UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549




FORM
10-K




x
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the Fiscal Year Ended June 30, 2008





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


For
the transition period
from           to





Commission
File Number: 000-28865





YARRAMAN
WINERY, INC.


(Name of
small business issuer in its charter)


Nevada
            
            88-0373061(State
      or other jurisdiction of
            
            (I.R.S.Employerincorporation
      or organization)
            
            Identification
      Number)


700
YARRAMAN ROAD, WYBONG


UPPER
HUNTER VALLEY


NEW SOUTH WALES, AUSTRALIA
2333(Address of
principal executive offices, Zip code)





(61) 2 6547-8118(Issuer’s telephone number,
including area code)





Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per
share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.Yes  ̈      No
   x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes  ̈      No
   x





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.   Yes
   o       No
  x





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     ̈





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





Large
accelerated filer    o       Accelerated
filer   o        Non-accelerated
filer    o       Smaller
reporting company   x





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





The
aggregate market value of the issuer’s voting and non-voting common equity held
by non-affiliates (9,878,588 shares) was approximately $14,817,882, based on the
average closing bid and ask price of $1.50 for such common equity as of June 30,
2008.





As of May
1, 2009, there were outstanding 38,000,000 shares of the issuer’s Common Stock,
par value $0.001.







DOCUMENTS
INCORPORATED BY REFERENCE
 
 None








FORWARD
LOOKING STATEMENTS





Some of
the statements under “Management’s Discussion and Analysis of Financial
Condition or Plan of Operations,” and “Description of Business” in this Annual
Report on Form 10-K are forward-looking statements.  These statements
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance,
or achievements expressed or implied by forward-looking statements.





In some
cases, you can identify forward-looking statements by terminology such as “may,”
“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative
of these terms or other comparable terminology.  You should read
statements that contain these words carefully, because they discuss our
expectations about our future operating results or our future financial
condition or state other “forward-looking” information.  There may be
events in the future that we are not able to accurately predict or
control.  Before you invest in our securities, you should be aware
that the occurrence of any of the events described in this Annual Report could
substantially harm our business, results of operations and financial condition,
and that upon the occurrence of any of these events, the trading price of our
securities could decline and you could lose all or part of your
investment.  Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, growth rates, levels of activity, performance or
achievements.  We are under no duty to update any of the
forward-looking statements after the date of this Annual Report to conform these
statements to actual results.





Although
we believe that the expectations reflected in these forward-looking statements
are based on reasonable assumptions, there are a number of risks and
uncertainties that could cause actual results to differ materially from such
forward-looking statements. These factors include among others:





•  
The risks associated with the production and sale of wines;


•  
Our ability to raise capital to fund capital expenditures;


•  
Grape and other fruit price volatility;


•  
Our ability to find and retain skilled personnel;


•  
Regulatory developments; and


•  
General economic conditions.





All
references in this Form 10-KSB to the “Company,” “Yarraman,” “we,” “us” or “our”
are to Yarraman Winery, Inc. and its subsidiary, Yarraman Estate Pty
Limited.








YARRAMAN
WINERY, INC.





FORM 10-K





FOR
THE FISCAL YEAR ENDED JUNE 30, 2008





INDEX





PART I
                            PageItem
      1
                            Business
                            4Item
      1A.
                            Risk
      Factors
                            18Item
      2
                            Properties
                            26Item
      3
                            Legal
      Proceedings
                            26Item
      4
                            Submission
      of Matters to a Vote of Security Holders
                            26PART IIItem
      5
                            Market
      for Common Equity, Related Stockholder Matters and Issuer Purchases of
      Equity Securities
                            27Item
      6
                            Selected
      Financial Data
                            29Item
      7
                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                            30Item
      7A
                            Quantitative
      and Qualitative Disclosures about Market RiskItem
      8
                            Financial
      Statements
                            34Item
      9
                            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                            35Item
      9A.
                            Controls
      and Procedures
                            35PART IIIItem
      10
                            Directors,
      Executive Officers and Corporate Governance
                            37Item
      11
                            Executive
      Compensation
                            41Item
      12
                            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                            43Item
      13
                            Certain
      Relationships and Related Transactions, and Director
      Independence
                            45Item
      14
                            Principal
      Accounting Fees and Services
                            46PART IVItem
      15
                            Exhibits,
      Financial Statement Schedules
                            48







PART I





ITEM
1.   BUSINESS





General





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





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





On
November 26, 2008, we made an offer to the shareholders of Asia Distribution
Solutions Ltd. (“ADSL”), a Cayman Islands company, to purchase all of the issued
and outstanding shares of ADSL.  As of May 1, 2009, approximately
96%  of the ADSL shareholders had accepted our offer.




In
November, 2008, we agreed to acquire the Jugiong Vineyard in New South Wales,
Australia, comprising 475 acres of vineyard and a grape supply contract which
has 4 years remaining, from certain of the shareholders of Delta Dawn (who are
also shareholders in YRMN).  The consideration for the acquisition of
the Jugiong Vineyard amounts to US$6 million to be satisfied by way of a
two-year redeemable convertible note to be issued by YRMN, bearing interest at 6
per cent per annum and the assumption of US$5 million of outstanding debt
against the property.





Overview





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





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


4


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.





Product
Overview





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





Yarraman
Range





Under the
Yarraman label we produce and  sell the following wines in 750mL
bottles; Semillon, Chardonnay, Rose, Chambourcin, Merlot and Shiraz. These wines
sell for approximately US$16 - $24. This new range of wine was recently released
for sale in the Australian market and will progressively be launched into our
various export markets





Red
Horse Range





In May
2006, we exported our first shipment of wines to our new distributor, Robert
Whale Selections, in the United States. This range of wines comprises Shiraz
Cabernet, Cabernet Merlot, Chardonnay and Semillon Verdelho and retail for
approximately US$13 per bottle. This range continues to be successfully
distributed in the US market.


5


The
Bolter





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





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





Yarraman
Race Club





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





The
Market





Overview





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





Domestic
Wine Sales





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


6


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





In
addition, we market and sell our wines through retail outlets in New South
Wales, through mailing lists, and through distributors and wine brokers who sell
in specific targeted areas outside of the state of New South Wales.





Export
Wine Sales





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





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




7


Our wines
are distributed and sold in the following countries:





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





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





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





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




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





Seasonal
and Quarterly Results





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





Recent
Developments





As of
June 30, 2008, our winery had approximately 870,000 liters of wine in tank and
barrel. We elected to take in a reduced volume of grapes for vintage 2008 to
enable us to balance our inventory levels with forecast
requirements.




On March
25, 2009 Michael Kingshott and Stephen Kulmar were appointed to our Board of
Directors. Our Chairman of the Board of Directors also subsequently resigned on
March 25, 2009 and Michael Kingshott was elected as our new Chairman of the
Board.


8


On
September 1, 2006, Andrew Lyon resigned as our Chief Executive Officer and
President, and we appointed Wayne Rockall as our Chief Executive
Officer.  On September 20, 2007 Wayne Rockall resigned. On September
25, 2008 Ian Long was appointed Chief Executive Officer and
President.





On April
27, 2007 John Wells resigned as our Chief Financial Officer and Secretary. On
May 18, 2007 Mark Valencic was appointed as Secretary and on October 1, 2007
Raymond Brien was appointed as Chief Financial Officer. On September 20, 2007
Mark Valencic resigned as Secretary and Lawrence Lichter was appointed as
Secretary. On June 30, 2008 Raymond Brien resigned as Chief Financial Officer.
On September 25, 2008 Lawrence Lichter was appointed Chief Financial
Officer.





On April
2, 2007 John J. Moroney resigned as a Director and on September 20, 2007 Brian
Johnson and Frank Starr resigned as Directors. On May 1, 2008 Gary Blom was
appointed to the Board of Directors and William Middleton resigned from the
Board. On June 24, 2008 Ian Long was appointed to the Board of Directors. None
of the foregoing resignations are the result of any disagreements between us and
the resigning person on any matters related to our operations, policies or
practices.





On
December 21, 2006 we submitted an offer to merge by scheme of arrangement with
Evans & Tate, Ltd., a company publicly traded in Australia. The terms of the
offer included a combination of issuance of shares of our common stock and
issuance of convertible notes. On February 14, 2007, we submitted a revised
offer, which offer was conditionally accepted pending the results of due
diligence by Evans & Tate, Ltd. Our revised offer was rejected on March 16,
2007. In connection with this transaction we entered into a Conditional Sale
Deed to purchase 18,387,998 shares of Evans & Tate, Ltd. stock from a third
party. Upon rejection of our offer by Evans & Tate, Ltd., the Conditional
Sale Deed was terminated. Related to this acquisition we incurred $312,009 of
expenses as of June 30, 2007.





As of May
1, 2009 96% of the issued and outstanding shareholders of  Asia
Distribution Solutions, Ltd.(ADSL) have approved our proposed
merger.


ADSL
Overview





ADSL
provides distribution services for foreign and Chinese companies to sell branded
beverages in the People’s Republic of China. ADSL provides procurement and
logistic solutions to supermarkets, hotels, high-end restaurants and bars,
cafes/bakeries, and beverage wholesalers/retailers. ADSL is the distributor of
branded beverages, including beers, soft drinks, wines and spirit. The company
operates in 4 different sectors:


•
            Production
      and Distribution of proprietary branded
labels


•
            Distribution
      of non-proprietary branded labels


•
            Retail
      Wine Mall


•
            Private
      Label brands





ADSL is
one of the only Wholly Owned Foreign Enterprises (WOFE) in the beverage industry
with a staff count of 93 employees and is headquartered in Shanghai, with
operations in: Shanghai / Chengdu / Beijing / Shenzhen





Distribution
network





ADSL
distributes its products to hotel, restaurant and catering (HORECA) accounts
throughout China. Our points of sale are currently focused on the larger, urban
and affluent regions of China, serving 3,500+ different points of sale. We have
a varied client base, including:


•
            On-Premise
      Accounts


•
            Wholesalers
      / Bars / Karaoke Bars / Pubs / Cafes / Golf Clubs / Hotels / Restaurants /
      Bakeries


•
            ADSL
      Value add: Reliable distribution and “one stop shopping” for smaller
      accounts


•
            Branded
      Stores: Supermarkets / hypermarkets / chain
  stores


•
            ADSL
      Value add: Quality, scale and professionalism of
    organization





Brands
represented





Core
wines


•
            Yarraman
      (Australia)


•
            Arabella
      (South Africa)


•
            Trios
      (Australia, Italy)




9




•
            Trivento
      (Argentina)


•
            Santa
      Carolina (Chile)


•
            Vina
      San Pedro (Chile)


•
            Ironstone
      (USA)





Core
beers


•
            Heineken


•
            Tsing
      Tao


•
            Pabst
      Blue Ribbon


•
            Tiger


•
            Budweiser





Core
spirits


•
            The
      Speyside Single Highland Malt
Whisky


•
            Drumguish
      Single Highland Malt Whisky


•
            Lord
      Fidlin’s Gin


•
            Latvia
      Ullmanoff Vodka


•
            Mao
      Tai





Core other
beverages)


•
            Snapple
      – (Teas & Juice Drinks)


•
            Yeshu
      - (Coconut Drink)


•
            Sunkist
      - (Orange Soda)


•
            Jia
      Jia Liang Teh - (Herbal Drinks)


•
            Kelsoloch
      - (Mixers, Tonics and Soda)


•
            Private
      Label Sodas and Teas





Wine
Mall





Brief
Overview


We expect
ADSL’s Wine Mall to be the market leader in China by continually pioneering the
retail experience for its consumers by offering a range of over 700 labels of
quality local and imported wines, beers and spirits, as well as professional
advice on wines selection, regular promotions and wine-tasting events. ADSL will
spearhead this effort via her subsidiary, Shanghai Wine Mall Trading Co Ltd,
together with our 49% equity partners comprising of a group of Wenzhou
investors.





Wine Mall
Concept


The
retail concept sets new standards in experience and immersion and cleverly
builds a sense of being ‘guided’ through the store and experiencing all it has
to offer. Wine Mall will have a multi-functional format embracing all consumer
segments, from self-service and full service and encourages the consumer to
explore further within the store. The store is cleverly divided into
supermarket, exhibition and seminar spaces. Dan Murphy’s big box liquor is the
benchmark used in the development of the Wine Mall concept





Wine mall
sites


•
            Wenzhou  -
      the Wenzhou store opened in early January 2009. This store is the largest
      format to date with floor space totaling 1200 square
    meters.


•
            Shanghai  -
      the Shanghai store is scheduled to open in late May 2009 and will have a
      total floor space of 600 square
meters





Yarraman
and Delta Dawn have agreed to enter into an agreement for Yarraman to acquire
the Jugiong Vineyard from Delta Dawn.





The
consideration for the purchase of the Jugiong vineyard is US$11 million which is
to be satisfied by the issue by Yarraman to Delta Dawn of a redeemable
convertible 2 year loan note in the principal amount of US$6million, bearing
interest at 6 per cent. per annum and, in addition, Yarraman will assume
US$5million of debt from Delta Dawn.





The
Jugiong Vineyard property was established by a group of private investors in
1998 and is located over two blocks of land totaling 650 acres (approximately
263 hectares) comprising the Wirrilla Homestead and Wirrilla Point Block, with
181 hectares under vines.  The property is located just outside the
township of Jugiong, a small rural town on the Hume Highway approximately 65 km
from Yass, 124 km from Canberra and 340 km from Sydney.




10




The
Jugiong Vineyard is situated within the Gundagai region which is one of four
prescribed viticultural regions in southern New South Wales, as defined by the
Australian Wine and Brandy Corporation’s Geographic Indications.





Gundagai
is a newly developed wine region, situated on what is known locally as the
“south-west slopes” of New South Wales. It is here that the landscape and its
mountain streams run down from the western heights of the Snowy Mountains
towards the plains of the Riverina area.  It is an undulating region
varying between 200 and 300 metres in altitude, which is warm to hot in
temperature with an even year-round rainfall though greater in the east but with
relatively low humidity.





Pursuant
to the terms of its acquisition agreement with Delta Dawn, Yarraman has agreed
to take approximately 20 per cent. of the anticipated growth in grape production
of the Jugiong Vineyard for its own private labels which it has been developing
for the China market.  The acquisition of Jugiong will be a
significant development for the Enlarged Group as the Board believes that the
wine made from the Jugiong grapes will be well suited to the Chinese
market.





The vine
planting summary as follows:





Varietal
                      
                      Wirilla Homestead
                        area (Ha)
                      
                      
                      Wirilla Point
                        area (Ha)
                      
                      
                      Total vine planting
                        area
                        (Ha)Shiraz
                      
                      
                      75
                      
                      
                      
                      15
                      
                      
                      
                      90Cabernet
      sauvignon
                      
                      
                      27
                      
                      
                      
                      21
                      
                      
                      
                      48Merlot
                      
                      
                      10
                      
                      
                      
                      1
                      
                      
                      
                      11Semillon
                      
                      
                      10
                      
                      
                      
                      —
                      
                      
                      
                      10Chardonnay
                      
                      
                      9
                      
                      
                      
                      —
                      
                      
                      
                      9Verdelho
                      
                      
                      —
                      
                      
                      
                      7
                      
                      
                      
                      7Sauvignon
      blanc
                      
                      
                      —
                      
                      
                      
                      6
                      
                      
                      
                      6Total
      Area
                      
                      
                      131
                      
                      
                      
                      50
                      
                      
                      
                      181





Other
well known wine brands produced within the Gundagai region include Clonakilla,
Lark Hill, Brindabella Hills, Barwang Vineyard and Chalkers
Crossing.





Climatic
averages from the Australian Bureau of Meteorology site in the neighboring
township of Gundagai indicate average rainfall is approximately 700 mm with
rainfall during the growing season, between October and April, of 376 mm. The
mean January temperature is approximately 23°C.





Research
and Development





Our
research and development focuses on the following four areas:





Fermentation





We engage
in research and development in a number of areas, including implementing
fermentation practices using yeast strains specific for different varieties of
wine. We have completed extensive research and development with
micro-oxygenation of wines. This system ultimately enables the acceleration of
red wine production, achieving premium wine styles within a shorter time
frame.




11


Barrels and Oak
Alternatives





All of
our French and American oak barrels are custom made by a select group of
cooperages to match the exact requirements for our wine styles. These barrels
provide oak characters to our products and integrate the oak characters into its
super and ultra-premium wines. In addition, after successfully completing
extensive trials with oak alternatives, we have implemented these practices in
our wine making process for premium wines.





Viticulture





Viticulture
practices are constantly being reviewed at both vineyards.


During
the years ended June 30, 2008 and 2007 we did not incur any research and
development expenses.





