**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




___________




**AMENDMENT
      NO. 1 to**




**FORM
      10-QSB**





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


**THE
      SECURITIES EXCHANGE ACT OF 1934**





FOR
      THE
      QUARTERLY PERIOD ENDED MARCH 31, 2006





**oTRANSITION
      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 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 x NO o




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 25,000,000 shares of the Issuer’s common stock outstanding on July 31,
      2006.




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









**TABLE
        OF CONTENTS**
   **Page**PART
                  I -
              
              FINANCIAL
                  INFORMATION
              3ITEM
                  1.
              
              FINANCIAL
                  STATEMENTS
              3ITEM
                  2.
              
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              22ITEM
                  3.
              
              CONTROLS
                  AND PROCEDURES
              29PART
                  II -
              
              OTHER
                  INFORMATION
              30ITEM
                  1.
              
              LEGAL
                  PROCEEDINGS.
              30ITEM
                  2.
              
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
              30ITEM
                  3.
              
              DEFAULTS
                  UPON SENIOR SECURITIES.
              30ITEM
                  4.
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS.
              30ITEM
                  5.
              
              OTHER
                  INFORMATION.
              30ITEM
                  6.
              
              EXHIBITS
              31







**EXPLANATORY
      NOTE**




We
      are
      filing this Amendment No. 1 to Quarterly Report on Form 10-QSB/A to (a) amend
      the
      financial statements and the notes to the financial statements and (b) amend
      Item 3 of Part I to amend our disclosure of internal controls and procedures
      relating to our financial reporting . Except
      as
      specifically referenced herein, this Amendment No. 1 to Quarterly Report on
      Form
      10-QSB/A does not reflect any event occurring subsequent to May 15, 2006, the
      filing date of the original report.









FINANCIAL
      INFORMATION




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




YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





MARCH
      31,
      2006







**Table
      of Contents**





Unaudited
                  Condensed Consolidated Balance Sheet
              4Unaudited
                  Condensed Consolidated Statements of Operations
              5Unaudited
                  Condensed Consolidated Statements of Cash Flow
              6Notes
                  to unaudited Condensed Consolidated Financial Statements
              7
  3
 **YARRAMAN
        WINERY, INC. AND SUBSIDIARY**
 **(FORMERLY
        KNOWN AS DAZZLING INVESTMENTS, INC., A DEVELOPMENT STAGE
        COMPANY)**
 
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
  **ASSETS**March
                  31, 2006(Unaudited)Current
                  AssetsCash
                  and cash equivalents
              
              $
              105,355Accounts
                  receivable, net
              
              
              560,107Inventory
              
              
              4,094,880Note
                  receivable
              
              
              750,000Other
                  receivables
              
              
              213,316Other
                  assets
              
              
              117,909Total
                  Current Assets
              
              
              5,841,567Property,
                  plant and equipment, net
              
              
              3,945,246Total Fixed
                  Assets
              
              
              3,945,246Other
                  AssetsIntangible
                  asset
              
              
              177,750Total
                  Other Assets
              
              
              177,750Total
                  Assets
              
              $
              9,964,563**LIABILITIES**Current
                  LiabilitiesAccounts
                  payable and accrued expenses
              
              $
              909,766Capital
                  leases, current portion
              
              
              19,087Due
                  to related party
              
              
              56,524Total
                  Current Liabilities
              
              
              985,377Capital
                  leases, net of current portion
              
              
              187,240Related
                  party debt
              
              
              1,995,837Long-term
                  debt
              
              
              3,980,9196,163,996Total
                  Liabilities
              
              
              7,149,373Stockholder's
                  EquityCommon
                  stock, $.001 par value,25,000,000
                  shares authorized and outstanding
              
              
              25,000Additional
                  paid in capital
              
              
              4,594,537Other
                  comprehensive income
              
              
              (60,840
              )Accumulated
                  deficit
              
              
              (1,743,507
              )Total
                  Stockholder's Equity
              
              
              2,815,190Total
                  Liabilities and Stockholder's Equity
              
              
              9,964,563
   4
 **YARRAMAN
          WINERY, INC. AND SUBSIDIARY**
 **(FORMERLY
          KNOWN AS DAZZLING INVESTMENTS, INC., A DEVELOPMENT STAGE
          COMPANY)**
  **CONDENSED
          CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(Unaudited)**
  Three
                  Month Periods Ended
              
              Nine
                  Month Periods EndedMarch
                  31,
              
              March
                  31,
              
              March
                  31,
              
              March
                  31,2006
              
              2005
              
              2006
              
              2005Sales,
                  net
              
              $
              290,782
              
              $
              414,753
              
              $
              1,305,537
              
              $
              1,131,717Cost
                  of sales
              
              
              184,766
              
              
              156,789
              
              
              975,703
              
              
              562,898Gross
                  profit
              
              
              106,016
              
              
              257,964
              
              
              329,834
              
              
              568,819Selling,
                  general and administrative expenses
              
              
              511,419
              
              
              254,600
              
              
              1,113,481
              
              
              857,569Income
                  (loss) from operations
              
              
              (405,403
              )
              
              3,364
              
              
              (783,647
              )
              
              (288,750
              )Other
                  (Income) ExpenseInterest
                  income
              
              
              (31,559
              )
              
              524
              
              
              (32,581
              )
              
              (2,276
              )Interest
                  expense
              
              
              179,036
              
              
              243
              
              
              180,331
              
              
              12,529Inventory
                  adjustment gain under grape processing agreement
              
              
              (152,081
              )
              
              0
              
              
              (152,081
              )
              
              0(Gain)/loss
                  on foreign currency
              
              
              (5,838
              )
              
              (3,276
              )
              
              (16,720
              )
              
              (3,276
              )Total
                  Other (Income) Expense
              
              
              (10,442
              )
              
              (2,509
              )
              
              (21,051
              )
              
              6,977Net
                  income (loss)
              
              $
              (394,961
              )
              $
              5,873
              
              $
              (762,596
              )
              $
              (295,727
              )Net
                  loss per share (basic and diluted)Basic
              
              
              ($0.016
              )
              $
              0.00
              
              
              ($0.032
              )
              
              ($0.016
              )Diluted
              
              
              ($0.016
              )
              $
              0.00
              
              
              ($0.032
              )
              
              ($0.016
              )Weighted
                  average number of sharesBasic
              
              
              25,000,000
              
              
              18,496,500
              
              
              23,554,778
              
              
              18,496,500Diluted
              
              
              25,000,000
              
              
              18,496,500
              
              
              23,554,778
              
              
              18,496,500
   5
  **YARRAMAN
          WINERY, INC. AND SUBSIDIARY**
 **(FORMERLY
          KNOWN AS DAZZLING INVESTMENTS, INC., A DEVELOPMENT STAGE
          COMPANY)**
 
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 Nine
                  Month Periods EndedMarch
                  31,
              
              March
                  31,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (762,596
              )
              
              (295,727
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
              
              
              186,430
              
              
              72,397Gain
                  on settlement of debt
              
              
              (152,081
              )
              
