Artfest International 10-Q 2008 Q2 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2008

Or

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

For the transition period from _____________ to ___________

Commission File Number:  000-49676

ARTFEST INTERNATIONAL, INC.

(Exact Name of Small Business Issuer as specified in its charter)

Delaware	03-0390855
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

15851 Dallas Parkway-Suite 600

Addison TX 75001

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:

(877) 278-6672

Indicate by check mark whether the Issuer:

(1) Has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports):

Yes xNo□

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	□	Accelerated Filer	□
Non-Accelerated Filer	□	Smaller Reporting Company	x

(2) Has been subject to such filing requirements for the past 90 days.

 Yes x No □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 Yes □ No x

66,775,630 shares of the registrant's Common Stock, $.0001 per share, were outstanding as of June 30, 2008.

Table of Contents

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	F-1
Item 2.	Management's Discussion and Analysis and Plan of Operation	3
Item 3	Quantitative and Qualitative Disclosures About Market Risk	5
Item 4T	Controls and Procedures.	5
PART II.	OTHER INFORMATION	6
Item 1.	Legal Proceedings	6
Item 2.	Unregistered Sales of Securities and Use of Proceeds	6
Item 3.	Defaults Upon Senior Securities	6
Item 4.	Submission of Matters to a Vote of Security Holders	6
Item 5.	Other Information	6
Item 6.	Exhibits and Reports on Form 8-K	6
Signatures		7
CERTIFICATIONS

PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

	PAGE
FINANCIAL STATEMENTS
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Cash Flows	F-4
Notes to Financial Statements	F-5

F-1

ARTFEST INTERNATIONAL, INC.

BALANCE SHEET

JUNE 30th (2007 & 2008)

UNAUDITED

ASSETS	June 30, 2008			Dec 31, 2007
Current Assets
Cash and cash equivalents	$	10,518		$	315
Prepaid Expenses		-			-
Accounts Receivable		351,000			351,000
Total Current Assets		361,518			351,315
Non-Current Assets
Inventory	$	10,000		$	-
Notes Receivable		91,500			-
Intangible Asset, net of accumulated amortization		29,266			8,000
Total Non-Current Assets		130,766			8,000
Property, Plant and Equipment
at cost, net of accumulated depreciation		89,413			75,435
TOTAL ASSETS	$	581,697		$	434,750
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and Accrued Liabilities	$	420,260		$	159,725
Current Portion of Notes Payable (Note 8)		460,873			226,620
Deferred Revenue		351,000			351,000
Rewards Payable		475,361			473,317
Total Current Liabilities		1,707,495			1,210,662
Non-current Liabilities
Loans Payable (Note 8)		784,497			769,547
TOTAL LIABILITIES	$	2,491,992		$	1,980,209
Stockholders' Equity:
Common Stock - $.001 par value - 250,000,000
shares authorized, 66,775,630 issued and
outstanding	$	66,776		$	36,231
Additional paid-in capital		703,698			253,243
Retained earnings (deficit)		(2,680,768	)		(1,834,933	)
TOTAL STOCKHOLDERS EQUITY	$	(1,910,295	)	$	(1,545,460	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	581,697		$	434,750

F-2

ARTFEST INTERNATIONAL, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
Revenue	$	24,724		$	38,000		$	24,736		$	218,143
Cost of Revenue		2,670			80,225			15,250			110,890
Gross Profit (Loss)		22,054			(42,225	)		9,486			107,253
Operating Expenses		130,090			135,924			849,360			308,200
Net Income (Loss) from Operations		(108,036	)		(178,150	)		(839,874	)		(200,947	)
Other Income (Expense), Net		8,078			92			(5,961	)		92
Net Income (Loss)	$	(99,958	)	$	(178,057	)	$	(845,834	)	$	(200,854	)
Weighted average number of common shares
outstanding - basic and fully diluted		66,775,630			28,060,629			66,775,630			28,060,629
Net (Loss) per share - basic and fully diluted	$	0.001		$	0.006		$	0.013		$	0.007