Customers





For the
years ended June 30, 2008 and 2007 the Company’s largest customer accounted for
20% and 12% of sales, respectively. Receivable from these customers was $158,412
and $0 as of June 30, 2008 and 2007, respectively.





Suppliers





We use
materials and supplies, such as glass bottles, closures, labels, boxes and
chemicals, that we currently obtain from a number of long standing suppliers.
The supplies are purchased for specific needs and there are no long-term
supplier agreements. Management monitors supply costs to maintain cost
effectiveness. Bottling of the wines is performed by a third party in the town
of Pokolbin that management believes offers product quality and prompt service,
thus minimizing holding times for finished goods as we use just-in-time bottling
and packaging for premium wine exports.





Competition





The 2008
Australian Wine Industry Directory lists 1,165 wine producers that export wine,
more than half of all producers. Fosters Group and Hardy Wine Company
(Constellation) account for 49% of all exports by volume, while the top 20
exporters account for 91%. The remaining 1,145 exporters compete for 9% of the
export volume. The Australian wine industry is highly competitive, with all
regions of Australia having producers of Premium, Super Premium and Ultra
Premium wines that will compete with the Company’s own products. Wine production
in Australia is dominated by large wineries that have significantly greater
financial, production, distribution and marketing resources than the Company.
Management believes that the principal competitive factor in the Premium, Super
Premium and Ultra Premium markets are product quality, price and label
recognition. We have received positive reviews of our wines and believe our
prices are competitive with other producers. Increasingly, the competition is
also coming from other wine producing countries. Wine imports into Australia
grew by 48% in volume, to 65 million litres during 2008.


12







Note
Sales





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”). Principal was 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, we granted the Investors rights of first refusal on financings we may
do in the future. The principal balance of the notes was collected as of
December 31, 2006. In connection with the Share Sale, we issued 1,250,000 shares
of common stock to MillhouseIAG Limited (“Millhouse”) as a finder’s
fee.


13


Charter
Amendment





On
February 3, 2006, our Board of Directors and the holders of a majority of our
outstanding common stock voted to increase the number of our authorized shares
of capital stock. Pursuant to this authorization, on or about March 17, 2006, we
increased the number of authorized shares of our 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.





Loans





On
December 21, 2005 we entered into a loan agreement with Provident Capital
(Provident), a financial institution located in Australia. The amount of the
loan was $4,071,000 with monthly interest payments due on the 15th of each month
at the rate of 10% per annum, rising to 16% per annum if we are late in our
payments. The principal balance was originally due and payable on December 31,
2007 but has been extended to July 6, 2009. The loan is secured by certain of
our property, plant and equipment and is guaranteed by the Trust. As of June 30,
2008, the loan balance was $5,511,308 inclusive of accrued and unpaid
interest.





On
December 21 2005, prior to the Exchange Agreement and in connection with the
Asset Purchase, Yarraman Australia entered into a loan agreement with the
Yarraman Road Trust (Trust), the nominal holder of all of Yarraman Australia’s
shares. The outstanding principal balance of this loan was $1,832,795 as of
June 30, 2008. This loan advance is non-interest bearing. The loan is secured by
the fixed assets of the Company, subordinated to all other loans of the Company
collateralized by the fixed assets. A total of 50% of the loan payable, or
$916,398, was to be repaid in thirty-six monthly installments and was scheduled
to commence on the first business day of the twenty-fifth month following the
loan agreement, or approximately February 1, 2008. On the thirty-sixth month of
payment, in January 2011, the remaining 50% of the loan payable or $916,398 was
due and payable. The initial repayment date of February 2008 was extended to
June 30, 2008.





On May 1,
2006 Yarraman Australia entered into a loan agreement with the Trust in the
principal amount of $826,020. Originally, this loan agreement had an
interest rate of 8%, with the same repayment terms of the December 21, 2005
loan. During the year ended June 30, 2006 a total of $10,910 in interest expense
was recorded on this loan, until the Trust waived the interest requirement on
this loan.


On May
25, 2006 the Trust extended to Yarraman Australia an additional $13,767, to be
repaid in accordance with the same terms as the December 21, 2005 loan. This
loan advance is also non-interest bearing.





On June
30, 2008 the Trust agreed to convert the $1,832,795 and the $826,020 loans into
equity of the Company and received 6,559,524 shares of common stock. The loans
at such time of conversion were approximately $2,755,000 USD.


14


As of
June 30, 2008 the Company is indebted to a private company that is owned by one
of the Company’s majority shareholders, Geoffrey White,  in the
amount of $2,334,733. This related party has made various advances, loans and
payments on behalf of the Company, all of which are unsecured, and due on
demand. These advances and loans accrued interest on their outstanding balance
ranging between 0% and 10% per annum.





On July
1, 2007 these advances and loans were restructured into one loan agreement for
approximately $3,289,000. This new loan included approximately $689,000 related
to a sale of wine by the related party to the Company during the year ended June
30, 2008. This portion of the new loan was to be repaid commencing December 7,
2007 with receipts from the proceeds of the re-sale of this wine by the Company
until it was repaid in full. As of June 30, 2008 the balance on this portion of
the loan was $689,000. The entire new loan accrues interest at 6.5% per annum.
This new loan is secured by the fixed assets of the Company, subordinate to the
loan from the commercial bank, such loan totaling $5,511,308 as of June 30,
2008. This new loan, together with outstanding interest, was to be repaid for
any amounts still outstanding on September 30, 2008. On June 30, 2008 a
total of AUD $2,400,000 or USD $2,280,000, of the above loan was converted
into 5,440,476 shares of the Company’s common stock, at a market price of
approximately $0.42 per share. On October 15, 2008, the lender extended the
repayment date on the balance of the loan remaining, subsequent to the
$2,280,000 portion of the loan that had converted into common stock, from
September 30, 2008 to September 30, 2009.





Regulatory
Matters





In nearly
all the countries that we market our wines, such as the United States, United
Kingdom and Canada, there are statutory authorities which exercise varying
degrees of market regulation. Management believes that we are substantially in
compliance with all regulations.





Australian
Regulatory Board





Wine
quality control and distribution is regulated by the Australian Wine and Brandy
Corporation. The Australian Wine and Brandy Corporation is the Australian
Government authority responsible for the promotion and regulation of the
Australian wine and brandy industry and the provision of wine sector information
to wineries throughout Australia. It provides the regulatory role in quality
control and its goal is to maintain the integrity of wines originating from
Australian vineyards. It also has a role of providing industry-wide knowledge
through published literature and market development. Our business has been
regulated by the Australian Wine and Brandy Corporation since our
formation.





Trademarks
and Intellectual Property





All
trademarks and intellectual property are licensed to us by Delta Dawn Pty Ltd.
Delta Dawn advises us that its material trademarks and intellectual property are
protected in all material respects by the law of the governments which regulate
the markets in which they are used.





Environmental
Matters





We
believe that our operations are in substantial compliance with all applicable
environmental requirements of Australia. With regard to its control of
production and waste management, management believes we operate within all
international standards.


15


Insurance





We
maintain liability insurance which, in the view of management, is adequate
protection for any damages arising out of our activities. The amount of the
liability insurance coverage is approximately AUD$13 million for industrial
special risk coverage, approximately  AUD$20 million for general
liability coverage and AUD$2 million for Directors and Officers liability
insurance. The insurance is provided by outside insurance companies. Insurance
is provided for physical loss or damage to assets owned by the Company, for
business interruption and equipment breakdown, for loss due to employee fraud,
computer crime, legal liability and directors’ and officers’
liability.





Consulting
Agreements





On
February 24, 2006 we entered into a consulting agreement with Madison One Group,
Ltd.(“ Madison One”), a strategic planning consulting firm to assist us to
identify potential candidates for acquisition purposes and assist in the
negotiation and execution of such transactions. As compensation, we agreed to
pay the firm a monthly, nonrefundable, fee of $6,500. The original term of the
contract was from March 1, 2006 until July 1, 2006, but it was continued past
that date on a month-to-month basis. This agreement was terminated in April
2007.





On
January 1, 2006 we entered into a consulting agreement with the 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 us is reduced to less
than 15%. Thereunder, we were paying the Trust an annual fee of approximately
$82,100. This agreement was terminated as of June 30, 2008.





Employees





As of
June 30, 2008, we had ten full-time employees and seven part-time employees.
During May to July we employ additional part-time, seasonal employees for vine
pruning. There are also additional seasonal employees used during harvest in the
winery. None of the employees are members of a union or labor organization. All
of the full time employees have entered into employment contracts with Yarraman
Australia.


16


Significant
Subsidiaries





Our
subsidiaries are Yarraman Australia.





Available
Information





We file
annual, quarterly and current reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy any document
we file with the Commission at the Commission's public reference room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
Commission filings are also available to the public from the Commission's
Website at www.sec.gov.





We make
available free of charge our annual, quarterly and current reports, proxy
statements and other information upon request. To request such materials, please
contact our Chief Financial Officer at 16133 Ventura Boulevard, Suite 425,
Encino, CA, USA 91436, or call (818)789-0265 extension 13.


17


ITEM
1A.   RISK FACTORS





Our
business may be adversely affected by competition.





The wine
industry is highly competitive. Within the wine industry we believe that our
principal competitors include wineries in the Hunter Valley, Victoria and South
Australia, which produce premium, super premium and ultra premium wines. Wine
production in Australia is dominated by large wineries that have significantly
greater financial, production, distribution and marketing resources than us.
Currently no Hunter Valley winery dominates the New South Wales wine market.
Several Hunter Valley wineries, however, are older and better established and
have greater label recognition than we do. We believe that the principal
competitive factors in the premium, super premium and ultra premium segment of
the wine industry are product quality, price, label recognition and product
supply. We believe that we compete favorably with respect to each of these
factors; however, larger scale production is necessary to satisfy retailers’ and
on premise demand.





An
inability to respond quickly and effectively to new trends could adversely
impact our competitive position.





Any
failure to maintain the superiority of our winemaking capabilities or to respond
effectively to market changes in the wine industry could adversely affect our
ability to retain existing business and secure new business. We will need to
constantly seek out new products and develop new solutions to maintain in our
existing quality. If we are unable to keep current with new trends, our
competitors’ services, technologies or products may render us
noncompetitive.





Increases
in staffing costs could adversely affect our business.





Our
business is labor intensive and we are dependent on the provision of services by
highly qualified personnel. These resources are scarce and we may face
competition for these services which could result in increased expenses for the
business. These labor expenses constitute a significant component of our overall
cost of doing business and increases in these expenses may adversely impact our
business.


18


Increases
in distribution expenses and/or decreases in the effectiveness of our
distributors could result in higher expenses with no corresponding increase in
revenue.





Our
current business model is reliant upon distribution and changes to the costs
associated with that distribution or a decrease in the effectiveness of those
distributors could have a significant adverse impact on the revenue and/or
profitability of our business.





Increases
in cost for grapes and other fruit could adversely affect our
business.





We may
purchase grapes and fruit from other sources. Significant increases in the price
of grapes or other fruit used to make our wine could increase the overall
expense of the Company doing business and reduce its profitability.





We
may be subject to product liability claims which could negatively impact our
profitability.





We sell
alcoholic beverages for consumption, which involves risks such as product
contamination or spoilage, product tampering and other adulteration of products.
We may be subject to liability if the consumption of any of our products causes
injury, illness or death. A significant product liability judgment against us
may negatively impact our profitability for a period of time depending on
product availability, competitive reaction and consumer attitudes. Even if a
product liability claim is unsuccessful or is not fully pursued, any negative
publicity surrounding such assertion that products provided through our
treatment programs caused illness or injury could adversely affect our
reputation with existing and potential customers and including irreparable harm
to our corporate and brand image.





We
have limited business liability insurance coverage.





We have
limited business liability insurance coverage for our operations. Any loss due
to business disruption, litigation or natural disaster may exceed or may be
excluded from the insurance coverage we have and could result in substantial
expenses and a diversion of resources. We do not have liability insurance to
cover any operations outside of Australia.





We
may experience negative results from our plans for expansion.





We may,
in the future, acquire other wineries and vineyards or expand our business
beyond Australia. Entering into any expansion transaction entails many risks,
any of which could have a negative impact on our business, including: (a)
diversion of management’s attention from other business concerns; (b) failure to
integrate the acquired company with our existing business; (c) additional
operating expenses not offset by additional revenue; and (d) dilution of our
stock as a result of issuing equity securities. Any expansion globally also
entails additional risks relating to operating our business in environments with
different legal and regulatory systems and business customs than those in
Australia, incurring additional costs in locating and retaining those
professionals with expertise in these area. There is also the likelihood that
significant start up costs will be incurred and that it may take time to achieve
successful market penetration in new markets. We may discover that such expanded
operations are less profitable than existing operations and that losses may be
incurred.


19


We
may have future capital needs for which we will need to access additional
financing. Additional financing could dilute our current stockholders’ equity
interests.





If
additional funds are raised through the issuance of equity or debt securities,
our current stockholders may experience dilution and any such securities may
have rights, preferences or privileges senior to those of the rights of our
common stock.





There can
be no assurance that additional financing will be available on terms favorable
to us, or at all. If adequate funds are not available or not available on
acceptable terms, we may not be able to fund our expansion, promote our brand
name as we desire, take advantage of unanticipated acquisition opportunities,
develop or enhance products or respond to competitive pressures. Any such
inability could have a material adverse effect on our business, results of
operations and financial condition.





We
may not be able to retain our key management and staff.





We are
highly dependent on the services of the principal members of our management. The
loss of one or more of such individuals could substantially impair the quality
of our products and affect our ongoing research and development programs. Our
success depends in large part upon our ability to attract and retain highly
qualified personnel. We compete in our hiring efforts with other wineries and
wine marketing companies and we may have to pay higher salaries to attract and
retain personnel.





Our
stock price is highly volatile.





There is
a significant risk that the market price of our common stock could decrease in
the future in response to any of the following factors, some of which are beyond
our control:




·
            variations
      in our quarterly operating results;





·
            general
      economic slowdowns;





·
            changes
      in market valuations of similar
companies;





·
            sales
      of large blocks of our common
stock;





·
            announcements
      by us or our competitors of significant contracts, acquisitions, strategic
      partnerships, joint ventures or capital commitments;
  and





·
            fluctuations
      in stock market prices and volumes, which are particularly common among
      highly volatile securities of internationally-based
    companies.




20


Efforts
to comply with securities laws and regulations have required substantial
financial and personnel resources and we still may fail to comply.




As
directed by the Sarbanes-Oxley Act of 2002, the Securities and Exchange
Commission adopted rules requiring public companies to include a report of
management on the Company’s internal controls over financial reporting in their
annual reports. The formal process of evaluating our internal controls over
financial reporting, which has required the devotion of substantial financial
and personnel resources, is continuing. Given the status of our efforts, coupled
with the fact that guidance from regulatory authorities in the area of internal
controls continues to evolve, uncertainty exists regarding our ability to comply
by applicable deadlines. Due to changes in our personnel over the last fiscal
year we were unable to timely file our financial reports. Steps have been taken
to rectify this situation.





We
are subject to the risks associated with doing business in
Australia.




As most
of our current operations are conducted in Australia, we are subject to special
considerations and significant risks not typically associated with companies
operating in North America and Western Europe. These include risks associated
with, among others, the political, economic and legal environments and foreign
currency exchange. Our results may be adversely affected by changes in the
political and social conditions in Australia, and by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures,
currency conversion and remittance abroad, and rates and methods of taxation,
among other things.




Yarraman
Estate Pty, Ltd., our wholly-owned subsidiary, is incorporated in Australia.
Some of our executive officers and all of our directors are non-residents of the
United States. Therefore, it may be difficult for an investor, or any other
person or entity, to enforce a U.S. court judgment based upon the civil
liability provisions of the U.S. federal securities laws in an Australian court
against us or any of those persons or to effect service of process upon these
persons in the United States.




Additionally,
it may be difficult for an investor, or any other person or entity, to enforce
civil liabilities under U.S. federal securities laws in original actions
instituted in Australia. It may be difficult to enforce a judgment in the United
States against us and most of our officers and directors or to assert U.S.
securities laws claims in Australia or serve process on most of our officers and
directors.




We
may experience an impact of the United States Foreign Corrupt Practices Act on
our business.




We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with us, are not
subject to these prohibitions. Compliance with the Foreign Corrupt Practices Act
could adversely impact our competitive position and failure to comply could
subject us to penalties and other adverse consequences. We have attempted to
implement safeguards to prevent and discourage non-compliant conduct by our
employees and agents. We can make no assurance, however, that our employees or
other agents will not engage in such conduct for which we might be held
responsible. If our employees or other agents are found to have engaged in such
practices, we could suffer severe penalties and other consequences that may have
a material adverse affect on our business, financial condition and results of
operations.




21




Effects
of International Sales.




