UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 x
QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2009
 
  ̈
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 large accelerated filer, an
accelerated filer, a non-accelerated filer, or smaller reporting
company.  See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
 
 Large
accelerated filer   ̈    Accelerated
filer    ̈   Non-accelerated
filer   ̈    Smaller
Reporting Company  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 May 31,
2009.
  Transitional
Small Business Disclosure Format (check one): YES o NO x
  
 
 TABLE OF
CONTENTS
  PagePART
      I - FINANCIAL INFORMATIONITEM
      1.
                  
                  
                  FINANCIAL
      STATEMENTS
                  
                  F-1ITEM
      2.
                  
                  
                  MANAGEMENT’S
      DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
                  
                  3ITEM
      4.
                  
                  
                  CONTROLS
      AND PROCEDURES
                  
                  11PART
      II - OTHER INFORMATIONITEM
      1.
                  
                  
                  LEGAL
      PROCEEDINGS
                  
                  12ITEM
      2.
                  
                  
                  UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                  
                  12ITEM
      3.
                  
                  
                  DEFAULTS
      UPON SENIOR SECURITIES
                  
                  12ITEM
      4.
                  
                  
                  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                  
                  12ITEM
      5.
                  
                  
                  OTHER
      INFORMATION
                  
                  12ITEM
      6.
                  
                  
                  EXHIBITS
                  
                  12
  2
  PART
I - FINANCIAL INFORMATION
 
 ITEM 1.  
FINANCIAL
STATEMENTS
  YARRAMAN
WINERY, INC. AND SUBSIDIARY
  CONSOLIDATED
UNAUDITED FINANCIAL STATEMENTS
 
 March 31,
2009
 
 TABLE
OF CONTENTS
 
 Consolidated
      Unaudited Balance Sheets
                  
                  
                  F-2Consolidated
      Unaudited Statements of Operations
                  
                  
                  F-3Consolidated
      Unaudited Statements of Cash Flow
                  
                  
                  F-4Notes
      to Consolidated Unaudited Financial Statements
                  
                  
                  F-5
  F-1
  YARRAMAN WINERY, INC. AND SUBSIDIARY
 CONSOLIDATED
BALANCE SHEETS
 
 March
      31,
                                    
                                    
                                    June
      30,2009
                                    
                                    
                                    2008(Unaudited)ASSETSCurrent
      AssetsAccounts
      receivable, net
                                    
                                    $
                                    959,671
                                    
                                    
                                    $
                                    555,798Inventory
                                    
                                    
                                    3,049,328
                                    
                                    
                                    
                                    4,409,833Other
      receivables
                                    
                                    
                                    -
                                    
                                    
                                    
                                    26,787Other
      assets
                                    
                                    
                                    466,681
                                    
                                    
                                    
                                    214,463Total
      Current Assets
                                    
                                    
                                    4,475,680
                                    
                                    
                                    
                                    5,206,881Property,
      plant and equipment, net
                                    
                                    
                                    2,961,540
                                    
                                    
                                    
                                    4,369,645Intangible
      asset
                                    
                                    
                                    177,977
                                    
                                    
                                    
                                    249,990$
                                    7,615,197
                                    
                                    
                                    $
                                    9,826,516LIABILITIES
      AND STOCKHOLDERS' EQUITY  (DEFICIT)Current
      Liabilities:Accounts
      payable and accrued expenses
                                    
                                    $
                                    1,303,780
                                    
                                    
                                    $
                                    1,404,104Cash
      deficit
                                    
                                    
                                    24,287
                                    
                                    
                                    
                                    37,990Capital
      leases, current portion
                                    
                                    
                                    14,922
                                    
                                    
                                    
                                    102,720Due
      to related parties, including interest
                                    
                                    
                                    2,951,168
                                    
                                    
                                    
                                    2,334,733Total
      Current Liabilities
                                    
                                    
                                    4,294,157
                                    
                                    
                                    
                                    3,879,547Long
      Term Liabilities:Capital
      leases, net of current portion
                                    
                                    
                                    41,252
                                    
                                    
                                    
                                    50,821Long-term
      debt, including interest
                                    
                                    
                                    3,926,615
                                    
                                    
                                    
                                    5,511,308Total
      Long Term Liabilities
                                    
                                    
                                    3,967,867
                                    
                                    
                                    
                                    5,562,129Total
      Liabilities
                                    
                                    
                                    8,262,024
                                    
                                    
                                    
                                    9,441,676Stockholder's
      Equity (Deficit):Common
      stock, $.001  par value, 90,000,000 shares authorized 38,000,000
      shares issued and outstanding
                                    
                                    
                                    38,000
                                    
                                    
                                    
                                    38,000Additional
      paid in capital
                                    
                                    
                                    11,019,252
                                    
                                    
                                    
                                    11,019,252Subscription
      receivable
                                    
                                    
                                    (71,500
                                    )
                                    
                                    
                                    (88,000
                                    )Other
      comprehensive income
                                    
                                    
                                    (377,169
                                    )
                                    
                                    
                                    (287,228
                                    )Accumulated
      deficit
                                    
                                    
                                    (11,255,410
                                    )
                                    
                                    
                                    (10,297,184
                                    )Total
      Stockholder's Equity (Deficit)
                                    
                                    
                                    (646,827
                                    )
                                    
                                    
                                    384,840$
                                    7,615,197
                                    
                                    
                                    $
                                    9,826,516
 
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  F-2
 
 YARRAMAN
WINERY, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
 
 For
      the Three Months Ended
                        
                        
                        For
      the Nine Months EndedMarch 31,
                        
                        
                        March 31,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Sales,
      net
                        
                        $
                        814,488
                        
                        
                        $
                        603,984
                        
                        
                        $
                        1,902,001
                        
                        
                        $
                        2,070,694Cost
      of sales
                        
                        
                        389,087
                        
                        
                        
                        379,244
                        
                        
                        
                        1,484,767
                        
                        
                        
                        1,419,827Gross
      profit
                        
                        
                        425,401
                        
                        
                        
                        224,740
                        
                        
                        
                        417,234
                        
                        
                        
                        650,867Selling,
      general and administrative expenses
                        
                        
                        239,302
                        
                        
                        
                        432,579
                        
                        
                        
                        959,125
                        
                        
                        
                        1,453,724Total
      operating expenses
                        
                        
                        239,302
                        
                        
                        
