**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


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




___________




**FORM
      10-QSB**





**/X/QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006





**/
      /TRANSITION REPORT UNDER 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 small business issuer 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)(61)
                2 9640 5253(Issuer’s
                Telephone Number, Including Area
                Code)(Former
                Name and Address and Former Fiscal Year, if Changed
              Since
                Last Report)




Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act during the past 12 months (or for such
      shorter period that the registrant was required to file such reports), and
      (2)
      has been subject to such filing requirements for the past 90 days. YES /X/
      NO /
      /




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES / / NO / X /




There
      were 53,507,450 shares of the Issuer’s common stock outstanding on November 10,
      2006.




Transitional
      Small Business Disclosure Format (check one): YES / / NO / X /









i








**Page**PART
                I -
            FINANCIAL
                INFORMATION
            3ITEM
                1.
            FINANCIAL
                STATEMENTS (UNAUDITED)
            3ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            21ITEM
                3.
            CONTROLS
                AND PROCEDURES
            32PART
                II -
            OTHER
                INFORMATION
            33ITEM
                1.
            LEGAL
                PROCEEDINGS.
            33ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
            33ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES.
            33ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS.
            33ITEM
                5.
            OTHER
                INFORMATION.
            33ITEM
                6.
            EXHIBITS.
            34





ii




**PART
      I -**  **FINANCIAL
      INFORMATION**




**ITEM
              1.**
            **FINANCIAL
                STATEMENTS******







**ADVANCED
      MEDICAL INSTITUTE, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET**





**September
                30, 2006(unaudited)****ASSETS****CURRENT
                ASSETS**Cash
                & cash equivalent
            
            $
            985,316Receivable,
                net
            
            
            11,166,760Receivables
                due from related parties
            
            
            1,120Inventory
            
            
            245,269Other
                assets
            
            
            737,569**TOTAL
                CURRENT ASSETS**
            
            
            13,136,034**NON-CURRENT
                ASSETS**Security
                deposits
            
            
            172,955Property
                and equipment, net
            
            
            735,313Intangible
                assets, net
            
            
            26,426,779**TOTAL
                NON-CURRENT ASSETS**
            
            
            27,335,047**TOTAL
                ASSETS**
            
            $
            40,471,081**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Unearned
                revenue
            
            $
            4,427,030Accounts
                payable & accrued expenses
            
            
            4,640,882Payables
                due to related parties
            
            
            2,593Interest
                bearing liabilities - current
            
            
            195,607Provisions
                for compensated absences
            
            
            195,111Income
                taxes payable
            
            
            311,210**TOTAL
                CURRENT LIABILITIES**
            
            
            9,772,433**NON-CURRENT
                LIABILITIES**Rental
                deposit received
            
            
            3,902Interest
                bearing liabilities - non-current
            
            
            2,295,027Deferred
                tax liabilities
            
            
            1,110,690**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            3,409,619**TOTAL
                LIABILITIES**
            
            
            13,182,052**Commitments
                & Contingency**
            
            
            -**STOCKHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share,90,000,000
                shares authorized,53,507,450
                issued and outstanding
            
            
            53,507Additional
                paid in capital
            
            
            24,149,420Other
                comprehensive loss
            
            
            (80,064
            )Retained
                earnings
            
            
            3,166,166**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            27,289,029**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            40,471,081





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





3


**ITEM
      1.**  **FINANCIAL
      STATEMENTS (CONTINUED)**





**ADVANCED
      MEDICAL INSTITUTE, INC. AND SUBSIDIARIES**


**CONSOLIDATED** **STATEMENTS
      OF INCOME**





**Three
                Month Periods Ended****September
                30, 2006****(unaudited)**
            
            **September
                30, 2005****(unaudited)****NET
                REVENUE**
            
            $
            10,403,670
            
            $
            5,094,700**COST
                OF REVENUE**
            
            
            (2,365,582
            )
            
            (1,910,514
            )**GROSS
                PROFIT**
            
            
            8,038,088
            
            
            3,184,186**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            (7,285,713
            )
            
            (3,558,002
            )**OPERATING
                INCOME (LOSS)**
            
            
            752,375
            
            
            (373,816
            )**OTHER
                INCOME AND (EXPENSE)**Rental
                income
            
            
            4,561
            
            
            12,933Bank
                interest
            
            
            20,359
            
            
            2,691Other
                income
            
            
            26,122
            
            
            379Management
                fee income
            
            
            181,182
            
            
            -Interest
                expense
            
            
            (2,305
            )
            