We intend
to continue to market our current and future products in most major world
markets. A number of risks are inherent in international transactions. In order
for us to market our products in the U.S., Europe, Canada, Asia and certain
other foreign jurisdictions, we may have to obtain required regulatory approvals
or clearances and otherwise comply with extensive regulations regarding safety,
manufacturing processes and quality, distribution and advertising rules and
regulations. There can be no assurance that we will be able to obtain or
maintain regulatory approvals or clearances in such countries or that we will
not be required to incur significant costs in obtaining or maintaining foreign
regulatory approvals or clearances.




Fluctuations
in currency exchange rates may adversely affect the demand for our products by
increasing the price of our products in the currency of the countries in which
the products are marketed.




Our
consolidated financial statements are presented in Australian and U.S. dollars.
Fluctuations in the rates of exchange between U.S. dollar and other foreign
currencies may negatively impact our financial condition and results of
operations. As we expand our presence into the U.S. and other international
markets, we expect the percentage of both our revenues and expenditures
denominated in non-Australian dollars to increase, with particular emphasis on
U.S. dollars. For the foreseeable future, we expect our expenditures to be
predominantly denominated in Australian dollars, resulting primarily from our
activities in Australia, and expect capital expenditures to be denominated in
Australian dollars.




We
may experience a risk of revenue reduction due to currency
conversions.




At this
time, all of our revenue, expenses and capital purchasing activities are
transacted in Australian Dollars. Capital transactions will always be reported
based on the current exchange rates, and resulting gains and losses from
historical rates are charged or credited directly to stockholders’ equity.
Revenues and expenses will be converted using the weighted-average exchange
rates for the periods being reported. Any major fluctuation in the average
exchange rate between the Australian Dollar and the U.S. Dollar during a period
will affect our results of operations reported as reported in U.S.
Dollars.




To the
extent future revenue is denominated in foreign currencies, we would be subject
to increased risks relating to foreign currency exchange rate fluctuations that
could have a material adverse affect on our financial condition and operating
results. To date, we have not engaged in any hedging transactions in connection
with our operations.




22




We
may not achieve the widespread brand recognition necessary to succeed outside of
Australia.




We
believe it is imperative to our long term success that we obtain meaningful
market share for our products in international markets. Therefore, we must
quickly establish recognition of our brands. This will require us to make
substantial expenditures on product development, strategic relationships and
marketing initiatives in new markets. In addition, we must devote significant
resources to ensure that our customers are provided with a high quality product
and a high level of customer service. Many of our potential competitors may have
substantially greater financial, marketing and other resources and potentially
greater access to content and distribution channels than us. We cannot be
certain that we will have sufficient resources to achieve the early and
widespread brand recognition we believe necessary to realize commercial
acceptance of our products.





Regulations
in international markets relating to alcoholic beverages could adversely affect
our business.




Our
business model is dependent upon the distribution of alcoholic beverages. In
certain countries, we may be subject to state or national laws governing the
distribution of alcoholic beverages. We may be required to expend substantial
unforeseen resources to comply with such regulations. Failure to comply with
such regulations could cause a significant disruption in our business
domestically and internationally as it could distract management attention and
have a material adverse effect on our business and financial condition or
results of operations.




Inability
to hire experienced and capable employees or executives or enter into
distributor agreements in non-Australian markets could adversely affect our
business in such markets.




We rely
heavily on the performance of our officers and key employees in Australia as
well as distributor agreements in foreign markets. Any growth will be dependent
on our ability to retain and motivate qualified personnel in those markets and
find retail market distributors with a broad base for re-sale of our products in
the market. If we do not succeed in attracting new qualified employees or
entering into an agreement with a distributor, our business could suffer
significantly. Competition for qualified personnel is intense in certain
markets, and we may be unable to identify, attract, hire, train, assimilate, or
retain a sufficient number of highly skilled managerial, marketing and technical
personnel necessary to implement our business plan. We may not be able to enter
into distribution agreements in certain markets which could have a significant
impact on our retail market penetration.




We
have a limited operating history.




We have
received only modest revenues and may experience many of the problems, delays,
expenses and difficulties commonly encountered by smaller companies, many of
which are beyond our control. These include, but are not limited to,
unanticipated problems related to product development, regulatory compliance,
manufacturing, marketing, additional costs and competition, product
obsolescence, as well as problems associated with sales or operations in foreign
countries. There can be no assurance that we will be able to market its products
or that products will meet with customer acceptance or generate any revenue, or
that we will ultimately achieve profitability. We have incurred significant
development and marketing operating losses to date and there can be no assurance
of future revenues or profits.




23




The
success of our plan of operation is uncertain.




Our
proposed plan of operation and prospects will be largely dependent upon our
ability to successfully attract distributors and build brand awareness with
customers. There can be no assurance that we will be able to successfully
implement our business plan or that unanticipated expenses, problems, or
difficulties will not occur which would result in material delays in its
implementation. There are no assurances that we will be able to generate
sufficient revenues from sales to distributors to become
profitable.




We
may rely upon our relationships with distributors, alliance partners and
customers.




We
believe that to be successful we may need to establish on-going
partnership/support relationships with certain customers and distributors. Our
reliance on these relationships may involve risks including among other things,
the risk of bankruptcy of the partner, the inability of such partner to
undertake necessary financial obligations, possible inconsistent business goals
or interests or a possible conflict on business decisions or
positions.





Enforceability
or claims for civil liability is uncertain.




The
majority of our officers and directors reside outside the United States. We
anticipate that a substantial portion of the assets that may be developed or
acquired by us will be located outside the United States and, as a result, it
may not be possible for investors to effect service of process within the United
States upon our officers or directors, or to enforce against our assets or
against such person judgments obtained in United States courts predicated upon
the liability provisions, and most particularly the civil liability provisions,
of the United States securities laws or state corporation or other
law.




We
may have risks due to our foreign operations and dependence on foreign sales
representatives.




As a
substantial portion of our operation will be subject to various factors
characteristic of conducting business outside the United States, such as import
duties, trade restrictions, work stoppages, foreign currency fluctuations,
export controls or license requirements, political or economic instability,
impositions of government controls and other factors, any or all of which could
have a material adverse effect on our business. Agreements may also be more
difficult to enforce and receivables more difficult to collect through a foreign
country’s legal or currency expatriation systems. In addition, the laws of
certain countries relating to proprietary rights do not protect our products and
intellectual property rights to the same extent as do the laws of the United
States and Australia.


24


We
may experience risks relating to our growth and expansion.




Growth of
our business may place significant pressures on our management, operation and
technical resources. We believe that for competitive reasons, it is important to
obtain a customer base as early as possible and accordingly, the failure to
expand operations in the early years of our business may hinder or preclude
significant future growth. If we are successful in obtaining customers for our
products, we may be required to raise substantial additional funds and deliver
large volumes of products to our customers on a timely basis at a reasonable
cost to us. We may be required to obtain additional financing in order to pursue
additional business opportunities. Our success will also depend in part upon our
ability to provide customers with timely service and support. We will also be
required to develop and improve operational, management and financial systems
and control. Failure to manage growth would have a material adverse effect on
our business and expenses arising from our activities to increase market
penetration and support growth may have a negative impact on operating
results.




25


ITEM
2.  PROPERTIES





The
following table lists details of our properties at June 30, 2008:





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.





The
Company’s executive offices and administrative offices are located on the Wybong
property at the vineyard.





We
believe our properties are adequate for our current needs and will be sufficient
to serve the needs of our operations for the foreseeable future.





ITEM
3.  LEGAL PROCEEDINGS





We are
subject to various legal proceedings from time to time in the ordinary course of
business, none of which is currently required to be disclosed under this Item
3.





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





There
were no matters submitted to shareholders to vote on during the fourth fiscal
quarter ended June 30, 2008.


26


PART II





ITEM
5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS





Market
Information





Yarraman’s
shares of common stock are publicly traded by brokers, without market makers,
and the resulting trade data (price and volume) are posted by the Pink Sheets
(www.pinksheets.com) a
centralized quotation service that collects and publishes market maker quotes
for over-the-counter securities that is published by Pinks Sheets
LLC.  Trade data for YRMN Shares may be found under the symbol
‘YRMN.PK’. The
following table sets forth the range of high and low sales prices for the
Company’s common stock for the periods indicated:





High
                  
                  
                  LowFiscal
      2008:1st
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.352nd
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.353rd
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.354th
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  1.50Fiscal
      2007:1st
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.352nd
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.353rd
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.354th
      Quarter
                  
                  $
                  2.35
                  
                  
                  $
                  2.35




Our stock
is thinly traded. Such prices above represent quotations between dealers,
without dealer markup, markdown or commissions, and may not represent actual
transactions.  During the fiscal year ended June 30, 2008 transactions
for the issuance of our common shares related to debt conversion and payment of
services were recorded at values between $0.42 and $0.45 per share.




Record
Holders





As of
April 27, 2009, there were 38,000,000shares of common stock
issued and outstanding, held by approximately 62 holders of record as indicated
on the records of the Company’s transfer agent.





Dividends





The
Company has not declared or paid dividends on its capital stock to date and
intends to retain any earnings for use in the business for the foreseeable
future.




Equity Compensation Plan
Information





We do not
currently have any equity compensation plans authorized.




Recent Sales of Unregistered
Securities





During
the year ended June 30, 2008 we issued the following  securities that
were not registered under the Securities Act of 1933, as amended (the
“Securities Act”):




27




Party
                        
                        SharesDelta
      Dawn Pty., Ltd.
                        
                        
                        6,561,524Whinners
      Pty., Ltd.
                        
                        
                        5,440,476William
      Middleton
                        
                        
                        315,000Ian
      Long
                        
                        
                        275,000William
      Stubbs
                        
                        
                        100,000Lichter,
      Yu and Associates
                        
                        
                        90,000Warrick
      Duthy
                        
                        
                        50,000Landmark
      Financial
                        
                        
                        50,000Frank
      Starr
                        
                        
                        50,000Brian
      Johnston
                        
                        
                        50,000Gottbetter
      Partners
                        
                        
                        18,00013,000,000




Purchases of Equity
Securities by the Issuer and Affiliated Purchasers





There
were no repurchases of equity securities by the issuer or affiliated purchasers
during the fourth quarter of the fiscal year ended June 30, 2008.




28


ITEM
6. SELECTED FINANCIAL DATA





Not
Applicable.


29


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




The
following discussion should be read in conjunction with other sections of this
Form 10-K including Part 1, “Item 1: Business” and Part II, “Item 8: Financial
Statements.”  Various sections of management’s discussion and analysis
(“MD&A”) contain statements that are forward-looking. These statements are
based on current expectations and assumptions that are subject to risks and
uncertainties. Actual results could differ materially due to factors discussed
in this report, as well as factors not within our control. We undertake no duty
to update any forward-looking statement to conform the statement to actual
results or changes in our expectations.




Our
MD&A is provided as a supplement to our audited financial statements to help
provide an understanding of our financial condition, changes in financial
condition and results of operations. The MD&A section is organized as
follows:




·
            Overview.
      This section provides a general description of the Company's business, as
      well as recent developments that we believe are important in understanding
      our results of operations as well as anticipating future trends in our
      operations.




·
            Critical
      Accounting Policies. This section provides an analysis of the
      significant estimates and judgments that affect the reported amounts of
      assets, liabilities, revenues, expenses, and the related disclosure of
      contingent assets and liabilities.




·
            Results of
      Operations. This section provides an analysis of our results of
      operations for the fiscal year ended June 30, 2008 (“Fiscal 2008”)
      compared to the fiscal year ended June 30, 2007 (“Fiscal
      2007”).  A brief description of certain aspects, transactions
      and events is provided, including related-party transactions that impact
      the comparability of the results being
analyzed.




·
            Liquidity
      and Capital Resources. This section provides an analysis of our
      financial condition as of June 30, 2008 and our cash flows for Fiscal 2008
      compared to Fiscal 2007.




Overview





Our
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial statements, during the
years ended June 30, 2008 and 2007, we incurred losses of  $3,628,825
and $4,452,780 , respectively. In addition, we have suffered recurring losses
from operations, cash deficiencies and the inability to meet our maturing
obligations without borrowing from related parties and selling shares of our
stock. These issues raise substantial concern about our ability to continue as a
going concern. Our continuation as a going concern is dependent upon our ability
to generate sufficient cash flow to meet our obligations on a timely basis, to
retain our current financing, to obtain additional financing, and ultimately to
attain profitability. As of June 30, 2008 we were able to convert approximately
$5,035,000  of debt into equity by issuing shares of our common
stock.





We
produce and sell premium, super-premium and ultra-premium wines from our
winemaking operations located outside of Sydney, Australia. Our revenues are
generated by selling our wines through distributors located both inside and
outside of Australia pursuant to agreements that generally obligate the
distributor to use its commercially reasonable efforts to arrange for the
purchase of our products by retail and wholesale venders of wines in our target
markets. We recognize revenue upon the shipment of the relevant wine (whether
bottled or in bulk form) to the purchaser under circumstances that give rise to
a binding obligation on the part of the purchaser to make payment to
us.




On
December 22, 2005, we entered into a Share Exchange Agreement with Yarraman
Estate Pty Limited, a privately owned Australian company (“Yarraman Australia”),
the beneficial owners of all of Yarraman Australia’s shares, and Delta Dawn Pty
Limited as trustee of the Yarraman Road Trust (“Delta Dawn”), the nominal holder
of such shares, pursuant to which we acquired all of the issued and outstanding
shares of stock of Yarraman Australia in exchange for the issuance in the
aggregate of 15,000,000 shares of our common stock to Delta Dawn for the benefit
of such beneficial owners, which were subsequently distributed to each such
owner.




As a
result of the share exchange, Yarraman Australia became our wholly-owned
subsidiary and Delta Dawn acquired approximately 60% of our issued and
outstanding stock. Contemporaneously, Yarraman Australia purchased certain
assets relating to the Yarraman winery operations from Delta Dawn. In connection
with these transactions, we entered into certain financing arrangements
described in this Annual Report and began to operate as a reporting company in
the United States.




30




In May
2009, we completed the acquisition of 96% of the outstanding shares of capital
stock of Asia Distribution Solutions Ltd.





Critical
Accounting Policies





The
methods, estimates and judgments we use in applying our accounting policies have
a significant impact on the results we report in our financial statements, which
we discuss under the heading “Results of Operations” following this section of
our MD&A. Some of our accounting policies require us to make difficult and
subjective judgments, often resulting from the need to make estimates on matters
that are inherently uncertain.




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




Revenue
Recognition




Revenues
consist of sales of finished goods, which are bottled and labeled wine, and bulk
wine, which is larger quantities of unbottled wine. Revenue is recognized when
the product is shipped or delivered and the risks, rewards and title of
ownership have transferred to the customer. We recognize some shipping and
handling fees as revenue, and the related expenses as a component of cost of
sales. All internal handling charges are included with selling and marketing
expense.  Historically, sales returns have not been
significant.  As such, we do not record a reduction to revenue for
estimated product returns in the same period that the related revenue is
recorded.





ALLOWANCE
FOR DOUBTFUL ACCOUNTS - The Company  determines its allowance for
doubtful accounts based on the aging of accounts receivable balances, its historic
write-off experience, and the financial condition of its customers. Changes
in the financial condition of the Company's major customers could result in
significant accounts receivable write-offs. The Company's allowance for doubtful
accounts at June 30, 2008 and 2007 was $104,213 and $42,440
respectively.





INVENTORY
VALUATION - The Company continually assesses the valuation of its inventories
and reduces the carrying value of those inventories that may have a cost in
excess of the current market value or may be obsolete or in excess of the
Company's forecasted usage to their estimated net realizable value. Net
realizable value is estimated using historic experience, current market
conditions and assumptions about future market conditions and expected demand.
If actual market conditions and future demand are less favorable than projected,
inventory write-downs, which are charged to costs of goods sold, may be
required.





IMPAIRMENT
OF INTANGIBLE ASSETS - The Company has intellectual materials and water usage
rights associated with its business. The Company reviews these assets for
impairment at least annually or more frequently if an event occurs or
circumstances change that would more likely than not reduce the fair value of
these assets below their carrying value. If the fair value of these assets is
less than their carrying value, then an impairment loss would be recognized
equal to the excess of the carrying value over the fair value of the asset. As
of June 30, 2008, the Company does not believe there has been any impairment of
these assets. Intangible assets at June 30, 2008 and 2007 totaled $249,990 and
$212,220, respectively.





Related-Party
Transactions





We have
related-party transactions and agreements, which we believe have been accounted
for at fair value. We utilized our best estimate of the value of these
transactions and agreements. Had alternative assumptions been used, the values
obtained may have been different.