F-3

ARTFEST INTERNATIONAL, INC. STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30th (2007 AND 2008) UNAUDITED
	June 30, 2008			June 30, 2007
Cash Flows From Operating Activities
Net income (loss)	$	(845,834	)	$	(200,854	)
Adjustments to reconcile net income (loss) to
net cash (used) provided by operating activities:
Increase in Depreciation		8,251			2,350
Increase in Amortization		234			-
Increase in Inventory		(10,000	)		-
Increase in Rewards Payable		-			-
(Increase) in Accounts Receivable		-			(351,000	)
Increase in Accounts Payable and Accrued Expenses		260,535			20,462
Increase in Deferred Revenue		-			351,000
Increase in Prepaid Expenses		-			270
Net cash (used) by operating activities		(586,814	)		(177,772	)
Cash Flows From Investing Activities
Increase in Intangible Assets		(21,500	)		-
Decrease in Notes Receivables		(91,500	)		-
Purchase of property, plant and equipment		(22,228	)		(45,069	)
Net cash used in investing activities		(135,228	)		(45,069	)
Cash Flows From Financing Activities
Issuance of Common Stock		30,545			-
(Increase) Decrease in Notes Receivable		-			-
Increase (Decrease) in Notes Payable		234,253			236,523
Increase in Loans Payable		16,994			-
Increase in Retained Earnings		-			-
Increase in Contributed Capital		450,455			-
Net cash used in financing activities		732,247			236,523
Net decrease in cash and cash equivalents		10,205			13,682
Cash and cash equivalents, Beginning of Period		315			255
Cash and cash equivalents, June 30	$	10,518		$	13,938

F-4

ARTFEST INTERNATIONAL, INC.

June 30, 2008

NOTES TO FINANCIAL STATEMENTS

Note 1 - History and organization of the company

The Company was incorporated on February 21, 2002 (Date of Inception) under the laws of the State of Delaware.  Artfest International Inc. provides sales, marketing, financial and e-commerce systems to the industries of Arts, Antiques, Collectibles and Luxury Goods. The markets are serviced by artists, dealers, galleries, and manufacturers of reproductions and luxury goods.

On December 28, 2007, pursuant to an Acquisition Agreement dated December 28, 2007, the Company acquired 100% of The Art Channel, Inc. in exchange for 28,000,000 shares of Artfest International, Inc. stock, which were issued to the former shareholders of The Art Channel, Inc. of which 8,000,000 shares were issued as of December 28, 2007 and 20,000,000 shares were issued as of March 28, 2008 subsequent to the Company’s annual meeting at which time the shareholders of the Company voted to increase the number of the authorized shares of the Company’s common stock to 500,000,000.

In addition, the Company agreed to issue an additional 1,500,000 shares of stock to the Company’s former Chairman and CEO, Larry Ditto pursuant to the terms in the Acquisition Agreement.

Note 2 - Accounting policies and procedures

Cash and cash equivalents

The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of June 30, 2008.

F-5

Fixed Assets

Property and equipment are recorded at historical cost. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives. Depreciation is calculated using the straight-line method over the estimated useful lives as follows:

Computer equipment	3 years
Office equipment	4 years
Proprietary Software	3 years
Furniture and Fixtures	7 years

Property and Equipment consist of the following:

Computer & Video	$	3,717
Office equipment	$	3,240
Proprietary software	$	60,500
Furniture and Fixtures- Art	$	78,502
Less-accumulated depreciation		(56,296	)
Total PP&E (net of depreciation)	$	89,663

Total Depreciation Expense for Jan-Jun 2008 was $8,251.

Intangible Assets

With the acquisition of The Art Channel Inc. on December 28, 2007, the Company acquired the subsidiary with shares of stock whose total value exceeded the net assets of the company being purchased by $29,500.  The excess amount of $29,500 was booked to the parent company (Artfest International Inc.) as Goodwill and listed under “Other Assets/Intangible Assets.”   This will be amortized over a period of 40 years beginning January 1, 2008.