                        432,579
                        
                        
                        
                        959,125
                        
                        
                        
                        1,453,724Income
      (loss) from operations
                        
                        
                        186,099
                        
                        
                        
                        (207,839
                        )
                        
                        
                        (541,891
                        )
                        
                        
                        (802,856
                        )Other
      (income) expenseInterest
      income
                        
                        
                        (455
                        )
                        
                        
                        (13
                        )
                        
                        
                        (3,576
                        )
                        
                        
                        (967
                        )Interest
      expense
                        
                        
                        133,758
                        
                        
                        
                        239,366
                        
                        
                        
                        411,443
                        
                        
                        
                        711,981Other
      (income) expense net
                        
                        
                        (2,442
                        )
                        
                        
                        (3,085
                        )
                        
                        
                        (10,964
                        )
                        
                        
                        21,892(Gain)
      loss on sale of fixed asset
                        
                        
                        95
                        
                        
                        
                        (152
                        )
                        
                        
                        (1,833
                        )
                        
                        
                        (5,970
                        )Transaction
      (gain) loss on foreign currency
                        
                        
                        (1,413
                        )
                        
                        
                        460
                        
                        
                        
                        21,265
                        
                        
                        
                        (31,370
                        )Total
      other expense
                        
                        
                        129,544
                        
                        
                        
                        236,576
                        
                        
                        
                        416,335
                        
                        
                        
                        695,567Profit
      (loss) before income taxes
                        
                        
                        56,555
                        
                        
                        
                        (444,416
                        )
                        
                        
                        (958,226
                        )
                        
                        
                        (1,498,424
                        )Provision
      for income taxes
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      profit (loss)
                        
                        
                        56,555
                        
                        
                        
                        (444,416
                        )
                        
                        
                        (958,226
                        )
                        
                        
                        (1,498,424
                        )Other
      comprehensive income (loss) Foreign currency translation
                        
                        
                        (89,006
                        )
                        
                        
                        (85,487
                        )
                        
                        
                        (89,941
                        )
                        
                        
                        195,130Comprehensive
      loss
                        
                        $
                        (32,451
                        )
                        
                        $
                        (529,902
                        )
                        
                        $
                        (1,048,167
                        )
                        
                        $
                        (1,303,293
                        )Net
      loss per share:Basic
      & diluted
                        
                        $
                        (0.00
                        )
                        
                        $
                        (0.02
                        )
                        
                        $
                        (0.03
                        )
                        
                        $
                        (0.06
                        )Weighted
      average number of shares outstanding:Basic
      & diluted
                        
                        
                        38,000,000
                        
                        
                        
                        25,250,000
                        
                        
                        
                        38,000,000
                        
                        
                        
                        25,250,000
 
 Weighted
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 unaudited consolidated
financial statements.
  F-3
 
 YARRAMAN
WINERY, INC. AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Unaudited)
 
 For the Nine Months EndedMarch 312009
                                      
                                      
                                      2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Loss
                                      
                                      $
                                      (958,226
                                      )
                                      
                                      $
                                      (1,498,424
                                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                                      
                                      
                                      188,018
                                      
                                      
                                      
                                      267,785Salary
      applied for stock payment
                                      
                                      
                                      16,500
                                      
                                      
                                      
                                      16,500Amortization
      of discount on debt
                                      
                                      
                                      -
                                      
                                      
                                      
                                      159,811(Increase)
      / decrease in assets:Accounts
      receivables
                                      
                                      
                                      636,069
                                      
                                      
                                      
                                      174,825Inventory
                                      
                                      
                                      (501,764
                                      )
                                      
                                      
                                      (1,107,002
                                      )Other
      receivables
                                      
                                      
                                      20,729
                                      
                                      
                                      
                                      (87,258
                                      )Other
      assets
                                      
                                      
                                      (194,842
                                      )
                                      
                                      
                                      85,807Increase
      in liabilities:Accounts
      payable and accrued expenses
                                      
                                      
                                      162,165
                                      
                                      
                                      
                                      409,612Total
      Adjustments
                                      
                                      
                                      326,875
                                      
                                      
                                      
                                      (79,920
                                      )Net
      cash used in operations
                                      
                                      
                                      (631,351
                                      )
                                      
                                      
                                      (1,578,344
                                      )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
                                      
                                      
                                      (20,020
                                      )
                                      
                                      
                                      (19,579
                                      )Acquisition
      of intangible
                                      
                                      
                                      (267
                                      )
                                      
                                      
                                      -Net
      cash used in investing activities
                                      
                                      
                                      (20,287
                                      )
                                      
                                      
                                      (19,579
                                      )CASH
      FLOWS FROM FINANCING ACTIVITIESCash
      deficit financing
                                      
                                      
                                      (2,960
                                      )
                                      
                                      
                                      -Capital
      lease payments
                                      
                                      
                                      (68,824
                                      )
                                      
                                      
                                      (22,124
                                      )Receivable
      from related party
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (64,136
                                      )Loans
      payable - related party
                                      
                                      
                                      1,380,308
                                      
                                      
                                      
                                      970,028Net
      cash provided by financing activities
                                      
                                      
                                      1,308,524
                                      
                                      
                                      
                                      883,768Effect
      of exchange rate changes on cash and cash equivalents
                                      
                                      
                                      (656,886
                                      )
                                      
                                      
                                      582,047Net
      decrease in cash and cash equivalents
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (132,108
                                      )Cash
      and cash equivalents, beginning balance
                                      
                                      
                                      -
                                      
                                      
                                      
                                      150,072Cash
      and cash equivalents, ending balance
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      17,964SUPPLEMENTAL
      DISCLOSURES:Cash
      paid for:Income
      tax payments
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -Interest
      payments
                                      
                                      $
                                      310,679
                                      
                                      
                                      $
                                      376,331Non-cash
      financing and investing activitiesInventory
      purchased from related party for debt
                                      
                                      $
                                      375,447
                                      
                                      
                                      $
                                      -Loan
      fee included in long-term debt
                                      
                                      $
                                      68,947
                                      
                                      
                                      $
                                      79,276Insurance
      financing included in accounts payable
                                      
                                      $
                                      52,970
                                      
                                      
                                      $
                                      -Discount
      on debt
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      177,239
 
 The
accompanying notes are an integral part of these unaudited consolidated
financial statements.
  F-4
  YARRAMAN
WINERY, INC. AND SUBSIDIARY
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 NINE
MONTHS ENDED MARCH 31, 2009
 
 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 March 31, 2009 the outstanding balance on this debt was
approximately $3,926,615.
 
