**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 SEPTEMBER 30, 2007





**o** **TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




FOR
      THE
      TRANSITION PERIOD FROM _____ TO_____





Commission
      File Number: 000-28865





**YARRAMAN
      WINERY, INC.**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
              (State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            **88-0373061**
              (I.R.S.
                Employer
              Identification
                No.)**700
                Yarraman Road**
              **Wybong**
              **Upper
                Hunter Valley**
              **New
                South Wales, Australia 2333**
              (Address
                of Principal Executive Offices)






**(61)
      2 6547-8118**


(Issuer’s
      Telephone Number)





(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 o NO x




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




There
      were 38,000,000 shares of the Issuer’s common stock outstanding on September 29,
      2008.




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




1




**TABLE
      OF CONTENTS**




**Page****PART
                I - FINANCIAL INFORMATION****ITEM
                1.**
            
            
            FINANCIAL
                STATEMENTS
            
            
            3**ITEM
                2.**
            
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
            
            
            22**ITEM
                3.**
            
            
            CONTROLS
                AND PROCEDURES
            
            
            31**PART
                II - OTHER INFORMATION****ITEM
                1.**
            
            
            LEGAL
                PROCEEDINGS
            
            
            32**ITEM
                2.**
            
            
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            
            32**ITEM
                3.**
            
            
            DEFAULTS
                UPON SENIOR SECURITIES
            
            
            32**ITEM
                4.**
            
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            
            32**ITEM
                5.**
            
            
            OTHER
                INFORMATION
            
            
            32**ITEM
                6.**
            
            
            EXHIBITS
            
            
            32




2





**PART
      I - FINANCIAL INFORMATION**





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




YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONSOLIDATED
      UNAUDITED FINANCIAL STATEMENTS





September
      30, 2007





**TABLE
      OF CONTENTS**





Consolidated
                Unaudited Balance Sheets
            
            
            4Consolidated
                Unaudited Statement of Operations
            
            
            5Consolidated
                Unaudited Statement of Cash Flow
            
            
            6Notes
                to Consolidated Unaudited Financial Statements
            
            
            7-21




3





YARRAMAN
                WINERY, INC. AND SUBSIDIARYCONSOLIDATED
                BALANCE SHEETS




ASSETS




September
                30,
            
            June
                30,2007
            
            2007Current
                Assets
            
            (Unaudited)Cash
                and cash equivalents
            
            $
            42,093
            
            $
            150,072Accounts
                receivable, net
            
            
            805,825
            
            
            775,718Inventory
            
            
            4,950,685
            
            
            4,074,056Other
                receivables
            
            
            105,323
            
            
            85,931Due
                from related parties
            
            
            49,492
            
            
            -Other
                assets
            
            
            204,212
            
            
            227,672Total
                Current Assets
            
            
            6,157,629
            
            
            5,313,449Property,
                plant and equipment, net
            
            
            4,333,147
            
            
            4,235,575Intangible
                asset
            
            
            222,100
            
            
            212,200$
            10,712,876
            
            $
            9,761,224




LIABILITIES
                AND STOCKHOLDERS’ EQUITY (DEFICIT)




Current
                Liabilities:Accounts
                payable and accrued expenses
            
            $
            1,212,234
            
            $
            1,199,567Capital
                leases, current portion
            
            
            140,758
            
            
            140,849Due
                to related party
            
            
            3,863,325
            
            
            2,905,986Total
                Current Liabilities
            
            
            5,216,317
            
            
            4,246,402Long
                Term Liabilities:Capital
                leases, net of current portion
            
            
            101,689
            
            
            124,847Loans
                payable - related party
            
            
            1,882,264
            
            
            1,749,097Long-term
                debt
            
            
            5,084,352
            
            
            4,818,008Total
                Long Term Liabilities
            
            
            7,068,305
            
            
            6,691,952Total
                Liabilities
            
            
            12,284,622
            
            
            10,938,354Stockholders’
                Equity (Deficit):Common
                stock, $.001 par value, 90,000,000 authorized25,250,000
                and 25,000,000 shares issued and outstanding
            
            
            25,250
            
            
            25,000Additional
                paid in capital
            
            
            5,565,002
            
            
            5,455,252Subscription
                receivable
            
            
            (104,500
            )
            
            -Other
                comprehensive income
            
            
            255,854
            
            
            10,977Accumulated
                deficit
            
            
            (7,313,352
            )
            
            (6,668,359
            )Total
                Stockholders’ Equity (Deficit)
            
            
            (1,571,746
            )
            
            (1,177,130
            )$
            10,712,876
            
            $
            9,761,224




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





4





YARRAMAN
                WINERY, INC. AND SUBSIDIARYCONSOLIDATED
                STATEMENT OF OPERATIONSTHREE
                MONTHS ENDED SEPTEMBER 30, 2007(Unaudited)




Sales,
                net
            
            $
            672,994Cost
                of sales
            
            
            464,365Gross
                profit
            
            
            208,629Selling,
                general and administrative expenses
            
            
            630,457Loss
                from operations
            
            
            (421,828
            )Other
                (Income) ExpenseInterest
                income
            
            
            (727
            )Interest
                expense
            
            
            199,634Other
                (income) expenses net
            
            
            23,031Transaction
                gain (loss) on foreign currency
            
            
            1,227Total
                Other (Income) Expense
            
            
            223,165Loss
                before income taxes
            
            
            (644,993
            )Provision
                for income taxes
            
            
            -Net
                loss
            
            
            (644,993
            )Other
                comprehensive income (loss)Foreign
                currency translation
            
            
            244,877Comprehensive
                Loss
            
            $
            (400,116
            )Net
                loss per share:Basic
                & diluted
            
            $
            (0.03
            )Weighted
                average number of shares outstanding:Basic
                & diluted
            
            
            25,250,000Weighted
                average of dilutive securities has not been calculated since the
                effect of
                dilutive securities is
                anti-dilutive




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





5





YARRAMAN
                WINERY, INC. AND SUBSIDIARYCONSOLIDATED
                STATEMENT OF CASH FLOWSTHREE
                MONTHS ENDED SEPTEMBER 30, 2007(Unaudited)




CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                Loss
            
            $
            (644,993
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
            
            
            88,943Amortization
                of discount on debt
            
            
            38,629(Increase)
                / decrease in assets:Accounts
                receivables
            
            
            (30,107
            )Inventory
            
            
            (876,629
            )Other
                receivables
            
            
            (19,392
            )Other
                assets
            
            
            23,460Increase
                in liabilities:Accounts
                payable and accrued expenses
            
            
            12,667Total
                Adjustments
            
            
            (762,429
            )Net
                cash used in operations
            
            
            (1,407,422
            )CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                from long-term debt
            
            
            41,565Proceeds
                from payment on subscription receivable
            
            
            5,500Capital
                lease payments
            
            
            9,882Receivable
                from related parties
            
            
            (49,492
            )Loans
                payable - related party
            
            
            915,060Net
                cash provided by financing activities
            
            
            922,515Effect
                of exchange rate changes on cash and cash equivalents
            
            
            376,928Net
                decrease in cash and cash equivalents
            
            
            (107,979
            )Cash
                and cash equivalents, beginning balance
            
            
            150,072Cash
                and cash equivalents, ending balance
            
            $
            42,093SUPPLEMENTAL
                DISCLOSURES:Cash
                paid for:Income
                tax payments
            
            $
            -Interest
                payments
            
            $
            282,949Non-cash
                financing and investing activitiesStock
                issued for services
            
            $
            –Discount
                on debt
            
            $
            38,629





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





6





**YARRAMAN
      WINERY, INC. AND SUBSIDIARY**


**NOTES
      TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS**


**THREE
      MONTHS ENDED SEPTEMBER 30, 2007**





NOTE
      1 - NATURE
      OF OPERATIONS





On
      December 16, 2005, Yarraman Estate Pty Limited, a privately owned Australian
      company engaged in the production of wine (“Yarraman Australia”), purchased from
      the beneficial owners of all of Yarraman Australia’s shares, (the
“Shareholders”) and Delta Dawn Pty Limited as trustee (the Trustee”) of the
      Yarraman Road Trust (the “Trust”), the nominal holder of such shares, certain
      assets including land, buildings and equipment and water license rights by
      assuming certain debt, capital leases, contribution to paid in capital for
      the
      Trust and a liability to the Trust (the “Asset Purchase”). The assets and
      liabilities were recorded at the historical cost of the related party. No cash
      was exchanged. The following is a summary of the transaction:





Assets
                Purchased
            
            $
            5,759,740Liabilities
                Assumed
            
            
            (4,384,740
            )Payable
                to Former Parent
            
            
            (431,151
            )Contribution
                to Capital
            
            
            (943,849
            )$
            -





Yarraman
      Australia’s assets are pledged as collateral for a loan advance owed by Yarraman
      Australia to a commercial bank. Prior to the Asset Purchase, the Trust was
      the
      borrower of this loan; subsequent to the Asset Purchase, Yarraman Australia
      assumed the loan. As of September 30, 2007 the outstanding balance on this
      debt
      was approximately $5,084,352.





