**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


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




___________




**FORM
      10-QSB**





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


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      QUARTERLY PERIOD ENDED DECEMBER 31, 2005





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


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      TRANSITION PERIOD FROM _____ TO_____





Commission
      File Number: 000-29531




**ADVANCED
      MEDICAL INSTITUTE INC.**


(Exact
      name of small business issuer in its charter)







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





Level
                1, 204-218 Botany Road
              Alexandria,
                NSW
              Australia
                2015(Address
                of Principal Executive Offices)





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





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




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




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




There
      were 36,122,450 shares of the Issuer’s common stock outstanding on February 13,
      2006.




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







**TABLE
      OF CONTENTS**


PagePART
                  I - FINANCIAL INFORMATION
              3ITEM
                  1.
              FINANCIAL
                  STATEMENTS
              3ITEM
                  2.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              18ITEM
                  3.
              CONTROLS
                  AND PROCEDURES
              27PART
                  II - OTHER INFORMATION
              28ITEM
                  1.
              LEGAL
                  PROCEEDINGS
              28ITEM
                  2.
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              28ITEM
                  3.
              DEFAULTS
                  UPON SENIOR SECURITIES
              29ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              29ITEM
                  5.
              OTHER
                  INFORMATION
              29ITEM
                  6.
              EXHIBITS
              29







ii


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




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




**CONSOLIDATED
      STATEMENTS OF FINANCIAL POSITION**





**Notes**
            
            **December
                31, 2005 (unaudited)**
            
            **June
                30, 2005****CURRENT
                ASSETS**Cash
            
            
            
            
            $
            865,605
            
            $
            295,961Accounts
                Receivable, net
            
            
            
            
            
            5,815,315
            
            
            2,812,704Inventory
            
            
            
            
            
            218,612
            
            
            228,163**TOTAL
                CURRENT ASSETS**
            
            
            
            
            
            6,899,532
            
            
            3,336,828**NON-CURRENT
                ASSETS**Receivables
                due from related parties
            
            
            10
            
            
            33,633
            
            
            220,995Security
                deposits
            
            
            
            
            
            92,271
            
            
            87,494Property
                and equipment, net
            
            
            3
            
            
            380,145
            
            
            330,872Intangible
                assets
            
            
            4
            
            
            6,471,031
            
            
            973,302**TOTAL
                NON-CURRENT ASSETS**
            
            
            
            
            
            6,977,080
            
            
            1,612,663**TOTAL
                ASSETS**
            
            
            
            
            $
            13,876,612
            
            $
            4,949,491**CURRENT
                LIABILITIES**Unearned
                revenue
            
            
            
            
            $
            3,355,970
            
            $
            1,803,044Payables
            
            
            
            
            
            3,020,734
            
            
            1,802,246Payables
                due to related parties
            
            
            10
            
            
            -
            
            
            1,835Notes
                payable
            
            
            5
            
            
            43,821
            
            
            144,685Provisions
                for compensated absences
            
            
            
            
            
            99,712
            
            
            190,685Income
                taxes payable
            
            
            
            
            
            185,383
            
            
            108,097**TOTAL
                CURRENT LIABILITIES**
            
            
            
            
            
            6,705,620
            
            
            4,050,592**NON-CURRENT
                LIABILITIES**Payables
                due to related parties
            
            
            10
            
            
            1,927
            
            
            18,427Rental
                deposit received
            
            
            
            
            
            3,815
            
            
            3,981Notes
                payable, net of current portion
            
            
            5
            
            
            64,171
            
            
            76,275Deferred
                tax liabilities
            
            
            
            
            
            147,294
            
            
            415Minority
                interests
            
            
            
            
            
            (11,304
            )
            
            -**TOTAL
                NON-CURRENT LIABILITIES**
            
            
            
            
            
            205,903
            
            
            99,098**TOTAL
                LIABILITIES**
            
            
            
            
            
            6,911,523
            
            
            4,149,690**STOCKHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share,90,000,000
                shares authorized,36,122,450
                and 31,122,450 issued and
              outstanding,
                respectively
            
            
            
            
            
            36,122
            
            
            31,122Additional
                paid in capital
            
            
            
            
            
            6,277,805
            
            
            782,805Other
                comprehensive income
            
            
            
            
            
            (165,992
            )
            
            (173,407
            )Retained
                earnings
            
            
            
            
            
            817,154
            
            
            159,281**TOTAL
                STOCKHOLDERS’ EQUITY**
            
            
            
            
            
            6,965,089
            
            
            799,801**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            
            
            
            $
            13,876,612
            
            $
            4,949,491






3


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





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





**Three
                Months Ended**
            
            **Six
                Months Ended****December
                31, 2005**
              **(unaudited)**
            
            **December
                31, 2004**
              **(unaudited)**
            
            **December
                31, 2005**
              **(unaudited)**
            
            **December
                31, 2004**
              **(unaudited)****TOTAL
                REVENUE**
            
            $
            7,511,008
            
            $
            3,278,932
            
            $
            12,605,708
            
            $
            6,111,748**COST
                OF REVENUE**
            
            
            (1,636,528
            )
            
            (1,167,577
            )
            
            (3,547,042
            )
            
            (2,017,361
            )**GROSS
                PROFIT**
            
            
            5,874,480
            
            
            2,111,355
            
            
            9,058,666
            
            
            4,094,387**SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES**
            
            
            (4,589,457
            )
            
            (2,067,570
            )
            
            (8,107,459
            )
            
            (3,847,737
            )**INCOME
                FROM OPERATIONS**
            
            
            1,285,023
            
            
            43,785
            
            
            951,207
            
            
            246,650**OTHER
                INCOME AND EXPENSE**Rental
                income
            
            
            2,783
            
            
            2,136
            
            
            15,716
            
            
            7,676Bank
                interest
            
            
            1,726
            
            
            2,450
            
            
            4,417
            
            
            4,154Sundry
                income
            
            
            320
            
            
            -
            
            
            694
            
            
            -Provision
                for doubtful debt
            
            
            -
            
            
            (121,580
            )
            
            -
            
            
            -Provision
                for doubtful debt written back
            
            
            -
            
            
            -
            
            
            -
            
            
            90,265Interest
                expense
            
            
            -
            
            
            (2,049
            )
            
            (1,241
            )
            
            (12,167
            )**TOTAL
                OTHER INCOME AND (EXPENSE)**
            
            
            4,829
            
            
            (119,043
            )
            
            19,586
            
            
            89,928**NET
                INCOME (LOSS) (before income tax expense)**
            
            
            1,289,852
            
            
            (75,258
            )
            
            970,793
            
            
            336,578INCOME
                TAX (EXPENSE) BENEFIT
            
            
            (439,408
            )
            
            22,577
            
            
            (311,935
            )
            
            (100,973
            )NET
                INCOME (LOSS) (before minority interest)
            
            
            850,444
            
            
            (52,681
            )
            
            658,858
            
            
            235,605NET
                INCOME ATTRIBUTABLE TO OUTSIDE EQUITY INTERESTS
            
            
            (5,512
            )
            
            -
            
            
            (985
            )
            