Income
Taxes




We
utilize the liability method of accounting for income taxes. Deferred income tax
assets and liabilities are calculated as the difference between the financial
statements and tax basis of assets and liabilities that will result in taxable
or deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income.




31




We record
a valuation allowance to reduce our deferred tax assets to the amount that we
believe is more likely than not to be realized. In assessing the need for a
valuation allowance, we consider all positive and negative evidence, including
scheduled reversals of deferred tax liabilities, projected future taxable
income, tax planning strategies, and recent financial performance.




The
application of tax laws and regulations is subject to legal and factual
interpretation, judgment and uncertainty. Tax laws themselves are subject to
change as a result of changes in fiscal policy, changes in legislation,
evolution of regulations and court rulings. Therefore, the actual income taxes
may be materially different from our estimates.  As a result of our
analysis, we concluded that a full valuation allowance against our net deferred
tax assets is appropriate at June 30, 2008 and 2007.




Contingencies




From time
to time, we are involved in disputes, litigation and other legal
proceedings.  We record a charge equal to at least the minimum
estimated liability for a loss contingency when both of the following conditions
are met: (i) information available prior to issuance of the financial
statements indicates that it is probable that an asset had been impaired or a
liability had been incurred at the date of the financial statements, and
(ii) the range of loss can be reasonably estimated. However, the actual
liability in any such litigation may be materially different from our estimates,
which could result in the need to record additional costs.  Currently,
we have no outstanding legal proceedings or claims that require a loss
contingency.





Stock-Based
Compensation Expense





Effective
January 1, 2006, we adopted SFAS 123R,Share-Based Payments(“SFAS
123R”).  SFAS 123R requires all share-based payments, including
grants of employee stock options and warrants, be recognized in our financial
statements based on their respective grant date fair values. Under this
standard, the fair value of each share-based payment award is estimated on the
date of grant using an option pricing model that meets certain requirements. We
currently use the Black-Scholes option pricing model to estimate the fair value
of our share-based payment awards. The Black-Scholes model meets the
requirements of SFAS 123R; however, the fair values generated by the model
may not be indicative of the actual fair values of our awards as the model does
not consider certain factors important to our awards, such as continued
employment, periodic vesting requirements and limited
transferability.





The
determination of the fair value of share-based payment awards utilizing the
Black-Scholes model is affected by our stock price and a number of assumptions,
including expected volatility, expected life, risk-free interest rate and
expected dividends. We use the historical volatility for our common stock as the
expected volatility assumption required in the Black-Scholes model, which could
be significantly different than actual volatility.  The expected life
of the awards is based on historical and other economic data trended into the
future. The risk-free interest rate assumption is based on observed interest
rates appropriate for the terms of our awards. The dividend yield assumption is
based on our history and expectation of dividend payouts.  Forfeitures
are estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates.





Stock-based
compensation expense recognized in our financial statements beginning January 1,
2006 and thereafter is based on awards that are ultimately expected to vest. We
evaluate the assumptions used to value our awards on a quarterly basis. If
factors change and we employ different assumptions, stock-based compensation
expense may differ significantly from what we have recorded in the past. If
there are any modifications or cancellations of the underlying unvested
securities, we may be required to accelerate, increase or cancel any remaining
unearned stock-based compensation expense. Future stock-based compensation
expense and unearned stock-based compensation will increase to the extent that
we grant additional equity awards to employees.


32


Results of
Operations





The
following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue. All amounts in the following
presentation are in U.S. Dollars unless otherwise indicated.




Twelve
      Months ended June 30,2008
                      
                      
                      2007Revenue
                      
                      $
                      2,318,719
                      
                      
                      
                      100
                      %
                      
                      $
                      2,012,445
                      
                      
                      
                      100
                      %Cost
      of Revenue
                      
                      $
                      2,747,800
                      
                      
                      
                      118
                      %
                      
                      $
                      2,997,698
                      
                      
                      
                      149
                      %Gross
      Profit
                      
                      $
                      (429,081
                      )
                      
                      
                      (18
                      )
      %
                      
                      $
                      (985,253
                      )
                      
                      
                      (49
                      )
      %Other
      (Income) Expense
                      
                      $
                      1,446,667
                      
                      
                      
                      62
                      %
                      
                      $
                      881,799
                      
                      
                      
                      (44
                      )
      %General
      and Administrative Expenses
                      
                      $
                      1,753,077
                      
                      
                      
                      76
                      %
                      
                      $
                      2,585,728
                      
                      
                      
                      128
                      %Income
      (Loss) Before Income Tax
                      
                      $
                      (3,628,825
                      )
                      
                      
                      (157
                      )
      %
                      
                      $
                      (4,452,780
                      )
                      
                      
                      (221
                      )
      %Income
      Tax Expenses
                      
                      $
                      0
                      
                      
                      
                      0
                      %
                      
                      $
                      0
                      
                      
                      
                      0
                      %Net
      Income (loss)
                      
                      $
                      (3,628,825
                      )
                      
                      
                      (157
                      )
      %
                      
                      $
                      (4,452,780
                      )
                      
                      
                      (221
                      )
      %




Twelve
Months Ended June 30, 2008 Compared to Twelve Months Ended June 30,
2007




Revenue .
Revenue was $2,318,719 in the twelve months ended June 30, 2008 compared to
$2,012,445 in the twelve months ended June 30, 2007. The increase in revenues of
$306,274 or approximately 15%, was primarily related to the following items: (1)
an increase in our domestic sales of $888,692 and an increase our bulk wine
sales of $321,037, (2) a decrease in our retail sales of $224,534 and a decrease
in our sales of grapes of $421,075, and (3) the effect of fluctuation in the
exchange rate between the Australian Dollar and the US Dollar of approximately
$195,000.





Cost of
Revenue . Cost of revenue was $2,747,800 in the twelve months ended June
30, 2008 compared to $2,997,698 in the twelve months ended June 30, 2007, a
decrease of $249,898. As a percentage of revenue, cost of revenue was 118% in
the twelve months ended June 30, 2008 compared to 149% in the twelve months
ended June 30, 2007. The decrease in cost of revenue is primarily due to
adjustments to the valuation of our inventory of $1,781,599 that were made in
the year ended June 30, 2007 and the effect of the fluctuation in the exchange
rate between the Australian Dollar and the US Dollar of approximately
$196,000.




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




Gross Profit
(Loss) . Gross loss was $429,081 in the twelve months ended June 30, 2008
compared to gross loss of $985,253 in the twelve months ended June 30, 2007. As
a percentage of revenues, gross loss was 18% in the twelve months ended
June 30, 2008 from 49% in the twelve months ended June 30, 2007 for the reasons
discussed above.





Other Income
(Expense). Other expense was $1,446,667 in the twelve months ended June
30, 2008 compared to $881,799 in the twelve months ended June 30, 2007. The
increase in other expense of $564,868 was primarily attributable to an increase
in our interest expense of $621,547. Our interest expense
increased  due to increased borrowings as described in our financial
statements, and due to the amortization of the remaining imputed
interest  on loans payable from related parties that converted into
common stock during the twelve months ended June 30, 2008. Such amortization for
the years ended June 30, 2008 and 2007 was $763,133, and $205,905,
respectively.


33




Sales, General
and Administrative Expenses . Sales, general and administrative expenses
were $1,753,077 in the twelve months ended June 30, 2008 compared to $2,585,728
in the twelve months ended June 30, 2007. This is a decrease of $832,651 or
approximately 32% from the 2007 period to the 2008 period. This decrease was
primarily attributable to a decrease in our expenses related to leasing and
operating the Wirrila vineyard of $392,390, .




As a
percentage of revenues, sales, general and administrative expenses decreased to
approximately 76% in the twelve months ended June 30, 2008 from 128% in the
twelve months ended June 30, 2007 due to the reasons as discussed
above.




Net Income
(Loss) . Our net loss was $3,628,825 in the twelve months ended June 30,
2008 compared to a net loss of $4,452,780 in the twelve months ended June 30,
2007. This decrease in loss was primarily attributable to an increase in our
sales as described above combined with the decrease in cost of sales and sales,
general and administrative costs outlined above.




Liquidity
and Capital Resources




As of
June 30, 2008, we had $0 of cash and cash equivalents and $1,327,335 of working
capital as compared to $150,072 and $1,067,047, respectively, at June 30, 2007.
Cash flow from operations is expected to improve as a result of our cost cutting
measures, including the termination of the Wirrilla lease and related operating
costs and improved sales. Cash flow from financing activities is expected to
improve as the Company converted approximately $5,035,000 of debt into equity by
issuing 12,000,000 shares of common stock.





During
the years ended June 30, 2008 and 2007, net cash used in operating activities
was $(1,113,356) and $(2,931,163), respectively. Net cash used in investing
activities totaled $60,108 for the year ended June 30, 2008, compared with $0
for the same period ended June 30, 2007. Net cash provided by financing
activities totaled $276,521 for the year ended June 30, 2008, compared to
$2,791,278 for the same period ended June 30, 2007. The net change in our cash
balance was $(150,072) and $39,634 for the years ended June 30, 2008 and 2007,
respectively.





Management
has been exploring options to refinance its long term loan from Provident,
currently with an outstanding balance of $5,511,308. Any refinancing transaction
will seek terms that provide a lower interest rate, which management believes
will further increase the amount cash flow as a result of savings because of
lower interest payments.





Management
has also been exploring additional investment capital alternatives with
professional investment bankers in the United States to raise an additional
$5,000,000.





Inflation
and Changing Prices




Management
believes our operations have not been and, in the foreseeable future, will not
be adversely affected by inflation or changing prices.





Off-Balance
Sheet Arrangements





We have
no off-balance sheet arrangements.





ITEM
8.  FINANCIAL STATEMENTS





The
information required by Item 8 is included herein Appendix A beginning at
page F-1.


34


ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE





Not
Applicable.





ITEM
9A.  CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures.
 
 We
maintain "disclosure controls and procedures" as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934.  In designing and
evaluating our disclosure controls and procedures, our management recognized
that disclosure controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of disclosure controls and procedures are
met.  Additionally, in designing disclosure controls and procedures,
our management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and
procedures.  The design of any disclosure controls and procedures is
also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
 
 Our
management, including our Chief Executive Officer and our Chief Financial
Officer, have evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Annual Report on Form
10-KSB.  Based on such evaluation, and as discussed in greater detail
below, our Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of the period covered by this Annual Report on Form 10-K,
our disclosure controls and procedures were not effective:
 
 •
              to
      give reasonable assurance that the information required to be disclosed by
      us in reports that we file under the Securities Exchange Act of 1934 is
      recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission's rules and forms,
      and
 
 •
              to
      ensure that information required to be disclosed in the reports that we
      file or submit under the Securities Exchange Act of 1934 is accumulated
      and communicated to our management, including our CEO and our Treasurer,
      to allow timely decisions regarding required
  disclosure.
 
 Management's
Report on Internal Control Over Financial Reporting.
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934.  Our internal control system was designed to
provide reasonable assurance to our management and the Board of Directors
regarding the preparation and fair presentation of published financial
statements.  Our internal control over financial reporting includes
those policies and procedures that:
 
 •
              pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of our
      assets,
 
 •
              provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorization of management and directors,
      and
 
 •
              provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on our financial
statements.
  35
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate.
 
 Our
management assessed the effectiveness of our internal control over financial
reporting as of June 30, 2008.  In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") in Internal Control-Integrated
Framework.   Based on the assessment using those criteria, our
management concluded that the internal control over financial reporting was not
effective at June 30, 2008.
 
 While we
have designed a system of internal controls to supplement our existing controls
during our implementation of Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX
404"), which has not been fully implemented, we have been unable to complete
testing of these controls and accordingly lack the documented evidence that we
believe is necessary to support an assessment that our internal control over
financial reporting is effective.  Without such testing, we cannot
conclude that there are any significant deficiencies or material weaknesses, nor
can we appropriately remediate any such deficiencies that might have been
detected.  In addition, during the analysis of our internal controls
in connection with our implementation of SOX 404, we did identify a number of
controls, the adoption of which are material to our internal control environment
and critical to providing reasonable assurance that any potential errors could
be detected.  Those identified controls include:
 
 •
              Inventory
      - we did not maintain adequate procedures to timely record and reconcile
      inventory, including any necessary
reserves,
 
 •
              Notes
      payable - we did not maintain adequate procedures to properly record the
      associated amortization of debt discounts timely nor the timely
      reconciliation of note balances,
 
 •
              Journal
      Entries – We did not maintain an adequate list of recurring closing
      entries which would help insure all required closing entries are reviewed
      and recorded properly.
 
 •
              Period
      Closing – We did not maintain an adequate checklist to insure that all
      period closing procedures are recorded properly and
      completely.
 
 
 Due to
the nature of these material weaknesses in our internal control over financial
reporting, there is more than a remote likelihood that misstatements which could
be material to our annual or interim financial statements could occur that would
not be prevented or detected.
 
 This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Our management's report was not subject to attestation by
our registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only management's
report in this annual report.
 
 Changes
in Internal Control over Financial Reporting.
 
 There
have been no changes in our internal control over financial reporting during our
fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.


36


PART III





ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT




Directors and Executive
Officers




The
following table sets forth the names, ages, years elected and principal offices
and positions of our current directors and executive officers as of May 1,
2009.





Name
                    
                    Year First Elected As
                      Officer
      or Director
                    
                    Age
                    
                    OfficeMichael
      Kingshott
                    
                    2009
                    
                    62
                    
                    Chairman,
      Board of DirectorsIan
      Long
                    
                    2008
                    
                    43
                    
                    Board
      Member, PresidentGary
      Blom
                    
                    2008
                    
                    58
                    
                    Board
      MemberStephen
      Kulmar
                    
                    2009
                    
                    56
                    
                    Board
      MemberLawrence
      P. Lichter
                    
                    2008
                    
                    46
                    
                    Chief
      Financial Officer,
Secretary





None of
the members of the Board of Directors or executive officers of the Company are
related to one another.  Each year the stockholders elect the members
of our Board of Directors.  We do not have a standing nominating
committee or compensation committee as our entire board of directors currently
serves these functions.  There were no changes in procedures for
nominating directors during the year ended June 30, 2008.




Michael Kingshott, Chairman,
Board of Directors
 Mr.
Kingshott is a prominent business executive in the City of London with over 37
years experience in property, shipping, transportation and logistics with
considerable trading and management experience with Asia. Between 1981 and 1993,
Mr. Kingshott was managing director at Sally UK Holdings plc and was chairman
between 1993 and 1995. Subsequently he became non-executive chairman of Embassy
Property Group plc, which was acquired by Jacobs Holdings plc in 1995. He left
Jacobs Holdings plc in 2002. He is currently Chairman of Serviced Office Group
plc and Non Executive Chairman of Global Beverage Asia.
 
 Stephen Kulmar, Board
Member
 Mr.
Kulmar has spent the last 28 years of his career building a leading retail
marketing agency in Australia. His experience covers all retail categories from
fashion apparel to liquor. He has worked with some of the most successful retail
businesses in Australia and New Zealand from Westfield to Woolworths to the
Warehouse Group. He recently retired from this
agency to concentrate on establishing a consulting business - Retail Oasis. He
is also a nonexecutive board member of two public companies and a
shareholder/director in two successful privately owned retail
businesses.


Ian Long,Chief Executive
Officer, President and Director.


Ian Long
has over 20 years experience in winemaking and wine business management,
including 10 years as Senior Winemaker at Rosemount Estate and 5 years as Group
Operations Winemaker for Southcorp Wines. In the role at Southcorp Mr. Long was
responsible for production optimization across the Southcorp Group of 11 company
wineries and 6 contract processors, being accountable for developing the overall
vision for winemaking facilities & the transition plan to achieve this
vision. The Southcorp Group produced brands such as Penfolds, Lindemans,
Rosemount, Seppelt & Wynns. Mr. Long has been a member of the Board of
Directors since June 2008 and our Chief Executive officer and President since
September 25, 2008.





Lawrence Lichter, Chief
Financial Officer and Secretary.


Lawrence
Lichter has been serving as Secretary since September 20, 2007 and as Chief
Financial Officer since September 25, 2008. Mr. Lichter has been a certified
public accountant since 1984. In 1991 he founded Lichter, Yu & Associates, a
certified public accounting firm for which he still works that provides
consulting services to public companies and assists them with the preparation of
their financial statements and with their SEC and Sarbanes Oxley compliance
matters. From December 1999 through March 2008 Mr. Lichter served as the chief
financial officer for Pacific American Services Group, LLC, a company which owns
an institutional securities firm and a financial services firm and which
specializes in income tax preparation and business management.




