**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON** **,
      D.C. 20549**




___________




**FORM
      10-Q**







x
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**
              **For
                the quarterly period ended December 31,
                2007**





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
                1, 204-218 Botany Road
              Alexandria,
                NSW
              Australia
                2015(Address
                of Principal Executive Offices) (Zip Code)




(61)
                2 9640 5253(Registrant’s
                Telephone Number, Including Area
                Code)




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




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.


Yes x No
o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
                  accelerated Filer o
              Accelerated
                  Filer o
              Non-Accelerated
                  Filer x




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




There
      were 53,507,450 shares of the Registrant’s Common Stock issued and outstanding
      on February 8, 2007.







**TABLE
        OF CONTENTS**
 
 **Page****Part
                  I.**
              **Financial
                  Information**
              3Item
                  1. Condensed Financial Statements (Unaudited)
              3Consolidated
                  Balance Sheets as at December 31, 2007 and June 30, 2007
              3Consolidated
                  Statements of Operations for the three month and six month periods
                  ended
                  December 31, 2007 and 2006
              4Consolidated
                  Statements of Cash Flows for the six month periods ended December
                  31, 2007
                  and 2006
              5Notes
                  to Consolidated Financial Statements
              7Item
                  2. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operations
              22Item
                  3. Quantitative and Qualitative Disclosures About Market Risk
              38Item
                  4. Controls and Procedures
              39**Part
                  II.**
              **Other
                  Information**
              40Item
                  1. Legal Proceedings
              40Item
                  1A. Risk Factors
              41Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              41Item
                  3. Defaults Upon Senior Securities
              41Item
                  4. Submission of Matters to a Vote of Security Holders
              41Item
                  5. Other Information
              41Item
                  6. Exhibits
              42SIGNATURES
              43
 
  2
  **PART
        I -** **FINANCIAL
        INFORMATION**
  **ITEM
        1.**  **FINANCIAL
        STATEMENTS** ****
 
 **ADVANCED
        MEDICAL INSTITUTE INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET** **S**
 
 **December
                  31, 2007 (Unaudited)**
              
              **June
                  30, 2007**
                **(Audited)****ASSETS****CURRENT
                  ASSETS**Cash
                  & cash equivalent
              
              $
              1,901,152
              
              $
              864,481Receivables,
                  net
              
              
              14,266,474
              
              
              12,158,950Receivables
                  due from related parties
              
              
              1,501
              
              
              1,453Inventory
              
              
              216,760
              
              
              269,707Other
                  assets
              
              
              972,097
              
              
              1,174,445**TOTAL
                  CURRENT ASSETS**
              
              
              17,357,984
              
              
              14,469,036**NON-CURRENT
                  ASSETS**Security
                  deposits
              
              
              199,846
              
              
              191,702Property
                  and equipment, net
              
              
              1,103,969
              
              
              1,045,917Intangible
                  assets, net
              
              
              28,388,890
              
              
              28,217,069**TOTAL
                  NON-CURRENT ASSETS**
              
              
              29,692,705
              
              
              29,454,688**TOTAL
                  ASSETS**
              
              $
              47,050,689
              
              $
              43,923,724**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY****CURRENT
                  LIABILITIES**Unearned
                  revenue
              
              $
              5,340,856
              
              $
              5,101,288Accounts
                  payable & accrued expenses
              
              
              6,434,730
              
              
              5,808,271Payables
                  due to related parties
              
              
              1,925
              
              
              4,932Interest
                  bearing liabilities - current
              
              
              336,837
              
              
              72,044Income
                  taxes payable
              
              
              766,013
              
              
              326,006**TOTAL
                  CURRENT LIABILITIES**
              
              
              12,880,361
              
              
              11,312,541**NON-CURRENT
                  LIABILITIES**Securities
                  deposit received
              
              
              2,845
              
              
              6,833Interest
                  bearing liabilities - non-current
              
              
              2,087,695
              
              
              2,424,362Deferred
                  tax liabilities
              
              
              1,746,476
              
              
              1,501,602**TOTAL
                  NON-CURRENT LIABILITIES**
              
              
              3,837,016
              
              
              3,932,797**TOTAL
                  LIABILITIES**
              
              
              16,717,377
              
              
              15,245,338**Commitments
                  & Contingency****Minority
                  Interests**
              
              
              5,289
              
              
              -**STOCKHOLDERS’
                  EQUITY**Common
                  stock, par value $0.001 per share,90,000,000
                  shares authorized,53,507,450
                  issued and outstanding
              
              
              53,507
              
              
              53,507Additional
                  paid in capital
              
              
              24,149,420
              
              
              24,149,420Other
                  comprehensive income
              
              
              4,135,949
              
              
              3,171,506Retained
                  earnings
              
              
              1,989,147
              
              
              1,303,953**TOTAL
                  STOCKHOLDERS’ EQUITY**
              
              
              30,328,023
              
              
              28,678,386**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY**
              
              $
              47,050,689
              
              $
              43,923,724
  The
        accompanying notes are an integral part of these unaudited financial
        statements.
  
  **ITEM
        1.**  **FINANCIAL
        STATEMENTS (CONTINUED)**
 
 **ADVANCED
        MEDICAL INSTITUTE INC. AND SUBSIDIARIES**
 **CONSOLIDATED** **STATEMENTS
        OF OPERATIONS**
  **Three
                  Month Periods Ended**
              
              **Six
                  Month Periods Ended****December
                  31, 2007**
                **(Unaudited)**
              
              **December
                  31, 2006**
                **(Unaudited)**
              
              **December
                  31, 2007**
                **(Unaudited)**
              
              **December
                  31, 2006**
                **(Unaudited)****NET
                  REVENUE**
              
              $
              13,167,619
              
              $
              9,918,553
              
              $
              24,376,126
              
              $
              20,322,223**COST
                  OF REVENUE**
              
              
              (2,806,273
              )
              
              (2,267,636
              )
              
              (5,418,456
              )
              
              (4,633,218
              )**GROSS
                  PROFIT**
              
              
              10,361,346
              
              
              7,650,917
              
              
              18,957,670
              
              
              15,689,005**SELLING,
                  GENERAL AND ADMINISTRATIVE EXPENSES**
              
              
              (9,015,693
              )
              
              (7,198,713
              )
              
              (17,421,304
              )
              
              (14,314,698
              )**OPERATING
                  INCOME**
              
              
              1,345,653
              
              
              452,204
              
              
              1,536,366
              
              
              1,374,307**OTHER
                  INCOME AND (EXPENSE)**Rental
                  income
              
              
              -
              
              
              5,147
              
              
              -
              
              
              9,708Bank
                  interest
              
              
              17,160
              
              
              9,643
              
              
              26,819
              
              
              30,002Management
                  fee income
              
              
              7,333
              
              
              27,868
              
              
              21,717
              
              
              53,990Other
                  income
              
              
              10,759
              
              
              37,660
              
              
              21,770
              
              
              46,289Interest
                  expense
              
              
              (67,749
              )
              
              (62,050
              )
              
              (132,502
              )
              
              (64,355
              )Minority
                  interest
              
              
              (21,382
              )
              
              14,660
              
              
              (33,723
              )
              
              17,485**TOTAL
                  OTHER (EXPENSE) INCOME**
              
              
              (53,879
              )
              
              32,928
              
              
              (95,919
              )
              
              93,119**NET
                  INCOME BEFORE INCOME TAXES**
              
              
              1,291,774
              
              
              485,132
              
              
              1,440,447
              
              
              1,467,426INCOME
                  TAX EXPENSE
              
              
              (545,043
              )
              
              (389,112
              )
              
              (755,253
              )
              
              (829,715
              )NET
                  INCOME
              
              
              746,731
              
              
              96,020
              
              
              685,194
              
              
              637,711Other
                  Comprehensive item - Foreign currency translation (loss)
                  income
              
              
              (256,659
              )
              
              1,485,706
              
              
              969,732
              
              
              1,610,125**Net
                  Comprehensive Income**
              
              **$**
              **490,072**
              
              **$**
              **1,581,726**
              
              **$**
              **1,654,926**
              
              **$**
              **2,247,836****Earnings
                  per common share, basic**
              
              **$**
              **0.01**
              
              **$**
              **0.00**
              
              **$**
              **0.01**
              
              **$**
              **0.01****Weighted
                  average number of shares, basic**
              
              
              **53,507,450**
              
              
              **53,507,450**
              
              
              **53,507,450**
              
              
              **47,186,478**
  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**
 
 **Six
                  Month Periods Ended****December
                  31, 2007**
                **(Unaudited)**
              
              **December
                  31, 2006**
                **(Unaudited)****Cash
                  Flows from Operating Activities**Receipts
                  from Customers
              
              $
              21,177,683
              
              $
              15,270,604Interest
                  Received
              
              
              26,461
              
              
              30,000Payment
                  to Suppliers & Employees
              
              
              (19,545,984
              )
              
              (13,991,098
              )Interest
                  Paid
              
              
              (132,502
              )
              
              (64,353
              )Income
                  Tax Paid
              
              
              (85,676
              )
              
              (227,493
              )**Net
                  cash provided by operating activities**
              
              
              1,439,982
              
              
              1,017,660**Cash
                  Flows from Investing Activities**Acquisition
                  of subsidiaries
              
              
              -
              
              
              (2,258,100
              )Payment
                  for Property, Plant & Equipment
              
              
              (194,503
              )
              
              (134,755
              )Payment
                  for Intangible Assets
              
              
              (47,566
              )
              
              (41,900
              )Loans
                  to related entities
              
              
              -
              
              
              (1,340,773
              )Payment
                  for security deposit
              
              
              -
              
              
              (258
              )**Net
                  cash used in investing activities**
              
              
              (242,069
              )
              
              (3,775,786
              )**Cash
                  Flows From Financing Activities**Collection
                  of Note Receivable
              
              
              -
              
              
              150,771Proceeds
                  from Borrowings
              
              
              -
              
              
              2,258,100Repayment
                  of Borrowings
              
              
              (175,802
              )
              
              (72,303
              )Dividend
                  Payment
              
              
              -
              
              
              (38,183
              )**Net
                  cash (used in) provided by financing activities**
              
              
              (175,802
              )
              
              2,298,385Net
                  increase(decrease) in cash and cash equivalents
              
              
              1,022,111
              
              
              (459,741
              )Effect
                  of exchange rate on cash
              
              
              14,560
              
              
              (37,204
              )Cash
                  and cash equivalents at beginning of period
              
              
              864,481
              
              
              1,103,243**Cash
                  and cash equivalents at end of period**
              
              **$**
              **1,901,152**
              
              **$**
              **606,298**
 
 The
        accompanying notes are an integral part of these unaudited financial
        statements.
  5
  
 **ITEM
        1.**  **FINANCIAL
        STATEMENTS (CONTINUED)**
 
 **ADVANCED
        MEDICAL INSTITUTE, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS (CONTINUED)**
 
 **Six
                  Month Periods Ended****December
                  31, 2007**
                **(Unaudited)**
              
              **December
                  31, 2006**
                **(Unaudited)****Reconciliation
                  of Cash & Cash Equivalents**Cash
                  & cash equivalents at the end of financial period as shown in the
                  Statement of Cash Flows is reconciled to the related items in the
                  Statement of Financial Position as follows:**Cash
                  & Cash Equivalents**
              
              $
              1,901,152
              
              $
              606,298**Reconciliation
                  of Cash Flow from Operations with Profit from Ordinary Activities
                  after
                  Income Tax****Net
                  Income**
              
              $
              685,194
              
              $
              637,711**Non-Cash
                  Flows in Profit from Ordinary Activities**Depreciation
              
              
              866,969
              
              
              534,400Provision
                  for doubtful accounts
              
              
              1,519,741
              
              
              2,303,932Minority
                  interest
              
              
              33,723
              
              
              (17,485
              )**Changes
                  in Assets and Liabilities**Decrease
                  (Increase) in inventories
              
              
              61,264
              
              
              (765
              )Increase
                  in receivables
              
              
              (2,985,654
              )
              
              (5,259,195
              )Increase
                  in unearned revenue
              
              
              71,251
              
              
              675,067Increase
                  in payables
              
              
              469,382
              
              
              1,405,391Decrease
                  (Increase) in provisions for compensated absences
              
              
              100,592
              
              
              -Increase
                  in deferred tax liabilities
              
              
              193,781
              
              
              378,037(Decrease)
                  Increase in security deposit
              
              
              (1,736
              )
              
              1,764Increase
                  in income tax payable
              
              
              425,475
              
              
              358,803**Cash
                  Flows Provided by Operating Activities**
              
              **$**
              **1,439,982**
              
              **$**
              **1,017,660****Supplemental
                  Cash Flow Disclosures:**Interest
                  paid
              
              $
              132,502
              
              $
              64,353Income
                  tax paid
              
              $
              85,676
              
              $
              227,493**Non-Cash
                  Investing/Financing Activities:**Stock
                  issued in acquisition
              
              $
              -
              
              $
              16,125,000Assets
                  acquired under capital leases
              
              $
              23,238
              
              $
              -
 
 The
        accompanying notes are an integral part of these unaudited financial
        statements.
  6
  **ADVANCED
        MEDICAL INSTITUTE INC.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**
 
 **1.**
              **NATURE
                  OF BUSINESS**
 
 Nature
        of Business
 
 Advanced
        Medical Institute Inc. (formerly Hawksdale Financial Visions, Inc.) (the
        “Company”) was organized on December 6, 1996 under the laws of the State of
        Nevada and was previously in the development stage through March 21,
        2005.
 