            -**NET
                INCOME (LOSS)**
            
            **$**
            **844,932**
            
            
            **($52,681**
            **)**
            **$**
            **657,873**
            
            **$**
            **235,605****Net
                income per share, basic and fully diluted**
            
            **$**
            **0.026**
            
            
            **($0.002**
            **)**
            **$**
            **0.020**
            
            **$**
            **0.009****Weighted
                average number of shares, basic and fully diluted**
            
            
            **32,344,672**
            
            
            **25,000,000**
            
            
            **33,566,894**
            
            
            **25,000,000**








4


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





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Six
                Months Ended****December
                31, 2005**
              **(unaudited)**
            
            **December
                31, 2004**
              **(unaudited)****Cash
                Flows from Operating Activities**Receipts
                from Customers
            
            $
            10,552,896
            
            $
            5,983,087Interest
                Received
            
            
            4,417
            
            
            4,154Payment
                to Suppliers & Employees
            
            
            (9,886,030
            )
            
            (5,780,752
            )**Net
                cash provided by operating activities**
            
            
            671,283
            
            
            206,489**Cash
                Flows from Investing Activities**Proceeds
                from Sale of Plant & Equipment
            
            
            -
            
            
            2,483Payment
                for Property, Plant & Equipment
            
            
            (76,973
            )
            
            (10,682
            )Payment
                for Intellectual Properties
            
            
            (34,642
            )
            
            -Repayment
                from (Loans to) related entities
            
            
            24,876
            
            
            (377,340
            )Payment
                for security deposit
            
            
            (8,696
            )
            
            (467
            )**Net
                cash used in investing activities**
            
            
            (95,435
            )
            
            (386,006
            )**Cash
                Flows From Financing Activities**Collection
                of Receivable
            
            
            150,771
            
            
            -Interest
                & Other Finance costs paid
            
            
            (1,241
            )
            
            (12,167
            )Proceeds
                from Borrowings
            
            
            -
            
            
            140,219Repayment
                of Borrowings
            
            
            (125,344
            )
            
            (14,266
            )**Net
                cash provided by financing activities**
            
            
            24,186
            
            
            113,786Net
                increase (decrease) in cash held
            
            
            600,034
            
            
            (65,731
            )Foreign
                currency conversion
            
            
            (28,637
            )
            
            11,715Cash
                at beginning of Financial Year
            
            
            294,208
            
            
            179,627**Cash
                at end of period**
            
            **$**
            **865,605**
            
            **$**
            **125,611**





5





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





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





**Six
                Months Ended****December
                31, 2005**
              **(unaudited)**
            
            **December
                31, 2004**
              **(unaudited)****Reconciliation
                of Cash**Cash
                at the end of financial period as shown in the Statement of Cash
                Flows is
                reconciled to the related items in the Statement of Financial Position
                as
                follows:Cash
            
            $
            865,605
            
            $
            125,611**Reconciliation
                of Cash Flow from Operations with Profit from Ordinary Activities
                after
                Income Tax****Net
                Income**
            
            
            658,858
            
            
            235,605**Non-Cash
                Flows in Profit from Ordinary Activities**Depreciation
            
            
            83,088
            
            
            44,032Provision
                for doubtful accounts (written back)
            
            
            528,101
            
            
            (90,265
            )**Cash
                Flows in Profit from Financing Activities**Interest
                & Other Finance costs paid
            
            
            1,241
            
            
            12,166**Changes
                in Assets and Liabilities**(Increase)
                Decrease in receivables
            
            
            (3,743,256
            )
            
            52,191Increase
                (Decrease) in unearned revenue
            
            
            1,677,878
            
            
            (188,515
            )Increase
                in payables
            
            
            1,315,228
            
            
            40,302Decrease
                in provisions for compensated absences
            
            
            (85,511
            )
            
            -Increase
                in deferred tax liabilities
            
            
            151,359
            
            
            -Increase
                in income tax payable
            
            
            84,297
            
            
            100,973**Cash
                Flows Provided by Operating Activities**
            
            **$**
            **671,283**
            
            **$**
            **206,489****Supplemental
                Cash Flow Disclosures:**Interest
                paid
            
            $
            1,650
            
            $
            12,167Income
                tax paid
            
            $
            98,872
            
            $
            -**Non-Cash
                Investing/Financing Activities:**Stock
                issued in acquisition
            
            $
            5,500,000
            
            $
            -








6




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





**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY**





**Additional**
            
            **Other**
            
            **Retained****Common
                Stock**
            
            **Paid-In**
            
            **Comprehensive**
            
            **Earnings****Shares**
            
            **Amount**
            
            **Capital**
            
            **Income**
            
            **(Deficit)**
            
            **Total****Balance
                June 30, 2004**
            
            
            25,000,000
            
            $
            25,000
            
            
            ($6,074
            )
            
            ($54,904
            )
            
            ($839,874
            )
            
            ($875,852
            )Issuance
                of stock
            
            
            6,122,450
            
            
            6,122
            
            
            755,878
            
            
            -
            
            
            -
            
            
            762,000Recapitalization
                as result of merger
            
            
            -
            
            
            -
            
            
            33,001
            
            
            -
            
            
            -
            
            
            33,001Other
                comprehensive income
            
            
            -
            
            
            -
            
            
            -
            
            
            (118,503
            )
            
            -
            
            
            (118,503
            )Net
                income, June 30, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            999,155
            
            
            999,155**Balance
                June 30, 2005**
            
            
            31,122,450
            
            $
            31,122
            
            $
            782,805
            
            
            ($173,407
            )
            $
            159,281
            
            $
            799,801Issuance
                of stock
            
            
            5,000,000
            
            
            5,000
            
            
            5,495,000
            
            
            -
            
            
            -
            
            
            5,500,000Other
                comprehensive income (unaudited)
            
            
            -
            
            
            -
            
            
            -
            
            
            7,415
            
            
            -
            
            
            7,415Net
                income, December 31, 2005 (unaudited)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            657,873
            
            
            657,873**Balance
                December 31, 2005**
            
            
            36,122,450
            
            $
            36,122
            
            $
            6,277,805
            
            
            ($165,992
            )
            $
            817,154
            
            $
            6,965,089








7





**ADVANCED
      MEDICAL INSTITUTE, INC.**


**AND
      SUBSIDIARIES**





**NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005 AND 2004**





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





Nature
      of Business





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





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





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


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





AMI
      Australia is a company limited by shares, incorporated and domiciled in
      Australia. The principal activity of AMI Australia is the medical treatment
      of
      sexual dysfunction in Australia and New Zealand. AMI Australia is a service
      provider company which arranges for patients with sexual dysfunction to be
      provided with medical services, pharmaceuticals and associated support services.
      AMI Australia operates a centralized call center and twenty-one clinics and
      sales offices throughout Australia and New Zealand. The clinics and sales
      offices are located at:





**New
      South Wales**


AMI
      Direct, Alexandria, Sydney, New South Wales


Bondi
      Junction, Sydney, New South Wales


Hurstville,
      Sydney, New South Wales


Parramatta,
      Sydney, New South Wales


Sydney
      City, Sydney, New South Wales


Albury,
      Regional New South Wales


Dubbo,
      Regional New South Wales


Newcastle,
      Regional New South Wales


Tamworth,
      Regional New South Wales


Wollongong,
      Regional New South Wales





**Queensland**


Chermside,
      North Brisbane, Queensland


Upper
      Mt
      Gravatt, South Brisbane, Queensland


Bundall,
      Gold Coast, Queensland


Cairns,
      Regional Queensland


Townsville,
      Regional Queensland





**South
      Australia**


Adelaide,
      South Australia





8




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





**Victoria**


St
      Kilda,
      Melbourne, Victoria


Box
      Hill,
      Melbourne, Victoria


Dandenong,
      Melbourne, Victoria





**Western
      Australia**


Perth,
      Western Australia





**New
      Zealand**


Auckland,
      North Island, New Zealand





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





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





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





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





Subsidiaries
      of AMI Australia





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





PE
      Patent
      Holdco Pty Limited (“PE”) licenses intellectual property to AMI Australia on a
      short-term royalty free arrangement. This intellectual property consists solely
      of an Australian innovation patent for its premature ejaculation programs
      (Australian Innovation Patent No. 2005100183, which is due to expire on July
      9,
      2012) and an Australian standard patent application (Australian standard patent
      application No. 2004222783).




