UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON D.C. 20549









FORM
10-Q




x
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934


For
the quarterly period ended September 30, 2009





or





o
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934


For
the transition period from           
               
to




Commission
File Number: 000-29531





ADVANCED
MEDICAL INSTITUTE INC.


(Exact
Name of Registrant as Specified in Its Charter)





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





Level 4, Terrace Tower, 80 William
      Street
                  Sydney, NSW
                  Australia 2000(Address
      of Principal Executive Offices) (Zip
Code)




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




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





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


Yes x     No  
o




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




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





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




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





There were 53,507,450
shares of the Registrant’s Common Stock issued and outstanding on
November 23, 2009.











TABLE OF
CONTENTS





PagePart
      I.
                Financial
      Information
                3Item
      1. Financial Statements
                3Consolidated Balance
      Sheets (Unaudited) as at September 30, 2009 and June 30,
      2009
                3Consolidated  Statements
      of Operations (Unaudited) for the Three Month Periods Ended September 30,
      2009 and 2008
                4Consolidated  Statements
      of Cash Flows (Unaudited) for the  Three Month Periods Ended
      September 30, 2009 and 2008
                5Notes
      to Consolidated Unaudited Financial Statements
                7Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                17Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                21Item
      4T. Controls and Procedures
                22Part
      II.
                Other
      Information
                22Item
      1. Legal Proceedings
                22Item
      1A. Risk Factors
                22Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                22Item
      3. Defaults Upon Senior Securities
                22Item
      4. Submission of Matters to a Vote of Security Holders
                22Item
      5. Other Information
                22Item
      6. Exhibits
                22SIGNATURES
                23




2





PART I -   FINANCIAL
INFORMATION





ITEM 1.   FINANCIAL STATEMENTS




ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE
SHEETS


(UNAUDITED)





September 30,
                    2009
                  
                  
                  June 30,
                    2009ASSETSCURRENT
      ASSETSCash
      & cash equivalents
                  
                  $
                  344,270
                  
                  
                  $
                  295,245Receivables,
      net
                  
                  
                  27,632,227
                  
                  
                  
                  24,021,361Receivables
      due from related parties
                  
                  
                  380,677
                  
                  
                  
                  428,525Inventory
                  
                  
                  897,671
                  
                  
                  
                  911,405Other
      assets
                  
                  
                  813,678
                  
                  
                  
                  1,014,424TOTAL
      CURRENT ASSETS
                  
                  
                  30,068,523
                  
                  
                  
                  26,670,960NON-CURRENT
      ASSETSSecurity
      deposits
                  
                  
                  191,384
                  
                  
                  
                  181,584Property
      and equipment, net
                  
                  
                  1,717,528
                  
                  
                  
                  1,630,979Assets
      related to discontinued operations
                  
                  
                  301,542
                  
                  
                  
                  289,977Deferred
      tax assets
                  
                  
                  264,479
                  
                  
                  
                  678,270Intangible
      assets, net
                  
                  
                  19,538,754
                  
                  
                  
                  18,327,078TOTAL
      NON-CURRENT ASSETS
                  
                  
                  22,013,687
                  
                  
                  
                  21,107,888TOTAL
      ASSETS
                  
                  $
                  52,082,210
                  
                  
                  $
                  47,778,848LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESUnearned
      revenue
                  
                  $
                  7,983,157
                  
                  
                  $
                  8,003,468Accounts
      payable & accrued expenses
                  
                  
                  17,576,748
                  
                  
                  
                  15,852,436Payables
      due to related parties
                  
                  
                  107,201
                  
                  
                  
                  278,737Interest
      bearing liabilities – current
                  
                  
                  692,468
                  
                  
                  
                  1,083,908Liabilities
      related to discontinued operations
                  
                  
                  5,171
                  
                  
                  
                  4,100TOTAL
      CURRENT LIABILITIES
                  
                  
                  26,364,745
                  
                  
                  
                  25,222,649NON-CURRENT
      LIABILITIESInterest
      bearing liabilities - non-current
                  
                  
                  783,086
                  
                  
                  
                  642,453Payable
      due to related parties
                  
                  
                  4,827,936
                  
                  
                  
                  3,803,131TOTAL
      NON-CURRENT LIABILITIES
                  
                  
                  5,611,022
                  
                  
                  
                  4,445,584TOTAL
      LIABILITIES
                  
                  
                  31,975,767
                  
                  
                  
                  29,668,233Commitments
      & ContingencySTOCKHOLDERS’
      EQUITYCommon
      stock, par value $0.001 per share,   90,000,000 shares authorized,
      53,507,450 issued and outstanding as at September 30, 2009 and June 30,
      2009
                  
                  
                  53,507
                  
                  
                  
                  53,507Additional
      paid in capital
                  
                  
                  24,149,420
                  
                  
                  
                  24,149,420Other
      comprehensive  loss
                  
                  
                  2,133,221
                  
                  
                  
                  953,945Accumulated
      deficit
                  
                  
                  (6,229,705
                  )
                  
                  
                  (7,046,257
                  )TOTAL
      STOCKHOLDERS’ EQUITY
                  
                  
                  20,106,443
                  
                  
                  
                  18,110,615TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
                  $
                  52,082,210
                  
                  
                  $
                  47,778,848




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





3




ITEM 1.   FINANCIAL STATEMENTS
(CONTINUED)





ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF
INCOME


(Unaudited)




Three Month Periods EndedSeptember 30,
                      2009
                    
                    
                    September 30,
                      2008NET
      REVENUE
                    
                    $
                    14,507,711
                    
                    
                    $
                    15,944,448COST
      OF REVENUE
                    
                    
                    (3,291,231
                    )
                    
                    
                    (3,591,200
                    )GROSS
      PROFIT
                    
                    
                    11,216,480
                    
                    
                    
                    12,353,248SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                    
                    
                    (9,774,975
                    )
                    
                    
                    (11,753,265
                    )OPERATING
      INCOME
                    
                    
                    1,441,505
                    
                    
                    
                    599,983OTHER
      INCOME AND (EXPENSE)Bank
      interest
                    
                    
                    1,736
                    
                    
                    
                    34,610Other
      income
                    
                    
                    -
                    
                    
                    
                    20,646Interest
      expense
                    
                    
                    (154,022
                    )
                    
                    
                    (71,745
                    )TOTAL
      OTHER INCOME (EXPENSE)
                    
                    
                    (152,286
                    )
                    
                    
                    (16,489
                    )INCOME
      FROM CONTINUED OPERATIONS
                    
                    
                    1,289,219
                    
                    
                    
                    583,494DISCONTINUED
      OPERATIONSLoss
      from discontinued operations
                    
                    
                    (23,334
                    )
                    
                    
                    (95,001
                    )Total
      loss from discontinued operations
                    
                    
                    (23,334
                    )
                    
                    
                    (95,001
                    )INCOME
      BEFORE INCOME TAXES
                    
                    
                    1,265,885
                    
                    
                    