            (1,246
            )Minority
                interest
            
            
            -
            
            
            4,527**TOTAL
                OTHER INCOME**
            
            
            229,919
            
            
            19,284**NET
                INCOME (LOSS) BEFORE INCOME TAXES**
            
            
            982,294
            
            
            (354,532
            )INCOME
                TAX EXPENSE
            
            
            (440,603
            )
            
            127,473NET
                INCOME (LOSS)
            
            
            541,691
            
            
            (227,059
            )Other
                Comprehensive item - Foreign currency translation income
            
            
            124,419
            
            
            1,185**Net
                Comprehensive Income (Loss)**
            
            **$**
            **666,110**
            
            **$**
            **(225,874**
            **)****Net
                income (loss) per share, basic & diluted**
            
            **$**
            **0.01**
            
            **$**
            **(0.01**
            **)****Weighted
                average number of shares, basic and diluted**
            
            
            **40,865,506**
            
            
            **31,122,450**





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





4





**ITEM
      1.**  **FINANCIAL
      STATEMENTS (CONTINUED)**





**ADVANCED
      MEDICAL INSTITUTE, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Three
                Month Periods Ended****September
                30, 2006****(unaudited)**
            
            **September
                30, 2005****(unaudited)****Cash
                Flows from Operating Activities**Receipts
                from Customers
            
            $
            7,473,589
            
            $
            4,874,955Interest
                Received
            
            
            20,359
            
            
            2,691Payment
                to Suppliers & Employees
            
            
            (6,537,399
            )
            
            (4,578,659
            )Income
                Tax Paid
            
            
            (226,370
            )
            
            -**Net
                cash provided by operating activities**
            
            
            730,179
            
            
            298,987**Cash
                Flows from Investing Activities**Acquisition
                of subsidiaries
            
            
            (2,258,100
            )
            
            -Payment
                for Property, Plant & Equipment
            
            
            (118,113
            )
            
            (10,839
            )Payment
                for Intellectual Properties
            
            
            (24,689
            )
            
            (33,652
            )Loans
                to related entities
            
            
            (814,206
            )
            
            (755
            )Payment
                for security deposit
            
            
            (228
            )
            
            (5,218
            )**Net
                cash used in investing activities**
            
            
            (3,215,336
            )
            
            (50,464
            )**Cash
                Flows From Financing Activities**Collection
                of Note Receivable
            
            
            150,771
            
            
            150,771Interest
                & Other Finance costs paid
            
            
            (2,305
            )
            
            (1,246
            )Proceeds
                from Borrowings
            
            
            2,258,100
            
            
            -Repayment
                of Borrowings
            
            
            (48,175
            )
            
            (115,219
            )Dividend
                Payment
            
            
            (37,994
            )
            
            -**Net
                cash provided by financing activities**
            
            
            2,320,397
            
            
            34,306Net
                (decrease) increase in cash and cash equivalents
            
            
            (164,760
            )
            
            282,829Effect
                of exchange rate on cash
            
            
            46,833
            
            
            1,518Cash
                and cash equivalents at beginning of period
            
            
            1,103,243
            
            
            295,961**Cash
                and cash equivalents at end of period**
            
            **$**
            **985,316**
            
            **$**
            **580,308**





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





5


**ITEM
      1.**  **FINANCIAL
      STATEMENTS (CONTINUED)**





**ADVANCED
      MEDICAL INSTITUTE, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)**





**Three
                Month Periods Ended****September
                30, 2006****(unaudited)**
            
            **September
                30, 2005****(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**
            
            $
            985,316
            
            $
            580,308**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                Income (Loss)**
            
            $
            541,691
            
            $
            (231,586
            )**Non-Cash
                Flows in Profit from Ordinary Activities**Depreciation
            
            
            170,660
            
            
            21,764Provision
                for doubtful accounts
            
            
            1,386,021
            
            
            199,375Minority
                interest
            
            
            (2,825
            )
            
            -**Cash
                Flows in Profit from Financing Activities**Interest
                & Other Finance costs paid
            
            
            2,305
            
            
            1,246**Changes
                in Assets and Liabilities**Increase
                in inventories
            
            
            (37,047
            )
            
            -Increase
                in receivables
            
            
            (3,270,877
            )
            