 On
        March
        21, 2005 the Company completed a Stock Exchange Agreement with Advanced Medical
        Institute Pty Ltd (renamed as “AMI Australia Holdings Pty Limited” on November
        22, 2005) (“AMI Australia”). As a result of the exchange agreement, the
        reorganization was treated as an acquisition by the accounting acquiree that
        is
        being accounted for as a recapitalization and as a reverse merger by the
        legal
        acquirer for accounting purposes. Pursuant to the recapitalization, all capital
        stock shares and amounts and per share data have been retroactively restated.
        Accordingly, the financial statements include the following:
 
 (1)
              The
                  balance sheet consists of the net assets of the accounting acquirer
                  at
                  historical cost and the net assets of the legal acquirer at historical
                  cost.
 (2)
              The
                  statements of operations include the operations of the accounting
                  acquirer
                  for the period presented and the operations of the legal acquirer
                  from the
                  date of the merger.
  AMI
        Australia is a company limited by shares, incorporated and domiciled in
        Australia. The principal activity of AMI Australia is the medical treatment
        of
        sexual dysfunction in Australia, New Zealand, China and Japan, however AMI
        Australia also provides prostate treatments to patients. AMI Australia is
        a
        service provider company which arranges for patients with sexual dysfunction
        to
        be provided with medical services, pharmaceuticals and associated support
        services. AMI Australia operates a centralized call center and twenty medical
        centers and sales offices throughout Australia and New Zealand. AMI China,
        a
        wholly owned subsidiary of the Company, operates 2 medical centers in Beijing,
        China and AMI Japan, a 75% subsidiary of the Company, operates a clinic in
        Tokyo, Japan as well as having an informal referral arrangement with 3 medical
        clinics in Osaka, Nagoya and Okinawa.
  On
        November 17, 2005, AMI Australia acquired 100% of the outstanding shares
        of PE
        Patent Holdco Pty Limited (“PE”) in exchange for 5 million shares of the Company
        valued at $1.10 per share. PE’s assets comprise an Australian innovation patent
        (Australian Innovation Patent No 2005100183, which is due to expire on July
        9,
        2012) and an Australian standard patent application (Australian standard
        patent
        application No. 2004222783) (collectively, the “Patents”).
  The
        patents and patent applications relate to various methods of treatment delivery
        via nasal (mucosal) inhalation and topical application of certain formulations
        which are used in AMI Australia’s treatments for premature ejaculation. The
        patents and associated formulations are integral to those
        treatments.
  AMI
        Australia’s nasal spray, injection, lozenge and tablet impotence and erectile
        dysfunction treatments are not patent protected.
  In
        acquiring PE, AMI Australia acquired only the right to use the Patents and
        the
        associated pharmaceutical formulations, treatment methodologies and dosing
        manuals in Australia and has no rights to use the patents or any of the
        underlying intellectual property in any other country.
  On
        April
        18, 2006, the Company acquired the remaining 7% of Intelligent Medical
        Technologies Pty Limited (“IMT”) which was previously held by third parties in
        exchange for 1.26 million shares of the Company. These shares were subsequently
        transferred by the Company to AMI Australia.
  In
        2003,
        IMT was granted the exclusive worldwide right and license from Sheiman Ultasonic
        Research Foundation Pty Limited (“SURF”) to exploit and sub-license certain
        inventions, patents and other intellectual property in relation to certain
        ultrasonic nebulizer technology within the field of the treatment of sexual
        dysfunction in men and women (including impotence, premature ejaculation
        and the
        treatment of female sexual arousal disorders). Some of these patents expire
        in
        October 2013, with the remaining patents expiring around 2023. IMT’s license was
        a broad based license which included the right to manufacture, market, sell
        and
        distribute products based on the technology and patents within the field
        of
        use.
  7
  IMT
        also
        had the option to extend its field of use to the treatment of prostate diseases.
        IMT exercised its option to extend its field of use to include prostate diseases
        on July 15, 2006 and IMT “terminated” its license with SURF. The termination was
        because of SURF’s failure to deliver to the Company information concerning
        updates and advances on the technologies. The termination does not affect
        IMT’s
        rights to use the technology - the only effect is to terminate the royalty
        payment obligations to SURF under the license. As
        a
        result of terminating the license agreement, IMT retained the right to use
        the
        technology in its treatments to treat sexual dysfunction without paying
        royalties or other fees to SURF.
 
 IMT
        applied for four worldwide patents relating to its ultrasonic nebulizer device
        in July 2005 and applied for three further worldwide patents relating to
        its
        device on February 10, 2006.
 
 IMT
        acquired this license in order to develop an ultrasonic nebulizer to deliver
        medications to patients’ lungs for the treatment of sexual dysfunction as it
        believes that this delivery system will be more efficient and clinically
        effective than any other alternative treatment option and will reduce dosage
        levels and the likelihood of side effects.
 
 IMT
        applied to list its nebuliser with the Therapeutic Goods Administration (the
        Australian functional equivalent of the FDA) in October 2006. IMT received
        comment letters from the TGA during March 2007 which requires it to provide
        further material in order to advance its application. IMT is in the process
        of
        dealing with the matters raised by the TGA and currently anticipates it will
        submit a revised application later this calendar year.
 
 On
        September 8, 2006, the Company entered into a Share Exchange Agreement with
        Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
        Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
        which the Company acquired all of the issued and outstanding shares of stock
        of
        Worldwide PE in exchange for the payment of A$3 million (approximately US$2.25
        million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
        common stock valued at $1.00 per share.
 
 The
        Company funded the cash component of the purchase price by AMI Australia
        entering into two secured three year term loans in the aggregate principal
        amount of A$3 million with ANZ Nominees Limited in its capacity as custodian
        of
        the Professional Pensions PST. The loan is secured by a security interest
        in all
        of AMI Australia’s assets and undertakings (including its existing equity
        interests in PE Patent Holdco Pty Limited, Intelligent Medical Technologies
        Pty
        Limited, Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing
        Pty Limited). The loans accrue interest at an annual coupon of 450 basis
        points
        above the then Australian Reserve Bank’s current cash rate (currently being an
        aggregate current interest rate of 11.50%). The Company has been meeting
        its
        interest payment obligations under these loans and has paid approximately
        A$652,000 in principal as at the date of this filing.
 
 The
        Company has been actively exploring international expansion into a range
        of
        jurisdictions and established subsidiaries in China and Japan in
        2006.
 
 The
        Chinese subsidiary, named Ai Te Wei (Beijing) Medicine Consulting Company
        (“AMI
        China”), is an indirect wholly owned subsidiary of the Company and AMI China has
        formed an alliance with 2 Beijing hospitals for the purpose of establishing
        operations and conducting clinical trials for regulatory purposes. AMI China
        has
        obtained regulatory approval to its proposed advertisements and commenced
        operations on September 4, 2006.
 
 The
        Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), is an
        indirect 75% owned subsidiary of the Company. AMI Japan has 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.
  8
  The
        Company’s initial operations in China and Japan have not been as successful as
        the company anticipated and the Company has substantially reduced the nature
        and
        scope of its operations in China and Japan. The Company is investigating
        alternative marketing and distribution methods in each of China and Japan
        but
        intends to expend considerably less on these activities than it spent on
        its
        operations during the year ended June 30, 2007 until it establishes a successful
        sales and marketing platform for these markets.
  On
        May 2,
        2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
        Group Limited, a privately owned company registered in the United Kingdom
        (“AMI
        UK”).
  The
        Option granted AMI UK a right to enter into an exclusive license to use
        Worldwide PE’s intellectual property in the United Kingdom. AMI UK paid
        Worldwide PE an upfront non-refundable fee of $50,000 to secure an initial
        period of four months to confirm the license which period was able to be
        extended for a further two months by AMI UK paying Worldwide PE a non-refundable
        extension fee of $50,000. During this initial six month period, AMI UK had
        the
        right to enter into a License Agreement (the “License”) by paying Worldwide PE
        an upfront non-refundable license fee of $1 million less the upfront fees
        paid
        to Worldwide PE prior to that date. Terms of the Option and the License were
        disclosed by the Company on its Current Report on Form 8-K filed with the
        Securities and Exchange Commission (the “SEC”) on May 3, 2007. On September 4,
        2007 AMI UK exercised its right to extend the option period and paid an
        extension fee of $50,000. Worldwide PE agreed to vary this extension period
        to
        four months rather than two months. AMI UK is currently in the process of
        finalizing its business plans for the UK and is continuing to discuss the
        license arrangements with Worldwide PE.
 
 Subsidiaries
  
  9
  The
        Company’s direct subsidiaries are AMI Australia, AMI International Pty Limited
        (“AMI International”) and AMI Management Services Pty Limited (formerly known as
        Women’s Health Foundation Pty Limited).
  AMI
        Australia’s direct subsidiaries are Advanced Medical Institute Pty Limited, PE
        Patent Holdco Pty Limited (“PE
        Patent”) ,
        Worldwide PE Patent Holdco Pty Limited (“Worldwide
        PE”) ,
        Advanced Medical Institute (NZ) Limited, IMT and Whygo Video
        Conferencing Pty Ltd (“Whygo”) .
  AMI
        International’s direct subsidiaries are AMI China (100% owned) and AMI Japan
        (75% owned).
  Details
        of PE Patent Holdco are set forth in the Nature of Business description above.
 Details
        of Worldwide PE are set forth in the Nature of Business description above.
  Details
        of IMT are set forth in the Nature of Business description above.
  AMI
        International Pty Limited was established to hold the Group’s ownership
        interests in the Japanese and Chinese companies established to conduct
        operations in those countries.
  AMI
        Management Services Pty Limited provides treasury and management services
        to AMI
        Australia and its subsidiaries.
  Advanced
        Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
        Zealand. AMI NZ contributed 2.4% of AMI Australia’s consolidated revenue during
        the half year (excluding other income).
  AMI
        Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
        conferencing services across Australia and in
        various locations around
        the world. James Matthews, a director of Whygo, holds the remaining 50% of
        the
        outstanding shares of Whygo.
 
 Whygo
        owns proprietary scheduling software, which allows its corporate partners
        to
        login and book rooms around the world. The source of Whygo’s income is derived
        from renting video conferencing rooms to its corporate partners through AMI
        Australia and its other channeling partners.
  AWIT
        Beijing Medicine Consulting Company (“AMI China”) conducts the Company’s
        business in China. AMI China commenced advertising of its services on September
        4, 2006.
  AMI
        Japan
        Kabushiki Gaisya (“AMI Japan”) conducts the Company’s business in Japan. AMI
        Japan commenced advertising of its services on October 1, 2006.
  During
        September 2006, AMI commenced a not for profit unit entity named “AMI SCI” which
        provides, as part of its community services program, specialized sexual
        dysfunction treatments to spinal cord victims in Australia. Details regarding
        its services and operation are located at rocketlaunch.com.au.
  On
        February 12, 2007, the Company entered into a written agreement with the
        Heartcheck Group of companies for an indefinite term, which can be terminated
        at
        any time with not less than twelve months written notice. Under the agreement,
        Heartcheck agrees to utilize services provided by the Company, including
        the
        provision of staff and premises. In exchange for these services, Heartcheck
        has
        agreed to reimburse the Company for all expenses associated with the provision
        of these services and to pay the company a net margin on those expenses.
        The
        provision of these services and the fees generated from this agreement with
        Heartcheck has contributed to the Company’s net revenues during the quarter
        ended December 31, 2007. Heartcheck is independently owned from the Company,
        its
        subsidiaries and its affiliates and it operates a business of providing cardiac
        related medical services in Australia.
  
 **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
  The
        accounting and reporting policies of the Company conform to accounting
        principles generally accepted in the United States of America. The following
        are
        descriptions of the more significant policies:
  10
  Basis
        of Accounting
 
 The
        accompanying financial statements are prepared on an accrual basis.
  Principles
        of Consolidation
  The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiaries, AMI Australia Holdings Pty Limited, AMI Management
        Services Pty Limited (“AMI MS”) and AMI International Pty Limited (“AMI
        International”) and their direct and indirect wholly-owned subsidiaries:
        Advanced Medical Institute Pty Ltd, PE Patent Holdco Pty Limited (“PE”),
        Advanced Medical Institute (NZ) Limited (“AMI NZ”) and Intelligent Medical
        Technologies Pty Ltd (“IMT”) and its 50% owned subsidiary, Whygo Video
        Conferencing Pty Ltd (“Whygo”) (which owns all of the shares in Whygo Limited, a
        UK entity). All significant intercompany accounts and transactions have been
        eliminated upon consolidation.
  Concentration
        of Credit Risk
  Financial
        instruments that potentially subject the Company to concentrations of credit
        risk are cash, accounts receivable and other receivables arising from its
        normal
        business activities. The Company places its cash in what it believes to be
        credit-worthy financial institutions. The Company has a diversified customer
        base. The Company controls credit risk related to accounts receivable through
        credit approvals, credit limits and monitoring procedures. The Company routinely
        assesses the financial strength of its customers and, based upon factors
        surrounding the credit risk, establishes an allowance, if required, for
        uncollectible accounts and, as a consequence, believes that its accounts
        receivable credit risk exposure beyond such allowance is limited.
  Cash
        Equivalents
  For
        purposes of the statement of cash flows, the Company considers all highly
        liquid
        investments with maturities of three months or less to be cash
        equivalents.
  Use
        of
        Estimates
  The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect certain reported amounts and disclosures. Accordingly, actual results
        could differ from those estimates.
  Revenue
        Recognition
  Sales
        are
        reported as deferred income when the sales contracts are executed and the
        term
        of the contract exceeds three months. Up to three months of medication is
        delivered to the patient upon the signing of a contract. Generally the term
        of
        the sales contracts are up to one year, but they can be for longer periods
        of
        time. The deferred income arising from the contracts that exceed three months
        is
        then amortized, on a straight line basis, into income during the approximated
        composite remaining medication delivery period. This approximated composite
        is
        an estimate that may vary from period to period.
  Unearned
        Revenue
  Unearned
        revenue arises from programs that exceed three months. The maximum program
        length is twelve months while the average program length purchased by each
        individual patient is four & half months. The Company made estimate of
        unearned revenue based on the average program length less three months for
        which
        medication is provided and revenue is recognized.
  Advertising
        Expense
  Advertising
        costs are charged to expense as they are incurred.
  11
  Income
        Tax
  Income
        taxes have been provided based upon the tax laws and rates in the countries
        in
        which operations are conducted and income is earned. The income tax rates
        imposed by the taxing authorities vary. Taxable income may vary from pre-tax
        income for financial accounting purposes. There is no expected relationship
        between the provision for income taxes and income before income taxes because
        the countries have different taxation rules, which vary not only to nominal
        rates but also in terms of available deductions, credits and other benefits.
        Deferred tax assets and liabilities are recognized for the anticipated future
        tax effects of temporary differences between the financial statement basis
        and
        the tax basis of the Company’s assets and liabilities using the applicable tax
        rates in effect at year end as prescribed by SFAS 109 “Accounting for Income
        Taxes”.
  Accounts
        Receivable
  Accounts
        receivable are sales for the year, net of sales refund, cancellation, unearned
        revenue and provision for doubtful debt. The Company estimates provision
        for
        doubtful debts based on the historical results.
  Inventories
  Inventories
        are valued at the lower of cost (determined on a first-in first-out basis)
        or
        market. Management compares the cost of inventories with the market value
        and
        allowance is made for writing down our inventories to market value, if lower.
        As
        of December 31, 2007 inventory consisted only of finished goods.
  Property
        and Equipment
  Property
        & Equipment placed in service is depreciated over the estimated useful lives
        of the assets using the diminishing value depreciation method.
  Property
        and equipment are carried at the lesser of cost and written down value.
        Expenditures for maintenance and repairs are expenses as incurred and
        expenditures for major renewals and betterments are capitalized. Assets retired
        or sold are removed from the property accounts, with gains or losses on disposal
        included in income.
  Employee
        Entitlements
  Contributions
        are made to an employee superannuation fund and are charged as expenses when
        incurred.
  Exchange
        Gain (Loss)
  During
        the three month periods ended December 31, 2007 and 2006, the transactions
        of
        AMI Australia were denominated in foreign currency and were recorded in
        Australian Dollars (AUD) at the rates of exchange in effect when the
        transactions occur. Exchange gains and losses are recognized for the different
        foreign exchange rates applied when the foreign currency assets and liabilities
        are settled.
  Foreign
        Currency
  As
        of
        December 31, 2007, the accounts of AMI Australia and its subsidiaries were
        maintained and its financial statements were expressed in the local currency
        for
        the jurisdiction in which the entity operated. Such financial statements
        were
        translated into the functional currency in Australian Dollars (AUD) and
        thereafter to reporting currency in U.S. Dollars (USD) in accordance with
        Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
        Translation,” with the AUD as the functional currency. According to the
        Statement, all assets and liabilities were translated at the current exchange
        rate, stockholders’ equity (deficit) is translated at the historical rates and
        income statement items are translated at the average exchange rate for the
        period. The resulting translation adjustments are reported under other
        comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive
        Income” as a component of shareholders’ equity (deficit).
  12
  Research
        and Development Costs
  Research
        and development costs are charged against income from ordinary activities
        before
        income tax as incurred.
  Intangible
        assets
  The
        Company applies the criteria specified in SFAS No. 141, “Business
        Combinations” to determine whether an intangible asset should be recognized
        separately from goodwill. Intangible assets acquired through business
        acquisitions are recognized as assets separate from goodwill if they satisfy
        either the “contractual-legal” or “separability” criterion. Per SFAS 142,
        intangible assets with definite lives are amortized over their estimated
        useful
        life and reviewed for impairment in accordance with SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-lived Assets.” Intangible
        assets, such as purchased technology, trademark, customer list, user base
        and
        non-compete agreements, arising from the acquisitions of subsidiaries and
        variable interest entities are recognized and measured at fair value upon
        acquisition. Intangible assets are amortized over their estimated useful
        lives
        from one to ten years. The Company reviews the amortization methods and
        estimated useful lives of intangible assets at least annually or when events
        or
        changes in circumstances indicate that it might be impaired. The recoverability
        of an intangible asset to be held and used is evaluated by comparing the
        carrying amount of the intangible asset to its future net undiscounted cash
        flows. If the intangible asset is considered to be impaired, the impairment
        loss
        is measured as the amount by which the carrying amount of the intangible
        asset
        exceeds the fair value of the intangible asset, calculated using a discounted
        future cash flow analysis. The Company uses estimates and judgments in its
        impairment tests, and if different estimates or judgments had been utilized,
        the
        timing or the amount of the impairment charges could be different.
  Goodwill,
        trademarks, patents and other intangible assets determined to have indefinite
        useful lives are not amortized. We test such trademarks and other intangible
        assets with indefinite useful lives for impairment annually, or more frequently
        if events or circumstances indicate that an asset might be impaired. Goodwill,
        trademarks, patents and other intangible assets determined to have definite
        lives are amortized over their estimated useful lives or the life of the
        trademark, patent and other intangible asset, whichever is less.
 