                    488,493INCOME
      TAX EXPENSE
                    
                    
                    (449,333
                    )
                    
                    
                    (373,847
                    )NET
      INCOME
                    
                    
                    816,552
                    
                    
                    
                    114,646Other
      Comprehensive item - Foreign currency translation income
      (loss)
                    
                    
                    1,179,276
                    
                    
                    
                    (4,854,822
                    )Net
      Comprehensive Income (Loss)
                    
                    $
                    1,995,828
                    
                    
                    $
                    (4,740,176
                    )Earnings
      per common share  – continued operations
                    
                    $
                    0.02
                    
                    
                    $
                    0.00Earnings
      per common share – discontinued operations
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.00Earnings
      per common share – basic & diluted
                    
                    $
                    0.02
                    
                    
                    $
                    0.00Weighted
      average number of shares, basic & diluted
                    
                    
                    53,507,450
                    
                    
                    
                    53,507,450





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





4




ITEM 1.   FINANCIAL STATEMENTS
(CONTINUED)





ADVANCED
MEDICAL INSTITUTE INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





Three
      Month Periods EndedSeptember 30,
                  2009
                
                
                September 30,
                  2008Cash
      Flows from Operating ActivitiesReceipts
      from Customers
                
                $
                10,964,097
                
                
                $
                11,383,497Interest
      Received
                
                
                1,736
                
                
                
                34,610Payment
      to Suppliers & Employees
                
                
                (10,295,645
                )
                
                
                (10,749,565
                )Interest
      Paid
                
                
                (154,022
                )
                
                
                (71,745
                )Income
      Tax Paid
                
                
                (107,885
                )
                
                
                (115,570
                )Net
      cash provided by operating activities of continued
    operations
                
                
                408,281
                
                
                
                481,227Net
      cash provided by (used in)
    discontinued operations
                
                
                6,949
                
                
                
                (100,639
                )Net
      cash provided by operating activities
                
                
                415,230
                
                
                
                380,588Cash
      Flows from Investing ActivitiesLoans
      to related entities
                
                
                -
                
                
                
                (784,233
                )Payment
      for Property, Plant & Equipment
                
                
                (6,272
                )
                
                
                (143,452
                )Payment
      for Intangible Assets
                
                
                (24,659
                )
                
                
                (17,629
                )Net
      cash used in investing activities
                
                
                (30,931
                )
                
                
                (945,314
                )Cash
      Flows From Financing ActivitiesProceeds
      from Borrowings
                
                
                869,900
                
                
                
                356,696Repayment
      of Borrowings
                
                
                (855,769
                )
                
                
                (91,130
                )Net
      cash provided by (used in) financing activities
                
                
                14,131
                
                
                
                265,566Net
      increase(decrease) in cash and cash equivalents
                
                
                398,430
                
                
                
                (299,160
                )Effect
      of exchange rate on cash
                
                
                (349,405
                )
                
                
                (486,066
                )Cash
      and cash equivalents at beginning of period
                
                
                295,245
                
                
                
                3,127,029Cash
      and cash equivalents at end of period
                
                $
                344,270
                
                
                $
                2,341,803





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





5




ITEM 1.   FINANCIAL STATEMENTS
(CONTINUED)





ADVANCED
MEDICAL INSTITUTE, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


(CONTINUED)





Three
      Months EndedSeptember 30,
                  2009
                
                
                September 30,
                  2008Reconciliation
      of Cash & Cash EquivalentsCash
      & cash equivalents at the end of financial period as shown in the
      Statement of Cash Flows is reconciled to the related items in the
      Consolidated Balance Sheets as follows:Cash
      & Cash Equivalents
                
                $
                344,270
                
                
                $
                2,341,803Reconciliation
      of Cash Flow from Operations with Profit from Ordinary Activities after
      Income TaxNet
      Income
                
                $
                816,552
                
                
                $
                114,646Non-Cash
      Flows in Profit from Ordinary ActivitiesDepreciation
      and amortization
                
                
                410,348
                
                
                
                463,165Provision
      for doubtful accounts
                
                
                1,373,313
                
                
                
                1,764,158Changes
      in Assets and LiabilitiesDecrease
      in inventories
                
                
                86,643
                
                
                
                210,906Increase
      in receivables
                
                
                (2,524,889
                )
                
                
                (5,188,309
                )(Decrease)
      Increase in unearned revenue
                
                
                (665,211
                )
                
                
                612,625Increase
      in payables
                
                
                382,107
                
                
                
                2,175,148Increase
      in provisions for compensated absences
                
                
                74,777
                
                
                
                70,431Increase
      in deferred tax liabilities
                
                
                449,333
                
                
                
                633,613Increase
      in security deposit
                
                
                5,308
                
                
                
                183Decrease
      in income tax payable
                
                
                -
                
                
                
                (375,339
                )Net
      cash provided by operating activities of continued
    operations
                
                
                408,281
                
                
                
                481,227Net
      cash provided by (used in) operating activities of discontinued
      operations
                
                
                6,949
                
                
                
                (100,639
                )Net
      cash provided by operating activities
                
                $
                415,230
                
                
                $
                380,588Supplemental
      Cash Flow Disclosures:Interest
      paid
                
                $
                154,022
                
                
                $
                71,745Income
      tax paid
                
                $
                -
                
                
                $
                115,570Non-Cash
      Investing/Financing Activities:Assets
      acquired under capital leases
                
                $
                -
                
                
                $
                136,303





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





6




ADVANCED
MEDICAL INSTITUTE INC.


AND
SUBSIDIARIES




NOTES
TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2009





1.
            NATURE OF
      BUSINESS





Nature of
Business




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




Business
Overview




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




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





2.
            BASIS OF
      PRESENTATION




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





3.
            RECENT
      PRONOUNCEMENTS








7








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





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





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





4.
            INTANGIBLE
      ASSETS







The
Company applies the criteria specified in SFAS No. 141 (ASC 805), “Business
Combinations” to determine whether an intangible asset should be recognized
separately from goodwill. Intangible assets acquired through business
acquisitions are recognized as assets separate from goodwill if they satisfy
either the “contractual-legal” or “separability” criterion. Per SFAS 142 (ASC
350), intangible assets with definite lives are amortized over their estimated
useful life and reviewed for impairment in accordance with SFAS No. 144
(ASC 360), “Accounting for the Impairment or Disposal of Long-lived Assets.”
Intangible assets, such as purchased technology, trademark, customer list, user
base and non-compete agreements, arising from the acquisitions of subsidiaries
and variable interest entities are recognized and measured at fair value upon
acquisition. Intangible assets are amortized over their estimated useful lives
from one to ten years. The Company reviews the amortization methods and
estimated useful lives of intangible assets at least annually or when events or
changes in circumstances indicate that it might be impaired. The recoverability
of an intangible asset to be held and used is evaluated by comparing the
carrying amount of the intangible asset to its future net undiscounted cash
flows. If the intangible asset is considered to be impaired, the impairment loss
is measured as the amount by which the carrying amount of the intangible asset
exceeds the fair value of the intangible asset, calculated using a discounted
future cash flow analysis. The Company uses estimates and judgments in its
impairment tests, and if different estimates or judgments had been utilized, the
timing or the amount of the impairment charges could be different.




