**UNITED
                  STATES****SECURITIES
                  AND EXCHANGE COMMISSION****WASHINGTON****,
                  D.C. 20549**___________**FORM
                  10-Q**
  x
              **Quarterly
                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934**
                **For
                  the quarterly period ended March 31, 2008**oro
              **Transition
                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934**
                **For
                  the transition period from     to**
  Commission
                  File Number: 000-29531**ADVANCED
                  MEDICAL INSTITUTE INC.**(Exact
                  Name of Registrant as Specified in Its Charter)NEVADA
              
              88-0409144(State
                  or Other Jurisdiction of
                Incorporation
                  or Organization)
              
              (I.R.S.
                  Employer Identification No.)Level
                  1, 204-218 Botany Road
                Alexandria,
                  NSW
                Australia
                  2015(Address
                  of Principal Executive Offices) (Zip Code)




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




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





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


Yes
x No o




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




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


Large
                  accelerated Filero
              Accelerated
                  Filero
              Non-Accelerated
                  Filerx
              Smaller
                  Reporting Companyo(Do
                  not check if a smaller reporting
                  company)




There
      were 53,507,450 shares of the Registrant’s Common Stock issued and outstanding
      on May 12, 2008.


1




**TABLE
      OF CONTENTS**





**Page****Part
                I.**
            **Financial
                Information**
            **3**Item
                1. Financial Statements
            3Consolidated Balance
                Sheets as at March 31, 2008 (unaudited) and June 30, 2007
                (audited)
            3Consolidated
                Unaudited Statements of Operations for the three month and nine month
                periods ended March 31, 2008 and 2007
            4Consolidated
                Unaudited Statements of Cash Flows for the nine month periods ended
                March
                31, 2008 and 2007
            5Notes
                to Consolidated Unaudited Financial Statements
            7Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            25Item
                3. Quantitative and Qualitative Disclosures About Market Risk
            41Item
                4T. Controls and Procedures
            42**Part
                II.**
            **Other
                Information**
            **43**Item
                1. Legal Proceedings
            43Item
                1A. Risk Factors
            44Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            44Item
                3. Defaults Upon Senior Securities
            44Item
                4. Submission of Matters to a Vote of Security Holders
            44Item
                5. Other Information
            44Item
                6. Exhibits
            45SIGNATURES
            46




2




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




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





**ADVANCED
      MEDICAL INSTITUTE INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET** **S**





**March
                31, 2008**
              **(Unaudited)**
            
            **June
                30, 2007**
              **(Audited)****ASSETS****CURRENT
                ASSETS**Cash
                & cash equivalent
            
            $
            2,761,663
            
            $
            737,383Receivables,
                net
            
            
            15,721,087
            
            
            11,961,840Receivables
                due from related parties
            
            
            1,766
            
            
            1,453Inventory
            
            
            202,176
            
            
            269,707Asset held
              for
              disposition
            
            
            39,465
            
            
            15,268Other
                assets
            
            
            1,216,704
            
            
            1,163,870**TOTAL
                CURRENT ASSETS**
            
            
            19,942,861
            
            
            14,149,521**NON-CURRENT
                ASSETS**Security
                deposits
            
            
            123,171
            
            
            119,603Property
                and equipment, net
            
            
            1,079,604
            
            
            930,795Assets
                held for disposition
            
            
            296,553
            
            
            256,860Intangible
                assets, net
            
            
            29,308,108
            
            
            28,205,177**TOTAL
                NON-CURRENT ASSETS**
            
            
            30,807,436
            
            
            29,512,435**TOTAL
                ASSETS**
            
            $
            50,750,297
            
            $
            43,661,956**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Unearned
                revenue
            
            $
            6,031,782
            
            $
            5,101,288Accounts
                payable & accrued expenses
            
            
            7,171,841
            
            
            5,591,560Payables
                due to related parties
            
            
            -
            
            
            2,947Interest
                bearing liabilities - current
            
            
            341,749
            
            
            72,044Income
                taxes payable
            
            
            1,093,702
            
            
            286,185**TOTAL
                CURRENT LIABILITIES**
            
            
            14,639,074
            
            
            11,054,024**NON-CURRENT
                LIABILITIES**Securities
                deposit received
            
            
            2,641
            
            
            6,833Interest
                bearing liabilities - non-current
            
            
            1,860,496
            
            
            2,424,362Deferred
                tax liabilities
            
            
            1,974,783
            
            
            1,501,602**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            3,837,920
            
            
            3,932,797**TOTAL
                LIABILITIES**
            
            
            18,476,994
            
            
            14,986,821**Commitments
                & Contingency****STOCKHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share,90,000,000
                shares authorized,53,507,450
                issued and outstanding
            
            
            53,507
            
            
            53,507Additional
                paid in capital
            
            
            24,149,420
            
            
            24,149,420Other
                comprehensive income
            
            
            5,527,051
            
            
            3,168,255Retained
                earnings
            
            
            2,543,325
            
            
            1,303,953**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            32,273,303
            
            
            28,675,135**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            50,750,297
            
            $
            43,661,956




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


3





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





**ADVANCED
      MEDICAL INSTITUTE INC. AND SUBSIDIARIES**


**CONSOLIDATED** **STATEMENTS
      OF OPERATIONS**




**Three
                Month Periods Ended**
            
            **Nine
                Month Periods Ended****March
                31, 2008**
              **(Unaudited)**
            
            **March
                31, 2007**
              **(Unaudited)**
            
            **March
                31, 2008**
              **(Unaudited)**
            
            **March
                31, 2007**
              **(Unaudited)****NET
                REVENUE**
            
            $
            13,408,468
            
            $
            9,002,590
            
            $
            36,948,958
            
            $
            28,809,524**COST
                OF REVENUE**
            
            
            (2,786,301
            )
            
            (2,297,734
            )
            
            (8,204,757
            )
            
            (6,930,952
            )**GROSS
                PROFIT**
            
            
            10,622,167
            
            
            6,704,856
            
            
            28,744,201
            
            
            21,878,572**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            (9,483,354
            )
            
            (6,446,260
            )
            
            (25,735,251
            )
            
            (19,354,923
            )**OPERATING
                INCOME**
            
            
            1,138,813
            
            
            258,596
            
            
            3,008,950
            
            
            2,523,649**OTHER
                INCOME AND (EXPENSE)**Rental
                income
            
            
            -
            
            
            4,735
            
            
            -
            
            
            14,443Bank
                interest
            
            
            26,052
            
            
            9,028
            
            
            52,267
            
            
            37,440License
                fee income
            
            
            -
            
            
            19,275
            
            
            -
            
            
            19,275Management
                fee income
            
            
            5,763
            
            
            44,549
            
            
            27,480
            
            
            90,838Other
                income
            
            
            408
            
            
            1,912
            
            
            7,689
            
            
            50,418Interest
                expense
            
            
            (66,872
            )
            
            (67,867
            )
            
            (198,926
            )
            
            (132,139
            )**TOTAL
                OTHER INCOME (EXPENSE)**
            
            
            (34,649
            )
            
            11,632
            
            
            (111,490
            )
            
            80,275**INCOME
                FROM CONTINUED OPERATIONS**
            
            
            1,104,164
            
            
            270,228
            
            
            2,897,460
            
            
            2,603,924**DISCONTINUED
                OPERATIONS**Loss
                from discontinued operations
            
            
            (53,436
            )
            
            (987,041
            )
            
            (406,284
            )
            
            (1,853,312
            )**INCOME
                (LOSS) BEFORE INCOME TAXES**
            
            
            1,050,728
            
            
            (716,813
            )
            
            2,491,176
            
            
            750,612INCOME
                TAX EXPENSE
            
            
            (496,551
            )
            
            (5,838
            )
            
            (1,251,804
            )
            
            (835,552
            )NET
                INCOME (LOSS)
            
            
            554,177
            
            
            (722,651
            )
            
            1,239,372
            
            
            (84,940
            )Other
                Comprehensive item - Foreign currency translation income
            
            
            1,357,078
            
            
            840,152
            
            
            2,358,796
            
            
            2,450,277**Net
                Comprehensive Income**
            
            **$**
            **1,911,255**
            
            **$**
            **117,501**
            
            **$**
            **3,598,168**
            
            **$**
            **2,365,337****Earnings
                (Loss) per common share, basic**
            
            **$**
            **0.01**
            
            
            **($0.01**
            **)**
            **$**
            **0.02**
            
            
            **($0.00**
            **)****Weighted
                average number of shares, basic**
            
            
            **53,507,450**
            
            
            **53,507,450**
            
            
            **53,507,450**
            
            
            **47,186,478**








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




4





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





**ADVANCED
      MEDICAL INSTITUTE INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Nine
                Month Periods Ended****March
                31, 2008**
              **(Unaudited)**
            
            **March
                31, 2007**
              **(Unaudited)****Cash
                Flows from Operating Activities**Receipts
                from Customers
            
            $
            31,607,148
            
            $
            23,416,297Interest
                Received
            
            
            50,569
            
            
            37,439Payment
                to Suppliers & Employees
            
            
            (27,758,083
            )
            
            (21,095,337
            )Interest
                Paid
            
            
            (198,926
            )
            
            (132,137
            )Income
                Tax Paid
            
            
            (86,851
            )
            
            (229,685
            )**Net
                cash provided by operating activities of continued
                operations**
            
            
            3,613,857
            
            
            1,996,577**Net
                cash used in discontinued operations**
            
            
            (448,801
            )
            
            (2,167,503
            )**Net
                cash provided by (used in) operating activities**
            
            
            3,165,056
            
            
            (170,926
            )**Cash
                Flows from Investing Activities**Acquisition
                of subsidiaries
            
            
            -
            
            
            (2,258,100
            )Payment
                for Property, Plant & Equipment
            
            
            (170,526
            )
            
            (245,918
            )Payment
                for Intangible Assets
            
            
            (73,181
            )
            
            (67,097
            )**Net
                cash used in investing activities**
            
            
            (243,707
            )
            
            (2,571,115
            )**Cash
                Flows From Financing Activities**Collection
                of Note Receivable
            
            
            -
            
            
            150,771Proceeds
                from Borrowings
            
            
            -
            
            
            2,258,100Repayment
                of Borrowings
            
            
            (500,635
            )
            
            (156,137
            )**Net
                cash (used in) provided by financing activities**
            
            
            (500,635
            )
            
            2,252,734Net
                increase(decrease) in cash and cash equivalents
            
            
            2,420,714
            
            
            (489,307
            )Effect
                of exchange rate on cash
            
            
            (523,532
            )
            