            (1,502,848
            )Increase
                in unearned revenue
            
            
            458,968
            
            
            1,279,819Increase
                in payables
            
            
            1,135,181
            
            
            778,248Decrease
                in provisions for compensated absences
            
            
            -
            
            
            (87,351
            )Increase
                (Decrease) in deferred tax liabilities
            
            
            207,579
            
            
            (159,202
            )Increase
                (Decrease) in income tax payable
            
            
            138,523
            
            
            (478
            )**Cash
                Flows Provided by Operating Activities**
            
            **$**
            **730,179**
            
            **$**
            **298,987****Supplemental
                Cash Flow Disclosures:**Interest
                paid
            
            $
            2,305
            
            $
            1,246Income
                tax paid
            
            $
            87,926
            
            $
            43,280**Non-Cash
                Investing/Financing Activities:**Stock
                issued in acquisition
            
            $
            16,125,000
            
            $
            -





The
      accompanying notes are an integral part of these financial
      statements





6


**ADVANCED
      MEDICAL INSTITUTE, INC.**


**AND
      SUBSIDIARIES**





**NOTES
      TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006**





**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 and New Zealand. 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-two clinics and
      sales offices throughout Australia and New Zealand. AMI China, a wholly owned
      subsidiary of the Company, operates a clinic in Beijing, China and AMI Japan,
      a
      75% subsidiary of the Company, operates a clinic in Tokyo, Japan.





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).





The
      patents relate to various methods of treatment delivery via nasal (mucosal)
      inhalation and topical application of certain formulations which are used in
      AMI
      Australia’s treatment programs for premature ejaculation. The patents and
      associated formulations are integral to those treatment programs.





AMI
      Australia’s nasal spray, injection, lozenge and tablet impotence and erectile
      dysfunction treatment programs 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. As of March 31, 2006, the Company
      owned 93% of IMT.





7


**1.**  **NATURE
      OF BUSINESS (Continued)**







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 is
      a broad based license which includes the right to manufacture, market, sell
      and
      distribute products based on the technology and patents within the field of
      use.
      IMT also has the option to extend its field of use to the treatment of prostate
      diseases on payment of AU$1. 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.





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 10.5%).





The
      Company has been actively exploring international expansion into a range of
      jurisdictions and recently established subsidiaries in China and
      Japan.





The
      Chinese subsidiary is an indirect wholly owned subsidiary of the Company and
      the
      Chinese entity has formed an alliance with a Beijing hospital for the purpose
      of
      establishing operations and conducting clinical trials for regulatory purposes.
      The Company’s Chinese subsidiary has obtained regulatory approval to its
      proposed advertisements and commenced operations on September 4,
      2006.





The
      Japanese subsidiary is an indirect 75% owned subsidiary of the Company. The
      Japanese subsidiary has formed an alliance with a Japanese party with expertise
      in marketing in the Japanese market and two financial investors. The
      Japanese subsidiary commenced operations on October 1, 2006.








8




**1.**  **NATURE
      OF BUSINESS (Continued)**





Subsidiaries









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, Worldwide PE Patent Holdco, 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 Patent Holdco 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 contributes 4.2% of AMI Australia’s consolidated
      revenue.




AMI
      Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
      conferencing services across Australia and in
      various locations around
      the world. Whygo uses some of AMI Australia clinic facilities and pays room
      hire
      fees for the usage. James Matthews, a director of Whygo, holds the remaining
      50%
      of the outstanding shares of Whygo.







9


**1.**  **NATURE
      OF BUSINESS (Continued)**







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.




AMI
      China
      conducts the Company’s business in China. AMI China commenced advertising of its
      services on September 4, 2006 and is in the early stages of its
      operations.




AMI
      Japan
      conducts the Company’s business in Japan. AMI Japan commenced advertising of its
      services on October 1, 2006 and is in the early stages of its
      operations.




During
      September 2006, AMI launched a not for profit unit entity named “AMI SCI” which
      provides, as part of its community services program, specialized sexual
      dysfunction treatment programs to spinal cord victims in Australia. This unit
      is
      in its early stages of development and details regarding its services and
      operation are located at rocketlaunch.com.au.