37




Gary
Blom





Gary Blom
has spent over 25 years as an investment banker in the United States and
Australia. After spending 12 years on Wall Street as Managing Partner of an
International Investment Bank which specialized in Corporate Finance, Mergers
and Acquisitions he returned to Australia in 1994 to successfully launch the
Imax theatres in Australia, New Zealand and Asia. Since 1994 he has been an
investor in Yarraman Estate. In recent years he has joined as a partner of
Barrack & York, an Australian corporate advisory firm that specializes in
providing a full service platform integrating and coordinating investment
banking, tax, accounting and legal services to corporations in the global
market.





Section 16(a)
Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, as well as persons who own more than 10% of a registered
class of our equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in beneficial
ownership. Directors, executive officers, and greater than 10% shareholders are
required by Securities and Exchange Commission regulation to furnish us with
copies of all Section 16(a) forms they file. Based solely upon a review of
copies of Section 16(a) reports and representations received by us from
reporting persons, and without conducting any independent investigation of our
own, we believe all Forms 3, 4 and 5 were timely filed with the SEC by such
reporting persons during the year ended June 30, 2008.





Code of
Ethics




On
February 3, 2006, we adopted a code of ethics that applies to our officers,
employees and directors, including our Chief Executive Officer (principal
executive officer) and Chief Financial Officer (principal financial and
accounting officer), and other persons who perform similar functions. A copy of
our Code of Ethics was filed as Exhibit 14.1 to our Annual Report on Form 10-KSB
for the fiscal year ended June 30, 2006. Our Code of Ethics is intended to be a
codification of the business and ethical principles which guide us, and to deter
wrongdoing, to promote honest and ethical conduct, to avoid conflicts of
interest, and to foster full, fair, accurate, timely and understandable
disclosures, compliance with applicable governmental laws, rules and
regulations, the prompt internal reporting of violations and accountability for
adherence to this Code. A copy of our Code of Ethics will be provided to any
person requesting same without charge.





Involvement in Certain Legal
Proceedings





To the
best of our knowledge, none of our directors or executive officers has, during
the past five years:





·
            been
      convicted in a criminal proceeding or been subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offences);





·
            had
      any bankruptcy petition filed by or against any business or property of
      such person or any business of which he or she was a general partner or
      executive officer, either at the time of the bankruptcy or within two
      years prior to that time;





·
            been
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his or
      her involvement in any type of business, securities, futures, commodities
      or banking activities; or





·
            been
      found by a court of competent jurisdiction (in a civil action), the
      Securities and Exchange Commission or the Commodity Futures Trading
      Commission to have violated a federal or state securities or commodities
      law, and the judgment has not been reversed, suspended, or
      vacated.





Board of Directors Meetings
and Subcommittees





Attendance
at Board Meetings and Annual Shareholders’ Meeting





The Board
held three meetings in Fiscal 2008. We expect each director to attend every
meeting of the Board as well as the annual meeting. All directors attended 100%
of the meetings of the Board in Fiscal 2008.




Audit
Committee




Our Board
of Directors has adopted an Audit Committee Charter. Our Board of Directors had
appointed William Stubbs to the Audit Committee. William Stubbs meets the
independence requirements and standards currently established by the SEC. The
Board of Directors has designated William Stubbs to serve on the Audit Committee
member as Chairman and “audit committee financial expert” within the meaning of
the rules and regulations of the SEC.




38




The Audit
Committee assists the Board by overseeing the performance of the independent
auditors and the quality and integrity of our internal accounting, auditing and
financial reporting practices. The Audit Committee is responsible for retaining
(subject to stockholder ratification) and, as necessary, terminating, the
independent auditors, annually reviews the qualifications, performance and
independence of the independent auditors and the audit plan, fees and audit
results, and pre-approves audit and non-audit services to be performed by the
auditors and related fees.





COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION


COMPENSATION
OF DIRECTORS





Prior to
May 1, 2008 members of our Board Directors received fees in the sum of AU$20,000
per year, with a wine allowance to the value of AU$5,000 and accommodation
entitlements at Yarraman Estate in the Upper Hunter Valley, Australia. Our Board
of Directors resolved that these fees were based on each Director attending and
preparing for no fewer than four Board meetings per year and in addition
providing additional assistance to us as required.





William
Stubbs was paid an additional fee of AU$5,000 in recognition of his role and
responsibilities as Chairman of the Board of Directors of the
Company.




39




As of May
1, 2008 the only Director that will receive a fee for his services is the
Chairman, William Stubbs. The fee will be AUD 10,000 per year, approximately
US$8,500.





For the
year ended June 30, 2008 director compensation was as follows:





Name
                      
                      Fees
                        Earned
      or
                        Paid
      in
                        Cash
                      
                      
                      Stock
                        Awards
                      
                      
                      Option
                        Awards
                      
                      
                      Non-Equity
                        Incentive
                        Plan
                        Compensation
                      
                      
                      Non-Qualified
                        Deferred
                        Compensation
                        Earnings
                      
                      
                      All
      Other
                        Compensation
                      
                      
                      TotalWilliam
      Stubbs
                      
                      $
                      22,500
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      22,500William
      Middleton
                      
                      $
                      16,666
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      0
                      
                      
                      $
                      16,666




For the
year ended June 30, 2007 director compensation was as follows:





Name
                    
                    Fees
                      Earned
      or
                      Paid
      in
                      Cash
                    
                    
                    Stock
                      Awards
                    
                    
                    Option
                      Awards
                    
                    
                    Non-Equity
                      Incentive
                      Plan
                      Compensation
                    
                    
                    Non-Qualified
                      Deferred
                      Compensation
                      Earnings
                    
                    
                    All
      Other
                      Compensation
                    
                    
                    TotalWilliam
      Stubbs
                    
                    $
                    20,700
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    20,700William
      Middleton
                    
                    $
                    16,420
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    0
                    
                    
                    $
                    16,420





Nominating
Committee





At this
time, we do not have a separate nominating committee as this function is
performed by our full Board of Directors. Our entire Board of Directors is
active in the nominating process. Nominations for election to the Board of
Directors may be made by the Board of Directors or by any shareholder entitled
to vote for the election of directors. The Board of Directors carefully
considers nominees regardless of whether they are nominated by shareholders or
existing board-members.





Securities Authorized for
Issuance under Equity Compensation Plans





None.


- 40 -


ITEM
11.  EXECUTIVE COMPENSATION





Summary
Compensation





The
following table sets forth, for the years indicated, all compensation awarded
to, paid to or earned by the following type of executive officers for the fiscal
year ended June 30, 2008: (i)individuals who served as, or acted in the capacity
of, our principal executive officer and principal financial officer for the
fiscal years ended June 30, 2008 and 2007





SUMMARY
COMPENSATION TABLE(1)





Name and
                                              Principal Position
                                            
                                            Year
                                            
                                            Salary($)
                                            
                                            
                                            Bonus
                                              ($)
                                            
                                            
                                            Stock
                                              Awards
                                              ($)
                                            
                                            
                                            Option
                                              Awards
                                              ($)
                                            
                                            
                                            Non-Equity
                                              Incentive Plan
                                              Compen-sation
                                              ($)
                                            
                                            
                                            Change in
                                              Pension Value
                                              and Non-qualified
                                              Deferred
                                              Compen-sation
                                              Earnings ($)
                                            
                                            
                                            All Other
                                              Compensation
                                              ($)
                                            
                                            
                                            Total ($)(a)
                                            
                                            (b)
                                            
                                            (c)
                                            
                                            
                                            (d)
                                            
                                            
                                            (e)
                                            
                                            
                                            (f)
                                            
                                            
                                            (g)
                                            
                                            
                                            (h)
                                            
                                            
                                            (i)
                                            
                                            
                                            (j)Wayne
      Rockall (1)
      ,
                                            
                                            2008
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0Chief
      Executive
                                            
                                            2007
                                            
                                            
                                            92,363
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            92,363OfficerRaymond
      Brien (2)
      ,
                                            
                                            2008
                                            
                                            
                                            69,356
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            8,964
                                            
                                            
                                            
                                            78,320Chief
      Financial
                                            
                                            2007
                                            
                                            
                                            4,038
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            538
                                            
                                            
                                            
                                            4,576OfficerJohn
      Wells (3)
      , Chief
                                              Financial
      Officer
                                            
                                            2007
                                            
                                            
                                            77,333
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            4,167
                                            
                                            
                                            
                                            81,500Ian
      Long,
                                              Chief
      Executive Officer
                                            
                                            2008
                                            
                                            
                                            108,382
                                            
                                            
                                            
                                            11,250
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            8,631
                                            
                                            
                                            
                                            128,263




(1)
            Mr.
      Rockall served as our Chief Executive Officer from
      September 1, 2006 until September 20, 2007 and did not collect any
      compensation from us during the 2008 fiscal
  year.


(2)
            Mr.
      Brien served as our Chief Financial Officer from October 1, 2007 until
      June 30, 2008.


(3)
            Mr.
      Wells served as our Chief Financial Officer from December 22, 2005 until
      April 27, 2007.




We have
not issued any stock options or maintained any stock option or other incentive
plans since our inception. We have no plans in place and have never maintained
any plans that provide for the payment of retirement benefits or benefits that
will be paid primarily following retirement including, but not limited to, tax
qualified deferred benefit plans, supplemental executive retirement plans,
tax-qualified deferred contribution plans and nonqualified deferred contribution
plans. Similarly, we have no contracts, agreements, plans or arrangements,
whether written or unwritten, that provide for payments to the named executive
officers or any other persons following, or in connection with the resignation,
retirement or other termination of a named executive officer, or a change in
control of us or a change in a named executive officer’s responsibilities
following a change in control.




Outstanding Equity Awards at
Fiscal Year End





None.




SARS/Long-Term Incentive
Plans – Awards in Last Fiscal Year





None.


- 41 -




Employment
Contracts





Yarraman
Australia has an employment agreement with Ian Long that provides for an annual
salary of AU$125,000 and an annual bonus structure of up to AU$25,000 by
achieving key performance criteria.  In addition an annual auto
allowance of AU$10,000 is provided.





Yarraman
Australia had an employment agreement with Wayne Rockall that commenced on
September 1, 2006 and was terminated on September 20, 2007.  The
agreement  provided for his total annual compensation for serving as
Chief Executive Officer and President of AU$200,000. Wayne Rockall was also
entitled to a bonus of up to 100% of base salary on achieving key budget and
performance criteria, which were never met.




Yarraman
Australia had an employment agreement with Mr. John Wells which commenced on May
9, 2005 and was terminated on April 27, 2007.  The agreement provided
for his total annual compensation of AU$75,000 for serving as Chief Financial
Officer.





Yarraman
Australia had an employment agreement with Mr. Raymond Brien which commenced on
June 12, 2007 and was terminated on June 20, 2008.  The agreement
provided for his total annual compensation to be AU$75,000 and an auto allowance
of AU$10,000 for serving as Chief Financial Officer.





The
Company has an agreement with Mr. Lawrence Lichter that provides for annual
compensation of US$25,000 for serving as company Secretary.





Report on Repricing of
Options/SARs





We did
not re-price any options or SARS during the fiscal year ended June 30,
2008.




- 42 -


ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS





The
following table sets forth, as of April 27, 2009, certain information concerning
the beneficial ownership of our Common Stock by:





·
            each
      stockholder known by us to own beneficially five percent or more of our
      outstanding common stock;





·
            each
      director;





·
            each
      executive officer; and





·
            all
      of our executive officers and directors as a group, and their percentage
      ownership and voting power.





Name and Address of Beneficial
                                    Owner
                                  
                                  Shares
                                    Beneficially
                                    Owned(1)
                                  
                                  
                                  Percent of
                                    Class†Delta
      Dawn Pty Ltd., as trustee for the
                                    Yarraman
      Road Trust (2)
                                  
                                  
                                  7,617,237
                                  (3)
                                  
                                  
                                  20.05
                                  %Huntleigh
      Investment Fund Limited
                                    49
      Micoud Street
                                    Castries,
      St. Lucia
                                  
                                  
                                  3,534,012
                                  (4)
                                  
                                  
                                  9.30
                                  %William
      J. Stubbs, Director
                                    58
      Terry Road
                                    Box
      Hill, New South Wales Australia 2765
                                  
                                  
                                  100,000
                                  
                                  
                                  
                                  .
                                  *Whinners
      Pty., Ltd
                                    Sydney,
      NSW Australia
                                  
                                  
                                  8,399,163
                                  
                                  
                                  
                                  22.10
                                  %Stephen
      Kulmar
                                    1a
      Rialto Lane
                                    Manly, NSW Australia
                                  
                                  
                                  275,800
                                  
                                  
                                  
                                  
                                  *




- 43 -




Name and Address of Beneficial
                            Owner
                          
                          Shares
                            Beneficially
                            Owned (1)
                          
                          
                          Percent of
                            Class†Ian
      Long, CEO, President, Director
                            700
      Yarraman Road
                            Wybong,
      NSW Australia 2333
                          
                          
                          275,000
                          
                          
                          
                          *Gary
      Blom, Director
                            Mallfame
      Pty., Ltd.
                            Sydney,
      NSW Australia
                          
                          
                          6,045,200
                          
                          
                          
                          15.91
                          %Lawrence
      Lichter, CFO and Secretary
                            16133
      Ventura Boulevard, #425
                            Encino,
      CA 91436 USA
                          
                          
                          90,000
                          
                          
                          
                          *Menala
      Pty., Ltd.
                            Sydney,
      NSW Australia
                          
                          
                          2,060,800
                          
                          
                          
                          5.42
                          %Total
      Held by Directors and Executive
                            Officers
                          
                          
                          6,786,000
                          
                          
                          
                          17.86
                          %




† As of
April 27, 2009 there were 38,000,000 shares of our common stock, par value
$0.001 per share, issued and outstanding.





* Less
than one percent.




(1)
            Unless
      otherwise noted, we believe that all persons named in the table have sole
      voting and investment power with respect to all shares of the Common Stock
      beneficially owned by them. A person is deemed to be the beneficial owner
      of securities which may be acquired by such person within sixty (60) days
      from the date indicated above upon the exercise of options, warrants or
      convertible securities. Each beneficial owner’s percentage of ownership is
      determined by assuming that options, warrants or convertible securities
      that are held by such person (not those held by any other person) and
      which are exercisable within sixty (60) days of the date indicated above,
      have been exercised. To date, we have not granted any options, warrants or
      any other form of securities convertible into our common
      stock.


(2)
              The
      address of the beneficial owner is c/o Yarraman Estate, 700 Yarraman Road,
      Wybong, Upper Hunter, New South Wales, 2333 Australia.


(3)
            Delta
      Dawn Pty Ltd. is trustee of Yarraman Road Trust, an Australian unit trust
      created by a declaration of trust contained in a deed poll dated September
      26, 2002. Interests in the trust property are evidenced by the issuance of
      units to the trust beneficiaries, with each unitholder entitled to the
      benefit of the assets of the Trust in the proportion in which they are
      registered as holding units from time to time. While the unitholders do
      not have the ability to direct the disposition and the voting of
      securities of the Registrant held in the name of Delta Dawn Pty Ltd as
      trust property, they may be deemed to beneficially own the securities as a
      result of their rights under the Trust documents. All unitholders have
      disclaimed any beneficial ownership that may be imposed due to
      interpretations of unitholders’ ownership of the trust
      property.




(4)
            Based
      on information reported by Huntleigh Investment Fund Limited on a Form 4
      filed on June 5, 2006.





Equity Compensation Plan
Information




We do not
have any equity compensation plans.




- 44 -


ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE





During
the year ended June 30, 2008, we entered into the following transactions
required to be reported under Item 404 of Regulation S-K (“Item
404”):





Yarraman
Australia leased vineyards and related plant and equipment from the Trust. 
Terms of the agreement included annual payment of approximately $239,000. 
The lease began on July 1, 2003 and terminated on December 22, 2005 when
Yarraman Australia purchased the vineyard and related plant and
equipment.





The
Company paid the Trustee approximately $35,000 per month for the use of
additional vineyard land also located in Australia. On January 1, 2006 the
Company entered into a written agreement to lease this vineyard land for
approximately $35,000 per month. The term was from January 1, 2006 through June
30, 2006. As of July 1, 2006 this lease was on a month-to-month basis with the
same payment terms. This leasing arrangement was terminated in May 2007. During
the years ended June 30, 2007  total lease expense was approximately
$359,000.





Stockholders
and Directors of the Company and of the Trust were provided wine during the
years ended June 30, 2008,  June 30, 2007  valued at $8,844
and $24,505  respectively.





The
Company had wine sales to entities related to various Stockholders, Officers and
Directors totaling $9,866 and $4,734 during the years ended June 30, 2008 and
2007, respectively.





On
February 1, 2008 Yarraman Australia entered into a consulting agreement whereby
it agreed to pay AUD$5,000 per month to a wholly owned entity of one of our
Board Members, Gary Blom, for his consulting services to the Company related to
the wine business.  During the year ending June 30, 2008 this entity
was paid AUD$20,000, approximately USD$19,200.