            (66,058
            )Cash
                and cash equivalents at beginning of period
            
            
            864,481
            
            
            1,103,243**Cash
                and cash equivalents at end of period**
            
            **$**
            **2,761,663**
            
            **$**
            **547,878**





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


5





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





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


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





**Nine
                Month Periods Ended****March
                31, 2008**
              **(Unaudited)**
            
            **March
                31, 2007**
              **(Unaudited)****Reconciliation
                of Cash & Cash Equivalents**Cash
                & cash equivalents at the end of financial period as shown in the
                Statement of Cash Flows is reconciled to the related items in the
                Statement of Financial Position as follows:**Cash
                & Cash Equivalents**
            
            $
            2,761,663
            
            $
            547,878**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                Income**
            
            $
            1,239,372
            
            $
            (84,940
            )**Non-Cash
                Flows in Profit from Ordinary Activities**Depreciation
            
            
            1,317,256
            
            
            940,117Provision
                for doubtful accounts
            
            
            3,162,216
            
            
            3,309,946**Changes
                in Assets and Liabilities**Decrease
                (Increase) in inventories
            
            
            85,854
            
            
            (7,456
            )Increase
                in receivables
            
            
            (5,808,092
            )
            
            (5,739,597
            )Increase
                in security deposit paid
            
            
            -
            
            
            (7,890
            )Increase
                in unearned revenue
            
            
            495,032
            
            
            535,852Increase
                in payables
            
            
            1,455,696
            
            
            485,001Decrease
                in provisions for compensated absences
            
            
            148,771
            
            
            48,674Increase
                in deferred tax liabilities
            
            
            336,975
            
            
            424,901Increase
                in security deposit
            
            
            1,350
            
            
            1,924Increase
                in income tax payable
            
            
            752,658
            
            
            275,742**Net
                cash provided by operating activities of continued
                operations**
            
            
            **3,187,088**
            
            
            **182,284****Net
                cash used in operating activities of discontinued
                operation**
            
            
            **(22,032**
            **)**
            
            **(353,200**
            **)****Net
                cash provided by used in operating activities**
            
            **$**
            **3,165,056**
            
            
            **($170,926**
            **)****Supplemental
                Cash Flow Disclosures:**Interest
                paid
            
            $
            198,926
            
            $
            132,139Income
                tax paid
            
            $
            143,135
            
            $
            229,685**Non-Cash
                Investing/Financing Activities:**Stock
                issued in acquisition
            
            $
            -
            
            $
            16,125,000Assets
                acquired under capital leases
            
            $
            23,238
            
            $
            -




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




6


**ADVANCED
      MEDICAL INSTITUTE INC.**


**AND
      SUBSIDIARIES**





**NOTES
      TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2008**





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





Nature
      of Business





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





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





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


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




AMI
      Australia is a company limited by shares, incorporated and domiciled in
      Australia. The principal activity of AMI Australia is the medical treatment
      of
      sexual dysfunction in Australia and New Zealand and to a lesser extent China.
      Our operations in and Japan were discontinued during the three months ended
      March 31, 2008. In addition, AMI Australia also provides prostate treatments
      to
      patients. AMI Australia is a service provider company which arranges for
      patients with sexual dysfunction to be provided with medical services,
      pharmaceuticals and associated support services. AMI Australia operates a
      centralized call center and twenty medical centers and sales offices throughout
      Australia and New Zealand. AMI China, a wholly owned subsidiary of the Company,
      operates 2 medical centers in Beijing, China.




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




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




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




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




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




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


7





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





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





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





IMT
      applied to list its nebuliser with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006. IMT received
      comment letters from the TGA during March 2007 which requires it to provide
      further material in order to advance its application. IMT is in the process
      of
      dealing with the matters raised by the TGA and currently anticipates it will
      submit a revised application later this calendar year.





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





The
      Company funded the cash component of the purchase price by AMI Australia
      entering into two secured three year term loans in the aggregate principal
      amount of A$3 million with ANZ Nominees Limited in its capacity as custodian
      of
      the Professional Pensions PST. The loan is secured by a security interest in
      all
      of AMI Australia’s assets and undertakings (including its existing equity
      interests in PE Patent Holdco Pty Limited, Intelligent Medical Technologies
      Pty
      Limited and Advanced Medical Institute (NZ) Limited) with the exception that
      the
      Company’s shares in Whygo Video Conferencing Pty Limited have now been released
      from the security. The loans accrue interest at an annual coupon of 450 basis
      points above the then Australian Reserve Bank’s current cash rate (currently
      being an aggregate current interest rate of 11.75%). The Company has been
      meeting its interest payment obligations under these loans and has paid
      approximately A$902,000 in principal as at the date of this filing.





The
      Company has been actively exploring international expansion into a range of
      jurisdictions and established subsidiaries in China and Japan in
      2006.





The
      Chinese subsidiary, named Ai Te Wei (Beijing) Medicine Consulting Company (“AMI
      China”), is an indirect wholly owned subsidiary of the Company and AMI China has
      formed an alliance with 2 Beijing hospitals for the purpose of establishing
      operations and conducting clinical trials for regulatory purposes. AMI China
      has
      obtained regulatory approval to its proposed advertisements and commenced
      operations on September 4, 2006.





The
      Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), is an
      indirect 75% owned subsidiary of the Company. AMI Japan commenced operations
      on
      October 1, 2006 and
      discontinued its operations on February 4, 2008 .


8





The
      Company’s initial operations in China and Japan have not been as successful as
      the company anticipated and the Company has substantially reduced the nature
      and
      scope of its operations in China and has wound down its operations in Japan.
      The
      Company is investigating alternative marketing and distribution methods in
      China
      but intends to expend considerably less on these activities than it spent on
      its
      operations during the year ended June 30, 2007 until it establishes a successful
      sales and marketing platform for these markets.




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




The
      Option granted AMI UK a right to enter into an exclusive license to use
      Worldwide PE’s intellectual property in the United Kingdom. AMI UK paid
      Worldwide PE an upfront non-refundable fee of $50,000 to secure an initial
      period of four months to confirm the license which period was able to be
      extended for a further two months by AMI UK paying Worldwide PE a non-refundable
      extension fee of $50,000. During this initial nine month period, AMI UK had
      the
      right to enter into a License Agreement (the “License”) by paying Worldwide PE
      an upfront non-refundable license fee of $1 million less the upfront fees paid
      to Worldwide PE prior to that date. Terms of the Option and the License were
      disclosed by the Company on its Current Report on Form 8-K filed with the
      Securities and Exchange Commission (the “SEC”) on May 3, 2007. On September 4,
      2007 AMI UK exercised its right to extend the option period and paid an
      extension fee of $50,000. Worldwide PE agreed to vary this extension period
      to
      four months rather
      than two months, however the option has now expired. Notwithstanding the
      expiration of the option, AMI UK is continuing to finalize its business plans
      for the UK and is continuing to discuss further license arrangements with
      Worldwide PE.




AMI
      Australia holds 50% of the outstanding shares of Whygo Videoconferencing Pty
      Limited (“Whygo”). Whygo provides video conferencing services across Australia
      and in various locations around the world. James Matthews, a director of Whygo,
      holds the remaining 50% of the outstanding shares of Whygo. On April 30, 2008
      AMI Australia entered into a share sale agreement with Mr Matthews pursuant
      to
      which AMI Australia agreed to sell its shares in Whygo for A$330,000. The
      initial installment of A$130,000 was received on entry into the agreement with
      2
      further installments of A$100,000 each due on December 15, 2008 and June 30,
      2009 respectively. The sale was in excess of book value of AMI Australia’s
      shares in Whygo and will generate a gain on disposal for AMI Australia (See
      note
      16 for details)




Whygo
      owns proprietary scheduling software, which allows its corporate partners to
      login and book rooms around the world. The source of Whygo’s income is derived
      from renting video conferencing rooms to its corporate partners through AMI
      Australia and its other channeling partners.


9




Subsidiaries









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




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




Whygo Video
      Conferencing Pty Ltd. (“Whygo”) was
      disposed of subsequent to March 31, 2008 (See notes 10 and 16 for
      details) andAMI
      Japan Kabushiki Gaisya (“AMI Japan”) was wound down and discontinued on February
      4, 2008 (See note 10 for details).




AMI
      International’s direct subsidiary is AWIT Beijing Medicine Consulting Company
      (“AMI China”) which conducts the Company’s business in China. AMI China
      commenced advertising of its services on September 4, 2006.




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




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




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




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




Advanced
      Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
      Zealand. AMI NZ contributed 2.6% of AMI Australia’s consolidated revenue during
      the nine months (excluding other income).







10




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




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




On
      February 12, 2007, the Company entered into a written agreement with the
      Heartcheck Group of companies for an indefinite term, which can be terminated
      at
      any time with not less than twelve months written notice. Under the agreement,
      Heartcheck agrees to utilize services provided by the Company, including the
      provision of staff and premises. In exchange for these services, Heartcheck
      has
      agreed to reimburse the Company for all expenses associated with the provision
      of these services and to pay the company a net margin on those expenses. The
      provision of these services and the fees generated from this agreement with
      Heartcheck has contributed to the Company’s net revenues during the quarter
      ended March 31, 2008. Heartcheck is independently owned from the Company, its
      subsidiaries and its affiliates and it operates a business of providing cardiac
      related medical services in Australia. As at March 31, 2008 the Company has
      receivables amounting to $0.9 million (net of provisions) owed to it by the
      Heart Check Group of companies.







**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 subsidiaries, AMI Australia Holdings Pty Limited, AMI Management
        Services Pty Limited (“AMI MS”) and AMI International Pty Limited (“AMI
        International”) and their direct and indirect wholly-owned subsidiaries:
        Advanced Medical Institute Pty Ltd, PE Patent Holdco Pty Limited (“PE”),
        Advanced Medical Institute (NZ) Limited (“AMI NZ”) and Intelligent Medical
        Technologies Pty Ltd (“IMT”). All significant inter-company accounts and
        transactions have been eliminated upon consolidation.
  The
        Company disposed of its 50% owned subsidiary, Whygo Video Conferencing Pty
        Ltd
        (“Whygo”) (which owns all of the shares in Whygo Limited, a UK entity) in the
        subsequent period and re-classed as ‘Assets held for disposition’ in the
        accompanied financial statements.
  The
        Company also re-classed its 75% owned subsidiary AMI Japan which was
        discontinued during the reporting period to ‘Assets held for
        disposition’.