 Impairment
        is determined by assessing the recoverable amount of the cash-generating
        unit
        (group of cash-generating units), to which the intangible asset relates.
        When
        the recoverable amount of the cash-generating unit (group of cash-generating
        units) is less than the carrying amount, an impairment loss is
        recognised.
 
 At
        December 31, 2007 and June 30, 2007, intangibles consist of the following:
 
 **Intangibles**
              
              **Gross**
                **Carrying**
                **Amount**
              
              **Accumulated****Amortization**
              
              **Impairment**
                **Loss**
              
              **Net
                  Carrying**
                **Amount**
                **Dec
                  31, 2007**
                **(Unaudited)**
              
              **Net
                  Carrying**
                **Amount**
                **June
                  30, 2007**
                **(Audited)**Amortized
                  intangibles:Patents
              
              $
              10,172,829
              
              $
              (975,627
              )
              $
              (718,017
              )
              $
              8,479,185
              
              $
              8,479,526Intellectual
                  Property
              
              
              16,540,918
              
              
              (1,283,548
              )
              
              -
              
              
              15,257,370
              
              
              15,198,095Computer
                  Software
              
              
              397,711
              
              
              (222,649
              )
              
              -
              
              
              175,063
              
              
              152,713Unamortized
                  intangibles:Intellectual
                  Property
              
              
              4,477,272
              
              
              -
              
              
              -
              
              
              4,477,272
              
              
              4,386,735$
              32,007,044
              
              $
              (2,481,824
              )
              $
              (727,600
              )
              $
              28,388,890
              
              $
              28,217,069
 
  13
  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.
  For
        intellectual property, the company assigned an 18 year life to the intellectual
        property that arose from Worldwide PE Patent, a 19 year life to the intellectual
        property that arose from PE Patent, and indefinite life to the intellectual
        property that arose from IMT.
  Computer
        software was assigned as having a 3 year life.
  Amortization
        expense from continuing operation for the six month periods ended December
        31,
        2007 and 2006 was $771,315 and $469,416 respectively. The Company expects
        the
        amortization expenses for the next five years to be as follows:
 
 **Year
                  Ending December 31,**
              
              **Annual
                  Amount**2008
              
              $1,543,0002009
              
              $1,543,0002010
              
              $1,543,0002011
              
              $1,543,0002012
              
              $1,543,000
  Long-Lived
        Assets ******
  Effective
        January 1, 2002, the Company adopted Statement of Financial Accounting Standards
        No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
        144”), which addresses financial accounting and reporting for the impairment
        or
        disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
        Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
        Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
        the Results of Operations for a Disposal of a Segment of a Business.” The
        Company periodically evaluates the carrying value of long-lived assets to
        be
        held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
        to be recorded on long-lived assets used in operations when indicators of
        impairment are present and the undiscounted cash flows estimated to be generated
        by those assets are less than the assets’ carrying amounts. In that event, a
        loss is recognized based on the amount by which the carrying amount exceeds
        the
        fair market value of the long-lived assets. Loss on long-lived assets to
        be
        disposed of is determined in a similar manner, except that fair market values
        are reduced for the cost of disposal. Based on its review, the Company believes
        that, as of December 31, 2007 there were no significant impairments of its
        long-lived assets.
  Segment
        Reporting
  Statement
        of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
        Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
        is based on the way a company’s management organizes segments within the company
        for making operating decisions and assessing performance. Reportable segments
        are based on products and services, geography, legal structure, management
        structure, or any other manner in which management disaggregates a company.
        SFAS
        131 has no effect on the Company’s consolidated financial statements as the
        Company consists of one reportable business segment.
  Basic
        and Diluted Earnings Per Share
 
 Earnings
        per share is calculated in accordance with the Statement of financial accounting
        standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
        Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for
        all
        periods presented has been restated to reflect the adoption of SFAS No. 128.
        Basic net loss per share is based upon the weighted average number of common
        shares outstanding. Diluted net loss per share is based on the assumption
        that
        all dilutive convertible shares and stock options were converted or exercised.
        Dilution is computed by applying the treasury stock method. Under this method,
        options and warrants are assumed to be exercised at the beginning of the
        period
        (or at the time of issuance, if later), and as if funds obtained thereby
        were
        used to purchase common stock at the average market price during the
        period.
  14
 
 **RECENT
        PRONOUNCEMENTS**
 
 In
        September 2006, FASB issued SFAS No. 157 “Fair Value Measurements”. This
        Statement defines fair value, establishes a framework for measuring fair
        value
        in generally accepted accounting principles (GAAP), and expands disclosures
        about fair value measurements. This Statement applies under other accounting
        pronouncements that require or permit fair value measurements, the Board
        having
        previously concluded in those accounting pronouncements that fair value is
        the
        relevant measurement attribute. Accordingly, this Statement does not require
        any
        new fair value measurements. However, for some entities, the application
        of this
        Statement will change current practice. This Statement is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. Management is currently
        evaluating the effect of this pronouncement on financial
        statements.
 
 In
        September 2006, FASB issued SFAS No. 158 “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
        No. 87, 88, 106, and 132(R)”. This Statement improves financial reporting by
        requiring an employer to recognize the over funded or under funded status
        of a
        defined benefit postretirement plan (other than a multiemployer plan) as
        an
        asset or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur through
        comprehensive income of a business entity or changes in unrestricted net
        assets
        of a not-for-profit organization. This Statement also improves financial
        reporting by requiring an employer to measure the funded status of a plan
        as of
        the date of its year-end statement of financial position, with limited
        exceptions. An employer with publicly traded equity securities is required
        to
        initially recognize the funded status of a defined benefit postretirement
        plan
        and to provide the required disclosures as of the end of the fiscal year
        ending
        after December 15, 2006. An employer without publicly traded equity securities
        is required to recognize the funded status of a defined benefit postretirement
        plan and to provide the required disclosures as of the end of the fiscal
        year
        ending after June 15, 2007. However, an employer without publicly traded
        equity
        securities is required to disclose the following information in the notes
        to
        financial statements for a fiscal year ending after December 15, 2006, but
        before June 16, 2007, unless it has applied the recognition provisions of
        this
        Statement in preparing those financial statements:
  ·
              A
                  brief description of the provisions of this Statement
  ·
              The
                  date that adoption is required
  ·
              The
                  date the employer plans to adopt the recognition provisions of
                  this
                  Statement, if earlier.
  The
        requirement to measure plan assets and benefit obligations as of the date
        of the
        employer’s fiscal year-end statement of financial position is effective for
        fiscal years ending after December 15, 2008. Management is currently evaluating
        the effect of this pronouncement on financial statements.
  In
        February 2007, FASB issued FASB Statement No. 159, The Fair Value Option
        for
        Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
        years beginning after November 15, 2007. Early adoption is permitted subject
        to
        specific requirements outlined in the new Statement. Therefore, calendar-year
        companies may be able to adopt FAS 159 for their first quarter 2007 financial
        statements.
  The
        new
        Statement allows entities to choose, at specified election dates, to measure
        eligible financial assets and liabilities at fair value that are not otherwise
        required to be measured at fair value. If a company elects the fair value
        option
        for an eligible item, changes in that item's fair value in subsequent reporting
        periods must be recognized in current earnings. FAS 159 also establishes
        presentation and disclosure requirements designed to draw comparison between
        entities that elect different measurement attributes for similar assets and
        liabilities. Management is currently evaluating the effect of this pronouncement
        on financial statements.
 
 In
        December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
        Combinations”. The objective of this statement will significantly change the
        accounting for business combinations. Under Statement 141R, an acquiring
        entity
        will be required to recognize all the assets acquired and liabilities assumed
        in
        a transaction at the acquisition -date fair value with limited exceptions.
        Statement 141 applies prospectively to business combinations for which the
        acquisition date is on or after the beginning of the first annual reporting
        period beginning on or after December 15, 2008. The Company does not expect
        the
        adoption of SFAS No. 141R to have a material impact on the consolidated
        financial statements.
  15
  In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements-An Amendment of ARB No. 51". The objective
        of
        this statement is to establish new accounting and reporting standards for
        the
        Noncontrolling interest in a subsidiary and for the deconsolidation of a
        subsidiary. Statement 160 is effective for fiscal years, and interim periods
        within those fiscal years, beginning on or after December 15, 2008. The Company
        does not expect the adoption of SFAS No. 160 to have a material impact on
        the
        consolidated financial statements.
 
 **2.**
              **OTHER
                  ASSETS**
  Following
        is the summary of other assets as of December 31, 2007 and June 30,
        2007.
 
 December
                  31
                (Unaudited)
              
              June
                  30
                (Audited)Bank
                  guarantees
              
              $
              78,835
              
              $
              84,917Advances
                  and prepayments
              
              
              58,022
              
              
              57,397Other
                  receivables
              
              
              61,369
              
              
              106,100Other
                  debtors
              
              
              774,184
              
              
              926,031Total
              
              $
              972,097
              
              $
              1,174,445
 
 
 **3.**
              **PROPERTY,
                  PLANT AND EQUIPMENT**
 
 Property,
        plant and equipment comprised of the following as of December 31, 2007 and
        June
        30, 2007:
 **December
                  31, 2007 (Unaudited)**
              
              **June
                  30, 2007**
                **(Audited)**Leasehold
                  improvements
              
              $
              579,010
              
              $
              541,746Less:
                  Accumulated depreciation
              
              
              92,084
              
              
              74,746486,926
              
              
              467,000Motor
                  Vehicles
              
              
              51,988
              
              
              50,334Less:
                  Accumulated Depreciation
              
              
              29,892
              
              
              26,70822,096
              
              
              23,626Office
                  Furniture & Equipment
              
              
              525,777
              
              
              474,426Less:
                  Accumulated Depreciation
              
              
              125,388
              
              
              99,363400,389
              
              
              375,063Computer
                  Hardware
              
              
              398,592
              
              
              357,854Less:
                  Accumulated Depreciation
              
              
              257,166
              
              
              220,420141,426
              
              
              137,434Low
                  Value Pooled Fixed Assets
              
              
              165,934
              
              
              142,171Less:
                  Accumulated Depreciation
              
              
              112,802
              
              
              99,37753,132
              
              
              42,794**Total
                  Property, Plant and Equipment**
              
              **$**
              **1,103,969**
              
              **$**
              **1,045,917**
  16
  **4.**
                **INTEREST
                    BEARING LIABILITIES**
 
 Interest
          bearing liabilities comprised of the following as of December 31, 2007
          and June
          30, 2007:
 
 **December
                    31, 2007 (Unaudited)**
                
                **June
                    30, 2007 (Audited)****Current,
                    as of the period ended**Capitalized
                    lease liability
                
                $
                66,577
                
                $
                72,044Secured
                    loan
                
                
                270,260
                
                
                -**$**
                **336,837**
                
                **$**
                **72,044****Non-current,
                    due as of the period ended**Capitalized
                    lease liability
                
                $
                9,819
                
                $
                25,220Secured
                    loan
                
                
                2,077,876
                
                
                2,399,412Total
                    non-current
                
                **$**
                **2,087,695**
                
                **$**
                **2,424,362**
  The
          interest bearing liabilities require monthly payments of principal and
          interest
          at a per annum interest rate ranging from 6.2% to 13.85%. Interest expense
          on
          the interest bearing liabilities amounted to $132,502 and $64,355 for the
          six
          month periods ended December 31, 2007 and 2006, respectively.
  Obligations
          under the notes are secured by the financed assets included in property
          and
          equipment. The secured loan is secured over all of AMI Australia’s assets and
          undertakings. The non-current portion of the loan is to be paid off by
          September
          2009.
  **5.**
                  **ACCOUNTS
                        PAYABLE AND ACCRUED
                        EXPENSES**
  Accounts
          payable and accrued expenses as of December 31, 2007 and June 30, 2007
          are
          summarized as follows:
  December
                    31
                  (Unaudited)
                
                June
                    30
                  (Audited)Accounts
                    payable
                