Total Amortization Expense for Jan–Jun 2008 was $234.38.

Impairment of long-lived assets

Long-lived assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. No such impairments have been identified by management at June 30, 2008.

F-6

Revenue recognition

The Company recognized revenue and gains when earned and related costs of sales and expenses when incurred.

Advertising costs

The Company expenses all costs of advertising as incurred. There were nominal advertising costs included in selling, or general and administrative expenses in 2008 and 2007.

Loss per share

Net loss per share is provided in accordance with Statement of Financial Accounting Standards No. 128 (SFAS # 128) "Earnings Per Share". Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. The Company had no dilutive common stock equivalents, such as stock options or warrants as of June 30, 2008.

Reporting on the costs of start-up activities

Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up Activities", which provides guidance on the financial reporting of start-up costs and organizational costs, requires most costs of start-up activities and organizational costs to be expensed as incurred. SOP-98-5 is effective for fiscal years beginning after December 15, 1998. With the adoption of SOP-98, there has been little or no effect on the Company's financial statements.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2008 and 2007 respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their  fair values. These financial instruments include cash and accounts payable. Fair values are  assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximated fair values or they are payable on demand.

F-7

Income Taxes

Deferred income tax assets and liabilities are computed annually for differences between the financial statement 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 on the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Segment reporting

The Company follows Statement of Financial Accounting Standards No. 130, "Disclosures About Segments of an Enterprise and Related Information". The Company operates as a  single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception.

Recent pronouncements

In June 2001, SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets", were issued. SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method of accounting, and that identifiable intangible assets acquired in a business combination be recognized as an assets apart from goodwill if they meet certain criteria. The impact of the adoption of SFAS No. 141 on our reported operating results, financial position and existing financial statements disclosure is not expected to be material.

SFAS No. 142 applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill and indefinite-lived intangible assets, include the acquired before initial application of the standard, will not be amortized but will be tested for impairment at least annually. The new standard is effective for fiscal years beginning after December 15, 2001. The impact of the adoption of SFAS No. 142 on our reported operating results, financial position and existing financial statement disclosure is not expected to be material.

In July 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations", was issued  which requires the recognition of a liability for an asset retirement obligation in the period in  which it is incurred. When the liability is initially recorded, the carrying amount of the related  long-lived asset is correspondingly increased. Over time, the liability is accreted to its present value and the related capitalized charge is depreciated over the useful life of the asset.  SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The impact of the  adoption of SFAS No. 143 on the Company's reported operating results, financial position and existing financial statement disclosure is not expected to be material.

F-8

In August 2001, SFAS No. 144, "Accounting for the Impairment of Disposal of Long-lived Assets", was issued. This statement addresses the financial accounting and reporting for the impairment of disposal of long-lived assets and broadens the definition of what constitutes a discontinued operation and how results of a discontinued operation are to be measured and presented. The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001. The impact of the adoption of SFAS No. 144  on our reported operating results, financial position and existing financial statement disclosure is not expected to be material.

Stock-Based Compensation

The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations and has adopted the disclosure only alternative of SFAS No. 123, "Accounting for Stock-Based Compensation". Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by SFAS No. 123.

Year End

The Company has adopted December 31 as its fiscal year end.

Note 3 - Going concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net loss of $4,172,519 for the period from February 21, 2002 (inception) to June 30, 2008. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amount of the classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Note 4 - Income taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), which requires use of the liability method. SFAS No. 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

F-9

The provisions for income taxes differs from the amount computed by applying the statutory federal income tax rate to Income before provision for income taxes. The source and tax effects of the differences are as follows:

U.S. federal statutory rate	34.00 %
Valuation reserve	34.00 %
Total	0.00 %

As of June 30, 2008, the Company has a net operating loss carryforward of approximately $4,172,519 for tax purposes, which will be available to offset future taxable income. This carryforward will expire in various years through 2027.

Note 5 - Stockholders' Equity

The Company was authorized to issue 500,000,000 shares of its $0.001 par value common stock and 2,000,000 shares of its $0.001 par value preferred stock as of June 30, 2008.