On
      December 22, 2005, Yarraman Australia, the Trustee and the Trust, entered into
      a
      Share Exchange Agreement (the “Exchange Agreement”) with Yarraman Winery, Inc.
      (formerly Dazzling Investments, Inc.), a company incorporated on December 6,
      1996 under the laws of the State of Nevada. Under the terms of the Exchange
      Agreement, Yarraman Winery, Inc. issued 15,000,000 shares of its common stock
      for all the issued and outstanding shares of Yarraman Australia (the “Share
      Exchange”). This issuance of Yarraman Winery, Inc.’s common stock is intended to
      be exempt from registration under the Securities Act of 1933, as amended
      (“Securities Act”).  Henceforth, Yarraman Winery, Inc. or Yarraman
      Australia are to be referred to collectively as the “Company”, unless reference
      is made to the respective company for reference to events surrounding that
      company.





The
      Share
      Exchange has been accounted for as a reverse acquisition under the purchase
      method of accounting since the stockholders of Yarraman Australia obtained
      control of the consolidated entity. Accordingly, the acquisition has been
      recorded as a recapitalization of Yarraman Australia, with Yarraman Australia
      being treated as the continuing entity. The historical financial statements
      presented are those of Yarraman Australia. The balance sheet consists of the
      net
      assets of Yarraman Australia, the accounting acquirer, at historical cost and
      the net assets of Yarraman Winery, Inc., the legal acquirer, at historical
      cost.
      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 acquisition. On February 3, 2006, the Company voted to change its fiscal
      year end from December 31 st to June
      30 th to
      correspond with the fiscal year end of Yarraman Australia.





The
      Company produces and sells premium, super premium and ultra premium varietal
      wines. The Company’s wines are made from grapes grown at its vineyard (the
“Vineyard”) and from grapes purchased from other Australian vineyards. The
      grapes are crushed, fermented and made into wine at the Company’s winery and the
      wines are sold principally under the Company’s Yarraman Estate Vineyard labels.
      Yarraman Australia’s vineyard and winery are located in the Upper Hunter Valley,
      approximately 200 miles north of Sydney, Australia.





7


Prior
      to
      the Exchange Agreement, on August 15, 2005, the Company’s Board of Directors’
declared a 4.55 for 1 common stock dividend to the shareholders of record as
      of
      August 26, 2005. The number of common stock shares outstanding increased from
      2,100,000 shares to 11,655,000 shares.  In connection with the Exchange
      Agreement, certain shareholders of the Company agreed to cancel an aggregate
      of
      8,158,500 shares of the Company’s common stock resulting in 3,496,500 shares of
      common stock outstanding as a result of the reverse acquisition. All prior
      year
      information has been adjusted to reflect the stock cancellation and the stock
      dividend.





In
      connection with Exchange Agreement, on December 22, 2005, the Company entered
      into a stock purchase agreement (the “Purchase Agreement”) with certain
      investors (the “Investors”) for the sale of an aggregate of 5,253,500 shares of
      common stock (the “Share Sale”) for aggregate gross proceeds in the form of
      promissory notes with an aggregate principal amount equal to $2,000,000
      (the “Notes”) .
      The
      Notes have a maturity of 300 days and principal is payable in approximately
      quarterly installments, with interest accruing on the original principal amount
      at the rate of prime plus 2.5%, payable at maturity.  Pursuant to the
      Purchase Agreement, the Company has granted the Investors rights of first
      refusal on financing the Company may do in the future. This right was
      relinquished in September 2006. The principal balance of the note has been
      collected as of December 31, 2006. Interest receivable amounting $36,851 is
      due
      on this Note as of September 30, 2007 and has been classified as other
      receivable in the accompanying financial statements.





In
      connection with the Share Sale, the Company issued 1,250,000 shares of common
      stock to MillhouseIAG Limited (“Millhouse”) as a finder’s fee.




8


NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Basis
      of Presentation


The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of
      America.  The functional currency of Yarraman Australia is the Australian
      Dollar (“AUD”); however, the accompanying consolidated financial statements have
      been translated and presented in United States Dollars (“USD” or
“$”).





Principles
      of Consolidation


The
      consolidated financial statements include the accounts of Yarraman Winery,
      Inc.
      and its wholly owned subsidiary, Yarraman Estate Pty Limited, Inc, collectively
      referred to within as “the Company”. All material intercompany accounts,
      transactions and profits have been eliminated in consolidation.





Revenue
      Recognition


The
      Company’s revenue recognition policies are in compliance with Staff Accounting
      Bulletin (SAB) 104. The Company recognizes
      revenue when the product is shipped and title passes to the customer, when
      a
      formal arrangement exists, the price is fixed or determinable, the delivery
      is
      completed, no other significant obligations of the Company exist and
      collectibility is reasonably assured. The
      Company’s standard terms are ‘FOB’ shipping point, with no customer acceptance
      provisions. No products are sold on consignment. Credit sales are recorded
      as
      trade accounts receivable and no collateral is required. Revenue from items
      sold
      through the Company’s retail location is recognized at the time of sale. The
      Company has established an allowance for doubtful accounts based upon factors
      pertaining to the credit risk of specific customers, historical trends, and
      other information. Delinquent accounts are written-off when it is determined
      that the amounts are uncollectible.  Revenues are recognized net of the
      amount of goods and services tax (GST) payable to the Australian taxing
      authority.





Accounts
      Receivable


The
      Company maintains reserves for potential credit losses on accounts receivable.
      Management reviews the composition of accounts receivable and analyzes
      historical bad debts, customer concentrations, customer credit worthiness,
      current economic trends and changes in customer payment patterns to evaluate
      the
      adequacy of these reserves. Allowance for doubtful debts amounted to $36,344
      as
      of September 30, 2007.





Vineyard
      Development Costs


Vineyard
      development costs consist primarily of the costs of the vines and expenditures
      related to labor and materials to prepare the land and construct vine trellises.
      The costs are capitalized until the vineyard becomes commercially productive,
      at
      which time annual amortization is recognized using the straight-line method
      over
      the estimated economic useful life of the vineyard, which is estimated to be
      30
      years. Amortization expense of vineyard development costs aggregated to $646
      for
      the three months ended September 30, 2007 and $3,460 for the year ended June
      30,
      2007, and is included in inventory costs and ultimately becomes a component
      of
      costs of goods sold.





Goods
      and Services Tax


Revenues,
      expenses and assets are recognized net of the amount of goods and services
      tax
      (GST), except where the amount of GST incurred is not recoverable from the
      taxation authority. In these circumstances, the GST is recognized as part of
      the
      cost of acquisition of the asset or as part of the expense. Receivables and
      payables are stated with the amount of GST included.





9


The
      net
      amount of GST recoverable from, or payable to, the Australian Tax Authority
      (ATO) is included as current asset or liability in the statement of financial
      position. Cash flows are included in the statement of cash flows on a gross
      basis. The GST components of cash flows arising from investing and financing
      activities, which are recoverable from, or payable to, the ATO are classified
      as
      operating cash flows. The Company has a net consumption tax payable of $24,920
      as of September 30, 2007. The Company had a net consumption tax receivable
      of
      $9,761 as of June 30, 2007.





In
      addition to GST, the Company is required to collect wine equalisation tax
      (“WET”) on sales of wine product to non-exempt Australian customers. Revenue is
      recorded net of WET taxes. The WET taxes payable is offset by a rebate of the
      WET tax offered by the Australian Taxation Office. The WET rebate of the WET
      tax
      is phased out after a statutory amount of Australian sales have been achieved.
      The Company has a net WET rebate receivable of $9,189 and $13,266 at September
      30, 2007 and June 30, 2007, respectively.





Inventories


Yarraman
      Australia’s annual crop and production costs are recognized as work-in-process
      inventories. Such costs are accumulated with related direct and indirect
      harvest, wine processing and production costs, and are transferred to finished
      goods inventories when the wine is produced, bottled, and ready for sale. The
      cost of finished goods is recognized as cost of sales when the wine product
      is
      sold. Inventories are stated at the lower of first-in, first-out (“FIFO”) cost
      or market by variety. In accordance with general practices in the wine industry,
      wine inventories are generally included in current assets in the accompanying
      balance sheet, although a portion of such inventories may be aged for more
      than
      one year.


During
        the year ending June 30, 2008, the management of the Company sold approximately
        341,300 liters of unbottled wine at below cost. The Company recorded
        approximately $920,000 in cost of sales to reflect this inventory at lower
        of
        cost or market at June 30, 2007. Per Company management this reduction in
        inventory is not indicative of impairment to any other inventory product
        at
        September 30, 2007 or subsequently. The sales, per management, were completed
        to
        infuse working capital into the Company for ongoing
        operations.