                $
                2,321,365
                
                $
                1,714,756Accrued
                    salaries
                
                
                190,670
                
                
                443,806Accrued
                    professional fees
                
                
                -
                
                
                30,557Other
                    current liabilities
                
                
                542,118
                
                
                102,000Provision
                    for DDR medication cost
                
                
                918,782
                
                
                887,845Provision
                    for DDR sales commission
                
                
                918,782
                
                
                828,428Provision
                    for DDR collection fee
                
                
                918,782
                
                
                828,428Provision
                    for patient refund
                
                
                131,505
                
                
                84,880Accrued
                    legal case settlement
                
                
                13,151
                
                
                250,396Accrued
                    DDR collection fee
                
                
                -
                
                
                211,709Accrued
                    payroll tax
                
                
                -
                
                
                59,416Accrued
                    compensated absences
                
                
                479,575
                
                
                366,050Total
                
                $
                6,434,730
                
                $
                5,808,271
  17
 6.
                    LEGAL
                            PROCEEDINGS
  As
          of
          December 31, 2007, 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
          July
          19, 2004, the Australian Competition and Consumer Commission (collectively,
          the
“ACCC”) filed a suit against AMI Australia in the Federal Court of Australia
          Sydney Registry. The ACCC claimed that a series of advertisements made
          by AMI
          Australia involving a celebrity that confessed impotence were misleading
          and
          deceptive. On August 15, 2006 the court ruled in favor of the ACCC that
          the
          advertisements were misleading and deceptive but declined to order corrective
          advertising or any pecuniary penalty other than an order that AMI Australia
          pay
          the ACCC’s costs on a party-party basis. The Company agreed to pay $94,300 in
          full settlement of these costs and full payment has been made with no further
          liability outstanding in relation to this matter.
  On
          September 27, 2004, Rocco Licastro, a former patient, filed a suit against
          AMI
          Australia in the District Court of NSW, Sydney Registry. Mr. Licastro’s claims
          result from an injection therapy that Mr. Licastro claims caused physical
          injuries. AMI Australia and Mr. Licastro agreed to settle the claim on
          confidential terms on September 21, 2007 with all payments made in full
          settlement of the claim fully paid as at December 31, 2007.
  On
          May
          25, 2007, AMI Australia commenced proceedings in the New South Wales Supreme
          Court against Channel Seven Sydney Pty Limited in respect of certain allegedly
          actionable statements made by Channel Seven. AMI Australia has alleged
          that the
          statements made involve a breach of the doctrine of injurious falsehood
          and that
          it is entitled to be compensated in damages. The proceedings are at an
          early
          stage.
  On
          December 13, 2007, AMI Australia commenced proceedings in the Federal Court
          of
          Australia Sydney Registry against Bade Medical Institute Pty Limited, Mr.
          David
          Wade, Mr. Buddy Beani and others (collectively “Bade”) alleging Bade had
          infringing 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.
          The
          orders obtained by AMI Australia require Bade to file their evidence of
          transfer
          by February 28, 2008 and AMI Australia has issued notices to produce to
          Bade in
          relation to the proceedings. Bade appear to have ceased operation since
          the
          orders were obtained. AMI Australia believes that it will be successful
          in its
          action against Bade.
 **7.**
                    LEASE
                            COMMITMENTS
  The
          Company is party to long-term, non-cancelable operating lease agreements
          for its
          administrative offices and clinic locations. The future aggregate minimum
          annual
          lease payments arising from these lease agreements are as follows:
 
 **December
                    31**
                  **(Unaudited)**Due
                    during the period ended,2008
                
                $
                768,6792009
                
                
                436,3732010
                
                
                161,6252011
                
                
                87,7322012
                
                
                8,767**$**
                **1,463,176**
  18
  Rent
          paid
          for the six month periods ended December 31, 2007 and 2006 was $911,443
          and
          $831,375, respectively.
  **8.**
                      CONCENTRATION
  Sales
          Markets - The Company’s revenue arises from Australian, New Zealand, Chinese and
          Japanese customers.
  Suppliers
          - Although the Company has access to a variety of suppliers, the majority
          of the
          Company’s products that are obtained for resale are purchased from a limited
          number of suppliers.
 **9.**
                      SHARE
                                EXCHANGE AGREEMENTS
  On
          September 8, 2006 the Company entered into a Share Exchange Agreement with
          Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
          Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
          which the Company acquired all of the issued and outstanding shares of
          stock of
          Worldwide PE in exchange for the payment of A$3 million (approximately
          US$2.25
          million) and the issuance in the aggregate of 16,125,000 shares of the
          Company’s
          common stock valued at $1.00 per share. These shares were subsequently
          transferred by the Company to AMI Australia. The issuance of our shares
          of
          common stock to the Worldwide PE Shareholders was exempt from registration
          under
          the Securities Act pursuant to Section 4(2) and Regulation S. As used herein,
          the “Company” shall also mean Worldwide PE when used for events after September
          8, 2006, described herein.
  The
          Company funded the cash component of the purchase price by AMI Australia
          entering into two secured three year term loans in the aggregate principal
          amount of A$3 million with ANZ Nominees Limited in its capacity as custodian
          of
          the Professional Pensions PST. The loan is secured by a security interest
          in all
          of AMI Australia’s assets and undertakings (including its existing equity
          interests in PE Patent Holdco Pty Limited, Intelligent Medical Technologies
          Pty
          Limited, Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing
          Pty Limited). The loan accrues interest at an annual coupon of 450 basis
          points
          above the then Australian Reserve Bank’s current cash rate (currently being an
          aggregate current interest rate of 11.50%).
 **10.**
                      RELATED
                                  PARTY TRANSACTIONS
  **December
                    31, 2007 (Unaudited)**
                
                **June
                    30, 2007**
                  **(Audited)**Related
                    party transactions comprised of the following:***Forhad
                    (Tony) Khan***Relationship:Director of the parent entityPayable
                    to this related party
                
                $
                -
                
                $
                2,947***Jack
                    Vaisman********(an
                    AU citizen)***Relationship:
                    Director of the CompanyDirector
                    salary from AMI Australia
                
                $
                174,900
                
                $
                -***James
                    Matthews********(an
                    AU citizen)***Relationship:
                    Director of the subsidiary (Whygo)Payable
                    to this related party
                
                $
                1,925
                
                $
                1,985***Prostate
                    Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                    from this related party
                
                $
                1,501
                
                $
                1,453
  19
 Total
          receivables due from related parties included in the Company’s statement of
          financial position was $1,501 and $1,453 as of December 31, 2007 and June
          30,
          2007 respectively.
  Total
          accounts payable to related parties included in the Company’s statement of
          financial position was $1,925 and $4,932 as of December 31, 2007 and June
          30,
          2007 respectively.
  Receivables
          from, and payables to, related parties are unsecured, interest-free and
          are due
          on demand.
 **11.**
                      CONTINGENT
                                    LIABILITY
  A
          dispute
          with a previous telecommunication carrier over billing in the amount of
          $122,924
          arose in 2002. AMI Australia responded with a counterclaim of $550,904
          against
          the carrier in 2003 and no correspondence has been received from the carrier.
          No
          settlement has been reached, but in the opinion of the Company’s directors, the
          $122,924 will not be paid. Similarly, the Company has not been actively
          pursuing
          the amount it claims is owed to it under the counterclaim. The financial
          statements do not include any adjustments that might result from the outcome
          of
          this uncertainty.
 **12.**
                      INCOME
                                    TAXES
  Total
          Federal and State income tax expense for the six months period ended December
          31, 2007 and 2006 amounted to $755,253 and $829,715 respectively. For the
          three
          month periods ended December 31, 2007, 2006 and 2005 there is a difference
          of 1%
          between the Australian federal statutory tax rate and the effective tax
          rate.
          This difference is due to the domicile of operating profits and losses
          in the
          Group as well as the impact of timing and past operating profits (losses)
          on
          these matters.
  20
 The
                      following is a reconciliation of income tax expense for the
                      six mont
                      periods ended December 31, 2007 and 2006:December
                      31, 2007
                  
                  U.S.
                  
                  State
                  
                  International
                  
                  TotalCurrent
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  432,134
                  
                  $
                  432,134Deferred
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  323,119
                  
                  $
                  323,119Total
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  755,253
                  
                  $
                  755,253December
                      31, 2006
                  
                  
                  U.S.
                  
                  
                  State
                  
                  
                  International
                  
                  
                  TotalCurrent
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  829,715
                  
                  $
                  829,715Deferred
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  0Total
                  
                  $
                  0
                  
                  $
                  0
                  
                  $
                  829,715
                  
                  $
                  829,715Reconciliation
                      of the differences between the statutory U.S. Federal income
                      tax rate
                      and
                      the effective rate is as follows:December
                      31,
                    2007
                  
                  
                  June
                      30,
                    2007Federal
                      statutory tax rate
                  
                  
                  34
                  %
                  
                  34
                  %Increase
                      (decrease) in rate resulting from:Non
                      US income taxed at different rates
                  
                  
                  (-1
                  %)
                  
                  (-1
                  %)Effective
                      tax rate
                  
                  
                  33
                  %
                  
                  33
                  %
 **13.**
                      OTHER
                                      COMPREHENSIVE INCOME (LOSS)
  Balances
          of related after-tax components comprising accumulated other comprehensive
          income (loss), included in stockholders’ equity, at December 31, 2007 and June
          30, 2007 are as follows:
 
 *Accumulated*
                  *Other*
                  *Comprehensive*
                  *Income*Balance
                    at June 30, 2006
                
                $
                (204,483
                )Change
                    for year ended June 30, 2007
                
                
                3,375,989Balance
                    at June 30, 2007
                
                $
                3,171,506Change
                    for six months ended December 31, 2007
                
                
                964,443Balance
                    at December 31, 2007
                
                $
                4,135,949
 **14.**
                    RECLASSIFICATION
  Certain
          comparative amounts have been reclassified to conform to the current
          presentation.
  21
  **ITEM
          2.**  **MANAGEMENT’S
          DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
          OPERATIONS**
  THE
          FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
          CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
          APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
          AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE
          YEAR ENDED JUNE 30, 2007.
  **PRELIMINARY
          NOTE REGARDING FORWARD-LOOKING STATEMENTS**
  The
          statements contained in this Form 10-Q that are not purely historical are
          forward-looking statements within the meaning of Section 27A of the Securities
          Act of 1933, as amended, and Section 21E of the Securities Exchange Act
          of 1934,
          as amended. These include statements about the Company’s expectations, beliefs,
          intentions or strategies for the future, which are indicated by words or
          phrases
          such as “anticipate,” “expect,” “intend,” “plan,” “will,” “the Company
          believes,” “management believes” and similar words or phrases. The
          forward-looking statements are based on the Company’s current expectations and
          are subject to certain risks, uncertainties and assumptions. The Company’s
          actual results could differ materially from results anticipated in these
          forward-looking statements. All forward-looking statements included in
          this
          document are based on information available to the Company on the date
          hereof,
          and the Company assumes no obligation to update any such forward-looking
          statements.
  **CRITICAL
          ACCOUNTING POLICIES AND ESTIMATES**
  Our
          discussion and analysis or plan of operations are based upon our consolidated
          financial statements, which have been prepared in accordance with accounting
          principles generally accepted in the United States. The preparation of
          these
          financial statements requires us to make estimates and judgments that affect
          the
          reported amounts of assets, liabilities, revenue and expenses, and related
          disclosure of contingent assets and liabilities. On an on-going basis,
          we
          evaluate our estimates, including those related to accounts receivable
          reserves,
          provisions for impairment losses of affiliated companies and other intangible
          assets, income taxes and contingencies. We base our estimates on historical
          experience and on various other assumptions that are believed to be reasonable
          under the circumstances, the results of which form the basis for making
          judgments about the carrying values of assets and liabilities that are
          not
          readily apparent from other sources. Actual results may differ from these
          estimates under different assumptions or conditions.
  We
          believe the following critical accounting policies reflect our more significant
          estimates and assumptions used in the preparation of our consolidated financial
          statements:
 