**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:





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 subsidiary, AMI Australia Holdings Pty Limited, and its direct
      and
      indirect wholly-owned subsidiaries: Advanced Medical Institute Pty Ltd, PE
      Patent Holdco Pty Limited (“PE”), Worldwide PE Patent Holdco Pty Limited
      (“Worldwide PE”), Advanced Medical Institute (NZ) Limited (“AMI NZ”), AMI
      Management Services Pty Limited, Intelligent Medical Technologies Pty Ltd
      (“IMT”) and AMI China, its 75% owned subsidiary AMI Japan 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.




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.








10








Exchange
      Gain (Loss)




During
      the fiscal year ended September 30, 2006 and 2005, 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
      September 30, 2006 and 2005, the accounts of AMI Australia and its subsidiaries
      were maintained and its financial statements were expressed in Australian
      Dollars (AUD). Such financial statements were translated into 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 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).





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 income (loss)
      per share for all periods presented has been restated to reflect the adoption
      of
      SFAS No. 128. Basic net income (loss) per share is based upon the weighted
      average number of common shares outstanding. Diluted net income (loss) per
      share is based on the assumption that all dilutive convertible shares and stock
      options were converted or exercised. Dilution is computed by applying the
      treasury stock method. Under this method, options and warrants are assumed
      to be
      exercised at the beginning of the period (or at the time of issuance, if later),
      and as if funds obtained thereby were used to purchase common stock at the
      average market price during the period.





**RECENT
      PRONOUNCEMENTS**





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAS No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006. Management believes that this statement will not
      have
      a significant impact on the financial statement..





11


In
      March
      2006 FASB issued SFAS No. 156 ‘Accounting for Servicing of Financial Assets’
this Statement amends SFAS No. 140, Accounting for Transfers and Servicing
      of
      Financial Assets and Extinguishments of Liabilities, with respect to the
      accounting for separately recognized servicing assets and servicing liabilities.
      This Statement:




1.
              Requires
                  an entity to recognize a servicing asset or servicing liability
                  each time
                  it undertakes an obligation to service a financial asset by entering
                  into
                  a servicing contract.




2.
              Requires
                  all separately recognized servicing assets and servicing liabilities
                  to be
                  initially measured at fair value, if practicable.




3.
              Permits
                  an entity to choose ‘Amortization method’ or Fair value measurement
                  method’ for each class of separately recognized servicing assets and
                  servicing liabilities:




4.
              At
                  its initial adoption, permits a one-time reclassification of
                  available-for-sale securities to trading securities by entities
                  with
                  recognized servicing rights, without calling into question the
                  treatment
                  of other available-for-sale securities under Statement 115, provided
                  that
                  the available-for-sale securities are identified in some manner
                  as
                  offsetting the entity’s exposure to changes in fair value of servicing
                  assets or servicing liabilities that a servicer elects to subsequently
                  measure at fair value.




5.
              Requires
                  separate presentation of servicing assets and servicing liabilities
                  subsequently measured at fair value in the statement of financial
                  position
                  and additional disclosures for all separately recognized servicing
                  assets
                  and servicing liabilities.




This
      Statement is effective as of the beginning of the Company’s first fiscal year
      that begins after September 15, 2006. Management is currently evaluating the
      effect of this pronouncement on financial statements.




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:






12


a.  A
      brief
      description of the provisions of this Statement




b.  The
      date
      that adoption is required




c.  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.








**3.**
            **PROPERTY,
                PLANT AND EQUIPMENT**





Property,
      plant and equipment comprised of the following as of September 30,
      2006:


Leasehold
                improvements
            
            $
            323,328Less:
                Accumulated depreciation
            
            
            48,649274,679Motor
                Vehicles
            
            
            44,285Less:
                Accumulated Depreciation
            
            
            19,91024,375Office
                Furniture & Equipment
            
            
            324,545Less:
                Accumulated Depreciation
            
            
            60,168264,377Computer
                Hardware
            
            
            281,917Less:
                Accumulated Depreciation
            
            
            150,942130,975Low
                Value Pooled Fixed Assets
            
            
            114,815Less:
                Accumulated Depreciation
            
            
            73,90840,907**Total
                Property, Plant and Equipment**
            
            **$**
            **735,313**






**4.**
            **INTEREST
                BEARING LIABILITIES**





Interest
      bearing liabilities comprised of the following as of September 30,
      2006:





**Current,
                as of the period ended September 30, 2006**Capitalized
                lease liability
            
            $
            46,247Unsecured
                loan
            
            
            149,360**$**
            **195,607****Non-current,
                due as of the period ended September 30,**Capitalized
                lease liability2007
            
            $
            47,4752008
            
            
            7,15254,627Secured
                loan
            
            
            2,240,400Total
                non-current
            
            **$**
            **2,295,027**




13


The
      interest bearing liabilities require monthly payments of principal and interest
      at a per annum interest rate ranging from 7.4% to 13.8%. Obligations under
      the
      notes are secured by the financed assets included in property and equipment.
      The
      secured loan is secured over all of AMI Australia’s assets and
      undertakings.







