**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


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







**FORM
      10-QSB**





**xQUARTERLY
      REPORT UNDER
      SECTION 13 OR 15(d) OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      QUARTERLY PERIOD ENDED MARCH 31, 2007





**oTRANSITION
      REPORT UNDER
      SECTION 13 OR 15(d) OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      TRANSITION PERIOD FROM _________ TO_________





Commission
      File Number: 000-29531




**ADVANCED
      MEDICAL INSTITUTE INC.**


(Exact
        name of small business issuer in its charter)
  NEVADA
                88-0409144(State
                    or Other Jurisdiction of
                  Incorporation
                    or Organization)
                (I.R.S.
                    Employer Identification No.)
  Level
          1,
          204-218 Botany Road
 Alexandria,
          NSW
 Australia
          2015
 (Address
          of Principal Executive Offices)
  (61)
          2
          9640 5253
 (Issuer’s
          Telephone Number, Including Area Code)
   
 (Former
          Name and Address and Former Fiscal Year, if Changed
 Since
          Last Report)




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




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




There
      were 53,507,450 shares of the Issuer’s common stock outstanding on May 11,
      2007.




Transitional
      Small Business Disclosure Format (check one): YES o NO x







**TABLE
          OF CONTENTS**
 **Page**PART
                    I -FINANCIAL
                    INFORMATIONITEM
                    1.FINANCIAL
                    STATEMENTS (UNAUDITED)
                
                
                1ITEM
                    2.MANAGEMENT’S
                    DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
                
                
                18ITEM
                    3.CONTROLS
                    AND PROCEDURES
                
                
                33PART
                    II -OTHER
                    INFORMATION
                
                
                34ITEM
                    1.LEGAL
                    PROCEEDINGS
                
                
                34ITEM
                    2.UNREGISTERED
                    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
                
                
                34ITEM
                    3.DEFAULTS
                    UPON SENIOR SECURITIES.
                
                
                34ITEM
                    4.SUBMISSION
                    OF MATTERS TO A VOTE OF SECURITY HOLDERS.
                
                
                34ITEM
                    5.OTHER
                    INFORMATION.
                
                
                34ITEM
                    6.EXHIBITS.
                
                
                34


ii




**FINANCIAL
      INFORMATION**




**FINANCIAL
      STATEMENTS** ****





**ADVANCED
      MEDICAL INSTITUTE INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET**





**March
                31, 2007****(unaudited)****ASSETS****CURRENT
                ASSETS**Cash
                & cash equivalent
            
            $
            821,883Receivables,
                net
            
            
            12,623,282Receivables
                due from related parties
            
            
            1,383Inventory
            
            
            233,789Other
                assets
            
            
            804,093**TOTAL
                CURRENT ASSETS**
            
            
            14,484,430**NON-CURRENT
                ASSETS**Security
                deposits
            
            
            202,045Property
                and equipment, net
            
            
            964,308Intangible
                assets, net
            
            
            27,894,079**TOTAL
                NON-CURRENT ASSETS**
            
            
            29,060,432**TOTAL
                ASSETS**
            
            $
            43,544,862**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Unearned
                revenue
            
            $
            4,863,352Accounts
                payable & accrued expenses
            
            
            4,917,035Payables
                due to related parties
            
            
            4,695Interest
                bearing liabilities - current
            
            
            223,885Provisions
                for compensated absences
            
            
            262,110Income
                taxes payable
            
            
            467,545**TOTAL
                CURRENT LIABILITIES**
            
            
            10,738,622**NON-CURRENT
                LIABILITIES**Securities
                deposit received
            
            
            6,335Interest
                bearing liabilities - non-current
            
            
            2,385,375Deferred
                tax liabilities
            
            
            1,426,274Minority
                interests
            
            
            -**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            3,817,984**TOTAL
                LIABILITIES**
            
            
            14,556,606**Commitments
                & Contingency**
            
            
            -**STOCKHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share,90,000,000
                shares authorized,53,507,450
                and 37,382,450 issued and outstanding
            
            
            53,507Additional
                paid in capital
            
            
            24,149,420Other
                comprehensive income (loss)
            
            
            2,245,794Retained
                earnings
            
            
            2,539,535**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            28,988,256**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            43,544,862




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










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





**ADVANCED
      MEDICAL INSTITUTE INC. AND SUBSIDIARIES**


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





**For
                the Three Month Periods Ended**
            
            **For
                the Nine Month Periods Ended****March
                31, 2007**
            
            **March
                31, 2006**
            
            **March
                31, 2007**
            
            **March
                31, 2006****(unaudited)**
            
            **(unaudited)**
            
            **(unaudited)**
            
            **(unaudited)****NET
                REVENUE**
            
            $
            9,391,231
            
            $
            9,150,703
            
            $
            29,713,454
            
            $
            21,756,411**COST
                OF REVENUE**
            
            
            (2,297,734
            )
            
            (2,242,042
            )
            
            (6,930,952
            )
            
            (5,789,084
            )**GROSS
                PROFIT**
            
            
            7,093,497
            
            
            6,908,661
            
            
            22,782,502
            
            
            15,967,327**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            (7,833,120
            )
            
            (5,177,799
            )
            
            (22,130,334
            )
            
            (13,285,258
            )**OPERATING
                INCOME (LOSS)**
            
            
            (739,623
            )
            
            1,730,862
            
            
            652,168
            
            
            2,682,069**OTHER
                INCOME AND (EXPENSE)**Rental
                income
            
            
            4,735
            
            
            (3,720
            )
            
            14,443
            
            
            11,996Bank
                interest
            
            
            9,362
            
            
            12,706
            
            
            39,364
            
            
            17,123License
                fee income
            
            
            19,275
            
            
            -
            
            
            19,275
            
            
            -Other
                income
            
            
            12,950
            
            
            10,275
            
            
            66,940
            
            
            10,969Management
                fee income
            
            
            44,549
            
            
            -
            
            
            90,838
            
            
            -Interest
                expense
            
            
            (68,061
            )
            
            7
            
            
            (132,416
            )
            
            (1,234
            )Minority
                interest
            
            
            -
            
            
            (16,712
            )
            
            -
            
            
            (17,697
            )**TOTAL
                OTHER INCOME (EXPENSE)**
            
            
            22,810
            
            
            2,556
            
            
            98,444
            
            
            21,157**NET
                INCOME (LOSS) BEFORE INCOME TAXES**
            
            
            (716,813
            )
            
            1,733,418
            
            
            750,612
            
            
            2,703,226INCOME
                TAX EXPENSE
            
            
            (5,838
            )
            
            (523,001
            )
            
            (835,552
            )
            
            (834,936
            )NET
                INCOME (LOSS)
            
            
            (722,651
            )
            
            1,210,417
            
            
            (84,940
            )
            
            1,868,290Other
                Comprehensive item - Foreign currency translation income
                (loss)
            
            
            840,152
            
            
            (237,517
            )
            
            2,450,277
            
            
            (230,102
            )**Net
                Comprehensive Income**
            
            **$**
            **117,501**
            
            **$**
            **972,900**
            
            **$**
            **2,365,337**
            
            **$**
            **1,638,188****Net
                income (loss) per share, basic & diluted**
            
            
            **($0.014**
            **)**
            **$**
            **0.034**
            
            
            **($0.002**
            **)**
            **$**
            **0.056****Weighted
                average number of shares, basic and diluted**
            
            
            **53,507,450**
            
            
            **36,122,450**
            
            
            **47,186,478**
            
            
            **33,603,931**





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




2





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





**ADVANCED
      MEDICAL INSTITUTE INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Nine
                Month Periods Ended****March
                31, 2007**
            
            **March
                31, 2006****(****unaudited)**
            
            **(unaudited)****Cash
                Flows from Operating Activities**Receipts
                from Customers
            
            $
            24,252,103
            
            $
            17,417,343Interest
                Received
            
            
            39,362
            
            
            17,123Payment
                to Suppliers & Employees
            
            
            (21,622,728
            )
            
            (16,529,956
            )Interest
                & Other Finance costs paid
            
            
            (132,414
            )
            
            (1,234
            )Income
                Tax Paid
            
            
            (229,685
            )
            
            -**Net
                cash provided by operating activities**
            
            
            2,306,638
            
            
            903,276**Cash
                Flows from Investing Activities**Proceeds
                from Sale of Plant & Equipment
            
            
            -
            
            
            434Acquisition
                of subsidiaries
            
            
            (2,258,100
            )
            
            -Payment
                for Property, Plant & Equipment
            
            
            (246,604
            )
            
            (113,613
            )Payment
                for Intellectual Properties
            
            
            (67,097
            )
            
            (40,864
            )Dividend
                Payment
            
            
            (38,551
            )
            
            -**Net
                cash used in investing activities**
            
            
            (2,610,352
            )
            
            (154,043
            )**Cash
                Flows From Financing Activities**Collection
                of Note Receivable
            
            
            150,771
            
            
            150,771Proceeds
                from Borrowings
            
            
            2,258,100
            
            
            -(Loan
                to) Repayment from related entities
            
            
            (1,964,052
            )
            
            24,740Repayment
                of Borrowings
            
            
            (156,137
            )
            
            (131,337
            )**Net
                cash provided by financing activities**
            
            
            288,682
            
            
            44,174Net
                (decrease) increase in cash and cash equivalents
            
            
            (15,032
            )
            
            793,407Effect
                of exchange rate on cash
            
            
            (266,328
            )
            
            (60,307
            )Cash
                and cash equivalents at beginning of period
            
            
            1,103,243
            
            
            295,961**Cash
                and cash equivalents at end of period**
            
            **$**
            **821,883**
            
            **$**
            **1,029,061**




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 CASH FLOWS (CONTINUED)**





**Nine
                Month Periods Ended****March
                31, 2007**
            
            **March
                31, 2006****(unaudited)**
            
            **(unaudited)****Reconciliation
                of Cash & Cash Equivalents**Cash
                & cash equivalents at the end of financial period as shown in the
                Statement of Cash Flows is reconciled to the related items in the
                Statement of Financial Position as follows:**Cash
                & Cash Equivalents**
            
            $
            821,883
            
            $
            1,029,061**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                (Loss) Income**
            
            $
            (84,940
            )
            $
            1,885,987**Non-Cash
                Flows in Profit from Ordinary Activities**Depreciation
            