AMI
      Australia’s 93% owned subsidiary,  Intelligent
      Medical Technologies Pty Limited (“IMT”) was granted the exclusive worldwide
      right and license from Sheiman Ultasonic Research Foundation Pty Limited
      (“SURF”) to exploit and sub-license certain inventions, patents and other
      intellectual property in relation to certain ultrasonic nebulizer technology
      within the field of the treatment of sexual dysfunction in men and women
      (including impotence, premature ejaculation and the treatment of female sexual
      arousal disorders). Some of these patents expire in October 2013, with the
      remaining patents expiring around 2023. IMT’s license is a broad based license
      which includes the right to manufacture, market, sell and distribute products
      based on the technology and patents within the field of use. IMT also has the
      option to extend its field of use to the treatment of prostate diseases on
      payment of AU$1. IMT applied for 4 worldwide patents relating to its ultrasonic
      nebulizer device in July 2005 and applied for 3 further worldwide patents
      relating to its device on February 10, 2006.




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




9





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





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





Basis
      of Accounting





The
      accompanying financial statements are prepared on an accrual basis.





Principles
      of Consolidation





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, AMI Australia Holdings Pty Limited, and its direct
      and
      indirect wholly-owned subsidiaries: Advanced Medical Institute Pty Ltd, PE
      Patent Holdco Pty Limited (“PE”), Advanced Medical Institute (NZ) Limited (“AMI
      NZ”) and Women’s Health Foundation Pty Limited (“WHF”), its 93% owned
      subsidiary, Intelligent Medical Technologies Pty Ltd (“IMT”) and its 50% owned
      subsidiary, Whygo Video Conferencing Pty Ltd (“Whygo”) (which owns all of the
      shares in Whygo Limited, a UK entity). All significant intercompany accounts
      and
      transactions have been eliminated upon consolidation.




Cash
      Equivalents





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





Use
      of
      Estimates





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





Revenue
      Recognition





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





Advertising
      Expense





Advertising
      costs are charged to expense as they are incurred.





Income
      Tax





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




10




Inventories





Inventories
      are measured at the lower of cost or net realizable value. Costs are assigned
      on
      a first-in first-out basis.





Property
      and Equipment





Equipment
      placed in service is depreciated over the estimated useful lives of the assets
      using the straight line depreciation method.





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





Employee
      Entitlements





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





Foreign
      Currency





As
      of
      December 31, 2005 and June 30, 2005, the accounts of AMI Australia and its
      subsidiaries were maintained and its financial statements were expressed in
      Australian Dollars (AUD). Such financial statements were translated into U.S.
      Dollars (USD) in accordance with Statement of Financial Accounts Standards
      (“SFAS”) No. 52, “Foreign Currency Translation”, with the AUD as the functional
      currency. According to the Statement, all assets and liabilities were translated
      at the current exchange rate, stockholders’ equity is translated at the
      historical rates and income statement items are translated at the average
      exchange rate for the period. The resulting translation adjustments are reported
      under other comprehensive income in accordance with SFAS No. 130, “Reporting
      Comprehensive Income”.




As
      of
      December 31, 2005 and June 30, 2005, the exchange rate between AUD and the
      USD
      was AUD$1=USD$0.7301 and AUD$1=USD$0.7620, respectively. The weighted-average
      rate of exchange between AUD and USD was AUD$1=USD$0.7523 and AUD$1=USD$0.75581,
      respectively.





Research
      and Development Costs





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





Intangible
      Assets





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




11





**2** **.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





Earnings
      Per Share





The
      Company uses SFAS No. 128, “Earnings Per Share”, for calculating the basic and
      diluted earnings (loss) per share. Basic earnings (loss) per share are computed
      by dividing net income (loss) attributable to common stockholders by the
      weighted average number of common shares outstanding. Diluted earnings per
      share
      are computed similar to basic earnings per share except that the denominator
      is
      increased to include common stock equivalents, if any, as if the potential
      common shares had been issued.








**December
                31, 2005**
            
            **June
                30, 2005****3.****PROPERTY,
                PLANT AND EQUIPMENT**Leasehold
                improvements at cost
            
            $
            145,872
            
            $
            123,402Less:
                Accumulated depreciation
            
            
            33,858
            
            
            28,879112,014
            
            
            94,523Motor
                Vehicles
            
            
            37,770
            
            
            37,770Less:
                Accumulated Depreciation
            
            
            15,290
            
            
            12,29222,480
            
            
            25,478Office
                Furniture & Equipment
            
            
            169,067
            
            
            140,029Less:
                Accumulated Depreciation
            
            
            41,007
            
            
            32,883128,060
            
            
            107,146Computer
                Hardware - at Cost
            
            
            146,602
            
            
            125,981Less:
                Accumulated Depreciation
            
            
            101,648
            
            
            90,40044,954
            
            
            35,581Low
                Value Pooled Fixed Assets
            
            
            71,524
            
            
            65,745Less:
                Accumulated Depreciation
            
            
            53,239
            
            
            47,42518,285
            
            
            18,320Computer
                Software at cost
            
            
            147,068
            
            
            129,529Less:
                Accumulated Depreciation
            
            
            92,716
            
            
            79,70554,352
            
            
            49,824**Total
                Property, Plant and Equipment, net**
            
            **$**
            **380,145**
            
            **$**
            **330,872****December
                31,
                2005**
            
            
            **June
                30, 2005****4.****INTANGIBLE
                ASSETS**Intellectual
                property
            
            $
            6,007,944
            
            $
            973,302Goodwill
            
            
            500,000
            
            
            -Accumulated
                amortization
            
            
            (36,913
            )
            
            -**Total
                Intangible Assets**
            
            **$**
            **6,471,031**
            
            **$**
            **973,302**






12





**December
                31, 2005**
            
            **June
                30, 2005****5.****INTEREST
                BEARING LIABILITIES****Current,
                as of the period ended**Capitalized
                lease liability
            
            $
            43,821
            
            $
            38,005Unsecured
                loan
            
            
            -
            
            
            106,680**$**
            **43,821**
            
            **$**
            **144,685****Non-current,
                due during the period ended:**Capitalized
                lease liability2006
            
            $
            47,495
            
            $
            42,1822007
            
            
            16,676
            
            
            34,093Total
                non-current
            
            **$**
            **64,171**
            
            **$**
            **76,275**




The
      interest bearing liabilities require monthly payments of principal and interest
      at a per annum interest rate ranging from 7.40% to 11.4%. Obligations under
      the
      notes are secured by the financed assets included in property and
      equipment.