 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.
 
 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.
  F-5
  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.
 
 NOTE 2 -
GOING
CONCERN
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented in the consolidated
financial statements do not purport to represent their realizable or settlement
value. As shown in the financial statements, during the year ended June 30,
2008, the Company incurred losses of $3,628,825. During the nine month period
ended March 31, 2009 the Company incurred a loss of $958,224. In addition to
suffering recurring losses from operations and negative cash flows from
operations, the Company has a cash overdraft and an inability to meets its
maturing obligations without borrowing from related parties and sale of its
stock.  These issues may raise substantial concern about its ability to
continue as a going concern.
  The
financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company’s continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to retain its current financing,
to obtain additional financing, and ultimately to
attain profitability.
 
 NOTE 3 -
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
approximately $74,082 and $104,213 as of March 31, 2009 and June 30, 2008,
respectively.
 
 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 $1,389
and $2,014 for the nine months ended March 31, 2009 and 2008, respectively, 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.
  F-6
  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 receivable of $5,178
and $11,578 as of March 31, 2009 and June 30, 2008, respectively.
 
 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 $0 and $7,365 at March 31, 2009
and June 30, 2008, 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 ended June 30, 2008, the management of the Company sold
approximately 341,300 liters of unbottled wine at below cost. With regards to
this sale, in the year ended June 30, 2008, 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 March 31, 2009 or
subsequently. The sales, per management, were completed to infuse working
capital into the Company for ongoing operations.
 
 March 31,
                              
                              
                              June 30,2009
                              
                              
                              2008(Unaudited)Winemaking
      and packaging materials
                              
                              $
                              61,558
                              
                              
                              $
                              86,507Work
      in progress (costs related to unprocessed and / or unbottled
      products)
                              
                              
                              2,571,088
                              
                              
                              
                              3,372,199Finished
      goods (bottled wine)
                              
                              
                              416,682
                              
                              
                              
                              951,127$
                              3,049,328
                              
                              
                              $
                              4,409,833
  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.
 
 As of
March 31, 2009 and June 30, 2008 Property, Plant and Equipment consist of the
following:
 March,
      31
                                  
                                  
                                  June
      30,2009
                                  
                                  
                                  2008(Unaudited)Building
      improvements
                                  
                                  $
                                  64,751
                                  
                                  
                                  $
                                  66,090Land
                                  
                                  
                                  723,441
                                  
                                  
                                  
                                  1,017,686Plant
      and equipment
                                  
                                  
                                  3,225,734
                                  
                                  
                                  
                                  4,535,464Computer
      equipment
                                  
                                  
                                  55,851
                                  
                                  
                                  
                                  66,429Furniture
      and fixtures
                                  
                                  
                                  19,647
                                  
                                  
                                  
                                  27,6374,089,424
                                  
                                  
                                  
                                  5,713,306Accumulated
      depreciation
                                  
                                  
                                  (1,127,884
                                  )
                                  
                                  
                                  (1,343,662
                                  )$
                                  2,961,540
                                  
                                  
                                  $
                                  4,369,645
  F-7
  Capital Lease
Obligations
 Included
in Property, Plant and Equipment as of March 31, 2009 and June 30, 2008 are
$193,587 and $302,696, respectively, 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 March 31, 2009 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 periods ended
March 31, 2009 and June 30, 2008. As of March 31, 2009 and June 30, 2008 the
intangible assets comprised of water licenses valued at $170,875 and $240,375,
respectively, which are held in perpetuity.
  Intangible
assets determined to have indefinite useful lives are not amortized.  The
Company tests intangible assets with indefinite and definite useful lives for
impairment annually, or more frequently if events or circumstances indicate that
an asset might be impaired. Intangible assets determined to have definite
lives are amortized over their useful lives or the life of the intangible asset,
whichever is less. As of March 31, 2009 and June 30, 2008, the intangible asset
with definite useful life is comprised of artwork for Company products and
advertising amounting to $7,102 and $9,615, respectively.
 
 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.
  F-8
  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 computed by dividing loss available to
common shareholders by the weighted average number of common shares outstanding
during the period. 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 periods ended March 31, 2009 and March 31, 2008 the Company’s common stock
equivalents have not been included for earning per share calculations as they
are anti-dilutive.
  Translation
Adjustment
 As of
March 31, 2009 and June 30, 2008, 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. 130 (“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.
 
 Advertising
 Advertising
is expensed as incurred. Advertising expense for the nine months ended March 31,
2009 and 2008 was approximately $15,745 and $4,642, respectively.
 
 Shipping
Costs
 Shipping
costs are included in selling and marketing expenses and totaled approximately
$74,181 and $79,709 for the nine months ended March 31, 2009 and 2008,
respectively.
  F-9
 
 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 have been
reclassified to conform to report classifications of the current
year.
 
 New Accounting
Pronouncements
  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 the acquiree , (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
June 30, 2009.
  F-10
 
 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.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (“FSP”) APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon either mandatory or optional conversion
(including partial cash settlement) are not addressed by paragraph 12 of APB
Opinion No. 14, Accounting for
Convertible Debt and Debt issued with Stock Purchase Warrants.
Additionally, FSP APB 14-1 specifies that issuers of such instruments
should separately account for the liability and equity components in a manner
that will reflect the entity’s non-convertible debt borrowing rate when interest
cost is recognized in subsequent periods. FSP APB 14-1 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. The Company will adopt FSP APB
14-1 beginning July 1, 2009, and this standard must be applied on a retroactive
basis. The Company is evaluating the impact the adoption of FSP APB 14-1 will
have on its consolidated financial position and results of
operations.
  In
May 2008, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 162,“TheHierarchy 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 the
Company’s financial reporting.
 
 A variety
of proposed or otherwise potential accounting standards are currently under
study by standard setting organizations and various regulatory agencies. Due to
the tentative and preliminary nature of those proposed standards, management has
not determined whether implementation of such proposed standards would be
material to the consolidated financial statements.
 
 NOTE 4 -
CASH AND 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 March 31, 2009 and June 30, 2008 cash held in Australian
Banks are within Australian statutory limits.
 
