**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


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




___________




**FORM
      10-QSB**





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


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      QUARTERLY PERIOD ENDED MARCH 31, 2006





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


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      TRANSITION PERIOD FROM _____ TO_____





Commission
      File Number: 000-29531




**ADVANCED
      MEDICAL INSTITUTE INC.**


(Exact
      name of small business issuer in its charter)




NEVADA
            
            88-0409144(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            
            (I.R.S.
                Employer Identification No.)Level
                1, 204-218 Botany Road
              Alexandria,
                NSW
              Australia
                2015(Address
                of Principal Executive Offices)




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


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




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




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




There
      were 37,382,450 shares of the Issuer’s common stock outstanding on May 11,
      2006.




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







i




TABLE
      OF
      CONTENTS


**Page**PART
                I -FINANCIAL
                INFORMATION
            3**ITEM
                1.**
            FINANCIAL
                STATEMENTS
            3**ITEM
                2.**
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            18**ITEM
                3.**
            CONTROLS
                AND PROCEDURES
            28PART
                II -OTHER
                INFORMATION
            30**ITEM
                1.**
            LEGAL
                PROCEEDINGS.
            30**ITEM
                2.**
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
            30**ITEM
                3.**
            DEFAULTS
                UPON SENIOR SECURITIES.
            30**ITEM
                4.**
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS.
            30**ITEM
                5.**
            OTHER
                INFORMATION.
            30**ITEM
                6.**
            EXHIBITS.
            31







ii




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




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




**CONSOLIDATED
      BALANCE SHEETS**





**March
                31, 2006 (unaudited)**
            
            **June
                30, 2005****ASSETS****CURRENT
                ASSETS**Cash
                and Cash equivalents
            
            $
            1,029,061
            
            $
            295,961Accounts
                Receivable, net
            
            
            8,077,348
            
            
            2,812,704Inventory
            
            
            148,137
            
            
            228,163**TOTAL
                CURRENT ASSETS**
            
            
            9,254,546
            
            
            3,336,828**NON-CURRENT
                ASSETS**Receivables
                due from related parties
            
            
            33,633
            
            
            220,995Security
                deposits
            
            
            98,006
            
            
            87,494Property
                and equipment, net
            
            
            506,908
            
            
            330,872Intangible
                assets
            
            
            6,152,544
            
            
            973,302**TOTAL
                NON-CURRENT ASSETS**
            
            
            6,791,091
            
            
            1,612,663**TOTAL
                ASSETS**
            
            $
            16,045,637
            
            $
            4,949,491**LIABILITIES
              AND STOCKHOLDERS’
              EQUITY****CURRENT
                LIABILITIES**Unearned
                revenue
            
            $
            3,665,916
            
            $
            1,803,044Payables
            
            
            3,329,995
            
            
            1,802,246Payables
                due to related parties
            
            
            —
            
            
            1,835Notes
                payable
            
            
            61,722
            
            
            144,685Provisions
                for compensated absences
            
            
            164,573
            
            
            190,685Income
                taxes payable
            
            
            247,790
            
            
            108,097**TOTAL
                CURRENT LIABILITIES**
            
            
            7,469,996
            
            
            4,050,592**NON-CURRENT
                LIABILITIES**Payables
                due to related parties
            
            
            13,745
            
            
            18,427Rental
                deposit received
            
            
            3,715
            
            
            3,981Notes
                payable, net of current portion
            
            
            83,503
            
            
            76,275Deferred
                tax liabilities
            
            
            532,650
            
            
            415Minority
                interests
            
            
            4,039
            
            
            —**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            637,652
            
            
            99,098**TOTAL
                LIABILITIES**
            
            
            8,107,648
            
            
            4,149,690**STOCKHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share,90,000,000
                shares authorized,36,122,450
                and 31,122,450 issued and
              outstanding,
                respectively
            
            
            36,122
            
            
            31,122Additional
                paid in capital
            
            
            6,277,805
            
            
            782,805Other
                comprehensive income (loss)
            
            
            (403,509
            )
            
            (173,407
            )Retained
                earnings
            
            
            2,027,571
            
            
            159,281**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            7,937,989
            
            
            799,801**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            16,045,637
            
            $
            4,949,491





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






3





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





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





**Three
                Months Ended**
            
            **Nine
                Months Ended****March
                31, 2006**
              **(unaudited)**
            
            **March
                31, 2005**
              **(unaudited)**
            
            **March
                31, 2006**
              **(unaudited)**
            
            **March
                31, 2005**
              **(unaudited)****NET
                REVENUE**
            
            $
            9,150,703
            
            $
            3,454,762
            
            $
            21,756,411
            
            $
            9,546,871**COST
                OF REVENUE**
            
            
            2,242,042
            
            
            1,107,700
            
            
            5,789,084
            
            
            3,174,243**GROSS
                PROFIT**
            
            
            6,908,661
            
            
            2,347,062
            
            
            15,967,327
            
            
            6,372,628**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            5,177,799
            
            
            2,219,732
            
            
            13,285,258
            
            
            5,953,662**INCOME
                FROM OPERATIONS**
            
            
            1,730,862
            
            
            127,330
            
            
            2,682,069
            
            
            418,966**OTHER
                INCOME AND EXPENSE**Rental
                income
            
            
            (3,720
            )
            
            52,307
            
            
            11,996
            
            
            60,170Bank
                interest
            
            
            12,706
            
            
            1,812
            
            
            17,123
            
            
            6,067Sundry
                income
            
            
            10,275
            
            
            —
            
            
            10,969
            
            
            —Provision
                for doubtful debt written back
            
            
            —
            
            
            15,035
            
            
            —
            
            
            15,035Interest
                expense
            
            
            7
            
            
            (7,332
            )
            
            (1,234
            )
            
            (19,795
            )**TOTAL
                OTHER INCOME AND (EXPENSE)**
            
            
            19,268
            
            
            61,822
            
            
            38,854
            
            
            61,477**NET
                INCOME (before income tax expense)**
            
            
            1,750,130
            
            
            189,152
            
            
            2,720,923
            
            
            480,443INCOME
                TAX EXPENSE
            
            
            (523,001
            )
            
            (131,559
            )
            
            (834,936
            )
            
            (131,559
            )NET
                INCOME (before minority interest)
            
            
            1,227,129
            
            
            57,593
            
            
            1,885,987
            
            
            348,884MINORITY
                INTEREST
            
            
            (16,712
            )
            
            —
            
            
            (17,697
            )
            
            —**NET
                INCOME**
            
            **$**
            **1,210,417**
            
            **$**
            **57,593**
            
            **$**
            **1,868,290**
            
            **$**
            **348,884****Net
                income per share, basic and fully diluted**
            
            **$**
            **0.034**
            
            **$**
            **0.002**
            
            **$**
            **0.056**
            
            **$**
            **0.017****Weighted
                average number of shares, basic and fully diluted**
            
            
            **36,122,450**
            
            
            **25,000,000**
            
            
            **33,603,931**
            
            
            **20,377,778**





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


4


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





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Nine
                Months Ended****March
                31, 2006**
              **(unaudited)**
            
            **March
                31, 2005**
              **(unaudited)****Cash
                Flows from Operating Activities**Receipts
                from Customers
            
            $
            17,417,343
            
            $
            9,119,852Interest
                Received
            
            
            17,123
            
            
            1,812Payment
                to Suppliers & Employees
            
            
            (16,512,732
            )
            
            (8,728,555
            )**Net
                cash provided by operating activities**
            
            
            921,734
            
            
            393,109**Cash
                Flows from Investing Activities**Proceeds
                from Sale of Plant & Equipment
            
            
            434
            
            
            2,686Payment
                for Property, Plant & Equipment
            
            
            (113,613
            )
            
            (30,198
            )Payment
                for Intellectual Properties
            
            
            (40,864
            )
            
            —Payment
                for security deposit
            
            
            (17,224
            )
            
            (290
            )**Net
                cash used in investing activities**
            
            
            (171,267
            )
            
            (27,802
            )**Cash
                Flows From Financing Activities**Collection
                of Note Receivable
            
            
            150,771
            
            
            —Interest
                & Other Finance costs paid
            
            
            (1,234
            )
            
            (19,795
            )Proceeds
                from Borrowings
            
            
            —
            
            
            225,525Repayment
                from (Loans to) related entities
            
            
            24,740
            
            
            (475,373
            )Repayment
                of Borrowings
            
            
            (131,337
            )
            