              0Decrease
                  (Increase) in account receivables
              
              
              127,605
              
              
              (356,761
              )Decrease
                  (Increase) in inventory
              
              
              (1,283,177
              )
              
              (757,584
              )Decrease
                  (Increase) in other receivables
              
              
              (57,138
              )
              
              (99,618
              )Decrease
                  (Increase) in other assets
              
              
              (9,950
              )
              
              (7,359
              )Decrease
                  (Increase) in deposits
              
              
              0
              
              
              15,942(Decrease)
                  Increase in accounts payableand
                  accrued expenses
              
              
              173,539
              
              
              (110,603
              )Total
                  Adjustments
              
              
              (1,014,772
              )
              
              (1,243,586
              )Net
                  cash used in operations
              
              
              (1,777,368
              )
              
              (1,539,313
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPayment
                  of finders fee
              
              
              (124,525
              )
              
              0Purchase
                  of fixed assets
              
              
              (32,141
              )
              
              (117,910
              )Net
                  cash used in investing activities
              
              
              (156,666
              )
              
              (117,910
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESCollection
                  on note receivable
              
              
              1,250,000
              
              
              0Increase
                  in note payable
              
              
              69,611
              
              
              0Payments
                  on capital leases
              
              
              (10,795
              )
              
              (159,751
              )Payments
                  on loans from related parties
              
              
              (126,117
              )
              
              0Proceeds
                  from loans from related parties
              
              
              1,206,017
              
              
              1,734,466Net
                  cash provided by financing activities
              
              
              2,388,716
              
              
              1,574,715Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              (393,050
              )
              
              3,243Net
                  change in cash and cash equivalents
              
              
              61,632
              
              
              (79,265
              )Cash
                  and cash equivalents at beginning of year
              
              
              43,723
              
              
              164,121Cash
                  and cash equivalents at end of period
              
              $
              105,355
              
              $
              84,856Supplemental
                  cash flows disclosures:Interest
                  payments
              
              $
              180,331
              
              $
              12,529Non
                  cash transactions:Purchase
                  of assets from former parentAssets
                  purchased
              
              $
              5,569,193
              
              $
              0Liabilities
                  assumed
              
              
              (4,239,681
              )
              
              0Payable
                  to former parent
              
              
              (416,887
              )
              
              0Contribution
                  to equity
              
              
              (912,625
              )
              
              0($0
              )
              $
              0


6


YARRAMAN
      WINERY, INC. AND SUBSIDIARY


CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








NOTE
      1 - NATURE
      OF OPERATIONS





Yarraman
      Winery, Inc., (“the Company” or “We”) formerly Dazzling Investments, Inc. was
      incorporated on December 6, 1996 under the laws of the State of Nevada.





On
      December 22, 2005, we entered into a Share Exchange Agreement (the “Exchange
      Agreement”) with Yarraman Estate Pty Limited, a privately owned Australian
      company (“Yarraman Australia”), and the beneficial owners of all of Yarraman
      Australia’s shares, (the “Shareholders”) and Delta Dawn Pty Limited as trustee
      of the Yarraman Road Trust (the “Trust”), the nominal holder of such shares,
      pursuant to which the Registrant 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 common stock of the Company (the “Shares”) to
      the Trustee (the “Share Exchange”) for the benefit of the
      Shareholders.





As
      a
      result of the Share Exchange, Yarraman Australia became a wholly-owned
      subsidiary of Yarraman Winery, Inc.





Yarraman
      Australia is an Australian Winery with a distinguished history and an
      international reputation for outstanding quality wines.





Originally
      established by Penfolds in the late 1950’s as their Dalwood Estate, Yarraman
      Australia boasts close to 80 hectares (200 acres) of vines, many over 40 years
      old and therefore capable of producing the highest intensity fruit and thus
      the
      highest quality wines.





We
      operate in an industry characterized by significant competition. We will need
      additional investments and funding in order to complete the development and
      improvements necessary for growth and planned operations.








On
      February 3, 2006, the Company voted to change its fiscal year end from December
      31 st to June
      30 th .








7





YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006





NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES




Basis
      of Presentation




The
      accompanying financial statements have been prepared by Yarraman Winery, Inc.
      pursuant to the rules and regulations of the Securities and Exchange Commission
      (the “SEC”) for Form 10-QSB and Item 310 of Regulation S-B and generally
      accepted accounting principles for interim financial reporting. These financial
      statements are unaudited and, in the opinion of management, include all
      adjustments (consisting of normal recurring adjustments and accruals) necessary
      for a fair presentation of the statement of financial position, operations,
      and
      cash flows for the periods presented. Operating results for the nine months
      ended March 31, 2006 and 2005 are not necessarily indicative of the results
      that
      may be expected for the fiscal year ended June 30, 2006, or any future period,
      due to seasonal and other factors. Certain information and footnote disclosures
      normally included in financial statements prepared in accordance with generally
      accepted accounting policies have been omitted in accordance with the rules
      and
      regulations of the SEC. These financial statements should be read in conjunction
      with the audited financial statements and accompanying notes, included in the
      Company’s Form 8-K filing regarding the merger transaction on December 22,
      2005.





Basis
      of Consolidation





These
      consolidated financial statements for March 31, 2006 include the accounts of
      Yarraman Winery, Inc. and its wholly owned subsidiary Yarraman Estate Pty
      Limited, Inc. All material intercompany accounts, transactions and profits
      have
      been eliminated in consolidation.





Revenue
      Recognition




Our
      revenue recognition policies are in compliance with Staff accounting bulletin
      (SAB) 104. Sales revenue is recognized at the date of shipment to customers
      when
      a formal arrangement exists, the price is fixed or determinable, the delivery
      is
      completed, no other significant obligations exist and collectibility is
      reasonably assured. Payments received before all of the relevant criteria for
      revenue recognition are satisfied are recorded as unearned revenue.





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




The
      company also receives processing revenue which represents fees charged to
      contract process fruit for other winemaking companies. It is recognized when
      the
      service is provided to the customer.






8





YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Cash
      and Cash Equivalents





Cash
      and
      cash equivalents include cash in hand and cash in time deposits, certificates
      of
      deposit and all highly debt instruments with original maturity of three months
      or less.





Allowance
      for Doubtful Accounts





We
      establish an allowance for doubtful accounts on a case-by-case basis when it
      is
      determined that the required payment of specific amounts owed is unlikely to
      occur after a review of historical collection experience, subsequent
      collections, and management’s evaluation of existing economic
      conditions.





Segment
      Reporting





We
      have a
      single operating segment consisting of the retail, domestic and international,
      sales departments. These departments have similar economic characteristics,
      offer the same products to customers, utilize the same production facilities
      and
      processes and have similar customer types and distribution methods.




Fair
      Value of Financial Instruments




The
      following methods and assumptions were used to estimate the fair value of each
      class of financial instrument for which it is practicable to estimate that
      value:




Accounts
      receivable, prepaid expenses and other assets, accounts payable, accrued
      expenses and other liabilities: The carrying amounts of these items are a
      reasonable estimate of their fair values.




Inventories






Our
      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.




9




YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




Property,
      Plant and Equipment




Property
      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 amortization 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
            
            4-25
                yearsWinery building
            
            20-40
              yearsEquipment
            
            2-40
                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.




