Raven Biofuels International (RVBF) 10QSB 2007 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended  June 30, 2007

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _________ to __________

Commission file number  000-50375

Auto Photo Technologies Inc.

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

Nevada	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

#6-260 E. Esplanade, North Vancouver, BC V7L 1A3

(Address of principal executive offices)

604-984-0400

(Issuer’s telephone number)

Not Applicable

(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 [ ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

1,186,667common shares issued and outstanding as of August 13, 2007.

Transitional Small Business Disclosure Format (Check one):   Yes [ ]   No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one):     Yes [ ]     No x

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PART I

Item 1. Financial Statements

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

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AUTO PHOTO TECHNOLOGIES INC. AND SUBSIDIARY

Consolidated Balance Sheets

		June 30, 2007 (Unaudited)		December 31, 2006
ASSETS
CURRENT ASSETS
Cash	$	4,370	$	14,807
Trade receivables		18,182		17,141
Other receivables		2,067		11,578
Prepaid expenses		229		2,634
Total Current Assets		24,848		46,160
FIXED ASSETS, NET		1,937		3,787
TOTAL ASSETS	$	26,785	$	49,947
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdraft	$	13,918	$	21,484
Accounts payable		103,949		114,606
Accounts payable – related parties (Note 2)		523,031		463,191
Accrued liabilities		16,275		12,128
Accrued liabilities – related parties (Note 2)		126,724		112,576
Income taxes payable		750		750
Advances payable		41,440		41,098
Notes payable and advances – related parties (Note 2)		121,228		83,902
Total Current Liabilities		947,315		849,735
TOTAL LIABILITIES		947,315		849,735
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.001 par value, 200,000,000    shares authorized, 1,186,667 shares issued and    outstanding		1,187		1,187
Additional paid-in capital		220,040		220,040
Other comprehensive income (loss)
Foreign currency translation adjustments		(33,489)		(22,685)
Accumulated deficit		(1,108,268)		(998,330)
Total Stockholders’ Equity (Deficit)		(920,530)		(799,788)
TOTAL LIABILITIES AND STOCKHOLDERS’    EQUITY (DEFICIT)	$	26,785	$	49,947

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

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AUTO PHOTO TECHNOLOGIES INC. AND SUBSIDIARY

Consolidated Statements of Operations and Other Comprehensive Loss

(Unaudited)

	For the Three Months Ended June 30				For the Six Months Ended June 30,
		2007		2006		2007		2006
REVENUES
Photo kiosk revenue	$	116,203	$	100,467	$	211,817	$	177,997
Sales commission		5,402		6,655		11,165		12,048
Total Revenues		121,605		107,122		222,982		190,045
EXPENSES
Photo kiosk rent and leasing expense		66,509		64,208		122,653		116,423
Photo kiosk operating supplies and expenses		6,648		14,525		13,170		27,689
General and administrative		60,560		52,120		123,783		92,944
Consulting expense – related party		33,249		33,249		66,498		66,498
Depreciation expense		964		5,395		1,902		10,557
Total Expenses		167,930		169,497		328,006		314,111
(Loss) from Operations		(46,325)		(62,375)		(105,024)		(124,066)
OTHER INCOME (EXPENSE)
Interest expense		(2,727)		(2,667)		(4,914)		(5,506)
Total Other Income (Expense)		(2,727)		(2,667)		(4,914)		(5,506)
(LOSS) BEFORE INCOME TAX EXPENSE		(49,052)		(65,042)		(109,938)		(129,572)
Income tax expense		-		-		-		-
NET (LOSS)		(49,052)		(65,042)		(109,938)		(129,572)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments		(7,208)		(13,293)		(10,804)		(18,389)
Total Other Comprehensive Income (Loss)		(7,208)		(13,293)		(10,804)		(18,389)
TOTAL COMPREHENSIVE (LOSS)	$	(56,260)	$	(78,335)	$	(120,742)	$	(147,961)
BASIC (LOSS) PER SHARE
(Loss) per share from operations	$	(0.04)	$	(65,042)	$	(0.09)	$	(129,572)
Total (Loss) per Share	$	(0.04)	$	(65,042)	$	(0.09)	$	(129,572)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		1,186,667		1		1,186,667		1

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

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AUTO PHOTO TECHNOLOGIES INC. AND SUBSIDIARY

Consolidated Statements of Stockholders’ Equity (Deficit)