            (19,988
            )**Net
                cash provided by (used in) financing activities**
            
            
            42,940
            
            
            (289,631
            )Net
                increase in cash held
            
            
            793,407
            
            
            75,676Effect
                of exchange rate on cash
            
            
            (60,307
            )
            
            21,877Cash
                at beginning of Financial Year
            
            
            295,961
            
            
            172,984**Cash
                **and
                cash equivalents a**t end of period**
            
            **$**
            **1,029,061**
            
            **$**
            **270,537**





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


5


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





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





**Nine
                Months Ended****March
                31, 2006**
              **(unaudited)**
            
            **March
                31, 2005**
              **(unaudited)****Reconciliation
                of Cash & Cash Equivalents**Cash
                at the end of financial period as shown in the Statement of Cash
                Flows is
                reconciled to the related items in the Statement of Financial Position
                as
                follows:**Cash****&
                Cash Equivalents**
            
            $
            1,029,061
            
            $
            270,537**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                Income**
            
            $
            1,885,987
            
            $
            348,884**Non-Cash
                Flows in Profit from Ordinary Activities**Loss
                on sale of non-current assets
            
            
            —
            
            
            65Depreciation
            
            
            187,547
            
            
            72,168Provision
                for doubtful accounts
            
            
            894,811
            
            
            14,127**Cash
                Flows in Profit from Financing Activities**Interest
                & Other Finance costs paid
            
            
            1,234
            
            
            19,795**Changes
                in Assets and Liabilities**Decrease
                in inventories
            
            
            68,141
            
            
            —Increase
                in receivables
            
            
            (6,632,776
            )
            
            (136,675
            )Increase
                (Decrease) in unearned revenue
            
            
            2,087,245
            
            
            (508,291
            )Increase
                in payables
            
            
            1,728,896
            
            
            322,997Decrease
                in provisions for compensated absences
            
            
            (14,048
            )
            
            —Increase
                in deferred tax liabilities
            
            
            560,088
            
            
            —Increase
                in income tax payable
            
            
            154,609
            
            
            131,559Decrease
                in foreign currency exchange rate
            
            
            —
            
            
            128,480**Cash
                Flows Provided by Operating Activities**
            
            **$**
            **921,734**
            
            **$**
            **393,109****Supplemental
                Cash Flow Disclosures:**Interest
                paid
            
            $
            1,234
            
            $
            19,795Income
                tax paid
            
            $
            129,280
            
            $
            86,891**Non-Cash
                Investing/Financing Activities:**Stock
                issued in acquisition
            
            $
            5,500,000
            
            
            —





The
      accompanying notes are an integral part of these financial
      statements


6


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





**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY **(DEFICIT)****





**Additional**
            
            **Other**
            
            **Retained****Common
                Stock**
            
            **Paid-In**
            
            **Comprehensive**
            
            **Earnings****Shares**
            
            **Amount**
            
            **Capital**
            
            **Income**
            
            **(Deficit)**
            
            **Total****Balance
                June 30, 2004**
            
            
            25,000,000
            
            $
            25,000
            
            $
            (6,074
            )
            $
            (54,904
            )
            $
            (839,874
            )
            $
            (875,852
            )Issuance
                of stock
            
            
            6,122,450
            
            
            6,122
            
            
            755,878
            
            
            —
            
            
            —
            
            
            762,000Recapitalization
                as result of merger
            
            
            —
            
            
            —
            
            
            33,001
            
            
            —
            
            
            —
            
            
            33,001Other
                comprehensive income
            
            
            —
            
            
            —
            
            
            —
            
            
            (118,503
            )
            
            —
            
            
            (118,503
            )Net
                income, June 30, 2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            999,155
            
            
            999,155**Balance
                June 30, 2005**
            
            
            31,122,450
            
            
            31,122
            
            
            782,805
            
            
            (173,407
            )
            
            159,281
            
            
            799,801Issuance
                of stock (unaudited)
            
            
            5,000,000
            
            
            5,000
            
            
            5,495,000
            
            
            —
            
            
            —
            
            
            5,500,000Other
                comprehensive income (unaudited)
            
            
            —
            
            
            —
            
            
            —
            
            
            (230,102
            )
            
            —
            
            
            (230,102
            )Net
                income, March 31, 2006 (unaudited)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,868,290
            
            
            1,868,290**Balance
                March 31, 2006 (unaudited)**
            
            
            36,122,450
            
            $
            36,122
            
            $
            6,277,805
            
            $
            (403,509
            )
            $
            2,027,571
            
            $
            7,937,989







The
      accompanying notes are an integral part of these financial
      statements





7


**ADVANCED
        MEDICAL INSTITUTE, INC.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2006**
 
 **1.** **NATURE
        OF BUSINESS**
 
 Nature
        of Business
 
 Advanced
        Medical Institute, Inc. (formerly Hawksdale Financial Visions, Inc.) (the
        “Company”) was organized December 6, 1996 under the laws of the State of Nevada
        and was previously in the development stage through March 21, 2005.
 
 On
        March
        21, 2005 the Company completed a Stock Exchange Agreement with Advanced Medical
        Institute Pty Ltd (renamed as “AMI Australia Holdings Pty Limited” on November
        22, 2005) (“AMI Australia”). As a result of the exchange agreement, the
        reorganization was treated as an acquisition by the accounting acquiree that
        is
        being accounted for as a recapitalization and as a reverse merger by the
        legal
        acquirer for accounting purposes. Pursuant to the recapitalization, all capital
        stock shares and amounts and per share data have been retroactively restated.
        Accordingly, the financial statements include the following:
 
 (1)
        The
        balance sheet consists of the net assets of the accounting acquirer at
        historical cost and the net assets of the legal acquirer at historical
        cost.
 (2)
        The
        statements of operations include the operations of the accounting acquirer
        for
        the period presented and the operations of the legal acquirer from the date
        of
        the merger.
 
 AMI
        Australia is a company limited by shares, incorporated and domiciled in
        Australia. The principal activity of AMI Australia is the medical treatment
        of
        sexual dysfunction in Australia and New Zealand. AMI Australia is a service
        provider company which arranges for patients with sexual dysfunction to be
        provided with medical services, pharmaceuticals and associated support services.
        AMI Australia operates a centralized call center and twenty-two clinics and
        sales offices throughout Australia and New Zealand. The clinics and sales
        offices are located at:
 
 **New
        South Wales**
 AMI
        Direct, Alexandria, Sydney, New South Wales
 Bondi
        Junction, Sydney, New South Wales
 Hurstville,
        Sydney, New South Wales
 Parramatta,
        Sydney, New South Wales
 Sydney
        City, Sydney, New South Wales
 Albury,
        Regional New South Wales
 Dubbo,
        Regional New South Wales
 Newcastle,
        Regional New South Wales
 Tamworth,
        Regional New South Wales
 Wollongong,
        Regional New South Wales
 
 **Queensland**
 Chermside,
        North Brisbane, Queensland
 Upper
        Mt
        Gravatt, South Brisbane, Queensland
 Bundall,
        Gold Coast, Queensland
 Cairns,
        Regional Queensland
 Townsville,
        Regional Queensland
 
 **South
        Australia**
 Adelaide,
        South Australia
  8
  
 **1.** **NATURE
        OF BUSINESS (Continued)**
 
 **Victoria**
 St
        Kilda,
        Melbourne, Victoria
 Box
        Hill,
        Melbourne, Victoria
 Dandenong,
        Melbourne, Victoria
 
 **Western
        Australia**
 Perth,
        Western Australia (2 clinics)
 
 **New
        Zealand**
 Auckland,
        North Island, New Zealand
 
 On
        November 17, 2005, AMI Australia acquired 100% of the outstanding shares
        of PE
        Patent Holdco Pty Limited (“PE”) in exchange for 5 million shares of the Company
        valued at $1.10 per share. PE’s assets comprise an Australian innovation patent
        (Australian Innovation Patent No 2005100183, which is due to expire on July
        9,
        2012) and an Australian standard patent application (Australian standard
        patent
        application No. 2004222783).
 
 The
        patents relate to various methods of treatment delivery via nasal (mucosal)
        inhalation and topical application of certain formulations which are used
        in AMI
        Australia’s treatment programs for premature ejaculation. The patents and
        associated formulations are integral to those treatment programs.
 