 NOTE 5 -
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES
 
 As of
March 31, 2009 and June 30, 2008 the accounts payable and accrued expenses
comprised of the following:
  March 31,
                      
                      
                      June 30,2009
                      
                      
                      2008(Unaudited)Trade
      creditors
                      
                      $
                      1,046,885
                      
                      
                      $
                      1,101,760Accrued
      expenses
                      
                      
                      193,325
                      
                      
                      
                      261,646Payroll
      liabilities
                      
                      
                      63,570
                      
                      
                      
                      40,698$
                      1,303,780
                      
                      
                      $
                      1,404,104
 
 F-11
 
 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
March 31, 2009 and June 30, 2008 annual leave was $21,270 and $23,316,
respectively.
 
 At March
31, 2009 and June 30, 2008 included in accrued expenses is a net consumption
tax receivable of $5,178 and $11,578, respectively and a net WET tax
receivable of $0 and $7,365, respectively.
 
 NOTE 6 -
MAJOR CUSTOMERS AND
VENDORS
 
 For the
nine months ended March 31, 2009 the Company had two customers which comprised
approximately 45% of total sales.   There was $219,637 receivable
from these customers as of March 31, 2009.  For the nine months ended
March 31, 2008 the Company had one customer which comprised approximately 19% of
total sales.     There was $158,412 receivable from the
customer as of June 30, 2008.
 
 For the
nine months ended March 31, 2009 the Company had three vendors that
accounted for more than 74% of purchases. There was $154,017 payable to these
vendors as of March 31, 2009.  For the nine months ended March 31,
2008 the Company had no vendors which comprised over 10% of total
purchases.
 
 NOTE 7 -
RELATED PARTY
TRANSACTIONS
 The
Company entered into various related party transactions with the Trustee and the
Trust, which is their primary shareholder. 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 then 15%. Under this agreement
the Company must pay the Trustee $100,000 AUD (Australian Dollars) or
approximately $68,350 USD (US Dollars) annually. This agreement was terminated
on June 30, 2008.  During the nine months ended March 31, 2008 the Company
paid the Trustee approximately $66,063.
 
 During
the quarter ended March 31, 2009 Yarraman Australia purchased the grape harvest,
at fair market value, from the Jugiong vineyard. The Jugiong vineyard is owned
by the Trust.  The value of the grape harvest was recorded at the
lower of cost or market of Jugiong, at approximately $375,447.  Of
this purchase price the Company recorded $174,703 to its work in process
inventory to be used in the Company’s wine production, and sold $200,744
worth of grapes to a third party, which is included in cost of sales for the
three months and nine months ended March 31, 2009.  The sale to a
third party totaled $575,783. This sale was related to a Grape Purchase
Agreement which the Trust has with a third party which the
Trust assigned to the Company.
 
 On
February 1, 2008 Yarraman Australia entered into a consulting agreement with an
entity that is wholly owned by one of the members of the Company’s Board of
Directors.  This agreement is for $4,800 per month for services
related to the wine industry.  This agreement was terminated by both
parties on June 30, 2008. On July 1, 2008 a new agreement was entered into to
provide for a total annual fee of $150,000 AUD (Australian Dollars) or
approximately $102,525.  During the nine months ended March 31, 2009,
a total of $83,705 was paid under this agreement.
 NOTE 8 -
LOANS PAYABLE -
RELATED PARTY / DUE TO RELATED PARTY
 
 Loans payable – 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 was $1,832,795. This loan advance was
non-interest bearing. The loan was 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 $916,398, was 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 $916,398 was to be 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 $826,020. 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 $13,767 to
be repaid in accordance with the same terms as the December 21, 2005 loan. This
loan advance was also non-interest bearing.
 
 As of
June 30, 2008 loan advances above totaling $1,832,795 and the $826,020 loan
payable were converted into 6,559,524 shares of the Company’s common stock at
the market price of approximately $0.42 per share, for a total of $2,755,000,
the value of these loans based on the currency conversion on the date of
conversion.
  F-12
 
 As the
loan advances totaling $1,832,795, the $826,020 loan payable, and the loan of
$13,767, all totaling $2,672,582 were non-interest bearing, the Company recorded
an imputed interest of $871,307 which was recorded as a discount on debt and a
contribution of capital to the Company. This discount on debt was being
amortized over the term that these loan advances were outstanding until such
time as they converted. As the loan advance was converted into common stock
during the year ended June 30, 2008, the remaining unamortized debt discount was
fully amortized upon conversion. During the years ended June 30, 2008 and 2007,
the Company amortized this discount on debt, recorded as an interest expense of
$763,133 and $205,905, respectively, at the prevailing exchange rates for the
years then ended.
 As of
March 31, 2009 the Company has a payable to the Trust of
$727,449.  These advances made during the nine months ended March 31,
2009 totaling approximately $352,002 made to the Company for working capital
purposes, and $375,447 due to the Trust related to the purchase of the Jugiong
harvest as described earlier.
 Due to related
party:
 
 As of
March 31, 2009 the Company is indebted to a private company that is owned by one
of the Company’s majority shareholders in the amount of $2,223,719. 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 the then outstanding advances and loans were restructured into one loan
agreement for approximately $3,289,000. This new loan included approximately
$689,000 related to a sale of wine by the related party to the Company during
the year ended June 30, 2008. This portion of the new loan was to be repaid
commencing December 7, 2007 with receipts from the proceeds of the re-sale of
this wine by the Company until it was repaid in full. The entire new loan
accrues interest at 6.5% per annum. This loan is secured by the fixed assets of
the Company, subordinate to the loan from the commercial bank, such loan
totaling $3,926,615 as of March 31, 2009. This new loan, together with
outstanding interest, was to be repaid for any amounts still outstanding on
September 30, 2008. On June 30, 2008 a total of AUD $2,400,000 or
USD $2,280,000, of the above loan was converted into 5,440,476 shares of
the Company’s common stock, at a market price of approximately $0.42 per share.
On October 15, 2008, the lender extended the repayment date on the
balance of the loan remaining, subsequent to the $2,280,000 portion of the
loan that had converted into common stock, from September 30, 2008 to September
30, 2009.
 
 NOTE 9 -
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 March 31, 2009 and June 30,
2008 the total amount due under this facility, inclusive of interest, is
$3,926,615 and $5,511,308, respectively. This loan facility requires monthly
interest payments due on the 15th 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 July 6, 2009 by the
lender.
 