 REVENUE
          RECOGNITION - Sales are reported as deferred income when the sales contracts
          are
          executed and the term of the contract exceeds three months. Up to three
          months
          medication is delivered to the patient upon the signing of a contract.
          Generally
          the term of the sales contracts are up to one year, but they can be for
          longer
          periods of time. The deferred income arising from the contracts that exceed
          three months is then amortized, on a straight-line basis, into income during
          the
          approximated composite remaining medication delivery period. This approximated
          composite is an estimate that may vary from period to period.
  ALLOWANCE
          FOR DOUBTFUL ACCOUNTS - We evaluate the collectibility of our trade receivables
          based on a combination of factors. We regularly analyze our significant
          customer
          accounts, and, when we become aware of a specific customer’s inability to meet
          its financial obligations to us, such as in the case of bankruptcy filings
          or
          deterioration in the customer’s ability to pay for our services, we record a
          specific reserve for bad debt to reduce the related receivable to the amount
          we
          reasonably believe is collectible. The allowances are calculated based
          on
          detailed review of certain individual customer accounts, historical rates
          and an
          estimation of the overall economic conditions affecting our customer base.
          We
          review a customer’s credit history with the Company before extending credit. If
          the financial condition of our customers were to deteriorate, resulting
          in an
          impairment of their ability to make payments, additional allowances may
          be
          required.
  22
  INCOME
          TAXES - We record a valuation allowance to reduce our deferred tax assets
          to the
          amount that is more likely than not to be realized. We have considered
          future
          market growth, forecasted earnings, future taxable income, and prudent
          and
          feasible tax planning strategies in determining the need for a valuation
          allowance.
  CONTINGENCIES
          - We may be subject to certain asserted and unasserted claims encountered
          in the
          normal course of business. It is our belief that the resolution of these
          matters
          will not have a material adverse effect on our financial position or results
          of
          operations, however, we cannot provide assurance that damages that result
          in a
          material adverse effect on our financial position or results of operations
          will
          not be imposed in these matters. We account for contingent liabilities
          when it
          is probable that future expenditures will be made and such expenditures
          can be
          reasonably estimated.
  LONG-LIVED
          ASSETS - We periodically assesses the need to record impairment losses
          on
          long-lived assets, such as property, plant and equipment, goodwill and
          purchased
          intangible assets, used in operations and its investments when indicators
          of
          impairment are present indicating the carrying value may not be recoverable.
          An
          impairment loss is recognized when estimated undiscounted future cash flows
          expected to result from the use of the asset plus net proceeds expected
          from
          disposition of the asset (if any) are less than the carrying value of the
          asset.
          When impairment is identified, the carrying amount of the asset is reduced
          to
          its estimated fair value. Goodwill is no longer amortized and potential
          impairment of goodwill and purchased intangible assets with indefinite
          useful
          lives are evaluated using the specific guidance provided by SFAS No. 142
          and
          SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”
This impairment analysis is performed at least annually. For investments
          in
          affiliated companies that are not majority-owned or controlled, indicators
          or
          value generally include revenue growth, operating results, cash flows and
          other
          measures. Management then determines whether there has been a permanent
          impairment of value based upon events and circumstances that have occurred
          since
          acquisition. It is reasonably possible that the impairment factors evaluated
          by
          management will change in subsequent periods, given that the Company operates
          in
          a volatile environment. This could result in material impairment charges
          in
          future periods.
  **NATURE
          OF THE OPERATIONS OF THE COMPANY**
  **NATURE
          OF BUSINESS**
  We
          were
          incorporated under the name of Hawksdale Financial Visions, Inc. (sometimes
          the
“Company”) on December 6, 1996 under the laws of the State of Nevada. We
          originally had intended to time share a single family dwelling house in
          the Rum
          Cay area of the Bahamas, offering a one-twelfth fractional interest. As
          at March
          31, 1997, all funds raised by the sale of shares of $.001 par value common
          stock
          (“Common Stock”) in order to fulfill our initial objective had been expended and
          we, thereafter, become dormant. From March 31, 1997 until January 28, 2005,
          we
          were in the developmental stage and had no operations and we could be defined
          as
          a “shell” company, an entity which is generally described as having no or
          nominal operations and with no or nominal assets or assets consisting solely
          of
          cash and cash equivalents.
  On
          October 1, 2004, we formed a corporation under the laws of the State of
          Nevada
          called “Advanced Medical Institute Inc.” and on October 5, 2004, we acquired one
          hundred shares of its common stock for cash. On October 15, 2004, the subsidiary
          was merged with and into the Company and as a result of the merger, the
          Company’s corporate name was changed to “Advanced Medical Institute Inc.”
  23
  On
          January 28, 2005, we entered into a Share Exchange Agreement (the “Exchange
          Agreement”) with Advanced Medical Institute Pty Limited (since renamed AMI
          Australia Holdings Pty Limited), a privately owned Australian company (“AMI
          Australia”), and AMI Australia’s shareholders, (the “Shareholders”), pursuant to
          which the parties agreed that we would acquire all of the issued and outstanding
          shares of stock of AMI Australia in exchange for the issuance in the aggregate
          of 14,600,000, or 58.4%, of our then issued shares of Common Stock (the
          “Shares”) to the Shareholders. On March 21, 2005, we closed the transaction and
          issued our Shares, resulting in us acquiring the business of AMI Australia
          (the
“Share Exchange”), which is discussed below. As used herein, the “Company” shall
          also mean AMI Australia and its subsidiaries after the close of the Share
          Exchange when used for events after March 21, 2005, described
          herein.
  On
          November 17, 2005 (the “Second Closing Date”), we entered into a Share Exchange
          Agreement (the “Second Exchange Agreement”) with PE Patent Holdco Pty Limited, a
          privately owned Australian company (“PE Patent”), and PE’s shareholders, (the
“PE Shareholders”), pursuant to which we acquired all of the issued and
          outstanding shares of stock of PE Patent in exchange for the issuance in
          the
          aggregate of 5,000,000 of our Shares to the PE Shareholders. The issuance
          of our
          shares of common stock to the PE Shareholders was exempt from registration
          under
          the Securities Act pursuant to Section 4(2) and Regulation S. As used herein,
          the “Company” shall also mean PE Patent after the Second Closing Date when used
          for events after November 17, 2005, described herein. On November 22, 2005
          ownership of PE Patent was transferred by us to our wholly owned subsidiary
          AMI
          Australia Holdings Pty Limited.
  On
          November 22, 2005 Advanced Medical Institute Pty Limited was renamed AMI
          Australia Holdings Pty Limited and a new wholly owned subsidiary of this
          entity
          was incorporated under the name Advanced Medical Institute Pty Limited.
  On
          April
          18, 2006, the Company acquired the remaining 7% of Intelligent Medical
          Technologies Pty Limited (“IMT”) which was previously held by third parties in
          exchange for 1.26 million shares of the Company. These shares were subsequently
          transferred by the Company to AMI Australia. The issuance of our shares
          of
          common stock to the IMT Shareholders was exempt from registration under
          the
          Securities Act pursuant to Section 4(2) and Regulation S.
  In
          2003,
          IMT was granted the exclusive worldwide right and license from Sheiman
          Ultasonic
          Research Foundation Pty Limited (“SURF”) to exploit and sub-license certain
          inventions, patents and other intellectual property in relation to certain
          ultrasonic nebulizer technology within the field of the treatment of sexual
          dysfunction in men and women (including impotence, premature ejaculation
          and the
          treatment of female sexual arousal disorders). Some of these patents expire
          in
          October 2013, with the remaining patents expiring around 2023. IMT’s license was
          a broad based license which included the right to manufacture, market,
          sell and
          distribute products based on the technology and patents within the field
          of
          use.
  IMT
          also
          had the option to extend its field of use to the treatment of prostate
          diseases.
          IMT exercised its option to extend its field of use to include prostate
          diseases
          on July 15, 2006 and IMT “terminated” its license with SURF. The termination was
          because of SURF’s failure to deliver to the Company information concerning
          updates and advances on the technologies. The termination does not affect
          IMT’s
          rights to use the technology - the only effect is to terminate the royalty
          payment obligations to SURF under the license. As
          a
          result of terminating the license agreement, IMT retained the right to
          use the
          technology in its treatments to treat sexual dysfunction without paying
          royalties or other fees to SURF.
  24
  IMT
          applied for 4 worldwide patents relating to its ultrasonic nebulizer device
          in
          July 2005 and applied for 3 further worldwide patents relating to its device
          on
          February 10, 2006.
  IMT
          acquired this license in order to develop an ultrasonic nebulizer to deliver
          medications to patients’ lungs for the treatment of sexual dysfunction as it
          believes that this delivery system will be more efficient and clinically
          effective than any other alternative treatment option and will reduce dosage
          levels and the likelihood of side effects.
  IMT
          applied to list its nebulizer with the Therapeutic Goods Administration
          (the
          Australian functional equivalent of the FDA) in October 2006. IMT received
          comment letters from the TGA during March 2007 which requires it to provide
          further material in order to advance its application. IMT is in the process
          of
          dealing with the matters raised by the TGA and currently anticipates it
          will
          submit a revised application later this financial year.
  On
          September 8, 2006, the Company entered into a Share Exchange Agreement
          with
          Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
          Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
          which the Company acquired all of the issued and outstanding shares of
          stock of
          Worldwide PE in exchange for the payment of A$3 million (approximately
          $2.25
          million) and the issuance in the aggregate of 16,125,000 shares of the
          Company’s
          common stock valued at $1.00 per share.
  The
          Company funded the cash component of the purchase price by AMI Australia
          entering into two secured three year term loans in the aggregate principal
          amount of AUD3 million (approximately $2.46 million) with ANZ Nominees
          Limited
          in its capacity as custodian of the Professional Pensions PST. The loan
          is
          secured by a security interest in all of AMI Australia’s assets and undertakings
          (including its existing equity interests in PE Patent Holdco Pty Limited,
          Intelligent Medical Technologies Pty Limited, Advanced Medical Institute
          (NZ)
          Limited and Whygo Video Conferencing Pty Limited). The loans accrue interest
          at
          an annual coupon of 450 basis points above the then Australian Reserve
          Bank’s
          current cash rate (currently being an aggregate current interest rate of
          11.50%). As at December 31, 2007 the principal of the loan had been reduced
          to
          AUD2.678 million (approximately $2.35 million) as a result of prepayments
          made
          by the Company and as at February 11, 2008 the principal of the loan had
          been
          reduced to AUD2.348 million (approximately $2.06 million) as a result of
          prepayments made by the Company.
  The
          Company has been actively exploring international expansion and established
          subsidiaries in China and Japan since 2006.
  The
          Chinese subsidiary, named Ai Te Wei (Beijing) Medicine Consulting Company
          (“AMI
          China”), is an indirect, wholly owned subsidiary of the Company and has formed
          an alliance with two Beijing hospitals for the purpose of establishing
          operations and conducting clinical trials for regulatory purposes. AMI
          China has
          obtained regulatory approval to its proposed advertisements and commenced
          operations on September 4, 2006. AMI China rents premises from these hospitals
          and has agreed to give persons associated with these hospitals a 20% share
          of
          profits from AMI China’s operations.
  The
          Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), is an
          indirect, 75% owned subsidiary of the Company. AMI Japan is also partly
          owned by
          a Japanese individual who has expertise in Japanese marketing and two financial
          investors. The Japanese subsidiary commenced operations on October 1, 2006.
          The
          Japanese investor received his shareholding in AMI Japan in consideration
          for
          assisting with the establishment of AMI Japan and in consideration for
          assisting
          with the marketing and management of AMI Japan.
  The
          Company’s initial operations in China and Japan have not been as successful as
          the company anticipated and the Company has substantially reduced the nature
          and
          scope of its operations in China and Japan. The Company is investigating
          alternative marketing and distribution methods in each of China and Japan
          but
          intends to expend considerably less on these activities than it spent on
          its
          operations during the year ended June 30, 2007 until it establishes a successful
          sales and marketing platform for these markets.
  25
  On
          May 2,
          2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
          Group Limited, a privately owned company registered in the United Kingdom
          (“AMI
          UK”). The Option granted AMI UK a right to enter into an exclusive license
          to
          use Worldwide PE’s intellectual property in the United Kingdom. AMI UK paid
          Worldwide PE an upfront non-refundable fee of $50,000 to secure an initial
          period of four months to confirm the license which period was able to be
          extended for a further two months by AMI UK paying Worldwide PE a non-refundable
          extension fee of $50,000. During this initial six month period, AMI UK
          had the
          right to enter into a License Agreement (the “License”) by paying Worldwide PE
          an upfront non-refundable license fee of $1 million less the upfront fees
          paid
          to Worldwide PE prior to that date. Terms of the Option and the License
          have
          been disclosed by the Company on its Current Report on Form 8-K filed with
          the
          Securities and Exchange Commission (the “SEC”) on May 3, 2007.
  On
          September 4, 2007 AMI UK exercised its right to extend the option period
          and
          paid an extension fee of $50,000. Worldwide PE agreed to vary this extension
          period to four months rather than two months. AMI UK is currently in the
          process
          of finalizing its business plans for the UK and is continuing to discuss
          the
          license arrangements with Worldwide PE.
  General
          Business Plan
  AMI
          Australia is a company incorporated and domiciled in Australia. AMI Australia
          was established in February 2001 when it entered into an agreement with
          Health
          Services for Men and Australian Momentum Health to acquire two chains of
          medical
          clinics and sales offices which provided services relating to the medical
          treatment of sexual dysfunction. The principal activity of AMI Australia
          continues to be the sale of services relating to the medical treatment
          of sexual
          dysfunction in Australia, New Zealand and Asia, however, AMI Australia
          also
          provides prostate treatments to patients. For the second quarter ended
          December
          31, 2007, AMI Australia’s revenues were approximately $13.2 million. For the
          first quarter ended December 31, 2007, AMI Australia’s revenues were
          approximately $11.2 million.
  AMI
          Australia operates a centralized call center and twenty clinics and sales
          offices throughout Australia and New Zealand. AMI Australia operates two
          clinics
          in Beijing, China and one medical center in Tokyo, Japan as well as having
          an
          informal alliance with three other medical centers in Osaka, Nagoya and
          Okinawa.
  AMI
          Australia is a service provider company which arranges for male patients
          in
          Australia, New Zealand, China and Japan with sexual dysfunction and prostate
          problems to be provided with medical services, pharmaceuticals and associated
          clinical support services. Its treatment options include:
  (a)  injections,
          lozenges, tablets and nasal spray program options for the treatment of
          erectile
          dysfunction;
  (b)  injections,
          lozenges and nasal spray program options for the treatment of premature
          ejaculation; and
  (c)  an
          oral
          elixir program for the treatment of prostate problems.
  AMI
          Australia changed its marketing focus during fiscal 2005 to target the
          broader
          market for its premature ejaculation treatments while continuing to offer
          and
          separately market erectile dysfunction treatments. AMI Australia’s concentration
          on sales within the market for those treatments has expanded our revenue
          base.
          Prior to this time, AMI Australia did not directly advertise or market
          its
          premature ejaculation treatments and its sole focus had been on the erectile
          dysfunction market. AMI Australia’s erectile dysfunction treatments
          predominantly focus on men age 40 and over whereas AMI Australia’s premature
          ejaculation treatments are targeted at a market that includes men from
          age 18
          and over.
  26
  During
          September 2006, the Company launched AMI SCI, a not-for-profit, indirect
          wholly
          owned subsidiary of the Company which aims to provide specialized sexual
          dysfunction treatments to spinal cord victims in Australia.
  Each
          of
          AMI Australia's treatments are prescribed by licensed Australian, New Zealand,
          Chinese and Japanese doctors and prepared and delivered by an Australian,
          New
          Zealand, Chinese or Japanese compounding pharmacy in full compliance with
          the
          relevant regulatory requirements. AMI Australia's products and services
          are only
          available by prescription and are sold on an "off-label" basis. AMI Australia's
          treatments are generally available in the same manner through both its
          medical
          clinics and sales offices or through its over-the-phone sales and marketing
          program.
  Since
          August 1, 2003, AMI Australia has used in its business certain intellectual
          property owned by PE Patent on a royalty free oral license. PE Patent became
          a
          wholly owned subsidiary through a Share Exchange Agreement on November
          17, 2005
          and subsequently became a wholly owned subsidiary of AMI Australia on November
          22, 2005. These transactions are more fully described in the section entitled
          “Introduction” above. This intellectual property consists solely of the rights
          to use the relevant medical formulations in Australia, an Australian innovation
          patent for AMI Australia’s premature ejaculation treatments (Australian
          Innovation Patent No 2005100183, which is due to expire on July 9, 2012)
          and an
          Australian standard patent application (Australian standard patent application
          No. 2004222783).
  The
          Australian innovation patent was issued to Dr. Jack Vaisman, the Chief
          Executive
          Officer, President and Chairman of the Board of Directors of the Company
          and the
          Founder, President and Chief Executive Officer of AMI Australia, who on
          July 22,
          2005 transferred the patent to PE Patent, which is now a wholly owned subsidiary
          of AMI Australia. The development of the intellectual property underlying
          the
          patents and patent applications was originally undertaken and funded by
          Dr.
          Vaisman. The innovation patent, titled “Treatment of Premature Ejaculation”
relates to various methods of treatment delivery via nasal (mucosal) inhalation
          and topical application of certain formulations which are used in AMI
          Australia’s treatments for premature ejaculation. The patents and associated
          formulations are integral to AMI Australia’s premature ejaculation
          treatments.
  AMI
          Australia’s nasal spray, injection, lozenge and tablet erectile dysfunction
          treatments are not patent protected. This technology was developed by AMI
          Australia and its founder, Dr Jack Vaisman, and in connection with predecessor
          businesses during the last 14 years.
  AMI
          Australia obtains customers through direct advertising and marketing and
          through
          its existing customer database which exceeds 300,000 people.
  Each
          of
          the individual medications used in our compound formulations are fully
          approved
          by the Australian Therapeutic Goods Administration (“TGA”) and the New Zealand Medicines
          and Medical Devices Safety Authority (“NZ
          DSA”). Our compound formulations have not been subject to a clinical trial
          program and have not been approved for use by the TGA or NZ DSA for
          over-the-counter sale, but may lawfully be prescribed by accredited medical
          practitioners on an individual prescription basis in Australia and New
          Zealand.
  27
  As
          part
          of its treatments, AMI Australia arranges for a fully licensed
          Australian , New
          Zealand, Chinese and Japan pharmacy to fill its patients’ individual
          prescriptions and supply medications to those patients.
  AMI
          Australia’s wholly-owned subsidiary, Intelligent Medical Technologies Pty
          Limited (“IMT”) was granted the exclusive worldwide right and license from
          Sheiman Ultrasonic Research Foundation Pty Limited (“SURF”) to exploit and
          sub-license certain inventions, patents and other intellectual property
          in
          relation to certain ultrasonic nebulizer technology (including Australian
          Patent
          No’s 693064 and 753817, European Patent No’s 0 705 145 and 1 071 479 and US
          Patent No’s 5,908,158 and 6,379,616) within the field of the treatment of sexual
          dysfunction in men and women (including impotence, premature ejaculation
          and the
          treatment of female sexual arousal disorders). Some of these patents expire
          in
          October 2013, with the remaining patents expiring around 2023.
  IMT’s
          license was a broad based license which included the right to manufacture,
          market, sell and distribute products based on the technology and patents
          within
          the field of use. IMT also had the option to extend its field of use to
          the
          treatment of prostate diseases. IMT exercised its option to extend its
          field of
          use to include prostate diseases on July 15, 2006 and IMT “terminated” its
          license with SURF. The termination was because of SURF’s failure to deliver to
          the Company information concerning updates and advances on the technologies.
          The
          termination does not affect the Company’s rights to use the technology - the
          only effect is to terminate the royalty payment obligations to SURF under
          the
          license. As
          a
          result of terminating the license agreement, IMT retained the right to
          use the
          technology in its treatments to treat sexual dysfunction without paying
          royalties or other fees to SURF.
  IMT
          applied for four patents in various countries throughout the world relating
          to
          its ultrasonic nebulizer device in July 2005 and applied for three additional
          patents relating to its device in February 2006. On April 18, 2006, AMI
          Australia acquired the remaining 7% of the outstanding shares of IMT, making
          it
          a wholly owned subsidiary of AMI Australia.
  IMT
          acquired its right to use the SURF technology in order to develop an ultrasonic
          nebulizer to deliver medications to patients’ lungs for the treatment of sexual
          dysfunction as it believes that this delivery system will be more efficient
          and
          clinically effective than any other alternative treatment option and will
          reduce
          dosage levels and the likelihood of side effects.
  IMT
          applied to list its nebulizer with the Therapeutic Goods Administration
          (the
          Australian functional equivalent of the FDA) in October 2006. IMT received
          comment letters from the TGA during March 2007 which requires it to provide
          further material in order to advance its application. IMT is in the process
          of
          dealing with the matters raised by the TGA and currently anticipates it
          will
          submit a revised application later this financial year.
  IMT
          intends to commence a voluntary pharmacokinetic clinical trial in Australia
          of a
          liquid form of a well known medication for the treatment of erectile dysfunction
          which is capable of being delivered through the nebulizer device in order
          to
          evidence the effectiveness of the nebulizer in delivering medications during
          this calendar year. This study is designed
          to test the efficacy of using its patent protected ultrasonic nebulizer
          device
          to deliver drugs used in the treatment of sexual dysfunction. In
          April,
          2006 IMT received
          approval from the Queensland Institute of Medical Research Human Research
          Ethics
          Committee to
          conduct this clinical trial. The trial is in the process of being undertaken
          at
          the direction of and under analysis by Q-Pharm, the commercial arm of a
          leading
          Australian university, with results expected this quarter. IMT estimates
          the
          cost of this clinical trial to be approximately $180,000.
  IMT
          has
          been spending a part of its capital on research and development activities
          with
          financial support from AMI Australia (approximately USD182,000 during fiscal
          2007). IMT has compiled a team of experts to assist it with these research
          and
          development activities. AMI Australia has entered into a distribution agreement
          with IMT whereby AMI Australia has the exclusive worldwide distribution
          rights
          of the technology for sexual dysfunction treatments and is entitled to
          use any
          innovations, including those that are in a non-sexual dysfunction field,
          developed by it as a result of its research and development in connection
          with
          its nebulizer device. As at December 31, 2007, the IMT research and development
          into the efficacy of the nebulizer is still in a development stage and
          there has
          been no income generated by AMI Australia as a result of its agreement
          with
          IMT.
  28
 