 AMI
        Australia’s nasal spray, injection, lozenge and tablet impotence and erectile
        dysfunction treatment programs are not patent protected.
 
 In
        acquiring PE, AMI Australia acquired only the right to use the Patents and
        the
        associated pharmaceutical formulations, treatment methodologies and dosing
        manuals in Australia and has no rights to use the patents or any of the
        underlying intellectual property in any other country.
 
 Subsidiaries
        of AMI Australia
 
 AMI
        Australia’s subsidiaries are Advanced Medical Institute Pty Limited, PE Patent
        Holdco Pty Limited, Women’s Health Foundation Pty Limited, Advanced Medical
        Institute (NZ) Limited, IMT and Whygo Video
        Conferencing Pty Ltd (“Whygo”) .
 
 PE
        Patent
        Holdco Pty Limited (“PE”) licenses intellectual property to AMI Australia on a
        short-term royalty free arrangement. This intellectual property consists
        solely
        of an Australian innovation patent for its premature ejaculation 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).
 
 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.
  IMT
        was
        granted the exclusive worldwide right and license from Sheiman Ultasonic
        Research Foundation Pty Limited (“SURF”) to exploit and sub-license certain
        inventions, patents and other intellectual property in relation to certain
        ultrasonic nebulizer technology within the field of the treatment of sexual
        dysfunction in men and women (including impotence, premature ejaculation
        and the
        treatment of female sexual arousal disorders). Some of these patents expire
        in
        October 2013, with the remaining patents expiring around 2023. IMT’s license is
        a broad based license which includes the right to manufacture, market, sell
        and
        distribute products based on the technology and patents within the field
        of use.
        IMT also has the option to extend its field of use to the treatment of prostate
        diseases on payment of AU$1. IMT applied for 4 worldwide patents relating
        to its
        ultrasonic nebulizer device in July 2005 and applied for 3 further worldwide
        patents relating to its device on February 10, 2006.
  9
 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.
 
 **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”), Advanced Medical Institute (NZ) Limited (“AMI
        NZ”), Women’s Health Foundation Pty Limited (“WHF”), its 93% owned subsidiary
        Intelligent Medical Technologies Pty Ltd (“IMT”) and its 50% owned subsidiary,
        Whygo Video Conferencing Pty Ltd (“Whygo”) (which owns all of the shares in
        Whygo Limited, a UK entity). All significant intercompany accounts and
        transactions have been eliminated upon consolidation.
  Cash
        Equivalents
 
 For
        purposes of the statement of cash flows, the Company considers all highly
        liquid
        investments with maturities of three months or less to be cash
        equivalents.
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect certain reported amounts and disclosures. Accordingly, actual results
        could differ from those estimates.
 
 Revenue
        Recognition
 
 Sales
        are
        reported as deferred income when the sales contracts are executed and the
        term
        of the contract exceeds three months. Up to three months of medication is
        delivered to the patient upon the signing of a contract. Generally the term
        of
        the sales contracts are up to one year, but they can be for longer periods
        of
        time. The deferred income arising from the contracts that exceed three months
        is
        then amortized, on a straight line basis, into income during the approximated
        composite remaining medication delivery period. This approximated composite
        is
        an estimate that may vary from period to period.
 
 Advertising
        Expense
 
 Advertising
        costs are charged to expense as they are incurred.
 
 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”.
  10
 Inventories
 
 Inventories
        are measured at the lower of cost or net realizable value. Costs are assigned
        on
        a first-in first-out basis.
 
 Property
        and Equipment
 
 Equipment
        placed in service is depreciated over the estimated useful lives of the assets
        using the straight line depreciation method.
 
 Property
        and equipment are carried at the lesser of cost and written down value.
        Expenditures for maintenance and repairs are expenses as incurred and
        expenditures for major renewals and betterments are capitalized. Assets retired
        or sold are removed from the property accounts, with gains or losses on disposal
        included in income.
 
 Employee
        Entitlements
 
 Contributions
        are made to an employee superannuation fund and are charged as expenses when
        incurred.
 
 Foreign
        Currency
 
 As
        of
        March 31, 2006 and March 31, 2005, the accounts of AMI Australia and its
        subsidiaries were maintained and its financial statements were expressed
        in
        Australian Dollars (AUD). Such financial statements were translated into
        U.S.
        Dollars (USD) in accordance with Statement of Financial Accounts Standards
        (“SFAS”) No. 52, “Foreign Currency Translation”, with the AUD as the functional
        currency. According to the Statement, all assets and liabilities were translated
        at the current exchange rate, stockholders’ equity is translated at the
        historical rates and income statement items are translated at the average
        exchange rate for the period. The resulting translation adjustments are reported
        under other comprehensive income in accordance with SFAS No. 130, “Reporting
        Comprehensive Income”.
  As
        of
        March 31, 2006, June 30, 2005 and March 31, 2005 the exchange rate between
        AUD
        and the USD was AUD$1=USD$0.7110, AUD$1=USD$0.7620 and AUD$1=USD$0.77019,
        respectively. The weighted-average rate of exchange between AUD and USD was
        AUD$1=USD$0.74817, AUD$1=USD$0.75581 and AUD$1=USD$0.75175,
        respectively.
 
 Research
        and Development Costs
 
 Research
        and development costs are charged against income from ordinary activities
        before
        income tax as incurred.
 
 Intangible
        Assets
 
 Goodwill,
        trademarks, patents and other intangible assets determined to have indefinite
        useful lives are not amortized. We test such trademarks and other intangible
        assets with indefinite useful lives for impairment annually, or more frequently
        if events or circumstances indicate that an asset might be impaired. Goodwill,
        trademarks, patents and other intangible assets determined to have definite
        lives are amortized over their estimated useful lives or the life of the
        trademark, patent and other intangible asset, whichever is
        less.
  11
 **2** **.** **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
 
 Earnings
        Per Share
 
 The
        Company uses SFAS No. 128, “Earnings Per Share”, for calculating the basic and
        diluted earnings (loss) per share. Basic earnings (loss) per share are computed
        by dividing net income (loss) attributable to common stockholders by the
        weighted average number of common shares outstanding. Diluted earnings per
        share
        are computed similar to basic earnings per share except that the denominator
        is
        increased to include common stock equivalents, if any, as if the potential
        common shares had been issued.
 
 **March
                  31, 2006**
                **(unaudited)**
              
              **June
                  30, 2005****3.****PROPERTY,
                  PLANT AND EQUIPMENT**Leasehold
                  improvements at cost
              
              $
              178,919
              
              $
              123,402Less:
                  Accumulated depreciation
              
              
              37,578
              
              
              28,879141,341
              
              
              94,523Motor
                  Vehicles
              
              
              42,162
              
              
              37,770Less:
                  Accumulated Depreciation
              
              
              16,403
              
              
              12,29225,759
              
              
              25,478Office
                  Furniture & Equipment
              
              
              196,049
              
              
              140,029Less:
                  Accumulated Depreciation
              
              
              47,009
              
              
              32,883149,040
              
              
              107,146Computer
                  Hardware - at Cost
              
              
              215,998
              
              
              125,981Less:
                  Accumulated Depreciation
              
              
              117,812
              
              
              90,40098,186
              
              
              35,581Low
                  Value Pooled Fixed Assets
              
              
              90,406
              
              
              65,745Less:
                  Accumulated Depreciation
              
              
              61,318
              
              
              47,42529,088
              
              
              18,320Computer
                  Software at cost
              
              
              166,121
              
              
              129,529Less:
                  Accumulated Depreciation
              
              
              102,627
              
              
              79,70563,494
              
              
              49,824**Total
                  Property, Plant and Equipment, net**
              
              **$**
              **506,908**
              
              **$**
              **330,872**
   12
   **March
                  31, 2006**
                **(unaudited)**
              
              **June
                  30, 2005****4.****INTANGIBLE
                  ASSETS**Intellectual
                  property
              
              $
              5,642,118
              
              $
              973,302Goodwill
              
              
              616,612
              
              
              —Accumulated
                  amortization
              
              
              (106,186
              )
              
              —**Total
                  Intangible Assets**
              
              **$**
              **6,152,544**
              
              **$**
              **973,302****The
                  table below provides information of our expected amortization expense
                  for
                  the twelve months ending on:**March
                  31, 2007
              
              
              268,456
              
              
              —March
                  31, 2008
              
              
              268,456
              
              
              —March
                  31, 2009
              
              
              268,456
              
              
              —March
                  31, 2010
              
              
              268,456
              
              
              —March
                  31, 2011
              
              
              268,456
              
              
              —Years
                  thereafter
              
              
              3,657,720
              
              
              —**$**
              **5,000,000**
              
              
              **—**
 Intangible
        assets consist of capitalized costs, such as legal fees and application fees,
        for patents and trademarks internally developed and the actual cost of purchased
        intangible assets, mainly consisting of patents directly used in our business,
        in accordance with SFAS 142.
 