 NOTE 10 -
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 March 31, 2009 and
June 30, 2008 are as follows:
 March
      31,
                            
                            
                            June
      30,2009
                            
                            
                            2008(Unaudited)Plant
      and equipment
                            
                            $
                            321,920
                            
                            
                            $
                            452,854Less:
      Accumulated depreciation
                            
                            
                            (128,333
                            )
                            
                            
                            (150,157
                            )$
                            193,587
                            
                            
                            $
                            302,697
 The
future minimum lease payments under the capital lease and the net present value
of the future minimum lease payments at March 31, 2009 and June 30, 2008 are as
follows:
  F-13
 March
      31,
                              
                              
                              June
      30,2009
                              
                              
                              2008(Unaudited)Total
      minimum lease payments
                              
                              $
                              56,174
                              
                              
                              $
                              153,541Amount
      representing interest
                              
                              
                              -
                              
                              
                              
                              -Present
      value of net minimum lease payments
                              
                              
                              56,174
                              
                              
                              
                              153,541Current
      portion
                              
                              
                              (14,922
                              )
                              
                              
                              (102,720
                              )Long-term
      capital lease obligation
                              
                              $
                              56,174
                              
                              
                              $
                              50,821
 The
future aggregate minimum annual lease payments arising from these lease
agreements are as follows:
 
 For the PeriodsApril
      1, 2009 through March  31, 2010
                    
                    $
                    56,174
 
 NOTE 11 -
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.  As of March 31, 2009
a total of $38,500 has been applied toward this subscription receivable through
payroll deductions for the President’s salary.
 
 On
September 20, 2007 the Company issued 750,000 shares of common stock to various
Officers, Directors and vendors in payment of services rendered in the years
ended June 30, 2008 and 2007. The Company has issued 700,0000 shares of it’s
common stock, recorded an expense of $315,000 for services rendered from the
year ended June 30, 2008, based on a per share price of $0.45. The Company also
issued 50,000 shares of common stock, during the year ended June 30, 2008, for
services performed during the year ended June 30, 2007. Such services and shares
to be issued upon such service were then valued at a market price of
$117,000.
 
 On June
30, 2008 the Company issued 12,000,000 shares of common stock to convert
outstanding debt from related parties into equity as described in footnote
8.
 
 NOTE 12 -
COMMITMENTS AND
CONTINGENCIES
 
 Consulting
Agreements
  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.
 
 NOTE 13 -
SUBSEQUENT
EVENTS
 
 On
September 5, 2008 the Company entered into an Implementation Agreement with Asia
Distributions Solutions, Ltd., (ADSL) a Cayman Island company publicly traded in
the United Kingdom on the London Stock Exchange's Alternative Investment Market
(AIM) a global market for smaller, growing companies.  The
Implementation Agreement (the “Offer”) sets out certain matters relating to the
conduct of the Offer and Merger Transaction that has been agreed to by the
Company and ADSL whereby ADSL shareholders are to receive 54,959,313 shares of
the Company’s common stock, at a then market price of $0.42 per share, in
exchange for the entire share capital of ADSL, issued and to be issued,
including 30,676,000 ADSL shares currently in issue and approximately 2,143,358
ADSL shares to be issued.  The formal Offer was made to ADSL
shareholders on November 26, 2008.
  F-14
 
 On
January 19, 2009 the acquisition of ADSL by the Company was approved by a
majority of the stockholders of ADSL.  As of May 1, 2009 over 96% of
the ADSL stockholders have accepted the Offer.  Company management has
been advised by legal counsel, as ADSL is a Cayman Islands company and pursuant
to Cayman Islands law, the Company can force the non-accepting ADSL shareholders
to accept the offer. Subsequent to February 23, 2009 ADSL ceased trading on the
AIM.  On June 5, 2009 the Company completed the acquisition of ADSL
and issued 49,106,738 shares of  common stock and 381,600 shares
of  Preferred Series A shares (which are convertible into 10 shares of
common stock for each Preferred Series A Share) to ADSL
shareholders.  The remaining 2,036,575 common shares to be issued
relate to non responding ADSL shareholders.
 
 Included
and contemporaneous with the Offer as outlined in the Implementation Agreement,
the Company proposes to acquire assets owned by the Trust.  The assets
are a vineyard and related plant and equipment that Yarraman Australia
previously leased from January 1, 2006 through May 31, 2007.  The
purchase price is $11,000,000 and will be paid by the assumption of
approximately $5,000,000 of debt related to the property and the issuance of a
two year convertible note with interest of six percent per annum for
approximately $6,000,000.
 
 On May
26, 2009 the Company agreed to acquire from Delta Dawn, as Trustee of the
Yarraman Road Trust, the “Ripe Cider” brand and the related business concept
involving the manufacture and international sale of a low alcoholic, low
carbohydrate, apple cider made from fresh apples, including all the recipes for
the production of the cider, trademarks (including the international
trademark applications), logos, designs, copyright, know how, show how, business
systems and arrangements and all other intellectual property associated with the
brand and the cider product and their manufacture and marketing  as
well as a contract with Independent Distillers Australia Pty Ltd (“IDA”) of
Melbourne, Victoria, Australia to supply bulk alcoholic apple cider for their
“Snowies Blonde” brand and IDA’s agreement to provide  ongoing
contract carbonated bottling packing services for the “Ripe Cider” brand
products.  The purchase price is $19,250,000 and will be paid by the
issuance of 55,000 shares of the Company’s Preferred Series B
shares.  Each share of Preferred Series B is convertible into 1,000
common shares of stock, for a total of 55,000,000 common shares, at such time
the Company has authorized shares available.  The market value of the
Company’s common stock on the date of the agreement was $0.35 per
share.


The
Company is determining if they have the required amount of authorized common
shares available to be issued for all their subsequent acquisitions. If an
inadequate number of shares is available to satisfy requirements under the above
acquisitions, the Company may have to record a liability until such time as an
adequate number of common shares are available to satisfy required issuances or
conversions.