Goodwill,
trademarks and other intangible assets determined to have indefinite useful
lives are not amortized.  We test such trademarks and other intangible
assets with indefinite useful lives for impairment annually, or more frequently
if events or circumstances indicate that an asset might be
impaired.  Goodwill, trademarks, patents and other intangible assets
determined to have definite lives are amortized over their estimated useful
lives or the life of the trademark, patent and other intangible asset, whichever
is less.





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





8




At
September 30, 2009 and June 30, 2009, intangibles consist of the
following:




Intangibles
                  
                  Gross Carrying
                    Amount
                  
                  
                  Accumulated
                    Amortization
                  
                  
                  Impairment
                    Loss
                  
                  
                  Net Carrying
                    Amount
                    September 30,
                    2009
                  
                  
                  Net Carrying
                    Amount
                    June 30, 2009Amortized
      intangibles:Australian
      Patents
                  
                  $
                  5,764,240
                  
                  
                  $
                  (1,193,929
                  )
                  
                  $
                  -
                  
                  
                  $
                  4,570,311
                  
                  
                  $
                  4,284,773Worldwide
      Patents
                  
                  
                  4,364,496
                  
                  
                  
                  (735,881
                  )
                  
                  
                  (1,494,711
                  )
                  
                  
                  2,133,904
                  
                  
                  
                  2,011,523Intellectual
      Property
                  
                  
                  17,667,245
                  
                  
                  
                  (2,891,419
                  )
                  
                  
                  (5,380,966
                  )
                  
                  
                  9,394,860
                  
                  
                  
                  8,865,082Computer
      Software
                  
                  
                  540,322
                  
                  
                  
                  (361,888
                  )
                  
                  
                  -
                  
                  
                  
                  178,434
                  
                  
                  
                  158,883Unamortized
      intangibles:Intellectual
      Property
                  
                  
                  3,261,245
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,261,245
                  
                  
                  
                  3,006,817$
                  31,597,548
                  
                  
                  $
                  (5,183,117
                  )
                  
                  $
                  (6,875,677
                  )
                  
                  $
                  19,538,754
                  
                  
                  $
                  18,327,078





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





The
exchange rate used for the period ended June 30, 2009
was A$:US$ 1:0.80480, and the rate used for the period ended September
30, 2009 was A$:US$ 1:0.87290. The rate change caused net book value of
intangible assets to increase, notwithstanding the addition to accumulated
amortization.




For
intellectual property, the Company assigned an 18 year life to the intellectual
property that arose from Worldwide PE Patent, a 19 year life to the intellectual
property that arose from PE Patent, and indefinite life to the intellectual
property that arose from IMT.




Computer
software was assigned a 3 year life.




Amortization
expense from continuing operations for the three months ended September 30, 2009
and 2008 were $325,658 and $414,219, respectively. The Company expects the
amortization expenses for the next five years to be as follows:




Year Ending September 30,
                  
                  Annual Amount2010
                  
                  $
                  1,303,0002011
                  
                  $
                  1,303,0002012
                  
                  $
                  1,303,0002013
                  
                  $
                  1,303,0002014
                  
                  $
                  1,303,000




5.
            OTHER
    ASSETS




Following
is the summary of other assets as of September 30, 2009 and June 30,
2009.





September 30
                  
                  
                  June 30Bank guarantees
                  
                  $
                  224,367
                  
                  
                  $
                  206,863Advances
      and prepayments
                  
                  
                  37,361
                  
                  
                  
                  42,640Other
      receivables
                  
                  
                  9,907
                  
                  
                  
                  9,134Other
      debtors
                  
                  
                  542,043
                  
                  
                  
                  755,787Total
                  
                  $
                  813,678
                  
                  
                  $
                  1,014,424




9




6.
            PROPERTY, PLANT AND
      EQUIPMENT





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





September 30
                    
                    
                    June 30Leasehold
      improvements
                    
                    $
                    634,330
                    
                    
                    $
                    590,908Less:
      Accumulated depreciation
                    
                    
                    85,078
                    
                    
                    
                    62,258549,252
                    
                    
                    
                    528,650Motor
      Vehicles
                    
                    
                    81,601
                    
                    
                    
                    75,235Less:
      Accumulated Depreciation
                    
                    
                    44,122
                    
                    
                    
                    38,96637,479
                    
                    
                    
                    36,269Office
      Furniture & Equipment
                    
                    
                    1,363,136
                    
                    
                    
                    1,217,911Less:
      Accumulated Depreciation
                    
                    
                    372,814
                    
                    
                    
                    289,911990,322
                    
                    
                    
                    928,000Computer
      Hardware
                    
                    
                    451,224
                    
                    
                    
                    413,800Less:
      Accumulated Depreciation
                    
                    
                    352,553
                    
                    
                    
                    315,63598,671
                    
                    
                    
                    98,165Low
      Value Pooled Fixed Assets
                    
                    
                    190,457
                    
                    
                    
                    173,057Less:
      Accumulated Depreciation
                    
                    
                    148,653
                    
                    
                    
                    133,16241,804
                    
                    
                    
                    39,895Total
      Property, Plant and Equipment, net
                    
                    $
                    1,717,528
                    
                    
                    $
                    1,630,979





Included
in property and equipment are assets of approximately $531,261 and $489,814, as
of September 30, 2009 and June 30, 2009, that are leased under non-cancellable
leases and accounted for as capital leases, which expire through October 2013.
The accumulated depreciation included in the property and equipment for these
leases is approximately $127,044 and $102,469 as of September 30, 2009 and June
30, 2009.





7.
            INTEREST BEARING
      LIABILITIES





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





September 30
                    
                    
                    June 30Current,
      as of the period endedCapitalized
      lease liability
                    
                    $
                    183,071
                    
                    
                    $
                    165,533Secured
      loan (1)
                    
                    
                    509,397
                    
                    
                    
                    918,375$
                    692,468
                    
                    
                    $
                    1,083,908Non-current,
      as of the period endedCapitalized
      lease liability
                    
                    $
                    183,314
                    
                    
                    $
                    212,720Secured
      loan (1)
                    
                    
                    599,772
                    
                    
                    
                    429,733Total
      non-current
                    
                    $
                    783,086
                    
                    
                    $
                    642,453




(1) The
Company borrowed A$2.4 million from St George Bank Limited in December 2008
comprising a A$1.9 million term facility and a A$500,000 overdraft facility. The
loan is secured by a first ranking security interest in all of AMI Australia’s
assets and undertakings (including its existing equity interests in PE Patent
Holdco Pty Limited, Intelligent Medical Technologies Pty Limited and Advanced
Medical Institute (NZ) Limited). The term facility is a commercial bill
acceptance/discount facility whereby the Company regularly discounts bills with
the bank at the prevailing interest rate plus a margin of 1.65%. The average
all-up cost of this facility during the period was 5.26%. On each rollover the
interest rate is reset.    The loan is due for repayment in
December 2011, however the Company is required to make principal repayments of
A$50,000 per month during each month of the term.  As at September 30,
2009, the total outstanding under the facility was A$1,774,967.