September
                  30, 2007(unaudited)
              
              June
                  30, 2007Winemaking
                  and packaging materials
              
              $
              91,678
              
              $
              97,858Work
                  in progress (costs related to unprocessed andnot
                  yet bottled products)
              
              
              3,520,288
              
              
              3,434,408Finished
                  goods (bottled wine)
              
              
              1,338,719
              
              
              541,790$
              4,950,685
              
              $
              4,074,056


Property,
      Plant and Equipment


Property,
      plant and equipment are stated at cost less accumulated depreciation. 
Expenditures for major additions and improvements are capitalized and minor
      replacements, maintenance and repairs are expensed as incurred. Whenever an
      asset is retired or disposed of, its cost and accumulated depreciation or
      amortizations are removed from the respective accounts and the resulting gain
      or
      loss is credited or charged to income.





Depreciation
      is computed using the straight-line and declining-balance methods over the
      following estimated useful lives:





Land
                improvements
            
            
            15
                yearsWinery
                building
            
            
            30
                yearsEquipment
            
            
            5-7
                years





Expenditures
      for repairs and maintenance are charged to operating expense as incurred.
      Expenditures for additions and betterments are capitalized. When assets are
      sold
      or otherwise disposed of, the cost and related accumulated depreciation are
      removed from the accounts, and any resulting gain or loss is included in
      operations.





10


As
      of
      September 30, 2007 and June 30, 2007 Property, Plant and Equipment consist
      of
      the following:


September
                  30, 2007(unaudited)
              
              June
                  30, 2007Buildings
                  and improvements
              
              $
              38,410
              
              $
              36,698Land
              
              
              940,315
              
              
              898,400Plant
                  and equipment
              
              
              4,190,646
              
              
              4,003,850Computer
                  equipment
              
              
              43,463
              
              
              41,527Furniture
                  and Fixtures
              
              
              23,894
              
              
              22,8305,236,728
              
              
              5,003,305Accumulated
                  depreciation
              
              
              (903,581
              )
              
              (767,730
              )$
              4,333,147
              
              $
              4,235,575


Capital
      Lease Obligations


Included
      in Property, Plant and Equipment as of September 30, 2007 are $295,215 of net
      fixed assets that were purchased on capital lease arrangements.





Fair
      Value of Financial Instruments


Statement
      of financial accounting standard No. 107, Disclosures about fair value of
      financial instruments, requires that the Company disclose estimated fair values
      of financial instruments. The carrying amounts reported in the statements of
      financial position for current assets and current liabilities qualifying as
      financial instruments are a reasonable estimate of fair value.





Long-Lived
      Assets


The
      Company has adopted Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”),
      which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
      the Results of Operations for a Disposal of a Segment of a Business.” The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. Under SFAS 144 impairment losses
      are
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets’ carrying amounts. In that event, a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. Based on its review, the Company believes
      that, as of September 30, 2007 there were no significant impairments of its
      long-lived assets.





Intangible
      Assets


Effective
      July 2002, the Company adopted Statement of Financial Accounting Standards
      No.
      142 (“SFAS 142”), “Goodwill and Other Intangible Assets.”  The adoption of
      SFAS No. 142 required an initial impairment assessment involving a comparison
      of
      the fair value of trademarks, patents and other intangible assets to current
      carrying value.  No impairment loss was recognized for the year ended June
      30, 2007. As of September 30, 2007 the intangible assets comprised of water
      licenses valued at $222,100, which are held in perpetuity.





11


Trademarks
      and other intangible assets determined to have indefinite useful lives are
      not
      amortized.  The Company tests 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. Trademarks and other intangible assets determined to have
      definite lives are amortized over their useful lives or the life of the
      trademark and other intangible asset, whichever is less. As of September 30,
      2007 all trademarks and other intangibles had been fully amortized.





Contingencies


Certain
      conditions may exist as of the date the financial statements are issued which
      may result in a loss to the Company but which will only be resolved when one
      or
      more future events occur or fail to occur.  The Company’s management and
      legal counsel assess such contingent liabilities, and such assessment inherently
      involves an exercise of judgment.  In assessing loss contingencies related
      to legal proceedings that are pending against the Company or unasserted claims
      that may result in such proceedings, the Company’s legal counsel evaluates the
      perceived merits of any legal proceedings or unasserted claims, as well as
      the
      perceived merits of the amount of relief sought or expected to be
      sought.





If
      the
      assessment of a contingency indicates that it is probable that a material loss
      has been incurred and the amount of the liability can be estimated, then the
      estimated liability would be accrued in the Company’s financial
      statements.  If the assessment indicates that a potential material loss
      contingency is not probable but is reasonably possible, or is probable but
      cannot be estimated, then the nature of the contingent liability, together
      with
      an estimate of the range of possible loss, if determinable and material, would
      be disclosed.





Loss
      contingencies considered to be remote by management are generally not disclosed
      unless they involve guarantees, in which case the guarantee would be
      disclosed.





Use
      of
      Estimates


The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make certain estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period.  Actual results could differ from those
      estimates. Significant estimates include collectibility of accounts
      receivable, accounts payable, sales returns, and recoverability of long-term
      assets.





Basic
      and Diluted Earnings Per Share


Earnings
      per share are calculated in accordance with the Statement of Financial
      Accounting Standards No. 128 (“SFAS No. 128”), “Earnings per share”. SFAS No.
      128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss
      per
      share for all periods presented has been stated to reflect the adoption of
      SFAS
      No. 128. Basic net loss per share is based upon the weighted average number
      of
      common shares outstanding. Diluted net loss per share is based on the assumption
      that all dilutive convertible shares and stock options were converted or
      exercised. Dilution is computed by applying the treasury stock method. Under
      this method, options and warrants are assumed to be exercised at the beginning
      of the period (or at the time of issuance, if later), and as if funds obtained
      thereby were used to purchase common stock at the average market price during
      the period. For the three months ended September 30, 2007 the Company’s common
      stock equivalents have not been included for earning per share calculations
      as
      they are anti-dilutive.





12


Net
      loss per share


The
      Company has adopted SFAS 128, “Earnings per Share.” Loss per common share is
      computed by dividing loss available to common shareholders by the weighted
      average number of common shares outstanding during the period. The common stock
      equivalents have not been included as they are anti-dilutive. As of September
      30, 2007, there are no common share equivalents.





Translation
      Adjustment


As
      of
      September 30, 2007, the accounts of Yarraman Australia were maintained, and
      their financial statements were expressed, in Australian Dollars (AUD). Such
      financial statements were translated into U.S. Dollars (USD) in accordance
      with
      Statement of Financial Accounting Standards No. 52 (“SFAS No. 52”), “Foreign
      Currency Translation”, with the AUD as the functional currency. According to
      SFAS No. 52, all assets and liabilities were translated at the current exchange
      rate, stockholders’ 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 Statement of Financial Accounting
      Standards No. 130 (“SFAS No. 130”), “Reporting Comprehensive Income” as a
      component of stockholders’ equity.





Statement
      of Cash Flows


In
      accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
      Company’s operations is based upon the local currencies. As a result, amounts
      related to assets and liabilities reported on the statement of cash flows will
      not necessarily agree with changes in the corresponding balances on the balance
      sheet.





Concentration
      of Credit Risk


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





Segment
      Reporting


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





Comprehensive
      Income


The
      Company has adopted Financial Accounting Standard No. 103 (“SFAS 130”),
“Reporting Comprehensive Income”. This statement establishes rules for the
      reporting of comprehensive income and its economic components. Comprehensive
      income consists of net loss to common shareholders and foreign currency
      translation adjustments and is presented in the consolidated statements of
      operations and stockholders’ equity.





13


Advertising


Advertising
      is expensed as incurred. Advertising expenses for the three months ended
      September 30, 2007 were approximately $987.





Shipping
      Costs


Shipping
      costs are included in selling and marketing expenses and totaled approximately
      $25,603 for the three months ended September 30, 2007.





Income
      taxes


The
      Company files federal and state income tax returns in the United States for
      its
      domestic operations, and files separate foreign tax returns for the Company’s
      Australian subsidiary. Income taxes are accounted for under Statement of
      Financial Accounting Standards No. 109, “Accounting for Income Taxes,” which is
      an asset and liability approach that requires the recognition of deferred tax
      assets and liabilities for the expected future tax consequences of events that
      have been recognized in the Company’s financial statements or tax
      returns.





Reclassifications


For
      comparative purposes, prior year’s consolidated financial statements may have
      been reclassified to conform to report classifications of the current
      year.





New
      Accounting Pronouncements


-
            In
                September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’.  This
                Statement defines fair value, establishes a framework for measuring
                fair
                value in generally accepted accounting principles (“GAAP”), and expands
                disclosures about fair value measurements. This Statement applies
                under
                other accounting pronouncements that require or permit fair value
                measurements, the Board having previously concluded in those accounting
                pronouncements that fair value is the relevant measurement attribute.
                Accordingly, this Statement does not require any new fair value
                measurements.  However, for some entities, the application of this
                Statement will change current practice.  This Statement is effective
                for financial statements issued for fiscal years beginning after
                November
                15, 2007, and interim periods within those fiscal years. The management
                of
                the Company is currently evaluating the effect of this pronouncement
                on
                the consolidated financial
                statements.