On
January 1, 2006 Yarraman Australia entered into a consulting agreement with the
Trustee to provide business consulting services related to the wine
industry for a term of two years or until such time as their ownership
percentage in the Company is reduced to less than 15%. Under this agreement
the Company must pay the Trustee $100,000AUD (Australian Dollars) or
approximately $96,150 USD (US Dollars) annually.  This agreement was
terminated in June 2008.  During the years ended June 30, 2008 and 2007 the
Company paid the Trustee approximately $66,063 and $126,860 ,
respectively.




- 45 -




On
December 21 2005, prior to the Exchange Agreement and in connection with the
Asset Purchase, Yarraman Australia entered into a loan agreement with the Trust,
the nominal holder of all of Yarraman Australia’s shares. The outstanding
principal balance of this loan was $1,832,795. This loan advance was
non-interest bearing. The loan was secured by the fixed assets of the Company,
subordinated to all other loans of the Company collateralized by the fixed
assets. A total of 50% of the loan payable, or $916,398, was to be repaid in
thirty-six monthly installments commencing on the first business day of the
twenty-fifth month following the loan agreement, or approximately February 1,
2008. On the thirty-sixth month of payment, in January 2011, the remaining 50%
of the loan payable or $916,398 was to be due and payable. The initial repayment
date of February 2008 was extended to June 30, 2008.




On May 1,
2006 Yarraman Australia entered into a loan agreement with the Trust in the
principal amount of $826,020. Originally, this loan agreement had an interest
rate of 8%, with the same repayment terms of the December 21, 2005 loan. During
the year ended June 30, 2006 a total of $10,910 in interest expense was recorded
on this loan, until the Trust waived the interest requirement on this loan. On
May 25, 2006 the Trust extended to Yarraman Australia an additional $13,767 to
be repaid in accordance with the same terms as the December 21, 2005 loan. This
loan advance was also non-interest bearing.





As of
June 30, 2008 both the loan advances above totaling $1,832,795 and the $826,020
loan payable were converted into 6,559,524 shares of the Company common stock at
the market price of approximately $0.42 per share.





As the
entire above loan advances, totaling $2,672,582 were non-interest bearing, the
Company recorded an imputed interest of $871,307 which is recorded as discount
on debt and a contribution of capital to the Company. This discount on debt is
being amortized over the term that these loan advances are outstanding. As the
loan advance was converted into common stock during the year ended June 30,
2008, the remaining unamortized debt discount was fully amortized upon
conversion. During the years ended June 30, 2008 and 2007, the Company amortized
this discount on debt, recorded as an interest expense of $763,133 and $205,905,
respectively, at the prevailing exchange rates for the years then
ended.





As of
June 30, 2008 the Company is indebted to a private company that is owned by one
of the Company’s majority shareholders, Geoffrey White,  in the
amount of $2,334,733. This related party has made various advances, loans and
payments on behalf of the Company, all of which are unsecured, and due on
demand. These advances and loans accrued interest on their outstanding balance
ranging between 0% and 10% per annum.




On July
1, 2007 these advances and loans were restructured into one loan agreement for
approximately $3,289,000. This new loan included approximately $689,000 related
to a sale of wine by the related party to the Company during the year ended June
30, 2008. This portion of the new loan was to be repaid commencing December 7,
2007 with receipts from the proceeds of the re-sale of this wine by the Company
until it was repaid in full. As of June 30, 2008 the balance on this portion of
the loan was $689,000. The entire new loan accrues interest at 6.5% per annum.
This new loan is secured by the fixed assets of the Company, subordinate to the
loan from the commercial bank, such loan totaling $5,511,308 as of June 30,
2008. This new loan, together with outstanding interest, was to be repaid for
any amounts still outstanding on September 30, 2008. On June 30, 2008 a
total of AUD $2,400,000 or USD $2,280,000, of the above loan was converted
into 5,440,476 shares of the Company’s common stock, at a market price of
approximately $0.42 per share. On October 15, 2008, the lender extended the
repayment date on the balance of the loan remaining, subsequent to the
$2,280,000 portion of the loan that had converted into common stock, from
September 30, 2008 to September 30, 2009.




Director Independence





Mr.
Stubbs qualifies as “independent” in accordance with Rule 10A-3 of the Exchange
Act.   Messrs. Long, Blom Kingshott,
Kulmarand Lichter do not qualify as independent.  Mr. Long is
employed by the Company.  Mr. Blom is a beneficiary of the Yarraman
Road Trust and a consultant to the Company.  Mr. Lichter’s firm,
Lichter, Yu and Associates provides accounting consulting services to the
Company. Mr. Kulmar is a beneficiary of the Yarraman Road Trust. Mr. Kingshott
is a major stockholder and employee of ADSL.





ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit Fees
..




The
aggregate fees billed to us by our principal accountant for services rendered
during the fiscal years ended June 30, 2008 and 2007 are set forth in the table
below:




- 46 -





Fee Category
                        
                        Fiscal year ended
                          June 30, 2008
                        
                        
                        Fiscal year ended
                          June30, 2007Audit
      fees (1)
                        
                        $
                        45,000
                        
                        
                        $
                        19,855Audit-related
      fees (2)
                        
                        $
                        0
                        
                        
                        $
                        0Tax
      fees (3)
                        
                        $
                        0
                        
                        
                        $
                        0All
      other fees (4)
                        
                        $
                        0
                        
                        
                        $
                        0Total
      fees
                        
                        $
                        45,000
                        
                        
                        $
                        19,855





(1)
            Audit
      fees consists of fees incurred for professional services rendered for the
      audit of consolidated financial statements, for reviews of our interim
      consolidated financial statements included in our quarterly reports on
      Form 10-Q and for services that are normally provided in connection with
      statutory or regulatory filings or engagements.


(2)
            Audit-related
      fees consists of fees billed for professional services that are reasonably
      related to the performance of the audit or review of our consolidated
      financial statements, but are not reported under “Audit
fees.”


(3)
            Tax
      fees consists of fees billed for professional services relating to tax
      compliance, tax planning, and tax advice.


(4)
            All
      other fees consists of fees billed for all other
  services.





Audit Committee’s
Pre-Approval Practice .





Section
10A(i) of the Securities Exchange Act of 1934 prohibits our auditors from
performing audit services for us as well as any services not considered to be
“audit services” unless such services are pre-approved by the board of directors
(in lieu of the audit committee) or unless the services meet certain de minimis
standards. Accordingly, our audit committee pre-approves all services, including
audit services, provided by our independent accountants.




- 47 -


ITEM
15.  EXHIBITS


Exhibit Number
                    
                    Description2.1
                    
                    Share
      Exchange Agreement, dated December 22, 2005 (incorporated herewith by
      reference to Exhibit 2.1 to Yarraman Winery, Inc.’s Current Report on Form
      8-K dated December 22, 2005 and filed with the Securities and Exchange
      Commission on December 22, 2005)3.1
                    
                    Certificate
      of Incorporation of Yarraman Winery, Inc. (incorporated herewith by
      reference to Exhibit 3.1 to Yarraman Winery, Inc.’s Registration Statement
      on Form 10-SB filed with the Securities and Exchange Commission on January
      12, 2002) as amended by Certificate of Amendment to Certificate of
      Incorporation dated (incorporated herewith by reference to Appendix A of
      Yarraman Winery, Inc.’s Definitive Information Statement on Schedule 14C
      filed with the Securities and Exchange Commission March 16,
      2006)3.2
                    
                    Amended
      and Restated By-laws of Yarraman Winery, Inc. (incorporated herewith by
      reference to Exhibit A to Appendix B of Yarraman Winery, Inc.’s Definitive
      Information Statement on Schedule 14C filed with the Securities and
      Exchange Commission March 16, 2006).10.1
                    
                    Stock
      Purchase Agreement dated as of December 22, 2005 (incorporated herewith by
      reference to Exhibit 2.1 to Yarraman Winery, Inc.’s Current Report on Form
      8-K dated December 22, 2005 and filed with the Securities and Exchange
      Commission on December 22, 2005)10.2
                    
                    Promissory
      Note dated as of December 22, 2005 from Oriental Holdings Limited
      (incorporated herewith by reference to Exhibit 2.1 to Yarraman Winery,
      Inc.’s Current Report on Form 8-K dated December 22, 2005 and filed with
      the Securities and Exchange Commission on December 22,
    2005)




- 48 -




Exhibit Number
                        
                        Description10.3
                        
                        Promissory
      Note dated as of December 22, 2005 from Glenealy Holdings Limited
      (incorporated herewith by reference to Exhibit 2.1 to Yarraman Winery,
      Inc.’s Current Report on Form 8-K dated December 22, 2005 and filed with
      the Securities and Exchange Commission on December 22,
    2005)10.4
                        
                        Promissory
      Note dated as of December 22, 2005 from Leeds Holdings Limited
      (incorporated herewith by reference to Exhibit 2.1 to Yarraman Winery,
      Inc.’s Current Report on Form 8-K dated December 22, 2005 and filed with
      the Securities and Exchange Commission on December 22,
    2005)10.5
                        
                        Promissory
      Note dated as of December 22, 2005 from Sunvalley Limited (incorporated
      herewith by reference to Exhibit 2.1 to Yarraman Winery, Inc.’s Current
      Report on Form 8-K dated December 22, 2005 and filed with the Securities
      and Exchange Commission on December 22, 2005)10.6
                        
                        Promissory
      Note dated as of December 22, 2005 from Dragon Enterprises Limited
      (incorporated herewith by reference to Exhibit 2.1 to Yarraman Winery,
      Inc.’s Current Report on Form 8-K dated December 22, 2005 and filed with
      the Securities and Exchange Commission on December 22,
    2005)10.7
                        
                        Lease
      Agreement dated May 12, 2006 between Yarraman Estate Pty Ltd and Delta
      Dawn Pty Limited (incorporated herewith by reference to Exhibit 10.1 to
      Yarraman Winery, Inc.’s 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)10.8
                        
                        Heads
      of Agreement dated March 24, 2006 between Yarraman Estate Pty Ltd. and
      World Icon International Limited (incorporated herewith by reference to
      Exhibit 10.2 to Yarraman Winery, Inc.’s 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)10.9
                        
                        Agreement
      for Services dated February 24, 2006 between Madison One Data Group
      Limited and Yarraman Winery, Inc. (incorporated herewith by reference to
      Exhibit 10.3 to Yarraman Winery, Inc.’s 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)10.10
                        
                        Consulting
      Agreement dated as of January 1, 2006 between Yarraman Estate Pty Ltd and
      Delta Dawn Pty Limited (incorporated herewith by reference to Exhibit 10.4
      to Yarraman Winery, Inc.’s 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)




- 49 -




Exhibit Number
                      
                      Description10.11
                      
                      Loan
      Agreement dated December 21, 2005 between Yarraman Estate Pty Ltd and
      Delta Dawn Pty Limited (incorporated herewith by reference to Exhibit 10.5
      to Yarraman Winery, Inc.’s 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)10.12
                      
                      Loan
      Agreement dated May 1, 2006 between Yarraman Estate Pty Ltd and Delta Dawn
      Pty Limited (incorporated herewith by reference to Exhibit 10.6 to
      Yarraman Winery, Inc.’s 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)10.13
                      
                      Loan
      Agreement dated August 1, 2006 between Yarraman Winery, Inc. and Whinners
      Pty Ltd (incorporated herewith by reference to Exhibit 10.13 to Yarraman
      Winery, Inc.’s Annual Report on Form 10-KSB for the year ended June 30,
      2006 and filed with the Securities and Exchange Commission on September
      28, 2006)10.14
                      
                      Assignment
      of Debts Agreement dated February 2007 between Yarraman Estate Pty Limited
      and Whinners Pty Limited (incorporated herewith by reference to Exhibit
      10.1 to Yarraman Winery, Inc.’s Quarterly Report on Form 10-QSB for the
      quarter ended March 31. 2007 and filed with the Securities and Exchange
      Commission on June 25, 2007)14.1
                      
                      Code
      of Ethics (incorporated herewith by reference to Exhibit 14.1 to Yarraman
      Winery, Inc.’s Annual Report on Form 10-KSB for the year ended June 30,
      2006 and filed with the Securities and Exchange Commission on September
      28, 2006)16.1
                      
                      Letter
      from Kabani & Company, Inc. regarding change in certifying accountant
      (incorporated herewith by reference to Exhibit 16.1 to Yarraman Winery,
      Inc.’s Current Report on Form 8-K dated September 20, 2007 and filed with
      the Securities and Exchange Commission on November 2,
  2007)21.1
                      
                      Subsidiaries
      of Yarraman Winery, Inc.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, filed herewith31.2
                      
                      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, filed
herewith




- 50 -




Exhibit Number
                    
                    Description32.1
                    
                    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), filed
      herewith32.2
                    
                    Certification
      of Chief Financial Officer and the Principal Financial Officer Pursuant to
      18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), filed
      herewith







- 51 -




Signatures




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.




Signature
                      
                      Title
                      
                      Date/s/ Ian
      Long
                      
                      Chief
      Executive Officer and Director
                      
                      June
      1, 2009Ian
Long
                      
                      (Principal
      Executive Officer
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
 
 Signature
                                    
                                    Title
                                    
                                    Date/s/ Ian
      Long
                                    
                                    Chief
      Executive Officer and Director
                                    
                                    June
      1, 2009Ian
      Long
                                    
                                    (Principal
      Executive Officer)/s/ Michael  Kingshott
                                    
                                    Chairman
      of the Board
                                    
                                    June
      1, 2009Michael  Kingshott/s/ Lawrence
      P. Lichter
                                    
                                    Chief
      Financial Officer
                                    
                                    June
      1, 2009Lawrence
      P. Lichter
                                    
                                    (Principal
      Financial Officer and Principal
                                      Accounting
      Officer)/s/ Gary Blom
                                    
                                    Director
                                    
                                    June
      1, 2009Gary
      Blom/s/
      Stephen Kulmar
                                    
                                    Director
                                    
                                    June
      1, 2009Stephen
      Kulmar
  - 52 -


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Stockholders and Board of Directors
 Yarraman
Winery, Inc.
 
 We have
audited the accompanying consolidated balance sheets of Yarraman Winery,
Inc.  (the “Company”) as of June 30, 2008 and 2007 and the related
consolidated statement of operations and comprehensive loss, stockholders'
equity (deficit) and cash flows for the years ended June 30, 2008 and 2007.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of June 30,
2008 and 2007 and the results of their operations and their cash flows for the
years ended June 30, 2008 and 2007, in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred
operating  losses and has negative cash flows from operations for the
year ended June 30, 2008 and 2007 as more fully described in Note 2. These
issues raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 /s/Sherb & Co., LLPCertified
      Public AccountantsNew
      York, NYMay
      25, 2009




F-1




YARRAMAN
WINERY, INC. AND SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS





June 30,2008
                
                
                2007ASSETSCurrent
      AssetsCash
      and cash equivalents
                
                $
                -
                
                
                $
                150,072Accounts
      receivable, net
                
                
                555,798
                
                
                
                775,718Inventory
                
                
                4,409,833
                
                
                
                4,074,056Other
      receivables
                
                
                105,842
                
                
                
                85,931Other
      assets
                
                
                214,463
                
                
                
                227,672Total
      Current Assets
                
                
                5,285,936
                
                
                
                5,313,449Property,
      plant and equipment, net
                
                
                4,369,644
                
                
                
                4,235,575Intangible
      asset
                
                
                249,990
                
                
                
                212,200$
                9,905,570
                
                
                $
                9,761,224LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      Liabilities:Cash
      overdraft
                
                $
                37,990
                
                
                $
                -Accounts
      payable and accrued expenses
                
                
                1,483,157
                
                
                
                1,199,567Capital
      leases, current portion
                
                
                102,720
                
                
                
                140,849Due
      to related party
                
                
                2,334,734
                
                
                
                2,905,986Total
      Current Liabilities
                
                
                3,958,601
                
                
                
                4,246,402Long
      Term Liabilities:Capital
      leases, net of current portion
                
                
                50,821
                
                
                
                124,847Loans
      payable - related party
                
                
                -
                
                
                
                1,749,097Long-term
      debt
                
                
                5,511,308
                
                
                
                4,818,008Total
      Long Term Liabilities
                
                
                5,562,129
                
                
                
                6,691,952Total
      Liabilities
                
                
                9,520,730
                
                
                
                10,938,354Stockholder's
      Equity (Deficit):Common
      stock, $.001 par value, 90,000,000 shares authorized 38,000,000 shares and
      25,000,000 shares issued and outstanding
                
                
                38,000
                
                
                
                25,000Additional
      paid in capital
                
                
                11,019,252
                
                
                