            
            940,224
            
            
            187,547Provision
                for doubtful accounts
            
            
            3,309,946
            
            
            894,811Minority
                interest
            
            
            (39,037
            )
            
            -**Changes
                in Assets and Liabilities**Increase
                in inventories
            
            
            (7,456
            )
            
            68,141Increase
                in receivables
            
            
            (5,675,583
            )
            
            (6,632,776
            )Increase
                in security deposit paid
            
            
            (7,890
            )
            
            (17,224
            )Increase
                in unearned revenue
            
            
            535,852
            
            
            2,087,245Increase
                in payables
            
            
            2,594,413
            
            
            1,728,896Increase
                (Decrease) in provisions for compensated absences
            
            
            48,674
            
            
            (14,048
            )Increase
                in deferred tax liabilities
            
            
            424,901
            
            
            560,088Increase
                in securities deposit received
            
            
            2,016
            
            
            -Increase
                in income tax payable
            
            
            265,518
            
            
            154,609**Cash
                Flows Provided by Operating Activities**
            
            **$**
            **2,306,638**
            
            **$**
            **903,276****Supplemental
                Cash Flow Disclosures:**Interest
                paid
            
            $
            132,414
            
            $
            1,234Income
                tax paid
            
            $
            229,685
            
            $
            -**Non-Cash
                Investing/Financing Activities:**Stock
                issued in acquisition
            
            $
            16,125,000
            
            $
            5,500,000





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




4




**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**





**NOTES
      TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007**





**1.** **NATURE
      OF BUSINESS**





Nature
      of Business





Advanced
      Medical Institute Inc. (formerly Hawksdale Financial Visions, Inc.) (the
“Company”) was organized on December 6, 1996 under the laws of the State of
      Nevada and was previously in the development stage through March 21,
      2005.




On
      March
      21, 2005 the Company completed a Stock Exchange Agreement with Advanced Medical
      Institute Pty Ltd (renamed as “AMI Australia Holdings Pty Limited” on November
      22, 2005) (“AMI Australia”). As a result of the exchange agreement, the
      reorganization was treated as an acquisition by the accounting acquiree that
      is
      being accounted for as a recapitalization and as a reverse merger by the legal
      acquirer for accounting purposes. Pursuant to the recapitalization, all capital
      stock shares and amounts and per share data have been retroactively restated.
      Accordingly, the financial statements include the following:





(1)
      The
      balance sheet consists of the net assets of the accounting acquirer at
      historical cost and the net assets of the legal acquirer at historical
      cost.




(2) The
        statements of operations include the operations of the accounting acquirer
        for
        the period presented and the operations of the legal acquirer from
        the
 date of the merger.




AMI
      Australia is a company limited by shares, incorporated and domiciled in
      Australia. The principal activity of AMI Australia is the medical treatment
      of
      sexual dysfunction in Australia, New Zealand, China and Japan. AMI Australia
      is
      a service provider company which arranges for patients with sexual dysfunction
      to be provided with medical services, pharmaceuticals and associated support
      services. AMI Australia operates a centralized call center and twenty-two
      medical centers and sales offices throughout Australia and New Zealand. AMI
      China, a wholly owned subsidiary of the Company, operates 2 medical centers
      in
      Beijing, China and AMI Japan, a 75% subsidiary of the Company, operates a clinic
      in Tokyo, Japan as well as having an informal referral arrangement with 3
      medical clinics in Osaka, Nagoya and Okinawa.




On
      November 17, 2005, AMI Australia acquired 100% of the outstanding shares of
      PE
      Patent Holdco Pty Limited (“PE”) in exchange for 5 million shares of the Company
      valued at $1.10 per share. PE’s assets comprise an Australian innovation patent
      (Australian Innovation Patent No 2005100183, which is due to expire on July
      9,
      2012) and an Australian standard patent application (Australian standard patent
      application No. 2004222783) (collectively, the “Patents”).




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




AMI
      Australia’s nasal spray, injection, lozenge and tablet impotence and erectile
      dysfunction treatment programs are not patent protected.




In
      acquiring PE, AMI Australia acquired only the right to use the Patents and
      the
      associated pharmaceutical formulations, treatment methodologies and dosing
      manuals in Australia and has no rights to use the patents or any of the
      underlying intellectual property in any other country.




On
      April
      18, 2006, the Company acquired the remaining 7% of Intelligent Medical
      Technologies Pty Limited (“IMT”) which was previously held by third parties in
      exchange for 1.26 million shares of the Company. These shares were subsequently
      transferred by the Company to AMI Australia. As of March 31, 2006, the Company
      owned 93% of IMT.




5




In
      2003,
      IMT was granted the exclusive worldwide right and license from Sheiman Ultasonic
      Research Foundation Pty Limited (“SURF”) to exploit and sub-license certain
      inventions, patents and other intellectual property in relation to certain
      ultrasonic nebulizer technology within the field of the treatment of sexual
      dysfunction in men and women (including impotence, premature ejaculation and
      the
      treatment of female sexual arousal disorders). Some of these patents expire
      in
      October 2013, with the remaining patents expiring around 2023. IMT’s license was
      a broad based license which included the right to manufacture, market, sell
      and
      distribute products based on the technology and patents within the field of
      use.





IMT
      also
      had the option to extend its field of use to the treatment of prostate diseases.
      IMT exercised its option to extend its field of use to include prostate diseases
      on July 15, 2006 and IMT “terminated” its license with SURF. The termination was
      because of SURF’s failure to deliver to the Company information concerning
      updates and advances on the technologies. The termination does not affect IMT’s
      rights to use the technology - the only effect is to terminate the royalty
      payment obligations to SURF under the license. As
      a
      result of terminating the license agreement, IMT retained the right to use
      the
      technology in its treatment programs to treat sexual dysfunction without paying
      royalties or other fees to SURF.





IMT
      applied for four worldwide patents relating to its ultrasonic nebulizer device
      in July 2005 and applied for three further worldwide patents relating to its
      device on February 10, 2006.





IMT
      acquired this license in order to develop an ultrasonic nebulizer to deliver
      medications to patients’ lungs for the treatment of sexual dysfunction as it
      believes that this delivery system will be more efficient and clinically
      effective than any other alternative treatment option and will reduce dosage
      levels and the likelihood of side effects.





IMT
      applied to list its nebulizer with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006 and believes it
      will receive a response, as to whether it has been accepted or rejected, from
      the TGA by June 30, 2007.





On
      September 8, 2006, the Company entered into a Share Exchange Agreement with
      Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
      Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
      which the Company acquired all of the issued and outstanding shares of stock
      of
      Worldwide PE in exchange for the payment of A$3 million (approximately US$2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share.





The
      Company funded the cash component of the purchase price by AMI Australia
      entering into two secured three year term loans in the aggregate principal
      amount of A$3 million with ANZ Nominees Limited in its capacity as custodian
      of
      the Professional Pensions PST. The loan is secured by a security interest in
      all
      of AMI Australia’s assets and undertakings (including its existing equity
      interests in PE Patent Holdco Pty Limited, Intelligent Medical Technologies
      Pty
      Limited, Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing
      Pty Limited). The loans accrue interest at an annual coupon of 450 basis points
      above the then Australian Reserve Bank’s current cash rate (currently being an
      aggregate current interest rate of 10.75%). The Company has been meeting its
      interest payment obligations under these loans and has pre-paid approximately
      A$147,000 in principal as at the date of this filing.





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





The
      Chinese subsidiary is an indirect wholly owned subsidiary of the Company and
      the
      Chinese entity has formed an alliance with 2 Beijing hospitals for the purpose
      of establishing operations and conducting clinical trials for regulatory
      purposes. The Company’s Chinese subsidiary has obtained regulatory approval to
      its proposed advertisements and commenced operations on September 4,
      2006.




6




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




On
      May 2,
      2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
      Group Limited, a privately owned company registered in the United Kingdom (“AMI
      UK”).




The
      Option grants AMI UK a right to enter into an exclusive license to use Worldwide
      PE’s intellectual property in the United Kingdom. AMI UK has paid Worldwide PE
      an upfront non-refundable fee of $50,000 to secure an initial period of four
      months to confirm the license which period may be extended for a further two
      months by AMI UK paying Worldwide PE a non-refundable extension fee of $50,000.
      During this initial six month period, AMI UK may elect to enter into a License
      Agreement (the “License”) by paying Worldwide PE an upfront non-refundable
      license fee of $1 million less the upfront fees paid to Worldwide PE prior
      to
      that date. Terms of the Option and the License have been disclosed by the
      Company on its Current Report on Form 8-K filed with the Securities and Exchange
      Commission (the “SEC”) on May 3, 2007.




Subsidiaries







7




The
      Company’s direct subsidiaries are AMI Australia, AMI International Pty Limited
      (“AMI International”) and AMI Management Services Pty Limited (formerly known as
      Women’s Health Foundation Pty Limited).




AMI
      Australia’s direct subsidiaries are Advanced Medical Institute Pty Limited, PE
      Patent Holdco Pty Limited (“PE
      Patent”) ,
      Worldwide PE Patent Holdco Pty Limited (“Worldwide
      PE”) ,
      Advanced Medical Institute (NZ) Limited, IMT and Whygo Video
      Conferencing Pty Ltd (“Whygo”) .




AMI
      International’s direct subsidiaries are AMI China (100% owned) and AMI Japan
      (75% owned).




Details
      of PE Patent Holdco are set forth in the Nature of Business description above.




Details
      of Worldwide PE are set forth in the Nature of Business description above.




Details
      of IMT are set forth in the Nature of Business description above.




AMI
      International Pty Limited was established to hold the Group’s ownership
      interests in the Japanese and Chinese companies established to conduct
      operations in those countries.




AMI
      Management Services Pty Limited provides treasury and management services to
      AMI
      Australia and its subsidiaries.




Advanced
      Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
      Zealand. AMI NZ contributed 3.0% of AMI Australia’s consolidated revenue during
      the nine month periods ended March 31, 2007 (excluding other
      income).




AMI
      Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
      conferencing services across Australia and in
      various locations around
      the world. James Matthews, a director of Whygo, holds the remaining 50% of
      the
      outstanding shares of Whygo.





Whygo
      owns proprietary scheduling software, which allows its corporate partners to
      login and book rooms around the world. The source of Whygo’s income is derived
      from renting video conferencing rooms to its corporate partners through AMI
      Australia and its other channeling partners. Whygo contributed 2.6% of AMI
      Australia’s consolidated revenue during the nine month periods ended March 31,
      2007 (excluding other income).