Intangible
      Assets





Effective
      July 2002, we adopted Statement of Financial Accounting Standards (“SFAS”) No.
      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 period ended March 31,
      2006.





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




Our
      intangible asset consist of water rights for irrigation purposes on our
      property. Our asset is not amortized as it has an indefinite useful life and
      it
      is assessed annually for any impairment. As of the date of this report there
      is
      no impairment.





Long-Lived
      Assets





Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”), which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
      the Results of Operations for a Disposal of a Segment of a Business.” The
      Company periodically evaluates




10


YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006





NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





the
      carrying value of long-lived assets to be held and used in accordance with
      SFAS
      144. SFAS 144 requires impairment losses to be recorded on long-lived assets
      used in operations when indicators of impairment are present and the
      undiscounted cash flows estimated to be generated by those assets are less
      than
      the assets’ carrying amounts.





In
      that
      event, a loss is recognized based on the amount by which the carrying amount
      exceeds the fair market value of the long-lived assets. Loss on long-lived
      assets to be disposed of is determined in a similar manner, except that fair
      market values are reduced for the cost of disposal. Based on its review, the
      Company believes that, as of March 31, 2006 there were no significant
      impairments of its long-lived assets.





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.
      As of March 31, 2006, there are no matters that warrant disclosure in the
      financial statements.





Advertising





Advertising
      costs are expensed in the period incurred.





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.


11


YARRAMAN
        WINERY, INC. AND SUBSIDIARY
  CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 MARCH
        31,
        2006








NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Concentration
      of Credit Risk





Financial
      instruments, which subject us to credit risk, consist primarily of cash
      equivalents and trade accounts receivable arising from its normal business
      activities. We place our cash in what we believe to be credit-worthy financial
      institutions. Concentration of credit risk with respect to trade accounts
      receivable are from customers located throughout the world. We actively evaluate
      the creditworthiness of the customers with which we conduct business through
      credit approvals, credit limits and monitoring procedures.





Earnings
      Per Share





Earnings
      per share are based on the weighted average number of shares of common stock
      and
      common stock equivalents outstanding during each period. Earnings per share
      are
      computed using the treasury stock method. The options to purchase common shares
      are considered to be outstanding for all periods presented, but are not
      calculated as part of the earnings per share.





Income
      Taxes





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





Exchange
      Gain (Loss)





As
      of
      March 31, 2006, the transactions of Yarraman Australia were denominated in
      a
      foreign currency and are recorded in Australian Dollar (“AUD”) at the rates of
      exchange in effect when the transactions occur. Exchange gains and losses are
      recognized for the different foreign exchange rates applied when the foreign
      currency assets and liabilities are settled.





Translation
      Adjustment





As
      of
      March 31, 2006, 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 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, stockholder’s equity are translated at the historical
      rates and income statement items are translated at the weighted average exchange
      rate for the period. The resulting translation adjustments are reported under
      other comprehensive income in accordance with SFAS No. 130, “Reporting
      Comprehensive Income” as a component of shareholders’ equity.





12




YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





New
      Accounting Pronouncements





In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."
      This statement applies to all voluntary changes in accounting principle and
      requires retrospective application to prior periods' financial statements of
      changes in accounting principle, unless this would be impracticable. This
      statement also makes a distinction between "retrospective application" of an
      accounting principle and the "restatement" of financial statements to reflect
      the correction of an error. This statement is effective for accounting changes
      and corrections of errors made in fiscal years beginning after December 15,
      2005.





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006.





In
      December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
      an
      Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
      companies to recognize in the statement of operations the grant- date fair
      value
      of stock options and other equity-based compensation issued to employees. FAS
      No. 123R is effective beginning in the Company's first quarter of fiscal 2006.





In
      March
      2006 FASB issued SFAS 156 ‘Accounting for Servicing of Financial Assets’ this
      Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities, with respect to the
      accounting for separately recognized servicing assets and servicing liabilities.
      This Statement:





1.
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract.


2.
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if practicable.


3.
            Permits
                an entity to choose ‘Amortization method’ or  Fair value measurement
                method’ for each class of separately recognized servicing assets and
                servicing liabilities:


4.
            At
                its initial adoption, permits a one-time reclassification of
                available-for-sale securities to trading securities by entities with
                recognized servicing rights, without calling into question the treatment
                of other available-for-sale securities under Statement 115, provided
                that
                the available-for-sale




13


YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006





NOTE
      2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





securities
      are identified in some manner as offsetting the entity’s exposure to changes in
      fair value  of
      servicing assets or servicing liabilities that a servicer elects to subsequently
      measure at fair  value.


5.
            Requires
                separate presentation of servicing assets and servicing liabilities
                subsequently measured at fair value in the statement of financial
                position
                and additional disclosures for all separately recognized servicing
                assets
                and servicing liabilities.





This
      Statement is effective as of the beginning of the Company’s first fiscal year
      that begins after September 15, 2006. Management believes that this statement
      will not have a significant impact on the consolidated financial
      statements.





In
      June
      2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization
      Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance
      on
      determining the amortization period for leasehold improvements acquired in
      a
      business combination or acquired subsequent to lease inception. The guidance
      in
      EITF 05-6 will be applied prospectively and is effective for periods beginning
      after June 29, 2005. EITF 05-6 is not expected to have a material effect on
      its
      consolidated financial position or results of operations.





We
      believe that the adoption of these standards will have no material impact on
      its
      financial statements.





NOTE
      3 - NOTES
      RECEIVABLE





We
      have
      four notes receivable from various entities related to their purchase of
      $2,000,000 of our stock (see Note 9). 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. As of March 31, 2006 the balance of these notes is
      $750,000.





NOTE
      4 - PROPERTY,
      PLANT& EQUIPMENT





Property,
      plant & equipment consist of the following:


March
                  31, 2006(unaudited)Leasehold
                  improvements
              
              $
              30,740Land
              
              
              708,119Vines
              
              
              44,429Plant
                  and equipment
              
              
              3,387,680Computer
                  equipment
              
              
              44,027Furniture
                  and fixtures
              
              
              19,0624,234,057Accumulated
                  depreciation
              
              
              (288,811
              )$
              3,945,246





14





YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








NOTE
      5 - INVENTORY




Inventory
      consists of the following:


March
                  31, 2006(unaudited)Winemaking
                  and packaging materials
              
              $
              844Work
                    in progress ( costs related to unprocessedand/ or unbottled
                    products )
              
              
              3,682,493Finished
                  good (bottled wine)
              
              
              411,543Total
              
              $
              4,094,880






NOTE
      6 - ANNUAL
      LEAVE





The
      provision for employee benefits to annual leave 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, 2006 annual leave liability existed in the amount of $28,956.





Note
      7 - RELATED
      PARTY TRANSACTIONS





We
      entered into various related party transactions with Yarraman Road Trust,
      various unit holders of Yarraman Road Trust, related entities of unit holders
      of
      Yarraman Road Trust and officers of the Company. These transactions are
      disclosed in full here and in general are considered not to be based on arms
      length transactions.