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




14


1.
            A
                brief description of the provisions of this Statement


2.
            The
                date that adoption is required


3.
            The
                date the employer plans to adopt the recognition provisions of this
                Statement, if earlier.





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





-
            In
                February 2007, FASB issued FASB Statement No. 159, The Fair Value
                Option
                for Financial Assets and Financial Liabilities. FAS 159 is effective
                for
                fiscal years beginning after November 15, 2007. Early adoption is
                permitted subject to specific requirements outlined in the new Statement.





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





-
                In
                    December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
                    consolidated Financial Statements”. This Statement amends ARB 51 to
                    establish accounting and reporting standards for the non-controlling
                    (minority) interest in a subsidiary and for the deconsolidation
                    of a
                    subsidiary. It clarifies that a non-controlling interest in a
                    subsidiary
                    is an ownership interest in the consolidated entity that should
                    be
                    reported as equity in the consolidated financial statements.
                    SFAS No. 160
                    is effective for fiscal years beginning on or after December
                    15, 2008. The
                    management of the Company is currently evaluating the effect
                    of this
                    pronouncement on financial
                    statements.





-
                In
                    March 2008, the FASB issued FASB Statement No. 161, Disclosures
                    about
                    Derivative Instruments and Hedging Activities. The new standard
                    is
                    intended to improve financial reporting about derivative instruments
                    and
                    hedging activities by requiring enhanced disclosures to enable
                    investors
                    to better understand their effects on an entity’s financial position,
                    financial performance, and cash flows The new standard also improves
                    transparency about the location and amounts of derivative instruments
                    in
                    an entity’s financial statements; how derivative instruments and related
                    hedged items are accounted for under Statement 133; and how derivative
                    instruments and related hedged items affect its financial position,
                    financial performance, and cash flows. . It is effective for
                    financial
                    statements issued for fiscal years and interim periods beginning
                    after
                    November 15, 2008, with early application encouraged. Management
                    is
                    currently evaluating the effect of this pronouncement on financial
                    statements.




15


-
                In
                    December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”.
                    This Statement replaces SFAS No. 141, Business Combinations.
                    This
                    Statement retains the fundamental requirements in Statement 141
                    that the
                    acquisition method of accounting (which Statement 141 called
                    the purchase
                    method) be used for all business combinations and for an acquirer
                    to be
                    identified for each business combination. This Statement also
                    establishes
                    principles and requirements for how the acquirer: (a) recognizes
                    and
                    measures in its financial statements the identifiable assets
                    acquired, the
                    liabilities assumed, and any non-controlling interest in theacquiree,
                    (b) recognizes and measures the goodwill acquired in the business
                    combination or a gain from a bargain purchase and (c) determines
                    what
                    information to disclose to enable users of the financial statements
                    to
                    evaluate the nature and financial effects of the business combination.
                    SFAS No. 141(R) will apply prospectively to business combinations
                    for
                    which the acquisition date is on or after Company’s fiscal year beginning
                    December 15, 2008. While the Company has not yet evaluated this
                    statement
                    for the impact, if any, that SFAS No. 141(R) will have on its
                    consolidated
                    financial statements, the Company will be required to expense
                    costs
                    related to any acquisitions after September 30,
                    2009.


-
                  In
                      May 2008, the Financial Accounting Standards Board (FASB) issued
                      Statement
                      of Financial Accounting Standards (SFAS) No. 162, “The Hierarchy of
                      Generally Accepted Accounting Principles.” The new standard is intended to
                      improve financial reporting by identifying a consistent framework,
                      or
                      hierarchy, for selecting accounting principles to be used in
                      preparing
                      financial statements that are presented in conformity with
                      U.S. generally
                      accepted accounting principles (GAAP) for non-governmental
                      entities.
                      Management of the Company is currently evaluating the effects,
                      if any,
                      that SFAS No. 162 may have on our financial
                      reporting.
  NOTE 3
        - CASH
        & CASH EQUIVALENTS





Cash
      and
      cash equivalents include cash in hand and cash in time deposits, certificates
      of
      deposit and all highly liquid debt instruments with original maturities of
      three
      months or less. As
      of
      September 30, 2007 cash held in Australian banks are within Australian statutory
      limits.





NOTE 4
      - ACCOUNTS
      PAYABLE AND ACCRUED EXPENSES





As
      of
      September 30, 2007 and June 30, 2007 the accounts payable and accrued expenses
      comprised of the following:


September
                  30, 2007(unaudited)
              
              June
                  30, 2007Trade
                  creditors
              
              $
              815,194
              
              $
              740,545Accrued
                  expenses
              
              
              211,745
              
              
              309,976Payroll
                  liabilities
              
              
              68,295
              
              
              32,046Stock
                  to be issued
              
              
              117,000
              
              
              117,000$
              1,212,234
              
              $
              1,199,567





Included
      in accrued expenses is a provision for annual employee leave, it represents
      the
      value of the estimated future cash outflows to be made resulting from employees’
services provided to the reporting dates based on their current wage rate. 
As of September 30, 2007 and June 30, 2007 annual leave was $42,171 and $33,668,
      respectively.





At
      September 30, 2007 and June 30, 2007 included in accrued expenses is net
      consumption tax payable of $24,920 and receivable of $9,761, respectively,
      and a
      net WET tax receivable of $9,188 and $13,266, respectively.





NOTE 5
      - MAJOR
      CUSTOMERS AND VENDORS





For
      the
      three months ended September 30, 2007 the Company’s largest customers, over 10%
      of total sales, accounted for 26.5% of sales. There was $208,201 receivable
      from
      the customers as of September 30, 2007.





16


For
      the
      three months ended September 30, 2007 Company had no vendors that accounted
      for
      more than 10% of purchases.




NOTE 6
      - RELATED
      PARTY TRANSACTIONS





The
      Company entered into various related party transactions with the Trustee and
      the
      Trust that is their primary stockholder. The Trust was the sole shareholder
      of
      Yarraman Australia prior to the Share Exchange.





-
            On
                January 1, 2006 Yarraman Australia entered into a consulting agreement
                with the Trustee to provide business consulting services related to
                the wine industry for a term of two years or until such time as their
                ownership percentage in the Company is reduced to less than
                15%. Under this agreement the Company must pay the Trustee$100,000
                AUD (Australian Dollars)or
                approximately$82,100
                USD (US Dollars)annually.
                This agreement was terminated on June 30, 2008.  During the three
                months ended September 30, 2007 and 2006 the Company paid the Trustee
                approximately $21,184 and $29,129,
                respectively.





NOTE 7
      - LOANS
      PAYABLE - RELATED PARTY / DUE TO RELATED PARTY





-
            On
                December 21 2005, prior to the Exchange Agreement and in connection
                with
                the Asset Purchase, Yarraman Australia entered into a loan agreement
                with
                the Trust, the nominal holder of all of Yarraman Australia’s
                shares. The outstanding principal balance of this loan is $1,774,085.
                This loan advance is non-interest bearing. The loan is secured by
                the
                fixed assets of the Company, subordinated to all other loans of the
                Company collateralized by the fixed assets. A total of 50% of the
                loan
                payable, or $887,043, is to be repaid in thirty-six monthly installments
                commencing on the first business day of the twenty-fifth month following
                the loan agreement, or approximately February 1, 2008. On the thirty-sixth
                month of payment, in January 2011, the remaining 50% of the loan
                payable
                or $887,043 is due and payable. The initial repayment date of February
                2008 was extended to June 30, 2008.





On
      May 1,
      2006 Yarraman Australia entered into a loan agreement with the Trust in the
      principal amount of $799,560. Originally, this loan agreement had an
      interest rate of 8%, with the same repayment terms of the December 21, 2005
      loan. During the year ended June 30, 2006 a total of $10,910 in interest expense
      was recorded on this loan, until the Trust waived the interest requirement
      on
      this loan. On May 25, 2006 the Trust extended to Yarraman Australia an
      additional $13,326 to be repaid in accordance with the same terms as the
      December 21, 2005 loan. This loan advance is also non-interest
      bearing.





As
      of
      June 30, 2008 both loan advances above totaling $1,774,085 and the $799,560
      loan
      payable were converted into 6,559,524 shares of the Company common stock.





17


As
      the
      entire above loan advances, totaling $2,586,971, were non-interest bearing,
      the
      Company recorded an imputed interest of $980,665 which is recorded as discount
      on debt and a contribution of capital to the Company. This discount on debt
      is
      being amortized over the term that these loan advances are outstanding. During
      the three months ended September 30, 2007, the Company amortized $38,629 of
      this
      discount on debt recorded as interest expense. All these loan advances are
      recorded as long-term debt.