 In
        accordance with SFAS 142 these costs are amortized over the legal life assigned
        to the patent or trademark, generally 17 years. They are also reviewed annually
        under SFAS 144 for impairment. We determine that an impairment of the intangible
        asset has taken place if the item is no longer being used in our business,
        it
        has no saleable value and management believes that there is no future use
        of the
        patent or trademark. As of March 31, 2006 there is no impairment of our
        intangible assets.
 
 **March
                  31,**
                **2006**
                **(unaudited)**
              
              **June
                  30, 2005****5.****INTEREST
                  BEARING LIABILITIES****Current,
                  as of the period ended**Capitalized
                  lease liability
              
              $
              61,722
              
              $
              38,005Unsecured
                  loan
              
              
              —
              
              
              106,680**$**
              **61,722**
              
              **$**
              **144,685****Non-current,
                  due during the period ended:**Capitalized
                  lease liability2006
              
              
              —
              
              $
              42,1822007
              
              $
              55,692
              
              
              34,0932008
              
              
              27,811
              
              
              —Total
                  non-current
              
              **$**
              **85,503**
              
              **$**
              **76,275**
 The
        interest bearing liabilities require monthly payments of principal and interest
        at a per annum interest rate ranging from 7.40% to 11.4%. Obligations under
        the
        notes are secured by the financed assets included in property and
        equipment.
 
 **6.****LEGAL
                  PROCEEDINGS**
  As
        of
        March 31, 2006, there was no litigation pending or threatened by or against
        the
        Company or any of its subsidiaries except as follows:
  On
        August
        24, 2004, AMI Australia initiated a suit against Mr. Mark Ryan, a former
        consultant, two companies controlled by Mr. Ryan which now compete with us,
        Dr.
        Ian Davies, Mr. Ryan’s partner, and a third company controlled by Dr. Davies
        (the “Defendants”) in the Federal Court of Australia. AMI Australia alleges that
        Mr. Ryan breached his confidentiality agreement with it and misused its
        intellectual property. AMI Australia obtained interim orders in late 2004.
        AMI
        Australia is seeking a permanent injunction restraining the Defendants from
        using its confidential information and intellectual property. AMI Australia
        is
        also seeking an as of yet unspecified amount of damages. All parties have
        recently completed discovery of documents and a number of subpoenas have
        been
        issued. The Defendants have denied the allegations. The court has ordered
        that a
        mediation of the matter be held on May 11, 2006.
  13
 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 claims that a series of advertisements made by
        AMI
        Australia involving a celebrity that confessed impotence were misleading
        and
        deceptive. AMI Australia has denied the allegation and is vigorously defending
        this suit. ACCC is seeking corrective advertising for the alleged misleading
        and
        deceptive advertisements. The ACCC has not made any claim for damages. The
        hearing of the proceedings concluded on September 2, 2005 with a final judgment
        expected within during the first half of 2006.
  On
        September 27, 2004, Rocco Licastro, a former patient, filed a suit against
        AMI
        Australia in the District Court of NSW, Sydney Registry. Mr. Licastro’s claims
        result from an injection therapy that Mr. Licastro claims caused physical
        injuries. Mr. Licastro is seeking damages including medical expenses, but
        no
        amount has been specified to date. These proceeding are in an early stage.
        AMI
        Australia has denied the allegations and is vigorously defending this
        suit.
 
 **7.****LEASE
                  COMMITMENTS**
 
 The
        Company is party to long-term, non-cancelable operating lease agreements
        for its
        administrative offices and clinic locations. The future aggregate minimum
        annual
        lease payments arising from these lease agreements are as follows:
 
 **As
                  of March 31, 2006**
              
              **As
                  of March 31, 2005**Due
                  during the period ended March 31:2006
              
              
              —
              
              $
              476,0622007
              
              $
              352,371
              
              
              342,3502008
              
              
              264,989
              
              
              233,2192009
              
              
              187,928
              
              
              167,2142010
              
              
              26,910
              
              
              6,9672011
              
              
              19,165
              
              
              —**$**
              **851,363**
              
              **$**
              **1,225,812**
 
 Rent
        paid
        for the nine months ended March 31, 2006 and 2005 was $852,194 and $519,742,
        respectively.
 
 **8.** **CONCENTRATION**
 
 Sales
        Markets - The Company’s revenue arises from Australian and New Zealand
        customers.
 
 Suppliers
        - Although the Company has access to a variety of suppliers, the majority
        of the
        Company’s products that are obtained for resale are purchased from a limited
        number of suppliers.
 
 
 **9.** **SHARE
        EXCHANGE AGREEMENTS**
 
 On
        March
        21, 2005 (the “Closing Date”), Advanced Medical Institute Inc. (a Nevada, USA
        company) (“AMI USA”) consummated the transactions contemplated by that certain
        Share Exchange Agreement dated as of January 28, 2005 (the “Exchange Agreement”)
        by and among AMI USA, 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 AMI USA acquired all of the issued and outstanding shares of stock
        of AMI
        Australia in exchange for the issuance in the aggregate of 14,600,000 of
        AMI
        USA’s shares of common stock (the “Shares”) to the Shareholders. The issuance of
        AMI USA’s shares of common stock to the Shareholders was exempt from
        registration under the Securities Act of 1933, as amended (“Securities Act”)
        pursuant to Section 4(2) and Regulation S.
 
 14
 Following
        the Closing Date, AMI Australia became a wholly-owned subsidiary of AMI USA,
        and
        upon the issuance of the Shares, the Shareholders became the owners of
        approximately 58.4% of all of AMI USA’s then issued and outstanding
        stock.
 
 On
        November 17, 2005 (the “Second Closing Date”), AMI USA consummated the
        transactions contemplated by that certain Share Exchange Agreement dated
        as of
        November 17, 2005 (the “Second Exchange Agreement”) by and among AMI USA, PE
        Patent Holdco Pty Limited, a privately owned Australian company (“PE”), and PE’s
        shareholders, (the “PE Shareholders”), pursuant to which AMI USA acquired all of
        the issued and outstanding shares of stock of PE in exchange for the issuance
        in
        the aggregate of 5,000,000 of AMI USA’s shares of common stock to the PE
        Shareholders. The issuance of AMI USA’s shares of common stock to the PE
        Shareholders was exempt from registration under the Securities Act pursuant
        to
        Section 4(2) and Regulation S.
 
 At
        the
        time of the transaction PE’s major asset was an Australian Innovation Patent for
        treatment programs that are used in our business and an application for an
        Australian standard patent for treatment programs that are used in our business.
        PE had no other significant assets or operations.
 
 As
        a
        result of the transaction, PE became a wholly-owned subsidiary of AMI USA,
        and
        upon the issuance of the Second Shares, the PE Shareholders became the owners
        of
        approximately 13.85% of all of AMI USA’s issued and outstanding
        stock.
 