Yarraman
      Australia leased approximately 200 acres of vineyards and related plant and
      equipment from its former parent, the Yarraman Road Trust. Terms of the
      agreement included annual payment of AU $285,000 plus GST of AU$28,500,
      approximately US $239,000. The lease began on July 1, 2003 and terminated on
      December 22, 2005 when we purchased the vineyard and related plant and
      equipment.





We
      also
      pay The Yarraman Road Trust approximately $35,000 per month for the use of
      additional vineyard land also located in Australia per a verbal agreement.
      On
      January 1, 2006 we entered into a written agreement to lease this vineyard
      land
      for AU$43,750 plus GST (approximately US $35,000 ) per month. The term is from
      January 1, 2006 through June 30, 2006.





Yarraman
      Australia had received non interest bearing loans from its former Parent to
      fund
      operations and purchase assets. As part of the terms of the purchase agreement
      the balance of this loan was AU$1,612,666, approximately US$1,146,000, and
      will
      be paid per the terms disclosed in Note 8. The loan does not include any
      interest charges.


15


YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








Note
      7 - RELATED
      PARTY TRANSACTIONS (CONTINUED)








Stockholders
      and Directors of the Company and of Yarraman Road Trust were provided wine
      during the nine months ended March 31, 2006 valued at $21,204.





The
      Company had wine sales to entities related to various Stockholders, Officers
      and
      Directors totaling $2,433 during the nine months ended March 31,
      2006.





The
      Company paid consulting fees to one of the Unit Holders of its Parent in the
      amount of approximately $82,300 during the nine months ended March 31, 2006.
      The
      Company also had a liability to this individual related to the consulting fee
      of
      approximately $14,576 as of March 31, 2006.





On
      January 1, 2006 we entered into a consulting agreement with Delta Dawn Pty.,
      Ltd
      as Trustee for the Yarraman Road Trust 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 our Company is reduced to less then 15%. We agreed
      to
      pay AU$100,000 plus GST, approximately US$78,000, annually.





During
      the nine months ended March 31, 2006 we included in its revenue fees for wine
      making and storage of wine of approximately $444,437 to a company in which
      we
      have a joint venture agreement. See Note 8.





On
      December 16, 2005 the Company purchased from its former parent, the Yarraman
      Road Trust (YRT), certain assets including land, buildings and equipment and
      water license rights by assuming certain debt (Note 10), capital leases (Note
      10), contribution to paid in capital by YRT and a liability to YRT. No cash
      was
      exchanged. All assets and liabilities were recorded at the historical cost
      basis
      of YRT. See the summary below:





Assets
                purchased
            
            $
            5,569,193Liabilities
                assumed
            
            
            (4,239,681
            )Payable
                to former parent
            
            
            (416,887
            )Contribution
                to capital
            
            
            (912,625
            )Net
            
            
            ($0
            )








The
      Company’s assets are also pledged as collateral for indebtedness of Yarraman
      Australia’s prior Parent, the Yarraman Road Trust. As of March 31, 2006 the
      outstanding balance on this debt was approximately $3,980,919. See Note 8.




16
  YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006





Note
      8 - COMMITMENTS
      AND CONTINGENCIES





Operating
      Leases





Yarraman
      Australia leased approximately 200 acres of vineyard land and plant and
      equipment from its prior parent, the Yarraman Road Trust, for AU$285,000 per
      year plus GST of AU$28,500 per year, approximately US$239,000 . The lease was
      entered into on July 1, 2003 and is for a term of two years, but may continue
      past that date at the same rate until canceled by either party. This lease
      was
      terminated on December 22, 2005 when we purchased all property under this lease.
      Please see Note 7 - Related Party Transactions.





On
      January 1, 2006 we entered into a written agreement with Delta Dawn Pty, Ltd.
      as
      trustee for Yarraman Road Trust, to lease additional vineyard land in Australia.
      The monthly rent is AU$43,750 plus GST, approximately US$35,000 USD. The lease
      term commences on January 1, 2006 and terminates on June 30, 2006, there is
      no
      option to renew. See Note 7 above.





Grape
      Processing Arrangements





In
      January 2004 Yarraman Australia entered into a Grape Processing Arrangement
      with
      two other Australian corporations for the 2004 harvest. The terms of the
      arrangement required Yarraman Australia to process the grape harvest provided
      by
      the other entities into bulk wine and provide safe storage. The agreement
      stipulates that for this service we would receive fifty percent (50%) of the
      proceeds of the sale of the bulk wine or finished wine. We also had the right
      to
      receive up to fifty percent (50%) of the bulk wine for consideration of our
      services.





Yarraman
      Australia exercised its right and received fifty percent (50%) of the related
      bulk wine prior to September 30, 2004.





Yarraman
      Australia also entered into a Grape Processing Arrangement with the same entity
      as above for the 2005 harvest. The agreement terms were the same except that
      we
      were to receive forty five percent of the proceeds from the sale of the finished
      bulk wine or the option of receiving 45% of the actual bulk wine inventory.
      We
      agreed to receive 45% of the bulk wine inventory.





Corporate
      Sponsorship





Yarraman
      Australia entered into a five year Sponsorship Agreement beginning on April
      1,
      2004 with Luna Park Sydney. The terms of the sponsorship require the Company
      to
      pay approximately $37,676 for year one, approximately $41,444 for years two
      through four, and approximately $48,979 for year five.





In
      September 2005 the agreement with Luna Park was renegotiated. The terms now
      call
      for a payment of approximately $46,341 for year two. For the remaining years
      three through five the fee will be calculated based on a formula related to
      the
      number of patrons attending the Luna Park Sydney facility.


17
  YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








Note
      8 - COMMITMENTS
      AND CONTINGENCIES (continued)




Guarantor





Our
      assets have been pledged as collateral for indebtedness owed by the Yarraman
      Road Trust, to a financial institution in Australia, the repayment of which
      the
      Company has guaranteed. The outstanding balance on this debt was approximately
      $3,980,919 as of March 31, 2006.





Consulting
      Agreements





On
      February 24, 2006 we entered into a consulting agreement with a Firm in New
      York
      to assist us in identifying suitable candidates for acquisition purposes and
      assist in the negotiation and execution of the transaction. As compensation
      we
      agreed to pay the firm a monthly, nonrefundable, fee of $6,500 beginning March
      1, 2006 and ending on July 1, 2006. We also agreed to pay a transaction fee
      that
      is based on a sliding percentage of any completed acquisition. The total monthly
      fees paid under the agreement may be deducted from the total transaction
      fee.





On
      January 1, 2006 we entered into a consulting agreement with Delta Dawn Pty.,
      Ltd
      as Trustee for the Yarraman Road Trust 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 our Company is reduced to less then 15%. We agreed
      to
      pay AU$100,000 plus GST, approximately US$78,000, annually. See Note
      7.





18
  YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








Note
      9 - COMMON
      STOCK





On
      August
      15, 2005, our 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.