The
      following is a reconciliation of the above loan advances as of September 30,
      2007:





December
                21, 2005 advance
            
            $
            1,774,085May
                1, 2006 advance
            
            
            799,560May
                25, 2006
            
            
            13,3262,586,971Discount
                on debt
            
            
            (980,665
            )1,606,306Amortization
                of discount on debt (balance sheet purposes)
            
            
            275,958$
            1,882,264





-
            As
                of September 30, 2007 the Company is indebted to a private company
                that is
                owned by one of the majority shareholders of the Company for $3,863,325.
                This related party has made various advances, loans and payments
                on behalf
                of the Company, all of which are unsecured, and due on demand. These
                advances and loans accrued interest on their outstanding balance
                ranging
                between 0% and 10% per annum.





On
      July
      1, 2007 various advances and loans made to the Company by a private company
      that
      is owned by one of the Company’s majority shareholder were restructured into one
      loan agreement for approximately $3,289,000. This new loan includes
      approximately $689,000 related to a sale of wine by the related party to the
      Company. This portion of the new loan is to be repaid commencing December 7,
      2007 with receipts from the proceeds of the re-sale of this wine by the Company
      until it is repaid in full. The entire new loan accrues interest at 6.5% per
      annum. This new loan is secured by the fixed assets of the Company, subordinate
      to the loan from the commercial bank, such loan totaling $5,084,352 as of
      September 30, 2007. This new loan, together with outstanding interest, is to
      be
      repaid for any amounts still outstanding on September 30, 2008. On June 30,
      2008
      a total of AUD$2,400,000, or $2,132,160 of the above loan was converted
      into 5,440,476 shares of the Company’s common stock. On
      October 15, 2008, the lender extended the repayment date on the balance of
      the
      loan remaining, subsequent to the $2,104,152 portion of the loan that had
      converted into common stock, from September 30, 2008 to September 30,
      2009.




NOTE 8
      - LONG-TERM
      DEBT





On
      December 21, 2005, prior to the Exchange Agreement and in connection with the
      Asset Purchase, Yarraman Australia assumed the loan facility that the Trust,
      the
      then nominal holder of all of Yarraman Australia’s shares, had with a financial
      institution located in Australia.  As of September 30, 2007 the total
      amount due under this facility, inclusive of interest, is $5,084,352. This
      loan
      facility requires monthly interest payments due on the 15 th of each
      month at the rate of 10% per annum, rising to 16% per annum if the Company
      is
      late in its payments.  The principal balance was due and payable on
      December 31, 2007.  The loan is secured by certain property, plant and
      equipment of the Company as well as a guaranteed by the Trust. This loan
      facility has been extended through to December 31, 2008 by the lender with
      the
      following changes in the loan agreement: Higher interest rate is to be 16.50%
      per annum, lower interest rate is to be 10.50% per annum and if the Company
      notifies the lender prior to 60 days of their intention to repay, there will
      be
      no repayment fee.





18


NOTE 9
      - LEASES PAYABLE





As
      a part
      of the Asset Purchase agreement in December 16, 2005, the Company assumed
      capital lease obligation to finance the purchase of plant and equipment. Minimum
      lease payments relating to the equipment have been capitalized and are being
      depreciated over the estimated useful lives of the equipment acquired. Assets
      under capital lease and related accumulated amortization at September 30, 2007
      are as follows:





Plant
                and equipment
            
            $
            387,601Less:
                Accumulated depreciation
            
            
            (92,386
            )$
            295,215





The
      future minimum lease payments under the capital lease and the net present value
      of the future minimum lease payments at September 30, 2007 are as
      follows:





Total
                minimum lease payments
            
            $
            262,327Amount
                representing interest
            
            
            (19,880
            )Present
                value of net minimum lease payments
            
            
            242,447Current
                portion
            
            
            (140,758
            )Long-term
                capital lease obligation
            
            $
            101,689





The
      future aggregate minimum annual lease payments arising from these lease
      agreements are as follows:




Year
                endedSeptember
                30, 2008
            
            $
            166,177September
                30, 2009
            
            
            64,844September
                30, 2010
            
            
            31,306$
            262,327





NOTE
      10 - STOCKHOLDERS’
      EQUITY





On
      February 3, 2006, the Board of Directors of the Company and the holders of
      a
      majority of the Company’s outstanding common stock voted to increase the number
      of authorized shares of its capital stock. Pursuant to this authorization,
      on or
      about March 17, 2006, the Company increased the number of authorized shares
      of
      its capital stock to 100,000,000 shares, of which ninety million (90,000,000)
      shares are common stock, par value of $0.001, and ten million (10,000,000)
      shares are Preferred Stock, par value of $0.001, which may be issued in one
      or
      more series or classes as designated by the Board of Directors, from time to
      time, without the approval of stockholders.





On
        July
        16, 2007, as part of an employment agreement with Ian Long, President and
        Board
        Member, the Company agreed to sell 250,000 shares of its common stock to
        Mr.
        Long at the per share price of $0.44, for a total of $110,000. Mr. Long is
        paying for these shares over a five year period.





19


NOTE
      11 - COMMITMENTS
      AND CONTINGENCIES





Consulting
      Agreements





-
            On
                February 24, 2006 the Company entered into a consulting agreement
                with a
                company in New York to assist us to identify potential candidates
                for
                acquisition purposes and assist in the negotiation and execution
                of such
                transactions. As compensation the Company agreed to pay the firm a
                monthly, nonrefundable, fee of $6,500. In addition, the Company agreed
                to
                pay a transaction fee to this consultant that is based on a sliding
                percentage of any completed acquisition.  The original term of the
                contract was from March 1, 2006 until July 1, 2006, it was subsequently
                continued on a month-to-month basis. The total monthly fees paid
                under the
                agreement may be deducted from the total transaction fee. This agreement
                was terminated in April 2007. There were no fees paid under this
                agreement
                for the three months ended September 30, 2007.





-
            On
                September 7, 2006 the Company entered into an agreement with a firm
                in New
                York, New York to provide the following services: strategic advisory,
                development and evaluation financing or capital raising alternatives
                and
                merger and acquisition services.  As compensation the Company agreed
                to pay a retainer of $35,000, of which $10,000 was paid, plus certain
                percentages of financing or capital that is raised and merger acquisitions
                completed.  The term of the contract was for six months, ending in
                February 2007.  The agreement was not renewed and the firm waived the
                remaining $25,000 retainer fee.





-
            On
                October 23, 2006 the Company entered into a consulting agreement
                with a
                firm in Australia for services in recruiting certain consultants
                and Board
                members for us, services in assisting the Company in establishing
                international distribution arrangements, and for services with a
                potential
                business merger.  Certain milestones were set in the contract. 
                Upon completion of each milestone an agreement was made for payment
                to the
                consultant in shares of the Company stock as
                follows:





Milestone
      1 - 50,000 shares of stock, or $100,000 in shares, whichever is
      greater


Milestone
      2 - 50,000 shares of stock, or $100,000 in shares, whichever is
      greater


Milestone
      3 - 100,000 shares of stock, or $200,000 in shares, whichever is
      greater





As
      of
      June 30, 2007 Milestone 1 was completed and the Company accrued $117,000 in
      consulting expense. The Company issued 50,000 shares of common stock
      related thereto as of September 20, 2008.





In
      addition to the above, the Company agreed to pay the consultant approximately
      $4,700 per month starting on November 1, 2006 and ending upon the completion
      of
      a potential business merger that was not completed. This agreement was
      terminated in June 2007. During the year ended June 30, 2007 the Company paid
      $22,500 to this consultant.





In
      connection with the above mentioned business merger that was not completed,
      on
      December 21, 2006 the Company had submitted an offer to merge with Evans &
Tate, Ltd., a company publicly traded in Australia.  In March 2007 the
      merger was abandoned, and all conditional offers were terminated. Related to
      this acquisition the Company has incurred approximately $312,000 in expenses
      that have been expensed in the year ended June 30, 2007.




Arbitration





The
      Company had entered into arbitration on a legal matter regarding one of their
      grape processing arrangements.  A dispute had arisen regarding storage
      charges that were invoiced related to the storage of wine processed under the
      arrangement.  The total amount in dispute was approximately $165,000. 
This amount has been recorded in income during the fiscal years ended June
      30,
      2006, 2005 and 2004.  No reserve had been accrued for this amount as the
      Company intended to vigorously defend their position. In the year ended June
      30,
      2007 this arbitration matter was mutually dropped by both parties.




20


NOTE
      12 - SUBSEQUENT
      EVENTS





On
      September 5, 2008 the Company entered into an Implementation Agreement with
      Asia
      Distributions Limited (ADSL), a public company in the United Kingdom, whereby
      the two companies propose to merge by means of an offer to be made on behalf
      of
      the Company to consist of 63,330,000 shares the Company’s common stock, in
      exchange for the entire share capital of ADSL, issued and to be issued,
      including 30,676,000 shares currently in issue and approximately 2,143,358
      shares to be issued. The formal offer is to be made to ADSL shareholders prior
      to October 16, 2008.