AWIT
      Beijing Medicine Consulting Company (“AMI China”) conducts the Company’s
      business in China. AMI China commenced advertising of its services on September
      4, 2006 and is in the early stages of its operations.




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




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




On
      February 12, 2007, the Company entered into a written agreement with the
      Heartcheck Group of companies for an indefinite term, which can be terminated
      at
      any time with not less than twelve months written notice. Under the agreement,
      Heartcheck agrees to utilize services provided by the Company, including the
      provision of staff and premises. In exchange for these services, Heartcheck
      has
      agreed to reimburse the Company for all expenses associated with the provision
      of these services and to pay the company a net margin on those expenses. The
      provision of these services and the fees generated from this agreement with
      Heartcheck has contributed to the Company’s other income during the nine months
      and quarter ended March 31, 2007 whereas there had been no revenue generated
      by
      the agreement during past fiscal periods. Heartcheck is independently owned
      from
      the Company, its subsidiaries and its affiliates and it operates a business
      of
      providing cardiac related medical services in Australia.




8





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**




The
      accounting and reporting policies of the Company conform to accounting
      principles generally accepted in the United States of America. The following
      are
      descriptions of the more significant policies:





Basis
      of Accounting





The
      accompanying financial statements are prepared on an accrual basis.





Principles
      of Consolidation





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, AMI Australia Holdings Pty Limited, and its direct
      and
      indirect wholly-owned subsidiaries: Advanced Medical Institute Pty Ltd, PE
      Patent Holdco Pty Limited (“PE”), Worldwide PE Patent Holdco Pty Limited
      (“Worldwide PE”), Advanced Medical Institute (NZ) Limited (“AMI NZ”), AMI
      Management Services Pty Limited, Intelligent Medical Technologies Pty Ltd
      (“IMT”) and AMI China, its 75% owned subsidiary AMI Japan and its 50% owned
      subsidiary, Whygo Video Conferencing Pty Ltd (“Whygo”) (which owns all of the
      shares in Whygo Limited, a UK entity). All significant intercompany accounts
      and
      transactions have been eliminated upon consolidation.




Use
      of
      Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates





Revenue
      Recognition





Sales
      are
      reported as deferred income when the sales contracts are executed and the term
      of the contract exceeds three months. Up to three months of medication is
      delivered to the patient upon the signing of a contract. Generally the term
      of
      the sales contracts are up to one year, but they can be for longer periods
      of
      time. The deferred income arising from the contracts that exceed three months
      is
      then amortized, on a straight line basis, into income during the approximated
      composite remaining medication delivery period. This approximated composite
      is
      an estimate that may vary from period to period.




Income
      Tax




Income
      taxes have been provided based upon the tax laws and rates in the countries
      in
      which operations are conducted and income is earned. The income tax rates
      imposed by the taxing authorities vary. Taxable income may vary from pre-tax
      income for financial accounting purposes. There is no expected relationship
      between the provision for income taxes and income before income taxes because
      the countries have different taxation rules, which vary not only to nominal
      rates but also in terms of available deductions, credits and other benefits.
      Deferred tax assets and liabilities are recognized for the anticipated future
      tax effects of temporary differences between the financial statement basis
      and
      the tax basis of the Company’s assets and liabilities using the applicable tax
      rates in effect at year end as prescribed by SFAS 109 “Accounting for Income
      Taxes”.




9





Exchange
      Gain (Loss)




During
      the fiscal nine month period ended March 31, 2007 and 2006, the transactions
      of
      AMI Australia were denominated in foreign currency and were recorded in
      Australian Dollars (AUD) at the rates of exchange in effect when the
      transactions occur. Exchange gains and losses are recognized for the different
      foreign exchange rates applied when the foreign currency assets and liabilities
      are settled.





Foreign
      Currency





As
      of
      March 31, 2007 and 2006, the accounts of AMI Australia and its subsidiaries
      were
      maintained and its financial statements were expressed in Australian Dollars
      (AUD). Such financial statements were translated into U.S. Dollars (USD) in
      accordance with Statement of Financial Accounts Standards (“SFAS”) No. 52,
“Foreign Currency Translation,” with the AUD as the functional currency.
      According to the Statement, all assets and liabilities were translated at the
      current exchange rate, stockholders’ equity is translated at the historical
      rates and income statement items are translated at the average exchange rate
      for
      the period. The resulting translation adjustments are reported under other
      comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive
      Income” as a component of shareholders’ equity (deficit).





Segment
      Reporting





Statement
      of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
      Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
      is based on the way a company’s management organizes segments within the company
      for making operating decisions and assessing performance. Reportable segments
      are based on products and services, geography, legal structure, management
      structure, or any other manner in which management disaggregates a company.
      SFAS
      131 has no effect on the Company’s consolidated financial statements as the
      Company consists of one reportable business segment.





Basic
      and Diluted Earnings Per Share





Earnings
      per share is calculated in accordance with the Statement of Financial Accounting
      Standards No. 128 (“SFAS No. 128”), “Earnings per share”. SFAS No. 128
      superseded Accounting Principles Board Opinion No.15 (APB 15). Net income (loss)
      per share for all periods presented has been restated to reflect the adoption
      of
      SFAS No. 128. Basic net income (loss) per share is based upon the weighted
      average number of common shares outstanding. Diluted net income (loss) per
      share
      is based on the assumption that all dilutive convertible shares and stock
      options were converted or exercised. Dilution is computed by applying the
      treasury stock method. Under this method, options and warrants are assumed
      to be
      exercised at the beginning of the period (or at the time of issuance, if later),
      and as if funds obtained thereby were used to purchase common stock at the
      average market price during the period.





**RECENT
      PRONOUNCEMENTS**





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





10




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




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




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




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




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




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




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




In
      September 2006, FASB issued SFAS No. 157 “Fair Value Measurements”. This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Management is currently
      evaluating the effect of this pronouncement on financial
      statements.





11




In
      September 2006, FASB issued SFAS No. 158 “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)”. This Statement improves financial reporting by
      requiring an employer to recognize the over funded or under funded status of
      a
      defined benefit postretirement plan (other than a multiemployer plan) as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This Statement also improves financial
      reporting by requiring an employer to measure the funded status of a plan as
      of
      the date of its year-end statement of financial position, with limited
      exceptions. An employer with publicly traded equity securities is required
      to
      initially recognize the funded status of a defined benefit postretirement plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after December 15, 2006. An employer without publicly traded equity securities
      is required to recognize the funded status of a defined benefit postretirement
      plan and to provide the required disclosures as of the end of the fiscal year
      ending after June 15, 2007. However, an employer without publicly traded equity
      securities is required to disclose the following information in the notes to
      financial statements for a fiscal year ending after December 15, 2006, but
      before June 16, 2007, unless it has applied the recognition provisions of this
      Statement in preparing those financial statements:




·
            A
                brief description of the provisions of this Statement




·
            The
                date that adoption is required




·
            The
                date the employer plans to adopt the recognition provisions of this
                Statement, if earlier.




The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position is effective for
      fiscal years ending after December 15, 2008. Management is currently evaluating
      the effect of this pronouncement on financial statements.




In
      February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
      years beginning after November 15, 2007. Early adoption is permitted subject
      to
      specific requirements outlined in the new Statement. Therefore, calendar-year
      companies may be able to adopt FAS 159 for their first quarter 2007 financial
      statements.




The
      new
      Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. FAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities. Management is currently evaluating the effect of this pronouncement
      on financial statements.




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





Property,
      plant and equipment comprised of the following as of March 31,
      2007:




Leasehold
                  improvements
              
              $
              488,809Less:
                  Accumulated depreciation
              
              
              (64,400
              )424,409Motor
                  Vehicles
              
              
              47,914Less:
                  Accumulated Depreciation
              
              
              (24,130
              )23,784Office
                  Furniture & Equipment
              
              
              409,918Less:
                  Accumulated Depreciation
              
              
              (79,519
              )330,399Computer
                  Hardware
              
              
              339,474Less:
                  Accumulated Depreciation
              
              
              (197,066
              )142,408Low
                  Value Pooled Fixed Assets
              
              
              132,854Less:
                  Accumulated Depreciation
              
              
              (89,546
              )43,308**Total
                  Property, Plant and Equipment, net**
              
              **$**
              **964,308**




12




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





Interest
      bearing liabilities comprised of the following as of March 31,
      2007:





**Current,
                as of the period ended March 31, 2007**Capitalized
                lease liability
            
            $
            62,285Unsecured
                loan
            
            
            161,600**$**
            **223,885****Non-current,
                due as of the period ended March 31, 2007**Capitalized
                lease liability2007
            
            $
            44,301Secured
                loan
            
            
            2,341,074Total
                non-current
            
            **$**
            **2,385,375**




The
      interest bearing liabilities require monthly payments of principal and interest
      at a per annum interest rate ranging from 6.2% to 11.5%. Interest expense on
      the
      interest bearing liabilities amounted to $132,416, and $1,234 for the nine
      month
      periods ended March 31, 2007 and 2006, respectively, and $68,061 and none for
      the three month periods ended March 31, 2007 and 2006, respectively.




Obligations
      under the notes are secured by the financed assets included in property and
      equipment. The secured loan is secured over all of AMI Australia’s assets and
      undertakings. The future aggregate payments arising from this loan is as
      follows:




Due
                during the twelve months period ended March 31,2008
            
            $
            238,0722009
            
            
            266,2622010
            
            
            297,0742011
            
            
            331,4502012
            
            
            369,5422013
            
            
            412,5682014
            
            
            426,106$
            2,341,074




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




As
      of
      March 31, 2007, there was no litigation pending or threatened by or against
      the
      Company or any of its subsidiaries except as follows:




On
      July
      19, 2004, the Australian Competition and Consumer Commission (collectively,
      the
“ACCC”) filed a suit against AMI Australia in the Federal Court of Australia
      Sydney Registry. The ACCC claimed that a series of advertisements made by AMI
      Australia involving a celebrity that confessed impotence were misleading and
      deceptive. On August 15, 2006 the court ruled in favor of the ACCC that the
      advertisements were misleading and deceptive but declined to order corrective
      advertising or any pecuniary penalty other than an order that AMI Australia
      pay
      the ACCC’s costs on a party-party basis. The Company has estimated a cost of
      settlement of $72,720 which is accrued as of March 31, 2007. AMI Australia
      has
      proposed payment by 10 installments and is awaiting response to that
      proposal.