**5.****LEGAL
                PROCEEDINGS**







As
      of
      September 30, 2006, there was no litigation pending or threatened by or against
      the Company or any of its subsidiaries except as follows:




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 estimated a cost of
      settlement of $65,709 which is accrued as of September 30, 2006.




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. Mr. Licastro is seeking damages including medical expenses, but no
      amount has been specified to date. These proceeding are in an early stage.
      AMI
      Australia has denied the allegations and is vigorously defending this
      suit.





**6.****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:




Due
                during the twelve months period ended September 30,2007
            
            $
            513,9432008
            
            
            361,1872009
            
            
            221,1562010
            
            
            30,215**$**
            **1,126,501**





Rent
      paid
      for the three months ended September 30, 2006 and 2005 was $374,388 and
      $284,771, respectively.





**7.**  **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.








14





**8.**  **SHARE
      EXCHANGE AGREEMENTS**





On
      September 8, 2006 (the “Fourth Closing Date”), 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 after
      the Fourth Closing Date 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 10.5%).




**9.****RELATED
                PARTY TRANSACTIONS**


Related
        parties comprised of the following as
        of
        September 30, 2006:


***Forhad
                (Tony) Khan***Relationship:Director of the parent entityPayable
                to this related party
            
            $
            2,593***Jack
                Vaisman********(an
                AU citizen)***Relationship:
                Director of the CompanyDirector
                salary from AMI Australia
            
            $
            58,084***James
                Matthews********(an
                AU citizen)***Relationship:
                Director of the subsidiary (Whygo)Director
                salary
            
            $
            11,170***Prostate
                Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                from this related party
            
            $
            1,120***Zinalda
                Vaisman********(an
                AU citizen)***Relationship:
                Jack Vaisman’s wifeSalary
            
            $
            12,064




Total
        receivables due from related parties included in the Company’s statement of
        financial position was $1,120 and $70,903 as of September 30, 2006 and September
        30, 2005, respectively.
 
 Total
        accounts payable to related parties included in the Company’s statement of
        financial position was $2,593 and $0 as of September 30, 2006 and September
        30,
        2005, respectively.
 
 15
 Receivables
        from, and payables to, related parties are unsecured, interest-free and are
        due
        on demand.


**10.**  **CONTINGENT
      LIABILITY**





A
      dispute
      with a previous telecommunication carrier over billing in the amount of $122,924
      arose in 2002. Since the time that AMI Australia filed a counter claim of
      $550,904 against the carrier in 2003, 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. The financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





**11.**  **ACQUISITION**





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, or 30.14%, of the
      Company’s then issued shares of Common Stock to the shareholders of Worldwide PE
      Patent Holdco.








**12.**  **OTHER
      COMPREHENSIVE INCOME (LOSS)**





Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity, at September 30, 2006 and June
      30, 2006, are as follows:





*Foreign
                Currency Translation Adjustment*
            
            *Accumulated
                Other Comprehensive Income*Balance
                at June 30, 2006
            
            $
            (204,483
            )
            $
            (204,483
            )Change
                for three months ended September 30, 2006
            
            
            124,419
            
            
            124,419Balance
                at September 30, 2006
            
            $
            (80,064
            )
            $
            (80,064
            )







16


**ITEM
      2.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**




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, 2006.




**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




The
      statements contained in this Form 10-QSB 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.




17


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




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




LONG-LIVED
      ASSETS - We periodically assesses the need to record impairment losses on
      long-lived assets, such as property, plant and equipment, goodwill and purchased
      intangible assets, used in operations and its investments when indicators of
      impairment are present indicating the carrying value may not be recoverable.
      An
      impairment loss is recognized when estimated undiscounted future cash flows
      expected to result from the use of the asset plus net proceeds expected from
      disposition of the asset (if any) are less than the carrying value of the asset.
      When an 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.”




