First Capital China 10QSB 2007 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________

FORM 10-QSB

_____________

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarter ended June 30, 2007

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from ________ to __________

Commission File Number: 000-30790

ARTCRAFT V, INC.

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

Delaware
(State or other jurisdiction of incorporation or organization)	(IRS Employee Identification No.)

Baimang Checking Station 1st Building South Mountain Xili Town, Shenzhen, China

(Address of principal executive offices)

011-775 27653497

(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) 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), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of August 13, 2007: shares of common stock: 10,250,000

ARTCRAFT V, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2007

TABLE OF CONTENTS

Unaudited Condensed Consolidated Balance Sheet	2

Unaudited Condensed Consolidated Statements of Operations	3

Unaudited Condensed Consolidated Statements of Cash Flow	4

Notes to unaudited Condensed Consolidated Financial Statements	5

ARTCRAFT V, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2007
(UNAUDITED)

ASSETS


Current Assets
Cash and cash equivalents	$	56,847
Other receivables		263
Note receivable		86,311
Total Current Assets		143,421

Property & equipment, net		18,273

Intangible assets, net		7,638

	$	169,332

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
Accounts payable and accrued expenses	$	33,108
Loan payable to related party		232,505
Deferred revenue		8,195
Shares to be issued, 150,000 shares of common stock		60,000
Total Current Liabilities		333,807

Minority Interest		28,315

Stockholders' Deficit

Common stock, $.001 par value, 100,000,000
shares authorized, 10,100,000 issued and outstanding		10,100
Additional paid in capital		42,700
Subscription receivable		(110,000	)
Other accumulated comprehensive gain		6,247
Accumulated deficit		(141,837	)
Total Stockholders' Deficit		(192,790	)

	$	169,332

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

ARTCRAFT V, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Month Periods Ended						Six Month Periods Ended
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006

Revenue, net	$	6,781		$	5,565			11,564		$	11,222

Operating Expenses:
General and administrative expenses		37,423			20,709			61,107			49,737

Loss from operations		(30,643	)		(15,144	)		(49,544	)		(38,515	)

Other (Income) Expense
Interest income					(1,165	)		(1,813	)		(2,253	)
Other (income) expense		897			(525	)		897			(525	)
Interest expense		-			-			40			73

Total Other Expense		897			(1,690	)		(876	)		(2,705	)

Net loss before minority interest		(31,540	)		(13,454	)		(48,667	)		(35,810	)

Minority interest		1,260			842			2,300			1,864

Net loss		(30,280	)		(12,612	)		(46,368	)		(33,946	)

Other comprehensive income
Foreign currency translation		1,559			373			2,666			1,134

Comprehensive Income	$	(28,721	)	$	(12,239	)		(43,702	)	$	(32,812	)

Net loss per share:
Basic & diluted	$	(0.003	)	$	(0.001	)		(0.004	)	$	(0.003	)

Weighted average number of shares outstanding:
Basic & diluted		10,100,000			10,100,000			10,100,000			10,100,000

Weighted average number of shares for dilutive securities has not been taken since the effect of dilutive securities is anti-dilutive

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

ARTCRAFT V, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED)

	2007			2006

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(46,368	)	$	(33,946	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation & amortization		4,354			4,183
Minority interest		(2,300	)		(1,864	)
(Increase) / decrease in assets:
Other receivables		(912	)		-
Prepaid expense		-			-
Increase/ (decrease) in current liabilities:
Accounts payable and accrued expenses		(1,230	)		7,674
Deferred revenue		2,030			727
Total Adjustments		1,942			10,720


Net cash used in operations		(44,426	)		(23,226	)

CASH FLOWS FROM FINANCING ACTIVITIES
Note receivables		-			(14,705	)
Loan from related party		93,382			34,924

Net cash provided by financing activities		93,382			20,219

Effect of exchange rate changes on cash and cash equivalents		141			104

Net increase (decrease) in cash and cash equivalents		49,097			(2,903	)

Cash and cash equivalents, beginning balance		7,750			17,619

Cash and cash equivalents, ending balance	$	56,847		$	14,716

SUPPLEMENTAL DISCLOSURES:

Cash paid during the year for:
Income tax paid	$	-		$	-
Interest payments	$	-		$	73

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

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note A –ORGANIZATION

Artcraft V, Inc. was incorporated under the laws of the State of Delaware on June 7, 2004. On November 7, 2005, the Company entered into an Exchange Agreement with Top Interest International Limited (“Top Interest”). Top Interest owns 70% equity interest of Shenzhen Xin Kai Yuen Info Consult Co., Ltd. (“188info.com”) which operates 188info.com, a professional information searching platform that is engaged in the business of providing information search engine, online web application and image designing, digital network service, online market research, online promotion and advertising services, and query searches for both individuals and businesses. Top Interest was incorporated under the laws of the British Virgin Islands. 188info.com was legally established under the laws of the People’s Republic of China. When used in these notes, the terms “Company”, “we”, “our” or “us” mean Artcraft V, Inc. and its subsidiaries.