The
interest bearing liabilities require monthly payments of principal and interest
at a per annum interest rate ranging from 5.26% to 14.17%. Interest expense on
the interest bearing liabilities amounted to $152,286 and $71,745 for the three
month periods ended September 30, 2009 and 2008, respectively.





10




8.   ACCOUNTS PAYABLE AND ACCRUED
EXPENSES




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




September 30
                
                
                June 30Bank
      overdraft
                
                $
                436,201
                
                
                $
                481,319Accounts
      payable
                
                
                8,830,145
                
                
                
                8,642,972Accrued
      salaries
                
                
                750,266
                
                
                
                480,436Accrued
      professional fees
                
                
                30,552
                
                
                
                60,360Other
      current liabilities
                
                
                1,318,458
                
                
                
                1,087,589Accrued
      DDR medication cost
                
                
                1,585,186
                
                
                
                1,259,512Accrued
      DDR sales commission
                
                
                1,681,205
                
                
                
                1,377,818Accrued
      DDR collection fee
                
                
                1,681,205
                
                
                
                1,377,818Provision
      for patient refund
                
                
                139,664
                
                
                
                120,720Accrued
      compensated absences
                
                
                1,123,866
                
                
                
                963,892Total
                
                $
                17,576,748
                
                
                $
                15,852,436





9.
            LEGAL
      PROCEEDINGS





As of
September 30, 2009, there was no litigation pending or threatened by or against
the Company or any of its direct or indirect subsidiaries other than AMI
Australia. AMI Australia currently is involved in the following litigation and
administrative matters:




On
October 25, 2006, Bade Medical Institute Pty Limited, Mr. David Wade, Mr. Buddy
Beani and others (collectively “Bade”) applied for Trade Mark No. 114322021 in
respect of the words “AMI Nasal Spray.” AMI Australia lodged an objection to the
registration of that application with IP Australia on June 21, 2007 and that
application was subsequently refused.  On December 13, 2007, AMI
Australia commenced proceedings in the Federal Court of Australia Sydney
Registry against Bade alleging Bade was infringing upon AMI Australia’s
trademarks and other intellectual property rights. On December 19, 2007, Bade
consented to orders that Bade transfer ownership of certain domain names and
telephone numbers to AMI Australia and consented to orders that Bade would not
use certain names which contained the word AMI.  Bade appear to have
ceased operation since the orders were obtained and has transferred the required
names to AMI Australia. AMI subsequently applied for final orders and damages
against Bade and final hearing of this matter concluded on September 2,
2009.  The court has indicated that judgment will be released
shortly.





On June
12, 2009, AMI Australia obtained an interlocutory injunction from the Supreme
Court of New South Wales preventing Fairfax Media Publications Limited
(“Fairfax”) from publishing information which AMI Australia alleges was
disclosed to Fairfax in breach of a duty of confidence owed to AMI
Australia.  Final hearing of this matter commenced on October 26, 2009
but was unable to be concluded by October 28, 2009, the final scheduled date for
the hearing of the matter.  Final hearing of the matter is now
scheduled for February 24 and 25, 2010 and AMI Australia’s interlocutory
injunction has been extended until that date.





10.
            LEASE
      COMMITMENTS




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




September 30Due
      during the period ended,2010
                  
                  $
                  539,6992011
                  
                  
                  463,8062012
                  
                  
                  365,8692013
                  
                  
                  315,5232014
                  
                  
                  295,5192015
                  
                  
                  295,5192016
                  
                  
                  73,880$
                  2,349,815




11








Rent paid
for the three month periods ended September 30, 2009 and 2008 were $353,037 and
$389,178, respectively.





11.
            DISCONTINUED
      OPERATION





AMI
Japan Kabushiki Gaisya





AMI Japan
Kabushiki Gaisya (“AMI Japan”) was an indirect 75% owned subsidiary of the
Company. AMI Japan had formed an alliance with a Japanese party with expertise
in marketing in the Japanese market and two financial investors. AMI Japan
commenced operations on October 1, 2006.





On or
about February 4, 2008, the operation of AMI Japan was wound down and
discontinued due to unsatisfactory operating results.





Loss from
the discontinued operation of AMI Japan during the period ended September 30,
2009 was $13,042.





The
capital contributed to AMI Japan of $217,897 has been classified as assets
pending sale on the accompanying consolidated balance sheet as of September 30,
2009.





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







September 30
                              
                              
                              June 30AssetsCash
      and cash equivalents
                              
                              $
                              853
                              
                              
                              $
                              1,704Other
      current assets
                              
                              
                              89,196
                              
                              
                              
                              84,005Property,
      Plant & Equipment, net
                              
                              
                              130,449
                              
                              
                              
                              126,552Intangible
      assets
                              
                              
                              2,547
                              
                              
                              
                              3,837Total
      Assets
                              
                              
                              223,045
                              
                              
                              
                              216,098LiabilitiesAccounts
      payable and accrued expense
                              
                              
                              5,148
                              
                              
                              
                              4,078Total
      Liabilities
                              
                              
                              5,148
                              
                              
                              
                              4,078Net
      Assets Held for disposal
                              
                              $
                              217,897
                              
                              
                              $
                              212,020




The
components of loss from operations related to the entity held for disposal for
the periods ended September 30, 2009 and 2008 are shown below.





September 30,
                              2009
                            
                            
                            September 30,
                              2008Net
      sales
                            
                            $
                            37,673
                            
                            
                            $
                            1,503Operating
      expensesSelling,
      general and administrative
                            
                            
                            50,715
                            
                            
                            
                            49,232Total
      operating expenses
                            
                            
                            50,715
                            
                            
                            
                            49,232Loss
      from operations
                            
                            
                            (13,042
                            )
                            
                            
                            (47,729
                            )Non-operating
      income (expenses)Other
      income
                            
                            
                            -
                            
                            
                            
                            2Interest
      income
                            
                            
                            -
                            
                            
                            
                            21Net
      Loss before income tax
                            
                            
                            (13,042
                            )
                            
                            
                            (47,686
                            )Provision
      for income tax
                            
                            
                            -
                            
                            
                            
                            -Net
      loss from entity held for disposal
                            
                            $
                            (13,042
                            )
                            
                            $
                            (47,686
                            )




12




AMI
China





AMI China
was a fully owned subsidiary of the Company.





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





Loss from
the discontinued operation of AMI China during the period ended September 30,
2009 was US$10,292.