18


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 is
      a broad based license which includes the right to manufacture, market, sell
      and
      distribute products based on the technology and patents within the field of
      use.
      IMT also has the option to extend its field of use to the treatment of prostate
      diseases on payment of AU$1. 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.




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 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 10.5%).




19


The
      Company has been actively exploring international expansion and recently
      established subsidiaries in China and Japan.




The
      Chinese subsidiary, named AMI China, is an indirect, wholly owned subsidiary
      of
      the Company and has formed an alliance with a Beijing hospital 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 this hospital and has agreed to give persons associated with
      the
      hospital a 20% share of profits from AMI China’s operations.




The
      Japanese subsidiary, named 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 2 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.




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 and New Zealand. For the first quarter ended September
      30, 2006, AMI Australia’s revenue was approximately $10.4 million.




The
      Company operates a centralized call center and twenty-two clinics and sales
      offices throughout Australia and New Zealand. On September 4, 2006, the Company
      opened a location in Beijing, China and on October 1, 2006 the Company opened
      a
      location in Tokyo, Japan. The results of operations from Japan are not reflected
      in this report.




The
      Company is a service provider company which arranges for male patients in
      Australia, New Zealand, China and Japan with sexual dysfunction to be provided
      with medical services, pharmaceuticals and associated clinical support services.
      Its treatment program options include:




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




(b)  injections,
      lozenges and nasal spray program options for the treatment of premature
      ejaculation.




AMI
      Australia changed its marketing focus during fiscal 2005 to target the broader
      market for its premature ejaculation treatment programs while continuing to
      offer and separately market erectile dysfunction treatment programs. AMI
      Australia’s concentration on sales within the market for those treatment
      programs has expanded our revenue base. Prior to this time, AMI Australia did
      not directly advertise or market its premature ejaculation treatment programs
      and its sole focus had been on the erectile dysfunction market. AMI Australia’s
      erectile dysfunction treatment programs predominantly focus on men age 40 and
      over whereas AMI Australia’s premature ejaculation treatment programs are
      targeted at a market that includes men from age 18 and over.




20


During
      March 2006, AMI Australia commenced trialing prostate treatments for men with
      prostate problems. Those treatments generated approximately 3.9% of AMI
      Australia’s revenue during the quarter ended September 30, 2006 ($407,024),
      however it is too early to assess whether these treatments options will
      contribute significantly to AMI Australia’s revenue or profitability in the
      longer term.




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 treatment programs are prescribed by licensed Australian and
      New
      Zealand doctors and prepared and delivered by an Australian or a New Zealand
      compounding pharmacy in full compliance with the respective Australian and
      New
      Zealand regulatory requirements. AMI Australia's products and services are
      only
      available by prescription and are sold on an "off-label" basis. AMI Australia's
      treatment programs are generally available in the same manner through 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 Holdco on a royalty free oral license. PE Patent
      Holdco 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 “Nature of Business” 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 treatment programs (Australian Innovation Patent No 2005100183,
      which is due to expire on July 9, 2012) and an Australian standard patent
      application (Australian standard patent application No.
      2004222783).




The
      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 Holdco. The development of the
      intellectual property underlying the patents was 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 treatment programs for premature ejaculation. The patents and
      associated formulations are integral to AMI Australia’s premature ejaculation
      treatment programs.




AMI
      Australia’s nasal spray, injection, lozenge and tablet erectile dysfunction
      treatment programs 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 13 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.




As
      part
      of its treatment programs, AMI Australia arranges for a fully licensed
      Australian or New Zealand pharmacy to fill its patients’ individual
      prescriptions and supply medications to those patients.




21


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 treatment programs 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 program option and
      will reduce dosage levels and the likelihood of side effects.




IMT
      has
      completed development of 15 working prototypes of its nebulizer device and
      is in
      the process of manufacturing a further 5 prototypes in connection with its
      application to list its device with the TGA. The ten prototypes which were
      completed by IMT in the first quarter of calendar 2006 are suitable for
      commercialization and such prototypes formed the basis of IMT’s application to
      list the device with the TGA.




IMT
      has
      received advice from Brandwood Biomed Pty Limited, an Australian regulatory
      expert on TGA requirements that IMT does not need to conduct clinical trials
      to
      list its device with the TGA. IMT filed its application to list its device
      during October 2006 and expects the application to be dealt with in the next
      3
      to 6 months.




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 and plans to conduct the trial at the direction
      of
      and under analysis by Q-Pharm, the commercial arm of a leading Australian
      university. IMT estimates the cost of this clinical trial to be approximately
      $180,000.