On
      December 12, 2005, our Board of directors submitted to, and a majority of
      shareholders eligible to vote, approved a proposal that pursuant to the terms
      of
      a Share Exchange Agreement (the “Agreement”), the Company acquired all of the
      outstanding capital stock of Yarraman Australia in exchange for 15,000,000
      shares of the Company’s common stock to the Trustee (the "Transaction"). This
      issuance of the Company’s common stock is intended to be exempt from
      registration under the Securities Act of 1933, as amended ("Securities Act").




In
      connection with the Transaction, certain shareholders of the Company agreed
      to
      cancel an aggregate of 8,158,500 shares of the Company common stock resulting
      in
      3,496,500 shares of common stock outstanding.





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




On
      December 22, 2005, we 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
      any
      financing the Company may do in the future.




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 April 18, 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.





All
      prior
      year information has been adjusted to reflect the stock cancellation and the
      stock dividend as of June 30, 2005.




19
  YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








Note
      10
      - LONG
      TERM DEBT





Loans





On
      December 21, 2005 we entered into a loan agreement with a financial institution
      located in Australia. The amount of the loan is AU$5,599,042, approximately
      US$3,980,919 with monthly interest payments due on the 15 th of each
      month at the rate of 10% per annum, rising to 16% per annum if the Company
      is
      late in its payments. The principal balance is due and payable on December
      26,
      2006. The loan is secured by certain assets of the Company as well as a
      guarantee by Yarraman Australia’s former parent and by a stockholder of the
      Company.





On
      December 22, 2006 we entered into a loan agreement with Delta Dawn Pty., Ltd
      as
      Trustee for the Yarraman Road Trust. The principle amount of the loan is
      AU$2,320,975, approximately US$1,640,377. There is no interest on the loan.
      The
      agreement requires principle payments as follows for the fiscal years ending
      on
      June 30 th :





2006
              
              $
              02007
              
              
              02008
              
              
              136,6952009
              
              
              273,3892010
              
              
              273,3892011
              
              
              968,392Total
              
              $
              1,640,377




Leases








The
      Company is party to long-term capital lease agreements for various equipment.
      The future aggregate minimum annual lease payments arising from these lease
      agreements are as follows:




Years
                  Ending June 30 -2006
              
              $
              19,0872007
              
              
              86,7242008
              
              
              77,1192009
              
              
              23,397Total
              
              $
              206,327


20
 YARRAMAN
      WINERY, INC. AND SUBSIDIARY




CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


MARCH
      31,
      2006








Note
      11
      - STOCK
      EXCHANGE AGREEMENT





On
      December 22, 2005 we completed a Stock Exchange Agreement with Yarraman Estate
      Pty., Ltd. (an Australian Company). As a result of the exchange agreement,
      the
      reorganization was treated as an acquisition by the accounting acquiree that
      is
      being accounted for as a recapitalization and as a reverse merger by the legal
      acquirer for accounting purposes. Pursuant to the recapitalization, all capital
      stock shares and amounts and per share data have been retroactively restated.
      Accordingly, the financial statements include the following:





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


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





Note
      12 - OTHER
      COMPREHENSIVE INCOME





Balances
      of related after-tax components comprising accumulated other comprehensive
      income (loss), included in stockholder’s equity at March 31, 2006 are as
      follows:


Foreign
                  Currency
                Translation
                  Adjustment
              
              Accumulated
                  Other Comprehensive IncomeBalance
                  at June 30, 2005
              
              $
              134,288
              
              $
              134,288Change
                  for 2006
              
              
              (143,738
              )
              
              (143,738
              )Balance
                  at March 31, 2006 (unaudited)
              
              
              ($9,450
              )
              
              ($9,450
              )




Note
      13
      -  GOING
      CONCERN





Generally
      accepted accounting principles in the United States of America contemplate
      the
      continuation of the Company as a going concern. However, we have suffered
      recurring losses from operations, cash deficiencies and the inability to meets
      our maturing obligations without borrowing from related parties and the sale
      of
      our stock.  These issues may raise substantial concern about our ability to
      continue as a going concern.




Management
      has prepared the following plan in order to address these concerns:




The
      Company has completed its merger as stated in Note 11. Related to this merger
      the company has been able to sell 5,253,500 shares of stock for $2,000,000.
      We
      have also obtained an additional loan from our the Yarraman Road Trust in the
      amount of AU$900,000, approximately US$640,000. This infusion of capital we
      believe will be sufficient enough to increase the working capital of the entity
      while we improve our operating results.





Note
      14 - SUBSEQUENT
      EVENT





On
      May 1,
      2006 we entered into a loan agreement with Delta Dawn Pty Ltd as Trustee for
      the
      Yarraman Road Trust in the amount of AU$900,000, approximately US$640,000.
      Interest is payable at an annual rate of 8% and the loan will be due in January,
      2011.




21




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




THE
      FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
      CONTAINED IN THE FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
      APPEARING ELSEWHERE HEREIN AND IN CONJUNCTION WITH THE MANAGEMENT’S DISCUSSION
      AND ANALYSIS SET FORTH IN THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB FOR THE
      YEAR ENDED DECEMBER 31, 2004 AND THE CURRENT REPORT ON FORM 8-K FOR THE EVENTS
      OCCURRING ON DECEMBER 22, 2005.




**PRELIMINARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




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




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




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




22


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




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




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




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




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




**NATURE
      OF THE OPERATIONS OF THE COMPANY**


Background .





We
      were
      incorporated on January 1, 1997 under the name Dazzling Investments, Inc. At
      the
      time of our formation, we intended to sell jewelry on the Internet, consisting
      of cubic zirconium stones mounted in various settings. As at December 31, 1996,
      all funds raised by the sale of shares of $.001 par value common stock in order
      to fulfill our initial objective had been expended and we, thereafter, become
      dormant.




23


From
      January 1, 1997 until December 22, 2005, we were in the developmental stage
      and
      had no operations and could therefore be defined as a “shell” company, an entity
      which is generally described as having no or nominal operations and with no
      or
      nominal assets or assets consisting solely of cash and cash
      equivalents.





On
      October 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 had 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 with Yarraman
      Estate Pty Ltd (“Yarraman Australia”), the shareholders of Yarraman Australia,
      Delta Dawn Pty Limited, as trustee of the 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 of our shares (the “Shares”) to the Trustee.
      Yarraman Australia became
      our wholly-owned subsidiary and, upon the issuance of the Shares, the Trustee
      owned 60% of the Shares. Through our wholly-owned subsidiary, Yarraman
      Australia, we operate our primary business, which consists of the operation
      of
      vineyards, wine production and distribution in Australia, United States, Canada,
      New Zealand, Hong Kong and throughout Europe.





**Overview** .




We
      produce and sell premium (up to US$14), super-premium (up to US$20) and
      ultra-premium (over US$20) wines. Our wines are made at our state-of-the-art
      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 where 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. Prior to the restructuring
      described above, Yarraman Australia conducted business as Delta Dawn Pty Ltd,
      as
      trustee for the Yarraman Road Trust.