The
capital contributed to AMI Japan of US$78,474 has been classified as assets
pending sale on the accompanying consolidated balance sheet as of September 30,
2009.





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





September30
                        
                        
                        June 30AssetsCash and cash equivalents
                        
                        $
                        13,137
                        
                        
                        $
                        13,121Other current assets
                        
                        
                        44,108
                        
                        
                        
                        39,532Property, Plant & Equipment,
      net
                        
                        
                        21,252
                        
                        
                        
                        21,226Total Assets
                        
                        
                        78,497
                        
                        
                        
                        73,879LiabilitiesAccounts payable and accrued
      expense
                        
                        
                        23
                        
                        
                        
                        22Total Liabilities
                        
                        
                        23
                        
                        
                        
                        22Net Assets
      Held for disposal
                        
                        $
                        78,474
                        
                        
                        $
                        73,857







The
components of loss from operations related to the entity held for disposal for
the periods ended September 30, 2009 and 2008 are shown below.





2009
                        
                        
                        2008Net
      sales
                        
                        $
                        -
                        
                        
                        $
                        4,854Operating
      expensesSelling,
      general and administrative
                        
                        
                        10,292
                        
                        
                        
                        (52,169
                        )Total
      operating expenses
                        
                        
                        10,292
                        
                        
                        
                        (52,169
                        )Net
      loss before income tax
                        
                        
                        (10,292
                        )
                        
                        
                        (47,315
                        )Provision
      for Income tax
                        
                        
                        -
                        
                        
                        
                        -Net
      loss from entity held for disposal
                        
                        $
                        (10,292
                        )
                        
                        $
                        (47,315
                        )




13


12.
              RELATED PARTY
      TRANSACTIONS
 
 September 30,
                                              2009
                                            
                                            
                                            June 30,
                                              2009Related
      party transactions comprised of the following:Prostate
      Health Clinic Pty. Ltd. (an AU co.)Relationship:
      Under common management control by Jack VaismanReceivable
      from this related party
                                            
                                            
                                            1,865
                                            
                                            
                                            
                                            1,719Loan
      to affiliate in Indonesia
                                            
                                            
                                            378,812
                                            
                                            
                                            
                                            426,806Receivable
      due from related parties - current
                                            
                                            $
                                            380,677
                                            
                                            
                                            $
                                            428,525Peter
      RileyRelationship:
      Director of AMI UKPayable
      to this related party
                                            
                                            
                                            70,845
                                            
                                            
                                            
                                            73,513Jacov
      VaismanRelationship:
      Director of AMI Inc.Payable
      to this related party
                                            
                                            
                                            1,440
                                            
                                            
                                            
                                            173,032Tony
      KhanRelationship:
      Executive Vice President of AMI Inc.Payable
      to this related party
                                            
                                            
                                            34,916
                                            
                                            
                                            
                                            32,192Payable
      due to related parties - current
                                            
                                            $
                                            107,201
                                            
                                            
                                            $
                                            278,737Secare
      Health Centre Pty LimitedRelationship:
      Under common management control by Jack VaismanPayable
      to this related party – non current
                                            
                                            $
                                            4,827,936
                                            
                                            
                                            $
                                            3,803,131
 
 Total
receivables due from related parties included in the Company’s balance sheets
were $380,677 and $428,525, as of September 30, 2009 and June 30, 2009,
respectively.
  Total
payables due to related parties included in the Company’s balance sheets were
$4,935,137 as of September 30, 2009 and $4,081,868 as of June 30,
2009.
 
 Receivables
from related parties are unsecured, interest-free, and due on
demand.
  14
 
 Payables
to related parties are as follows:
 The
Company originally borrowed A$1.0 million from Secare Health Centre Pty Limited
(“Secare”) in November 2008.  Secare is controlled by the company’s
chief executive officer and founder, Jack Vaisman. The Company subsequently
borrowed a further A$4,281,489 from Secare. The loan is secured by a second
ranking security interest in all of AMI Australia’s assets and undertakings
(including its existing equity interests in PE Patent Holdco Pty Limited,
Intelligent Medical Technologies Pty Limited and Advanced Medical Institute (NZ)
Limited). The loan attracts an interest cost of 10% per annum.  No
repayment of this loan has been made up to September 30, 2009.  The
loan is due for repayment in December 2011.
 
 13.
              INCOME
    TAXES
 
 Total
income tax expense for the three months ended September 30, 2009 and 2008
amounted to $449,333 and $373,847, respectively. For the three month periods
ended September 30, 2009 and 2008 there is a difference of 1% between the
Australian federal statutory tax rate and the effective tax rate. This
difference is due to the domicile of operating profits and losses in the Group
as well as the impact of timing and past operating profits (losses) on these
matters.
 
 September 30, 2009
                            
                            U.S.
                            
                            
                            State
                            
                            
                            International
                            
                            
                            TotalCurrent
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            548,690
                            
                            
                            $
                            548,690Deferred
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            (99,357
                            )
                            
                            $
                            (99,357
                            )Total
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            449,333
                            
                            
                            $
                            449,333
 
 September
      30, 2008
                            
                            U.S.
                            
                            
                            State
                            
                            
                            International
                            
                            
                            TotalCurrent
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            146,548
                            
                            
                            $
                            146,548Deferred
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            227,299
                            
                            
                            $
                            227,299Total
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            373,847
                            
                            
                            $
                            373,847
 
 Reconciliation
of the differences between the statutory U.S. Federal income tax rate and the
effective rate is as follows:
 
 September 30,
                              2009
                            
                            
                            September 30,
                              2008Federal
      statutory tax rate
                            
                            
                            34
                            %
                            
                            
                            34
                            %Decrease
      in rate resulting from:Non
      US income taxed at different rates
                            
                            
                            (1
                            )%
                            
                            
                            (1
                            )%33
                            %
                            
                            
                            33
                            %Temporary
      Difference
                            
                            
                            2
                            %
                            
                            
                            44
                            %Effective
      Tax Rate
                            
                            
                            35
                            %
                            
                            
                            77
                            %
  Deferred
tax liability arises due to the following temporary differences:
 
 September 30,
                                                2009
                                              
                                              
                                              Future tax
                                                rate %
                                              
                                              
                                              Deferred tax
                                                liability
                                              
                                              
                                              June 30, 2009
                                              
                                              
                                              Future tax
                                                rate %
                                              
                                              
                                              Deferred tax
                                                liabilityOwing by
      patients via ACFC
                                              
                                              $
                                              (34,413,617
                                              )
                                              
                                              30
                                              %
                                              
                                              $
                                              (10,324,085
                                              )
                                              
                                              $
                                              (28,861,821
                                              )
                                              
                                              30
                                              %
                                              
                                              $
                                              (8,658,546
                                              )Provision
      DDR cancellation
                                              
                                              
                                              18,634,670
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              5,590,401
                                              
                                              
                                              