                5,455,252Subscription
      receivable
                
                
                (88,000
                )
                
                
                -Other
      comprehensive (loss) income
                
                
                (287,228
                )
                
                
                10,977Accumulated
      deficit
                
                
                (10,297,184
                )
                
                
                (6,668,359
                )Total
      Stockholder's Equity (Deficit)
                
                
                384,840
                
                
                
                (1,177,130
                )$
                9,905,570
                
                
                $
                9,761,224





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


F-2





YARRAMAN
WINERY, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS





Years Ended June 30,2008
                  
                  
                  2007Sales,
      net
                  
                  $
                  2,318,719
                  
                  
                  $
                  2,012,445Cost
      of sales
                  
                  
                  2,747,800
                  
                  
                  
                  2,997,698Gross loss
                  
                  
                  (429,081
                  )
                  
                  
                  (985,253
                  )Selling,
      general and administrative expenses
                  
                  
                  1,753,077
                  
                  
                  
                  2,585,728Total
      operating expenses
                  
                  
                  1,753,077
                  
                  
                  
                  2,585,728Loss
      from operations
                  
                  
                  (2,182,158
                  )
                  
                  
                  (3,570,981
                  )Other
      (Income) ExpenseInterest
      income
                  
                  
                  (3,730
                  )
                  
                  
                  (1,088
                  )Interest
      expense
                  
                  
                  1,493,032
                  
                  
                  
                  871,485Other
      income
                  
                  
                  (5,751
                  )
                  
                  
                  -(Gain)
      Loss on sale of fixed asset
                  
                  
                  (6,076
                  )
                  
                  
                  13,032Transaction
      gain on foreign currency
                  
                  
                  (30,808
                  )
                  
                  
                  (1,630
                  )Total
      Other Expense
                  
                  
                  1,446,667
                  
                  
                  
                  881,799Loss
      before income taxes
                  
                  
                  (3,628,825
                  )
                  
                  
                  (4,452,780
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  
                  (3,628,825
                  )
                  
                  
                  (4,452,780
                  )Other
      comprehensive lossForeign
      currency translation
                  
                  
                  (298,205
                  )
                  
                  
                  (141,212
                  )Comprehensive
      Loss
                  
                  $
                  (3,927,030
                  )
                  
                  $
                  (4,593,992
                  )Net
      loss per share:Basic
      & diluted
                  
                  $
                  (0.14
                  )
                  
                  $
                  (0.18
                  )Weighted
      average number of shares outstanding:Basic
      & diluted
                  
                  
                  26,083,333
                  
                  
                  
                  25,000,000





Net loss
per share diluted and weighted average of dilutive securities has not been
calculated since the effect of dilutive securities is anti-dilutive





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


F-3





YARRAMAN
WINERY, INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Years Ended June 30,2008
                  
                  
                  2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Loss
                  
                  $
                  (3,628,825
                  )
                  
                  $
                  (4,452,780
                  )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Shares
      to be issued for consulting services
                  
                  
                  -
                  
                  
                  
                  117,000Shares
      issued for services
                  
                  
                  315,000
                  
                  
                  
                  -Depreciation
      and amortization
                  
                  
                  446,416
                  
                  
                  
                  389,266Salary
      forgiven for stock payment
                  
                  
                  22,000
                  
                  
                  
                  -Amortization
      of discount on debt
                  
                  
                  763,133
                  
                  
                  
                  205,905(Increase)
      / decrease in assets:Accounts
      receivable
                  
                  
                  301,073
                  
                  
                  
                  (205,461
                  )Inventory
                  
                  
                  191,281
                  
                  
                  
                  757,764Other
      receivables
                  
                  
                  (9,996
                  )
                  
                  
                  26,647Other
      assets
                  
                  
                  41,490
                  
                  
                  
                  21,549Increase
      in liabilities:Accounts
      payable and accrued expenses
                  
                  
                  239,477
                  
                  
                  
                  114,768Accrued
      interest related party loan
                  
                  
                  205,595
                  
                  
                  
                  94,179Total
      Adjustments
                  
                  
                  2,515,469
                  
                  
                  
                  1,521,617Net
      cash used in operations
                  
                  
                  (1,113,356
                  )
                  
                  
                  (2,931,163
                  )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
                  
                  
                  (45,685
                  )
                  
                  
                  -Acquisition
      of intangible
                  
                  
                  (14,423
                  )
                  
                  
                  -Net
      cash provided by (used in) investing activities
                  
                  
                  (60,108
                  )
                  
                  
                  -CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from long-term debt
                  
                  
                  49,961
                  
                  
                  
                  74,634Cash
      overdraft
                  
                  
                  37,990
                  
                  
                  
                  -Capital
      lease payments
                  
                  
                  (137,460
                  )
                  
                  
                  (95,164
                  )Loans
      payable receipts from related party
                  
                  
                  427,172
                  
                  
                  
                  3,069,324Loans
      payable repayments to related party
                  
                  
                  (101,142
                  )
                  
                  
                  (257,516
                  )Net
      cash provided by financing activities
                  
                  
                  276,521
                  
                  
                  
                  2,791,278Effect
      of exchange rate changes on cash and cash equivalents
                  
                  
                  746,871
                  
                  
                  
                  179,520Net (decrease)
      increase in cash and cash equivalents
                  
                  
                  (150,072
                  )
                  
                  
                  39,634Cash
      and cash equivalents, beginning balance
                  
                  
                  150,072
                  
                  
                  
                  110,438Cash
      and cash equivalents, ending balance
                  
                  $
                  -
                  
                  
                  $
                  150,072SUPPLEMENTAL
      DISCLOSURES:Cash
      paid for:Income
      tax payments
                  
                  $
                  -
                  
                  
                  $
                  -Interest
      payments
                  
                  $
                  408,440
                  
                  
                  $
                  282,949Non-cash
      financing and investing activitiesPurchase
      of equipment under capital leases
                  
                  $
                  -
                  
                  
                  $
                  144,297Discount
      on debt
                  
                  $
                  -
                  
                  
                  $
                  871,307Conversion of
      related party debt to common stock
                  
                  $
                  5,046,318
                  
                  
                  $
                  -Sale
      of common stock for subscription receivable
                  
                  $
                  110,000
                  
                  
                  $
                  -Common
      shares issued for accrued services
                  
                  $
                  117,000
                  
                  
                  $
                  -Debt
      issued for inventory
                  
                  $
                  727,524
                  
                  
                  $
                  -





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


F-4


YARRAMAN
WINERY INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)





TotalAdditional
                    
                    
                    Other
                    
                    
                    
                    
                    
                    
                    
                    
                    Stockholders'Common
      Stock
                    
                    
                    Paid
                    
                    
                    Comprehensive
                    
                    
                    Subscription
                    
                    
                    Accumulated
                    
                    
                    EquityShares
                    
                    
                    Amount
                    
                    
                    in
      Capital
                    
                    
                    Income
      (Loss)
                    
                    
                    Receivable
                    
                    
                    Deficit
                    
                    
                    (Deficit)Balance
      as of June 30, 2006
                    
                    
                    25,000,000
                    
                    
                    $
                    25,000
                    
                    
                    $
                    4,583,945
                    
                    
                    $
                    152,189
                    
                    
                    $
                    
                    
                    $
                    (2,215,578
                    )
                    
                    $
                    2,545,556Other
      comprehensive loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (141,212
                    )
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    (141,212
                    )Contribution
      from shareholders
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    871,307
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    871,307Net
      loss for the year ended June 30, 2007
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    (4,452,781
                    )
                    
                    
                    (4,452,781
                    )Balance
      as of June 30, 2007
                    
                    
                    25,000,000
                    
                    
                    
                    25,000
                    
                    
                    
                    5,455,252
                    
                    
                    
                    10,977
                    
                    
                    
                    -
                    
                    
                    
                    (6,668,359
                    )
                    
                    
                    (1,177,130
                    )Other
      comprehensive loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (298,205
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (298,205
                    )Sale
      of common stock
                    
                    
                    250,000
                    
                    
                    
                    250
                    
                    
                    
                    109,750
                    
                    
                    
                    -
                    
                    
                    
                    (88,000
                    )
                    
                    
                    -
                    
                    
                    
                    22,000Common
      stock issued for services
                    
                    
                    750,000
                    
                    
                    
                    750
                    
                    
                    
                    431,250
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    432,000Conversion
      of related party debt to common stock
                    
                    
                    12,000,000
                    
                    
                    
                    12,000
                    
                    
                    
                    5,023,000
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    5,035,000Net
      loss for the year ended June 30, 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    (3,628,825
                    )
                    
                    
                    (3,628,825
                    )Balance
      as of June 30, 2008
                    
                    
                    38,000,000
                    
                    
                    $
                    38,000
                    
                    
                    $
                    11,019,252
                    
                    
                    $
                    (287,228
                    )
                    
                    $
                    (88,000
                    )
                    
                    
                    (10,297,184
                    )
                    
                    $
                    384,840





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


F-5


YARRAMAN
WINERY, INC. AND SUBSIDIARY


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


YEAR
ENDED JUNE 30, 2008





NOTE 1 -
NATURE OF
OPERATIONS





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





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





Yarraman
Australia’s assets are pledged as collateral for a loan advance owed by Yarraman
Australia to a commercial bank. Prior to the Asset Purchase, the Trust was the
borrower of this loan; subsequent to the Asset Purchase, Yarraman Australia
assumed the loan. As of June 30, 2008 the outstanding balance on this debt was
approximately $5,511,308.





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





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





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


F-6





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





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





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





NOTE 2 -
GOING
CONCERN





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented in the consolidated
financial statements do not purport to represent their realizable or settlement
value. As shown in the financial statements, during the years ended June 30,
2008 and 2007, the Company incurred losses of $3,628,825 and $4,452,780,
respectively. In addition to suffering recurring losses from operations and
negative cash flows from operations, the Company has a cash overdraft and
an inability to meets its maturing obligations without borrowing from related
parties and sale of its stock.  These issues may raise substantial concern
about its ability to continue as a going concern.





The
financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company’s continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, to retain its current financing,
to obtain additional financing, and ultimately to
attain profitability.





NOTE 3 -
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES





Basis of
Presentation


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





Principles of
Consolidation


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





Revenue
Recognition


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





Accounts
Receivable


The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. Allowance for doubtful debts amounted to
approximately $104,213 and $42,440 as of June 30, 2008 and June 30, 2007,
respectively.




F-7


Vineyard Development
Costs


Vineyard
development costs consist primarily of the costs of the vines and expenditures
related to labor and materials to prepare the land and construct vine trellises.
The costs are capitalized until the vineyard becomes commercially productive, at
which time annual amortization is recognized using the straight-line method over
the estimated economic useful life of the vineyard, which is estimated to be 30
years. Amortization expense of vineyard development costs aggregated to $2,014
and $3,460 for the years ended June 30, 2008 and 2007, respectively, and is
included in inventory costs and ultimately becomes a component of costs of goods
sold.





Goods and Services
Tax


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





The net
amount of GST recoverable from, or payable to, the Australian Tax Authority
(ATO) is included as current asset or liability in the statement of financial
position. Cash flows are included in the statement of cash flows on a gross
basis. The GST components of cash flows arising from investing and financing
activities, which are recoverable from, or payable to, the ATO are classified as
operating cash flows. The Company has a net consumption tax receivable of
$11,578 and $9,761 as of June 30, 2008 and 2007, respectively.





In
addition to GST, the Company is required to collect wine equalisation tax
(“WET”) on sales of wine product to non-exempt Australian customers. Revenue is
recorded net of WET taxes. The WET taxes payable is offset by a rebate of the
WET tax offered by the Australian Taxation Office. The WET rebate of the WET tax
is phased out after a statutory amount of Australian sales have been achieved.
The Company has a net WET rebate receivable of $7,365 and $13,266 at June 30,
2008 and 2007, respectively.





Inventories


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





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





June 302008
                  
                  
                  2007Winemaking
      and packaging materials
                  
                  $
                  86,507
                  
                  
                  $
                  97,858Work
      in progress (costs related to unprocessed and / or unbottled
      products)
                  
                  
                  3,372,199
                  
                  
                  
                  3,434,408Finished
      goods (bottled wine)
                  
                  
                  951,127
                  
                  
                  
                  541,790$
                  4,409,833
                  
                  
                  $
                  4,074,056





Property, Plant and
Equipment


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





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





Land
      improvements
                15
      yearsWinery
      building
                30
      yearsEquipment
                5-7
      years


F-8





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





As of
June 30, 2008 and 2007 Property, Plant and Equipment consist of the
following:





June 302008
                  
                  
                  2007Building
      improvements
                  
                  $
                  66,090
                  
                  
                  $
                  36,698Land
                  
                  
                  1,017,686
                  
                  
                  
                  898,400Plant
      and equipment
                  
                  
                  4,535,464
                  
                  
                  
                  4,003,850Computer
      equipment
                  
                  
                  66,429
                  
                  
                  
                  41,527Furniture
      and fixtures
                  
                  
                  27,637
                  
                  
                  
                  22,8305,713,306
                  
                  
                  
                  5,003,305Accumulated
      depreciation
                  
                  
                  (1,343,662
                  )
                  
                  
                  (767,730
                  )$
                  4,369,644
                  
                  
                  $
                  4,235,575





Capital Lease
Obligations


Included
in Property, Plant and Equipment as of June 30, 2008 and 2007 are $302,696 and
$292,705, respectively, of net fixed assets that were purchased on capital lease
arrangements.





Fair Value of Financial
Instruments


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





Long-Lived
Assets


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





Intangible
Assets


Effective
July 2002, the Company adopted Statement of Financial Accounting Standards No.
142 (“SFAS 142”), “Goodwill and Other Intangible Assets.”  The adoption of
SFAS No. 142 required an initial impairment assessment involving a comparison of
the fair value of trademarks, patents and other intangible assets to current
carrying value.  No impairment loss was recognized for the years ended June
30, 2008 and 2007. As of June 30, 2008 and 2007 the intangible assets comprised
of water licenses valued at $240,375 and $212,200, respectively, which are held
in perpetuity.





Intangible
assets determined to have indefinite useful lives are not amortized.  The
Company tests intangible assets with indefinite and definite useful lives
for impairment annually, or more frequently if events or circumstances indicate
that an asset might be impaired. Intangible assets determined to have
definite lives are amortized over their useful lives or the life of the
intangible asset, whichever is less. As of June 30, 2008 the intangible assets
with a definite useful life is comprised of artwork for Company
products and advertising amounting to $9,615.





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.


F-9





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





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





Use of
Estimates


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





Basic and Diluted Earnings
Per Share


Earnings
per share are calculated in accordance with the Statement of Financial
Accounting Standards No. 128 (“SFAS No. 128”), “Earnings per share”. SFAS No.
128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been stated to reflect the adoption of SFAS
No. 128. Basic net loss per share is computed by dividing loss available to
common shareholders by the weighted average number of common shares outstanding
during the period . Diluted
net loss per share is based on the assumption that all dilutive convertible
shares and stock options were converted or exercised. Dilution is computed by
applying the treasury stock method. Under this method, options and warrants are
assumed to be exercised at the beginning of the period (or at the time of
issuance, if later), and as if funds obtained thereby were used to purchase
common stock at the average market price during the period. For the years ended
June 30, 2008 and 2007 the Company’s common stock equivalents have not been
included for earning per share calculations as they are
anti-dilutive.




Translation
Adjustment


As of
June 30, 2008 and 2007, the accounts of Yarraman Australia were maintained, and
their financial statements were expressed, in Australian Dollars (AUD). Such
financial statements were translated into U.S. Dollars (USD) in accordance with
Statement of Financial Accounting Standards No. 52 (“SFAS No. 52”), “Foreign
Currency Translation”, with the AUD as the functional currency. According to
SFAS No. 52, all assets and liabilities were translated at the current exchange
rate, stockholders’ equity are translated at the historical rates and income
statement items are translated at the weighted average exchange rate for the
period. The resulting translation adjustments are reported under other
comprehensive income in accordance with Statement of Financial Accounting
Standards No. 130 (“SFAS No. 130”), “Reporting Comprehensive Income” as a
component of stockholders’ equity.





Statement of Cash
Flows


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





Concentration of Credit
Risk


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





Segment
Reporting


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


F-10





Comprehensive
Income


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





Advertising


Advertising
is expensed as incurred. Advertising expenses for the years ended June 30, 2008
and 2007 were approximately $20,500 and $22,500, respectively.





Shipping
Costs


Shipping
costs are included in selling and marketing expenses and totaled approximately
$124,800 and $80,200 for the years ended June 30, 2008 and 2007,
respectively.