F-15
  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-K FOR THE YEAR
ENDED JUNE 30, 2008.
  PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
  The
statements contained in this Form 10-Q that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These include statements about the Company’s expectations, beliefs,
intentions or strategies for the future, which are indicated by words or phrases
such as “anticipate,” “expect,” “intend,” “plan,” “will,” “the Company
believes,” “management believes” and similar words or phrases. The
forward-looking statements are based on the Company’s current expectations and
are subject to certain risks, uncertainties and assumptions. The Company’s
actual results could differ materially from results anticipated in these
forward-looking statements. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements.
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  The
methods, estimates and judgments we use in applying our accounting policies have
a significant impact on the results we report in our financial statements, which
we discuss under the heading “Results of Operations” following this section of
our MD&A. Some of our accounting policies require us to make difficult and
subjective judgments, often resulting from the need to make estimates on matters
that are inherently uncertain.
  We
believe the following critical accounting policies reflect our more significant
estimates and assumptions used in the preparation of our consolidated financial
statements:
  REVENUE
RECOGNITION
  Revenues
consist of sales of finished goods, which are bottled and labeled wine, and bulk
wine, which is larger quantities of unbottled wine. Revenue is recognized when
the product is shipped or delivered and the risks, rewards and title of
ownership have transferred to the customer. We recognize some shipping and
handling fees as revenue, and the related expenses as a component of cost of
sales. All internal handling charges are included with selling and marketing
expense.  Historically, sales returns have not been
significant.  As such, we do not record a reduction to revenue for
estimated product returns in the same period that the related revenue is
recorded.
 
 ALLOWANCE FOR DOUBTFUL
ACCOUNTS
 
 The
Company determines its allowance for doubtful accounts based on the aging
of accounts receivable balances, its historic write-off experience, and the
financial condition of its customers. Changes in the financial condition of the
Company's major customers could result in significant accounts receivable
write-offs. The Company's allowance for doubtful accounts at March 31, 2009 and
June 30, 2008 was $74,082 and $104,213, respectively.
 
 INVENTORY
VALUATION
 
 The
Company continually assesses the valuation of its inventories and reduces the
carrying value of those inventories that may have a cost in excess of the
current market value or may be obsolete or in excess of the Company's forecasted
usage to their estimated net realizable value. Net realizable value is estimated
using historic experience, current market conditions and assumptions about
future market conditions and expected demand. If actual market conditions and
future demand are less favorable than projected, inventory write-downs, which
are charged to costs of goods sold, may be required.
 
 IMPAIRMENT OF INTANGIBLE
ASSETS
 
 The
Company has intellectual materials and water usage rights associated with its
business. The Company reviews these assets for impairment at least annually or
more frequently if an event occurs or circumstances change that would more
likely than not reduce the fair value of these assets below their carrying
value. If the fair value of these assets is less than their carrying value, then
an impairment loss would be recognized equal to the excess of the carrying value
over the fair value of the asset. As of March 31, 2009 the Company does not
believe there has been any impairment of these assets. Intangible assets at
March 31, 2009 and June 30, 2008 totaled $177,977 and $249,990,
respectively.
  3
 
 NATURE
OF THE OPERATIONS OF THE COMPANY
  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.
 
 On
November 26, 2008, we made an offer to the shareholders of Asia Distribution
Solutions Ltd. (“ADSL”), a Cayman Islands company, to purchase all of the issued
and outstanding shares of ADSL.  As of May 1, 2009, approximately
96% of the ADSL shareholders had accepted our offer. The transaction
encompassed the issuance of 54,959,313 shares of the Company’s common stock. The
Company completed this acquisition on June 5, 2009 and issued 49,106,738 shares
of  common stock and 381,600 shares of  Preferred Series A
shares (convertible at the rate of 10 common shares to 1 preferred share) to the
ADSL shareholders.  The remaining 2,036,575 common shares to be issued
relate to non responding ADSL shareholders.
  In
November, 2008, we agreed to acquire the Jugiong Vineyard in New South Wales,
Australia, comprising 475 acres of vineyard and a grape supply contract which
has 4 years remaining, from Delta Dawn, as Trustee of the Yarraman Road Trust
(who is also a shareholder in YRMN).  The consideration for the
acquisition of the Jugiong Vineyard amounts to $6,000,000 to be satisfied by way
of a two-year redeemable convertible note to be issued by YRMN, bearing interest
at 6 per cent per annum and the assumption of $5,000,000 of outstanding debt
against the property.  This acquisition has not yet been
finalized.
 
 On May
26, 2009 the Company agreed to acquire from Delta Dawn, as Trustee of the
Yarraman Road Trust, the “Ripe Cider” brand and the related business concept
involving the manufacture and international sale of a low alcoholic, low
carbohydrate, apple cider made from fresh apples, including all the recipes for
the production of the cider, trademarks (including the international
trademark applications), logos, designs, copyright, know how, show how, business
systems and arrangements and all other intellectual property associated with the
brand and the cider product and their manufacture and marketing  as
well as a contract with Independent Distillers Australia Pty Ltd (“IDA”) of
Melbourne, Victoria, Australia to supply bulk alcoholic apple cider for their
“Snowies Blonde” brand and IDA’s agreement to provide  ongoing
contract carbonated bottling packing services for the “Ripe Cider” brand
products.  The purchase price is $19,250,000 and will be paid by the
issuance of 55,000 shares of the Company’s Preferred Series B
shares.  Each share of Preferred Series B is convertible into 1,000
common shares of stock, for a total of 55,000,000 common shares, at such time
the Company has authorized shares available.  The market value of the
Company’s common stock on the date of the agreement was $0.35 per
share.
 
 The
Company is determining if they have the required amount of authorized common
shares available to be issued for all their subsequent
acquisitions.  If an inadequate number of shares is available to
satisfy requirements under the above acquisitions, the Company may have to
record a liability until such time as an adequate number of common shares are
available to satisfy required issuances or conversions.
 
 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 Valley 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.
  4
  The
Jugiong Vineyard is located over two blocks of land comprising the Wirrilla
Homestead and Wirrilla Point Block in the Gundagai recion of New South Wales,
Australia.  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.
 