Pursuant to the Stock Purchase and Share Exchange Agreement, the Company purchased all of the issued and outstanding shares of Top Interest from the shareholders for issuance of a total of 10,000,000 shares of the Company’s common stock, or approximately 99% of the total issued and outstanding shares. This transaction closed on November 7, 2005 and has been accounted for as a reverse acquisition.

Note B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared by Artcraft V, Inc., pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) Form 10-QSB and Item 310 of Regulation S-B, and generally accepted accounting principles for interim financial reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-KSB. The results of the three months and six months ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007.

Basis of Consolidation

The consolidated financial statements include the accounts of Artcraft V, Inc. and its wholly owned subsidiary Top Interest International and majority owned subsidiary Shenzhen Xin Kai Yuen Info Consult Co., Ltd., 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. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. As of June 30, 2007, deferred revenue was $8,195.

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Risks and Uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Contingencies

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

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

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

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make 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.

Exchange Gain (Loss)

During the six months periods ended June 30, 2007, the transactions of 188info.com were denominated in foreign currency and were recorded in Chinese Yuan Renminbi (CNY) at the rates of exchange in effect when the transactions occur. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Translation Adjustment

As of June 30, 2007, the accounts of 188info.com were maintained, and its financial statements were expressed, in Chinese Yuan Renminbi (CNY). Such financial statements were translated into U.S. Dollars (USD) in accordance with Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation,” with the CNY as the functional currency. According to the Statement, all assets and liabilities were translated at the current exchange rate, stockholder’s equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income” as a component of shareholders’ equity.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. 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.

Property & Equipment

Property and equipment are stated at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance and repairs are charged to expense as incurred. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, or the remaining term of the lease, as follows:

Furniture and Fixtures	5 years
Equipment	5 years
Computer Hardware and Software	5 years

Property & equipment consist of the following at June 30, 2007:

	June 30,2007
Automobile	$	11,467
Office equipment		19,945
		31,412
Accumulated depreciation		(13,139	)
	$	18,273

Depreciation and amortization expenses were $4,354 and $4,183 for the six months periods ended June 30, 2007 and 2006, respectively.

Advertising

Advertising expenses consist primarily of costs of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses all advertising costs as incurred. The company did not incur any advertising expense during the six months ended June 30, 2007 and 2006.

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and Diluted Earnings Per Share

Earnings per share is 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 restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Basic and diluted loss per share were $0.004 and $0.003 for the six months ended June 30, 2007 and 2006 respectively.

Recent 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 is currently evaluating the effect of this pronouncement on 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:

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

a. A brief description of the provisions of this Statement

b. The date that adoption is required

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

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

In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies may be able to adopt FAS 159 for their first quarter 2007 financial statements.

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.

Note C – NOTES RECEIVABLE

As of June 30, 2007, other receivable includes unsecured cash loan of $86,311 to an ex shareholder. The note is due on demand carry the interest rate of 2.25% annum. The interest income of $1,813 and $2,253 was recorded on the note, for the periods ended June 30, 2007 & 2006, respectively.

Note D – RELATED PARTY TRANSACTIONS

Throughout the history of the Company, certain members of the Board of Directors and general management have made loans to the Company to cover operating expenses or operating deficiencies.

As of June 30, 2007, total loan payable to related parties were $232,505, including a non interest-bearing, unsecured and due on demand note payable to an officer of Top Interest in the amount of $84,000 and a non interest-bearing, unsecured and due on demand note payable to a shareholders of Artcraft V Inc. in the amount of $148,505.

Note E – COMMON STOCK

On May 17, 2005, the Company issued 150,000 shares of common stock to individuals for subscriptions receivable of $60,000 ($0.40 per share). However, the physical certificates were not issued as the company is still waiting for its registration statement to become effective. The amount received has been reflected as shares to be issued in the equity section in the accompanying consolidated financial statements.