Concentration
      of Credit Risk




Financial
      instruments that potentially subject the Company to concentrations of credit
      risk are cash, accounts receivable and other receivables arising from its normal
      business activities. The Company places its cash in what it believes to be
      credit-worthy financial institutions. The Company has a diversified customer
      base. The Company controls credit risk related to accounts receivable through
      credit approvals, credit limits and monitoring procedures. The Company routinely
      assesses the financial strength of its customers and, based upon factors
      surrounding the credit risk, establishes an allowance, if required, for
      uncollectible accounts and, as a consequence, believes that its accounts
      receivable credit risk exposure beyond such allowance is limited.




Cash
      Equivalents




For
      purposes of the statement of cash flows, the Company considers all highly liquid
      investments with maturities of three months or less to be cash
      equivalents.


11




Use
      of
      Estimates




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




Revenue
      Recognition




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




Unearned
      Revenue




Unearned
      revenue arises from programs that exceed three months. The maximum program
      length is twelve months while the average program length purchased by each
      individual patient is four and one-half months. The Company made estimate
      of unearned revenue based on the average program length less three months for
      which medication is provided and revenue is recognized. As at March 31, 2008
      unearned revenue amounted to $6,031,782.




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”.




Accounts
      Receivable




Accounts
      receivable are sales for the year, net of sales refund, cancellation, unearned
      revenue and provision for doubtful debt. The Company estimates provision for
      doubtful debts based on the historical results. As at March 31, 2008 accounts
      receivable amounted to $15,721,087 (net of provisions).


12




Inventories




Inventories
      are valued at the lower of cost (determined on a first-in first-out basis)
      or
      market. Management compares the cost of inventories with the market value and
      allowance is made for writing down our inventories to market value, if lower.
      As
      of March 31, 2008 inventory consisted only of finished goods and amounted to
      $202,176.




Property
      and Equipment




Property
      & Equipment placed in service is depreciated over the estimated useful lives
      of the assets using the diminishing value depreciation method.




Property
      and equipment are carried at the lesser of cost and written down value.
      Expenditures for maintenance and repairs are expenses as incurred and
      expenditures for major renewals and betterments are capitalized. Assets retired
      or sold are removed from the property accounts, with gains or losses on disposal
      included in income.




Employee
      Entitlements




Contributions
      are made to an employee superannuation fund and are charged as expenses when
      incurred.




Exchange
      Gain (Loss)




During
      the three month periods ended March 31, 2008 and 2007, the transactions of
      AMI
      Australia were denominated in foreign currency and were recorded in Australian
      Dollars (A$) at the rates of exchange in effect when the transactions occur.
      Exchange gains and losses are recognized for the different foreign exchange
      rates applied when the foreign currency assets and liabilities are
      settled.




Foreign
      Currency




As
      of
      March 31, 2008, the accounts of AMI Australia and its subsidiaries were
      maintained and its financial statements were expressed in the local currency
      for
      the jurisdiction in which the entity operated. Such financial statements were
      translated into the functional currency in Australian Dollars (A$) and
      thereafter to reporting currency in U.S. Dollars (US$) in accordance with
      Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
      Translation,” with the Australian Dollar as the functional currency. According
      to the Statement, all assets and liabilities were translated at the current
      exchange rate, stockholders’ equity (deficit) is translated at the historical
      rates and income statement items are translated at the average exchange rate
      for
      the period. The resulting translation adjustments are reported under other
      comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive
      Income” as a component of shareholders’ equity (deficit).




Research
      and Development Costs




Research
      and development costs are charged against income from ordinary activities before
      income tax as incurred.




Intangible
      assets




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


13




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





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





At
      March
      31, 2008 and June 30, 2007, intangibles consist of the following:





**Intangibles**
            
            **Gross
                Carrying****Amount**
            
            **Accumulated****Amortization**
            
            **Impairment****Loss**
            
            **Net
                Carrying Amount**
              **March
                31, 2008**
              **(Unaudited)**
            
            **Net
                Carrying Amount**
              **June
                30, 2007**
              **(Audited)**Amortized
                intangibles:Patents
            
            $
            10,649,735
            
            $
            (1,167,436
            )
            $
            (751,678
            )
            $
            8,730,621
            
            $
            8,479,526Intellectual
                Property
            
            
            17,316,362
            
            
            (1,586,771
            )
            
            -
            
            
            15,729,591
            
            
            15,198,095Computer
                Software
            
            
            428,679
            
            
            (252,768
            )
            
            -
            
            
            175,911
            
            
            152,713Unamortized
                intangibles:Intellectual
                Property
            
            
            4,671,985
            
            
            -
            
            
            -
            
            
            4,671,985
            
            
            4,386,735$
            33,066,760
            
            $
            (3,006,975
            )
            $
            (751,678
            )
            $
            29,308,108
            
            $
            28,217,069




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


The
        exchange rate used for the period ended June 30, 2007
        was A$:US$ 1:0.84880 and the rate used for the period ended March 31,
        2008 was A$:US$ 1:0.91780. The rate change caused the increase in the net
        book
        value of intangible assets in addition to development of software cost during
        the period.




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




Computer
      software was assigned as having a 3 year life.




Amortization
      expense from continuing operation for the nine month periods ended March 31,
      2008 and 2007 was $1,193,432 and $839,444 respectively. The Company expects
      the
      amortization expenses for the next five years to be as follows:




14




Year
                  Ending March 31,
              
              Annual
                  Amount2008
              
              $1,591,0002009
              
              $1,591,0002010
              
              $1,591,0002011
              
              $1,591,0002012
              
              $1,591,000




Long-Lived
      Assets ******




Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”), which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
      the Results of Operations for a Disposal of a Segment of a Business.” The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets’ carrying amounts. In that event, a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. Based on its review, the Company believes
      that, as of March 31, 2008 there were no significant impairments of its
      long-lived assets.




Segment
      Reporting




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




Basic
      and Diluted Earnings Per Share





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





**RECENT
      PRONOUNCEMENTS**





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


15





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




·  A
      brief
      description of the provisions of this Statement




·  The
      date
      that adoption is required




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




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


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




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





In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations”. The objective of this statement will significantly change the
      accounting for business combinations. Under Statement 141R, an acquiring entity
      will be required to recognize all the assets acquired and liabilities assumed
      in
      a transaction at the acquisition date fair value with limited exceptions.
      Statement 141 applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. The Company does not expect
      the
      adoption of SFAS No. 141R to have a material impact on the consolidated
      financial statements.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements-An Amendment of ARB No. 51". The objective
      of
      this statement is to establish new accounting and reporting standards for the
      Noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. Statement 160 is effective for fiscal years, and interim periods
      within those fiscal years, beginning on or after December 15, 2008. The Company
      does not expect the adoption of SFAS No. 160 to have a material impact on the
      consolidated financial statements.


16




In
      March,
      2008, the Financial Accounting Standards Board (“FASB”) issued FASB Statement
      No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The
      new standard is intended to improve financial reporting about derivative
      instruments and hedging activities by requiring enhanced disclosures to enable
      investors to better understand their effects on an entity’s financial position,
      financial performance, and cash flows. It is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15, 2008,
      with early application encouraged. The new standard also improves transparency
      about the location and amounts of derivative instruments in an entity’s
      financial statements; how derivative instruments and related hedged items are
      accounted for under Statement 133; and how derivative instruments and related
      hedged items affect its financial position, financial performance, and cash
      flows. FASB Statement No. 161 achieves these improvements by requiring
      disclosure of the fair values of derivative instruments and their gains and
      losses in a tabular format. It also provides more information about an entity’s
      liquidity by requiring disclosure of derivative features that are credit
      risk-related. Finally, it requires cross-referencing within footnotes to enable
      financial statement users to locate important. Based on current conditions,
      the
      Company does not expect the adoption of SFAS 161 to have a significant impact
      on
      its results of operations or financial position.








**2.** **OTHER
      ASSETS**




Following
      is the summary of other assets as of March 31, 2008 and June 30,
      2007.





March
                31
              (Unaudited)
            
            June
                30
              (Audited)Bank
                guarantees
            
            $
            107,154
            
            $
            84,917Advances
                and prepayments
            
            
            306,734
            
            
            57,397Other
                receivables
            
            
            64,246
            
            
            106,100Other
                debtors
            
            
            738,570
            
            
            915,456Total
            
            $
            1,216,704
            
            $
            1,163,870








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





Property,
      plant and equipment comprised of the following as of March 31, 2008 and June
      30,
      2007:





**March
                31, 2008 (Unaudited)**
            
            **June
                30, 2007 (Audited)**Leasehold
                improvements
            
            $
            529,798
            
            $
            446,746Less:
                Accumulated depreciation
            
            
            104,450
            
            
            74,746425,348
            
            
            372,000Motor
                Vehicles
            
            
            54,425
            
            
            50,334Less:
                Accumulated Depreciation
            
            
            32,488
            
            
            26,70821,937
            
            
            23,626Office
                Furniture & Equipment
            
            
            585,791
            
            
            456,897Less:
                Accumulated Depreciation
            
            
            142,458
            
            
            96,757443,333
            
            
            360,140Computer
                Hardware
            
            
            421,388
            
            
            352,652Less:
                Accumulated Depreciation
            
            
            285,930
            
            
            220,421135,458
            
            
            132,231Low
                Value Pooled Fixed Assets
            
            
            177,399
            
            
            142,171Less:
                Accumulated Depreciation
            
            
            123,871
            
            
            99,37353,528
            
            
            42,798**Total
                Property, Plant and Equipment, net**
            
            **$**
            **1,079,604**
            
            **$**
            **930,795**




17





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





Interest
      bearing liabilities comprised of the following as of March 31, 2008 and June
      30,
      2007:





**March
                31, 2008**
              **(Unaudited)**
            
            **June
                30, 2007**
              **(Audited)****Current,
                as of the period ended**Capitalized
                lease liability
            
            $
            58,819
            
            $
            72,044Secured
                loan
            
            
            282,930
            
            
            -**$**
            **341,749**
            
            **$**
            **72,044****Non-current,
                due as of the period ended**Capitalized
                lease liability
            
            $
            3,088
            
            $
            25,220Secured
                loan
            
            
            1,857,408
            
            
            2,399,412Total
                non-current
            
            **$**
            **1,860,496**
            
            **$**
            **2,424,362**




The
      interest bearing liabilities require monthly payments of principal and interest
      at a per annum interest rate ranging from 6.2% to 13.85%. Interest expense
      on
      the interest bearing liabilities amounted to $199,501 and $132,416 for the
      nine
      month periods ended March 31, 2008 and 2007, respectively.