                                              16,788,933
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              5,036,680Provision
      un-dispensed DDR medications
                                              
                                              
                                              1,585,187
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              475,556
                                              
                                              
                                              
                                              1,259,512
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              377,854Accrued
      ACFC collection and commission
                                              
                                              
                                              3,362,410
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              1,008,723
                                              
                                              
                                              
                                              2,755,635
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              826,691Provision
      for patient refund
                                              
                                              
                                              139,663
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              41,899
                                              
                                              
                                              
                                              120,720
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              36,216Unutilized
      tax losses
                                              
                                              
                                              6,764,857
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              2,029,457
                                              
                                              
                                              
                                              5,663,851
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              1,699,155Amortization
      of patents
                                              
                                              
                                              (2,416,213
                                              )
                                              
                                              30
                                              %
                                              
                                              
                                              (724,864
                                              )
                                              
                                              
                                              (2,083,987
                                              )
                                              
                                              30
                                              %
                                              
                                              
                                              (625,196
                                              )Impairment
      loss
                                              
                                              
                                              6,160,770
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              1,848,231
                                              
                                              
                                              
                                              5,680,134
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              1,704,040Other
      miscellaneous
                                              
                                              
                                              1,063,871
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              319,161
                                              
                                              
                                              
                                              937,806
                                              
                                              
                                              30
                                              %
                                              
                                              
                                              281,354Total
                                              
                                              $
                                              881,598
                                              
                                              
                                              30
                                              %
                                              
                                              $
                                              264,479
                                              
                                              
                                              $
                                              2,260,783
                                              
                                              
                                              30
                                              %
                                              
                                              $
                                              678,248
  15
 
 14.
              OTHER COMPREHENSIVE INCOME
      (LOSS)
 
 Balances
of related after-tax components comprising accumulated other comprehensive
income (loss), included in stockholders’ equity, at September 30, 2009 and June
30, 2009 are as follows:
 
 Accumulated
                                Other
                                Comprehensive
                                IncomeBalance
      at June 30, 2008
                              
                              $
                              6,972,500Change
      for year ended June 30, 2009
                              
                              
                              (6,018,555
                              )Balance
      at June 30, 2009
                              
                              
                              953,945Change
      for three months ended September 30, 2009
                              
                              
                              1,179,276Balance
      at September 30, 2009
                              
                              $
                              2,133,221
 
 The
change for the three months ended September 30, 2009 is primarily attributable
to the appreciation in the Australian dollar against the US dollar from the
closing rate of A$:US$ 1:0.80480 for the year ended June 30, 2009 to
A$:US$ 1:0.87290 for the three-month period ended September 30,
2009.
  16
 
 ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 THE
FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED JUNE 30, 2009.
 
 Preliminary
Note Regarding Forward-Looking Statements
  The
statements contained in this Form 10-Q that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These include statements about the Company’s expectations, beliefs,
intentions or strategies for the future, which are indicated by words or phrases
such as “anticipate,” “expect,” “intend,” “plan,” “will,” “the Company
believes,” “management believes” and similar words or phrases. The
forward-looking statements are based on the Company’s current expectations and
are subject to certain risks, uncertainties and assumptions. The Company’s
actual results could differ materially from results anticipated in these
forward-looking statements. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements.
  Overview
  We were
originally incorporated under the name of Hawksdale Financial Visions, Inc. on
December 6, 1996 under the laws of the State of Nevada. We were involved in the
business of timeshares, but became dormant on March 31, 1997, and until January
28, 2005, we were a “blank check” company with nominal assets. On October 15,
2004, we changed our name to “Advanced Medical Institute Inc.” On March 21,
2005, we completed a Share Exchange Agreement with Advanced Medical Institute
Pty Limited, a privately owned Australian company (“AMI Australia”), whereby AMI
Australia became our wholly-owned subsidiary. On November 17, 2005, we entered
into a Share Exchange Agreement with PE Patent Holdco Pty Limited, a privately
owned Australian company (“PE Patent Holdco”), whereby PE Patent Holdco became
our wholly-owned subsidiary. On September 8, 2006, we entered into a Share
Exchange Agreement with Worldwide PE Patent Holdco Pty Limited (ACN 117 157
727), a privately owned Australian company (“Worldwide PE”), whereby Worldwide
PE became our wholly-owned subsidiary.
  Business
Overview
  AMI is a
service provider company, which arranges for patients with sexual dysfunction
and prostate problems in Australia, New Zealand and the United Kingdom to be
provided with medical services, pharmaceuticals and associated clinical support
services.
  For the
year ended June 30, 2009, AMI’s revenues were approximately $53.4
million.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  Our
discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related to accounts
receivable reserves, provisions for impairment losses of affiliated companies
and other intangible assets, income taxes and contingencies. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
 
 We
believe the following critical accounting policies reflect our more significant
estimates and assumptions used in the preparation of our consolidated financial
statements:
 
 REVENUE
RECOGNITION   Sales are reported as deferred income when the
sales contracts are executed and the term of the contract exceeds three months.
Up to three months medication is delivered to the patient upon the signing of a
contract. Generally the terms of the sales contracts are up to one year, but
they can be for longer periods of time. The deferred income arising from the
contracts that exceed three months is then amortized, on a straight-line basis,
into income during the approximated composite remaining medication delivery
period. This approximated composite is an estimate that may vary from period to
period.
  ALLOWANCE
FOR DOUBTFUL ACCOUNTS   We evaluate the collectibility of our
trade receivables based on a combination of factors. We regularly analyze our
significant customer accounts, and, when we become aware of a specific
customer’s inability to meet its financial obligations to us, such as in the
case of bankruptcy filings or deterioration in the customer’s ability to pay for
our services, we record a specific reserve for bad debt to reduce the related
receivable to the amount we reasonably believe is collectible. The allowances
are calculated based on detailed review of certain individual customer accounts,
historical rates and an estimation of the overall economic conditions affecting
our customer base. We review a customer’s credit history with the Company before
extending credit. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
  17
 
 INCOME
TAXES   Income taxes have been provided based upon the tax laws
and rates in the countries in which operations are conducted and income is
earned.  The income tax rates imposed by the taxing authorities
vary.  Taxable income may vary from pre-tax income for financial
accounting purposes.  There is no expected relationship between the
provision for income taxes and income before income taxes because the countries
have different taxation rules, which vary not only as to nominal rates, but also
in terms of available deductions, credits and other
benefits.  Deferred tax assets and liabilities are recognized for the
anticipated future tax effects of temporary differences between the financial
statement basis and the tax basis of the Company’s assets and liabilities using
the applicable tax rates in effect at year end as prescribed by SFAS 109 (ASC
740) “Accounting for Income Taxes.”
 