On
        September 27, 2004, Rocco Licastro, a former patient, filed a suit against
        AMI
        Australia in the District Court of NSW, Sydney Registry. Mr. Licastro’s claims
        result from an injection therapy that Mr. Licastro claims caused physical
        injuries. Mr. Licastro is seeking damages including medical expenses, but
        no
        amount has been specified to date. The proceedings began on February 19,
        2007
        and concluded on February 28, 2007. Judgment has been reserved. AMI Australia
        has denied the allegations and is vigorously defending this suit. AMI Australia
        also seeks to be indemnified by its insurer. The result is difficult to predict
        because there are a number of factual issues each of which could materially
        affect the result.




13




***CONTINGENT
      LIABILITY***


A
        dispute
        with a previous telecommunication carrier over billing in the amount of $122,924
        arose in 2002. AMI Australia responded with a counterclaim of $550,904 against
        the carrier in 2003 and no correspondence has been received from the carrier.
        No
        settlement has been reached, but in the opinion of the Company’s directors, the
        $122,924 will not be paid. Similarly, the Company has not been actively pursing
        the amount it claims is owed to it under the couterclaim. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.




**6.**
              **LEASE
                  COMMITMENTS**





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




Due
                during the twelve months period ended March 31,2008
            
            $
            707,6132009
            
            
            564,3982010
            
            
            277,6262011
            
            
            89,4192012
            
            
            57,328**$**
            **1,696,384**




Rent
      paid
      for the nine months ended March 31, 2007 and 2006 was $1,272,467 and $852,194,
      respectively.





**7.**
            **CONCENTRATION**





Sales
      Markets - The Company’s revenue arises from Australian, New Zealand, Chinese and
      Japanese customers. The majority of the revenue is patient based and derives
      from the Australian market.




Suppliers
      - Although the Company has access to a variety of suppliers, the majority of
      the
      Company’s products that are obtained for resale are purchased from a limited
      number of suppliers. Top 3 suppliers of products accounted for 80.9% of total
      purchases during the 9 month periods ended March 31, 2007.




14




**8.**
            **SHARE
                EXCHANGE AGREEMENTS -
                ACQUISITION**





On
      September 8, 2006 the Company entered into a Share Exchange Agreement with
      Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
      Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
      which the Company acquired all of the issued and outstanding shares of stock
      of
      Worldwide PE in exchange for the payment of A$3 million (approximately US$2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share. These shares were subsequently
      transferred by the Company to AMI Australia. The issuance of our shares of
      common stock to the Worldwide PE Shareholders was exempt from registration
      under
      the Securities Act pursuant to Section 4(2) and Regulation S. As used herein,
      the “Company” shall also mean Worldwide PE when used for events after September
      8, 2006, described herein.




The
      Company funded the cash component of the purchase price by AMI Australia
      entering into two secured three year term loans in the aggregate principal
      amount of A$3 million with ANZ Nominees Limited in its capacity as custodian
      of
      the Professional Pensions PST. The loan is secured by a security interest in
      all
      of AMI Australia’s assets and undertakings (including its existing equity
      interests in PE Patent Holdco Pty Limited, Intelligent Medical Technologies
      Pty
      Limited, Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing
      Pty Limited). The loan accrues interest at an annual coupon of 450 basis points
      above the then Australian Reserve Bank’s current cash rate (currently being an
      aggregate current interest rate of 10.75%).


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


Related
                party transactions comprised of the following as of March 31, 2007:***Forhad
                (Tony) Khan***Relationship:Director of the parent entityPayable
                to this related party
            
            $
            2,805***Jack
                Vaisman********(an
                AU citizen)***Relationship:
                Director of the CompanyDirector
                salary from AMI Australia
            
            $
            171,293***James
                Matthews********(an
                AU citizen)***Relationship:
                Director of the subsidiary (Whygo)Payable
                to this related party
            
            $
            1,890Director
                salary
            
            $
            35,359***Prostate
                Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                from this related party
            
            $
            1,383***Zinalda
                Vaisman********(an
                AU citizen)***Relationship:
                Jack Vaisman’s wifeSalary
            
            $
            35,585




Total
        receivables due from related parties included in the Company’s statement of
        financial position was $1,383  and
        $33,633 as of March 31, 2007 and March 31, 2006, respectively.
 
 Total
        accounts payable to related parties included in the Company’s statement of
        financial position was $4,695  and
        $13,745 as of March 31, 2007 and March 31, 2006, respectively.
 
 15
  Receivables
        from, and payables to, related parties are unsecured, interest-free and are
        due
        on demand.




**10.**
            **INCOME
                TAXES**





Total
      Federal and State income tax expense for the nine months period ended March
      31,
      2007 and 2006 amounted to $835,552 and $ 834,936 ,respectively.
      For the nine month periods ended March 31, 2007 and 2006 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.





The
                following is a reconciliation of income tax expense for the nine
                month
                periods ended March 31, 2007 &
2006:




March
                31, 2007
            
            U.S.
            
            State
            
            International
            
            TotalCurrent
            
            $
            0
            
            $
            0
            
            $
            539,164
            
            $
            539,164Deferred
            
            $
            0
            
            $
            0
            
            $
            296,388
            
            $
            296,388Total
            
            $
            0
            
            $
            0
            
            $
            835,552
            
            $
            835,552March
                31, 2006
            
            
            U.S.
            
            
            State
            
            
            International
            
            
            TotalCurrent
            
            $
            0
            
            $
            0
            
            $
            278,598
            
            $
            278,598Deferred
            
            $
            0
            
            $
            0
            
            $
            556,338
            
            $
            556,338Total
            
            $
            0
            
            $
            0
            
            $
            834,936
            
            $
            834,936




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




2007
            
            
            2006Federal
                statutory tax rate
            
            
            34
            %
            
            34
            %Increase
                (decrease) in rate resulting from:Non
                US income taxed at different rates
            
            
            (1
            %)
            
            (1
            %)Effective
                tax rate
            
            
            33
            %
            
            33
            %





16




**11.**
            **OTHER
                COMPREHENSIVE INCOME
                (LOSS)**





Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity, at March 31, 2007 are as
      follows:





*Accumulated
                Other Comprehensive Income*Balance
                at June 30, 2006
            
            $
            (204,483
            )Foreign
                currency translation adjustment for nine months ended March 31,
                2007
            
            
            2,450,277Balance
                at March 31, 2007
            
            $
            2,245,794




17




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




THE
      FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
      CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
      APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
      AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE
      YEAR ENDED JUNE 30, 2006.




**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




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




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





REVENUE
      RECOGNITION - Sales are reported as deferred income when the sales contracts
      are
      executed and the term of the contract exceeds three months. Up to three months
      medication is delivered to the patient upon the signing of a contract. Generally
      the term of the sales contracts are up to one year, but they can be for longer
      periods of time. The deferred income arising from the contracts that exceed
      three months is then amortized, on a straight-line basis, into income during
      the
      approximated composite remaining medication delivery period. This approximated
      composite is an estimate that may vary from period to period.




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




18




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




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




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




**NATURE
      OF THE OPERATIONS OF THE COMPANY**




**NATURE
      OF BUSINESS**




We
      were
      incorporated under the name of Hawksdale Financial Visions, Inc. (sometimes
      the
“Company”) on December 6, 1996 under the laws of the State of Nevada. We
      originally had intended to time share a single family dwelling house in the
      Rum
      Cay area of the Bahamas, offering a one-twelfth fractional interest. As at
      March
      31, 1997, all funds raised by the sale of shares of $.001 par value common
      stock
      (“Common Stock”) in order to fulfill our initial objective had been expended and
      we, thereafter, become dormant. From March 31, 1997 until January 28, 2005,
      we
      were in the developmental stage and had no operations and we could be defined
      as
      a “shell” company, an entity which is generally described as having no or
      nominal operations and with no or nominal assets or assets consisting solely
      of
      cash and cash equivalents.




On
      October 1, 2004, we formed a corporation under the laws of the State of Nevada
      called “Advanced Medical Institute Inc.” and on October 5, 2004, we acquired one
      hundred shares of its common stock for cash. On October 15, 2004, the subsidiary
      was merged with and into the Company and as a result of the merger, the
      Company’s corporate name was changed to “Advanced Medical Institute Inc.”




19




On
      January 28, 2005, we entered into a Share Exchange Agreement (the “Exchange
      Agreement”) with Advanced Medical Institute Pty Limited (since renamed AMI
      Australia Holdings Pty Limited), a privately owned Australian company (“AMI
      Australia”), and AMI Australia’s shareholders, (the “Shareholders”), pursuant to
      which the parties agreed that we would acquire all of the issued and outstanding
      shares of stock of AMI Australia in exchange for the issuance in the aggregate
      of 14,600,000, or 58.4%, of our then issued shares of Common Stock (the
“Shares”) to the Shareholders. On March 21, 2005, we closed the transaction and
      issued our Shares, resulting in us acquiring the business of AMI Australia
      (the
“Share Exchange”), which is discussed below. As used herein, the “Company” shall
      also mean AMI Australia and its subsidiaries after the close of the Share
      Exchange when used for events after March 21, 2005, described
      herein.




On
      November 17, 2005 (the “Second Closing Date”), we entered into a Share Exchange
      Agreement (the “Second Exchange Agreement”) with PE Patent Holdco Pty Limited, a
      privately owned Australian company (“PE Patent”), and PE’s shareholders, (the
“PE Shareholders”), pursuant to which we acquired all of the issued and
      outstanding shares of stock of PE Patent in exchange for the issuance in the
      aggregate of 5,000,000 of our Shares to the PE Shareholders. The issuance of
      our
      shares of common stock to the PE Shareholders was exempt from registration
      under
      the Securities Act pursuant to Section 4(2) and Regulation S. As used herein,
      the “Company” shall also mean PE Patent after the Second Closing Date when used
      for events after November 17, 2005, described herein. On November 22, 2005
      ownership of PE Patent was transferred by us to our wholly owned subsidiary
      AMI
      Australia Holdings Pty Limited.




On
      November 22, 2005 Advanced Medical Institute Pty Limited was renamed AMI
      Australia Holdings Pty Limited and a new wholly owned subsidiary of this entity
      was incorporated under the name Advanced Medical Institute Pty Limited.