On November 19, 2002 the Company issued 19,832,000 shares of its $0.001 par value common stock as founders' shares to acquire 100% of the outstanding shares of Artfest International, Inc., a Delaware Corporation for a net book value of $19,832.

As of December 28, 2007 the Company issued 8,000,000 shares of its $0.001 par value common stock as partial payment to shareholders of The Art Channel, Inc. pursuant to an acquisition agreement.   As of December 31, 2007, the Company’s authorized shares were 40,000,000.

In March 2008, the Company amended its Certificate of Incorporation to increase its authorized shares to 502,000,000, of which 500,000,000 shares are common stock, par value $0.001 and 2,000,000 shares are preferred stock, par value $0.001.   The Company then issued an additional 20,000,000 shares of common stock to shareholders of The Art Channel, Inc. and 1,500,000 shares of common stock to Larry D. Ditto pursuant to an acquisition agreement.

 In May 2008, the Company issued 4,500,000 shares of its $0.001 par value common stock to Beryl Zyskind for consulting services.

F-10

Note 6 - Warrants and options

As of June 30, 2008 and 2007, there were no warrants outstanding; there are 1,600,000 options outstanding to acquire any additional shares of common stock.

Note 7 - Related party transactions

The officers and directors of the Company are involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such person may face a conflict in selecting between the Company and  their other business interest. The Company has not formulated a policy for the resolution of such conflicts.

Note 8 - Loans and Notes Payable

On January 5, 2003, the Company purchased a 2002 Chevrolet Avalanche through GMAC for $29,717. The note calls for a term of 5 years at a rate of 5.9% beginning on  February 24, 2003, and maturing on December 24, 2007.  As of the report date, the Company had  defaulted on the note and the vehicle was returned to GMAC for sale. GMAC has sold the vehicle and credited the company with $10,491 leaving a balance due of $ 8,315.

The Company has $784,497 in loans payable to shareholders and $460,873 in short-term notes. The notes call for varying interest rates ranging from 1% to 12% per annum, and contain a stock payment option payable at the lender's discretion.

As of the report date, the Company is in default on all of its short term notes payable to shareholders and non-shareholders. Management has not formulated a repayment plan, and no contingency plan has been established in the event that the lenders seek legal remedies.

On July 5, 2007, the Company signed a loan payable to Brothers Realty & Investment Group, LLC for $35,000 due on July 5, 2008.   This loan accrues interest at 12% per annum.

On August 26, 2007, the Company signed a loan payable to Andy Haase in the amount of $30,000 due on August 26, 2008.  The loan accrues interest at 10% per annum.  The original amount was $35,000, with a $5,000 payment having been made in July 2007.

On April 3, 2007, the Company signed a loan payable to Dale Bagwell for $20,000 with no fixed due date.  The loan is non-interest bearing. The original amount was $25,000, with a $5,000 payment having been made in July 2007.

On December 7, 2007 the Company signed a loan payable to Patrick Haxton in the amount of $15,000 with no fixed due date.  The loan is non-interest bearing.

On January 31, 2008, the Company signed a Promissory Note payable to the TBF Charitable Trust Foundation for $50,000 due on July 31, 2008. The loan accrues an interest at 1.5% per month, or 18% per annum.

On March 17, 2008, March 24, 2008, and March 25, 2008 the Company received an advance on a loan prior to the execution of loan agreements in the amounts of $10,000, $7,200 and $7,800 respectively for a total of $25,000 from a third party source (See Note 9 for further details).   On April 4, 2008, the Company received an advance on a loan prior to the execution of loan agreements in the amount of $25,000 from a third party source. Pursuant to the terms of a Securities Purchase Agreement, the third party has agreed to advance the Company an aggregate of $300,000, to be paid in twelve payments of $25,000 each over a period of fifteen weeks, with each advance to be evidenced by a Convertible Debenture.  Such payments have not been received on a timely basis.

F-11

References in this document to "us," "we," "the Registrant" or "the Company" refer to Artfest International, Inc., and its predecessors.