 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   Effective January 1, 2002, the Company adopted Statement
of Financial Accounting Standards No. 144 (ASC 360), “Accounting for the
Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and
reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
for a Disposal of a Segment of a Business.” The Company periodically evaluates
the carrying value of long-lived assets to be held and used in accordance with
SFAS 144 (ASC 360). SFAS 144 (ASC 360) requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets’ carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
market value of the long-lived assets. Loss on long-lived assets to be disposed
of is determined in a similar manner, except that fair market values are reduced
for the cost of disposal.
 
 CURRENCY
CONVERSION   As of September 30, 2009 and 2008, the accounts of
AMI Australia were maintained, and its financial statements were expressed, in
Australian Dollars (A$). Such financial statements were translated into US
Dollars ($) in accordance with Statement of Financial Accounts Standards
(“SFAS”) No. 52, “Foreign Currency Translation”, with the Australian
Dollar as the functional currency. In accordance with the Statement, all
assets and liabilities were translated at the exchange rate (A$1 = US$0.87290)
as of September 30, 2009, stockholder’s equity are translated at the historical
rates and income statement items are translated at the weighted-average exchange
rate for the period. The resulting translation adjustments are reported under
other comprehensive income in accordance with SFAS No. 130, “Reporting
Comprehensive Income”.
 
 The
following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
  Results of
operations:
  Three
                            Months
                            ended
                            September
                            31,
                          
                          
                          Three
                            Months
                            ended
                            September
                            31,2009
                          
                          
                          2008Revenue
                          
                          
                          100
                          %
                          
                          
                          100
                          %Cost
      of revenue
                          
                          
                          22.7
                          %
                          
                          
                          22.5
                          %Gross
      profit
                          
                          
                          77.3
                          %
                          
                          
                          77.5
                          %Selling,
      general and administrative expenses
                          
                          
                          67.4
                          %
                          
                          
                          73.7
                          %Other
      income and expenses
                          
                          
                          (1.0
                          )%
                          
                          
                          (0.1
                          )%Discontinued
      operations
                          
                          
                          (0.2
                          )%
                          
                          
                          (0.6
                          )%Income
      before income tax
                          
                          
                          8.7
                          %
                          
                          
                          3.1
                          %Income
      tax expenses
                          
                          
                          3.1
                          %
                          
                          
                          2.4
                          %Net
      income
                          
                          
                          5.6
                          %
                          
                          
                          0.7
                          %
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 As of
September 30, 2009, we had total liabilities of $31,975,767, including unearned
revenue of $7,983,157, and we had a positive net worth of $20,106,443.
As of June 30, 2009, we had total liabilities of $29,668,233, including unearned
revenue of $8,003,468, and we had a positive net worth of $18,110,615.  
The predominant reason for the significant increase in the net worth of the
Company between June 30, 2009 and September 30, 2009 is due to a significant
appreciation in the A$ exchange rate as compared to the US$ exchange
rate.
  18
  Our
aggregate cash balances as at September 30, 2009 were $344,270, our inventory
was $897,671, and our net receivables were approximately $27.6 million. These
receivables are due on average within 90-180 days. We forecast that we will be
able to generate sufficient funds from our business in order to fund our
operations in the ordinary course during the next 12 months.  This
forecast is based on the significant positive cash flow from operating
activities generated by the Company over the past 3 months.
  In the
event that we continue to expand our business, we may need to raise debt or
equity funding in order to undertake such expansion.  However, there
can be no assurance that we can or will obtain sufficient funds from operations
or from additional financings on terms acceptable to us.  If we are
unable to obtain sufficient additional financing, we may not be able to expand
our operations as considered or we could be required to reduce spending and
operations.
 
 The
Company borrowed A$3 million from ANZ Nominees Limited in its capacity as
custodian of the Professional Pensions PST in September 2006.  The
outstanding balance of this loan was fully repaid in December 2008 using funds
from the St George facility discussed below.
 
 The
Company borrowed A$2.4 million from St George Bank Limited in December 2008
comprising a A$1.9 million term facility and a A$500,000 overdraft facility. The
loan is secured by a first ranking security interest in all of AMI Australia’s
assets and undertakings (including its existing equity interests in PE Patent
Holdco Pty Limited, Intelligent Medical Technologies Pty Limited and Advanced
Medical Institute (NZ) Limited). The term facility is a commercial bill
acceptance/discount facility whereby the Company regularly discounts bills with
the bank at the prevailing interest rate plus a margin of 1.65%. The average
all-up cost of this facility during the period was 5.26%. On each rollover the
interest rate is reset.    The loan is due for repayment in
December 2011, however the Company is required to make principal repayments of
A$50,000 per month during each month of the term.  As at September 30,
2009, the total outstanding under the facility was A$1,774,967.
  The
Company borrowed a further A$1 million from Secare Health Centre Pty Limited
(“Secare”) in December 2008.  Secare is controlled by the company’s
chief executive officer and founder, Jack Vaisman and the Company has
subsequently borrowed a further A$4,281,489 from Secare. The loan is secured by
a second ranking security interest in all of AMI Australia’s assets and
undertakings (including its existing equity interests in PE Patent Holdco Pty
Limited, Intelligent Medical Technologies Pty Limited and Advanced Medical
Institute (NZ) Limited). The loan attracts an interest cost of 10% per
annum.  No repayment of this loan has been made up to September 30,
2009.  The loan is due for repayment in December 2011.
  The loans
referred to above were provided to repay the ANZ facility, to fund expansion
into the United Kingdom and to meet operational expenses.
  19
 
 RESULTS
OF OPERATIONS
 
 THREE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30,
2008
 
 Revenue.
Revenue was $14,507,711 in
the three months ended September 30, 2009, compared to $15,944,448 in the three
months ended September 30, 2008, a decrease of $1,436,737,
or  9%.  The decrease in the three-month period ended
September 30, 2009 is primarily attributable to the depreciation in the
Australian dollar against the US dollar from the rate of A$:US$ 1:0.89174
for the three-month period ended September 30, 2008 to A$:US$ 1:0.83244 for
the three-month period ended September 30, 2009.  Revenue in
Australian dollars was A$17,427,936 in the three months ended March 31, 2009
compared to A$17,880,153 in the three months ended September 30, 2008, an
decrease of A$452,217 or 2.5%.  We attribute this decrease primarily
to the decrease in the number of patients purchasing our programs which is due
to difficult economic conditions and a reduction in the advertising and
promotion of our programs in Australia during the relevant
period.
 Our
unearned revenue as at September 30, 2009 was $7,983,157 compared to $6,476,016
as at September 30, 2008. The gross increase in unearned revenue from the three
months ended September 30, 2008 to the three months ended September 30, 2009 was
$1,507,141, or an increase of 23.2%. The increase in unearned revenue in the
three-month period is primarily attributed to the increase in weighted average
program length of treatment programs during the quarter ended September 30,
2009.
  Revenue
in our PE treatments has increased by $2,619,643 or 34.9% to $10,119,678, and
revenue in our ED treatments decreased by $3,501,986 or 44.7% to $4,327,937, in
the three months ended September 30, 2009, compared to the three months ended
September 30, 2008. We attribute the increase in revenue in our PE treatments to
the increase in the number of sales per patient along with the higher sales
price of the treatment programs sold. Revenue in our prostate treatments has
decreased by $409,296 or 79.8%, to $103,460, in the three months ended September
30, 2009, compared to the three months ended September 30, 2008. We attribute
the decrease in revenue in our prostate treatments to decreases in the number of
patients. We attribute the decrease in revenue in our ED treatments to the
decrease in the number of patients as well as the depreciation in Australian
dollar against the US dollar.
  Revenue
in our Australian operations was $11,675,252 in the three months ended September
30, 2009, compared to $15,407,506 in the three months ended September 30, 2008.
Compared to the same period in the previous year, there is a decrease of
$3,732,254, or 24.2%, in the three months ended September 30, 2009. The decrease
in the three-month period ended September 30, 2009 is primarily attributable to
the decrease in the number of patients purchasing our programs which is due to
difficult economic condition and a reduction in the advertising and promotion of
our programs in Australia during the relevant period.
 