On
      April
      18, 2006, the Company acquired the remaining 7% of Intelligent Medical
      Technologies Pty Limited (“IMT”) which was previously held by third parties in
      exchange for 1.26 million shares of the Company. These shares were subsequently
      transferred by the Company to AMI Australia. The issuance of our shares of
      common stock to the IMT Shareholders was exempt from registration under the
      Securities Act pursuant to Section 4(2) and Regulation S.




In
      2003,
      IMT was granted the exclusive worldwide right and license from Sheiman Ultasonic
      Research Foundation Pty Limited (“SURF”) to exploit and sub-license certain
      inventions, patents and other intellectual property in relation to certain
      ultrasonic nebulizer technology within the field of the treatment of sexual
      dysfunction in men and women (including impotence, premature ejaculation and
      the
      treatment of female sexual arousal disorders). Some of these patents expire
      in
      October 2013, with the remaining patents expiring around 2023. IMT’s license was
      a broad based license which included the right to manufacture, market, sell
      and
      distribute products based on the technology and patents within the field of
      use.




IMT
      also
      had the option to extend its field of use to the treatment of prostate diseases.
      IMT exercised its option to extend its field of use to include prostate diseases
      on July 15, 2006 and IMT “terminated” its license with SURF. The termination was
      because of SURF’s failure to deliver to the Company information concerning
      updates and advances on the technologies. The termination does not affect IMT’s
      rights to use the technology - the only effect is to terminate the royalty
      payment obligations to SURF under the license. As
      a
      result of terminating the license agreement, IMT retained the right to use
      the
      technology in its treatment programs to treat sexual dysfunction without paying
      royalties or other fees to SURF.




20




IMT
      applied for 4 worldwide patents relating to its ultrasonic nebulizer device
      in
      July 2005 and applied for 3 further worldwide patents relating to its device
      on
      February 10, 2006.




IMT
      acquired this license in order to develop an ultrasonic nebulizer to deliver
      medications to patients’ lungs for the treatment of sexual dysfunction as it
      believes that this delivery system will be more efficient and clinically
      effective than any other alternative treatment option and will reduce dosage
      levels and the likelihood of side effects.




IMT
      applied to list its nebulizer with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006 and believes it
      will receive a response, as to whether accepted or rejected, from the TGA by
      June 30, 2007.




On
      September 8, 2006, the Company entered into a Share Exchange Agreement with
      Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
      Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
      which the Company acquired all of the issued and outstanding shares of stock
      of
      Worldwide PE in exchange for the payment of A$3 million (approximately $2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share.




The
      Company funded the cash component of the purchase price by AMI Australia
      entering into two secured three year term loans in the aggregate principal
      amount of A$3 million (approximately $2.25 million) with ANZ Nominees Limited
      in
      its capacity as custodian of the Professional Pensions PST. The loan is secured
      by a security interest in all of AMI Australia’s assets and undertakings
      (including its existing equity interests in PE Patent Holdco Pty Limited,
      Intelligent Medical Technologies Pty Limited, Advanced Medical Institute (NZ)
      Limited and Whygo Video Conferencing Pty Limited). The loans accrues interest
      at
      an annual coupon of 450 basis points above the then Australian Reserve Bank’s
      current cash rate (currently being an aggregate current interest rate of
      10.75%).




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




The
      Chinese subsidiary, named AWIT Beijing Medicine Consulting Company (“AMI
      China”), is an indirect, wholly owned subsidiary of the Company and has formed
      an alliance with 2 Beijing hospitals for the purpose of establishing operations
      and conducting clinical trials for regulatory purposes. AMI China has obtained
      regulatory approval to its proposed advertisements and commenced operations
      on
      September 4, 2006. AMI China rents premises from these hospitals and has agreed
      to give persons associated with these hospitals a 20% share of profits from
      AMI
      China’s operations.




The
      Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), is an
      indirect, 75% owned subsidiary of the Company. AMI Japan is also partly owned
      by
      a Japanese individual who has expertise in Japanese marketing and 2 financial
      investors. The Japanese subsidiary commenced operations on October 1, 2006.
      The
      Japanese investor received his shareholding in AMI Japan in consideration for
      assisting with the establishment of AMI Japan and in consideration for assisting
      with the marketing and management of AMI Japan.




On
      May 2,
      2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
      Group Limited, a privately owned company registered in the United Kingdom (“AMI
      UK”).




The
      Option grants AMI UK a right to enter into an exclusive license to use Worldwide
      PE’s intellectual property in the United Kingdom. AMI UK has paid Worldwide PE
      an upfront non-refundable fee of $50,000 to secure an initial period of four
      months to confirm the license which period may be extended for a further two
      months by AMI UK paying Worldwide PE a non-refundable extension fee of $50,000.
      During this initial six month period, AMI UK may elect to enter into a License
      Agreement (the “License”) by paying Worldwide PE an upfront non-refundable
      license fee of $1 million less the upfront fees paid to Worldwide PE prior
      to
      that date. Terms of the Option and the License have been disclosed by the
      Company on its Current Report on Form 8-K filed with the Securities and Exchange
      Commission (the “SEC”) on May 3, 2007.




21




General
      Business Plan




AMI
      Australia is a company, incorporated and domiciled in Australia. AMI Australia
      was established in February 2001 when it entered into an agreement with Health
      Services for Men and Australian Momentum Health to acquire two chains of medical
      clinics and sales offices which provided services relating to the medical
      treatment of sexual dysfunction. The principal activity of AMI Australia
      continues to be the sale of services relating to the medical treatment of sexual
      dysfunction in Australia, New Zealand and Asia. For the third quarter ended
      March 31, 2007, AMI Australia’s revenue was approximately $9.4 million. For the
      second quarter ended December 31, 2006, AMI Australia’s revenue was
      approximately $9.9 million. Management believes that the reason for the drop
      in
      revenue in January is because of the effect of the Christmas holiday period.
      Australians tend to go on a long vacation from Christmas until the beginning
      or
      middle of January. The large number of Australians who are on vacation during
      this period tends to result in a reduction in the Company’s sales during this
      period.




The
      Company operates a centralized call center and twenty-two medical centers and
      sales offices throughout Australia and, New Zealand. The Company is operating
      2
      medical centers in Beijing, China and 1 medical center in Tokyo, Japan as well
      as having an informal alliance with 3 other medical centers in Osaka, Nagoya
      and
      Okinawa.




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




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




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




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




During
      March 2006, AMI Australia commenced trialing prostate treatments for men with
      prostate problems. Those treatments generated approximately $1,043,156 or 3.5%
      of AMI Australia’s total net revenue during the nine month period ended March
      31, 2007, however it is too early to assess whether these treatment options
      will
      contribute significantly to AMI Australia’s revenue or profitability in the
      longer term.




During
      September 2006, the Company launched AMI SCI, a not-for-profit, indirect wholly
      owned subsidiary of the Company which aims to provide specialized sexual
      dysfunction treatments to spinal cord victims in Australia.




22




Each
      of
      AMI Australia's treatment programs are prescribed by licensed Australian, New
      Zealand, Chinese and Japanese doctors and prepared and delivered by an
      Australian, New Zealand, Chinese or Japanese compounding pharmacy in full
      compliance with the relevant regulatory requirements. AMI Australia's products
      and services are only available by prescription and are sold on an "off-label"
      basis. AMI Australia's treatment programs are generally available in the same
      manner through both its medical clinics and sales offices or through its
      over-the-phone sales and marketing program.




Since
      August 1, 2003, AMI Australia has used in its business certain intellectual
      property owned by PE Patent Holdco on a royalty free oral license. PE Patent
      Holdco became a wholly owned subsidiary through a Share Exchange Agreement
      on
      November 17, 2005 and subsequently became a wholly owned subsidiary of AMI
      Australia on November 22, 2005. These transactions are more fully described
      in
      the section entitled “Nature of Business” above. This intellectual property
      consists solely of the rights to use the relevant medical formulations in
      Australia, an Australian innovation patent for AMI Australia’s premature
      ejaculation treatment programs (Australian Innovation Patent No 2005100183,
      which is due to expire on July 9, 2012) and an Australian standard patent
      application (Australian standard patent application No.
      2004222783).




The
      Australian innovation patent was issued to Dr. Jack Vaisman, the Chief Executive
      Officer, President and Chairman of the Board of Directors of the Company and
      the
      Founder, President and Chief Executive Officer of AMI Australia, who on July
      22,
      2005 transferred the patent to PE Patent Holdco. The development of the
      intellectual property underlying the patents and patent applications was
      undertaken and funded by Dr. Vaisman. The innovation patent, titled “Treatment
      of Premature Ejaculation” relates to various methods of treatment delivery via
      nasal (mucosal) inhalation and topical application of certain formulations
      which
      are used in AMI Australia’s treatment programs for premature ejaculation. The
      patents and associated formulations are integral to AMI Australia’s premature
      ejaculation treatment programs.




AMI
      Australia’s nasal spray, injection, lozenge and tablet erectile dysfunction
      treatment programs are not patent protected. This technology was developed
      by
      AMI Australia and its founder, Dr Jack Vaisman, and in connection with
      predecessor businesses during the last 13 years.




AMI
      Australia obtains customers through direct advertising and marketing and through
      its existing customer database which exceeds 300,000 people.




Each
      of
      the individual medications used in our compound formulations are fully approved
      by the Australian Therapeutic Goods Administration (“TGA”) and the New Zealand Medicines
      and Medical Devices Safety Authority (“NZ
      DSA”). Our compound formulations have not been subject to a clinical trial
      program and have not been approved for use by the TGA or NZ DSA for
      over-the-counter sale, but may lawfully be prescribed by accredited medical
      practitioners on an individual prescription basis in Australia and New
      Zealand.




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




AMI
      Australia’s wholly-owned subsidiary, Intelligent Medical Technologies Pty
      Limited (“IMT”) was granted the exclusive worldwide right and license from
      Sheiman Ultrasonic Research Foundation Pty Limited (“SURF”) to exploit and
      sub-license certain inventions, patents and other intellectual property in
      relation to certain ultrasonic nebulizer technology (including Australian Patent
      No’s 693064 and 753817, European Patent No’s 0 705 145 and 1 071 479 and US
      Patent No’s 5,908,158 and 6,379,616) within the field of the treatment of sexual
      dysfunction in men and women (including impotence, premature ejaculation and
      the
      treatment of female sexual arousal disorders). Some of these patents expire
      in
      October 2013, with the remaining patents expiring around 2023.