Obligations
      under the notes are secured by the financed assets included in property and
      equipment. The secured loan is secured over all of AMI Australia’s assets and
      undertakings. The principal of the loan is due to mature in September
      2009.







**5.** **ACCOUNTS
      PAYABLE AND ACCRUED EXPENSES**




Accounts
      payable and accrued expenses as of March 31, 2008 and June 30, 2007 are
      summarized as follows:




March
                    31
                  (Unaudited)
                
                June 30
                  (Audited)Accounts
                    payable
                
                $
                2,555,840
                
                $
                1,531,627Accrued
                    salaries
                
                
                472,944
                
                
                443,806Accrued
                    professional fees
                
                
                44,605
                
                
                30,557Other
                    current liabilities
                
                
                369,743
                
                
                68,418Provision
                    for DDR medication cost
                
                
                1,011,416
                
                
                887,845Provision
                    for DDR sales commission
                
                
                1,011,416
                
                
                828,428Provision
                    for DDR collection fee
                
                
                1,011,416
                
                
                828,428Provision
                    for patient refund
                
                
                156,026
                
                
                84,880Accrued
                    legal case settlement
                
                
                -
                
                
                250,396Accrued
                    DDR collection fee
                
                
                -
                
                
                211,709Accrued
                    payroll tax
                
                
                -
                
                
                59,416Accrued
                    compensated absences
                
                
                538,435
                
                
                366,050Total
                
                $
                7,171,841
                
                $
                5,591,560




18




6.LEGAL
      PROCEEDINGS




As
      of
      March 31, 2008, there was no litigation pending or threatened by or against
      the
      Company or any of its direct or indirect subsidiaries other than AMI Australia.
      AMI Australia currently is involved in the following litigation and
      administrative matters:




On
      May
      25, 2007, AMI Australia commenced proceedings in the New South Wales Supreme
      Court against Channel Seven Sydney Pty Limited in respect of certain allegedly
      actionable statements made by Channel Seven. AMI Australia has alleged that
      the
      statements made involve a breach of the doctrine of injurious falsehood and
      that
      it is entitled to be compensated in damages. The proceedings are at an early
      stage.




On
      October 25, 2006, Bade Medical Institute Pty Limited, Mr. David Wade, Mr. Buddy
      Beani and others (collectively “Bade”) applied for Trade Mark No. 114322021 in
      respect of the words “AMI Nasal Spray”. AMI Australia lodged an objection to the
      registration of that application with IP Australia on June 21, 2007.On December
      13, 2007, AMI Australia commenced proceedings in the Federal Court of Australia
      Sydney Registry against Bade alleging Bade was infringing upon AMI Australia’s
      trademarks and other intellectual property rights. On December 19, 2007, Bade
      consented to orders that Bade transfer ownership of certain domain names and
      telephone numbers to AMI Australia and consented to orders that Bade would
      not
      use certain names which contained the word AMI. The orders obtained by AMI
      Australia require Bade to file their evidence of transfer by February 28, 2008
      and AMI Australia has issued notices to produce to Bade in relation to the
      proceedings. Bade appear to have ceased operation since the orders were obtained
      and has transferred the required names to AMI Australia. Following Bade’s
      repeated failure to respond to Notices to Produce, AMI Australia issued
      Subpoenas to Produce which were returnable on May 7, 2008. No documents were
      produced on that date and the Subpoena was stood over until May 14, 2008. Bade
      failed to file its evidence by February 28, 2008 and has failed to file any
      evidence to date.




On
      April
      28, 2008 Justice Flick ordered that:




(a)  AMI
      file
      and sever a statement of claim on or before May 28, 2008; and


(b)  Bade
      file
      and serve defenses on or before June 12, 2008.




AMI
      Australia filed all evidence upon which it relies by March 19, 2008. Bade must
      file and serve all evidence in answer to AMI’s opposition on or by June 21,
      2008.


19




**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:





**March
                31 (Unaudited)**Due
                during the period ended,2009
            
            $
            752,9962010
            
            
            357,4412011
            
            
            126,6982012
            
            
            71,494**$**
            **1,308,629**




Rent
      paid
      for the nine month periods ended March 31, 2008 and 2007 was $1,432,581 and
      $1,272,467, respectively.





**8.**  **CONCENTRATION**




Sales
      Markets - The Company’s revenue arises primarily from Australian, New Zealand
      and to a lesser extent, Chinese and Japanese customers .




Suppliers
      - Although the Company has access to a variety of suppliers, the majority of
      the
      Company’s products that are obtained for resale are purchased from a limited
      number of suppliers.







**9.**  **SHARE
      EXCHANGE AGREEMENTS**




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




The
      Company funded the cash component of the purchase price by AMI Australia
      entering into two secured three year term loans in the aggregate principal
      amount of A$3 million with ANZ Nominees Limited in its capacity as custodian
      of
      the Professional Pensions PST. The loan is secured by a security interest in
      all
      of AMI Australia’s assets and undertakings (including its existing equity
      interests in PE Patent Holdco Pty Limited, Intelligent Medical Technologies
      Pty
      Limited, Advanced Medical Institute (NZ) Limited and Whygo Video Conferencing
      Pty Limited). The loan accrues interest at an annual coupon of 450 basis points
      above the then Australian Reserve Bank’s current cash rate (currently being an
      aggregate current interest rate of 11.75%).




**10.** **DISCONTINUED
      OPERATION/ASSETS HELD FOR DISPOSITION**





***Whygo
      Video Conferencing Pty Limited***




On
      April
      30, 2008, AMI Australia Holdings Pty Limited, a wholly owned subsidiary of
      Advanced Medical Institute Inc., entered into a Share Sale Agreement with Mr.
      James Matthews pursuant to which AMI Australia agreed to sell its 50% interest
      in Whygo Video Conferencing Pty Limited (ACN 105 732 492), a privately owned
      Australian company in exchange for the payment of A$330,000 (approximately
      US$305,000) to Mr. Matthews.


20





Under
      the
      Sale Agreement, A$130,000 was paid on signing with a further A$100,000 payable
      by no later than December 15, 2008 and the final payment of A$100,000 payable
      by
      June 30, 2009.





Following
      is the summary of net assets held for disposition as of March 31:





Current
            2008Assets
                held for disposition
            $17,433Profit
                from discontinued operations
            $22,032Net
                assets held for disposition
            $39,465




***AMI
      Japan Kabushiki Gaisya***





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





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





Loss
      from
      the discontinued operation of AMI Japan during the period ended March 31, 2008
      was US$428,316.





The
      capital contributed to AMI Japan of US$296,553 has been classified as assets
      pending sale on the accompanying consolidated balance sheet as of March 31,
      2008.





Following
      is the summary of net assets held as of March 31:





Non-Current
            2008Assets
                held for disposition
            $724,869Loss
                from discontinued operations
            ($428,316)Net
                assets held for disposition
            $296,553




**11.** **RELATED
      PARTY TRANSACTIONS**


**March
                31, 2008**
              **(Unaudited)**
            
            **June
                30, 2007**
              **(Audited)**Related
                party transactions comprised of the following:***Forhad
                (Tony) Khan***Relationship:Director of the parent entityPayable
                to this related party
            
            $
            -
            
            $
            2,947***Prostate
                Health Clinic Pty. Ltd. (an AU co.)***Relationship:Under common management control by Jack VaismanReceivable
                from this related party
            
            $
            1,766
            
            $
            1,453




Total
      receivables due from related parties included in the Company’s statement of
      financial position was $1,766 and $1,453 as of March 31, 2008 and June 30,
      2007
      respectively.




Total
      accounts payable to related parties included in the Company’s statement of
      financial position was $Nil and $2,947 as of March 31, 2008 and June 30, 2007
      respectively.




Receivables
      from, and payables to, related parties are unsecured, interest-free and are
      due
      on demand.


21





**12.** **CONTINGENT
      LIABILITY**




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







**13.** **INCOME
      TAXES**




Total
      Federal and State income tax expense for the nine months period ended March
      31,
      2008 and 2007 amounted to $1,251,804 and $835,552 respectively. For the three
      month periods ended March 31, 2008 and 2007 there is a difference of 1% between
      the Australian federal statutory tax rate and the effective tax rate. This
      difference is due to the domicile of operating profits and losses in the Group
      as well as the impact of timing and past operating profits (losses) on these
      matters.




March
                  31, 2008
              
              U.S.
              
              State
              
              International
              
              TotalCurrent
              
              $
              0
              
              $
              0
              
              $
              826,629
              
              $
              826,629Deferred
              
              $
              0
              
              $
              0
              
              $
              425,175
              
              $
              425,175Total
              
              $
              0
              
              $
              0
              
              $
              1,251,804
              
              $
              1,251,804March
                  31, 2007
              
              
              U.S.
              
              
              State
              
              
              International
              
              
              TotalCurrent
              
              $
              0
              
              $
              0
              
              $
              539,164
              
              $
              539,164Deferred
              
              $
              0
              
              $
              0
              
              $
              296,388
              
              $
              296,388Total
              
              $
              0
              
              $
              0
              
              $
              835,552
              
              $
              835,552Reconciliation
                  of the differences between the statutory U.S. Federal income tax
                  rate and
                  the effective rate is as follows:March
                  31, 2008
              
              
              June
                  30, 2007Federal
                  statutory tax rate
              
              
              34
              %
              
              34
              %Increase
                  (decrease) in rate resulting from:
              
              
              33
              %
              
              33
              %Non
                  US income taxed at different rates
              
              
              (1)
              %
              
              (1)
              %33
              %
              
              33
              %Temporary
                Difference
              
              
              17
              %
              
              78
              %Effective
                Tax Rate
              
              
              50
              %
              
              111
              %


Deferred
        tax liability arises due to the following temporary differences:
 March
                    31, 2007
                
                Future
                    tax rate %
                
                Deferred
                    tax liability
                
                June
                    30, 2007
                
                Future
                    tax rate %
                
                Deferred
                    tax liabilityOwing
                    to patients via ACFC
                
                $
                19,583,862
                
                
                30
                %
                $
                5,875,159
                
                $
                13,998,454
                
                
                30
                %
                $
                4,199,536Provision
                    DDR cancellation
                
                
                (10,875,930
                )
                
                30
                %
                
                (3,262,779
                )
                
                (7,265,728
                )
                
                30
                %
                
                (2,179,718
                )Provision
                    un-dispensed DDR medications
                
                
                (1,011,416
                )
                
                30
                %
                
                (303,425
                )
                
                (887,845
                )
                
                30
                %
                
                (266,354
                )Accrued
                    ACFC collection and commission
                
                
                (2,022,831
                )
                
                30
                %
                
                (606,849
                )
                
                (1,656,858
                )
                
                30
                %
                
                (497,057
                )Provision
                    for patient refund
                
                
                (156,026
                )
                
                30
                %
                
                (46,808
                )
                
                (84,880
                )
                
                30
                %
                
                (25,464
                )Amortization
                    of patents
                
                
                467,123
                
                
                30
                %
                
                140,137
                
                
                985,277
                
                
                30
                %
                
                295,583Other
                    miscellaneous
                
                
                597,828
                
                
                30
                %
                
                179,348
                
                
                (83,080
                )
                
                30
                %
                
                (24,924
                )Total
                
                $
                6,582,610
                
                
                30
                %
                $
                1,974,783
                
                $
                5,005,340
                
                
                30
                %
                $
                1,501,602




22




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




Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity, at March 31, 2008 and June 30,
      2007 are as follows:





*Accumulated
                Other Comprehensive Income*Balance
                at June 30, 2006
            
            $
            (204,483
            )Change
                for year ended June 30, 2007
            
            
            3,372,738Balance
                at June 30, 2007
            
            $
            3,168,255Change
                for nine months ended March 31, 2008
            
            
            2,358,796Balance
                at March 31, 2008
            
            $
            5,527,051





**15.** **RECLASSIFICATION**




Certain
      comparative amounts have been reclassified to conform to the current
      presentation.