This report contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on certain assumptions and describe future plans, strategies and expectations of the Company. They are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions.

These statements are not guarantees of future performance, events or results and involve potential risks and uncertainties. Accordingly, actual performance, events or results may differ materially from such forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause actual results to differ materially from current expectations include, but are not limited to, changes in general economic conditions, changes in interest rates, legislative and regulatory changes, the unavailability of equity and debt financing, unanticipated costs associated with our potential acquisitions, expanding a new line of business, ability to meet competition, loss of existing key personnel, ability to hire and retain future personnel, our failure to manage our growth effectively and the other risks identified in this filing or other reports of the Company filed with the U.S. Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning us and our business, including additional factors that could materially affect our financial results, is included in our other filings with the U.S. Securities and Exchange Commission.

ITEM 2 . MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

Introduction

Artfest International, Inc. (the "Company", "we", "us", "our") is publicly traded on the Over the Counter Bulletin Board under the symbol (ARTI.OB).  We currently market, sell, and print paintings and autographed limited-edition celebrity photographs which are reproduced on canvas using the Giclée and lithograph processes.  Giclée creatings fine art prints from a digital source using ink-jet printing.  Lithography creates fine art prints utilizing a chemical process to apply ink to a flat surface using a printing plate.  The Giclée method is used to reproduce signed and numbered limited editions of fine art, and autographed limited-edition celebrity art from existing photographs.  Our products, fine art reproductions and celebrity collectibles (hereinafter, our “Products”) will be sold utilizing a direct marketing system, as well as over the Internet through independent contractors known as Associate Members (“Associate Members”).  We have also commenced operating and managing a full-scale television network called the Art Channel Network™ (the “Art Channel Network”) which broadcasts art and other creative-related programming and is currently available to 20,000,000 viewers in 218 independent TV market nation-wide, and which our management believes will eventually be broadcast to over 40,000,000 households via satellite and cable.  In addition to art-centric programming, we intend to use the Art Channel Network to broadcast advertising for our Products.

We intend to utilize three (3) sales strategies.

(1)	Direct Marketing and Sales: We will utilize an Associate Rewards Referral / Party Plan System modeled after companies like Home Interiors, Tupperware, Pampered Chef and Avon.
(2)	Internet Driven: We will offer our Associate Members a state-of-the-art website which is a completely automated, turn-key online business building system which will create unlimited spam-free traffic to our Associate Members’ websites.  This system uses our software technology, which our management believes is unmatched in the industry.
(3)	Our signed and numbered fine art and autographed celebrity collectibles will be marketed and sold through independent contractors known as our “Associate Members”.  Individuals can become Associate Members by enrolling and agreeing to the terms and conditions for a free information and ecommerce personalized Company website.

-3-

Description of Our Products and Services

The Giclée technique was designed to reproduce, and protect rare and valuable pieces of art by using an ink-jet printing technique to recreate images from a digital source.  The average person will not easily recognize the difference between a Giclée reproduction and an original work of art.

In order to quickly respond to anticipated competition, and in order to keep the public up to date on our current offerings, we produce our own television series.  This allows us to keep television programming fresh and inclusive of our latest offerings.

We are currently marketing a business opportunity to individuals by allowing them to become our Associate Members.  After individuals become Associate Members, they will be able to sell our Products using our state-of-the-art website.

Results of Operations

(a) Revenues

We generated operating revenues of $24,724 for the three months ended June 30, 2008, as compared to $0 for the same period in 2007.  We had a net operating loss $109,685 for the three months ended June 30, 2008, as compared to a net operating loss of $57,995 for the same period in 2007.

We generated operating revenues of $24,736 for the six months ended June 30, 2008, as compared to $0 for the same period in 2007.  We had a net operating loss of $849,114. as compared to a net operating loss of $108,713 for the same period in 2007.

(b) Costs and Expenses

 We had $131,739 of selling general and administrative expenses in the three months ended June 30, 2008 as compared to $57,995 of selling, general and administrative expenses for the three months ended June 30, 2007.  .