23




IMT’s
      license was a broad based license which included the right to manufacture,
      market, sell and distribute products based on the technology and patents within
      the field of use. IMT also had the option to extend its field of use to the
      treatment of prostate diseases. IMT exercised its option to extend its field
      of
      use to include prostate diseases on July 15, 2006 and IMT “terminated” its
      license with SURF. The termination was because of SURF’s failure to deliver to
      the Company information concerning updates and advances on the technologies.
      The
      termination does not affect the Company’s rights to use the technology - the
      only effect is to terminate the royalty payment obligations to SURF under the
      license. As
      a
      result of terminating the license agreement, IMT retained the right to use
      the
      technology in its treatment programs to treat sexual dysfunction without paying
      royalties or other fees to SURF.




IMT
      applied for four patents in various countries throughout the world relating
      to
      its ultrasonic nebulizer device in July 2005 and applied for three additional
      patents relating to its device in February 2006. On April 18, 2006, AMI
      Australia acquired the remaining 7% of the outstanding shares of IMT, making
      it
      a wholly owned subsidiary of AMI Australia.




IMT
      acquired its right to use the SURF technology in order to develop an ultrasonic
      nebulizer to deliver medications to patients’ lungs for the treatment of sexual
      dysfunction as it believes that this delivery system will be more efficient
      and
      clinically effective than any other alternative treatment program option and
      will reduce dosage levels and the likelihood of side effects.




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




IMT
      has
      received advice from Brandwood Biomed Pty Limited, an Australian regulatory
      expert on TGA requirements that IMT does not need to conduct clinical trials
      to
      list its device with the TGA. IMT filed its application to list its device
      during October 2006 and expects the application to be accepted or rejected
      by
      June 30, 2007.




IMT
      intends to commence a voluntary pharmacokinetic clinical trial in Australia
      of a
      liquid form of a well known medication for the treatment of erectile dysfunction
      which is capable of being delivered through the nebulizer device in order to
      evidence the effectiveness of the nebulizer in delivering medications during
      this calendar year. This study is designed
      to test the efficacy of using its patent protected ultrasonic nebulizer device
      to deliver drugs used in the treatment of sexual dysfunction. In
      April,
      2006 IMT received
      approval from the Queensland Institute of Medical Research Human Research Ethics
      Committee to
      conduct this clinical trial and plans to conduct the trial at the direction
      of
      and under analysis by Q-Pharm, the commercial arm of a leading Australian
      university. IMT estimates the cost of this clinical trial to be approximately
      $180,000.




IMT
      has
      been spending a large portion of its capital on research and development
      activities with financial support from AMI Australia (approximately $284,000
      during fiscal 2005, and approximately $205,000 during fiscal 2006). IMT has
      compiled a team of experts to assist it with these research and development
      activities. AMI Australia has entered into a distribution agreement with IMT
      whereby AMI Australia has the exclusive worldwide distribution rights of the
      technology for sexual dysfunction treatments and is entitled to use any
      innovations, including those that are in a non-sexual dysfunction field,
      developed by it as a result of its research and development in connection with
      its nebulizer device. As at March 31, 2007, the IMT research and development
      into the efficacy of the nebulizer is still in a development stage and there
      has
      been no income generated by AMI Australia as a result of its agreement with
      IMT.




24




On
      September 8, 2006, the Company entered into a Share Exchange Agreement with
      Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
      Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
      which the Company acquired all of the issued and outstanding shares of stock
      of
      Worldwide PE in exchange for the payment of A$3 million (approximately $2.25
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share. The Company funded the cash component
      of
      the purchase price by AMI Australia entering into two secured three year term
      loans in the aggregate principal amount of A$3 million (approximately $2.25
      million) with ANZ Nominees Limited in its capacity as custodian of the
      Professional Pensions PST. The loan is secured by a security interest in all
      of
      AMI Australia’s assets and undertakings (including its existing equity interests
      in PE Patent Holdco Pty Limited, Intelligent Medical Technologies Pty Limited,
      Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing Pty
      Limited). The loans accrues interest at an annual coupon of 450 basis points
      above the then Australian Reserve Bank’s current cash rate (currently being an
      aggregate current interest rate of 10.75%).




On
      February 12, 2007, the Company entered into a written agreement with the
      Heartcheck Group of companies for a indefinite term, which can be terminated
      at
      any time with not less than twelve months written notice. Under the agreement,
      Heartcheck agrees to utilize services provided by the Company, including the
      provision of staff and premises. In exchange for these services, Heartcheck
      has
      agreed to reimburse the Company for all expenses associated with the provision
      of these services and to pay the company a net margin on those expenses. The
      provision of these services and the fees generated from this agreement with
      Heartcheck has contributed to the Company’s net profit during the half year and
      quarter ended March 31, 2007 whereas there has been no revenue generated by
      the
      agreement during past fiscal periods. Heartcheck is independently owned from
      the
      Company, its subsidiaries and its affiliates and it operates a business of
      providing cardiac related medical services in Australia.




Competition





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





Companies
      of all sizes are engaged in the development and commercialization of
      technologies in the erectile dysfunction and premature ejaculation market
      segments. Currently, no known alternate premature ejaculation technology similar
      to ours has been commercialized. Competition is intense in the erectile
      dysfunction segment of our business and includes many large and small
      competitors who have greater revenue, more customers and higher levels of brand
      recognition than AMI Australia. The efficacy, safety, patients’ and customers’
ease of use and cost effectiveness of our products are important factors for
      success in our principal businesses. Many of our competitors have substantially
      greater financial and other resources, larger research and development staffs
      and more experience in the regulatory approval process. Moreover, potential
      competitors have or may have intellectual property or other rights that conflict
      with patents, license agreements and other intellectual property rights covering
      our technologies.





Staff





As
      of
      March 31, 2007, the Company and its operating subsidiaries had a total staff
      of
      approximately 328 people, of which 223 are full-time and 105 are part-time
      staff, working in the areas of sales and marketing, customer support, product
      development and back office functions. Of the 328 people, the Company’s staff
      includes 26 independent consultants and 52 licensed medical personnel. None
      of
      the Company’s employees are members of a union or labor
      organization.




None
      of
      AMI Australia’s subsidiaries have any employees except Whygo which has 3
      full-time employees and 1 part-time employee, AMI NZ which has 1 full-time
      employee and 1 part time employee, AMI China which has 15 full-time employees
      and AMI Japan which has 3 full-time employees and 1 part-time employee.




25




The
      Company’s core staff includes:




DR.
      JACOV
      (JACK) VAISMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR - Dr. Vaisman
      has served as the Company’s Chief Executive Officer, President and as a Director
      since March 21, 2005. Dr. Vaisman is a pioneer in the sexual dysfunction
      business in Australia. Since 2001, he has served as the managing director and
      chief executive officer of AMI Australia. He is responsible for the overall
      management and strategic direction of AMI Australia’s impotency operations. Dr.
      Vaisman is also currently a consultant to and shareholder in Yayasan On Clinic,
      which operates a similar business in Indonesia. From 1993 through 2001, Dr.
      Vaisman was the founder and director of On Clinic International in Australia,
      the predecessor company to AMI Australia. The holder of a Bachelor of Medicine,
      a Master of Gynecology and a PhD in Medical Science, Dr. Vaisman has more than
      35 years of experience and expertise in the field of sexual health care
      provision and was recently granted an innovation patent in the field of
      premature ejaculation treatment by the Australian patent office.




DILIP
      SHRESTHA, CHIEF FINANCIAL OFFICER - Mr. Shrestha was appointed as the Company’s
      Chief Financial Officer on April 7, 2005. Mr. Shrestha has also served as the
      chief financial officer of AMI Australia since July 1, 2005. From 2001 to July
      1, 2005, Mr. Shrestha was the Financial Controller of AMI Australia. Prior
      to
      that he was an Assistant Accountant, a position held from 1999 until 2001,
      with
      Australian Momentum Health Pty Ltd, one of two medical establishments leading
      in
      providing impotency treatment in Australia and a predecessor company to AMI
      Australia. Mr. Shrestha holds a Bachelor of Business Accounting, Master of
      E-Commerce and a Graduate Diploma of Information System and
      E-Commerce.




FORHAD
      (TONY) KHAN, EXECUTIVE VICE PRESIDENT, SECRETARY AND DIRECTOR - Mr. Khan has
      served as the Company’s Executive Vice President since July 30, 2005, he has
      been the Company’s Secretary and a Director since March 21, 2005. Mr. Khan also
      served as the chief operating officer of AMI Australia since July 1, 2005.
      From
      2001 to July 1, 2005, Mr. Khan was the General Manager of AMI Australia. Prior
      to joining AMI Australia, Mr. Khan was the Director and sole operator of
      Australian Momentum Health Pty Ltd. Mr. Khan was Sales Manager and then
      Operations Manager for On Clinic International prior to establishing AMH. Mr.
      Khan holds a Masters degree in Commerce and Accounting and has been involved
      in
      the industry for over ten years.





Currency
      Conversion





As
      of
      March 31, 2007 and 2006, the accounts of AMI Australia were maintained, and
      its
      financial statements were expressed, in Australian Dollars (AUD). Such financial
      statements were translated into U.S. Dollars (USD or $) in accordance with
      Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
      Translation”, with the AUD as the functional currency. According to the
      Statement, all assets and liabilities were translated at the exchange rate
      as of
      March 31, 2007, stockholder’s equity are translated at the historical rates and
      income statement items are translated at the weighted-average exchange rate
      for
      the period. The resulting translation adjustments are reported under other
      comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive
      Income”.




26




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





Result
      of operations:





**Three
                months ended**
              **March
                31,**
            
            **Nine
                months ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenue
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %Cost
                of revenue
            
            
            24.5
            %
            
            24.5
            %
            
            23.3
            %
            
            26.6
            %Gross
                profit
            
            
            75.5
            %
            
            75.5
            %
            
            76.7
            %
            
            73.4
            %Selling,
                general and administrative expenses
            
            
            83.4
            %
            
            56.6
            %
            
            74.5
            %
            
            61.1
            %Other
                income and expenses
            
            
            0.3
            %
            
            *
            
            
            0.3
            %
            
            0.1
            %Income (loss)
                before income tax
            
            
            (7.6
            )%
            
            18.9
            %
            
            2.5
            %
            
            12.4
            %Income
                tax expenses
            
            
            0.1
            %
            
            5.7
            %
            
            2.8
            %
            
            3.8
            %Net
                income (loss)
            
            
            (7.7
            )%
            
            13.2
            %
            
            (0.3
            )%
            
            8.6
            %





*
            less
                than 0.1%.