	Common Stock				Additional Paid in Capital		Other Comprehensive Income (Loss)		Accumulated Deficit
	Shares		Amount
Balance,   December 31, 2006	1,186,667	$	1,187	$	220,040	$	(22,685)	$	(998,330)
2007 Changes Unaudited
Foreign currency   translation adjustments	-		-		-		(10,804)		-
Net loss for the six months ended June 30, 2007	-		-		-		-		(109,938)
Balance, June 30, 2007	1,186,667	$	1,187	$	220,040	$	(33,489)	$	(1,108,268)

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

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AUTO PHOTO TECHNOLOGIES INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ended June 30,
		2007		2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(109,938)	$	(129,572)
Adjustments to reconcile net loss to net cash    provided (used) by operating activities:
Depreciation expense		1,902		10,557
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables		(1,041)		(18,903)
Decrease in other receivables		9,511		819
Decrease in prepaid expenses		2,405		1,573
Increase (decrease) in accounts payable		(12,535)		37,830
Increase in accounts payable – related parties		58,336		69,504
Increase (decrease) in accrued liabilities		3,890		(7,507)
Increase in accrued liabilities – related parties		11,539		5,313
Net Cash Provided (Used) by Operating Activities		(35,931)		(30,386)
CASH FLOWS FROM INVESTING ACTIVITIES		-		-
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft		(7,855)		(8,005)
Notes payable – related parties		32,977		(35,000)
Advances payable – related party		372		25,102
Cash in Escrow Account		-		96,000
Subscriptions payable proceeds		-		(96,000)
Net Cash Provided by Financing Activities		25,494		(17,903)
NET INCREASE (DECREASE) IN CASH		(10,437)		(48,289)
CASH AT BEGINNING OF YEAR		14,807		52,608
CASH AT END OF PERIOD	$	4,370	$	4,319
CASH PAID DURING THE PERIOD FOR:
Interest	$	1,674	$	652
Income taxes	$	-	$	-

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

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AUTO PHOTO TECHNOLOGIES INC. AND SUBSIDIARY

Notes to the Unaudited Consolidated Financial Statements

June 30, 2007

NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and notes thereto. Operating results for the six months ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

NOTE 2 - RELATED PARTY TRANSACTIONS

These transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Accounts Payable – Related Parties

As of June 30, 2007 and December 31, 2006, the Company owed Ian S. Grant and Company Ltd. $450,534 and $392,201, respectively, for consulting fees.

As of June 30, 2007 and December 31, 2006, the Company’s subsidiary, Auto Photo Kiosk GmbH (APK), owed its 20% minority interest shareholder $72,497 and $70,990, respectively for goods delivered and services performed on behalf of the subsidiary.

Accrued Liabilities – Related Parties

As of June 30, 2007 and December 31, 2006 the Company’s subsidiary, APK, owed its 20% minority interest shareholder $110,282 and $99,065, respectively for items supplied and expenses paid on behalf of the subsidiary.

Notes Payable and Advances – Related Parties

As of June 30, 2007 and December 31, 2006, the Company had borrowed $65,212 and $29,412, respectively, from the Company’s CEO and President, Ian S. Grant. This note bears an interest rate of 8%, is unsecured and is due on demand. For the six months ended June 30, 2007 and the year ended December 31, 2006 accrued liabilities – related parties included accrued interest of $10,927 and $8,641, respectively for this note.

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AUTO PHOTO TECHNOLOGIES INC. AND SUBSIDIARY

Notes to the Unaudited Consolidated Financial Statements

June 30, 2007

NOTE 2 - RELATED PARTY TRANSACTIONS (Continued)

Notes Payable and Advances – Related Parties (Continued)

As of June 30, 2007 and December 31, 2006, the Company’s subsidiary, APK, had borrowed $21,938 (Euro 16,207) and $21,482 (Euro 16,207), respectively, from its 20% minority shareholder. This note bears an interest rate of 5%, is unsecured and is due on demand. For the six months ended June 30, 2007 and the year ended December 31, 2006 accrued liabilities – related parties included accrued interest of $5,515 and $4,870, respectively for this note.

As of June 30, 2007 and December 31, 2006 the company’s subsidiary, APK, owed $34,078 and $33,008 to the CEO of the subsidiary’s minority interest shareholder. This advance is unsecured and non-interest bearing.