We
      own
      approximately 632 acres in the Upper Hunter Valley, New South Wales. The Upper
      Hunter Wybong vineyard has a total of approximately 632 acres, of which 187
      acres are under vine and approximately 13 acres are utilized for the winery.
      The
      land mostly comprises of black, sandy loam, alluvial soils along the creek
      frontage and adjacent slopes, rising to arable red loams with well drained
      plains and sandy slopes which extend to the sandstone ridges on the perimeter.
      The surplus acreage is used for pastures used primarily to produce mulch covers
      under the vines. Located on the property is the Wybong Creek, a perennial
      stream. Because of climate, soil and other grown conditions, the Upper Hunter
      Valley is ideally suited to growing superior quality Shiraz, Chardonnay, Merlot
      and Semillon wine grapes.





Opened
      in
      1967 on the Upper Hunter Wybong property, our winery currently has a 2,300
      ton
      processing facility with the capacity to yield 160,000 cases. The winery
      utilizes current technology in its harvesting, production and packaging of
      its
      products. Over US$7.7 million (AU$10.3 million) has been spent since 1994 on
      capital improvements to the winery and vineyard.





24


We
      have
      entered into a lease to use the “Wirrilla Vineyard,” located in the Gundagai
      region, which totals 1,312 acres located in a newly developed wine region in
      the
      southwest slopes of New South Wales. The lease is with Delta Dawn to whom we
      pay
      a monthly fee of approximately US$35,000 (AU$43,750) and have all rights to
      develop the land and utilize all fruit produced on the land. Currently the
      lease
      expires June 30, 2006 and management intends to enter into an extension of
      the
      lease with Delta Dawn Pty Limited during the second six months of 2006. A copy
      of the agreement is attached as Exhibit 10.1 hereto.





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




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


-    
                    Australia
                -    
                    Canada-    
                    USA
                -    
                    New Zealand-    
                    Denmark
                -    
                    Singapore-    
                    Switzerland
                -    
                    Germany-  
                      Hong Kong
                -    
                    United Kingdom-    
                    Ireland
                -    
                    Malaysia-    
                    Poland




We
      export
      approximately 57% of our annual volume production whereas most competitors
      in
      the region export approximately 14% of its 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 .





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





**Seasonal
      And Quarterly Results**





The
      Company has historically experienced and expects to continue experiencing
      seasonal fluctuations in its 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 the Company has 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.





**Recent
      Developments during Third Quarter of 2006**





The
      Company has engaged the services of Mr. Warrick Duthy of Warrick Duthy
      Consulting to advise the company on its global brand strategy, mergers and
      acquisitions primarily in Asia, China and Australia. The Company is in the
      process of finalizing a formal agreement with Mr. Duthy.





25


In
      March
      2006 our General Manager of Sales and Marketing resigned. Management is seeking
      a qualified person to replace this position with a new Marketing Communications
      Director based in Australia. The role of the Marketing Communications Director
      will be to support our importers and distributors with an increased focus on
      brand management, internet sales, media/advertising and
      communications.





On
      February, 2006, we entered into an exclusive agreement with Madison One Data
      Group Limited, a company based in Mill Neck, New York to seek out a U.S. company
      that may complement our Australian operations within the United States. Madison
      One plans to seek potential candidates to enter into agreements involving the
      Company including potential mergers, consolidations, recapitalizations, joint
      ventures, business combinations, exchange offers or the purchase or sale of
      securities or assets. A copy of the agreement is filed as Exhibit 10.2 hereto
      and is incorporated herein by reference.





We
      recently terminated our agreement with our long-time Australian distribution
      company Aria Wine Company Pty Ltd, and are currently seeking new distribution
      arrangements in Australia.. On February 13, 2006, we signed an amended
      sponsorship agreement as exclusive wine supplier with Luna Park, a premier
      tourist attraction and functions center in Sydney, pursuant to which we will
      provide wine for a period of five years.





In
      February 2006, we finalized a distribution agreement with Robert Whale Imports
      to act as the sole importer of our new range of wines expected to be released
      in
      June 2006 and shipped to California.





In
      March
      2006, we made our first shipments to Poland through our new importer Vinifera
      SP. We also entered into a Heads of Agreement with World Icon Pty Ltd to act
      as
      our exclusive distribution agent for Taiwan. A copy of the agreement is filed
      as
      Exhibit 10.3 hereto and is incorporated herein by reference.





In
      January 2006, we entered into an agreement with Delta Dawn to provide consulting
      services related to the wine industry. Delta Dawn’s role will be to assist
      management along with Warrick Duthy Consulting and Madison One in their
      respective search for potential strategic relationships. A copy of the agreement
      is filed as Exhibit 10.4 hereto and incorporated herein by
      reference.





The
      quality of our wines continued to attract national attention including
      recommendations from the Wine State Magazine and Kemeny’s, a major Sydney based
      retailer. The Company launched a new range of premium wines for the Australian
      market which will sell at a retail price of up to US$10.





In
      early
      April 2006, we completed the 2006 harvest. The total tonnage of grapes processed
      during the harvest was approximately 1,026 tons which is expected to result
      in
      approximately 720,000 liters of wine. As of May 1, 2006, the winery has 1.5
      million liters of wine in tank and barrel. Despite extreme heat conditions
      with
      a protracted period of above average temperatures during the harvest period,
      the
      wine quality produced from the 2006 harvest is considered to be very
      good.




**RESULTS
      OF OPERATIONS.**




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




**Nine
                Months ended March 31, 2006**
            
            **Three
                Months ended March 31, 2006****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %Cost
                of Revenue
            
            
            75
            %
            
            50
            %
            
            64
            %
            
            37
            %Gross
                Profit
            
            
            25
            %
            
            50
            %
            
            36
            %
            
            63
            %Other
                Income
            
            
            2
            %
            
            (1
            )%
            
            4
            %
            
            1
            %General
                and administrative expenses
            
            
            85
            %
            
            75
            %
            
            176
            %
            
            61
            %Income
                before income tax
            
            
            (58
            )%
            
            (26
            )%
            
            (136
            )%
            
            1
            %Income
                tax expenses
            
            
            0
            %
            
            0
            %
            
            0
            %
            
            0
            %**Net
                Income**
            
            
            (58
            )%
            
            (26
            )%
            
            (136
            )%
            
            1
            %




**NINE
      MONTHS ENDED MARCH 31, 2006 COMPARED TO NINE MONTHS ENDED MARCH 31,
      2005**




***REVENUE*** **.** Revenue
      was $1,305,537 in the nine months ended March 31, 2006 compared to $1,131,717
      in
      the nine months ended March 31, 2005. The increase in revenues of $173,820,
      or
      15.4%, was primarily related to the following items: (1) our wholesale domestic
      sales increased by $251,290, or 140%, (2) we recognized $446,878 in revenue
      from
      a packaging and bottling contract that we did not have in the prior comparative
      period and (3) we had a reduction in our export sales of $421,000, or 65%.
      The
      increase in domestic sales we attribute to the introduction of a new range
      of
      lower priced wine products that we introduced in the most current quarter.
      The
      reduction in our export sales has resulted from fewer orders from the United
      States (79% decline), Canada (69% decline) and Ireland (71% decline). Management
      believes that sales to the United States and Canada were down significantly
      due
      to poor performance by our distributors and we are currently working towards
      improving market penetration in the United States by entering into agreements
      with new distributors and revising our product marketing strategies.