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      March 31, 2007, we had total liabilities of $14,556,606 including unearned
      revenue of $4,863,352 and we had a positive net worth of $28,988,256. As at
      our
      fiscal year ended June 30, 2006, we had total liabilities of $9,561,389
      including unearned revenue of $3,887,052 and we had a positive net worth of
      $10,497,919. As at March 31, 2007 our total current assets were $14,484,430,
      our
      total current liabilities were $10,738,622 and our net current assets were
      $3,745,808.




Our
      aggregate cash balances as at March 31, 2007 were $821,883. We forecast that
      we
      will be able to generate sufficient funds from our business in order to fund
      our
      operations in the ordinary course during the next 12 months. Management has
      expanded our business into China and Japan and is considering further
      international expansion through either establishing new sales clinic operations
      or by licensing the intellectual property for use in territories in which we
      do
      not have clinics such as our recent entry into an Option Agreement with AMI
      UK
      to license our intellectual property for the United Kingdom. Income generated
      from Heartcheck is also expected to be reinvested into the Company to contribute
      to our ongoing working capital needs.




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




**NINE
      MONTHS ENDED MARCH 31, 2007 COMPARED TO NINE MONTHS ENDED MARCH 31, 2006**




***REVENUE*** **.** Revenue
      was $29,713,454 in the nine months ended March 31, 2007 compared to $21,756,411
      during the nine months ended March 31, 2006, an increase of $7,957,043 or 36.6%.
      The increase in revenue in the nine-month period is primarily attributable
      to
      the increase in the number of patients buying treatment programs from us during
      the nine months ended March 31, 2007 than in the same period in 2006. We
      attribute this increase to the following factors: (1) increased advertising
      campaigns with improved target marketing in the premature ejaculation segment;
      (2) increased brand name recognition; and (3) effectiveness of our
      products.




27




In
      addition, our unearned revenue in the nine months ending March 31, 2007
      increased by $976,300 to $4,863,352 compared to an increase of $1,862,872 to
      $3,665,916 in the nine months ending March 31, 2006. The gross increase in
      unearned revenue from the quarter ended March 31, 2006 to the quarter ended
      March 31, 2007 was $1,197,436, or an increase of 32.7 %. The increase in
      unearned revenue in the nine-month period ended March 31, 2007 is primarily
      attributable to the increase in the number of patients buying treatment programs
      from us than in the same period in 2006. We attribute this increase to the
      following factors: (1) increased advertising campaigns with improved target
      marketing in the premature ejaculation segment; (2) increased brand name
      recognition; and (3) effectiveness of our products.




Revenue
      in AMI Australia’s PE treatment programs has increased by $4,401,247 or 38.8% to
      $15,591,557 and revenue in AMI Australia’s ED treatment programs has increased
      by $2,410,379 or 24.8% to $12,145,837 in the nine months ending March 31, 2007,
      compared to the nine months ending March 31, 2006. The increase in revenue was
      generated by an increase in the number of patients in AMI Australia’s PE and ED
      treatment programs compared to the nine months ending March 31, 2006.





Revenue
      in our Australian operations was $28,637,855 in the nine months ended March
      31,
      2007 compared to $21,721,842 during the nine months ended March 31, 2006, an
      increase of $6,916,013 or 31.8%. The increase in revenue in the nine-month
      period is primarily attributable to the increase in the number of patients
      buying treatment programs from us during the nine months ended March 31, 2007
      than in the same period in 2006. We attribute this increase to the following
      factors: (1) increased advertising campaigns with improved target marketing
      in
      the premature ejaculation segment; (2) increased brand name recognition; and
      (3)
      effectiveness of our products.





Revenue
      in our New Zealand operations was $898,203 in the nine months ended March 31,
      2007 compared to $34,569 during the nine months ended March 31, 2006, an
      increase of $863,634 or 2498.3%. The increase in revenue in the nine-month
      period is primarily attributable to the increase in the number of patients
      buying treatment programs from us during the nine months ended March 31, 2007
      than in the same period in 2006. We attribute this increase to the following
      factors: (1) increased advertising campaigns with improved target marketing
      in
      the premature ejaculation segment; (2) increased brand name recognition; and
      (3)
      effectiveness of our products.





Revenue
      in our Chinese operations was $28,974 in the nine months ended March 31, 2007
      compared to zero during the nine months ended March 31, 2006. The China
      operation (AMI China) started to operate in this financial year.





Revenue
      in our Japanese operations was $138,268 in the nine months ended March 31,
      2007
      compared to zero during the nine months ended March 31, 2006. The Japan
      operation (AMI Japan) was established in this financial year.




***COST
        OF REVENUE*** **.** Cost of
        revenue increased to $6,930,952 in the nine months ended March 31, 2007 compared
        to $5,789,084 in the nine months ended March 31, 2006, an increase of $1,141,868
        or 19.7%. The increase in cost of revenue in the nine-month period is primarily
        attributable to an increase in the number of staff employed by AMI Australia
        and, to a lesser extent, AMI
        China and AMI
        Japan, which additional people were needed to service and sell the additional
        number of PE and ED treatment programs that were sold by AMI Australia during
        this period and which were required to staff the Company’s Chinese and Japanese
        operations. As a percentage of revenue, cost of revenue was 23.3% in the
        nine
        months ended March 31, 2007 compared to 26.6% in the nine months ended March
        31,
        2006. The decrease in the cost of revenue percentage by 3.3% is primarily
        attributable to the growth in AMI Australia’s revenue being greater than the
        growth in staff costs necessary to service the treatment programs resulting
        from
        that increased revenue.




28




***GROSS
      PROFIT.*** Gross
      profit was $22,782,502 in the nine months ended March 31, 2007 compared to
      $15,967,327 in the nine months ended March 31, 2006. As a percentage of revenue,
      gross profit increased to 76.7% in the nine months ended March 31, 2007 from
      73.4% in the nine months ended March 31, 2006. The 3.3% increase in the gross
      profit percentage is primarily attributable to the growth in AMI Australia’s
      revenue and improvements in our margins due to the increase in total costs
      being
      less than the increase in total revenue.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*****.**Selling,
      general and administrative expenses were $23,002,562 in the nine months ended
      March 31, 2007 compared to $13,285,258 in the nine months ended March 31, 2006.
      As a percentage of revenue, selling, general and administrative expenses
      increased to 74.5% in the nine months ended March 31, 2007 from 61.1% in the
      nine months ended March 31, 2006. The principal reason for the 13.4% increase
      in
      these expenses as a percentage of revenue is because we have spent $2,696,496
      setting up our China and Japan operations during the period. We presently
      anticipate that we will continue to incur a higher percentage growth of selling,
      general and administrative costs in each of China and Japan during the next
      6 to
      12 months due to the need for further working capital to be invested in the
      current stages of those locations. Funds used to establish operations in China
      and Japan have not been capitalized because management believes that the initial
      results of operations and speculative nature of the market may indicate that
      the
      locations may not result in profitability in the longer
      term.




Selling,
      general and administrative expenses in our Chinese operations were $743,288
      in
      the nine months ended March 31, 2007 compared to zero expense **** in
      the
      nine months ended March 31, 2006. Major expenses incurred were staff costs
      and
      advertising expenses.





Selling,
      general and administrative expenses in our Japanese operations were $1,953,208
      in the nine months ended March 31, 2007 compared to zero expense **** in
      the
      nine months ended March 31, 2006. Major expenses incurred were staff costs
      and
      advertising expenses.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $970,672 in the nine months ended March 31, 2007
      compared to $21,157 in the nine months ended March 31, 2006. As a percentage
      of
      revenue, other income and expenses increased to 0.3% in the nine months ended
      March 31, 2007 from 0.1% in the nine months ended March 31, 2006. The increase
      is due to fees received by the Company from Heartcheck during the nine months
      ended March 31, 2007. The amount of revenue generated by the Company from
      providing these services in the nine month period was $90,838.


***NET
        INCOME (LOSS) BEFORE INCOME TAX AND INCOME TAX
        EXPENSES*** **.**
  Income
        (Loss) before income tax was ($716,813) in the three months ended March 31,
        2007
        compared to $1,733,418 in the three months ended March 31, 2006. This decrease
        was primarily attributable to start up costs incurred by the Company in setting
        up its operations in China and Japan.




Income
      tax expenses were $835,552 in the nine months ended March 31, 2007 compared
      to
      $834,936 in the nine months ended March 31, 2006. This increase is primarily
      attributable to the increase in income of AMI Australia during the nine months
      ended March 31, 2007 and our inability to offset our international losses
      against our Australian profits for tax purposes. As a percentage of revenue,
      income tax expense decrease to 2.8% from 3.8% that is attributable to the
      decrease in net income before income tax. Australian corporate tax is assessed
      nationally at 30% of net profit before tax.




***NET
        INCOME (LOSS)*** **.** Net loss
        was ($722,651) in the three months ended March 31, 2007 compared to income
        of
        $1,210,417 in the three months ended March 31, 2006. This decrease is primarily
        attributable to the reasons set forth above related to the expansion to China
        and Japan.




29





Net
      income in our Australian operations was $2,614,142 in the nine months ended
      March 31, 2007 compared to $1,902,599 **** in
      the
      nine months ended March 31, 2006. This increase is attributable to the increase
      in revenue.





Net
      income in our New Zealand operations was $117,644 in the nine months ended
      March
      31, 2007 compared to a net loss ($34,309) **** in
      the
      nine months ended March 31, 2006. This increase is attributable to the increase
      in revenue.




Net
        loss
        in our Chinese operations was ($165,827) in the three months ended March
        31,
        2007 compared to zero income **** in
        the
        three months ended March 31, 2006. The principal reason for the net loss
        is
        because we have expended significant resources into setting up our China
        operation.




Net
      loss
      in our Japanese operations was ($965,488) in the three months ended March 31,
      2007 compared to zero income****in
      the
      three months ended March 31, 2006. The principal reason for the net loss is
      because we have expended significant resources into setting up our Japan
      operation.