Included
        and contemporaneous with the offer in the Implementation Agreement, the Company
        proposes to acquire assets owned by the Trust. The asset is a vineyard and
        related plant and equipment that Yarraman Australia previously leased from
        January 1, 2006 through May 31, 2007. The purchase price is expected to be
        approximately $11,000,000.




Subsequent
        to March 31, 2008 the Company issued 700,000 shares of common stock to various
        Officers, Directors and vendors in payment of services rendered. The Company
        has
        recorded as an expense the value of the shares issued, $315,000, based on
        a per
        share price of $0.45.




21





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




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




**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




The
      statements contained in this Form 10-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 is based upon our consolidated financial statements,
      which have been prepared in accordance with accounting principles generally
      accepted in the United States. The preparation of these financial statements
      requires us to make estimates and judgments that affect the reported amounts
      of
      assets, liabilities, revenues 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:




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 operating results or financial position, 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 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.




22


INVENTORY
      - The annual crop and production costs relating thereto are recognized as
      work-in-process inventories. Such costs are accumulated with related direct
      and
      indirect harvest, wine processing and production costs, and are transferred
      to
      finished goods inventories when the wine is produced, bottled, and ready for
      sale. The cost of finished goods is recognized as cost of sales when the wine
      product is sold. Inventories are stated at the lower of first-in, first-out
      (“FIFO”) cost or market by variety. In accordance with general practices in the
      wine industry, wine inventories are generally included in current assets in
      the
      accompanying balance sheet, although a portion of such inventories may be aged
      for more than one year.





REVENUE
      RECOGNITION - The Company recognizes revenue when the product is shipped and
      title passes to the customer. The Company’s standard terms are ‘FOB’ shipping
      point, with no customer acceptance provisions. No products are sold on
      consignment. Credit sales are recorded as trade accounts receivable and no
      collateral is required. Revenue from items sold through the Company’s retail
      location is recognized at the time of sale. The Company has established an
      allowance for doubtful accounts based upon factors pertaining to the credit
      risk
      of specific customers, historical trends, and other information. Delinquent
      accounts are written-off when it is determined that the amounts are
      uncollectible. Revenues are recognized net of the amount of goods and services
      tax (GST) payable to the Australian taxing authority.




The
      Company also receives processing revenue which represents fees charged in
      connection with contracts to process fruit for other winemaking companies.
      It is
      recognized when the service is provided to the customer.




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 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 purchased intangible assets with indefinite useful lives will
      be
      evaluated using the specific guidance provided by SFAS No. 142 and SFAS No.
      144,
“Goodwill and Other Intangible Assets” and “Accounting for the Impairment or
      Disposal of Long-Lived Assets.” This impairment analysis will be 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.




23


**NATURE
      OF THE OPERATIONS OF THE COMPANY**




**Background**





We
      were
      incorporated as a Nevada corporation on December 6, 1996 under the name Dazzling
      Investments, Inc. From January 1, 1997 until December 22, 2005, we were in
      the
      developmental stage and had no operations. On October 7, 2005, we caused to
      be
      formed a corporation under the laws of the State of Nevada called Yarraman
      Winery, Inc. and acquired one hundred shares of its common stock for cash.
      As
      such, Yarraman Winery, Inc. (“Merger Sub”) became our wholly-owned subsidiary.
      On December 6, 2005, Merger Sub was merged with and into us. As a result of
      the
      merger, our corporate name was changed to “Yarraman Winery, Inc.” Prior to the
      merger, Merger Sub had no liabilities and nominal assets and, as a result of
      the
      merger the separate existence of Merger Sub ceased. We were the surviving
      corporation in the merger and, except for the name change provided for in the
      Agreement and Plan of Merger, there was no change in our directors, officers,
      capital structure or business.





On
      December 22, 2005, we entered into a Share Exchange Agreement (the “Exchange
      Agreement”) with Yarraman Estate Pty Ltd (“Yarraman Australia”), the
      shareholders of Yarraman Australia, Delta Dawn Pty Limited, as trustee of the
      Yarraman Road Trust (the “Trustee” or “Delta Dawn”) and our shareholders,
      pursuant to which we acquired all of the issued and outstanding shares of stock
      of Yarraman Australia in exchange for the issuance in the aggregate of
      15,000,000 shares of our common stock (the “Shares”) to the Trustee. Yarraman
      Australia became our wholly-owned subsidiary and, upon the issuance of the
      Shares, the Trustee owned 60% of our issued and outstanding common stock.
      Through our wholly-owned subsidiary, Yarraman Australia, we operate our primary
      business, which consists of the operation of vineyards and wine production
      in
      Australia and distribution of our wine products in Australia, United States,
      Canada, New Zealand, Hong Kong and throughout Europe.





**Overview**




We
      produce and sell premium (up to US$14), super-premium (up to US$20) and
      ultra-premium (over US$20) wines. Our wines are made at our winery in New South
      Wales, Australia, where grapes are crushed, fermented and made into wine or
      blended with wines purchased from other vineyards for production of varietals.
      Wines are sold both in Australia and internationally, principally under our
      “Yarraman” label. The vineyards from which we produce our wines are located on
      land in two regions in the State of New South Wales, Australia - the Upper
      Hunter Valley and Gundagai.





Opened
      in
      1967 on the Upper Hunter Wybong property, our winery currently has a 2,300
      ton
      processing facility with the capacity to yield 160,000 cases. The winery
      utilizes current technology in its harvesting, production and packaging of
      its
      products. Over US$10 million has been spent since 1994 on capital improvements
      to the winery and vineyard.





The
      Wirrilla Vineyard is located over two blocks of land comprising the Wirrilla
      Homestead and Wirrilla Point Block, with 470 acres under vines. The Wirrilla
      Vineyard produces wines including Sauvignon Blanc, Semillon, Verdelho,
      Chardonnay, Merlot, Cabernet Sauvignon and Shiraz. The wines produced from
      this
      vineyard are used in our premium range of wines.


Yarraman
        was awarded the Upper Hunter Exporter of the year award at the 2008 Hunter
        Export Awards. The annual Hunter Export Awards are held annually to recognize
        outstanding performance by exporters from all industries within the Hunter
        Valley region of New South Wales, Australia.





**Product
      Overview**





We
      offer
      a variety of wine for sale to retail customers. Our product line consists
      of:





24


***Classic
      Hunter***





Under
      the
      Classic Hunter label, we produce and sell the following wines in 750ml bottles:
      Shiraz, Chardonnay, Merlot and Gewurztraminer. The Shiraz is our largest selling
      varietal in this range and has become the product most associated with the
      “Yarraman Classic Hunter” label. The wines sell for approximately US$23 per
      bottle.





These
      wines have received numerous awards and medals in the last three years from
      international and Australian wine shows including the International Wine and
      Food Society, the Hunter Valley Show, the Royal Adelaide Show, the Sydney Royal
      Wine Show and the Melbourne Wine Show. The
      Shiraz and Merlot were recently awarded 4 1⁄2 stars by the highly influential
      Australian wine magazine, Winestate. The Merlot is currently one of the
      finalists for the Winestate 2008 Wine Of The Year Award. The Shiraz also
      received a Silver medal at the 2008 Hunter Valley Wine Show.





***Black
      Cypress***





Under
      the
      Black Cypress label, we currently produce and sell the following types of wines
      in 750ml bottles: Shiraz, Cabernet Merlot, Shiraz Rose, Chardonnay, Verdelho,
      Semillon, Sauvignon Blanc, Gewurztraminer and Chambourcin. The wines sell for
      approximately US$16 per bottle.





These
      wines have received numerous awards and medals in the last four years from
      international and Australian wine shows including New World Wine Awards (NZ),
      the Winestate Shiraz Challenge, the International Food and Wine Society, the
      Hunter Valley Show, the Royal Adelaide Show, the Sydney Royal Wine Show and
      the
      Melbourne Wine Show. The
      Shiraz was recently awarded a Silver medal at the 2008 Hunter Valley Wine Show.
      The Cabernet Merlot was awarded 4 1⁄2 stars by influential Australian wine
      magazine Winestate, in their “Best Wines of 2007” issue.





***Red
      Horse Range***




In
      May
      2006, we exported our first shipment of wines to our new distributor, Robert
      Whale Selections, in the United States. Under this label the range of wines
      is
      comprised of Shiraz Cabernet, Caberenet Merlot, Chardonnay and Semillon Verdelho
      and retail for approximately US$13 per bottle. In
      the
      year ended June 30, 2008 we sold approximately 5,500 cases through this
      distributor.





***Banjo
      Collection***





Under
      the
      Banjo Collection label, we produce and sell the following types of wines in
      750ml bottles: Cabernet Merlot, Chardonnay Semillon and Shiraz Merlot. The
      suggested retail price for these wines is approximately US$12. The Cabernet
      Merlot is the Banjo range’s largest selling variety and has become the product
      most associated with the “Yarraman” label in the Banjo range.