 Product
Overview
 
 We offer
a variety of wine for sale to retail customers. Our product line consists
of:
 
 Yarraman
Range
 
 Under the
Yarraman label we produce and  sell the following wines in 750mL
bottles; Semillon, Chardonnay, Rose, Chambourcin, Merlot and Shiraz. These wines
sell for approximately $16 - $24. This new range of wine was recently released
for sale in the Australian market and will progressively be launched into our
various export markets
 
 Red
Horse Range
 
 In May
2006, we exported our first shipment of wines to our new distributor, Robert
Whale Selections, in the United States. This range of wines comprises Shiraz
Cabernet, Cabernet Merlot, Chardonnay and Semillon Verdelho and retail for
approximately $13 per bottle. This range continues to be successfully
distributed in the US market.
  5







The
Bolter





The
Bolter collection is a range of wines which was released in November 2005
targeting domestic and international markets. These wines are currently
distributed by a broad range of liquor retailers in Australia and exported to a
number of countries throughout Europe and Asia. The suggested retail price for
these wines is approximately $10. During the year ended June 30, 2008 we shipped
approximately 25,000 cases.





The
Bolter range sells the following types of wines in 750 ml bottles: Shiraz,
Cabernet Merlot, Chardonnay, and Classic Dry White





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 released 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
Market





Overview





The
Australian Bureau of Statistics (ABS) reported that 1.83 million tons of grapes
were harvested for winemaking purposes in 2008. This was an increase of 31% over
the 2007 harvest. The reasons behind the increased harvest are primarily the
easing of the continuing drought conditions and slightly improved
availability of irrigation water. ABS has estimated that there were 173,000
hectares of vineyard cultivated for wine, drying and table grapes in 2008, a
decrease of 0.6% over 2007.





Domestic
Wine Sales





Data
published by the Australian Wine & Brandy Corporation (AWBC) shows that
Australian wine accounted for 89% of domestic wine sales in Australia for 2008.
Domestic sales of Australian wine decreased to 426 million litres - a decline of
4.8% compared to 2007. Red wine sales decreased to 155 million litres, to
account for 36.3% of total domestic sales, white wine sales decreased to 206
million litres, or 48.3% of total domestic wine sales. The balance is made up of
sparkling and fortified wines. Yarraman Australia’s sales account for less than
1% of the domestic market.


6





We
utilize a system of self distribution, employing three full-time sales
representatives. We have a central distribution depot at our Wybong winery along
with a third party warehouse in Sydney which services same or next day delivery
in Sydney and New South Wales.





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.





Export
Wine Sales





In 2008
Australian wine exports declined to 715 million litres, a fall of 9.8% from
2007. The average price per litre increased from AUD$3.66 to AUD$3.75, the
second consecutive year that the average price has risen. The overall dollar
value of these exports declined by 6.9% to AUD$2.7 billion. The United Kingdom
remains the largest overseas market at 268 million litres (37.5%), however the
average value per litre is well below the overall average, at AUD$3.34. The
United States is the second largest overseas market at 185 million litres
(25.9%). The average value per litre in this market is above the overall
average, at AUD$3.96 per litre. Yarraman Australia ships approximately 7,500
cases per year to the United States market and approximately 250 cases per year
to the United Kingdom.





With
continuing investment and development in our brands, we plan to capitalize on
consumer demand in our primary export markets of the United States, European
Union and Asia. We have also as a result of the acquisition of Asia Distribution
Solutions Ltd, established a major market presence in mainland China and we
see this market as the major source of our export sales growth over the next few
years.





Our wines
are distributed and sold in the following countries:





s
      Australia
              
              s
      Canada
              
              s
    Chinas
    USA
              
              s
      Poland
              
              s
    Japans
      Ireland
              
              s
      Singapores
      Germanys United
      Kingdom





We export
approximately 27% of our annual volume production. The grape production for a
particular year will be reflected in sales revenue in approximately two years
due to the fact that we record product from upon bottling and sales following
the ageing time necessary in winemaking.





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.




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. All amounts in the following
presentation are in U.S. Dollars unless otherwise indicated.


7





Three
Months Ended March 31, 2009 Compared to Three Months Ended March 31,
2008





Three Months Ended March 31,2009
                  
                  
                  2008Sales
                  
                  $
                  814,488
                  
                  
                  
                  100
                  %
                  
                  $
                  603,984
                  
                  
                  
                  100
                  %Cost
      of Sales
                  
                  
                  389,087
                  
                  
                  
                  48
                  %
                  
                  
                  379,244
                  
                  
                  
                  63
                  %Gross
      profit
                  
                  
                  425,401
                  
                  
                  
                  52
                  %
                  
                  
                  224,740
                  
                  
                  
                  37
                  %SG&A
                  
                  
                  239,302
                  
                  
                  
                  29
                  %
                  
                  
                  432,579
                  
                  
                  
                  72
                  %Other
      expense
                  
                  
                  129,544
                  
                  
                  
                  16
                  %
                  
                  
                  236,576
                  
                  
                  
                  39
                  %Net
      loss
                  
                  $
                  56,555
                  
                  
                  
                  7
                  %
                  
                  $
                  (444,416
                  )
                  
                  
                  (74
                  )%





Revenue.
Revenue was $814,488 in the three months ended March 31, 2009 compared to
$603,984 during the three months ended March 31, 2008. The increase in revenues
of $210,504 or approximately 35%, was primarily related to a sale of grapes
that we made to a third party in the three months ended March 31, 2009 in the
amount of $559,445.  We had no such revenue in the three months ending
March 31, 2008.  Our domestic Australian sales decreased by $205,400
and our overseas sales decreased by $137,031 due to the overall world economic
situation.





Cost of
Revenue . Cost of revenue was $389,087 in the three months ended March
31, 2009 compared to $379,244 in the three months ended March 31, 2008, an
increase of $9,843. As a percentage of revenue, cost of revenue was 48% in the
three months ended March 31, 2009 compared to 63% in the three months ended
March 31, 2008, a decrease of 15%. The decrease in our cost of revenue as a
percentage of revenue is primarily due to the grape sale we had as stated above.
Our profit margin on the grapes sold was significantly higher then on our
regular inventory sales.


8




Gross
Profit. Gross profit was $425,401 in the three months ended March 31,
2009 compared to gross profit of $224,740 in the three months ended March 31,
2008. As a percentage of revenues, gross profit increased to 52% in the three
months ended March 31, 2009 from 37% in the three months ended March 31, 2008
for the reasons discussed above.





Other
Expense. Other expense was $129,544 in the three months ended March 31,
2009 compared to $236,576 in the three months ended March 31, 2008. The decrease
in other expense of $107,032 was primarily attributable to a decrease in our
interest expense as we converted approximately $5,035,000 of our long term debt
into equity as of June 30, 2008.  Interest expense for the period
decreased by $105,608.