IMT
      has
      been spending a large portion of its capital on research and development
      activities with financial support from AMI Australia (approximately USD284,000
      during fiscal 2005, and approximately USD205,000 during fiscal 2006). 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 September 30, 2006, 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.




22


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 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
      10.5%).




Competition





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





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. 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.





Staff





As
      of
      September 30, 2006, the Company and its operating subsidiaries had a total
      staff
      of approximately 341 people, of which 228 are full-time and 113 are part-time
      staff, working in the areas of sales and marketing, customer support, product
      development and back office functions. Of the 341 people, AMI Australia’s staff
      includes 26 independent consultants and 50 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 one part-time employee, AMI NZ which has 1 full-time
      employees and AMI China which has 16 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.




23


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.




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. 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
      September 30, 2006 and 2005, 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
      = USD0.74680) as of September 30, 2006, stockholder’s equity are translated at
      the historical rates and income statement items are translated at the
      weighted-average exchange rate for the period. The resulting translation
      adjustments are reported under other comprehensive income in accordance with
      SFAS No. 130, “Reporting Comprehensive Income”.




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






Result
      of operations:




**Three
                months ended**
              **September,****2007**
            
            **2006**Revenue
            
            
            100
            %
            
            100
            %Cost
                of Revenue
            
            
            22.7
            %
            
            37.5
            %Gross
                Profit
            
            
            77.3
            %
            
            62.5
            %Selling,
                General and administrative expenses
            
            
            70.0
            %
            
            69.8
            %Other
                income and expenses
            
            
            2.1
            %
            
            0.3
            %Income
                before income tax
            
            
            9.4
            %
            
            (7.0
            %)Income
                tax expenses
            
            
            4.2
            %
            
            (2.5
            %)Net
                Income
            
            
            5.2
            %
            
            (4.5
            %)




24


**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      September 30, 2006, we had total liabilities of $13,182,052 including unearned
      revenue of $4,427,030 and we had a positive net worth of $27,289,029. As of
      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 at September
      30,
      2006 our total current assets were $13,136,034, our total current liabilities
      were $9,772,433 and our net current assets were $3,363,601.




Our
      aggregate cash balances as at September 30, 2006 were $985,316. 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
      is
      expanding our business into China and Japan and is considering further
      international expansion. 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.




**THREE
      MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30,
      2005**




***REVENUE*** **.** Revenue
      was $10,403,670 in the three months ended September 30, 2006 compared to
      $5,094,700 in the three months ended September 30, 2005, an increase of
      $5,308,970 or 104.2%. The increase in revenue in the three-month period is
      primarily attributable to the increase in the number of patients buying
      treatment programs from us during the three months ended September 30, 2006
      than
      in the same period in 2005. 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.




In
      addition, our unearned revenue in the three months ending September 30, 2006
      increased by $539,978 to $4,427,030 compared to an increase of $1,284,428 to
      $3,087,472 in the three months ending September 30, 2005. The gross increase
      in
      unearned revenue from the quarter ended September 30, 2005 to the quarter ended
      September 30, 2006 was $1,339,558, or an increase of 43.4%. The increase in
      unearned revenue in the three-month period ended September 30, 2006 is primarily
      attributable to the increase in the number of patients buying treatment programs
      from us than in the same period in 2005. 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 treatment programs has increased by $3,150,512 or 128% to
      $5,609,624 and revenue in AMI Australia’s ED treatment programs has increased by
      $1,677,633 or 68% to $4,146,290 in the three months ending September 30, 2006,
      compared to the three months ending September 30, 2005. The number of patients
      in AMI Australia’s PE and ED treatment programs increased by 56% and 15%
      respectively compared to the three months ending September 30,
      2005.




25


***COST
      OF REVENUE*** **.** Cost of
      revenue increased to $2,365,582 in the three months ended September 30, 2006
      compared to $1,910,514 in the three months ended September 30, 2005 primarily
      as
      a result of an increase in the number of staff employed by AMI Australia, which
      additional people were needed to service and sell the additional number of
      PE
      and ED treatment programs that were sold by AMI Australia during this period.
      As
      a percentage of revenue, cost of revenue was 22.7% in the three months ended
      September 30, 2006 compared to 37.5% in the three months ended September 30,
      2005. The decrease in the cost of revenue percentage by 14.8% is primarily
      attributable to the growth in AMI Australia’s revenue being greater than the
      growth in staff costs necessary to service the treatment programs resulting
      from
      that increased revenue.