The
      Banjo
      Collection is an “export only” range that combines fruit sourced from our
      vineyards in the Upper Hunter Valley and Gundagai regions. These wines have
      received numerous awards since release in 2003 in the Sydney International
      Wine
      Competition, the International Wine and Food Society and the New World Wine
      Awards (NZ).





***The
      Bolter***





The
        Bolter collection is a range of wines which was released in November 2005
        targeting domestic and international markets. This range was previously produced
        exclusively for a third party who would then sell to wholesalers and retailers.
        In June 2007 we assumed control of all sale and distribution for this
        collection. These wines are currently sold to a broad range of liquor retailers
        in Australia, with a suggested retail price for these wines of approximately
        US$10. During the year ended June 30, 2008 we sold approximately 25,000 cases
        of
        this collection, compared to no sales in the year ended June 30,
        2007.
 The
          Bolter collection sells the following range of wines in 750 ml bottles:
          Shiraz,
          Cabernet Merlot, Classic Dry White and Chardonnay.





25


***Yarraman
      Race Club***





Following
      the successful launch of the “Red Horse” range in the USA, Yarraman has recently
      released a similar series of wines in the Australian market. This range of
      wines
      has been releasesd in conjunction with a promotional offer whereby consumers
      who
      purchase a dozen of these wines become members of the Yarraman Race Club, and
      receive ownership shares in four Thoroughbred Race Horses. Members of the
      Yarraman Race Club receive many benefits, including a proportional share of
      the
      prize money won by the horses and invitations to attend race meetings when
      the
      horses are running.


The
        Yarraman Race Club collection sells the following range of wines in 750ml
        bottles: Verdelho, Chardonnay, Rose, Shiraz and Cabernet Merlot. The wines
        sell
        for approximately US$13.50. The Cabernet Merlot was awarded 3 stars and the
        Shiraz 4 stars by the influential Australian wine magazine
        Winestate.





**The
      Market**





***Overview***





The
      Australian Bureau of Statistics (ABS) reported that 1.37 million tons of grapes
      were harvested for winemaking purposes in 2007. This was a decrease of 23.1%
      from the 2006 harvest. The reasons behind the reduced harvest are primarily
      the
      continuing drought and scarcity of irrigation water, plus the affects of frost
      and bushfires in some areas. ABS has estimated that there were 173,776 hectares
      cultivated for wine, drying and table grapes in 2007, an increase of 4.3% over
      2005.





***Domestic
      Wine Sales***





Data
      published by the Australian Wine & Brandy Corporation (AWBC) shows that
      Australian wine accounted for 91% of domestic wine sales in Australia for 2007.
      Domestic sales of Australian wine increased to 439 million litres - a rise
      of
      slightly more than 1% compared to 2006. Red wine accounted for 36.9% of domestic
      sales, white wine accounted for 47.7%, the balance made up of sparkling and
      fortified wines. Yarraman Australia’s sales account for less than 1% of the
      domestic market.





We
      utilize a system of self distribution, employing three full-time sales
      representatives. We believe the program of self-representation is generating
      a
      strong presence in the New South Wales market with approximately US$731,209
      in
      domestic sales during the 2007 fiscal year, a 35.9% increase from the prior
      period due to new restaurant, retail and wholesale accounts that were
      established.





In
      addition, we market and sell our wines through retail outlets in New South
      Wales, through mailing lists, and through distributors and wine brokers who
      sell
      in specific targeted areas outside of the state of New South Wales. As we have
      increased production volumes and achieved wider brand recognition, sales to
      other domestic markets have increased both in terms of absolute dollars and
      as a
      percentage of our total Company sales.




26


***Export
      Wine Sales***





In
      2007
      Australian wine exports grew to 785 million litres. The average price per litre
      increased 3% to US$3.25, the first time in five years that the average price
      for
      Australian wine exports has increased. The overall dollar value of these exports
      grew by 6.4% to US$2.55 billion. The United Kingdom remains the largest overseas
      market at 290 million litres (36.9%) , however the average value per litre
      is
      well below the overall average, at US$2.88. The United States is the second
      largest overseas market at 204 million litres (25.9%). The average value per
      litre in this market is well above the overall average, at $3.81 per litre.
      Yarraman Australia ships approximately 10,000 cases per year to the United
      States market.





During
      2003, the Australian dollar began to strengthen against the US Dollar, the
      Euro
      and the Pound Sterling. As a result, we saw a decline in revenue per liter
      (in
      Australian dollar terms) for sales in those export markets. Despite this, the
      increase in international red wine sales including sales to the United States
      continue to be major drivers of growth for Australian wineries. Red wine
      continues to have a higher margin of sales over white wine comprising 50% of
      the
      total Australian wine exports. The United States has had the strongest export
      growth for all Australian wines. However, the United Kingdom, which consists
      of
      41% of the total market, remains Australia’s largest overseas market by volume.
      Despite the disparity in size, the United States market supports higher sales
      margins per gallon and correspondingly was the largest market by value.
      Currently, the Company ships approximately 7500 cases per year to the United
      States, less than 1% of the total market.




China
      has
      become the fastest growing export market for Yarraman wines and will quickly
      become our single largest export market by volume and value. Yarraman has
      received purchase orders and a confirmed shipping schedule for 8,800 cases
      of
      wine to be delivered to Shanghai Sing Xia Trading Co (a subsidiary of Asia
      Distribution Solutions Ltd). The total volume will be shipped during the period
      August 2008 through November 2008. As of September 2008 we have shipped
      approximately 3,300 cases.





With
      continuing investment and development in our brands, we plan to capitalize
      on
      consumer demand in our primary export markets of the United States, Canada,
      United Kingdom, Ireland and Asia. We have also explored certain parts of Central
      Europe and China as being areas in which, with carefully selected chosen
      partners, it can develop branded and non-branded wine distribution.





Our
      wines
      are distributed by independent companies in the following
      countries:


s
              USA
              s
              Canada
              s
              Malaysias
              Denmark
              s
              Poland
              s
              Japans
              Switzerland
              s
              Germanys
              Ireland
              s
              United
                  Kingdom




We
      export
      approximately 50% of our annual volume production.





We
      appoint agents or distributors in export markets to facilitate importation
      of
      wines to the desired markets. Agents or distributors provide sales
      representation and facilitate or directly distribute wines within their
      designated regions.




All
      markets, with the exception of Canada, purchase “Yarraman” branded wines in
      Australian dollars with shipping from Australia paid for by and at the risk
      of
      the purchaser. These wines are then sold wholesale.





27


Our
      Canadian distributor acts as a commissioned agent facilitating the importation
      wines into the Canadian provinces and provides sales representation in
      government controlled and privatized markets. Exports to Canada are also shipped
      from Australia at the purchaser’s risk and cost, although such sales are made in
      Canadian dollars.





**Seasonal
      and Quarterly Results**





We
      have historically experienced and expect to continue experiencing seasonal
      fluctuations in our revenues and net income. Sales volumes increase
      progressively beginning in the fourth quarter through to the second quarter
      with
      declines in the first six weeks of the third quarter for the domestic market.
      In
      the export market we have traditionally seen increases in orders in the third
      quarter progressively increasing to the second quarter of the following
      financial year due to substantial lead times to meet seasonal sales
      requirements.




**RESULTS
      OF OPERATIONS**




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




**Three
                Months ended September
                30,****2007**
            
            **2006**Revenue
            
            $
            672,994
            
            
            100
            %
            $
            404,745
            
            
            100
            %Cost
                of Revenue
            
            
            464,365
            
            
            69
            %
            
            280,062
            
            
            69
            %Gross
                Profit
            
            
            208,629
            
            
            31
            %
            
            124,683
            
            
            31
            %Other
                (Income) Expense
            
            
            223,165
            
            
            33
            %
            
            153,040
            
            
            38
            %Operating
                expenses
            
            
            630,457
            
            
            94
            %
            
            553,526
            
            
            137
            %Loss before
                income tax
            
            
            (644,993
            )
            
            96
            %
            
            (581,883
            )
            
            (144
            )%Income
                tax expenses
            
            
            0
            
            
            0
            
            
            0
            
            
            0**Net
                Income(loss)**
            
            $
            (644,993
            )
            
            96
            %
            
            ($581,883
            )
            
            (144
            )%





**Three
      Months Ended September 30, 2007 Compared to Three Months Ended September 30,
      2006**




***Revenue*** .
      Revenue
      was $672,994 in the three months ended September 30, 2007 compared to $404,745
      in the three months ended September 30, 2006. The increase in revenues of
      $268,249, or approximately 66%, was a direct result of an increase in sales
      of
      approximately $196,561 from our sales team under the direction of our consultant
      from Delta Dawn in an organized effort to increase domestic sales. In addition,
      the effect of the fluctuation in the exchange rate between the Australian Dollar
      and the US Dollar of approximately $71,688.





28


***Cost
      of Revenue*** .
      Cost of
      revenue was $464,365 in the three months ended September 30, 2007 compared
      to
      $280,062 in the three months ended September 30, 2006, an increase of $184,303.
      As a percentage of revenue, cost of revenue was 69% in the three months ended
      September 30, 2007 compared to 69% in the three months ended September 30,
      2006.
      The increase in cost of revenue is primarily due to the dollar increase in
      our
      sales.