 
 **March
                  31, 2006**
                **(unaudited)**
              
              **June
                  30,**
                **2005**
              
              **March
                  31, 2005**
                **(unaudited)****10.****RELATED
                  PARTY TRANSACTIONS*****Advance
                  Medical Solutions Pty. Ltd. (an AU co.)***Relationship:Under common management control (dissolved as of September 30,
                  2005)Call
                  center fees charged to the Company
              
              
              —
              
              
              
              
              $
              241,989Customer
                  service fees charged to the Company
              
              
              —
              
              
              
              
              $
              87,212***Jack
                  Vaisman********(an
                  AU citizen)***Relationship:
                  Director of the CompanyDirector
                  salary from AMI Australia
              
              $
              358,815
              
              
              
              
              $
              57,827Payable
                  to this related party (including annual leave)
              
              $
              648
              
              $
              18,427***James
                  Matthews********(an
                  AU citizen)***Relationship:
                  Director of the subsidiary (Whygo)Director
                  salary
              
              $
              39,716
              
              
              
              
              $
              46,904Receivable
                  from this related party
              
              
              —
              
              $
              36,591
   15
   ***Prostate
                  Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                  from this related party
              
              $
              13,097
              
              
              —***Total
                  Health Screening Pty. Ltd.********(an
                  AU co.)***Relationship:
                  Affiliated with a director of the Company (Jack Vaisman was previously
                  a
                  director - he took over management in order to try to recover monies
                  owed
                  to AMI Australia)Rental
                  revenue received from this entity
              
              $
              2,163
              
              
              
              
              $
              17,693Payable
                  to this related party
              
              
              —
              
              $
              1,835***Zinalda
                  Vaisman********(an
                  AU citizen)***Relationship:
                  Jack Vaisman’s wifeSalary
              
              $
              34,473
              
              
              
              
              $
              10,062***Dragon
                  Enterprises Ltd.***Relationship:
                  This entity owns 1,850,000 shares of the CompanyReceivable
                  from this related party
              
              $
              33,633
              
              $
              184,404Total
                  receivables due from related parties included in the Company’s statement
                  of financial position was $33,633 and $220,995 as of March 31,
                  2006 and
                  June 30, 2005, respectively.Total
                  accounts payable to related parties included in the Company’s statement of
                  financial position was $13,745 and $20,262 as of March 31, 2006
                  and June
                  30, 2005, respectively.Receivables
                  from, and payables to, related parties are unsecured, interest-free
                  and
                  have no fixed repayment term.
 
 **11.** **CONTINGENT
        LIABILITY**
 
 A
        dispute
        with a previous telecommunication carrier over billing in the amount of $122,924
        arose in 2002. Since the time that AMI Australia filed a counter claim of
        $550,904 against the carrier in 2003, no correspondence has been received,
        from
        the carrier. No settlement has been reached, but in the opinion of the Company’s
        directors, the $122,924 will not be paid. The financial statements do not
        include any adjustments that might result from the outcome of this
        uncertainty.
 
 **12.** **STOCK**
 
 On
        October 28, 2004 the officers and directors of the Company surrendered for
        cancellation 1,450,000 shares of common stock.
 
 On
        November 8, 2004 the Company issued a stock dividend of 15 shares for each
        share
        outstanding on November 8, 2004.
 
 All
        prior
        year information has been adjusted to reflect the stock cancellation and
        the
        stock dividend.
 
 On
        May
        25, 2005 the Company’s Articles of Incorporation were amended to increase the
        number of authorized shares of the capital stock of the Company to 100,000,000.
        The Company designated 90,000,000 shares as Common Stock and 10,000,000 shares
        as Preferred Stock.
 
 On
        June
        29, 2005 the Company entered into a subscription agreement with certain non-U.S.
        persons pursuant to which the Company issued an aggregate of 6,122,450 shares
        of
        common stock for aggregate gross proceeds of $762,000.
 
 16
 On
        November 17, 2005, the Company entered into a share exchange agreement with
        PE
        Patent Holdco Pty Limited (“PE”), pursuant to which the Company acquired all of
        the issued and outstanding shares of stock of PE in exchange for the issuance
        in
        the aggregate of 5,000,000, or 13.85%, of the Company’s issued shares of Common
        Stock to the shareholders of PE.
 
 All
        prior
        year information has been adjusted to reflect the stock cancellation and
        the
        stock dividend.
 
 **13.** **OTHER
        COMPREHENSIVE INCOME**
 
 Balances
        of related after-tax components comprising accumulated other comprehensive
        income (loss), included in stockholders’ equity, at March 31, 2006 and June 30,
        2004 and 2005, and are as follows:
 
 *Foreign
                  Currency Translation Adjustment*
              
              *Accumulated
                  Other Comprehensive Income*Balance
                  at June 30, 2004
              
              $
              (54,904
              )
              $
              (54,904
              )Change
                  for fiscal 2005
              
              
              (118,503
              )
              
              (118,503
              )Balance
                  at June 30, 2005
              
              
              (173,407
              )
              
              (173,407
              )Change
                  for nine months ended March 31, 2006
              
              
              (230,102
              )
              
              (230,102
              )Balance
                  at March 31, 2006
              
              $
              (403,509
              )
              $
              (403,509
              )
 
 
 **14.** **INCOME
        TAX**
 
 Total
        Federal and State income tax expense for the nine months ended March 31,
        2006
        and 2005 amounted to $834,936  and
        $131,559, respectively. For the nine months ended March 31, 2006 and 2005
        there
        is a difference of 4% and 7% between the federal statutory tax rate and the
        effective tax rate.
 The
                    following is a reconciliation of income tax expense:March
                    31, 2006
                
                U.S.
                
                State
                
                International
                
                TotalCurrent
                
                $
                0
                
                $
                0
                
                $
                278,598
                
                $
                278,598Deferred
                
                $
                0
                
                $
                0
                
                $
                556,338
                
                $
                556,338Total
                
                $
                0
                
                $
                0
                
                $
                834,936
                
                $
                834,936March
                    31, 2005
                
                
                U.S.
                
                
                State
                
                
                International
                
                
                TotalCurrent
                
                $
                0
                
                $
                0
                
                $
                131,559
                
                $
                131,559Deferred
                
                $
                0
                
                $
                0
                
                $
                0
                
                $
                0Total
                
                $
                0
                
                $
                0
                
                $
                131,559
                
                $
                131,559Reconciliation
                    of the differences between the statutory U.S. Federal income
                    tax
                    rateand
                    the effective rate is as follows:2006
                
                
                2005Federal
                    statutory tax rate
                
                
                34
                %
                
                34
                %Increase
                    (decrease) in rate resulting from:Non
                    US income taxed at different rates
                
                
                (4
                )%
                
                (7
                )%Effective
                    tax rate
                
                
                30
                %
                
                27
                %
 
 17
 **15.** **SUBSEQUENT
        EVENTS**
  **LEASES**
 On
        April
        15, 2006, the Company entered into a new lease for an office commencing on
        April
        15, 2006. The term of the lease is for 48 months with monthly rent of
        approximately $1,174.
 
 On
        April
        24, 2006, the Company entered into a new lease for an office commencing on
        April
        24, 2006. The term of the lease is for 16 months with monthly rent of
        approximately $2,962.
 
 **SHARE
        EXCHANGE AGREEMENT**
 
 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.
 
 **CONSULTING
        AGREEMENT**
 
 On
        April
        24, 2006, AMI Australia Holdings Pty Limited (“AMI Australia”), wholly owned
        subsidiary of Advanced Medical Institute Inc. (the “Company”) executed a
        non-exclusive consulting agreement (the “Agreement”) with Doyle Corporate Pty
        Limited (“Doyle Corporate”) for the purpose of engaging Richard Doyle, Louise
        Stonier and Natasha Petukh as consultants to perform legal services, business
        development services and other such services set forth in the Agreement.
        The
        terms of the Agreement is effective as of January 9, 2006 and continues in
        perpetuity unless earlier terminated in accordance with the terms of the
        Agreement with weekly payments of approximately $7,832. In addition, Doyle
        Corporate shall be eligible for additional discretionary bonuses.
 