NOTE 3 - GOING CONCERN

The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have cash or other material assets, nor does it have established sources of revenues to cover operating costs and to allow it to continue as a going concern. The consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. It is the intent of the Company to obtain financing through equity offerings or other feasible financing alternatives to fund its ongoing operations. The Company also continues to pursue the development of Auto Photo Kiosk GmbH operations to cover the Company’s working capital needs. There is no assurance the Company will be successful in raising new capital or increasing the revenues of its subsidiary, Auto Photo Kiosk GmbH.

NOTE 4 - COMPARATIVE FIGURES

Certain prior period and prior year comparative figures have been reclassified to conform to the current period presentation.

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

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. Forward-looking statements are statements that relate to future events, future financial performance or are otherwise projections of future results. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section of this quarterly report on Form 10-QSB entitled “Risk Factors”, that may cause our company’s or our industry’s 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 these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our”, “our Company” and “Auto Photo” mean our company, Auto Photo Technologies Inc. , unless otherwise indicated.

Our Current Business

We hold a majority interest in Auto Photo Kiosk GmbH ("APK"), a limited liability corporation under the laws of Germany. We own 80%, and Vending Concept GmbH, a Swiss corporation, owns the remaining 20% of the share capital of APK. We acquired this interest from Spectre Industries Inc., formerly our parent company, on December 11, 2003 when we assumed all of the assets and liabilities of Spectre Industries at that time.

The primary asset of Spectre Industries that we acquired was APK. APK was incorporated in September 2001 as a photographic service company to operate automated kiosk-style instant photo booths and related products, in major public access areas in Germany.

APK's existing location operators are government and municipal agencies, malls and shopping centres. APK currently has 17 instant photo booths installed. The customers are individuals who go to the photo booths for photos to use in forms of personal identification (such as passports, driver's licenses, personal identification, etc.). APK's photo booths produce photos using digital technology and require no photo processing chemicals.

The locations for installation of a photo booth are made available by APK's location operators who provide the locations for the photo booths. Of the 17 booths in operation, 15 operate under a revenue sharing arrangement and 2 operate on a fixed rent basis. Under each revenue sharing arrangement, the location operator is paid between 30-44% of the net revenues (gross revenues less value-added-tax ("V.A.T.")), generated by each installed photo booth. The fixed rental rate for photo booths ranges between €280 to €500 per month. The length of the location rental contracts vary from one year (contracts with written termination three months prior to expiration) up to 10 years. Of our location rental contracts, 16 are one-year term contracts and one is a ten-year term contract.

Regardless of the location operator arrangement for any individual photo booth, we currently charge €7.00 per photo session for all photo booths. There is no correlation between location operator remuneration and whether a unit is leased or owned.

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Of the 17 instant photo booths that are installed, 11 are leased from EFS Business Consult & Co. Hora oHG Germany under two lease agreements. Both lease agreements have the same terms, and are for a period of 36 months with an automatic extension for 24 months. Under the terms of the lease agreements APK pays a fixed lease payment of €300 per month per machine. The 2 lease agreements have each been extended for an additional 30 months, at the same rental rate of €300 per month per machine.

The remaining six machines are directly owned by APK, having been purchased at a cost of €14, 271 per booth. Of the instant photo booths that are installed, 5 are located in shopping centres and 12 are located in various city government buildings.

The photo booths generate revenue simply by the customer entering the booth and selecting what type of photos they desire. The menu screen will prompt the customer to deposit the required payment in to the coin slots, which as noted above is currently €7.00 per session.

Plan of Operation and Cash Requirements

Overview

You should read the following discussion of our financial condition and results of operations together with the consolidated audited financial statements and the notes to consolidated audited financial statements included elsewhere in this filing prepared in accordance with accounting principles generally accepted in the United States. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements.

We remain an early stage company with minimal operations. As noted below we have only recently been generating revenue from our photo booth operations. Our primary concerns in regards to our efforts to maintain and expand our business and increase our revenues are:

• market acceptance of our instant photo booth services;

• our ability to successfully compete with other more established companies who provide similar products; and

• our short term funding requirements until we achieve a break-even level of operations.

While we are encouraged by the recent increases in sales and revenues (from $383,040 for the year ended December 31, 2005 to $398,388 for the year ended December 31, 2006), we realize that in order for this trend to continue we must establish and maintain a significant share of the market for automated photo sales. The only measurement that we have for ascertaining whether or not the auto photo market is accepting our services, and whether or not we are successfully competing in such market, is whether our revenues are increasing on a month to month basis. As we are an early stage development company, and until we achieve a more substantial level of operations and have greater resources available to us, it will be difficult to analyze how we are doing in terms of our efforts to obtain additional market share and successfully compete in the auto photo market, other than by looking to our revenues as a benchmark.