23




**16.** **SUBSEQUENT
      EVENT**




On
      April
      30, 2008, AMI Australia Holdings Pty Limited (“AMI Australia”), a wholly owned
      subsidiary of Advanced Medical Institute Inc. (the “Registrant”) entered into a
      Share Sale Agreement (the “Sale Agreement”) with Mr. James Matthews pursuant to
      which AMI Australia agreed to sell its 50% interest in Whygo Video Conferencing
      Pty Limited (ACN 105 732 492), a privately owned Australian company (“Whygo”) in
      exchange for the payment of A$330,000 (approximately US$305,000) to Mr.
      Matthews.




Under
      the
      Sale Agreement, A$130,000 was paid on signing with a further A$100,000 payable
      by no later than December 15, 2008 and the final payment of A$100,000 payable
      by
      June 30, 2009.




Whygo
      and
      its subsidiaries conduct a video conferencing business in Australia and Europe.
      AMI Australia’s ownership interest in Whygo was not considered significant to
      AMI Australia’s operations. The purchaser, Mr. Matthews, held the remaining 50%
      interest in Whygo prior to entering into the Sale Agreement.




The
      initial cash proceeds of the sale have been applied to reduction of AMI
      Australia’s secured loan from ANZ Nominees Limited. The total principal owed to
      ANZ Nominees as of May 1, 2008 has now been reduced to approximately A$2.098
      million.


24




**ITEM
      2.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




THE
      FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
      CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
      APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
      AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE
      YEAR ENDED JUNE 30, 2007.




**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




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




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





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




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


25




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




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




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




**NATURE
      OF THE OPERATIONS OF THE COMPANY**




**NATURE
      OF BUSINESS**




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


26




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




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




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




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




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


27




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




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




IMT
      applied to list its nebulizer with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006. IMT received
      comment letters from the TGA during March 2007 which requires it to provide
      further material in order to advance its application. IMT is in the process
      of
      dealing with the matters raised by the TGA and currently anticipates it will
      submit a revised application later this calendar year.




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




The
      Company funded the cash component of the purchase price by AMI Australia
      entering into two secured three year term loans in the aggregate principal
      amount of A$3 million (approximately US$2.46 million) with ANZ Nominees Limited
      in its capacity as custodian of the Professional Pensions PST. The loan is
      secured by a security interest in all of AMI Australia’s assets and undertakings
      (including its existing equity interests in PE Patent Holdco Pty Limited,
      Intelligent Medical Technologies Pty Limited and Advanced Medical Institute
      (NZ)
      Limited) with the exception that the Company’s shares in Whygo Video
      Conferencing Pty Limited have now been released from the security. The loans
      accrue interest at an annual coupon of 450 basis points above the then
      Australian Reserve Bank’s current cash rate (currently being an aggregate
      current interest rate of 11.75%). As at March 31, 2008 the principal of the
      loan
      had been reduced to A$2.33 million (approximately US$2.14 million) as a result
      of prepayments made by the Company and as at May 7, 2008 the principal of the
      loan had been reduced to A$2.098 million (approximately US$1.93 million) as
      a
      result of prepayments made by the Company.




The
      Company has been actively exploring international expansion and established
      subsidiaries in China and Japan since 2006.




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




The
      Japanese subsidiary, named AMI Japan Kabushiki Gaisya (“AMI Japan”), was an
      indirect, 75% owned subsidiary of the Company. AMI Japan was also partly owned
      by a Japanese individual who has expertise in Japanese marketing and two
      financial investors. The Japanese investor received his shareholding in AMI
      Japan in consideration for assisting with the establishment of AMI Japan and
      in
      consideration for assisting with the marketing and management of AMI Japan.
      The
      Japanese subsidiary commenced operations on October 1, 2006 but was discontinued
      on February 4, 2008.




The
      Company’s initial operations in China and Japan have not been as successful as
      the company anticipated and the Company has substantially reduced the nature
      and
      scope of its operations in China and discontinued its operations in Japan.
      The
      Company is investigating alternative marketing and distribution methods in
      China
      but intends to expend considerably less on these activities than it spent on
      its
      operations during the year ended June 30, 2007 until it establishes a successful
      sales and marketing platform for these markets.


28


On
      May 2,
      2007, Worldwide PE entered into an Option Agreement (the “Option”) with AMI
      Group Limited, a privately owned company registered in the United Kingdom (“AMI
      UK”). The Option granted AMI UK a right to enter into an exclusive license to
      use Worldwide PE’s intellectual property in the United Kingdom. AMI UK paid
      Worldwide PE an upfront non-refundable fee of $50,000 to secure an initial
      period of four months to confirm the license which period was able to be
      extended for a further two months by AMI UK paying Worldwide PE a non-refundable
      extension fee of $50,000. During this initial nine month period, AMI UK had
      the
      right to enter into a License Agreement (the “License”) by paying Worldwide PE
      an upfront non-refundable license fee of $1 million less the upfront fees paid
      to Worldwide PE prior to that date. Terms of the Option and the License have
      been disclosed by the Company on its Current Report on Form 8-K filed with
      the
      United States Securities and Exchange Commission (the “SEC”) on May 3, 2007.


On
        September 4, 2007 AMI UK exercised its right to extend the option period
        and
        paid an extension fee of $50,000. Worldwide PE agreed to vary this extension
        period to four months rather than two months however
        the option has now expired. Notwithstanding the expiration of the option,
        AMI UK
        is continuing to finalize its
        business plans for the UK and is continuing to discuss further license
        arrangements with Worldwide PE.




AMI
      Australia holds 50% of the outstanding shares of Whygo Videoconferencing Pty
      Limited (“Whygo”). Whygo provides video conferencing services across Australia
      and in
      various locations around
      the world. James Matthews, a director of Whygo, holds the remaining 50% of
      the
      outstanding shares of Whygo. On April 30, 2008 AMI Australia entered into a
      share sale agreement with Mr. Matthews pursuant to which AMI Australia agreed
      to
      sell its shares in Whygo for A$330,000. The initial installment of A$130,000
      was
      received on entry into the agreement with 2 further installments of A$100,000
      each due on December 15, 2008 and June 30, 2009 respectively. The sale was
      in
      excess of book value of AMI Australia’s shares in Whygo and will generate a
      capital profit for AMI Australia.





Whygo
      owns proprietary scheduling software, which allows its corporate partners to
      login and book rooms around the world. The source of Whygo’s income is derived
      from renting video conferencing rooms to its corporate partners through AMI
      Australia and its other channeling partners.




On
      April
      30, 2008, AMI Australia Holdings Pty Limited (“AMI Australia”), a wholly owned
      subsidiary of Advanced Medical Institute Inc. (the “Registrant”) entered into a
      Share Sale Agreement (the “Sale Agreement”) with Mr. James Matthews pursuant to
      which AMI Australia agreed to sell its 50% interest in Whygo Video Conferencing
      Pty Limited (ACN 105
      732
      492 ),
      a
      privately owned Australian company (“Whygo”) in exchange for the payment of
      A$330,000 (approximately US$305,000) to Mr. Matthews. The initial cash proceeds
      of the sale have been applied to reduction of AMI Australia’s secured loan from
      ANZ Nominees Limited. The total principal owed to ANZ Nominees as of May 1,
      2008
      has now been reduced to approximately A$2.098 million.




General
      Business Plan




AMI
      Australia is a company incorporated and domiciled in Australia. AMI Australia
      was established in February 2001 when it entered into an agreement with Health
      Services for Men and Australian Momentum Health to acquire two chains of medical
      clinics and sales offices which provided services relating to the medical
      treatment of sexual dysfunction. The principal activity of AMI Australia
      continues to be the sale of services relating to the medical treatment of sexual
      dysfunction in Australia, New Zealand and Asia, however, AMI Australia also
      provides prostate treatments to patients. For the third quarter ended March
      31,
      2008, AMI Australia’s revenues were approximately $13.8 million. For the second
      quarter ended December 31, 2007, AMI Australia’s revenues were approximately
      $13.2 million. For the first quarter ended September 30, 2007, AMI Australia’s
      revenues were approximately $11.2 million.


29




AMI
      Australia operates a centralized call center and twenty clinics and sales
      offices throughout Australia and New Zealand. AMI Australia operates two clinics
      in Beijing, China. Until February 4, 2008, AMI Australia operated one medical
      center in Tokyo, Japan as well as having an informal alliance with three other
      medical centers in Osaka, Nagoya and Okinawa.




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




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




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




(c)  an
      oral
      elixir program for the treatment of prostate problems.




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




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




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




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




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


30




AMI
      Australia’s nasal spray, injection, lozenge and tablet erectile dysfunction
      treatments are not patent protected. This technology was developed by AMI
      Australia and its founder, Dr Jack Vaisman, and in connection with predecessor
      businesses during the last 14 years.




AMI
      Australia obtains customers through direct advertising and marketing and through
      its existing customer database which exceeds 350,000 people.