  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, 2005.
  **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.
  18
 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.
  INCOME
        TAXES - We record a valuation allowance to reduce our deferred tax assets
        to the
        amount that is more likely than not to be realized. We have considered future
        market growth, forecasted earnings, future taxable income, and prudent and
        feasible tax planning strategies in determining the need for a valuation
        allowance.
  CONTINGENCIES
        - We may be subject to certain asserted and unasserted claims encountered
        in the
        normal course of business. It is our belief that the resolution of these
        matters
        will not have a material adverse effect on our financial position or results
        of
        operations, however, we cannot provide assurance that damages that result
        in a
        material adverse effect on our financial position or results of operations
        will
        not be imposed in these matters. We account for contingent liabilities when
        it
        is probable that future expenditures will be made and such expenditures can
        be
        reasonably estimated.
  LONG-LIVED
        ASSETS - We periodically assesses the need to record impairment losses on
        long-lived assets, such as property, plant and equipment, goodwill and purchased
        intangible assets, used in operations and its investments when indicators
        of
        impairment are present indicating the carrying value may not be recoverable.
        An
        impairment loss is recognized when estimated undiscounted future cash flows
        expected to result from the use of the asset plus net proceeds expected from
        disposition of the asset (if any) are less than the carrying value of the
        asset.
        When an impairment is identified, the carrying amount of the asset is reduced
        to
        its estimated fair value. Goodwill is no longer amortized and potential
        impairment of goodwill and purchased intangible assets with indefinite useful
        lives are evaluated using the specific guidance provided by SFAS No. 142
        and
        SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”
This impairment analysis is performed at least annually. For investments
        in
        affiliated companies that are not majority-owned or controlled, indicators
        or
        value generally include revenue growth, operating results, cash flows and
        other
        measures. Management then determines whether there has been a permanent
        impairment of value based upon events and circumstances that have occurred
        since
        acquisition. It is reasonably possible that the impairment factors evaluated
        by
        management will change in subsequent periods, given that the Company operates
        in
        a volatile environment. This could result in material impairment charges
        in
        future periods.
  19
 **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.”
  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 Patent’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.
  20
 General
        Business Plan
  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 provide services relating
        to
        the treatment of sexual dysfunction. AMI Australia currently operates 22
        locations throughout Australia and New Zealand. For the third quarter ended
        March 31, 2006, AMI Australia’s revenue was approximately $9.15
        million.
  AMI
        Australia is a service provider company which arranges for male and female
        patients in Australia and New Zealand with sexual dysfunction to be provided
        with medical services, pharmaceuticals and associated clinical support services.
        Its treatment program options for men 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 is currently developing and trialing menopause treatments for women.
        Less than 1% of AMI Australia’s total revenue is generated from treatments for
        women.
 
 AMI
        Australia’s concentration on sales within the market for its premature
        ejaculation treatment programs has expanded our revenue base. Prior to this
        time, AMI Australia did not directly advertise or market its premature
        ejaculation treatment programs, the 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 broader market that includes
        men from age 18 and over. 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.
  Each
        of
        AMI Australia’s treatment programs are prescribed by licensed Australian and New
        Zealand doctors and the medication is prepared and delivered by an Australian
        or
        a New Zealand registered compounding pharmacy in full compliance with the
        respective Australian and New Zealand regulatory requirements. AMI Australia’s
        products and services are only available by prescription and are sold on
        an
“off-label” basis. AMI Australia’s treatment programs are generally available in
        the same manner through either 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 of the
        intellectual property that since July 2005 has been orally licensed from
        PE
        Patent on a short-term royalty free arrangement. PE Patent became a wholly
        owned
        subsidiary through a Share Exchange Agreement on November 17, 2005 and
        subsequently became a wholly owned subsidiary of AMI Australia on November
        22,
        2005. These transactions are more fully described in the Nature of Business
        section above. This intellectual property consists solely of 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. The development of the intellectual
        property underlying the patents was undertaken and funded by Dr. Vaisman.
        The
        innovation patent, titled “Treatment of Premature Ejaculation” relates to
        various methods of treatment delivery via nasal (mucosal) inhalation and
        topical
        application of certain formulations which are used in AMI Australia’s treatment
        programs for premature ejaculation. The patents and associated formulations
        are
        integral to AMI Australia’s premature ejaculation treatment programs. Since
        November 22, 2005, PE Patent has been a wholly owned subsidiary of AMI
        Australia.
  21
 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 formulations are fully approved by
        the
        Australian Therapeutic Goods Administration (“TGA”) and the New Zealand Medicines
        and Medical Devices Safety Authority (“NZ
        DSA”) Our formulations have not been subject to a clinical trial program and
        have not been approved for use by the TGA or NZ DSA for over the counter
        sale,
        but may lawfully be prescribed by accredited medical practitioners on an
        individual prescription basis in Australia and New Zealand.
  As
        part
        of its treatment programs, AMI Australia arranges for a fully licensed
        Australian or New Zealand pharmacy to fill its patients’ individual
        prescriptions and supply medications to those patients.
  AMI
        Australia’s subsidiary, Intelligent Medical Technologies Pty Limited (“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 (including Australian Patent No’s 693064 and
        753817, European Patent No’s 0 705 145 and 1 071 479 and US Patent No’s
        5,908,158 and 6,379,616) within the field of the treatment of sexual dysfunction
        in men and women (including impotence, premature ejaculation and the treatment
        of female sexual arousal disorders). Some of these patents expire in October
        2013, with the remaining patents expiring around 2023. IMT’s license is a broad
        based license which includes the right to manufacture, market, sell and
        distribute products based on the technology and patents within the field
        of use.
        IMT also has the option to extend its field of use to the treatment of prostate
        diseases on payment of AU$1. IMT applied for four 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, the Company acquired the remaining 7% of the
        outstanding shares of IMT, making it a direct, wholly owned
        subsidiary.
  IMT
        acquired its 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 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. The
        final ten prototypes were completed in the first quarter of calendar 2006
        and
        are suitable for commercialization.
  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 and IMT plans to complete and file its listing
        application in the first half of calendar 2006.
  IMT
        intends to commence a phase I 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. IMT has obtained ethics committee approval from a leading
        Australian university 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.
  22
 IMT
        has
        been spending a large portion of its capital on research and development
        activities with financial support from AMI Australia (approximately USD$284,000
        during fiscal 2005, and approximately USD$100,000 during the nine months
        ended
        March 31, 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, 2006,
        the
        IMT research and development into the efficacy of the nebulizer is still
        in a
        development stage and there has been no income generated by AMI Australia
        as a
        result of its agreement with IMT.
  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 Australian 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.
 
 Subsidiaries
        of AMI Australia
 
 AMI
        Australia’s subsidiaries are Advanced Medical Institute Pty Limited, PE Patent,
        Women’s Health Foundation Pty Limited, Advanced Medical Institute (NZ) Limited,
        IMT and Whygo Video
        Conferencing Pty Ltd (“Whygo”) .
 
 Details
        of PE Patent are set forth in the General Business Description above.
 
 Details
        of IMT are set forth in the General Business Description above.
 
 Women’s
        Health Foundation Pty Limited (“WHF”) conducts a business of providing menopause
        treatment programs to women. WHF contributes less than 1% of AMI Australia’s
        consolidated revenue and AMI Australia holds all of the shares in WHF. WHF
        was
        formed on September 29, 2005.
 
 Advanced
        Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
        Zealand. AMI NZ contributes less than 1% of AMI Australia’s consolidated revenue
        and AMI Australia holds all of the shares in AMI NZ. AMI NZ was formed on
        October 13, 2005.
 
 AMI
        Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
        conferencing services, which facilitates its client by providing video
        conferencing rooms across Australia and around the world. Whygo uses some
        of AMI
        Australia clinic facilities and pays room hire fees for the usage. In those
        locations where AMI Australia does not have locations, Whygo uses other
        facilities. James Matthews, a director of Whygo holds the remaining 50% of
        the
        outstanding shares of Whygo.
 
 23
 Whygo
        owns proprietary scheduling software, which allows its corporate partners
        to
        login and book rooms anywhere around the world. The source of Whygo’s income is
        derived from video conferencing rooms to its corporate partners through AMI
        Australia and its other channeling partners.
 
 Staff
 
 As
        of
        March 31, 2006, AMI Australia had a total staff of approximately 224 people,
        of
        which 137 are full-time and 87 are part-time staff, working in the areas
        of
        sales and marketing, customer support, product development and back office
        functions. Of the 224 people, AMI Australia’s staff includes 26 independent
        consultants and 51 licensed medical personnel. None of the Company’s employees
        are members of a union or labor organization.
  None
        of
        AMI Australia’s subsidiaries have any employees except Whygo which has three
        full-time employees and one part-time employee.
  AMI
        Australia’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, 2006 and 2005, the accounts of AMI Australia were maintained, and
        its
        financial statements were expressed, in Australian Dollars (AUD). Such financial
        statements were translated into US Dollars (USD) in accordance with Statement
        of
        Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”,
        with the AUD as the functional currency. According to the Statement, all
        assets
        and liabilities were translated at the exchange rate (AUD1 = USD0.71100)
        as of
        March 31, 2006, stockholder’s equity are translated at the historical rates and
        income statement items are translated at the weighted-average exchange rate
        for
        the period. The resulting translation adjustments are reported under other
        comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive
        Income”.
  24
 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,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Revenue
              
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %Cost
                  of Revenue
              