  On
            September 8, 2006, the Company entered into a Share Exchange Agreement
            with
            Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately
            owned
            Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
            which the Company acquired all of the issued and outstanding shares of
            stock of
            Worldwide PE in exchange for the payment of AUD3 million (approximately
            USD2.46
            million) and the issuance in the aggregate of 16,125,000 shares of the
            Company’s
            common stock valued at $1.00 per share. The Company funded the cash component
            of
            the purchase price by AMI Australia entering into two secured three year
            term
            loans in the aggregate principal amount of AUD3 million with ANZ Nominees
            Limited in its capacity as custodian of the Professional Pensions PST.
            The loan
            is secured by a security interest in all of AMI Australia’s assets and
            undertakings (including its existing equity interests in PE Patent Holdco
            Pty
            Limited, Intelligent Medical Technologies Pty Limited, Advanced Medical
            Institute (NZ) Limited and Whygo Video Conferencing Pty Limited). The
            loans
            accrue interest at an annual coupon of 450 basis points above the then
            Australian Reserve Bank’s current cash rate (currently being an aggregate
            current interest rate of 11.50%). As at June 30, 2007, the loan had been
            reduced
            to AUD2.825 million (approximately USD2.4 million) as a result of prepayments
            made by the Company and as at February 11, 2008 the principal of the
            loan had
            been reduced to AUD2.348 million (approximately USD2.06 million) as a
            result of
            prepayments made by the Company.
  On
          February 12, 2007, the Company entered into a written agreement with the
          Heartcheck Group of companies for an indefinite term, which can be terminated
          at
          any time with not less than twelve months written notice. The Heartcheck
          Group
          includes Australian Heart Check Clinic, Heart Check Australia, Heart Check
          Medical Clinic Pty Ltd and Sydney Heart Medical Centre Pty Ltd (collectively
          defined as the “Heart Check Group”) Under the agreement, the Heartcheck Group
          agrees to utilize services provided by the Company, including the provision
          of
          staff and premises. In exchange for these services, the Heartcheck Group
          has
          agreed to reimburse the Company for all expenses associated with the provision
          of these services and to pay the company a net margin on those expenses.
          The
          Heartcheck Group is independently owned from the Company, its subsidiaries
          and
          its affiliates and it operates a business of providing cardiac related
          medical
          services in Australia.
  Competition
  We
          compete with rival treatments such as Viagra, Cialis and Levitra in the
          erectile
          dysfunction field. AMI Australia does not currently have any major competitors
          in the premature ejaculation market in Australia and New Zealand.
  Companies
          of all sizes are engaged in the development and commercialization of
          technologies in the erectile dysfunction and premature ejaculation market
          segments. Currently, no known alternate premature ejaculation technology
          similar
          to ours has been commercialized in our primary territories. Competition
          is
          intense in the erectile dysfunction segment of our business and includes
          many
          large and small competitors who have greater revenue, more customers and
          higher
          levels of brand recognition than AMI Australia. The efficacy, safety, patients’
and customers’ ease of use and cost effectiveness of our products are important
          factors for success in our principal businesses. Many of our competitors
          have
          substantially greater financial and other resources, larger research and
          development staffs and more experience in the regulatory approval process.
          Moreover, potential competitors have or may have intellectual property
          or other
          rights that conflict with patents, license agreements and other intellectual
          property rights covering our technologies .
  29
 
 Staff
  As
          of
          December 31, 2007, the Company and its operating subsidiaries had a total
          staff
          of approximately 282 people, of which 197 are full-time and 85 are part-time
          staff, working in the areas of sales and marketing, customer support, product
          development and back office functions. The Company’s staff includes 24
          independent consultants and 55 licensed medical personnel. None of the
          Company’s
          employees are members of a union or labor organization.
  None
          of
          AMI Australia’s subsidiaries have any employees except Whygo which has three
          full-time employees and 1 part-time employee, AMI NZ which has one part
          time
          employee, AMI China which has 12 full-time employees and AMI Japan which
          has
          four full-time employees.
  The
          Company’s core staff includes:
  DR.
          JACOV
          (JACK) VAISMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR - Dr. Vaisman
          has served as the Company’s Chief Executive Officer, President and as a Director
          since March 21, 2005. Dr. Vaisman is a pioneer in the sexual dysfunction
          business in Australia. Since 2001, he has served as the managing director
          and
          chief executive officer of AMI Australia. He is responsible for the overall
          management and strategic direction of AMI Australia’s impotency operations. Dr.
          Vaisman is also currently a consultant to and shareholder in Yayasan On
          Clinic,
          which operates a similar business in Indonesia. From 1993 through 2001,
          Dr.
          Vaisman was the founder and director of On Clinic International in Australia,
          the predecessor company to AMI Australia. The holder of a Bachelor of Medicine,
          a Master of Gynecology and a PhD in Medical Science, Dr. Vaisman has more
          than
          35 years of experience and expertise in the field of sexual health care
          provision and was recently granted an innovation patent in the field of
          premature ejaculation treatment by the Australian patent office.
  DILIP
          SHRESTHA, CHIEF FINANCIAL OFFICER - Mr. Shrestha was appointed as the Company’s
          Chief Financial Officer on April 7, 2005. Mr. Shrestha has also served
          as the
          chief financial officer of AMI Australia since July 1, 2005. From 2001
          to July
          1, 2005, Mr. Shrestha was the Financial Controller of AMI Australia. Prior
          to
          that he was an Assistant Accountant, a position held from 1999 until 2001,
          with
          Australian Momentum Health Pty Ltd, one of two medical establishments leading
          in
          providing impotency treatment in Australia and a predecessor company to
          AMI
          Australia. Mr. Shrestha holds a Bachelor of Business Accounting, Master
          of
          E-Commerce and a Graduate Diploma of Information System and E-Commerce
          and is a
          fully qualified certified practicing accountant in Australia.
  FORHAD
          (TONY) KHAN, EXECUTIVE VICE PRESIDENT, SECRETARY AND DIRECTOR - Mr. Khan
          has
          served as the Company’s Executive Vice President since July 30, 2005, he has
          been the Company’s Secretary and a Director since March 21, 2005. Mr. Khan also
          served as the Chief Operating Officer of AMI Australia since July 1, 2005.
          From
          2001 to July 1, 2005, Mr. Khan was the General Manager of AMI Australia.
          Prior
          to joining AMI Australia, Mr. Khan was the Director and sole operator of
          Australian Momentum Health Pty Ltd (“AMH”). Mr. Khan was Sales Manager and then
          Operations Manager for On Clinic International prior to establishing AMH.
          Mr.
          Khan holds a Masters degree in Commerce and Accounting and has been involved
          in
          the industry for over ten years.
 
 Currency
          Conversion
  As
          of
          December 31, 2007 and 2006, the accounts of AMI Australia were maintained,
          and
          its financial statements were expressed, in Australian Dollars (AUD). Such
          financial statements were translated into US Dollars (USD) in accordance
          with
          Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
          Translation”, with the AUD as the functional currency. According to the
          Statement, all assets and liabilities were translated at the exchange rate
          (AUD1
          = USD0.87670) as of December 31, 2007, stockholder’s equity are translated at
          the historical rates and income statement items are translated at the
          weighted-average exchange rate for the period. The resulting translation
          adjustments are reported under other comprehensive income in accordance
          with
          SFAS No. 130, “Reporting Comprehensive Income”.
  30
 
 The
          following table sets forth, for the periods indicated, certain operating
          information expressed as a percentage of revenue:
 
 Result
          of operations:
 
 **Three
                    Months**
                  **ended**
                  **December
                    31,**
                
                **Three
                    Months ended**
                  **December
                    31,**
                
                **Six
                    Months ended**
                  **December
                    31,**
                
                **Six
                    Months ended**
                  **December
                    31,****2007**
                
                **2006**
                
                **2007**
                
                **2006**Revenue
                100%
                
                100%
                
                100%
                
                100%Cost
                    of revenue
                21.3%
                
                22.9%
                
                22.2%
                
                22.8%Gross
                    profit
                78.7%
                
                77.1%
                
                77.8%
                
                77.2%Selling,
                    general and administrative expenses
                68.5%
                
                72.6%
                
                71.5%
                
                70.4%Other
                    income and expenses
                (0.4%)
                
                0.4%
                
                (0.4%)
                
                0.4%Income
                    before income tax
                9.8%
                
                4.9%
                
                5.9%
                
                7.2%Income
                    tax expenses
                4.1%
                
                3.9%
                
                3.1%
                
                4.1%Net
                    income
                5.7%
                
                1.0%
                
                2.8%
                
                3.1%
  **LIQUIDITY
          AND CAPITAL RESOURCES**
  As
          of
          December 31, 2007, we had total liabilities of $16,717,377 including unearned
          revenue of $5,340,856 and we had a positive net worth of $30,333,312. Our
          total
          liabilities as at December 31, 2007 included approximately $2.1 million
          in
          non-current debt and $1.7 million in deferred tax liabilities, leaving
          a balance
          of approximately $7.5 million of current liabilities (other than deferred
          revenue). These current liabilities are typically due within 30 to 90 days.
          As
          of June 30, 2007, we had total liabilities of $15,245,338 including unearned
          revenue of $5,101,288 and we had a positive net worth of
          $28,678,386.  As
          at our
          fiscal year ended June 30, 2006, we had total liabilities of $9,561,389
          including unearned revenue of $3,887,052 and we had a positive net worth
          of
          $10,497,919. As of December 31, 2006, we had total liabilities of $14,285,285
          including unearned revenue of $4,899,974 and we had a positive net worth
          of
          $28,870,755.
  Our
          aggregate cash balances as at December 31, 2007 were $1,901,152, our inventory
          was $216,760 and our net receivables were approximately $14.3 million.
          These
          receivables are due on average within 90-180 days. We forecast that we
          will be
          able to generate sufficient funds from our business in order to fund our
          operations in the ordinary course during the next 12 months. Management
          has
          expanded our business into China and Japan and is considering further
          international expansion through either establishing new sales clinic operations
          or by licensing the intellectual property for use in territories in which
          we do
          not have clinics such as our recent entry into an Option Agreement with
          AMI UK
          to license our intellectual property for the United Kingdom. Income of
          $21,717
          that was generated from the Heartcheck Group is also expected to be reinvested
          into the Company to contribute to our ongoing working capital
          needs.
  The
          Company borrowed AUD3 million from ANZ Nominees Limited in its capacity
          as
          custodian of the Professional Pensions PST. The loan is secured by a security
          interest in all of AMI Australia’s assets and undertakings (including its
          existing equity interests in PE Patent Holdco Pty Limited, Intelligent
          Medical
          Technologies Pty Limited, Advanced Medical Institute (NZ) Limited and Whygo
          Video Conferencing Pty Limited). The loans accrue interest at an annual
          coupon
          of 450 basis points above the then Australian Reserve Bank’s current cash rate
          (currently being an aggregate current interest rate of 11.50%). As at December
          31, 2007 the principal of the loan had been reduced to AUD2.678 million
          (approximately $2.35 million) as a result of prepayments made by the Company
          and
          as at February 11, 2008 the principal of the loan had been reduced to AUD2.348
          million (approximately $2.06 million) as a result of prepayments made by
          the
          Company. This loan is currently due to be repaid in September 2009.
  31
 In
          the
          event that we continue to expand our business, we may need to raise additional
          debt or equity funding in order to undertake such expansion. However, there
          can
          be no assurance that we can or will obtain sufficient funds from operations
          or
          from additional financings on terms acceptable to us. If we are unable
          to obtain
          sufficient additional financing, we may not be able to expand our operations
          as
          considered or we could be required to reduce spending and operations.
 