 We had $858,600 of selling general and administrative expenses in the six months ended June 30, 2008 as compared to $108,713 of selling, general and administrative expenses for the six months ended June 30, 2007.

Significant expenses in the three and six months ended June 30, 2008 consisted of accounting and professional fees related to financial reporting and compliance, fees in developing our business model and operating plans, and of interest accrued on notes and loans payable.

(c) Depreciation, Depletion and Amortization

Depreciation totaled  $5,139 as of June 30, 2008, and  $1,175 in 2007.

(e) Net Loss

The company had a net loss of $96,613 and $842,490 for the three months and six months ended June 30, 2008, respectively compared to a net loss of $57, 995 and $108, 713 for the three months and six months ended June 30, 2007, respectively.

-4-

Plan of Operation

Our current plan, in summary, as of August 18, 2008, is focused primarily on corporate and securities law considerations in completing a process of updating filings with both applicable state and Federal agencies, as needed, including the SEC, and related efforts. Management believes the success of the business, potential in the future, needs a stable foundation as a public company. The first part is compliance with laws and regulations, primarily updating and keeping current filings with the SEC which we have done, and next establishing the business as a “trading” entity upon some stock exchange or similar trading medium. At the same time, it is important to continue core business pursuits, such as operational improvements, and become a profitable business. We anticipate obtaining funding to address cash flow needs through private placements, loans and similar matters. Our plan is subject to many risks. No assurance of success can be given. We have, as of June, 2008, confirmed terms on a loan and related arrangements. We may experience additional funding from this source, with no guarantee, but also are subject to restrictions on obtaining other funding, and undertaking both corporate level and operations level actions while the agreement is in place. See Part III, Item 9, Loan Obligation and Management Restructuring, and other information, contained in the Company Form 10-KSB report for the fiscal year ended December 31, 2004, and subsequent filings and amendments, if any.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information has been omitted, as the Company qualifies as a smaller reporting company.

ITEM 4T.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive and financial officers, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report (the "Evaluation Date"), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure, and (ii) is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Our auditors identified material adjustments in the areas of valuation of marketable securities.

There have been no changes in our internal controls or in other factors that could affect these controls subsequent to the Evaluation Date.

-5-

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On July 31, 2008, we agreed to a binding arbitration through the Fresno County Bar Association in Fresno, California with respect to a dispute between us and our former attorney, David Kahn, Esq. with respect to his fee for legal services rendered.  

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

Equity Securities Sold Without Registration

There were no securities issued without registration during the three months ended June 30, 2008

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

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

None

ITEM 5. OTHER INFORMATION.

On June 3, 2008, Mr. Jacob Cohen, our Chief Operating  Officer resigned.  The duties of the Chief Operating Officer are currently being performed by our CEO, Mr. Edward Vakser.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

Exhibits.

Exhibits included or incorporated by reference herein are set forth in the attached Exhibit Index.

Form 8-K

None.

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SIGNATURES

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

	Artfest International, Inc.
Date: August 18, 2008	By:	/s/ Eddie Vakser
		President (principal executive officer and principal financial officer)

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBIT INDEX

Number	Description
3.1    3.2    3.3	Articles of Incorporation [1] Articles of Amendment of the Articles of Incorporation [3] Bylaws [1]
10.1 10.2	Agreement and Plan of Reorganization, Soldnet, Inc. and Artfest, Inc. [2] Loan Agreement (form) with Promissory Note (form), December, 2005 [3]
31 ** 32 **	Certifications pursuant to Sarbanes - Oxley Act of 2002 Certifications of Officers pursuant to Section 1350, of the Sarbanes - Oxley Act of 2002

** Filed Herewith

[1] Incorporated by reference to the Company’s filed Form 10SB with the SEC, February, 2002.

[2] Incorporated by reference to the Company’s filed Form 8K with the SEC, November, 2002.

[3] Incorporated by reference to the Company’s filed Form 10KSB with the SEC, for the year ended December 31, 2002

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