**6.** **LEGAL
        PROCEEDINGS**




As
      of
      December 31, 2005, there was no litigation pending or threatened by or against
      the Company or any of its subsidiaries except as follows:




On
      August
      24, 2004, AMI Australia initiated a suit against Mr. Mark Ryan, a former
      consultant, two companies controlled by Mr. Ryan which now compete with us,
      Dr.
      Ian Davies, Mr. Ryan’s partner, and a third company controlled by Dr. Davies
      (the “Defendants”) in the Federal Court of Australia. AMI Australia alleges that
      Mr. Ryan breached his confidentiality agreement with it and misused its
      intellectual property. AMI Australia obtained interim orders in late 2004.
      AMI
      Australia is seeking a permanent injunction restraining the Defendants from
      using its confidential information and intellectual property. AMI Australia
      is
      also seeking an as of yet unspecified amount of damages. All parties have
      recently completed discovery of documents and a number of subpoenas have been
      issued. The Defendants have denied the allegations.




On
      August
      10, 2004, Bradley Joyce, AMI Australia’s former Chief Executive Officer filed a
      suit against AMI Australia in the Industrial Commission of NSW. Mr. Joyce
      alleges that his contract is unfair and seeks to have the Industrial Commission
      of NSW amend the contract to include a six month severance payment (which would
      be approximately AU$100,000). These proceedings are at an early stage and a
      compulsory conciliation conference did not resolve the claim. These proceedings
      were settled on August 24, 2005 with the proceedings being
      dismissed.




On
      July
      19, 2004, the Australian Competition and Consumer Commission (collectively,
      the
“ACCC”) filed a suit against AMI Australia in the Federal Court of Australia
      Sydney Registry. The ACCC claims that a series of advertisements made by AMI
      Australia involving a celebrity that confessed impotence were misleading and
      deceptive. AMI Australia has denied the allegation and is vigorously defending
      this suit. ACCC is seeking corrective advertising for the alleged misleading
      and
      deceptive advertisements. The ACCC has not made any claim for damages. The
      hearing of the proceedings concluded on September 2, 2005 with a final judgment
      expected within during the first half of 2006.




On
      December 17, 2002, Alan Hibberd, a former patient, notified a claim against
      AMI
      Australia in accordance with the Personal Injuries Proceeding Act of 2002 (Qld).
      AMI Australia received the notification on April 5, 2004. Mr. Hibberd claims
      that we did not properly notify him of possible adverse effects of the medical
      procedure he underwent. Mr. Hibberd was seeking reimbursement of wages in the
      amount of AU$1,731 and presently unspecified damages for physical injuries.
      These proceedings were settled in full satisfaction of all claims and claims
      for
      contribution from Mr. Hibberd, the treating doctor and the supplying pharmacy
      on
      November 23, 2005.








13




**7.** **LEASE
        COMMITMENTS**




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





**As
                of December 31, 2005**
            
            **As
                of**
              **December
                31, 2004**Due
                during the period ended December 31:2005
            
            
            
            
            $
            540,1472006
            
            $
            350,454
            
            
            385,9302007
            
            
            258,006
            
            
            271,0642008
            
            
            181,925
            
            
            169,3652009
            
            
            50,613
            
            
            49,398**$**
            **840,998**
            
            **$**
            **1,415,904**





Rent
      paid
      for the six months ended December 31, 2005 and 2004 was $591,700 and $324,267,
      respectively.




**8.** **CONCENTRATION**





Sales
      Markets - The Company’s revenue arises from Australian and New Zealand
      customers.





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





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





On
      March
      21, 2005 (the “Closing Date”), Advanced Medical Institute Inc. (a Nevada, USA
      company) (“AMI USA”) consummated the transactions contemplated by that certain
      Share Exchange Agreement dated as of January 28, 2005 (the “Exchange Agreement”)
      by and among AMI USA, Advanced Medical Institute Pty Limited (since renamed
      AMI
      Australia Holdings Pty Limited), a privately owned Australian company (“AMI
      Australia”), and AMI Australia’s shareholders, (the “Shareholders”), pursuant to
      which AMI USA acquired all of the issued and outstanding shares of stock of
      AMI
      Australia in exchange for the issuance in the aggregate of 14,600,000 of AMI
      USA’s shares of common stock (the “Shares”) to the Shareholders. The issuance of
      AMI USA’s shares of common stock to the Shareholders was exempt from
      registration under the Securities Act of 1933, as amended (“Securities Act”)
      pursuant to Section 4(2) and Regulation S.





Following
      the Closing Date, AMI Australia became a wholly-owned subsidiary of AMI USA,
      and
      upon the issuance of the Shares, the Shareholders became the owners of
      approximately 58.4% of all of AMI USA’s then issued and outstanding
      stock.





14




On
      November 17, 2005 (the “Second Closing Date”), AMI USA consummated the
      transactions contemplated by that certain Share Exchange Agreement dated as
      of
      November 17, 2005 (the “Second Exchange Agreement”) by and among AMI USA, PE
      Patent Holdco Pty Limited, a privately owned Australian company (“PE”), and PE’s
      shareholders, (the “PE Shareholders”), pursuant to which AMI USA acquired all of
      the issued and outstanding shares of stock of PE in exchange for the issuance
      in
      the aggregate of 5,000,000 of AMI USA’s shares of common stock to the PE
      Shareholders. The issuance of AMI USA’s shares of common stock to the PE
      Shareholders was exempt from registration under the Securities Act pursuant
      to
      Section 4(2) and Regulation S.





As
      a
      result of the transaction, PE became a wholly-owned subsidiary of AMI USA,
      and
      upon the issuance of the Second Shares, the PE Shareholders became the owners
      of
      approximately 13.85% of all of AMI USA’s issued and outstanding
      stock.




**December
                  31, 2005**
              
              **June
                  30, 2005**
              
              **December
                  31, 2004****10.
                  RELATED PARTY TRANSACTIONS*****Advance
                  Medical Solutions Pty. Ltd. (an AU co.)***Relationship:Under common management control (dissolved as of September 30,
                  2005)Call
                  center fees charged to the Company
              
              
              -
              
              
              
              
              $
              136,863Customer
                  service fees charged to the Company
              
              
              -
              
              
              
              
              $
              65,293***Jack
                  Vaisman********(an
                  AU citizen)***Relationship:
                  Director of the CompanyDirector
                  salary from AMI Australia
              
              $
              272,284
              
              
              
              
              $
              36,693Payable
                  to this related party (including annual leave)
              
              $
              1,927
              
              $
              18,427***James
                  Matthews********(an
                  AU citizen)***Relationship:
                  Director of the subsidiary (Whygo)Director
                  salary
              
              $
              30,296
              
              
              
              
              
              -Receivable
                  from this related party
              
              
              -
              
              $
              36,591***Total
                  Health Screening Pty. Ltd.********(an
                  AU co.)***Relationship:
                  Affiliated with a director of the Company (Jack Vaisman was previously
                  a
                  director - he took over management in order to try to recover monies
                  owed
                  to AMI Australia)Rental
                  revenue received from this entity
              
              $
              2,163
              
              
              
              
              $
              7,676Payable
                  to this related party
              
              
              -
              
              $
              1,835***Zinalda
                  Vaisman********(an
                  AU citizen)***Relationship:
                  Jack Vaisman’s wifeSalary
              
              $
              22,511
              
              
              
              
              
              -***Dragon
                  Enterprises Ltd.***Relationship:
                  This entity owns 1,850,000 shares of the CompanyReceivable
                  from this related party
              
              $
              33,633
              
              $
              184,404
  15
  Total
        receivables due from related parties included in the Company’s statement of
        financial position was $33,633 and $220,995 as of December 31, 2005 and June
        30,
        2005, respectively.
 