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




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




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




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




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




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


31




IMT
      applied to list its nebulizer with the Therapeutic Goods Administration (the
      Australian functional equivalent of the FDA) in October 2006. IMT received
      comment letters from the TGA during March 2007 which requires it to provide
      further material in order to advance its application. IMT is in the process
      of
      dealing with the matters raised by the TGA and currently anticipates it will
      submit a revised application later this calendar year .




IMT
      has
      substantially completed a voluntary pharmacokinetic clinical trial in Australia
      of a liquid form of a well known medication for the treatment of erectile
      dysfunction which is capable of being delivered through the nebulizer device
      in
      order to evidence the effectiveness of the nebulizer in delivering medications
      during this calendar year. This study is designed
      to test the efficacy of using its patent protected ultrasonic nebulizer device
      to deliver drugs used in the treatment of sexual dysfunction. IMT
      expects to be in a position to announce the results of this trial in the near
      future. The trial has been conducted under the direction of and under analysis
      by Q-Pharm, the commercial arm of a leading Australian university.




IMT
      has
      been spending a part of its capital on research and development activities
      with
      financial support from AMI Australia (approximately USD182,000 during fiscal
      2008). 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, 2008, 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.





On
      September 8, 2006, the Company entered into a Share Exchange Agreement with
      Worldwide PE Patent Holdco Pty Limited (ACN 117 157 727), a privately owned
      Australian company (“Worldwide PE”), and Worldwide PE’s shareholders pursuant to
      which the Company acquired all of the issued and outstanding shares of stock
      of
      Worldwide PE in exchange for the payment of A$3 million (approximately US$2.46
      million) and the issuance in the aggregate of 16,125,000 shares of the Company’s
      common stock valued at $1.00 per share. The Company funded the cash component
      of
      the purchase price by AMI Australia entering into two secured three year term
      loans in the aggregate principal amount of A$3 million with ANZ Nominees Limited
      in its capacity as custodian of the Professional Pensions PST. The loan is
      secured by a security interest in all of AMI Australia’s assets and undertakings
      (including its existing equity interests in PE Patent Holdco Pty Limited,
      Intelligent Medical Technologies Pty Limited and Advanced Medical Institute
      (NZ)
      Limited) with the exception that AMI Australia’s shares in Whygo Video
      Conferencing Pty Limited have now been released from the security. The loans
      accrue interest at an annual coupon of 450 basis points above the then
      Australian Reserve Bank’s current cash rate (currently being an aggregate
      current interest rate of 11.75%). As at March 31, 2008, the loan had been
      reduced to A$2.33 million (approximately US$2.14 million) as a result of
      prepayments made by the Company and as at May 7, 2008 the principal of the
      loan
      had been reduced to A$2.098 million (approximately US$1.93 million) as a result
      of prepayments made by the Company.




On
      February 12, 2007, the Company entered into a written agreement with the
      Heartcheck Group of companies for an indefinite term, which can be terminated
      at
      any time with not less than twelve months written notice. The Heartcheck Group
      includes Australian Heart Check Clinic, Heart Check Australia, Heart Check
      Medical Clinic Pty Ltd and Sydney Heart Medical Centre Pty Ltd (collectively
      defined as the “Heart Check Group”) Under the agreement, the Heartcheck Group
      agrees to utilize services provided by the Company, including the provision
      of
      staff and premises. In exchange for these services, the Heartcheck Group has
      agreed to reimburse the Company for all expenses associated with the provision
      of these services and to pay the company a net margin on those expenses. The
      Heartcheck Group is independently owned from the Company, its subsidiaries
      and
      its affiliates and it operates a business of providing cardiac related medical
      services in Australia.


32




Competition





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





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





Staff





As
      of
      March 31, 2008, the Company and its operating subsidiaries had a total staff
      of
      approximately 289 people, of which 200 are full-time and 89 are part-time staff,
      working in the areas of sales and marketing, customer support, product
      development and back office functions. The Company’s staff includes 27
      independent consultants and 52 licensed medical personnel. None of the Company’s
      employees are members of a union or labor organization.




None
      of
      AMI Australia’s subsidiaries have any employees except Whygo which has three
      full-time employees and 1 part-time employee, AMI NZ which has one part time
      employee and AMI China which has 12 full-time employees.




The
      Company’s core staff includes:




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




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


33




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





Currency
      Conversion




As
      of
      March 31, 2008 and 2007, the accounts of AMI Australia were maintained, and
      its
      financial statements were expressed, in Australian Dollars (A$). Such financial
      statements were translated into US Dollars (US$) in accordance with Statement
      of
      Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”,
      with the Australian Dollar as the functional currency. According to
      the Statement, all assets and liabilities were translated at the exchange rate
      (A$1 = US$0.91780) as of March 31, 2008, stockholder’s equity are translated at
      the historical rates and income statement items are translated at the
      weighted-average exchange rate for the period. The resulting translation
      adjustments are reported under other comprehensive income in accordance with
      SFAS No. 130, “Reporting Comprehensive Income”.





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





Results
      of operations:




**Three
                  Months ended**
                **March
                  31,**
              
              **Three
                  Months ended**
                **March
                  31,**
              
              **Nine
                  Months ended**
                **March
                  31,**
              
              **Nine
                  Months ended**
                **March
                  31,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Revenue
              
              
              100%
              
              
              100%
              
              
              100%
              
              
              100%Cost
                  of revenue
              
              
              20.8%
              
              
              25.5%
              
              
              22.2%
              
              
              24.1%Gross
                  profit
              
              
              79.2%
              
              
              74.5%
              
              
              77.8%
              
              
              75.9%Selling,
                  general and administrative expenses
              
              
              70.7%
              
              
              71.6%
              
              
              69.7%
              
              
              67.2%Other
                  income and expenses
              
              
              (0.3%)
              
              
              0.1%
              
              
              (0.3%)
              
              
              0.3%Discontinued
                  operation
              
              
              (0.4%)
              
              
              (11.1%)
              
              
              (1.1%)
              
              
              (6.4%)Income
                  before income tax
              
              
              7.8%
              
              
              (8.1)%
              
              
              6.7%
              
              
              2.6%Income
                  tax expenses
              
              
              3.7%
              
              
              0.1%
              
              
              3.3%
              
              
              2.9%Net
                  income
              
              
              4.1%
              
              
              (8.0)%
              
              
              3.4%
              
              
              (0.3)%




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      March 31, 2008, we had total liabilities of $18,476,994 including unearned
      revenue of $6,031,782 and we had a positive net worth of $32,273,303. Our total
      liabilities as at March 31, 2008 included approximately $1.9 million in
      non-current debt and $2.0 million in deferred tax liabilities, leaving a balance
      of approximately $8.6 million of current liabilities (other than deferred
      revenue). These current liabilities are typically due within 30 to 90 days.
      As
      of June 30, 2007, we had total liabilities of $14,986,821 including unearned
      revenue of $5,101,288 and we had a positive net worth of
      $28,675,135.  As
      of
      March 31, 2007, we had total liabilities of $14,357,841 including unearned
      revenue of $4,863,352 and we had a positive net worth of
      $28,990,939.


34




Our
      aggregate cash balances as at March 31, 2008 were $2,761,663, our inventory
      was
      $202,176 and our net receivables were approximately $15.7 million. These
      receivables are due on average within 90-180 days. We forecast that we will
      be
      able to generate sufficient funds from our business in order to fund our
      operations in the ordinary course during the next 12 months. Management has
      expanded our business into China and Japan. Although the Japanese operations
      proved unsuccessful, management is still considering further international
      expansion through either establishing new sales clinic operations or by
      licensing the intellectual property for use in territories in which we do not
      have clinics such as our recent entry into an Option Agreement with AMI UK
      to
      license our intellectual property for the United Kingdom. Income of $27,480
      that
      was generated from the Heartcheck Group is also expected to be reinvested into
      the Company to contribute to our ongoing working capital needs.




The
      Company borrowed A$3 million from ANZ Nominees Limited in its capacity as
      custodian of the Professional Pensions PST. The loan is secured by a security
      interest in all of AMI Australia’s assets and undertakings (including its
      existing equity interests in PE Patent Holdco Pty Limited, Intelligent Medical
      Technologies Pty Limited and Advanced Medical Institute (NZ) Limited) with
      the
      exception that the Company’s shares in Whygo Video Conferencing Pty Limited have
      recently been released from this security. The loans accrue interest at an
      annual coupon of 450 basis points above the then Australian Reserve Bank’s
      current cash rate (currently being an aggregate current interest rate of
      11.75%). As at March 31, 2008 the principal of the loan had been reduced to
      A$2.33 million (approximately US$2.14 million). This loan is currently due
      to be
      repaid in September 2009.




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





**NINE
      MONTHS ENDED MARCH 31, 2008 COMPARED TO NINE MONTHS ENDED MARCH 31, 2007**




*REVENUE* .
      Revenue
      was $36,948,958 in the nine months ended March 31, 2008 compared to $28,809,524
      in the nine months ended March 31, 2007. Compared to the same period in the
      previous year, there is an increase of $8,139,434 or 28.3% in the nine months
      ended March 31, 2008. We attribute this increase to primarily the following
      factors: (1) increased effectiveness of advertising campaigns; (2) increased
      brand name recognition; and (3) effectiveness of our products.





In
      addition, our unearned revenue in
      the
      nine months ending March 31, 2008 increased by $930,494 to $6,031,782 compared
      to an increase of $976,300 to $4,863,352 in the nine months ending March 31,
      2007. The gross increase in unearned revenue from the nine months ended March
      31, 2007 to the nine months ended March 31, 2008 was $1,168,430, or an increase
      of 24.0%. The increase in unearned revenue in the nine-month period ended March
      31, 2008 is primarily attributable to the increase in the number of patients
      buying treatment programs from us than in the same period in 2007. We attribute
      this increase to the following factors: (1) increased advertising campaigns
      with
      improved target marketing in the premature ejaculation segment; (2) increased
      brand name recognition; and (3) effectiveness of our products.


35




Revenue
      in AMI Australia’s PE treatments has increased by $1,563,067 or 9.6% to
      $17,795,923 and revenue in AMI Australia’s ED treatments has increased by
      $5,832,149 or 50.0% to $17,503,930 in the nine months ending March 31, 2008,
      compared to the nine months ending March 31, 2007. The number of patients in
      AMI
      Australia’s PE treatments and ED treatments are stable compared to the nine
      months ending March 31, 2007. We attribute the increase in revenue in our PE
      treatments and ED treatments to the increase in the number of sales per patient
      along with the higher sale price of the treatment programs sold.
      Revenue in AMI Australia’s prostate treatments has increased by $676,747 or
      64.9% to $1,719,903 in the nine months ending March 31, 2008, compared to the
      nine months ending March 31, 2007. We attribute the increase in revenue in
      our
      prostate treatments to increased awareness and advertising of those treatments.
      The number of patients in AMI Australia’s prostate treatments increased by 53.0%
      compared to the nine months ending March 31, 2007.