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note F – INTANGIBLE ASSETS

Intangible assets consist of the following at June 30, 2007:


	June 30, 2007

Software	$	12,729

		12,729

Accumulated amortization		(5,091	)

	$	7,638

Amortization expense for the Company’s intangible assets over the next four fiscal years is estimated to be: 2008-$2,545, 2009-$2,545, 20109-$2,545, 2011-$3

Note H – INCOME TAXES

The Company through its subsidiary, 188info.com, is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred net accumulated operating losses for income tax purposes. The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the future and hence the Company has not recorded any deferred assets as of June 30, 2007.

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) is at a statutory rate of 33%, which is comprises of 30% national income tax and 3% local income tax. 188info.com qualified as a new technology enterprise and under PRC Income Tax Laws, they are subject to a preferential tax rate of 15%.

The components of income before income taxes are as follows:

	June 30, 2007		June 30, 2006
Loss from United States	$	41,002	$	29,598
Loss from China		7,665		6,212
Loss before income taxes		48,667		35,810
Less: Income taxes		-		-
Net loss available to shareholders	$	48,667	$	35,810

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company uses 34% statutory rate for Artcraft V Inc. and 15% statutory rate for Shenzhen Xin Kai Yuen Info Consult Co., Ltd.

The following table sets forth the significant components of the net deferred tax assets for operation in China as of June 30, 2007 and 2006.

	June 30, 2007			June 30, 2006
Net operating loss carry forwards	$	28,100		$	7,800
Total deferred tax assets		4,200			1,100
Less: Valuation allowance		(4,200	)		(1,100	)
Net deferred tax assets	$	-		$	-

The following table sets forth the significant components of the net deferred tax assets for operation in the United States as of June 30, 2007 and 2006.

	June 30, 2007			June 30, 2006
Net operating loss carry forwards	$	109,600		$	32,400
Total deferred tax assets		37,200			11,000
Less: Valuation allowance		(37,200	)		(11,000	)
Net deferred tax assets	$	-		$	-

The following is a reconciliation of the income tax rate to the income taxes reflected in the Statement of Operations:

	June 30, 2007			June 30, 2006
China tax rate		15	%		15	%
U.S. Statutory rates		34	%		34	%
Total		49	%		49	%
Valuation allowance		(49	%)		(49	%)
Income tax expense	$	-		$	-

Note I – STATUTORY COMMON WELFARE FUND

In accordance with the laws and regulations of the PRC, after the payment of the PRC income taxes shall be allocated to the statutory surplus reserves and statutory public welfare fund for staff and workers. The proportion of allocation for reserve is 5 to 10 percent of the profit after tax until the accumulated amount of allocation for statutory reserve reaches 50 percent of the registered capital. Statutory surplus reserves are to be utilized to offset prior years’ losses, or to increase its share capital.

General reserve fund and statutory surplus fund are restricted for set off against losses, expansion of production and operation or increase in register capital of the respective company. Statutory public welfare fund is restricted to the capital expenditures for the collective welfare of employees. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of June 30, 2007, the Company had no reserves to these non-distributable reserve funds since it had no income from operations.

ARTCRAFT V, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note J – OTHER COMPREHENSIVE INCOME

Balances of related after-tax components comprising accumulated other comprehensive income (loss), included in stockholders’ equity, at June 30, 2007 are as follows:

	Foreign Currency Translation Adjustment
Balance at December 31, 2006	$	3,581
Change for 2007		2,666

Balance at June 30, 2007	$	6,247

Note K - GOING CONCERN

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the company as a going concern. However, the Company has an accumulated deficit of $141, 837 as of June 30, 2007 including losses of $46,368 and $33,946 for the six months ended June 30, 2007 and 2006. The Company’s total liabilities exceed its total assets by $192,790. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and succeed in its future operations, The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. Management devoted considerable effort from inception through the six months ended June 30, 2007, towards obtaining additional equity and management of accrued expenses and accounts payable.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

Item 2. Management’s Discussion and Analysis or Plan of Operation

SAFE HARBOR REGARDING FORWARD-LOOKING STATEMENTS

The information contained in Item 2 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. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

RESULTS OF OPERATIONS

The following table presents certain consolidated statement of operations information for the six months ended June 30, 2007 and 2006. Certain columns may not add due to rounding.