***GROSS
      PROFIT.*** Gross
      profit was $8,038,088 in the three months ended September 30, 2006 compared
      to
      $3,184,186 in the three months ended September 30, 2005. As a percentage of
      revenue, gross profit increased to 77.3% in the three months ended September
      30,
      2006 from 62.5% in the three months ended September 30, 2005. The 14.8% increase
      in the gross profit percentage is primarily attributable to the growth in AMI
      Australia’s revenue and improvements in our margins due to the increase in total
      costs being less than the increase in total revenue. This is primarily due
      to a
      range of our expenses (such as rent) being fixed costs, unaffected by revenue
      levels.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $7,285,713 in the three months ended
      September 30, 2006 compared to $3,558,002 in the three months ended September
      30, 2005. As a percentage of revenue, selling, general and administrative
      expenses increased to 70.0% in the three months ended September 30, 2006 from
      69.8% in the three months ended September 30, 2005. The 0.2% increase as a
      percentage of revenue has increased because we have invested resources into
      setting up our China and Japan operations prior to expanding the business into
      those countries. The substantial increase in selling, general and administrative
      expenses since the three months ended September 30, 2005 is due to extensive
      growth in the Company’s business over the last 12 months and management notes
      that the growth in expenses was less than the growth in revenue during that
      period.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $229,919 in the three months ended September 30, 2006
      compared to $19,284 in the three months ended September 30, 2005. As a
      percentage of revenue, other income and expenses increased to 2.1% in the three
      months ended September 30, 2006 from 0.3% in the three months ended September
      30, 2005. The increase is due to the management income received during the
      three
      months ended September 30, 2006.




***NET
      INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES*** **.**




Income
      before income tax was $982,294 in the three months ended September 30, 2006
      compared to ($354,532) in the three months ended September 30, 2005. This
      increase was attributable to the increase in revenue resulting from additional
      advertising expenditure and decrease in percentage of costs and expenses during
      the three months ended September 30, 2006. The increase is also attributable
      to
      an increase in our product recognition and recognition of the “AMI” name in
      Australia.




Income
      tax expenses were $440,603 in the three months ended September 30, 2006 compared
      to ($127,473) in the three months ended September 30, 2005. This increase is
      primarily attributable to the increase in income during the three months ended
      March 31, 2006. As a percentage of revenue, income tax expense rose to 4.2%
      from
      (2.5%) which is attributable to the increasing profitability of the Company.
      Australian corporate tax is assessed nationally at 30% of net profit before
      tax.




***NET
      INCOME*** **.** Net
      income was $541,691 in the three months ended September 30, 2006 compared to
      ($227,059) **** in
      the
      three months ended September 30, 2005. This increase is attributable to the
      reasons set forth above related to the increase in our gross profit percentage,
      while at the same time maintaining our selling, general and administrative
      expenses at a nearly consistent level compared to sales.




26


**ITEM
      3.**  **CONTROLS
      AND PROCEDURES** ****




Evaluation
      of Disclosure on Controls and Procedures .





Under
      the
      supervision and with the participation of our management, including the
      principal executive officer and the principal accounting 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 the end of the period covered by this
      report (the “Evaluation Date”). Based on this evaluation, our principal
      executive officer and principal accounting 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 accumulated and communicated to
      management (including such officers) as appropriate to allow timely decisions
      regarding required disclosure and recorded, processed, summarized and reported
      within the time periods specified in SEC rules and forms relating to the
      Company, including our consolidated subsidiaries.





Changes
      in Internal Control Over Financial Reporting .




Additionally,
      there were no changes in our internal control over financial reporting that
      during the period covered by this Quarterly Report on Form 10-QSB has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.




27


**PART
      II -**  **OTHER
      INFORMATION** ****




**ITEM
              1.**
            **LEGAL
                PROCEEDINGS.******




None.




**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.**




None.




28


**ITEM
              6.**
            **EXHIBITS.******




**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).







29


**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:
              November 17, 2006
            By:
            /s/ Jacov
              (Jack) VaismanJacov
              (Jack) VaismanChief
              Executive Officer




Date:
              November 17, 2006
            By:
            /s/ Dilip
              ShresthaDilip
              ShresthaChief
                Financial Officer













30