Revenue
      in our Australian operations was $35,934,473 in the nine months ended March
      31,
      2008 compared to $27,882,347 in the nine months ended March 31, 2007. Compared
      to the same period in the previous year, there is an increase of $8,052,126
      or
      28.9% in the nine months ended March 31, 2008. We attribute this increase to
      the
      following factors: (1) increased advertising campaigns with improved target
      marketing in the premature ejaculation segment; (2) increased brand name
      recognition; and (3) effectiveness of our products. It is also attributable
      to
      significant movements in the A$:US$ exchange rate conversion from Australian
      Dollars to U.S. Dollars.





Revenue
      in our New Zealand operations was $975,765 in the nine months ended March 31,
      2008 compared to $898,203 in the nine months ended March 31, 2007. The increase
      of $77,562 or 8.64% in revenue in the nine months ended March 31, 2008 is
      primarily attributable to an increase in the number of patients buying
      treatments from us during the nine months ended March 31, 2008 compared to
      the
      same period in 2007.





Revenue
      in our Chinese operations was $38,720 in the nine months ended March 31, 2008
      compared to $28,974 during the nine months ended March 31, 2007. The increase
      of
      $9,746 or 33.6% in revenue in the nine months ended March 31, 2008 is primarily
      attributable to an increase in the number of patients buying treatments from
      us
      during the nine months ended March 31, 2008 compared to the same period in
      2007.





***COST
      OF REVENUE*** **.** Cost of
      revenue was $8,204,757 in the nine months ended March 31, 2008 compared to
      $6,930,952 in the nine months ended March 31, 2007. The increase in cost of
      revenue was attributable to an increase in the staff salaries and commissions
      incurred by AMI Australia. As a percentage of revenue, cost of revenue was
      22.2%
      in the nine months ended March 31, 2008 compared to 24.1% in the nine months
      ended March 31, 2007. The decrease in cost of revenue percentage by 1.8% in
      the
      nine months ended March 31, 2008 is primarily attributable to the growth in
      AMI
      Australia’s revenue being larger than the growth in staff costs necessary to
      service the treatments resulting from that increased revenue.




***GROSS
      PROFIT.*** Gross
      profit was $28,744,201 in the nine months ended March 31, 2008 compared to
      $21,878,572 in the nine months ended March 31, 2007. As a percentage of revenue,
      gross profit increased to 77.8% in the nine months ended March 31, 2008 from
      75.9% in the nine months ended March 31, 2007. The 1.9% increase in the gross
      profit percentage in the nine months ended March 31, 2008 is primarily
      attributable to the increase in total costs of revenue being less than the
      increase in total revenue. It is also attributable to a decrease in expenditure
      on our international operations.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $25,735,251 in the nine months ended
      March 31, 2008 compared to $19,354,923 in the nine months ended March 31, 2007.
      As a percentage of revenue, selling, general and administrative expenses
      decreased to 67.2% in the nine months ended March 31, 2008 from 69.7% in the
      nine months ended March 31, 2007. The principal reason for the decrease of
      2.5%
      in the nine months ended March 31, 2008 is attributable to the increase in
      total
      expenses being less than the increase in total revenue resulting from a higher
      number of sales during the period. It is also attributable to a decrease in
      expenditure on our international operations.


36




Selling,
      general and administrative expenses in our Chinese operations were $579,300
      in
      the nine months ended March 31, 2008 compared to $743,288 **** in
      the
      nine months ended March 31, 2007. Major expenses incurred were staff costs
      and
      advertising expenses. Selling, general and administrative expenses decreased
      during this period as we decreased the size and scope of our operation in this
      period.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were ($111,490) in the nine months ended March 31, 2008
      compared to $80,275 in the nine months ended March 31, 2007. As a percentage
      of
      revenue, other income and expenses decreased to (0.3%) in the nine months ended
      March 31, 2008 from 0.3% in the nine months ended March 31, 2007. The decrease
      in the nine months ended March 31, 2008 is due to the decrease in the income
      received by the Company from the Heart Check Group and the increase in interest
      paid on the Company’s secured long term loan.




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




Income
      before income tax was $2,491,176 in the nine months ended March 31, 2008
      compared to $750,612 in the nine months ended March 31, 2007. This increase
      was
      attributable to the increase in revenue during the nine months ended March
      31,
      2008 compared to the same period in 2007.




Income
      tax expenses were $1,251,804 in the nine months ended March 31, 2008 compared
      to
      $835,552 in the nine months ended March 31, 2007. As a percentage of revenue,
      income tax expense increased to 3.3% in the nine months ended March 31, 2008
      from 2.9% in the nine months ended March 31, 2007 which is attributable to
      the
      Company increasing the profitability of its business.




***NET
      INCOME*** **.** Net
      income was $1,239,372 in the nine months ended March 31, 2008 compared to
      ($84,940) in the nine months ended March 31, 2007. This increase in the nine
      months ended March 31, 2008 compared to the nine months ended March 31, 2007
      is
      attributable to the increase in revenue in Australia and the significant
      reduction in the Company’s losses in its China and Japan
      operations.





Net
      income in our Australian operations was $2,639,514 in the nine months ended
      March 31, 2008 compared to $2,569,420 **** in
      the
      nine months ended March 31, 2007. The increase in the nine months ended March
      31, 2008 compared to the nine months ended March 31, 2007 is primarily
      attributable to the increase in revenue during the nine months ended March
      31,
      2008.





Net
      loss
      in our New Zealand operations was ($267,231) in the nine months ended March
      31,
      2008 compared to $117,644 in the nine months ended March 31, 2007. The decrease
      in the nine months ended March 31, 2008 compared to the nine months ended March
      31, 2007 is attributable to the increase in advertising expenses.





Net
      loss
      in our Chinese operations was ($541,530) in the nine months ended March 31,
      2008
      compared to ($777,341) **** in
      the
      nine months ended March 31, 2007. The decrease in the nine months ended March
      31, 2008 compared to the nine months ended March 31, 2007 is because we have
      reduced the amount of expenditures into our China operations.





Net
      loss
      in our Japanese operations, which were discontinued on February 4, 2008, was
      ($428,313) in the nine months ended March 31, 2008 compared to ($1,814,275)
      in
      the nine months ended March 31, 2007. The decrease in the nine months ended
      March 31, 2008 compared to the nine months ended March 31, 2007 is because
      of
      the reduction of the amount of expenditures resulting from the winding down
      of
      the Japanese operations.





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


37





**THREE
      MONTHS ENDED MARCH 31, 2008 COMPARED TO THREE MONTHS ENDED MARCH 31, 2007**




*REVENUE* .
      Revenue
      was $13,408,468 in the three months ended March 31, 2008 compared to $9,002,590
      in the three months ended March 31, 2007. Compared to the same period in the
      previous year, there is an increase of $4,405,878 or 48.9% in the three months
      ended March 31, 2008. We attribute this increase to primarily the following
      factors: (1) increased effectiveness of advertising campaigns; (2) increased
      brand name recognition; and (3) effectiveness of our products.





In
      addition, our unearned revenue in
      the
      three months ending March 31, 2008 increased by $690,926 to $6,031,782 compared
      to a decrease of $36,622 to $4,863,352 in the three months ending March 31,
      2007. The gross increase in unearned revenue from the three months ended March
      31, 2007 to the quarter ended March 31, 2008 was $1,168,430, or an increase
      of
      24.0%. The increase in unearned revenue in the three-month period ended March
      31, 2008 is primarily attributable to the increase in the number of patients
      buying treatment programs from us than in the same period in 2007. We attribute
      this increase to the following factors: (1) increased advertising campaigns
      with
      improved target marketing in the premature ejaculation segment; (2) increased
      brand name recognition; and (3) effectiveness of our products.




Revenue
        in AMI Australia’s PE treatments has increased by $902,893 or 17.6% to
        $6,044,467 and revenue in AMI Australia’s ED treatments has increased by
        $3,209,958 or 88.2% to $6,851,362 in the three months ending March 31, 2008,
        compared to the three months ending March 31, 2007. The number of patients
        in
        AMI Australia’s PE treatments and ED treatments are stable compared to the three
        months ending March 31, 2007. We
        attribute the increase in revenue in our PE treatments and ED treatments
        to the
        increase in the
        number of sales
        per patient
        along with the higher sales price of the treatment programs sold .
        Revenue
        in AMI Australia’s prostate treatments has increased by $186,219 or 54.8% to
        $526,187 in the three months ending March 31, 2008, compared to the three
        months
        ending March 31, 2007. We attribute the increase in revenue in our prostate
        treatments to increased awareness and advertising of those treatments. The
        number of patients in AMI Australia’s prostate treatments increased by 15.8%
        compared to the three months ending March 31, 2007.


Revenue
      in our Australian operations was $12,989,944 in the three months ended March
      31,
      2008 compared to $8,834,629 in the three months ended March 31, 2007. Compared
      to the same period in the previous year, there is an increase of $4,155,315
      or
      47.0% in the three months ended March 31, 2008. We attribute this increase
      to
      the following factors: (1) increased advertising campaigns with improved target
      marketing in the premature ejaculation segment; (2) increased brand name
      recognition; and (3) effectiveness of our products. It is also attributable
      to
      significant movements in the A$:US$ exchange rate conversion from Australian
      Dollars to U.S. Dollars.





Revenue
      in our New Zealand operations was $402,393 in the three months ended March
      31,
      2008 compared to $148,291 in the three months ended March 31, 2007. The increase
      of $254,102 or 171.3% in revenue in the three months ended March 31, 2008 is
      primarily attributable to the increase in the number of patients buying
      treatments from us during the three months ended March 31, 2008 than in the
      same
      period in 2007.





Revenue
      in our Chinese operations was $16,132 in the three months ended March 31, 2008
      compared to $19,670 during the three months ended March 31, 2007. The decrease
      of $3,538 or 18.0% in revenue in the three months ended March 31, 2008 is
      primarily attributable to the decrease in the number of patients buying
      treatments from us during the three months ended March 31, 2008 than in the
      same
      period in 2007.