***Gross
      Profit (Loss)*** .
      Gross
      profit was $208,629 in the three months ended September 30, 2007 compared to
      gross profit of $124,683 in the three months ended September 30, 2006. As a
      percentage of revenues, gross profit was 31% in the three months ended September
      30, 2007 compared to 31% in the three months ended September 30,
      2006.





***Other
      Income (Expense)*** .
      Other
      expense was $223,165 in the three months ended September 30, 2007 compared
      to
      $153,040 in the three months ended September 30, 2006. The increase in other
      expense of $70,125 was primarily attributable to an increase in our interest
      expense of $43,003. Our interest expense increased substantially due to
      increased borrowings as described in our financial statements.





***Sales,
      General and Administrative Expenses*** .
      Sales,
      general and administrative expenses were $630,457 in the three months ended
      September 30, 2007 compared to $553,526 in the three months ended September
      30,
      2006. This is an increase of $76,931 or approximately 14% from the 2006 period
      to the 2007 period. This increase was primarily attributable to an increase
      in
      our compensation and professional fees related to an accrual of
      $273,600 for services provided by directors, officers and vendors of the
      Company. Without these one time expenses our actual sales, general and
      administrative expenses decreased by approximately $202,169 due to cost saving
      measures implemented by management.




As
      a
      percentage of revenues, sales, general and administrative expenses decreased
      to
      approximately 94% in the three months ended September 30, 2007 from 137% in
      the
      three months ended September 30, 2006 due to the reasons as discussed
      above.




***Net
      Income (Loss)*** .
      Our net
      loss was $644,993 in the three months ended September 30, 2007 compared to
      a net
      loss of $581,883 in the three months ended September 30, 2006. This increase
      in
      loss was primarily attributable to an increase in our general expenses as
      described above.




**Liquidity
      and Capital Resources**




As
      of
      September 30, 2007, we had $42,093 of cash and cash equivalents and $941,312
      of
      working capital as compared to $150,072 and $1,067,047 respectively, at June
      30,
      2007. Cash flow from operations is expected to improve as a result of our cost
      cutting measures, including the termination of the Wirrilla lease and related
      operating costs and improved sales. Cash flow from financing activities is
      expected to improve as the Company converted approximately $4,500,000 of debt
      into equity by issuing 12,000,000 shares of common stock.





On
      December 21, 2005, we entered into a long term, loan with Delta Dawn with an
      initial principal balance of AU$1,612,666. According to the repayment terms,
      50%
      of the loan balance is first due after the first 25 months and the remaining
      balance is otherwise payable for 36 equal monthly installments thereafter.
      After
      the 36 months, the entire remaining balance becomes due and payable immediately.
      On June 30, 2008 Delta Dawn agreed to convert this loan to equity and received
      approximately 4,516,900 shares of common stock.





29


An
      additional loan agreement was also signed on May 1, 2006 with Delta Dawn, with
      a
      principal amount of $656,000. This loan was provided to assist with our working
      capital requirements due to the low level of sales revenue generated during
      the
      period. On June 30, 2008 Delta Dawn agreed to convert this loan to equity and
      received approximately 2,042,600 shares of common stock.





On
      May
      25, 2006, Delta Dawn loaned us an additional $10,950 to be paid according to
      the
      terms of the May 1, 2006 loan.





As
      of
      June 30, 2007 the Company is indebted to Whinners Pty., Ltd., owned by Geoffrey
      White, one of the unit holders of the Company’s majority shareholder for
      $3,289,000. This related party has made various advances, loans and payments
      on
      behalf of the Company and has provided necessary cash flow. On July 1, 2007
      these advances and loans, including additional loans and advances made
      subsequent to June 30, 2007, were restructured into one loan agreement for
      approximately $3,289,000. This portion of the new loan is to be repaid
      commencing December 7, 2007 with receipts from the proceeds of the re-sale
      of
      this wine by the Company until it is repaid in full. The entire new loan accrues
      interest at 6.5% per annum. This new loan is secured by the fixed assets of
      the
      Company, subordinate to the loan from Provident, such loan totaling $5,084,352
      as of September 30, 2007. This new loan, together with outstanding interest,
      is
      to be repaid for any amounts still outstanding on September 30, 2008. As of
      June
      30, 2008 Whinners Pty., Ltd. agreed to convert approximately $2,132,160 of
      this
      debt into equity and received 5,440,476 shares of common stock. On
      October 15, 2008, the lender extended the repayment date on the balance of
      the
      loan remaining, subsequent to the $2,104,152 portion of the loan that had
      converted into common stock, from September 30, 2008 to September 30,
      2009.





Management
      has been exploring options to refinance its long term loan from Provident,
      currently with an outstanding balance of $5,084,352. Any refinancing transaction
      will seek terms that provide a lower interest rate, which management believes
      will further increase the amount cash flow as a result of savings because of
      lower interest payments.





The
      Company has engaged professional investment bankers in the United States to
      raise an additional $3,500,000. In addition the company has been working on
      an
      acquisition, as explained in the footnotes to the financial statements, that
      would also improve its liquidity.




30





**ITEM
      3.  CONTROLS AND PROCEDURES**




EVALUATION
        OF DISCLOSURE CONTROLS
 
 The
        Company maintains controls and procedures designed to ensure that they are
        able
        to collect the information that is required to be disclosed in the reports
        they
        file with the Securities and Exchange Commission (the "SEC") and to process,
        summarize and disclose this information within the time period specified
        in the
        rules of the SEC. The Company's Chief Executive and Chief Financial Officer
        are
        responsible for establishing, maintaining and enhancing these procedures.
        The
        office is also responsible, as required by the rules established by the SEC,
        for
        the evaluation of the effectiveness of these procedures.
 
 Based
        on
        management's evaluation (with participation of our principal executive officer
        and principal financial officer), as of the end of the period covered by
        this
        report, the principal executive officer and principal financial officer
        concluded that a deficiency was identified in the Company's internal controls
        over financial reporting which constituted a "material weakness." Accordingly,
        management concluded that the Company's disclosure controls and procedures
        were
        not effective.
 
 The
        material weakness was the result of an insufficient number of personnel having
        adequate knowledge, experience and training to provide effective, and timely,
        oversight and review over the Company's financial close and reporting
        process.
 
 LIMITATIONS
        ON THE EFFECTIVENESS OF CONTROLS
 
 The
        Company's management does not expect that their disclosure controls or their
        internal controls over financial reporting will prevent all error and fraud.
        A
        control system, no matter how well conceived and operated, can provide only
        reasonable, but not absolute, assurance that the objectives of a control
        system
        are met. Further, any control system reflects limitations on resources, and
        the
        benefits of a control system must be considered relative to its costs. These
        limitations also include the realities that judgments in decision-making
        can be
        faulty and that breakdowns can occur because of simple error or
        mistake.
 
 Additionally,
        controls can be circumvented by the individual acts of some persons, by
        collusion of two or more people or by management override of a control. A
        design
        of a control system is also based upon certain assumptions about potential
        future conditions; over time, controls may become inadequate because of changes
        in conditions, or the degree of compliance with the policies or procedures
        may
        deteriorate. Because of the inherent limitations in a
 cost-effective
        control system, misstatements due to error or fraud may occur and
 may
        not
        be detected.


31





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




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




None.




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





On
      July
      16, 2007 the Company sold 250,000 shares to Ian Long, President and Board Member
      at a price of $0.44 per share, a total of $110,000.


.


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




None.




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




None.




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




On
      September 20, 2007 Wayne Rockall resigned as our Chief Executive Officer. On
      September 25, 2008 we appointed Ian Long as our Chief Executive
      Officer.





On
      October 1, 2007 Raymond Brien was appointed our Chief Financial Officer, which
      he then resigned on June 30, 2008. On September 25, 2008 we appointed Lawrence
      Lichter as our Chief Financial Officer.





On
      September 20, 2007 Mark Valencic resigned as our Secretary. On September 20,
      2007 Lawrence Lichter was appointed as our Secretary.





On
      May 1,
      2008 William Middleton resigned from our Board of Directors. On May 1, 2008
      Gary
      Blom was elected to our Board of Directors and on June 24, 2008 Ian Long was
      elected to our Board of Directors.





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




The
      following exhibits are filed as part of this report:




**Exhibit
                Number**
            **Description**31.1
            Certification
                of Principal 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 Principal Financial Officer pursuant to Rule 13a-14(b)/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 Pursuant to 18 U.S.C. 1350 (Section 906
                of the
                Sarbanes-Oxley Act of 2002).32.2
            Certification
                of Chief Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906
                of the
                Sarbanes-Oxley Act of 2002).




32




**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.




**YARRAMAN
              WINERY, INC.**Date:
              October 15, 2008
            By:
            /s/ Ian
              LongName:
              Ian LongTitle:
              Chief Executive Officer


33