 Revenue
in our UK operations was $2,627,632 in the three months ended September 30,
2009, compared to $149,412 in the three months ended September 30,
2008.  The Company’s UK operation started its business activities in
September 2008.
  Cost of
Revenue. Cost of revenue was $3,291,231 in the three months ended
September 30, 2009, compared to $3,591,200 in the three months ended September
30, 2008. The increase in cost of revenue was attributable to an increase in the
medication cost incurred by AMI Australia and AMI’s UK operation. As a
percentage of revenue, cost of revenue was 22.7% in the three months ended
September 30, 2009, compared to 22.5% in the three months ended September 30,
2008.  The stable cost of revenue percentage in 2009 is primarily
attributable to management’s efforts to address operation performance and
control its costs.
  Gross Profit. Gross profit was
$11,126,480 in the three months ended September 30, 2009, compared to
$12,353,248 in the 2008 comparable period. As a percentage of revenue, gross
profit decreased to 77.3% in the quarter ended September 30, 2009 from 77.5% in
the 2008 quarter. The stable gross profit percentage in 2009 is primarily
attributable to management’s efforts to address operation performance and
control its costs.
  Gross
profit in our UK operations was $1,967,813 in the three months ended September
30, 2009, compared to $15,035 in the three months ended September 30,
2008.  The Company’s UK operation started its business activities in
September 2008.
  Selling, General
and Administrative Expenses. Selling, general and administrative expenses
were $9,774,975 in the three months ended September 30, 2009, compared to
$11,753,265 in the three months ended September 30, 2008. As a percentage of
revenue, selling, general and administrative expenses decreased to 67.4% in the
three months ended September 30, 2009 from 73.7% in the three months ended
September 30, 2008. The decrease in the three months ended September 30, 2009 is
primarily attributable to management’s efforts to address operation performance
which significantly reduced advertising expenses and staff costs.
 
 Selling,
general and administrator expenses in our UK operations was $2,144,635 in the
three months ended September 30, 2009, compared to $524,021 in the three months
ended September 30, 2008.  The Company’s UK operation started its
business activities in September 2008.
  Other
Income. Other income and expenses was ($152,286) in the three months
ended September 30, 2009, compared to ($16,489) in the three months ended
September 30, 2008. As a percentage of revenue, other income and expenses was
(1.0%) in the three months ended September 30, 2009 and (0.1%) in the three
months ended September 30, 2008.  The 0.9% increase in the other
income and expenses in 2009 is primarily attributable to the increase in
interest expenses, following the increase in interest bearing
borrowings.
  20
 
 Net Income Before
Income Tax and Income Tax Expenses.Net income before income tax was
$1,265,885 in the three months ended September 30, 2009, compared to $488,493 in
the three months ended September 30, 2008. This increase was primarily
attributable to the significant decrease in selling, general and administrative
expenses as a percentage of revenue in the three months ended September 30, 2009
as well as the improvement in the UK operations for the relevant
period.
 Income
tax expenses were $449,333 in the three months ended September 30, 2009 compared
to $373,847 in the three months ended September 30, 2008. As a percentage of
revenue, income tax expense increased to 3.1% in the three months ended
September 30, 2009 from 2.4% in the three months ended September 30, 2008. This
increase is attributable to the decrease in selling, general and administrative
expenses.
  Net
Income. Net income was $816,552 in the three months ended September 30,
2009, compared to $114,646 in the three months ended September 30, 2008. This
increase in the 2009 quarter compared to the 2008 quarter is attributable to the
significant decrease in selling, general and administrative expenses as a
percentage of revenue for the three-month period ended September 30, 2009 as
well as the improvement in the UK operations for the relevant
period.
  Net
income in our Australian operations was $1,030,471 in the three months ended
September 30, 2009, compared to $876,185 in the three months ended September 30,
2008. The increase is primarily attributable to the decrease in selling, general
and administrative expenses in the three months ended September 30,
2009.
  Net loss
in our UK operations was $176,824 in the three months ended September 30, 2009,
compared to $508,986 in the three months ended September 30,
2008.  The decrease is primarily attributable to the UK operations
being in a loss making start up period during the period ending September 30,
2008 and the improvement in operating performance in the UK operation during the
three months ended September 30, 2009.
 
 The above
discussions of results exclude those entities which have no or what management
deems insignificant operations.
 
 OFF-BALANCE SHEET
ARRANGEMENTS
 
 We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a material current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
 
 ITEM 3.   QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
 
 As
a “smaller reporting company” as defined by Item 10 of Regulation S-K, the
Company is not required to provide this information
 
  21
 
  ITEM
4T.   CONTROLS AND PROCEDURES
 
 Disclosure
Controls and Procedures
  Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, the Company
conducted an evaluation of the effectiveness, as of the end of the period
covered by this report, of our disclosure controls and procedures, as such term
is defined in Exchange Act Rule 13a-15(e).  Based on this evaluation,
our principal executive officer and principal financial officer have concluded
that, as of such date, the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in our
Exchange Act reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
  Changes
in internal controls over financial reporting
  Not
applicable.
 
 PART II -
OTHER INFORMATION
 
 ITEM 1.   LEGAL PROCEEDINGS.
  Please
see Note 8 to our financial statements above.
  ITEM 1A.   RISK FACTORS
  There
have been no material changes in our business, operations or prospects that
would require a change to the Risk Factor disclosure included in our most recent
Annual Report on Form 10-K for the year ended June 30, 2009 that have not
already been disclosed.
 
 ITEM 6.   EXHIBITS.
  The
following exhibits are filed as part of this report:
 
 Exhibit Number
                  
                  Description31.1
                  
                  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).
  22
 
 SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  Date:
      November 23, 2009
                By:
                /s/ 
      Jacov (Jack) VaismanJacov
      (Jack) VaismanChief
      Executive Officer
  23
  Exhibit
Index
 
 Exhibit Number
                  
                  Description31.1
                  
                  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).
  24