 Total
        accounts payable to related parties included in the Company’s statement of
        financial position was $1,927 and $20,262 as of December 31, 2005 and June
        30,
        2005, respectively.
 
 Receivables
        from, and payables to, related parties are unsecured, interest-free and have
        no
        fixed repayment term.
 **11.** **CONTINGENT
        LIABILITY**





A
      dispute
      with a previous telecommunication carrier over billing in the amount of $122,924
      arose in 2002. Since the time that AMI Australia filed a counter claim of
      $550,904 against the carrier in 2003, no correspondence has been received,
      from
      the carrier. No settlement has been reached, but in the opinion of the Company’s
      directors, the $122,924 will not be paid. The financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.




**12.** **INVESTING
      TRANSACTIONS**





AMI
      Australia acquired 51% of the shares in Intelligent Medical Technologies Pty
      Ltd
      on October 28, 2004 for $666,214. On May 4, 2005 AMI Australia also purchased
      an
      additional 42% of Intelligent Medical Technologies Pty Ltd for $190,500,
      increasing its shareholding to 93% of IMT.





**13.** **STOCK**





On
      October 28, 2004, the officers and directors of the Company surrendered for
      cancellation 1,450,000 shares of common stock.





On
      November 8, 2004, the Company issued a stock dividend of 15 shares for each
      share outstanding on November 8, 2004.





All
      prior
      year information has been adjusted to reflect the stock cancellation and the
      stock dividend.





On
      May
      25, 2005, the Company’s Articles of Incorporation were amended to increase the
      number of authorized shares of the capital stock of the Company to 100,000,000.
      The Company designated 90,000,000 shares as Common Stock and 10,000,000 shares
      as Preferred Stock.





On
      June
      29, 2005, the Company entered into a subscription agreement with certain
      non-U.S. persons pursuant to which the Company issued an aggregate of 6,122,450
      shares of common stock for aggregate gross proceeds of $762,000.





On
      November 17, 2005, the Company entered into a share exchange agreement with
      PE
      Patent Holdco Pty Limited (“PE”), pursuant to which the Company acquired all of
      the issued and outstanding shares of stock of PE in exchange for the issuance
      in
      the aggregate of 5,000,000, or 13.85%, of the Company’s issued shares of Common
      Stock to the shareholders of PE.





All
      prior
      year information has been adjusted to reflect the stock cancellation and the
      stock dividend.





16




**14.** **OTHER
      COMPREHENSIVE INCOME**




Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholders’ equity, at December 31, 2005 and June
      30, 2004 and 2005, and are as follows:





*Foreign
                Currency Translation Adjustment*
            
            *Accumulated
                Other Comprehensive Income*Balance
                at June 30, 2004
            
            $
            (54,904
            )
            $
            (54,904
            )Change
                for fiscal 2005
            
            
            (118,503
            )
            
            (118,503
            )Balance
                at June 30, 2005
            
            
            (173,407
            )
            
            (173,407
            )Change
                for six months ended December 31, 2005
            
            
            7,415
            
            
            7,415Balance
                at December 31, 2005
            
            $
            (165,992
            )
            $
            (165,992
            )







17




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




THE
      FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
      CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
      APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
      AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE
      YEAR ENDED JUNE 30, 2005.




**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




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




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





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




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




18




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




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




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




**NATURE
      OF THE OPERATIONS OF THE COMPANY**




**NATURE
      OF BUSINESS**




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




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




19


On
      January 28, 2005, we entered into a Share Exchange Agreement (the “Exchange
      Agreement”) with Advanced Medical Institute Pty Limited (since renamed AMI
      Australia Holdings Pty Limited), a privately owned Australian company (“AMI
      Australia”), and AMI Australia’s shareholders, (the “Shareholders”), pursuant to
      which the parties agreed that we would acquire all of the issued and outstanding
      shares of stock of AMI Australia in exchange for the issuance in the aggregate
      of 14,600,000, or 58.4%, of our then issued shares of Common Stock (the
“Shares”) to the Shareholders. On March 21, 2005, we closed the transaction and
      issued our Shares, resulting in us acquiring the business of AMI Australia
      (the
“Share Exchange”), which is discussed below. As used herein, the “Company” shall
      also mean AMI Australia 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 into a Share Exchange
      Agreement (the “Second Exchange Agreement”) with PE Patent Holdco Pty Limited, a
      privately owned Australian company (“PE”), and PE’s shareholders, (the “PE
      Shareholders”), pursuant to which we acquired all of the issued and outstanding
      shares of stock of PE in exchange for the issuance in the aggregate of 5,000,000
      of our Shares 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 after the Second Closing Date when used for events after November
      17, 2005, described herein.




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.




General
      Business Plan




AMI
      Australia was established in February 2001 when it entered into an agreement
      with Health Services For Men and Australian Momentum Health to acquire two
      chains of medical clinics and sales offices which provide services relating
      to
      the treatment of sexual dysfunction. AMI Australia currently operates 21
      locations throughout Australia and New Zealand. For the second quarter ended
      December 31, 2005, AMI Australia’s revenue was approximately $7.5 million
      (AUD$10 million).




AMI
      Australia is a service provider company which arranges for patients to be
      provided with medical services, pharmaceuticals and associated clinical support
      services to men and women with sexual dysfunction. Its treatment program options
      for men include:




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




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





AMI
      Australia is currently developing and trialing menopause treatments for women.
      Less than 1% of AMI Australia’s total revenue is generated from treatments for
      women.





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




20


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




Since
      August 1, 2003, AMI Australia has used in its business certain of the
      intellectual property that since July 2005 has been orally licensed from PE
      Patent Holdco Pty Limited on a short-term royalty free arrangement, which entity
      is now a wholly owned subsidiary of AMI Australia. This intellectual property
      consists solely of an Australian innovation patent for its premature ejaculation
      treatment programs (Australian Innovation Patent No. 2005100183, which is due
      to
      expire on July 9, 2012) and an Australian standard patent application
      (Australian standard patent application No. 2004222783).




The
      Australian innovation patent was issued to Dr. Jack Vaisman, the Chief Executive
      Officer, President and Chairman of the Board of Directors of the Company and
      the
      Founder, President and Chief Executive Officer of AMI Australia, who on July
      22,
      2005 subsequently transferred the patent to PE Patent Holdco Pty Limited. The
      development of the intellectual property underlying the patents was undertaken
      and funded by Dr. Vaisman. The innovation patent, titled “Treatment of Premature
      Ejaculation” relates to various methods of treatment delivery via nasal
      (mucosal) inhalation and topical application of certain formulations which
      are
      used in AMI Australia’s treatment programs for premature ejaculation. The
      patents and associated formulations are integral to AMI Australia’s premature
      ejaculation treatment programs. AMI Australia’s nasal spray, injection, lozenge
      and tablet impotence and erectile dysfunction treatment programs are not patent
      protected.