Sales, General
and Administrative Expenses. Sales, general and administrative expenses
were $239,302 in the three months ended March 31, 2009 compared to $432,579 in
the three months ended March 31, 2008. This is a decrease of $193,277 or
approximately 45% from the 2008 period to the 2009 period.  As a
percentage of revenues, sales, general and administrative expenses decreased to
approximately 29% in the three months ended March 31, 2009 from 72% in the three
months ended March 31, 2008.




Net Profit
(Loss). Our net profit was $56,555 for the three months ended March 31,
2009 compared to a net loss of ($444,416) in the three months ended March 31,
2008. This increase in the net profit was primarily attributable to the increase
in our sales, decrease in our cost of sales, decrease in our interest expense
and decrease in our selling, general and administrative expenses as described
above.





Nine
Months Ended March 31, 2009 Compared to Nine Months Ended March 31,
2008





Nine Months Ended March 31,2009
                  
                  
                  2008Sales
                  
                  $
                  1,902,001
                  
                  
                  
                  100
                  %
                  
                  $
                  2,070,694
                  
                  
                  
                  100
                  %Cost
      of Sales
                  
                  
                  1,484,767
                  
                  
                  
                  78
                  %
                  
                  
                  1,419,827
                  
                  
                  
                  69
                  %Gross
      profit
                  
                  
                  417,234
                  
                  
                  
                  22
                  %
                  
                  
                  650,867
                  
                  
                  
                  31
                  %SG&A
                  
                  
                  959,125
                  
                  
                  
                  50
                  %
                  
                  
                  1,453,724
                  
                  
                  
                  70
                  %Other
      expense
                  
                  
                  416,335
                  
                  
                  
                  22
                  %
                  
                  
                  695,567
                  
                  
                  
                  34
                  %Net
      loss
                  
                  $
                  (958,226
                  )
                  
                  
                  (50
                  )%
                  
                  $
                  (1,498,424
                  )
                  
                  
                  (72
                  )%





Revenue.
Revenue was $1,902,001 in the nine months ended March 31, 2009 compared to
$2,070,694 during the nine months ended March 31, 2008. The decrease in revenues
of $168,693, or approximately 8%, was primarily related to a decrease in
our bulk wine sales of $447,074. During the nine months ended March 31,
2008 we sold a large amount of bulk wine in order to raise additional cash for
working capital purposes.  The sale of bulk wine is not a normal
practice of the Company and we did not have any significant bulk wine sales
during the nine months ended March 31, 2009.





Also in
the nine months ended March 31, 2009 our domestic sales decreased by $300,000,
or 14%, as compared to the prior year due to the general economic situation
worldwide.





During
the nine months ended March 31, 2009 we also had a sale of grapes of $559,445 to
a third party, which we did not have in the comparable nine month period ending
March 31, 2008.





Cost of
Revenue. Cost of revenue was $1,484,767 in the nine months ended March
31, 2009 compared to $1,419,827 in the nine months ended March 31, 2008, an
increase of $64,940. As a percentage of revenue, cost of revenue was 78% in the
nine months ended March 31, 2009 compared to 69% in the nine months ended March
31, 2008. The decrease in cost of revenue as a percentage of revenue is
primarily due to the grape sale we had as stated above. Our profit margin on the
grapes sold was significantly higher then on our regular inventory
sales.


9




Gross
Profit. Gross profit was $417,234 in the nine months ended March 31, 2009
compared to gross profit of $650,867 in the nine months ended March 31, 2008. As
a percentage of revenues, gross profit decreased to 22% in the nine months ended
March 31, 2009 from 31% in the nine months ended March 31, 2008 for the reasons
discussed above.





Other
Expense. Other expense was $416,335 in the nine months ended March 31,
2009 compared to $695,567 in the nine months ended March 31, 2008. The decrease
in other expense of $279,232 was attributable to a decrease in our interest
expense.  At June 30, 2008 we converted approximately $5,035,000 of
our long term debt into equity. Our interest expense for the period decreased by
$300,538.




Sales, General
and Administrative Expenses. Sales, general and administrative expenses
were $959,125 in the nine months ended March 31, 2009 compared to $1,453,724 in
the nine months ended March 31, 2008. This is a decrease of $494,599 or
approximately 34% from the 2008 period to the 2009 period. During the nine
months ending March 31, 2008 we recorded approximately $284,400 of expense
related to the issuance of Company stock for services to various parties. We did
not incur such expenses in the nine months ending March 31, 2009.




As a
percentage of revenues, sales, general and administrative expenses decreased to
approximately 50% in the nine months ended March 31, 2009 from 70% in the nine
months ended March 31, 2008 due to the reasons as discussed above.




Net Loss.
Our net loss was $958,226 in the nine months ended March 31, 2009 compared to a
net loss of $1,498,424 in the nine months ended March 31, 2008. This decrease in
our net loss was primarily attributable to the reduction in Sales, General and
Administrative expenses, the reduction in our interest expense and the gain on
our foreign currency translation.





Liquidity
and Capital Resources




As of
March 31, 2009, the Company had $0 cash and cash equivalents and $181,523 of
working capital as compared to $0 and $1,327,334, respectively, at June 30,
2008. Cash flow from operations has improved due to cost cutting measures and
improved collections on receivables. Cash flow used in operations decreased by
$946,993 from $1,578,334 in the nine months ending March 31, 2008 to $631,351 in
the nine months ending March 31, 2009.




Management
has been exploring options to refinance its long term loan from Provident,
currently with an outstanding balance of $3,926,615. 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.





Management
has engaged professional investment bankers in the United States to assist in
raising additional capital.


10


ITEM
4.  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.


11





PART II -   OTHER INFORMATION




ITEM 1.  
LEGAL
PROCEEDINGS.




None.




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





None.




ITEM 3.  
DEFAULTS UPON SENIOR
SECURITIES.




None.




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




None.




ITEM 5.  
OTHER
INFORMATION.





None


ITEM 6.  
EXHIBITS
  The
following exhibits are filed as part of this report:
  Exhibit Number
                    
                    Description31.1
                    
                    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).
  12
 
 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:
      July 2, 2009
                  By:
                  /s/ Ian
      LongName:
      Ian LongTitle:
      Chief Executive Officer
  13