 **SIX
          MONTHS ENDED DECEMBER 31, 2007 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
          2006**
  *REVENUE* .
          Revenue
          was $24,376,126 in the six months ended December 31, 2007 compared to
          $20,322,223 in the six months ended December 31, 2006. Compared to the
          same
          period in the previous year, there is an increase of $4,053,903 or 19.9%
          in the
          six months ended December 31, 2007. We attribute this increase to primarily
          the
          following factors: (1) increased effectiveness of advertising campaigns;
          (2)
          increased brand name recognition; and (3) effectiveness of our products.
 
 In
          addition, our unearned revenue in the six months ending December 31, 2007
          increased by $239,568 to $5,340,856 compared to an increase of $1,012,922
          to
          $4,899,974 in the six months ending December 31, 2006. The gross increase
          in
          unearned revenue from the six months ended December 31, 2006 to the six
          months
          ended December 31, 2007 was $440,882, or an increase of 9.0%. The increase
          in
          unearned revenue in the six-month period ended December 31, 2007 is primarily
          attributable to the increase in the number of patients buying treatment
          programs
          from us than in the same period in 2006. We attribute this increase to
          the
          following factors: (1) increased advertising campaigns with improved target
          marketing in the premature ejaculation segment; (2) increased brand name
          recognition; and (3) effectiveness of our products.
  Revenue
          in AMI Australia’s PE treatments has increased by $315,352 or 2.9% to
          $11,379,997 and revenue in AMI Australia’s ED treatments has increased by
          $2,994,231 or 37.3% to $11,024,027 in the six months ending December 31,
          2007,
          compared to the six months ending December 31, 2006. The number of patients
          in
          AMI Australia’s PE treatments and ED treatments are stable compared to the six
          months ending December 31, 2006. We attribute the increase in revenue in
          our PE
          treatments and ED treatments to the increase in sales per person. Revenue
          in AMI
          Australia’s prostate treatments has increased by $490,528 or 69.8% to $1,193,716
          in the six months ending December 31, 2007, compared to the six months
          ending
          December 31, 2006. We attribute the increase in revenue in our prostate
          treatments to increased awareness and advertising of those treatments.
          The
          number of patients in AMI Australia’s prostate treatments increased by 14.0%
          compared to the six months ending December 31, 2006.
 
 Revenue
          in our Australian operations was $23,722,916 in the six months ended December
          31, 2007 compared to $19,545,093 in the six months ended December 31, 2006.
          Compared to the same period in the previous year, there is an increase
          of
          $4,177,823 or 21.4% in the six months ended December 31, 2007. We attribute
          this
          increase to the following factors: (1) increased advertising campaigns
          with
          improved target marketing in the premature ejaculation segment; (2) increased
          brand name recognition; and (3) effectiveness of our products. It is also
          attributable to significant movements in the A$:US$ exchange rate conversion
          from Australian Dollars to U.S. Dollars resulting in the reporting of
          revenue.
 
 32
  Revenue
          in our New Zealand operations was $573,372 in the six months ended December
          31,
          2007 compared to $749,912 in the six months ended December 31, 2006. The
          decrease of $176,540 or 23.5% in revenue in the six months ended December
          31,
          2007 is primarily attributable to the decrease in the number of patients
          buying
          treatments from us during the six months ended December 31, 2007 than in
          the
          same period in 2006.
 
 Revenue
          in our Chinese operations was $22,589 in the six months ended December
          31, 2007
          compared to 9,304 during the six months ended December 31, 2006. The increase
          of
          $13,285 or 142.8% in revenue in the six months ended December 31, 2007
          is
          primarily attributable to the increase in the number of patients buying
          treatments from us during the six months ended December 31, 2007 than in
          the
          same period in 2006.
 
 Revenue
          in our Japanese operations was $57,249 in the six months ended December
          31, 2007
          compared to $17,914 during the six months ended December 31, 2006. The
          Japan
          operation (AMI Japan) was established on October 1, 2006 so less income
          was
          generated during the six months ended December 31, 2006.
  ***COST
          OF REVENUE*** **.** Cost of
          revenue was $5,418,456 in the six months ended December 31, 2007 compared
          to
          $4,633,218 in the six months ended December 31, 2006. The increase in cost
          of
          revenue was attributable to an increase in the staff cost incurred by AMI
          Australia. As a percentage of revenue, cost of revenue was 22.2% in the
          six
          months ended December 31, 2007 compared to 22.8% in the six months ended
          December 31, 2006. The decrease in cost of revenue percentage by 0.6% in
          the six
          months ended December 31, 2007 is primarily attributable to the growth
          in AMI
          Australia’s revenue being larger than the growth in staff costs necessary to
          service the treatments resulting from that increased revenue.
  ***GROSS
          PROFIT.*** Gross
          profit was $18,957,670 in the six months ended December 31, 2007 compared
          to
          $15,689,005 in the six months ended December 31, 2006. As a percentage
          of
          revenue, gross profit increased to 77.8% in the six months ended December
          31,
          2007 from 77.2% in the six months ended December 31, 2006. The 0.6% increase
          in
          the gross profit percentage in the six months ended December 31 2007 is
          primarily attributable to the increase in total costs of revenue being
          less than
          the increase in total revenue.
  ***SELLING,
          GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
          general and administrative expenses were $17,421,304 in the six months
          ended
          December 31, 2007 compared to $14,314,698 in the six months ended December
          31,
          2006. As a percentage of revenue, selling, general and administrative expenses
          increased to 71.5% in the six months ended December 31, 2007 from 70.4%
          in the
          six months ended December 31, 2006. The principal reason for the increase
          of
          1.1% in the six months ended December 31, 2007 is attributable to the increase
          in total expenses being more than the increase in total revenue resulting
          from
          an higher number of sales during the period.
  Selling,
          general and administrative expenses in our Chinese operations were $394,625
          in
          the six months ended December 31, 2007 compared to $620,822 **** in
          the
          six months ended December 31, 2006. Major expenses incurred were staff
          costs and
          advertising expenses. Selling, general and administrative expenses decreased
          during this period as we decreased the size and scope of our operation
          in this
          period.
  Selling,
          general and administrative expenses in our Japanese operations were $444,113
          in
          the six months ended December 31, 2007 compared to $661,907 **** in
          the
          six months ended December 31, 2006. Major expenses incurred were staff
          costs and
          advertising expenses. Selling, general and administrative expenses decreased
          during this period as we decreased the size and scope of our operation
          in this
          period.
  33
  ***OTHER
          INCOME AND EXPENSES*** **.** Other
          income and expenses were ($95,919) in the six months ended December 31,
          2007
          compared to $93,119 in the six months ended December 31, 2006. As a percentage
          of revenue, other income and expenses decreased to (0.4%) in the six months
          ended December 31, 2007 from 0.4% in the six months ended December 31,
          2006. The
          decrease in the six months ended December 31, 2007 is due to the decrease
          in the
          income received by the Company from the Heart Check Group and the increase
          in
          interest paid resulting from the Company’s secured long term loan.
  ***NET
          INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES*** **.**
  Income
          before income tax was $1,440,447 in the six months ended December 31, 2007
          compared to $1,467,426 in the six months ended December 31, 2006. This
          decrease
          is immaterial.
  Income
          tax expenses were $755,253 in the six months ended December 31, 2007 compared
          to
          $829,715 in the six months ended December 31, 2006. As a percentage of
          revenue,
          income tax expense decreased to 3.1% in the six months ended December 31,
          2007
          from 4.1% in the six months ended December 31, 2006 which is attributable
          to the
          Company reducing its expenditures internationally. Such expenditures are
          unable
          to be offset against Australian income for tax purposes.
  ***NET
          INCOME*** **.** Net
          income was $685,194 in the six months ended December 31, 2007 compared
          to
          $637,711 in the six months ended December 31, 2006. This increase the six
          months
          ended December 31, 2007 compared to the six months ended December 31, 2006
          is
          attributable to the reduction in the Company’s losses in its China and Japan
          operations.
 
 Net
          income in our Australian operations was $1,770,349 in the six months ended
          December 31, 2007 compared to $2,105,362 **** in
          the
          six months ended December 31, 2006. The decrease in the six months ended
          December 31, 2007 compared to the six months ended December 31, 2006 is
          primarily attributable to the increase in patent amortization expenses
          during
          the six months ended December 31, 2007.
 
 Net
          loss
          in our New Zealand operations was ($222,587) in the six months ended December
          31, 2007 compared to $190,587 in the six months ended December 31, 2006.
          The
          decrease in the six months ended December 31, 2007 compared to the six
          months
          ended December 31, 2006 is attributable to a decline in customer
          numbers.
 
 Net
          loss
          in our Chinese operations was ($372,791) in the six months ended December
          31,
          2007 compared to ($611,516) **** in
          the
          six months ended December 31, 2006. The decrease in the six months ended
          December 31, 2007 compared to the six months ended December 31, 2006 is
          because
          we have reduced the size of our investment and expenditure into our China
          operations.
 
 Net
          loss
          in our Japanese operations was ($386,571) in the six months ended December
          31,
          2007 compared to ($848,786) in the six months ended December 31, 2006.
          The
          decrease in the six months ended December 31, 2007 compared to the six
          months
          ended December 31, 2006 is because we have reduced the size of our investment
          and expenditure into our Japanese operations.
 
 The
          above
          discussions of results exclude those entities which have no or what management
          deems insignificant operations.
 
 **THREE
          MONTHS ENDED DECEMBER 31, 2007 COMPARED TO THREE MONTHS ENDED DECEMBER
          31, 2006**
  *REVENUE* .
          Revenue
          was $13,167,619 in the three months ended December 31, 2007 compared to
          $9,918,553 in the three months ended December 31, 2006. Compared to the
          same
          period in the previous year, there is an increase of $3,249,066 or 32.8%
          in the
          three months ended December 31, 2007. We attribute this increase to primarily
          the following factors: (1) increased effectiveness of advertising campaigns;
          (2)
          increased brand name recognition; and (3) effectiveness of our
          products.
 
 34
  In
          addition, our unearned revenue in the three months ending December 31,
          2007
          increased by $128,613 to $5,340,856 compared to an increase of $472,944
          to
          $4,899,974 in the three months ending December 31, 2006. The gross increase
          in
          unearned revenue from the three months ended December 31, 2006 to the quarter
          ended December 31, 2007 was $440,882, or an increase of 9.0%. The increase
          in
          unearned revenue in the three-month period ended December 31, 2007 is primarily
          attributable to the increase in the number of patients buying treatment
          programs
          from us than in the same period in 2006. We attribute this increase to
          the
          following factors: (1) increased advertising campaigns with improved target
          marketing in the premature ejaculation segment; (2) increased brand name
          recognition; and (3) effectiveness of our products.
  Revenue
          in AMI Australia’s PE treatments has increased by $396,872 or 7.5% to $5,694,511
          and revenue in AMI Australia’s ED treatments has increased by $2,410,587 or
          59.7% to $6,451,475 in the three months ending December 31, 2007, compared
          to
          the three months ending December 31, 2006. The number of patients in AMI
          Australia’s PE treatments and ED treatments are stable compared to the three
          months ending December 31, 2006. We attribute the increase in revenue in
          our PE
          treatments and ED treatments to the increase in sales per person. Revenue
          in AMI
          Australia’s prostate treatments has increased by $314,366 or 106.1% to $610,530
          in the three months ending December 31, 2007, compared to the three months
          ending December 31, 2006. We attribute the increase in revenue in our prostate
          treatments to increased awareness and advertising of those treatments.
          The
          number of patients in AMI Australia’s prostate treatments increased by 9.1%
          compared to the three months ending December 31, 2006.
 
 Revenue
          in our Australian operations was $12,833,719 in the three months ended
          December
          31, 2007 compared to $9,567,670 in the three months ended December 31,
          2006.
          Compared to the same period in the previous year, there is an increase
          of
          $3,266,049 or 34.1% in the three months ended December 31, 2007. We attribute
          this increase to the following factors: (1) increased advertising campaigns
          with
          improved target marketing in the premature ejaculation segment; (2) increased
          brand name recognition; and (3) effectiveness of our products. It is also
          attributable to significant movements in the A$:US$ exchange rate conversion
          from Australian Dollars to U.S. Dollars resulting in the reporting of
          revenue.
 
 Revenue
          in our New Zealand operations was $288,714 in the three months ended December
          31, 2007 compared to $323,665 in the three months ended December 31, 2006.
          The
          decrease of $34,951 or 10.8% in revenue in the three months ended December
          31,
          2007 is primarily attributable to the decrease in the number of patients
          buying
          treatments from us during the three months ended December 31, 2007 than
          in the
          same period in 2006.
 
 Revenue
          in our Chinese operations was $15,382 in the three months ended December
          31,
          2007 compared to $9,304 during the three months ended December 31, 2006.
          The
          increase of $6,078 or 65.3% in revenue in the three months ended December
          31,
          2007 is primarily attributable to the increase in the number of patients
          buying
          treatments from us during the three months ended December 31, 2007 than
          in the
          same period in 2006.
 