AMI
      Australia obtains customers through direct advertising and marketing and through
      its existing customer database which exceeds 250,000 people.




AMI
      Australia is also in the process of developing new treatment programs to expand
      the range of methods and delivery systems available to its
      customers.




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




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




AMI
      Australia’s 93% owned subsidiary, Intelligent Medical Technologies Pty Limited
      (“IMT”) was granted the exclusive worldwide right and license from Sheiman
      Ultasonic Research Foundation Pty Limited (“SURF”) to exploit and sub-license
      certain inventions, patents and other intellectual property in relation to
      certain ultrasonic nebulizer technology (including Australian Patent No’s 693064
      and 753817, European Patent No’s 0 705 145 and 1 071 479 and US Patent No’s
      5,908,158 and 6,379,616) within the field of the treatment of sexual dysfunction
      in men and women (including impotence, premature ejaculation and the treatment
      of female sexual arousal disorders). Some of these patents expire in October
      2013, with the remaining patents expiring around 2023. IMT’s license is a broad
      based license which includes the right to manufacture, market, sell and
      distribute products based on the technology and patents within the field of
      use.
      IMT also has the option to extend its field of use to the treatment of prostate
      diseases on payment of AU$1. IMT applied for 4 worldwide patents relating to
      its
      ultrasonic nebulizer device in July 2005 and applied for 3 additional worldwide
      patents relating to its device in February 2006. Anantoly Fanshil, a director
      of
      the Company, owns 5% of the outstanding equity of IMT.




21


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




IMT
      has
      completed development of 5 working prototypes of its nebulizer
      device.




Additional
      prototypes, which incorporate various improvements to the functionality and
      efficiency of the device (the “Beta Devices”), are scheduled for completion
      during February 2006.




IMT
      has
      received advice from Brandwood Biomed Pty Limited (an Australian regulatory
      expert on TGA requirements) that it does not need to conduct clinical trials
      to
      list its device with the TGA and it expects to complete and file its listing
      application this financial year.




IMT
      intends to commence a phase I pharmacokinetic clinical trial of a liquid form
      of
      a well known medication for the treatment of erectile dysfunction which is
      capable of being delivered through the device in order to formally prove the
      efficacy of the device at a conceptual level during this financial year. IMT
      has
      begun its preparation to commence these trials at the direction of and under
      analysis by Q-Pharm, the commercial arm of a leading Australian university.
      IMT
      estimates the cost of this clinical trial to be in the order of
      $180,000




IMT
      has
      been spending a large portion of its capital on research and development
      activities with financial support from AMI Australia (AUD$379,000 during fiscal
      2005 being approximately USD$284,000, and AUD$102,000 during the six months
      ended December 31, 2005 being approximately USD$77,000). AMI Australia’s loan to
      IMT is on an unsecured, at-call interest free basis. Such loan is an on demand
      loan and may be called by AMI Australia at any time. 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. IMT is entitled to use any innovations developed
      by it as a result of its research and development in connection with its
      nebulizer device. As of December 31, 2005, the IMT research and development
      into
      the efficacy of the nebulizer is still in a development stage and there has
      been
      no income generated by AMI Australia as a result of its agreement with
      IMT.




Competition





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





Companies
      of all sizes are engaged in the development and commercialization of
      technologies in the erectile dysfunction and premature ejaculation market
      segments. Currently, no known alternate premature ejaculation technology similar
      to ours has been commercialized. Competition is intense in the erectile
      dysfunction segment of our business and includes many large and small
      competitors who have greater revenue, more customers and a higher level 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 patents or other rights that conflict with patents
      covering our technologies.





Subsidiaries
      of AMI Australia





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





22


Details
      of PE Patent Holdco are set forth in the General Business Description above.





Details
      of IMT are set forth in the General Business Description above.





Women’s
      Health Foundation Pty Limited (“WHF”) conducts a business of providing menopause
      treatment programs to women. WHF contributes less than 1% of AMI Australia’s
      consolidated revenue and AMI Australia holds all of the shares in WHF. WHF
      was
      formed on September 29, 2005.





Advanced
      Medical Institute (NZ) Limited (“AMI NZ”) conducts the group’s business in New
      Zealand. AMI NZ contributes less than 1% of AMI Australia’s consolidated revenue
      and AMI Australia holds all of the shares in AMI NZ. AMI NZ was formed on
      October 13, 2005.





AMI
      Australia holds 50% of the outstanding shares of Whygo. Whygo provides video
      conferencing services, which facilitates its client by providing video
      conferencing rooms across Australia and around the world. Whygo uses some of
      AMI
      Australia clinic facilities and pays room hire fees for the usage. In those
      locations where AMI Australia does not have locations, Whygo uses other
      facilities. James Matthews, a director of Whygo holds the remaining 50% of
      the
      outstanding shares of Whygo.





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





Staff





As
      of
      December 31, 2005, AMI Australia had a total staff of approximately 197 people,
      of which 134 are full-time and 63 are part-time staff, working in the areas
      of
      sales and marketing, customer support, product development and back office
      functions. Of the 197 people, AMI Australia’s staff includes 26 consultants and
      47 licensed medical personnel. None of the Company’s employees are members of a
      union or labor organization.




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




AMI
      Australia’s core staff include:




DR.
      JACOV
      (JACK) VAISMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR - Dr. Vaisman has served
      as
      the Company’s Chief Executive Officer 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 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 with Australian Momentum Health Pty Ltd,
      a
      position he held from 1999 until 2001. Mr. Shrestha holds a Bachelor of Business
      Accounting, Master of E-Commerce and a Graduate Diploma of Information System
      and E-Commerce.




23


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 (“AMH”), one of two medical establishments leading in
      providing impotency treatment in Australia. 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 10 years.




Currency
      Conversion




As
      of
      December 31, 2005 and 2004, the accounts of AMI Australia were maintained,
      and
      its financial statements were expressed, in Australian Dollars (AUD). Such
      financial statements were translated into US Dollars (USD) in accordance with
      Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
      Translation”, with the AUD as the functional currency. According to the
      Statement, all assets and liabilities were translated at the exchange rate
      (AUD1
      = USD0.7301) as of December 31, 2005, stockholder’s equity are translated at the
      historical rates and income statement items are translated at the
      weighted-average exchange rate for the period. The resulting translation
      adjustments are reported under other comprehensive income in accordance with
      SFAS No. 130, “Reporting Comprehensive Income”.




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






Result
      of operations:




**Three
                months ended**
              **December
                31,**
            **Six
                months ended**
              **December
                31,****2005**
            **2004**
            **2005**
            **2004**Revenue
            100%
            100%
            100%
            100%Cost
                of Revenue
            21.8%
            35.6%
            28.1%
            33.0%Gross
                Profit
            78.2%
            64.4%
            71.9%
            67.0%General
                and administrative expenses
            61.1%
            63.1%
            64.3%
            63.0%Other
                income and expenses
            0.1%
            (3.6%)
            0.1%
            1.5%Income
                before income tax
            17.2%
            (2.3%)
            7.7%
            5.5%Income
                tax expenses
            6.0%
            0.7%
            2.5%
            1.6%**Net
                Income**
            11.2%
            (1.6%)
            5.2%
            3.9%




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      December 31, 2005, we had total liabilities of $6,911,523 including unearned
      revenue of $3,355,970 and we had a positive net worth of $6,965,089. As of
      September 30, 2005, we had total liabilities of $6,021,595 including unearned
      revenue of $3,087,472 and we had a positive net worth of $573,927. As of June
      30, 2005, we had total liabilities of $4,149,690 including unearned revenue
      of
      $1,803,044 and a positive net worth of $799,801.