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





**THREE
      MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31, 2006**




***REVENUE*** .
        Revenue
        was $9,391,231 in the three months ended March 31, 2007 compared to $9,150,703
        during the three months ended March 31, 2006, an increase of $240,528 or
        2.6%.
        The increase in revenue during the three-month period is primarily attributable
        to the increase in the number of patients buying treatment programs from
        us
        during the three months ended March 31, 2007 than in the same period in 2006.
        We
        attribute this increase to the following factors: (1) increased advertising
        campaigns with improved target marketing in the premature ejaculation segment;
        (2) increased brand name recognition; and (3) effectiveness of our products.
        The
        revenue in the second quarter ending December 31, 2006 was $9.9 million.
        Management believes that the reason for the drop in revenue in January is
        because of the effect of the Christmas holiday period. Australians tend to
        go on
        a long vacation from Christmas until the beginning or middle of January.
        The
        large number of Australians who are on vacation during this period tends
        to
        result in a reduction in the Company’s sales during this
        period.




In
      addition, our unearned revenue in the three months ending March 31, 2007
      decreased from the quarter ended December 31, 2006 by $36,622 to $4,863,352
      compared to an increase from the quarter ended December 31, 2006 of $309,946
      to
      $3,665,916 in the three months ending March 31, 2006. We had a gross decrease
      in
      unearned revenue from the quarter ended March 31, 2006 to the quarter ended
      March 31, 2007 of $1,197,436, or a decrease of 32.7%. The decrease in unearned
      revenue in the three-month period ended March 31, 2007 compared to the unearned
      revenue in the three month period ended March 31, 2006 was because gross sales
      had increased substantially in the quarter ended March 31, 2006 whereas gross
      sales decreased in the quarter ended March 31, 2007 compared to sales in the
      quarter ended December 31, 2006.




Revenue
      in AMI Australia’s PE treatment programs has decreased by $123,421 or 2.5% to
      $4,641,165 and revenue in AMI Australia’s ED treatment programs has decreased by
      $10,854 or 0.3% to $4,001,788 in the three months ending March 31, 2007,
      compared to the three months ending March 31, 2006. The decreases are mainly
      due
      to increase in the cancellation of programs in the three months ended March
      31,
      2007.




30





Revenue
      in our Australian operations was $9,092,762 in the three months ended March
      31,
      2007 compared to $9,132,060 during the three months ended March 31, 2006, a
      decrease of $39,298 or 0.4%. The decrease in revenue in the three-month period
      is primarily attributable to the increase in the cancellation of programs in
      the
      three months ended March 31, 2007.





Revenue
      in our New Zealand operations was $148,291 in the three months ended March
      31,
      2007 compared to $18,643 during the three months ended March 31, 2006, an
      increase of $129,648 or 695.4%. The increase in revenue in the three-month
      period is primarily attributable to the increase in the number of patients
      buying treatment programs from us during the three months ended March 31, 2007
      than in the same period in 2006.





Revenue
      in our Chinese operations was $19,670 in the three months ended March 31, 2007
      compared to zero during the three months ended March 31, 2006. The China
      operation (AMI China) started to operate in this financial year.





Revenue
      in our Japanese operations was $120,354 in the three months ended March 31,
      2007
      compared to zero during the three months ended March 31, 2006. The Japan
      operation (AMI Japan) was established in this financial year.




***COST
      OF REVENUE*** **.** Cost of
      revenue increased to $2,297,734 in the three months ended March 31, 2007
      compared to $2,242,042 in the three months ended March 31, 2006, an increase
      of
      $55,692 or 2.5%. The increase in cost of revenue in the nine-month period is
      primarily attributable to an increase in the staff cost incurred by AMI
      Australia and, to a lesser extent, AMI China and AMI Japan, which
      additional people were needed to service and sell the additional number of
      ED
      treatment programs that were sold by AMI Australia during this period. As a
      percentage of revenue, cost of revenue remained constant at 24.5% in the three
      months ended March 31, 2007 and the three months ended March 31, 2006.




***GROSS
      PROFIT.*** Gross
      profit was $7,093,497 in the three months ended March 31, 2007 compared to
      $6,908,661 in the three months ended March 31, 2006. As a percentage of revenue,
      gross profit remained constant at 75.5% in the three months ended March 31,
      2007
      and the three months ended March 31, 2006.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $8,031,898 in the three months ended
      March 31, 2007 compared to $5,177,799 in the three months ended March 31, 2006.
      As a percentage of revenue, selling, general and administrative expenses
      increased to 83.4% in the three months ended March 31, 2007 from 56.6% in the
      three months ended March 31, 2006. The principal reason for the 26.8% increase
      in these expenses as a percentage of revenue is because we have spent
 $1,270,828 setting up our China and Japan operations during the period.
      Management believes that we will continue to incur a higher percentage growth
      of
      selling, general and administrative costs in each of China and Japan during
      the
      next 6 to 12 months due to the need for further working capital in the current
      stages of those locations. Funds used to establish operations in China and
      Japan
      have not been capitalized because management believes that the initial results
      of operations and speculative nature of the market may indicate that the
      locations may not result in profitability in the longer term.




Selling,
      general and administrative expenses in our Chinese operations were $184,388
      in
      the three months ended March 31, 2007 compared to zero expense **** in
      the
      three months ended March 31, 2006. Major expenses incurred were staff costs
      and
      advertising expenses.





Selling,
      general and administrative expenses in our Japanese operations were $1,086,440
      in the three months ended March 31, 2007 compared to zero expense **** in
      the
      three months ended March 31, 2006. Major expenses incurred were staff costs
      and
      advertising expenses.




31




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $221,588 in the three months ended March 31, 2007
      compared to $2,556 in the three months ended March 31, 2006. As a percentage
      of
      revenue, other income and expenses increased to 0.3% in the three months ended
      March 31, 2007 from less than 0.1% in the three months ended March 31, 2006.
      The
      increase is due to fees received by the Company from Heartcheck during the
      three
      months ended March 31, 2007 The amount of revenue generated by the Company
      from
      providing these services in the three month period was $44,549.




***NET
      INCOME (LOSS) BEFORE INCOME TAX AND INCOME TAX
      EXPENSES*** **.**




Income
      (Loss) before income tax was ($716,813) in the three months ended March 31,
      2007
      compared to $1,733,418 in the three months ended March 31, 2006. This decrease
      was primarily attributable to start up costs incurred by the Company in setting
      up its operations in China and Japan.




Income
      tax expenses were ($5,838) in the three months ended March 31, 2007 compared
      to
      $523,001 in the three months ended March 31, 2006. As a percentage of revenue,
      income tax expense decreased to approximately 0.1% from 5.7% which is
      attributable to the decreasing profitability of the Company. Australian
      corporate tax is assessed nationally at 30% of net profit before
      tax.




***NET
      INCOME (LOSS)*** **.** Net loss
      was ($722,651) in the three months ended March 31, 2007 compared to income
      of
      $1,210,417 in the three months ended March 31, 2006. This decrease is primarily
      attributable to the reasons set forth above related to the expansion to China
      and Japan.





Net
      income in our Australian operations was $548,113 in the three months ended
      March
      31, 2007 compared to $1,241,982 **** in
      the
      three months ended March 31, 2006. This decrease is primarily attributable
      to
      the decrease in revenue and increase in expenses.





Net
      loss
      in our New Zealand operations was ($72,943) in the three months ended March
      31,
      2007 compared to ($31,565) **** in
      the
      three months ended March 31, 2006. This increase is attributable to the increase
      in expenses.





Net
      loss
      in our Chinese operations was ($165,827) in the three months ended March 31,
      2007 compared to zero income **** in
      the
      three months ended March 31, 2006. The principal reason for the net loss is
      because we have expended significant resources into setting up our China
      operation.





Net
      loss
      in our Japanese operations was ($965,488) in the three months ended March 31,
      2007 compared to zero income **** in
      the
      three months ended March 31, 2006. The principal reason for the net loss is
      because we have expended significant resources into setting up our Japan
      operation.





The
      above
      discussion 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.





**EFFECT
      OF FLUCTUATION IN FOREIGN EXCHANGE RATES**





Information
      regarding the effects of the fluctuation in foreign exchange rates on our
      Company is included in Note 2 of the Notes to Unaudited Condensed Consolidated
      Financial Statements.




32




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




Evaluation
      of Disclosure on Controls and Procedures .





Under
      the
      supervision and with the participation of our management, including the
      principal executive officer and the principal accounting officer, we conducted
      an evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as of the end of the period covered by this
      report (the “Evaluation Date”). Based on this evaluation, our principal
      executive officer and principal accounting officer concluded as of the
      Evaluation Date that our disclosure controls and procedures were effective
      such
      that the material information required to be included in our Securities and
      Exchange Commission (“SEC”) reports is accumulated and communicated to
      management (including such officers) as appropriate to allow timely decisions
      regarding required disclosure and recorded, processed, summarized and reported
      within the time periods specified in SEC rules and forms relating to the
      Company, including our consolidated subsidiaries.





Changes
      in Internal Control Over Financial Reporting .




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




33




**OTHER
      INFORMATION** ****




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


On
        September 27, 2004, Rocco Licastro, a former patient, filed a suit against
        AMI
        Australia in the District Court of NSW, Sydney Registry. Mr. Licastro’s claims
        result from an injection therapy that Mr. Licastro claims caused physical
        injuries. Mr. Licastro is seeking damages including medical expenses, but
        no
        amount has been specified to date. The proceedings began on February 19,
        2007
        and concluded on February 28, 2007. A judgment has not yet been rendered.
        AMI
        Australia has denied the allegations and is vigorously defending this
        suit.




**ITEM
      2.**  **UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**




None.




**ITEM
      3.**  **DEFAULTS
      UPON SENIOR SECURITIES.**




None.




**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS.** ****





None.




**ITEM
      5.**  **OTHER
      INFORMATION.**




There
      have been no material changes to the procedures by which security holders may
      recommend nominees to the Company’s board of directors.




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




The
      following exhibits are filed as part of this report:




**Exhibit
                Number**
            
            **Description**31.1
            
            Certification
                of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of
                the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of the Chief Financial Officer pursuant to Rule 13A-14(A)/15D-14(A)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer and the Chief Financial Officer Pursuant
                to 18
                U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
                2002).




34




**SIGNATURES**




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


**ADVANCED
                MEDICAL INSTITUTE INC.**Date:
                May 14, 2007By:
            /s/
                Jacov (Jack) VaismanJacov
                (Jack) VaismanChief
                Executive Officer


Date:
                    May 14, 2007By:
                /s/
                      Dilip ShresthaDilip
                      ShresthaChief
                      Financial Officer
 35