 Revenue
          in our Japanese operations was $29,803 in the three months ended December
          31,
          2007 compared to $17,914 during the three months ended December 31, 2006.
          The
          Japan operation (AMI Japan) was established on October 1, 2006 so less
          income
          was generated during the three months ended December 31, 2006.
  ***COST
          OF REVENUE*** **.** Cost of
          revenue was $2,806,273 in the three months ended December 31, 2007 compared
          to
          $2,267,636 in the three months ended December 31, 2006. The increase in
          cost of
          revenue was attributable to an increase in the staff cost incurred by AMI
          Australia. As a percentage of revenue, cost of revenue was 21.3% in the
          three
          months ended December 31, 2007 compared to 22.9% in the three months ended
          December 31, 2006. The decrease in cost of revenue percentage by 1.6% in
          the
          three months ended December 31, 2007 is primarily attributable to the growth
          in
          AMI Australia’s revenue being larger than the growth in staff costs necessary to
          service the treatments resulting from that increased revenue.
  35
  ***GROSS
          PROFIT.*** Gross
          profit was $10,361,346 in the three months ended December 31, 2007 compared
          to
          $7,650,917 in the three months ended December 31, 2006. As a percentage
          of
          revenue, gross profit increased to 78.7% in the three months ended December
          31,
          2007 from 77.1% in the three months ended December 31, 2006. The 1.6% increase
          in the gross profit percentage in the three months ended December 31 2007
          is
          primarily attributable to the increase in total costs of revenue being
          less than
          the increase in total revenue.
  ***SELLING,
          GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
          general and administrative expenses were $9,015,693 in the three months
          ended
          December 31, 2007 compared to $7,198,713 in the three months ended December
          31,
          2006. As a percentage of revenue, selling, general and administrative expenses
          decreased to 68.5% in the three months ended December 31, 2007 from 72.6%
          in the
          three months ended December 31, 2006. The principal reason for the decrease
          of
          4.1% in the three months ended December 31, 2007 is attributable to the
          increase
          in total expenses being less than the increase in total revenue resulting
          from
          the higher number of sales made during the period.
  Selling,
          general and administrative expenses in our Chinese operations were $222,552
          in
          the three months ended December 31, 2007 compared to $302,971 **** in
          the
          three months ended December 31, 2006. Major expenses incurred were staff
          costs
          and advertising expenses.
  Selling,
          general and administrative expenses in our Japanese operations were $148,225
          in
          the three months ended December 31, 2007 compared to $523,027 **** in
          the
          three months ended December 31, 2006. Major expenses incurred were staff
          costs
          and advertising expenses.
  ***OTHER
          INCOME AND EXPENSES*** **.** Other
          income and expenses were ($53,879) in the three months ended December 31,
          2007
          compared to $32,928 in the three months ended December 31, 2006. As a percentage
          of revenue, other income and expenses decreased to (0.4%) in the three
          months
          ended December 31, 2007 from 0.4% in the three months ended December 31,
          2006.
          The decrease in the three months ended December 31, 2007 is due to the
          decrease
          in the income received by the Company from the Heart Check Group and the
          interest paid resulting from the Company’s secured long term loan.
  ***NET
          INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES*** **.**
  Income
          before income tax was $1,291,774 in the three months ended December 31,
          2007
          compared to $485,132 in the three months ended December 31, 2006. This
          increase
          was primarily attributable to the increase in revenue and decrease in percentage
          of costs and expenses during the three months ended December 31, 2007.
          The
          increase is also attributable to an increase in our product recognition
          and
          recognition of the “AMI” name in Australia.
  Income
          tax expenses were $545,043 in the three months ended December 31, 2007
          compared
          to $389,112 in the three months ended December 31, 2006. As a percentage
          of
          revenue, income tax expense increased to 4.1% in the three months ended
          December
          31, 2007 from 3.9% in the three months ended December 31, 2006 which is
          attributable to the increasing profitability of the Company.
  The
          Company’s income (loss) before income tax during the three most recent fiscal
          quarters were ($716,814) (March 31, 2007), ($1,301,443) (June 30, 2007)
          and
          $148,673 (September 30, 2007). The result in this quarter is a substantial
          improvement on the performance during the last three quarters with the
          improvement being due principally to the increase in revenue in Australia
          and
          the reduction in the Company’s losses in its China and Japan operations, though
          the result in the quarter ended June 30, 2007 was also affected by an impairment
          in the carrying value for the Company’s intellectual property.
  ***NET
          INCOME*** **.** Net
          income was $746,731 in the three months ended December 31, 2007 compared
          to
          $96,020 in the three months ended December 31, 2006. This increase in the
          three
          months ended December 31, 2007 compared to the three months ended December
          31,
          2006 is attributable to the increase in revenue in Australia and the reduction
          in the Company’s losses in its China and Japan operations.
  The
          Company’s net income (loss) during the three most recent fiscal quarters were
          ($722,651) (March 31, 2007), ($1,235,582) (June 30, 2007) and ($61,537)
          (September 30, 2007). The result in this quarter is a significant improvement
          on
          the performance during the last three quarters with the improvement being
          due
          principally to the increase in revenue in Australia and a reduction in
          the
          Company’s losses in its China and Japan operations, though the result in the
          quarter ended June 30, 2007 was also affected by an impairment in the carrying
          value for the Company’s intellectual property.
 
 36
  Net
          income in our Australian operations was $1,338,307 in the three months
          ended
          December 31, 2007 compared to $1,124,244 **** in
          the
          three months ended December 31, 2006. The increase in the three months
          ended
          December 31, 2007 compared to the three months ended December 31, 2006
          is
          primarily attributable to attributable to the increase in revenue and decrease
          in percentage of costs and expenses during the three months ended December
          31,
          2007.
 
 Net
          loss
          in our New Zealand operations was ($196,963) in the three months ended
          December
          31, 2007 compared to $67,070 in the three months ended December 31, 2006.
          The
          decrease in the three months ended December 31, 2007 compared to the three
          months ended December 31, 2006 is attributable to a decline in customer
          numbers.
 
 Net
          loss
          in our Chinese operations was ($207,836) in the three months ended December
          31,
          2007 compared to ($293,663) **** in
          the
          three months ended December 31, 2006. The decrease in the three months
          ended
          December 31, 2007 compared to the three months ended December 31, 2006
          is
          because we have reduced the size of our investment and expenditure into
          our
          China operations.
 
 Net
          loss
          in our Japanese operations was ($118,416) in the three months ended December
          31,
          2007 compared to ($709,906) in the three months ended December 31, 2006.
          The
          decrease in the three months ended December 31, 2007 compared to the three
          months ended December 31, 2006 is because we have reduced the size of our
          investment and expenditure into our Japanese operations.
 
 The
          above
          discussions of results exclude those entities which have no or what management
          deems insignificant operations.
 
 **OFF-BALANCE
          SHEET ARRANGEMENTS**
 
 We
          do not
          have any off-balance sheet arrangements that have or are reasonably likely
          to
          have a material current or future effect on our financial condition, changes
          in
          financial condition, revenues or expenses, results of operations, liquidity,
          capital expenditures or capital resources.
  37
  **ITEM
          3.**  **QUANTITATIVE
          AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
 
 We
          may be
          exposed to changes in financial market conditions in the normal course
          of
          business. Market risk generally represents the risk that losses may occur
          as a
          result of movements in interest rates and equity prices. We currently do
          not use
          financial instruments in the normal course of business that are subject
          to
          changes in financial market conditions.
 
 ***Currency
          Fluctuations and Foreign Currency Risk***
 
 The
          majority of our operations are conducted in Australia, except for small
          parts of
          our operations which are located in New Zealand, the United Kingdom, China
          and
          Japan. Most of our sales and purchases are conducted within Australia in
          Australian Dollars. Hence, the effect of fluctuations of exchange rate
          is
          considered minimal to our business operations as the vast majority of both
          our
          revenues and expenses are denominated in Australian dollars, which is the
          official currency of Australia.
 
 The
          Company does, however, use United States dollars for financial reporting
          purposes. Conversion of Australian Dollars into foreign currencies is regulated
          by the Reserve Bank of Australia through a unified floating exchange rate
          system. Although the Australian government has stated its intention to
          support
          the value of the Australian Dollar, there can be no assurance that such
          exchange
          rate will not become volatile or that the Australian Dollar will not devalue
          significantly against the US dollar. Exchange rate fluctuations may adversely
          affect the value, in US dollar terms, of the Company’s net assets and income
          derived from its operations in Australia. In this respect we note that
          the
          Australian dollar has strengthened significantly against the United States
          dollar over the last 3 to 6 months.
 
 ***Interest
          Rate Risk***
 
 Our
          long
          term debt is subject to a variable interest rate. The interest rate applicable
          to that debt has increased from 10.5% in September 2006 (when the facility
          commenced) to 11.50% now due to 3 increases in the official Australian
          government interest rate which the rate is based on. Market commentary
          suggests
          that further increases in this interest rate by 0.25% to 0.5% are likely
          in the
          short to medium term.
 
 ***Credit
          Risk***
 
 Our
          receivables are consumer based with a broad spread of concentration with
          average
          receivable size less than $1,500. The Company has made significant provisions
          against our receivables in line with historical collection levels. Our
          receivables are regularly monitored by our credit manager.
 38
  **ITEM
          4.**  **CONTROLS
          AND PROCEDURES**
  *Disclosure
          Controls and Procedures*
  Under
          the
          supervision and with the participation of our management, including our
          chief
          executive officer and the chief financial officer, we conducted an evaluation
          of
          the effectiveness of the design and operation of our disclosure controls
          and
          procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
          Exchange Act of 1934, as of December 31, 2007, the end of the period covered
          by
          this report (the “Evaluation Date”). Based on this evaluation, our chief
          executive officer and chief financial officer concluded as of the Evaluation
          Date that our disclosure controls and procedures were effective such that
          the
          material information required to be included in our Securities and Exchange
          Commission (“SEC”) reports is recorded, processed, summarized and reported
          within the time periods specified in SEC rules and forms relating to us
          and our
          consolidated subsidiaries, and was made known to others within those entities,
          particularly during the period when this report was being prepared.
  *Changes
          in internal controls over financial reporting*
  There
          were no significant changes in our internal controls over financial reporting
          (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
          Act
          of 1934) during the three months ended December 31, 2007 that have materially
          affected, or are reasonably likely to materially affect, the Company’s internal
          control over financial reporting.
  39
 **PART
            II -**
 **OTHER
          INFORMATION** ****
  **ITEM
          1.**  **LEGAL
          PROCEEDINGS.** ****
  As
          of
          December 31, 2007, 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
          July
          19, 2004, the Australian Competition and Consumer Commission (collectively,
          the
“ACCC”) filed a suit against AMI Australia in the Federal Court of Australia
          Sydney Registry. The ACCC claimed that a series of advertisements made
          by AMI
          Australia involving a celebrity that confessed impotence were misleading
          and
          deceptive. On August 15, 2006 the court ruled in favor of the ACCC that
          the
          advertisements were misleading and deceptive but declined to order corrective
          advertising or any pecuniary penalty other than an order that AMI Australia
          pay
          the ACCC’s costs on a party-party basis. The Company has agreed to pay $94,300
          in full settlement of these costs and fullpartial payment has been made
          with no
          further liability outstanding in relation to this matter with the balance
          has
          been paid in January 2008.
  On
          September 27, 2004, Rocco Licastro, a former patient, filed a suit against
          AMI
          Australia in the District Court of NSW, Sydney Registry. Mr. Licastro’s claims
          result from an injection therapy that Mr. Licastro claims caused physical
          injuries. AMI Australia and Mr. Licastro agreed to settle the claim on
          confidential terms on September 21, 2007 with all payments made in full
          settlement of the claim fully accrued as at December 31, 2007.
  On
          May
          25, 2007, AMI Australia commenced proceedings in the New South Wales Supreme
          Court against Channel Seven Sydney Pty Limited in respect of certain allegedly
          actionable statements made by Channel Seven. AMI Australia has alleged
          that the
          statements made involve a breach of the doctrine of injurious falsehood
          and that
          it is entitled to be compensated in damages. The proceedings are at an
          early
          stage.
  On
          December 13, 2007, AMI Australia commenced proceedings in the Federal Court
          of
          Australia Sydney Registry against Bade Medical Institute Pty Limited, Mr.
          David
          Wade, Mr. Buddy Beani and others (collectively “Bade”) alleging Bade had
          infringing 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.
          The
          orders obtained by AMI Australia require Bade to file their evidence of
          transfer
          by February 28, 2008 and AMI Australia has issued notices to produce to
          Bade in
          relation to the proceedings. Bade appear to have ceased operation since
          the
          orders were obtained. AMI Australia believes that it will be successful
          in its
          action against Bade.
  40
  **ITEM
          1A.**  **RISK
          FACTORS**
  There
          have been no material changes in our business, operations or prospects
          that
          would require a change to the Risk Factor disclosure included in our most
          recent
          Annual Report on Form 10-KSB for the year ended June 30, 2007 that have
          not
          already been disclosed.
  **ITEM
          2.**  **UNREGISTERED
          SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**
  None.
  **ITEM
          3.**  **DEFAULTS
          UPON SENIOR SECURITIES.**
  None.
  **ITEM
          4.**  **SUBMISSION
          OF MATTERS TO A VOTE OF SECURITY HOLDERS.** ****
 
 None.
  **ITEM
          5.**  **OTHER
          INFORMATION.**
  There
          have been no material changes to the procedures by which security holders
          may
          recommend nominees to the Company’s board of directors.
  41
 **ITEM
            6.**  **EXHIBITS.** ****
  The
          following exhibits are filed as part of this report:
 **Exhibit
                    Number**
                
                **Description**31.1
                
                Certification
                    of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A)
                    of the
                    Securities Exchange Act of 1934, as adopted pursuant to Section
                    302 of the
                    Sarbanes-Oxley Act of 2002.31.2
                
                Certification
                    of the Chief Financial Officer pursuant to Rule 13A-14(A)/15D-14(A)
                    of the
                    Securities Exchange Act of 1934, as adopted pursuant to Section
                    302 of the
                    Sarbanes-Oxley Act of 2002.32.1
                
                Certification
                    of Chief Executive Officer and the Chief Financial Officer Pursuant
                    to 18
                    U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
                    2002).
 42
  **SIGNATURES**
  In
          accordance with the requirements of the Exchange Act, the registrant caused
          this
          report to be signed on its behalf by the undersigned, thereunto duly
          authorized.
  **ADVANCED
                  MEDICAL INSTITUTE INC.**Date: February
                  14, 2008
                By:
                /s/ Jacov
                  (Jack) VaismanJacov
                  (Jack) VaismanChief
                  Executive OfficerDate:
                  February 14, 2008
                By:
                /s/ Dilip ShresthaDilip ShresthaChief
                      Financial Officer
 43