With the filing of our registration statement we are taking the initial steps in “going public” and accessing the public markets. We are doing this both from an investor relations standpoint, so that our shareholders may have some liquidity in their investment in the event that a public market develops for our securities; and from a desire to make our company more readily able to attract future financing. We currently plan to have our common stock quoted on the National Association of Securities Dealers Inc.'s OTC Bulletin Board. In order to do this, a market maker must file a Form 15c-211 to allow the market maker to make a market in our shares of common stock. However, we cannot provide our investors with any assurance that our common stock will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize. As noted herein, we will require further financing to fund the expansion of our business and by being a public company we will be a more attractive investment for a wider range of potential investors.

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Until we are able to generate material revenues from operations we must limit our expenses as much as possible. To date the majority of our expenses have been as a result of legal and accounting costs associated with the offering and our registration statement. Now that we are no longer faced with such expenses as they relate specifically to our registration statement and the offering, we anticipate that our ongoing operating, legal and audit expenses will be at a manageable level, provided that we at least maintain our current level of revenues.

Cash Requirements

We anticipate that we will expend approximately $300,000 during the twelve-month period ending June 30, 2008 to fund, service and maintain our current photo booths, and for working capital. These expenditures are broken down as follows:

Estimated Funding Required During the Twelve Month Period Ending June 30, 2008

Operating Expenses
Management and Consulting		$137,000
Subsidiary Operations		96,000
General and Administrative		83,000
Total Operating Expenses	$	316,000

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the annual financial statements for the year ended December 31, 2006, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

As a result, there will also be substantial doubt about our ability to continue as a going concern as the continuation of its business will be dependent upon obtaining further financing, successful and sufficient market acceptance of the automated photo products, the continuing successful development of the photo booth operations, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of the stockholders who will be receiving its shares in the spin off. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for its continued operations. We intend to pursue various financing alternatives to meet its immediate and long-term financial requirements, which it anticipates will consist of further private placements of its equity securities or shareholder loans. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our obligations as they become due and we will be forced to scale down or perhaps even cease operations.

Management believes automated photo booths that provide instant photos will become an increasingly popular market segment. Digital photographic technology continues to rapidly replace conventional photography given its efficiency and quality. We believe that placing this technology in an instant photo booth will address a number of recreational and identification needs for consumers seeking photographic services. The recreational applications apply to local consumers as a novelty and, more importantly, tourists who have not had any experience with a similar product or service in their home jurisdiction. For identification purposes, the photos taken with our photo booths are capable of providing photographs for passport applications. In addition, we are hoping to expand upon the recognition of our services for providing further official identification services for government or other agencies who require such photographic services in this format. If we are successful at building our brand and showing consistent sales growth we hope that we may be successful at completing future equity or debt financings.

As noted, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements, which we anticipate will consist of further private placements of equity securities, advances from

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related parties or shareholder loans. We plan to rely on loans from management to meet our short term cash requirements. We have not entered into any definitive agreements with any shareholders or related parties for the provision of loans or advances. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, or generate significant material revenues from operations, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.

Financial Condition, Liquidity and Capital Resources

As at June 30, 2007 we had cash on hand of $4,370 and our total current assets were $24,848, which consisted primarily of cash, accounts receivable and prepaid expenses. While our revenue from sales has been increasing from period to period, there is no guarantee that this will continue, or will increase to a sufficient level to fund our operations. However, as our revenues and cash flow from operations increase, we look forward to relying less on the sale of stock and advances from related parties in order to finance our operations.

As at June 30, 2007, our total current liabilities increased to $947,315 from $849,735 at December 31, 2006, primarily reflecting an increase in amounts due to related parties.

We do not anticipate any material changes in the cost or requirements relating to the capital resources required to conduct our operations. We do not have any obligations regarding, and do not intend on making, any material capital expenditures.

Historically, we have financed our cash flow and operations from the sale of stock and advances from shareholders. On July 25, 2006, we effected equity private placements totalling $104,000. These funds will not be sufficient for us to address our minimum current and ongoing expenses, and as a result we will have to restrict or eliminate expenses associated with the marketing and promotion activity connected with the development and marketing of our products and expansion of our automated photo booths. Although we will be required to impose such limitations, we anticipate that our cash-on-hand will be sufficient to pay for the remaining offering expenses associated with the offering and pay for the offering expenses that are currently due and owing. However, we cannot satisfy our minimum cash requirements for the year ending December 31, 2007 without further funding. As we will require additional monies during 2007, we hope to raise any such additional capital primarily through the private placement of our securities or advances from related parties.

