009 from 78.9% in the 2008 quarter. We attribute this decrease primarily to the
increase in the percentage of cost of revenue to revenue during the relevant
period.





Selling, General
and Administrative Expenses. Selling, general and administrative expenses
were $8,025,415 in the three months ended December 31, 2009, compared to
$9,800,763 in the three months ended December 31, 2008. As a percentage of
revenue, selling, general and administrative expenses increased to 126.1% in the
three months ended December 31, 2009 from 74.2% in the three months ended
December 31, 2008. The increase in the three months ended December 31, 2009 is
primarily attributable to the decrease in revenue during the relevant
period.




Other Income and
(Expenses). Other income and expenses was a net expense of ($170,209 in
the three months ended December 31, 2009, compared to other net income of
$67,356 in the three months ended December 31, 2008. As a percentage of revenue,
other income and expenses was (2.7%) in the three months ended December 31, 2009
and 0.5% in the three months ended December 31, 2008.  The 3.2%
decrease in the other income and expenses in 2009 is primarily attributable to
the increase in interest expenses that resulted from additional borrowings and
higher interest rates on our Australian dollar borrowings.


22


Net Income Before
Income Tax and Income Tax Expenses. Net income before income tax was
($4,237,525) in the three months ended December 31, 2009, compared to $549,373
in the three months ended December 31, 2008. The decrease is primarily
attributable to losses generated in our UK operations in the three months ended
December 31, 2009.




Income
tax expenses were $9,702 in the three months ended December 31, 2009 compared to
$162,440 in the three months ended December 31, 2008. As a percentage of
revenue, income tax expense decreased to 0.1% in the three months ended December
31, 2009 from 1.3% in the three months ended December 31, 2008. The decrease is
primarily attributable the decrease in revenue in the three months ended
December 31, 2009.




Net Income
.. Net income was ($4,247,227) in the three months ended December 31, 2009,
compared to $386,933 in the three months ended December 31, 2008. The decrease
is primarily attributable to losses generated in our UK operations in the three
months ended December 31, 2009.




Net
income in our Australian operations was $20,079 in the three months ended
December 31, 2009, compared to $361,461 in the three months ended December 31,
2008. The decrease is primarily attributable the decrease in revenue in the
three months ended December 31, 2009.




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”, we are not required to provide this
information.





23




ITEM
4T.   CONTROLS AND PROCEDURES





(a)  Evaluation
of Disclosure Controls and Procedures




Our
management, with the participation of our principal executive officer and
principal financial officer has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d) –
15(e) under the  Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as of the end of the period covered by this report. Based
on such evaluation, our principal executive officer and principal financial
officer have concluded that, as of the end of such period, our disclosure
controls and procedures are effective in recording processing, summarizing and
reporting, on a timely basis, information required to be disclosed by us in
reports we file or submit under the Exchange Act and are effective in ensuring
that information required to be disclosed by us in reports that we file or
submit under the Exchange Act is accumulated and communicated to management,
including our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding disclosure.




(b)  Changes
in internal controls over financial reporting.




During
the second quarter of 2009, in connection with our evaluation of internal
control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, we concluded that there were no changes in our
internal control procedures that materially affected, or are reasonably likely
to materially affect, our internal control our financial reporting.





PART II -
OTHER INFORMATION





Item 1.   Legal Proceedings.




Please
see Note 8 to our financial statements above.




Item 1A.   Risk Factors




As a
“smaller reporting company”, we are not required to provide this
information.





Item 2.   Unregistered Sales of Equity
Securities and Use of Proceeds.




Not
applicable for this quarterly report.





Item 3.   Defaults upon Senior
Securities.




Not
applicable for this quarterly report.





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




Not
applicable for this quarterly report.





Item 5.   Other Information.




Not
applicable for this quarterly report.





Item 6.   Exhibits.





The
following exhibits are filed as part of this report:





Exhibit Number
                
                Description31.1
                
                Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                
                Certification
      of the Chief Financial Officer pursuant to  Section 302 of the
      Sarbanes-Oxley Act of 2002.32
                
                Certification
      of Chief Executive Officer and the Chief Financial Officer pursuant
      to  Section 906 of the Sarbanes-Oxley Act of
    2002.




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SIGNATURES





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






ADVANCED
      MEDICAL INSTITUTE INC.Date:
      March 3, 2010
                By:
                /s/ 
      Jacov (Jack) VaismanJacov
      (Jack) VaismanChief
      Executive Officer




By:
                    /s/ 
      Dilip ShresthaDilip
      ShrestnaChief
      Financial Officer
  25





Exhibit
Index





Exhibit Number
                
                Description31.1
                
                Certification
      of Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act
      of 2002.31.2
                
                Certification
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                
                Certification
      of Chief Executive Officer and the Chief Financial Officer pursuant
      Section 906 of the Sarbanes-Oxley Act of
2002.





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