	2007			2006

Revenue, net	$	11,564		$	11,222

General and administrative expenses		61,107			49,737
Income from operations		(49,544	)		(38,515	)

Other (Income) Expense
Interest income		(1,813	)		(2,253	)
Other expense		897			(525	)
Minority interest		(2,300	)		(1,864	)
Interest expense		40			73
Total Other (Income) Expense		(3,176	)		(4,569	)


Net loss	$	(46,368	)	$	(33,946	)

Net Revenue

Net sales for the six months ended June 30, 2007 totaled $11,564 compared to $11,222 for the six months ended June 30, 2006, an increase of $342, or approximately 3%. The increase was due to expansion of new business and the increase in the number of new clients.

Operating Expense

General and administrative expenses for the six months ended June 30, 2007 totaled $61,107 or approximately 528.4% of net revenue compared to $49,737 or approximately 443.2% of net revenue for the six months ended June 30, 2006. The increase in operating expense of $11,370 or approximately 23% mainly comes from the U.S. holding Company, which paid the audit fee, professional fee or legal fee. Also, for operating subsidiary in China, the company also increased employees’ benefits, such as increased wages, social securities and insurance related fees.

Income (Loss) from Operations

Income (loss) from operations for the six months ended June 30, 2007 totaled $(49,544) or approximately 428.4% of net revenue compared to $(38,515) or approximately 343.2% of net revenue for the six months ended June 30, 2006, a decrease of $11,029 or approximately 28.6%. The decrease in income from operations was primarily due to increase in expenses as stated above.

Net Income (Loss)

Net income (loss) for the six months ended June 30, 2007 totaled $(46,368) compared to $(33,946) for the six months ended June 30, 2006, a decrease of $12,422 or approximately 37%. The decrease in net loss was primarily due to reason described above.

LIQUIDTY AND CAPITAL RESOURCES

Cash has historically been generated from operations. Operations and liquidity needs are funded primarily through cash flows from operations and short-term borrowings. Cash and cash equivalents were $56,847 at June 30, 2007 and current assets totaled $143,421 at June 30, 2007. The Company's total current liabilities were $333,807 at June 30, 2007. Working capital at June 30, 2007 was $(190,386). During the six months ended June 30, 2007, net cash used in operating activities was $(44,792).

We will continue to evaluate alternative sources of capital to meet our growth requirements, including other asset or debt financing, issuing equity securities and entering into other financing arrangements. There can be no assurance, however, that any of the contemplated financing arrangements described herein will be available and, if available, can be obtained on terms favorable to us.

Our operations and short term financing does not currently meet our cash needs. We believe we will be able to generate revenues from sales and raise capital through private placement offerings of its equity securities to provide the necessary cash flow to meet anticipated working capital requirements. Our actual working capital needs for the long and short term will depend upon numerous factors, including our operating results, competition, and the availability of credit facilities, none of which can be predicted with certainty. Our future expansion will depend on operating results and will be limited by its ability to enter into financings and raise capital.

Working Capital Requirements

Historically, operations and short term financing have been sufficient to meet our cash needs. We believe that we will be able to generate revenues from sales and raise capital through private placement offerings of its equity securities to provide the necessary cash flow to meet anticipated working capital requirements. However, our actual working capital needs for the long and short term will depend upon numerous factors, including operating results, competition, and the availability of credit facilities, none of which can be predicted with certainty. Future expansion will be limited by the availability of financing products and raising capital.

OFF-BALANCE SHEET ARRANGEMENTS

We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

RECENT ACCOUNTING PRONOUNCEMENTS

a. A brief description of the provisions of this Statement

b. The date that adoption is required

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

OFF-BALANCE SHEET ARRANGEMENTS

Critical Accounting Policies

Artcraft V, Inc.’s financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact its financial condition and results of operations, Artcraft V. views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on Artcraft V, Inc.’s consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

Item 3. Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of September 30, 2006. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the second quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not a party to any pending legal proceedings and no such action by, or to the best of our knowledge, against us has been threatened.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted during the quarter ending June 30, 2007, covered by this report to a vote of the Company’s shareholders, through the solicitation of proxies or otherwise.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports of Form 8-K.

(a) Exhibits

31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002

(b) Reports of Form 8-K

None.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

ARTCRAFT V, INC.

By: /s/ Li Te Xiao

Li Te Xiao

President, Chief Executive Officer,

Chief Financial Officer and Director

Date: August 13, 2007

First Capital China Inactive 10QSB2007 Q2 Quarterly report (small business)