Income
taxes


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





Reclassifications


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





New Accounting
Pronouncements





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





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





1. A
brief description of the provisions of this Statement


2. The
date that adoption is required


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


F-11





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





In
February 2007, FASB issued FASB Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”. FAS 59 is effective for fiscal
years beginning after November 15, 2007. Early adoption is permitted subject to
specific requirements outlined in the new Statement. The new Statement allows
entities to choose, at specified election dates, to measure eligible financial
assets and liabilities at fair value that are not otherwise required to be
measured at fair value. If a company elects the fair value option for an
eligible item, changes in that item’s fair value in subsequent reporting periods
must be recognized in current earnings. FAS 159 also establishes presentation
and disclosure requirements designed to draw comparison between entities that
elect different measurement attributes for similar assets and liabilities. The
management of the Company is currently evaluating the effect of this
pronouncement on financial statements.





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





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





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





In May
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position (“FSP”) APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). FSP APB 14-1 clarifies that convertible debt instruments
that may be settled in cash upon either mandatory or optional conversion
(including partial cash settlement) are not addressed by paragraph 12 of APB
Opinion No. 14, Accounting for
Convertible Debt and Debt issued with Stock Purchase Warrants.
Additionally, FSP APB 14-1 specifies that issuers of such instruments
should separately account for the liability and equity components in a manner
that will reflect the entity’s non-convertible debt borrowing rate when interest
cost is recognized in subsequent periods. FSP APB 14-1 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. The Company will adopted FSP APB
14-1 beginning July 1, 2009, and this standard must be applied on a retroactive
basis. The Company is evaluating the impact the adoption of FSP APB 14-1 will
have on its consolidated financial position and results of
operations.




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





A variety
of proposed or otherwise potential accounting standards are currently under
study by standard setting organizations and various regulatory agencies. Due to
the tentative and preliminary nature of those proposed standards, management has
not determined whether implementation of such proposed standards would be
material to the consolidated financial statements.


F-12





NOTE 4 -
CASH AND CASH
EQUIVALENTS





Cash and
cash equivalents include cash in hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less. As of June 30, 2008 and 2007 cash held in Australian Banks are
within Australian statutory limits.





NOTE 5 -
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES





As of
June 30, 2008 and 2007 the accounts payable and accrued expenses comprised of
the following:




June 302008
                  
                  
                  2007Trade
      creditors
                  
                  $
                  1,101,760
                  
                  
                  $
                  740,545Accrued
      expenses
                  
                  
                  340,700
                  
                  
                  
                  309,976Payroll
      liabilities
                  
                  
                  40,697
                  
                  
                  
                  32,046Stock
      to be issued
                  
                  
                  -
                  
                  
                  
                  117,000$
                  1,483,157
                  
                  
                  $
                  1,199,567








Included
in accrued expenses is a provision for annual employee leave, it represents the
value of the estimated future cash outflows to be made resulting from employees’
services provided to the reporting dates based on their current wage rate. As of
June 30, 2008 and June 30, 2007 annual leave was $23,316 and $33,668,
respectively.





At June
30, 2008 and 2007 included in accrued expenses is a net consumption
tax receivable of $11,578 and $9,761, respectively and a net WET tax
receivable of $7,365 and $13,266, respectively.





NOTE 6 -
MAJOR CUSTOMERS AND
VENDORS





For the
year ended June 30, 2008 the Company had one customer which comprised
approximately 20% of their total sales. There was a $158,412 receivable
from the customer as of June 30, 2008.





For the
year ended June 30, 2007 the Company’s largest customer accounted for 12% of
sales. There was no receivable from the customer as of June 30,
2007.





For the
years ended June 30, 2008 and 2007 the Company had no vendors that
accounted for more than 10% of purchases.





NOTE 7 -
RELATED PARTY
TRANSACTIONS




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





The
Company paid the Trustee approximately $35,000 per month for the use of
additional vineyard land also located in Australia. On January 1, 2006 the
Company entered into a written agreement to lease this vineyard land for
approximately $35,000 per month. The term was from January 1, 2006 through June
30, 2006. As of July 1, 2006 this lease was on a month-to-month basis with the
same payment terms. This leasing arrangement was terminated in May 2007. During
the year ended June 30, 2007 total lease expense was approximately
$359,000.





On
January 1, 2006 Yarraman Australia entered into a consulting agreement with the
Trustee to provide business consulting services related to the wine
industry for a term of two years or until such time as their ownership
percentage in the Company is reduced to less then 15%. Under this agreement
the Company must pay the Trustee $100,000 AUD (Australian Dollars) or
approximately $96,150 USD (US Dollars) annually. This agreement was terminated
on June 30, 2008.  During the years ended June 30, 2008 and 2007 the
Company paid the Trustee approximately $66,063 and $126,860,
respectively.





On
February 1, 2008 Yarraman Australia entered into a consulting agreement with an
entity that is wholly owned by one of the members of the
Company's Board of Directors. This agreement is for $4,800 per month for
services related to the wine industry. During the year ending June 30, 2008
approximately $19,200 was paid under this agreement. This agreement was
terminated by both parties on June 30, 2008.




F-13




NOTE 8 -
LOANS PAYABLE -
RELATED PARTY / DUE TO RELATED PARTY





Loans payable – related
party:





On
December 21 2005, prior to the Exchange Agreement and in connection with the
Asset Purchase, Yarraman Australia entered into a loan agreement with the Trust,
the nominal holder of all of Yarraman Australia’s shares. The outstanding
principal balance of this loan was $1,832,795. This loan advance was
non-interest bearing. The loan was secured by the fixed assets of the Company,
subordinated to all other loans of the Company collateralized by the fixed
assets. A total of 50% of the loan payable, or $916,398, was to be repaid in
thirty-six monthly installments commencing on the first business day of the
twenty-fifth month following the loan agreement, or approximately February 1,
2008. On the thirty-sixth month of payment, in January 2011, the remaining 50%
of the loan payable or $916,398 was to be due and payable. The initial repayment
date of February 2008 was extended to June 30, 2008.





On May 1,
2006 Yarraman Australia entered into a loan agreement with the Trust in the
principal amount of $826,020. Originally, this loan agreement had an interest
rate of 8%, with the same repayment terms of the December 21, 2005 loan. During
the year ended June 30, 2006 a total of $10,910 in interest expense was recorded
on this loan, until the Trust waived the interest requirement on this loan. On
May 25, 2006 the Trust extended to Yarraman Australia an additional $13,767 to
be repaid in accordance with the same terms as the December 21, 2005 loan. This
loan advance was also non-interest bearing.





As of
June 30, 2008 loan advances above totaling $1,832,795 and the $826,020 loan
payable were converted into 6,559,524 shares of the Company’s common stock at
the market price of approximately $0.42 per share, for a
total of $2,755,000, the value of these loans based on the currency conversion
on the date of conversion.





As the
loan advances totaling $1,832,795, the $826,020 loan payable, and the loan of
$13,767, all totaling $2,672,582




Due to related
party:





As of
June 30, 2008 the Company is indebted to a private company that is owned by one
of the Company’s majority shareholders in the amount of $2,334,733. This
related party has made various advances, loans and payments on behalf of the
Company, all of which are unsecured, and due on demand. These advances and loans
accrued interest on their outstanding balance ranging between 0% and 10% per
annum.





On July
1, 2007 these advances and loans were restructured into one loan agreement for
approximately $3,289,000. This new loan included approximately $689,000 related
to a sale of wine by the related party to the Company during the year ended June
30, 2008. This portion of the new loan was to be repaid commencing December 7,
2007 with receipts from the proceeds of the re-sale of this wine by the Company
until it was repaid in full. As of June 30, 2008 the balance on this portion of
the loan was $689,000. The entire new loan accrues interest at 6.5% per annum.
This new loan is secured by the fixed assets of the Company, subordinate to the
loan from the commercial bank, such loan totaling $5,511,308 as of June 30,
2008. This new loan, together with outstanding interest, was to be repaid for
any amounts still outstanding on September 30, 2008. On June 30, 2008 a
total of AUD $2,400,000 or USD $2,280,000, of the above loan was converted
into 5,440,476 shares of the Company’s common stock, at a market price of
approximately $0.42 per share. On October 15, 2008, the lender extended the
repayment date on the balance of the loan remaining, subsequent to the
$2,280,000 portion of the loan that had converted into common stock, from
September 30, 2008 to September 30, 2009.





NOTE 9 -
LONG-TERM
DEBT





On
December 21, 2005, prior to the Exchange Agreement and in connection with the
Asset Purchase, Yarraman Australia assumed the loan facility that the Trust, the
then nominal holder of all of Yarraman Australia’s shares, had with a financial
institution located in Australia. As of June 30, 2008 the total amount due under
this facility, inclusive of interest, is $5,511,308. This loan facility requires
monthly interest payments due on the 15th of each month at the rate of 10% per
annum, rising to 16% per annum if the Company is late in its payments. The
principal balance was due and payable on December 31, 2007. The loan is secured
by certain property, plant and equipment of the Company as well as a guaranteed
by the Trust. This loan facility has been extended through to July 6, 2009 by
the lender.


F-14





NOTE 10 -
LEASES
PAYABLE





As a part
of the Asset Purchase agreement in December 16, 2005, the Company assumed
capital lease obligation to finance the purchase of plant and equipment. Minimum
lease payments relating to the equipment have been capitalized and are being
depreciated over the estimated useful lives of the equipment acquired. Assets
under capital lease and related accumulated amortization at June 30, 2008 and
2007 are as follows:





June 30,2008
                  
                  
                  2007Plant
      and equipment
                  
                  $
                  452,854
                  
                  
                  $
                  370,324Less:
      Accumulated depreciation
                  
                  
                  (150,157
                  )
                  
                  
                  (77,619
                  )$
                  302,697
                  
                  
                  $
                  292,705





The
future minimum lease payments under the capital lease and the net present value
of the future minimum lease payments at June 30, 2008 and 2007 are as
follows:





June 30,2008
                  
                  
                  2007Total
      minimum lease payments
                  
                  $
                  153,541
                  
                  
                  $
                  345,929Amount
      representing interest
                  
                  
                  -
                  
                  
                  
                  (80,233
                  )Present
      value of net minimum lease payments
                  
                  
                  153,541
                  
                  
                  
                  265,696Current
      portion
                  
                  
                  (102,720
                  )
                  
                  
                  (140,849
                  )Long-term
      capital lease obligation
                  
                  $
                  50,821
                  
                  
                  $
                  124,847





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





Year
      endedJune
      30, 2009
                  
                  $
                  102,720June
      30, 2010
                  
                  
                  50,821$
                  153,541





NOTE 11 -
STOCKHOLDERS’
EQUITY





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





On July
16, 2007, as part of an employment agreement with Ian Long, President and Board
Member, the Company agreed to sell 250,000 shares of its common stock to Mr.
Long at the per share price of $0.44, for a total of $110,000. Mr. Long is
paying for these shares over a five year period. As of June 30, 2008 a total of
$22,000 has been applied toward this subscription receivable through payroll
deductions for the Presidents salary.




On
September 20, 2007 the Company issued 750,000 shares of common stock to various
Officers, Directors and vendors in payment of services rendered in the years
ended June 30, 2008 and 2007. The Company has issued 700,0000 shares of it’s
common stock, recorded an expense of $315,000 for services rendered from the
year ended June 30, 2008, based on a per share price of $0.45. The Company also
issued 50,000 shares of common stock, during the year ended June 30, 2008, for
services performed during the year ended June 30, 2007. Such services and shares
to be issued upon such service were then valued at a market price of
$117,000.




On June
30, 2008 the Company issued 12,000,000 shares of common stock to convert
outstanding debt from related parties into equity as described in footnote
8.


F-15





NOTE 12 -
COMMITMENTS AND
CONTINGENCIES





Consulting
Agreements





-
            On
      February 24, 2006 the Company entered into a consulting agreement with a
      company in New York to assist us to identify potential candidates for
      acquisition purposes and assist in the negotiation and execution of such
      transactions. As compensation the Company agreed to pay the firm a
      monthly, nonrefundable, fee of $6,500. In addition, the Company agreed to
      pay a transaction fee to this consultant that is based on a sliding
      percentage of any completed acquisition.  The original term of the
      contract was from March 1, 2006 until July 1, 2006, it was subsequently
      continued on a month-to-month basis. The total monthly fees paid under the
      agreement may be deducted from the total transaction fee. This agreement
      was terminated in April 2007. There were no fees paid under this agreement
      during the year ended June 30,
2008.





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




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





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


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


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





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





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





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





Arbitration





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





NOTE 13 -
INCOME
TAXES





The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” “SFAS 109”. Under SFAS 109 the
Company is required to recognize the deferred tax assets and liabilities for
both the expected impact of differences between the financial statements and the
tax basis of assets and liabilities, and for the expected future tax benefit to
be derived from tax losses and tax credit carry forwards. SFAS 109 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets.





The
Company’s subsidiary Yarraman Australia is governed by the income tax laws of
Australia. Pursuant to the Australian tax code corporations are subject to tax
at a statutory rate of 30%.


F-16





The
components of loss before income tax consist of the following:





Year ended June 30,2008
                  
                  
                  2007U.S.
      Operations
                  
                  $
                  661,629
                  
                  
                  $
                  225,162Australian
      Operations
                  
                  
                  2,967,196
                  
                  
                  
                  4227,618$
                  3,628,825
                  
                  
                  $
                  4,452,780





The table
below summarizes the differences between the US statutory Federal rate and the
Company’s effective tax rate as follows:




Year ended June 30,2008
                  
                  
                  2007Income
      tax at Federal statutory rate
                  
                  
                  34
                  %
                  
                  
                  34
                  %U.S.
      tax rate in excess of foreign tax rate
                  
                  
                  (3
                  )%
                  
                  
                  (3
                  )%Permanent
      differences
                  
                  
                  (3
                  )%
                  
                  
                  (1
                  )%Temporary
      differences
                  
                  
                  -
                  
                  
                  
                  (5
                  )%Valuation
      allowance for tax benefits not recognized
                  
                  
                  (28
                  )%
                  
                  
                  (25
                  )%-
                  
                  
                  
                  -





The
Company has a net operating loss (“NOL”) carryforward for United States income
tax purposes at June 30, 2008 expiring through the year 2028. Management
estimates their US NOL as of June 30, 2008 to be approximately $615,000. The
utilization of the Company’s NOL’s may be limited because of a possible change
in ownership as defined under Section 382 of Internal Revenue Code. The
Company’s Australian operation has NOL carryfowards for Australian Income tax
purposes at June 30, 2008 that are available to offset future income for an
indefinite period. Management estimates their Australian NOL as of June 30, 2008
to be approximately $10,030,000.





Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The Company has recognized, a
valuation allowance for those deferred tax assets for which it is more likely
than not that realization will not occur. The Company’s deferred tax assets as
of June 30, 2008 are as follows:





NOL
      carryforwards
                  
                  $
                  3,200,000Valuation
      allowance
                  
                  
                  (3,200,000
                  )Deferred
      tax asset, net of allowance
                  
                  $
                  -





F-17


NOTE 14 -
SUBSEQUENT
EVENTS





On
September 5, 2008 the Company entered into an Implementation Agreement with Asia
Distributions Solutions, Ltd., (ADSL) a Cayman Island company publicly traded in
the United Kingdom on the London Stock Exchange's Alternative Investment Market
(AIM) a global market for smaller, growing companies.  The
Implementation Agreement sets out certain matters relating to the conduct of the
Offer and Merger Transaction that has been agreed to by the Company and ADSL
whereby ADSL shareholders are to receive 54,959,313 shares of the Company’s
common stock in exchange for the entire share capital of ADSL, issued and to be
issued, including 30,676,000 ADSL shares currently in issue and approximately
2,143,358 ADSL shares to be issued.  The formal Offer was made to ADSL
shareholders on November 26, 2008.
 
 On
January 19, 2009 the acquisition of ADSL by the Company was approved by a
majority of the stockholders of ADSL.  As of May 1, 2009 over 96% of
the ADSL stockholders have accepted the Offer.  The Company is in the
process of completing the acquisition of the ADSL shares.  Company
management has been advised by legal counsel, as ADSL is a Cayman Islands
company and pursuant to Cayman Islands law the Company can force the
non-accepting ADSL shareholders to accept the offer, which the Company is in the
process of completing.  Subsequent to February 23, 2009 ADSL ceased
trading on the AIM.
 
 Included
and contemporaneous with the Offer as outlined in the Implementation Agreement,
the Company proposes to acquire assets owned by the Trust.  The assets
are a vineyard and related plant and equipment that Yarraman Australia
previously leased from January 1, 2006 through May 31, 2007.  The
purchase price is $11,000,000 and will be paid by the assumption of
approximately $5,000,000 of debt related to the property and the issuance of a
two year convertible note with interest of six percent per annum for
approximately $6,000,000.


F-18