Our
      bank
      balances as of December 31, 2005 were $865,605. 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. As set out
      previously, we are considering further expansion of our business offshore.
      If we
      expand our business in this manner we may need to raise additional debt or
      equity funding in order to undertake any 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
      proposed or we could be required to reduce spending and operations.




24




**SIX
      MONTHS ENDED DECEMBER 31, 2005 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
      2004**




***REVENUE*** **.** Revenue
      was $12,605,708 in the six months ended December 31, 2005 compared to $6,111,748
      in the six months ended December 31, 2004 an increase of $6,493,960 or 106.3%.
      The increase in revenue in the six-month period is primarily attributable to
      the
      increase in the number of patients buying treatment programs from us during
      the
      six months ended December 31, 2005 than in the same period in 2004.




We
      recognize all expenses on the date they are incurred regardless of whether
      they
      relate to recognized or unearned revenue whereas unearned revenue (which is
      generated by current expenses) is unable to be recognized in the current period.




In
      addition, our unearned revenue (or forward sales) during the six months ending
      December 31, 2005 increased by $1,552,926 to $3,355,970 compared to a decrease
      of $(6,637) to $1,598,101 during the six months ending December 31,
      2004.




The
      increase in revenue and unearned revenue in the six-month period is primarily
      attributable to an increase in advertising and more targeting of our
      advertising, resulting in an increase in revenue generated from AMI Australia’s
      Premature Ejaculation (PE) treatment programs and AMI Australia’s Erectile
      Dysfunction (ED) treatment programs. Revenue in AMI Australia’s PE treatment
      programs has increased by 207% and revenue in AMI Australia’s ED treatment
      programs has increased by 25% in the six months ending December 31, 2005,
      compared to the six months ending December 31, 2004. The number of patients
      in
      AMI Australia’s PE and ED treatment programs increased by 262% and 25%
      respectively compared to the six months ending December 31, 2004.




***COST
      OF REVENUE*** **.** Cost of
      revenue increased to $3,547,042 in the six months ended December 31, 2005
      compared to $2,017,361 in the six months ended December 31, 2004 as a result
      of
      an increase in the number of staff employed by AMI Australia, which additional
      staff were needed to service and sell the additional PE and ED treatment
      programs sold by AMI Australia during this period. As a percentage of revenue,
      cost of revenue was 28.1% in the six months ended December 31, 2005 compared
      to
      33.0% in the six months ended December 31, 2004. Gross profit was $9,058,666
      in
      the six months ended December 31, 2005 compared to $4,094,387 in the six months
      ended December 31, 2004. As a percentage of revenue, gross profit increased
      to
      71.9% in the six months ended December 31, 2005 from 67.0% in the six months
      ended December 31, 2004. The 4.9% increase in the gross profit percentage is
      primarily attributable to the growth in AMI Australia’s revenue being greater
      than the growth in staff costs necessary to service the treatment programs
      resulting from that increased revenue.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $8,107,459 in the six months ended
      December 31, 2005 compared to $3,847,737 in the six months ended December 31,
      2004. As a percentage of revenue, selling, general and administrative expenses
      increased to 64.3% in the six months ended December 31, 2005 from 63.0% in
      the
      six months ended December 31, 2004. The 1.3% increase as a percentage of revenue
      was related to AMI Australia being required to recognize all expenses relating
      to the sale of the increased number of treatment programs upfront while being
      unable to recognize unearned revenue or forward sales resulting from those
      expenses in the current period and also related to additional legal and
      accounting expenses incurred as a result of our U.S. securities law compliance
      requirements.







25




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $19,586 in the six months ended December 31, 2005
      compared to $89,928 in the six months ended December 31, 2004. As a percentage
      of revenues, other income and expenses decreased to 0.1% in the six months
      ended
      December 31, 2005 from 1.5% in the six months ended December 31, 2004. The
      decrease is due to no provision of doubtful debts being written back during
      the
      six months ended December 31, 2005.




***INCOME
      BEFORE INCOME TAX AND INCOME TAX EXPENSES*** **.**  Income
      before income tax was $970,793 in the six months ended December 31, 2005
      compared to $336,578 in the six months ended December 31, 2004. This increase
      was attributable to the increase in revenue when compared with an increased
      percentage of costs and expenses during the six months ended December 31, 2005.
      The increase is also attributable to an increase in our product recognition
      and
      recognition of the “AMI” name in Australia.




Income
      tax expenses were $311,935 in the six months ended December 31, 2005 compared
      to
      $100,973 in the six months ended December 31, 2004. This increase is
      attributable to the increase in income during the six months ended December
      31,
      2005.




***NET
      INCOME*** **.** Net
      income was $657,873 in the six months ended December 31, 2005 compared to
      $235,605 in the six months ended December 31, 2004. This increase is
      attributable to the reasons set forth above related to the increase in the
      gross
      profit percentage. The growth in revenue is greater than the growth in variable
      costs (such as cost of revenue) necessary to service the treatment programs
      resulting from that increased revenue. Moreover, the growth in fixed costs
      is
      either smaller than the growth in revenues or is remaining
      constant.




**THREE
      MONTHS ENDED DECEMBER 31, 2005 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
      2004**




***REVENUE*** **.** Revenue
      was $7,511,008 in the three months ended December 31, 2005 compared to
      $3,278,932 in the three months ended December 31, 2004, an increase of
      $4,232,076 or 129.1%.




The
      Company recognizes all expenses on the date they are incurred regardless of
      whether they relate to recognized or unearned revenue whereas unearned revenue
      (which is generated by current expenses) is unable to be recognized in the
      current period.




In
      addition, the Company’s unearned revenue (or forward sales) in the three months
      ending December 31, 2005 increased by $268,498 to $3,355,970 compared to an
      increase of $160,060 to $1,598,101 in the three months ending December 31,
      2004.
      The gross increase in unearned revenue from the quarter ended December 31,
      2004
      to the quarter ended December 31, 2005 was $108,438, or an increase of
      67.7%.




The
      increase in revenue and unearned revenue in the three-month period is primarily
      attributable to an increase in advertising and improved targeting of our
      advertising, resulting in an increase in revenue generated from AMI Australia’s
      Premature Ejaculation (PE) treatment programs and AMI Australia’s Erectile
      Dysfunction (ED) treatment programs. Revenue in AMI Australia’s PE treatment
      programs has increased by 278% and revenue in AMI Australia’s ED treatment
      programs has increased by 75% in the three months ending December 31, 2005,
      compared to the three months ending December 31, 2004. The number of patients
      in
      AMI Australia’s PE and ED treatment programs increased by 388% and 83%
      respectively compared to the quarter ending December 31, 2004.