38




***COST
      OF REVENUE*** **.** Cost of
      revenue was $2,786,301 in the three months ended March 31, 2008 compared to
      $2,297,734 in the three months ended March 31, 2007. The increase in cost of
      revenue was attributable to an increase in the staff cost incurred by AMI
      Australia. As a percentage of revenue, cost of revenue was 20.8% in the three
      months ended March 31, 2008 compared to 25.5% in the three months ended March
      31, 2007. The decrease in cost of revenue percentage by 4.7% in the three months
      ended March 31, 2008 is primarily attributable to a significant decrease in
      the
      scale of the Company’s international operations and expenditure.




***GROSS
      PROFIT.*** Gross
      profit was $10,622,167 in the three months ended March 31, 2008 compared to
      $6,704,856 in the three months ended March 31, 2007. As a percentage of revenue,
      gross profit increased to 79.2% in the three months ended March 31, 2008 from
      74.5% in the three months ended March 31, 2007. The 4.7% increase in the gross
      profit percentage in the three months ended March 31, 2008 is primarily
      attributable to the increase in total costs of revenue being less than the
      increase in total revenue.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $9,483,354 in the three months ended
      March 31, 2008 compared to $6,446,260 in the three months ended March 31, 2007.
      As a percentage of revenue, selling, general and administrative expenses
      decreased to 70.7% in the three months ended March 31, 2008 from 71.6% in the
      three months ended March 31, 2007. The principal reason for the decrease of
      0.9%
      in the three months ended March 31, 2008 is primarily attributable to a
      significant decrease in the scale of the Company’s international operations and
      expenditure.




Selling,
      general and administrative expenses in our Chinese operations were $184,674
      in
      the three months ended March 31, 2008 compared to $184,388 **** in
      the
      three months ended March 31, 2007. Major expenses incurred were staff costs
      and
      advertising expenses.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were ($34,649) in the three months ended March 31, 2008
      compared to $11,632 in the three months ended March 31, 2007. As a percentage
      of
      revenue, other income and expenses decreased to (0.3%) in the three months
      ended
      March 31, 2008 from 0.1% in the three months ended March 31, 2007. The decrease
      in the three months ended March 31, 2008 is due to the decrease in the income
      received by the Company from the Heart Check Group.




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




Income
      before income tax was $1,050,728 in the three months ended March 31, 2008
      compared to ($716,813) in the three months ended March 31, 2007. This increase
      was primarily attributable to the increase in revenue and decrease in percentage
      of costs and expenses during the three months ended March 31, 2008. The increase
      is also attributable to an increase in our product recognition and recognition
      of the “AMI” name in Australia and a decrease in the scale of our expenditure on
      our international operations.




Income
      tax expenses were $496,551 in the three months ended March 31, 2008 compared
      to
      $5,838 in the three months ended March 31, 2007. As a percentage of revenue,
      income tax expense increased to 3.6% in the three months ended March 31, 2008
      from 0.1% in the three months ended March 31, 2007 which is attributable to
      the
      increasing profitability of the Company.




***NET
      INCOME*** **.** Net
      income was $554,177 in the three months ended March 31, 2008 compared to
      ($722,651) in the three months ended March 31, 2007. This increase in the three
      months ended March 31, 2008 compared to the three months ended March 31, 2007
      is
      attributable to the increase in revenue in Australia and the reduction in the
      Company’s losses in its China and Japan operations.





Net
      income in our Australian operations was $870,591 in the three months ended
      March
      31, 2008 compared to $520,188 **** in
      the
      three months ended March 31, 2007. The increase in the three months ended March
      31, 2008 compared to the three months ended March 31, 2007 is primarily
      attributable to the increase in revenue and decrease in percentage of costs
      and
      expenses during the three months ended March 31, 2008.


39




Net
      loss
      in our New Zealand operations was ($44,644) in the three months ended March
      31,
      2008 compared to ($72,943) in the three months ended March 31, 2007. The
      decrease in the three months ended March 31, 2008 compared to the three months
      ended March 31, 2007 is attributable to an increase in customer
      numbers.





Net
      loss
      in our Chinese operations was ($168,738) in the three months ended March 31,
      2008 compared to ($165,827) **** in
      the
      three months ended March 31, 2007. The increase is immaterial.





Net
      loss
      in our Japanese operations, which were discontinued during the 2008 period,
      was
      ($41,742) in the three months ended March 31, 2008 compared to ($965,489) in
      the
      three months ended March 31, 2007. The decrease in the three months ended March
      31, 2008 compared to the three months ended March 31, 2007 is because of the
      reduction of the amount of expenditures resulting from the winding down of
      the
      Japanese operations.





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





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a material current or future effect on our financial condition, changes
      in
      financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures or capital resources.


40




**ITEM
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





We
      may be
      exposed to changes in financial market conditions in the normal course of
      business. Market risk generally represents the risk that losses may occur as
      a
      result of movements in interest rates and equity prices. We currently do not
      use
      financial instruments in the normal course of business that are subject to
      changes in financial market conditions.





***Currency
      Fluctuations and Foreign Currency Risk***





The
      majority of our operations are conducted in Australia, except for small parts
      of
      our operations which are located in New Zealand and China. Most of our sales
      and
      purchases are conducted within Australia in Australian Dollars. Hence, the
      effect of fluctuations of exchange rate is considered minimal to our business
      operations as the vast majority of both our revenues and expenses are
      denominated in Australian dollars, which is the official currency of
      Australia.





The
      Company does, however, use United States dollars for financial reporting
      purposes. Conversion of Australian Dollars into foreign currencies is regulated
      by the Reserve Bank of Australia through a unified floating exchange rate
      system. Although the Australian government has stated its intention to support
      the value of the Australian Dollar, there can be no assurance that such exchange
      rate will not become volatile or that the Australian Dollar will not devalue
      significantly against the US dollar. Exchange rate fluctuations may adversely
      affect the value, in US dollar terms, of the Company’s net assets and income
      derived from its operations in Australia. In this respect we note that the
      Australian dollar has strengthened significantly against the United States
      dollar over the last three to six months.





***Interest
      Rate Risk***





Our
      long
      term debt is subject to a variable interest rate. The interest rate applicable
      to that debt has increased from 10.5% in September 2006 (when the facility
      commenced) to 11.75% now due to 5 increases in the official Australian
      government interest rate which the rate is based on. Market commentary suggests
      that further increases in this interest rate are unlikely in the short to medium
      term.





***Credit
      Risk***





Our
      receivables are consumer based with a broad spread of concentration with average
      receivable size less than $1,500. The Company has made significant provisions
      against our receivables in line with historical collection levels. Our
      receivables are regularly monitored by our credit manager.




41




**ITEM
      4(T).**  **CONTROLS
      AND PROCEDURES**




*Disclosure
      Controls and Procedures*




Under
      the
      supervision and with the participation of our management, including our chief
      executive officer and the chief financial officer, we conducted an evaluation
      of
      the effectiveness of the design and operation of our disclosure controls and
      procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as of March 31, 2008, the end of the period covered by
      this report (the “Evaluation Date”). Based on this evaluation, our chief
      executive officer and chief financial officer concluded as of the Evaluation
      Date that our disclosure controls and procedures were effective such that the
      material information required to be included in our Securities and Exchange
      Commission (“SEC”) reports is recorded, processed, summarized and reported
      within the time periods specified in SEC rules and forms relating to us and
      our
      consolidated subsidiaries, and was made known to others within those entities,
      particularly during the period when this report was being prepared.




*Changes
      in internal controls over financial reporting*




There
      were no significant changes in our internal controls over financial reporting
      (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange
      Act
      of 1934) during the three months ended March 31, 2008 that have materially
      affected, or are reasonably likely to materially affect, the Company’s internal
      control over financial reporting.




42




PART
        II - ****




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




As
      of
      March 31, 2008, there was no litigation pending or threatened by or against
      the
      Company or any of its direct or indirect subsidiaries other than AMI Australia.
      AMI Australia currently is involved in the following litigation and
      administrative matters:




On
      May
      25, 2007, AMI Australia commenced proceedings in the New South Wales Supreme
      Court against Channel Seven Sydney Pty Limited in respect of certain allegedly
      actionable statements made by Channel Seven. AMI Australia has alleged that
      the
      statements made involve a breach of the doctrine of injurious falsehood and
      that
      it is entitled to be compensated in damages. The proceedings are at an early
      stage.




On
      October 25, 2006, Bade Medical Institute Pty Limited, Mr. David Wade, Mr. Buddy
      Beani and others (collectively “Bade”) applied for Trade Mark No. 114322021 in
      respect of the words “AMI Nasal Spray”. AMI Australia lodged an objection to the
      registration of that application with IP Australia on June 21, 2007.On December
      13, 2007, AMI Australia commenced proceedings in the Federal Court of Australia
      Sydney Registry against Bade alleging Bade was infringing upon AMI Australia’s
      trademarks and other intellectual property rights. On December 19, 2007, Bade
      consented to orders that Bade transfer ownership of certain domain names and
      telephone numbers to AMI Australia and consented to orders that Bade would
      not
      use certain names which contained the word AMI. The orders obtained by AMI
      Australia require Bade to file their evidence of transfer by February 28, 2008
      and AMI Australia has issued notices to produce to Bade in relation to the
      proceedings. Bade appear to have ceased operation since the orders were obtained
      and has transferred the required names to AMI Australia. Following Bade’s
      repeated failure to respond to Notices to Produce, AMI Australia issued
      Subpoenas to Produce which were returnable on May 7, 2008. No documents were
      produced on that date and the Subpoena was stood over until May 14, 2008. Bade
      failed to file its evidence by February 28, 2008 and has failed to file any
      evidence to date.




On
      April
      28, 2008 Justice Flick ordered that:




(a)  AMI
      file
      and sever a statement of claim on or before May 28, 2008; and


(b)  Bade
      file
      and serve defenses on or before June 12, 2008.




AMI
      Australia filed all evidence upon which it relies by March 19, 2008. Bade must
      file and serve all evidence in answer to AMI’s opposition on or by June 21,
      2008.




43




**ITEM
      1A.**  **RISK
      FACTORS**




There
      have been no material changes in our business, operations or prospects that
      would require a change to the Risk Factor disclosure included in our most recent
      Annual Report on Form 10-KSB for the year ended June 30, 2007 that have not
      already been disclosed.




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




None.




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




None.




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





None.




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




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





44


**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).





45




**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 15, 2008
            By:
            /s/ Jacov
              (Jack) VaismanJacov (Jack) VaismanChief
                Executive Officer




Date:
                May 15, 2008
            By:
            /s/
              Dilip ShresthaDilip
              ShresthaChief
                Financial Officer




46