              
              24.5
              %
              
              32.1
              %
              
              26.6
              %
              
              33.2
              %Gross
                  Profit
              
              
              75.5
              %
              
              67.9
              %
              
              73.4
              %
              
              66.8
              %General
                  and administrative expenses
              
              
              56.6
              %
              
              64.3
              %
              
              61.1
              %
              
              62.4
              %Other
                  income and expenses
              
              
              0.2
              %
              
              1.9
              %
              
              0.2
              %
              
              0.6
              %Income
                  before income tax
              
              
              19.1
              %
              
              5.5
              %
              
              12.5
              %
              
              5.0
              %Income
                  tax expenses
              
              
              5.7
              %
              
              3.8
              %
              
              3.8
              %
              
              1.3
              %**Net
                  Income**
              
              
              13.4
              %
              
              1.7
              %
              
              8.7
              %
              
              3.7
              %
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  As
        of
        March 31, 2006, we had total liabilities of $8,107,648 including unearned
        revenue of $3,665,916 and we had a positive net worth of $7,937,989. As of
        December 31, 2005, we had total liabilities of $6,911,523 including unearned
        revenue of $3,355,970 and we had a positive net worth of $6,965,089. As of
        June
        30, 2005, we had total liabilities of $4,149,690 including unearned revenue
        of
        $1,803,044 and a positive net worth of $799,801. As at March 31, 2006 our
        total
        current assets were $9,254,546, our total current liabilities were $7,469,996
        and our net current assets were $1,784,550.
   Our
        aggregate cash balances as at March 31, 2006 were $1,029,061. 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
        considered further expansion of our business to markets outside of Australia
        and
        New Zealand. In the event that we expand our business outside of our current
        markets, 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, 2006 COMPARED TO NINE MONTHS ENDED MARCH 31,
        2005**
  ***REVENUE*** **.** Revenue
        was $21,756,411 in the nine months ended March 31, 2006 compared to $9,546,871
        in the nine months ended March 31, 2005 an increase of $12,209,540 or 127.9%.
        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, 2006 than in the same period in 2005. We
        attribute this increase to the following factors: (1) increased advertising
        campaigns with improved target marketing in the premature ejaculation segment;
        (2) increased brand name recognition; and (3) effectiveness of our
        products.
  25
 We
        recognize all expenses on the date they are incurred regardless of whether
        they
        relate to recognized or unearned revenue whereas unearned revenue (which
        is
        generated by current expenses) is unable to be recognized in the current
        period.
  In
        addition, our unearned revenue during the nine months ending March 31, 2006
        increased by $1,862,872 to $3,665,916 for the nine months ending March 31,
        2006
        compared to an increase of $487,345 to $2,078,809 during the prior nine months
        ending March 31, 2005. The increase in unearned revenue in the nine-month
        period
        is primarily attributed to the increase in the number of patients buying
        treatment programs from us during the nine months ended March 31, 2006 than
        in
        the same period in 2005. We attribute this increase to the following factors:
        (1) increased advertising campaigns with improved target marketing in the
        premature ejaculation segment; (2) increased brand name recognition; and
        (3)
        effectiveness of our products.
  Revenue
        in AMI Australia’s premature ejaculation (“PE”) treatment programs increased by
        $8,379,051 or 292% and revenue in AMI Australia’s erectile dysfunction (“ED”)
        treatment programs has increased by $3,167,089 or 47% in the nine months
        ending
        March 31, 2006, compared to the nine months ending March 31, 2005. The number
        of
        patients in AMI Australia’s PE and ED treatment programs increased by 232% and
        25% respectively compared to the nine months ending March 31, 2005.
  ***COST
        OF REVENUE*** **.** Cost of
        revenue increased to $5,789,084 in the nine months ended March 31, 2006 compared
        to $3,174,243 in the nine months ended March 31, 2005 primarily as a result
        of
        an increase in the number of staff employed by AMI Australia, which additional
        staff was needed to service and sell the additional number of PE and ED
        treatment programs that were sold by AMI Australia during this period. As
        a
        percentage of revenue, cost of revenue was 26.6% in the nine months ended
        March
        31, 2006 compared to 33.2% in the nine months ended March 31, 2005. The decrease
        in the cost of revenue percentage by 6.6% is primarily attributable to the
        growth in AMI Australia’s revenue being greater than the growth in staff costs
        necessary to service the treatment programs resulting from that increased
        revenue.
  ***GROSS
        PROFIT*** Gross
        profit was $15,967,327 in the nine months ended March 31, 2006 compared to
        $6,372,628 in the nine months ended March 31, 2005. As a percentage of revenue,
        gross profit increased to 73.4% in the nine months ended March 31, 2006 from
        66.8% in the nine months ended March 31, 2005. The 6.6% increase in the gross
        profit percentage is primarily attributable to the growth in AMI Australia’s
        revenue and our continued ability to improve margins due to the increase
        in
        total costs being less than the increase in total revenue. This is primarily
        due
        to a range of our expenses (such as rent) being fixed costs which are unaffected
        by revenue levels.
  ***SELLING,
        GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
        general and administrative expenses were $13,285,258 in the nine months ended
        March 31, 2006 compared to $5,953,662 in the nine months ended March 31,
        2005.
        As a percentage of revenue, selling, general and administrative expenses
        decreased to 61.1% in the nine months ended March 31, 2006 from 62.4% in
        the
        nine months ended March 31, 2005. The 1.3% decrease as a percentage of revenue
        was related to the increase in revenue of AMI Australia exceeding the increase
        in total costs. This was partly attributable to greater efforts to control
        costs
        which were implemented by management during the period and AMI Australia
        increasing revenues without having to increase its fixed administrative
        costs.
  ***OTHER
        INCOME AND EXPENSES*** **.** Other
        income and expenses were $38,854 in the nine months ended March 31, 2006
        compared to $61,477 in the nine months ended March 31, 2005. As a percentage
        of
        revenues, other income and expenses decreased to 0.2% in the nine months
        ended
        March 31, 2006 from 0.6% in the nine months ended March 31, 2005. The decrease
        is related to the reduction in rental income during the nine months ended
        March
        31, 2006 as we no longer sublease premises to related parties.
  ***NET
        INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES*** **.**  Income
        before income tax was $2,720,923 in the nine months ended March 31, 2006
        compared to $480,443 in the nine months ended March 31, 2005. This increase
        was
        primarily attributable to the increase in revenue resulting from additional
        advertising expenditure and decrease in percentage of costs and expenses
        during
        the nine months ended March 31, 2006. The increase is also attributable to
        an
        increase in our product recognition and recognition of the “AMI” name in
        Australia.
  26
 Income
        tax expenses were $ 834,936
        in the nine months ended March 31, 2006 compared to $131,559 in the nine
        months
        ended March 31, 2005. This increase is attributable to the increase in income
        during the nine months ended March 31, 2006. As a percentage of gross income,
        income tax expense rose from 1.3% to 3.8% which is attributable to the
        increasing profitability of the Company. Australian corporate tax is assessed
        nationally at 30% of net profit before tax.
  ***NET
        INCOME*** **.** Net
        income was $1,868,290 in the nine months ended March 31, 2006 compared to
        $348,884 in the nine months ended March 31, 2005. This increase is attributable
        to the reasons set forth above related to the increase in our gross profit
        percentage, while at the same time maintaining our selling, general and
        administrative expenses at a nearly consistent level compared to
        sales.
  **THREE
        MONTHS ENDED MARCH 31, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31, 2005**
  ***REVENUE*** **.** Revenue
        was $9,150,703 in the three months ended March 31, 2006 compared to $3,454,762
        in the three months ended March 31, 2005, an increase of $5,695,941 or 164.9%.
        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, 2006 than in the same period in 2005. We
        attribute this increase to the following factors: (1) increased advertising
        campaigns with improved target marketing in the premature ejaculation segment;
        (2) increased brand name recognition; and (3) effectiveness of our
        products.
  We
        recognize all expenses on the date they are incurred regardless of whether
        they
        relate to recognized or unearned revenue whereas unearned revenue (which
        is
        generated by current expenses) is unable to be recognized in the current
        period.
  In
        addition, our unearned revenue in the three months ending March 31, 2006
        increased by $309,946 to $3,665,916 compared to an increase of $480,708 to