***COST
      OF REVENUE*** **.** Cost of
      revenue was $1,636,528 in the three months ended December 31, 2005 compared
      to
      $1,167,577 in the three months ended December 31, 2004 primarily as a result
      of
      growth in AMI Australia’s PE and ED treatment programs during the three months
      ended December 31, 2005. As a percentage of revenue, cost of revenue was 21.8%
      in the three months ended December 31, 2005 compared to 35.6% in the three
      months ended December 31, 2004. The decrease in the cost of revenue percentage
      by 13.8% is attributable to the growth in AMI Australia’s revenue being greater
      than the growth in staff costs necessary to service the treatment programs
      resulting from that increased revenue.




26




***GROSS
      PROFIT.*** Gross
      profit was $5,874,480 in the three months ended December 31, 2005 compared
      to
      $2,111,355 in the three months ended December 31, 2004. As a percentage of
      revenue, gross profit increased to 78.2% in the three months ended December
      31,
      2005 from 64.4% in the three months ended December 31, 2004. The 13.8% increase
      in the gross profit percentage is primarily attributable to the growth in AMI
      Australia’s revenue from the increased sale of PE and ED treatment programs
      exceeding the growth in expenses needed to service those sales. Variable
      expenses (such as employee costs and advertising expenses) grew at a lower
      percentage than the growth in revenue while fixed costs (such as rent, insurance
      and certain head office expenses) remained constant or grew by a small
      percentage.




***SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Selling,
      general and administrative expenses were $4,589,457 in the three months ended
      December 31, 2005 compared to $2,067,570 in the three months ended December
      31,
      2004. As a percentage of revenue, selling, general and administrative expenses
      decreased to 61.1% in the three months ended December 31, 2005 from 63.1% in
      the
      three months ended December 31, 2004. The decrease is primarily due to the
      increase in revenue during the three months ended December 31, 2005 exceeding
      the growth in staff expenses (predominantly wages) in the same period. In
      addition, our advertising targeting was more focused and the increased
      recognition of the “AMI” name contributed to lower selling, general and
      administrative expenses.




***OTHER
      INCOME AND EXPENSES*** **.** Other
      income and expenses were $4,829 in the three months ended December 31, 2005
      compared to $(119,043) in the three months ended December 31, 2004. As a
      percentage of revenue, other income and expenses increased to 0.1% in the three
      months ended December 31, 2005 from (3.6%) in the three months ended December
      31, 2004. The increase is due to no provision of doubtful debts during the
      three
      months ended December 31, 2005.




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




Income
      before income tax was $1,289,852 in the three months ended December 31, 2005
      compared to $(75,258) in the three months ended December 31, 2004. This increase
      was attributable to the increase in revenue during the three months ended
      December 31, 2005 exceeding the increase in advertising and staff costs in
      the
      corresponding period.




Income
      tax expenses were $439,408 in the three months ended December 31, 2005 compared
      to $(22,577) in the three months ended December 31, 2004. This increase is
      attributable to the increase in net income during the three months ended
      December 31, 2005.




***NET
      INCOME*** **.** Net
      income was $850,444 in the three months ended December 31, 2005 compared to
      $(52,681) in the three months ended December 31, 2004 before outside equity
      interests. This increase is attributable to the reasons set forth above. Net
      income attributable to outside equity interests was $5,512 in the three months
      ended December 31, 2005 compared to $0 in the three months ended December 31,
      2004. The increase is because AMI Australia did not have any subsidiaries during
      the three months ended December 31, 2004. Net income attributable to the members
      of parent entity was $844,932 in the three months ended December 31, 2005
      compared to $(52,681) in the three months ended December 31, 2004. The reasons
      for the increase are the same as the increase in net income.




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




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




Additionally,
      there were no significant changes in the Company’s internal controls or in other
      factors that could significantly affect these controls subsequent to the
      Evaluation Date. We have not identified any significant deficiencies or material
      weaknesses in our internal controls, and therefore there were no corrective
      actions taken.




27




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




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




As
      of
      December 31, 2005, there was no litigation pending or threatened by or against
      the Company or any of its subsidiaries except as follows:




On
      August
      24, 2004, AMI Australia initiated a suit against Mr. Mark Ryan, a former
      consultant, two companies controlled by Mr. Ryan which now compete with us,
      Dr.
      Ian Davies, Mr. Ryan’s partner, and a third company controlled by Dr. Davies
      (the “Defendants”) in the Federal Court of Australia. AMI Australia alleges that
      Mr. Ryan breached his confidentiality agreement with it and misused its
      intellectual property. AMI Australia obtained interim orders in late 2004.
      AMI
      Australia is seeking a permanent injunction restraining the Defendants from
      using its confidential information and intellectual property. AMI Australia
      is
      also seeking an as of yet unspecified amount of damages. All parties have
      recently completed discovery of documents and a number of subpoenas have been
      issued. The Defendants have denied the allegations.




On
      August
      10, 2004, Bradley Joyce, AMI Australia’s former Chief Executive Officer filed a
      suit against AMI Australia in the Industrial Commission of NSW. Mr. Joyce
      alleges that his contract is unfair and seeks to have the Industrial Commission
      of NSW amend the contract to include a six month severance payment (which would
      be approximately AU$100,000). These proceedings are at an early stage and a
      compulsory conciliation conference did not resolve the claim. These proceedings
      were settled on August 24, 2005 with the proceedings being
      dismissed.




On
      July
      19, 2004, the Australian Competition and Consumer Commission (collectively,
      the
“ACCC”) filed a suit against AMI Australia in the Federal Court of Australia
      Sydney Registry. The ACCC claims that a series of advertisements made by AMI
      Australia involving a celebrity that confessed impotence were misleading and
      deceptive. AMI Australia has denied the allegation and is vigorously defending
      this suit. ACCC is seeking corrective advertising for the alleged misleading
      and
      deceptive advertisements. The ACCC has not made any claim for damages. The
      hearing of the proceedings concluded on September 2, 2005 with a final judgment
      expected during the first half of 2006.




On
      August
      10, 2004, Bradley Joyce, AMI Australia’s former Chief Executive Officer filed a
      suit against AMI Australia in the Industrial Commission of NSW. Mr. Joyce
      alleged that his contract was unfair and sought to have the Industrial
      Commission of NSW amend the contract to include a six month severance payment
      (which would be approximately AU$100,000). AMI Australia has denied the
      allegations and is vigorously defending this suit.




On
      December 17, 2002, Alan Hibberd, a former patient, notified a claim against
      AMI
      Australia in accordance with the Personal Injuries Proceeding Act of 2002 (Qld).
      AMI Australia received the notification on April 5, 2004. Mr. Hibberd claims
      that we did not properly notify him of possible adverse effects of the medical
      procedure he underwent. Mr. Hibberd was seeking reimbursement of wages in the
      amount of AU$1,731 and presently unspecified damages for physical injuries.
      These proceedings were settled in full satisfaction of all claims and claims
      for
      contribution from Mr. Hibberd, the treating doctor and the supplying pharmacy
      on
      November 23, 2005.




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




None.




28


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




None.




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





None.




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




None.




**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 Principal Financial Officer Pursuant
                to
                18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
                2002).










29




**SIGNATURES**




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




**ADVANCED
              MEDICAL INSTITUTE INC.**Date: February
              13, 2006
            By:
            /s/
              Jacov (Jack) VaismanJacov
              (Jack) VaismanChief
                Executive Officer




Date: February
              13, 2006
            By:
            /s/ Dilip
              ShresthaDilip
              ShresthaChief
                Financial Officer




30