***COST
      OF REVENUE*** **.** Cost of
      revenue was $975,703 in the nine months ended March 31, 2006 compared to
      $562,898 in the nine months ended March 31, 2005. As a percentage of revenue,
      cost of revenue was 75% in the nine months ended March 31, 2006 compared to
      50%
      in the nine months ended March 31, 2005. The increase is primarily due to the
      change in our revenue mix with increased contract winemaking revenue which
      is a
      high cost, low-margin activity for us. Gross profit was $329,834 in the nine
      months ended March 31, 2006 compared to $568,819 in the nine months ended March
      31, 2005. As a percentage of revenues, gross profit decreased to 25% in the
      nine
      months ended March 31, 2006 from 50% in the nine months ended March 31, 2005
      for
      the reasons discussed above





***OTHER
      INCOME (EXPENSE)*** **.** Other
      income (expense) was $21,051 in the nine months ended March 31, 2006 compared
      to
      $(6,977) in the nine months ended March 31, 2005. The increase was primarily
      attributable to a gain on settlement of a debt of $152,081, offset by an
      increase in our interest expense of $167,802. The gain on settlement of debt
      was
      as a result of our adjusting the terms of one of our grape processing
      arrangements pursuant to which we had an obligation to provide 108,701 liters
      of
      2005 vintage, with a value of A$578,289 (US$432,658), to a customer who hired
      us
      to process fruit it supplied into wine.  We were able to satisfy this
      obligation in full by providing the customer with 108,701 liters of 2004
      vintage, with a value of A$375,018 (US$280,577).  The difference of
      $152,081 was recognized as a gain on the settlement of a debt because we view
      the obligation as a debt as neither the customer’s wine nor the related fruit is
      carried as part of our inventory.





As
      a
      result of the asset purchase agreement with Delta Dawn which closed on December
      22, 2005, the company assumed an interest bearing loan which was not present
      in
      the same period the previous year. Interest paid in the nine month period ended
      March 31, 2006 was $180,331. As a percentage of revenue, other income and
      expense increased to 2% for the nine months ended March 31, 2006 compared to
      (1)% for the nine months ended March 31, 2005, the increase is because on the
      reasons discussed above.




26


***SALES,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.** Sales,
      general and administrative expenses were $1,113,481 in the nine months ended
      March 31, 2006 compared to $857,569 in the nine months ended March 31, 2005.
      This is an increase of $255,912, or 29.8% from the 2005 period to the 2006
      period. This
      increase was primarily attributable to an increase of $131,818 in salary and
      wages. Our total sales expenses increased because we hired additional sales
      representatives to assist in development of existing markets and exploration
      into new markets during the nine months ended March 31, 2006. Sales wages
      increased by $62,365, or 65%. **** Also, **** during
      the nine months ended March 31, 2006, our officer’s salaries increased as we
      hired new executive management who have experience with managing publicly traded
      United States companies. Officers’ salary increased by $69,453 or 42% **** Depreciation
      and amortization expense associated with fixed assets acquired from the asset
      purchase agreement with Delta Dawn also contributed to the higher sales, general
      and administrative expenses. Our depreciation expenses increased by $94,912,
      or
      131%.  As
      a
      percentage of revenues, sales, general and administrative expenses increased
      to
      85% in the nine months ended March 31, 2006 from 75% in the nine months ended
      March 31, 2005 due
      to the reasons as discussed above.




***NET
      INCOME (LOSS).*** **** Our
      net **** loss
      was
      $(762,596) in the nine months ended March 31, 2006 compared to a net loss of
      $(295,727) in the nine months ended March 31, 2005. This
      increase in loss was primarily attributable to the lower gross profit achieved
      in the current period due to changes in our product mix combined with the
      increase in sales, general and administrative costs and interest expense as
      outlined above.




**THREE
      MONTHS ENDED MARCH 31, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31,
      2005**




***REVENUE*** **.** Revenue
      was $290,782 in the three months ended March 31, 2006 compared to $414,753
      in
      the three months ended March 31, 2005. The decrease in revenue in the
      three-month period is primarily attributable to a significant reduction in
      export sales to Canada and Ireland of $163,128, or 66%. Revenue for the three
      month period ended March 2005 also included bulk wines sales to United Kingdom
      of $93,131, which did not occur in the same period this year.




***COST
      OF REVENUE*** **.** Cost of
      revenue was $184,766 in the three months ended March 31, 2006 compared to
      $156,789 in the three months ended March 31, 2005. As a percentage of revenue,
      cost of revenue was 64% in the three months ended March 31, 2006 compared to
      37%
      in the three months ended March 31, 2005.This increase in cost of revenue was
      mainly attributable to a change in our product mix to lower margin items in
      the
      current period. During the current quarter we released a new wine product which
      is a lower priced, lower gross margin, product for us but which is designed
      to
      allow the company to increase sales in the highly competitive, lower priced
      retail market. Gross profit was $106,016 in the three months ended March 31,
      2006 compared to $257,964 in the three months ended March 31, 2005. As a
      percentage of revenue, gross profit decreased to 36% in the three months ended
      March 31, 2006 from 63% in the three months ended March 31, 2005 related to
      the
      items discussed above.





***OTHER
      INCOME (EXPENSE)*** **.** Other
      income (expense) was $10,442 in the three months ended March 31, 2006 compared
      to $2,509 in the three months ended March 31, 2005. The increase was primarily
      attributable to an increase in interest expense of $178,793, which is a result
      our assumption of an interest bearing loan following the asset purchase
      agreement with Delta Dawn on December 22, 2005. This increase in interest
      expense was offset by a $152,081 gain as a result of our adjusting the terms
      of
      one of our grape processing arrangements in which we had an obligation to
      provide 108,701 liters of 2005 vintage, with a value of A$578,289 (US$432,658),
      to a customer who hired us to process fruit it supplied into wine.  We were
      able to satisfy this obligation in full by providing the customer with 108,701
      liters of 2004 vintage, with a value of A$375,018 (US$280,577).  The
      difference of $152,081 was recognized as a gain on the settlement of a debt
      because we view the obligations as a debt as neither the cutomer’s wine nor the
      related fruit is carried as part of our inventory. As a percentage of revenue,
      other income increased to 4% in the three months ended March 31, 2006 from
      other
      income of 1% in the three months ended March 31, 2005.




27


***SALES,
      GENERAL AND ADMINISTRATIVE EXPENSES*** **.**  Sales,
      general and administrative expenses were $511,419 in the three months ended
      March 31, 2006 compared to $254,600 in the three months ended March 31, 2005,
      an
      increase of $256,819 This increase was primarily attributable to an increase
      of
      $45,356 in salary and wages. Our total sales expenses increased because we
      hired
      additional sales representatives to assist in development of markets in the
      current period. Sales wages increased by $26,479, or 101%. **** Also, during
      the three months ended March 31, 2006, our officer’s salaries increased as we
      hired new executive management whom have experience with managing listed
      companies in the United States. Officers’ salary increased by $18,876 or 60%. **** Depreciation
      and amortization expense associated with fixed assets acquired from the asset
      purchase agreement with Delta Dawn in December 2005 also contributed to the
      higher sales, general and administrative expenses. Our depreciation expenses
      increased by $81,812, or 339%. As
      a
      percentage of revenue, sales, general and administrative expenses increased
      to
      176% in the three months ended March 31, 2006 from 61% in the three months
      ended
      March 31, 2005. This increase was due to the items as discussed above.