        $2,078,809 in the three months ending March 31, 2005. The gross increase
        in
        unearned revenue from the quarter ended March 31, 2005 to the quarter ended
        March 31, 2006 was $1,587,107, or an increase of 76.3%. The increase in unearned
        revenue in the three-month period ended March 31, 2006 is primarily attributable
        to the increase in the number of patients buying treatment programs from
        us than
        in the same period in 2005. We attribute this increase to the following factors:
        (1) increased advertising campaigns with improved target marketing in the
        premature ejaculation segment; (2) increased brand name recognition; and
        (3)
        effectiveness of our products.
  Revenue
        in AMI Australia’s PE treatment programs has increased by $3,658,837 or 307% and
        revenue in AMI Australia’s ED treatment programs has increased by $1,803,654 or
        80% in the three months ending March 31, 2006, compared to the three months
        ending March 31, 2005. The number of patients in AMI Australia’s PE and ED
        treatment programs increased by 220% and 41% respectively compared to the
        three
        months ending March 31, 2005.
  ***COST
        OF REVENUE*** **.** Cost of
        revenue increased to $2,242,042 in the three months ended March 31, 2006
        compared to $1,107,700 in the three months ended March 31, 2005 primarily
        as a
        result of an increase in the number of staff employed by AMI Australia, which
        additional staffs were needed to service and sell the additional number of
        PE
        and ED treatment programs that were sold by AMI Australia during this period.
        As
        a percentage of revenue, cost of revenue was 24.5% in the three months ended
        March 31, 2006 compared to 32.1% in the three months ended March 31, 2005.
        The
        decrease in the cost of revenue percentage by 7.6% 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.
  27
 ***GROSS
        PROFIT.*** Gross
        profit was $6,908,661 in the three months ended March 31, 2006 compared to
        $2,347,062 in the three months ended March 31, 2005. As a percentage of revenue,
        gross profit increased to 75.5% in the three months ended March 31, 2006
        from
        67.9% in the three months ended March 31, 2005. The 7.6% increase in the
        gross
        profit percentage is primarily attributable to the growth in AMI Australia’s
        revenue and improvements in our margins due to the increase in total costs
        being
        less than the increase in total revenue. This is primarily due to a range
        of our
        expenses (such as rent) being fixed costs, unaffected by revenue
        levels.
  ***SELLING,
        GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
        general and administrative expenses were $5,177,799 in the three months ended
        March 31, 2006 compared to $2,219,732 in the three months ended March 31,
        2005.
        As a percentage of revenue, selling, general and administrative expenses
        decreased to 56.6% in the three months ended March 31, 2006 from 64.3% in
        the
        three months ended March 31, 2005. The 7.7% decrease as a percentage of revenue
        was related to the increase in revenue of AMI Australia exceeding the increase
        in total costs. This was partly attributable to greater efforts to control
        costs
        which were implemented by management during the period and AMI Australia
        increasing revenues without having to increase fixed administrative costs.
  ***OTHER
        INCOME AND EXPENSES*** **.** Other
        income and expenses were $19,268 in the three months ended March 31, 2006
        compared to $61,822 in the three months ended March 31, 2005. As a percentage
        of
        revenue, other income and expenses decreased to 0.2% in the three months
        ended
        March 31, 2006 from 1.9% in the three months ended March 31, 2005. The decrease
        is due to the reduction in rental income during the three months ended March
        31,
        2006 as we no longer sublease premises to related parties
  ***NET
        INCOME BEFORE INCOME TAX AND INCOME TAX EXPENSES*** **.**  Income
        before income tax was $1,750,130 in the three months ended March 31, 2006
        compared to $189,152 in the three months ended March 31, 2005. This increase
        was
        attributable to the increase in revenue resulting from additional advertising
        expenditure and decrease in percentage of costs and expenses during the three
        months ended March 31, 2006. The increase is also attributable to an increase
        in
        our product recognition and recognition of the “AMI” name in
        Australia.
  Income
        tax expenses were $523,001 in the three months ended March 31, 2006 compared
        to
        $131,559 in the three months ended March 31, 2005. This increase is primarily
        attributable to the increase in income during the three months ended March
        31,
        2006. As a percentage of gross income, income tax expense rose from 3.8%
        to 5.7%
        which is attributable to the increasing profitability of the Company. Australian
        corporate tax is assessed nationally at 30% of net profit before
        tax.
  ***NET
        INCOME*** **.** Net
        income was $1,227,129 in the three months ended March 31, 2006 compared to
        $57,593 **** in
        the
        three months ended March 31, 2005, before outside equity interest. This increase
        is attributable to the reasons set forth above related to the increase in
        our
        gross profit percentage, while at the same time maintaining our selling,
        general
        and administrative expenses at a nearly consistent level compared to sales.
        Net
        income attributable to outside equity interests was $16,712 in the three
        months
        ended March 31, 2006 compared to $0 in the three months ended March 31, 2005.
        The increase is because AMI Australia did not have any subsidiaries during
        the
        three months ended March 31, 2005. Net income attributable to the members
        of
        parent entity was $1,210,417 in the three months ended March 31, 2006 compared
        to $57,593 in the three months ended March 31, 2005. This increase is
        attributable to the reasons set forth above.
  ITEM
        3. CONTROLS AND PROCEDURES.
  Under
        the
        supervision and with the participation of the Company’s management, including
        our principal executive officer and the principal accounting officer, the
        Company conducted an evaluation of the effectiveness of the design and operation
        of its 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, the
        Company’s principal executive officer and principal accounting officer concluded
        as of the Evaluation Date that the Company’s disclosure controls and procedures
        were effective such that the material information required to be included
        in our
        Securities and Exchange Commission (“SEC”) reports is recorded, processed,
        summarized and reported within the time periods specified in SEC rules and
        forms
        relating to the Company, including our consolidated subsidiaries, and was
        made
        known to them by others within those entities, particularly during the period
        when this report was being prepared.
  28
 Additionally,
        there were no significant changes in the Company’s internal controls or in other
        factors that could significantly affect these controls subsequent to the
        Evaluation Date. We have not identified any significant deficiencies or material
        weaknesses in our internal controls, and therefore there were no corrective
        actions taken.
   29
  **PART
        II -** **OTHER
        INFORMATION** ****
  **ITEM
        1.** **LEGAL
        PROCEEDINGS.** ****
  As
        of
        March 31, 2006, there was no litigation pending or threatened by or against
        the
        Company or any of its subsidiaries except as follows:
  On
        August
        24, 2004, AMI Australia initiated a suit against Mr. Mark Ryan, a former
        consultant, two companies controlled by Mr. Ryan which now compete with us,
        Dr.
        Ian Davies, Mr. Ryan’s partner, and a third company controlled by Dr. Davies
        (the “Defendants”) in the Federal Court of Australia. AMI Australia alleges that
        Mr. Ryan breached his confidentiality agreement with it and misused its
        intellectual property. AMI Australia obtained interim orders in late 2004.
        AMI
        Australia is seeking a permanent injunction restraining the Defendants from
        using its confidential information and intellectual property. AMI Australia
        is
        also seeking an as of yet unspecified amount of damages. All parties have
        recently completed discovery of documents and a number of subpoenas have
        been
        issued. The Defendants have denied the allegations. The court has ordered
        that a
        mediation of the matter be held on May 11, 2006.
  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 claims that a series of advertisements made by
        AMI
        Australia involving a celebrity that confessed impotence were misleading
        and
        deceptive. AMI Australia has denied the allegation and is vigorously defending
        this suit. ACCC is seeking corrective advertising for the alleged misleading
        and
        deceptive advertisements. The ACCC has not made any claim for damages. The
        hearing of the proceedings concluded on September 2, 2005 with a final judgment
        expected during the first half of 2006.
  **ITEM
        2.** **UNREGISTERED
        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**
  None.
  **ITEM
        3.** **DEFAULTS
        UPON SENIOR SECURITIES.**
  None.
  **ITEM
        4.** **SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS.** ****
 
 None.
  **ITEM
        5.** **OTHER
        INFORMATION.**
  None.
  30
 **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).
 
  31
   **SIGNATURES**
  In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
   Date:
                  May 11, 2006
              **ADVANCED
                  MEDICAL INSTITUTE INC.**
                
                
                By:    
                  /s/ Jacov (Jack)
                  Vaisman
                Jacov
                  (Jack) Vaisman
                Chief
                  Executive OfficerDate:
                  May 11, 2006
              By:    
                  /s/ Dilip
                  Shrestha
                Dilip
                  Shrestha
                Chief
                  Financial Officer
  
  32