***NET
      INCOME (LOSS).*** Our
      net loss
      before income tax was $(394,961) in the three months ended March 31, 2006
      compared to net income of $5,873 in the three months ended March 31, 2005.
      This
      increase in loss was attributable to the decrease in our export revenue, higher
      cost of revenue due to change in our product mix, an increase in selling,
      general and administrative expenses attributable to increased sales and officer
      salaries and an increase in our interest expense relating to new
      debt.




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      March 31, 2006, we had $105,355 of cash and cash equivalents and $4,856,190
      of
      working capital as compared to $78,334 and $464,360, respectively, at March
      31,
      2005.




Cash
      flow
      from operations is expected to increase as a result of our expansion of
      distribution channels, particularly in the United States, and review of our
      market strategy.




We
      have
      entered into a loan agreement with Delta Dawn, as outlined below, and continue
      to receive funds on a note receivable from the sale of shares of Common Stock
      of
      our company in December 2005, both of which are expected to provide funds to
      meet our immediate liquidity needs for the next six months..




Management
      has entered into discussions with a large premium wine distribution company
      for
      distribution of the Company’s wines nationally in Australia. In addition the
      Company entered into an exclusive agreement with Madison One Data Group Limited,
      based in New York, to assist the company find a U.S. company to add strategic
      value to the company in that region.




As
      of
      March 31, 2006, we held a note receivable of $750,000, due to us from the sale
      of our common stock in December 2005, which is planned to be redeemed over
      the
      next three months. Of the balance on the note, $250,000 was collected prior
      to
      April 30, 2006, leaving a remaining balance of $500,000. Management believes
      that if the entire note balance is collected, the funds will be use to pay
      for
      the expenses of our ongoing exploration for expansion of international and
      domestic markets and will be re-invested into funding our ongoing capital
      requirements.





We
      entered into a long term, interest free loan with Delta Dawn with a principal
      balance of $1,612,666 on December 21, 2005. 50% of the loan balance is first
      due
      after 25 months and is payable for 36 equal monthly installments. After the
      36
      months, the entire remaining balance becomes due and payable immediately. A
      copy of
      the agreement is filed as Exhibit 10.5 hereto and is incorporated herein by
      reference.




28


An
      additional loan agreement was also signed on May 1, 2006 with Delta Dawn, with
      a
      principal amount of $640,000, of which Delta Dawn advanced $355,500 during
      the
      three month period ending March 31, 2006. This loan was provided to assist
      with
      our working capital requirements due to the low level of sales revenue generated
      during the period. The remaining balance of $284,500 was received in May
      2006. A copy
      of the agreement is filed as Exhibit 10.6 hereto and is incorporated herein
      by
      reference.




Management
      is exploring options to refinance its long term loan from Provident Bank,
      currently having an outstanding balance of $3,980,919. 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
      believes our operations have not been and, in the foreseeable future, will
      not
      be adversely affected by inflation or changing prices.


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


Under
      the
      supervision and with the participation of our management, including the
      principal executive officer and the principal accounting officer, we conducted
      an evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities Exchange Act of 1934, as of the end of the period covered by this
      report (the “Evaluation Date”). Based on this evaluation, our principal
      executive officer and principal accounting officer concluded as of the
      Evaluation Date that our disclosure controls and procedures were effective
      such
      that the material information required to be included in our Securities and
      Exchange Commission (“SEC”) reports is accumulated and communicated to
      management (including such officers) as appropriate to allow timely decisions
      regarding required disclosure and recorded, processed, summarized and reported
      within the time periods specified in SEC rules and forms relating to the
      Company, including our consolidated subsidiaries.




Additionally,
      there were no changes in our internal control over financial reporting that
      during the period covered by this Quarterly Report on Form 10-QSB has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.




29




**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.******


On
      February 3, 2006, the Board of directors submitted to and on February 6, 2006
      a
      majority of shareholders eligible to vote approved by written consent an
      amendment (the “Amendment”) to the Company’s Articles of Incorporation (i) to
      increase the number of authorized shares of the capital stock of the Company
      to
      100,000,000; (ii) to designate 90,000,000 shares of the capital stock as Common
      Stock; and (iii) to designate 10,000,000 shares of the capital stock as
      Preferred Stock 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
      the stockholders. Also submitted to and approved by a majority of shareholders
      eligible to vote was an amendment and restatement of the Company’s Bylaws (the
“Amended Bylaws”).




Shareholders
      holding in the aggregate 15,000,000 shares of Common Stock or 60% of the voting
      stock outstanding on such date, approved the Amendment and the Amended Bylaws
      on
      February 6, 2006. An information statement was distributed to the other
      shareholders of the Company on March 20, 2006.


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


None.


30
  **ITEM
                  6.**
                **EXHIBITS.******


**(a)**  **EXHIBITS**




The
      following exhibits are filed as part of this report:




**Exhibit
                  Number**
              
              **Description**10.1
              
              Lease
                  Agreement dated May 12, 2006 between Yarraman Estate Pty Ltd and
                  Delta
                  Dawn Pty Limited. *10.2
              
              Heads
                  of Agreement dated March 24, 2006 between Yarraman Estate Pty Ltd.
                  and
                  World Icon International Limited. *10.3
              
              Agreement
                  for Services dated February 24, 2006 between Madison One Data Group
                  Limited and Yarraman Winery, Inc. *10.4
              
              Consulting
                  Agreement dated as of January 1, 2006 between Yarraman Estate Pty
                  Ltd and
                  Delta Dawn Pty Limited. *10.5
              
              Loan
                  Agreement dated December 21, 2005 between Yarraman Estate Pty Ltd
                  and
                  Delta Dawn Pty Limited. *10.6
              
              Loan
                  Agreement dated May 1, 2006 between Yarraman Estate Pty Ltd and
                  Delta Dawn
                  Pty Limited. *31.1
              
              Certification
                  of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A)
                  of the
                  Securities Exchange Act of 1934, as adopted pursuant to Section
                  302 of the
                  Sarbanes-Oxley Act of 2002.31.2
              
              Certification
                  of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A)
                  of
                  the Securities Exchange Act of 1934, as adopted pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002.32.1
              
              Certification
                  of Chief Executive Officer and the Principal Financial Officer
                  Pursuant to
                  18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of
                  2002).





*
      Previously filed with the Quarterly Report on Form 10-QSB for the period ended
      March 31, 2006 and filed with the Securities and Exchange Commission on May
      15,
      2006.


31




**SIGNATURES**




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




**YARRAMAN
              WINERY, INC.**Date: August
              22, 2006
            By:
            /s/ Andrew
              LyonAndrew
              LyonChief
                Executive Officer


Date: August
              22, 2006
            By:
            /s/ John
              WellsJohn
              WellsChief
                Financial Officer










32