Results of Operations.

Three month period ended June 30 2007, compared to three month period ended June 30, 2006

We incurred a net loss of $49,052 for the three month period ended June 30, 2007 compared to a net loss of $65,042 for the comparative period in 2006. After the foreign currency adjustments, the total comprehensive loss increased to $56,260 for the three month period ended June 30, 2007 compared to $78,335 for the three month period ended June 30, 2006.

We recorded total revenues of $121,605 for the three month period ended June 30, 2007 and total revenues of $107,122 during the comparable period in 2006. Photo kiosk revenue for the three month period ended June 30, 2007 was $116,203 versus $100,467 for the three month period ended June 30, 2006. The higher 2007 photo kiosk revenues of $15,736 can be attributed to a price increase in 2007, a strengthening of the Euro against the US dollar and improved revenue from certain locations. Sales commission revenue for the three month period ended June 30, 2007 was $5,402 versus $6,655 for the three month period ended June 30, 2006. Photo kiosk rent and leasing costs were $66,509for the three month period ended June 30, 2007 compared to $64,208 for the three month period ended June 30, 2006. This increase is due to higher revenues and activity. General and administrative expenses for the three month period ended June 30, 2007 were $60,560 versus $52,120 for the same period in 2006. This increase in 2007 can be attributed to higher APK selling expenses and the strength of the Euro against the US dollar.

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The loss from operations for the three month period ended June 30, 2007 was $46,325 versus $62,375 for the three month period ended June 30, 2006.

Six month period ended June 30 2007, compared to six month period ended June 30, 2006

We incurred a net loss of $109,938 for the six month period ended June 30, 2007 compared to a net loss of $129,572 for the comparative period in 2006. After the foreign currency adjustments, the total comprehensive loss increased to $120,742 for the six month period ended June 30, 2007 compared to $147,961 for the six month period ended June 30, 2006.

We recorded total revenues of $222,982 for the six month period ended June 30, 2007 and total revenues of $190,045 during the comparable period in 2006. Photo kiosk revenue for the six month period ended June 30, 2007 was $211,817 versus $177,997 for the six month period ended June 30, 2006. The higher 2007 photo kiosk revenues of $33,820 can be attributed to a price increase in 2007, a strengthening of the Euro against the US dollar and improved revenue from certain locations. Sales commission revenue for the six month period ended June 30, 2007 decreased to $11,165 versus $12,048 for the six month period ended June 30, 2006. Photo kiosk rent and leasing costs increased to $122,653for the six month period ended June 30, 2007 compared to $116,423 for the six month period ended June 30, 2006 due to the higher revenues and activity. General and administrative expenses for the six month period ended June 30, 2007 were $123,783 versus $92,944 for the same period in 2006. This increase for 2007 can be attributed to higher APK selling expenses, the strength of the Euro against the US dollar and higher professional fees in 2007.

The loss from operations for the six month period ended June 30, 2007 was $105,024 versus $124,066 for the six month period ended June 30, 2006.

As of June 30, 2007, we had a working capital deficiency of $922,467.

Product Research and Development

Our business plan is focused on a strategy of acquiring and maximizing new products and services characterized by rapid technological change, evolving industry standards and changing client preferences. To date, execution of our business plan has focused on the operation of our automated photo booth business. Our plans for the automated photo booth business will continue to develop, along with our ability to make timely and cost-effective enhancements and additions to the auto photo kiosk technology. Furthermore, we will continue to look for new products and services that meet customer demands.

Purchase of Significant Equipment

As we lease our instant photo booths, we do not intend to purchase any significant equipment over the twelve months ending December 31, 2007.

Employees

As of June 30, 2007, we do not have any employees other than our directors and officers. Our company is managed by Ian S. Grant, our sole director and officer. Over the twelve month period ending June 30, 2008, we do not expect to hire any additional employees. Our subsidiary APK has two employees.

Going Concern

The financial statements included with this quarterly report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

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In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the financial statements.

Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.  This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007.  Management is currently evaluating the impact SFAS No. 157 will have on our financial position, results of operations, and cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB statement No. 115.” This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. If an entity elects the fair value option for a held-to-maturity or available-for-sale security in conjunction with the adoption of this Statement, that security shall be reported as a trading security under Statement 115, but the accounting for a transfer to the trading category under paragraph 15(b) of Statement 115 does not apply. Electing the fair value option for an existing held-to-maturity security will not call into question the intent of an entity to hold other debt securities to maturity in the future. This statement is effective as of the first fiscal year that begins after November 15, 2007. We are currently analyzing the effects of SFAS 159 but do not expect its implementation will have a significant impact on our financial condition or results of operations.

In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48 Accounting for Uncertainly in Income Taxes – An Interpretation of FASB Statement No. 109.  FIN 48 prescribes detailed guidance for the financial statement recognition, measurement, and disclosure of uncertain tax positions recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.  Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods.  FIN 48 will be effective for fiscal years beginning after December 15, 2006, and the provisions of FIN 48 will be applied to all positions upon the adoption of the Interpretation.  The cumulative effect of applying the provisions of this Interpretation will be reported as an adjustment to the opening balance of retained earnings for that fiscal year.  Management does not believe that its adoption will have a material effect on our financial position, results of operations, or cash flows.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach, as those terms are defined in SAB 108. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. If a company determines that an adjustment to prior year financial statements is required upon adoption of SAB 108 and does not elect to restate its previous financial statements, then it must recognize the cumulative effect of applying SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities with a corresponding adjustment to the fiscal 2006 opening balance in retained earnings. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006, and was adopted by our company in the first quarter of 2007. Management does not believe the adoption of SAB 108 will have a material impact on our financial position or results of operations.

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APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

RISK FACTORS

GENERAL STATEMENT ABOUT RISKS

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this quarterly report in evaluating our company and our business before purchasing shares of our company's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.

This quarterly report on Form 10-QSB contains forward-looking statements. Forward-looking statements are statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by the use of terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this quarterly report include statements about:

• Our future operating results,

• Our future capital expenditures,

• Our expansion and growth of operations, and

• Our future investments in and acquisitions of additional instant photo booths.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

• General economic and business conditions,

• Exposure to market risks in our financial instruments,

• Fluctuations in demand for instant photo booths products,

• Competition for instant photo booth customers in the instant photo booth industry,

• Technological changes and developments in the instant photo booth industry,

• Regulatory uncertainties and potential liabilities, and

• the risks in the section of this quarterly report entitled "Risk Factors",

any of which may cause our or our industry's 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 these forward-looking statements.

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While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.

Risks Relating to Our Business:

We have had minimal revenues from operations and if we are not able to generate material revenues we may be forced to scale back or cease operations or our business operations may fail.

To date we have not generated any material revenues from operations and we have been dependent on sales of our equity securities to meet our cash requirements. We commenced our business operations in December 2003. We have generated $211,817 in revenue from our automated photo booth business for the six month period ended June 30, 2007. We incurred a net loss of $(109,938) for the six month period ended June 30, 2007, and a loss of $(129,572) for the six month period ended June 30, 2006. As of June 30, 2007, we had a working capital deficiency of $922,467. On July 25, 2006, we received an aggregate of $104,000 gross proceeds from a private placement financing in which we sold shares of our common stock. We have estimated that we will require between $250,000 and $300,000 to carry out our business plan for the twelve-month period ending June 30, 2008. Because we cannot anticipate when we will be able to generate significant revenues from sales, we will need to raise additional funds to continue to develop our photo business to respond to competitive pressures, to sign further site contracts or to respond to unanticipated requirements or expenses. If we are not able to generate significant revenues from we will not be able to maintain our operations or achieve a profitable level of operations.

We have only commenced our business operations in December, 2003 and we have a limited operating history. If we cannot successfully manage the risks associated with the expansion of our automated photo business, we may not achieve profitable operations and ultimately our business may fail.

We have a limited operating history. Our operating activities since our incorporation on December 11, 2003 consisted primarily of acquiring and operating our automated photo business. On December 11, 2003, we acquired the majority of the outstanding shares in APK, a German company which provides instant photos through automated photo kiosks. APK was incorporated in September of 2001. Our prospects are subject to the risks and expenses which we will encounter in our efforts to establish and expand our auto photo business. Our limited operating history makes it difficult or impossible to predict future results of our operations. We may not establish a clientele that will make us profitable, which might result in the loss of some or all of your investment in our common stock.

The fact that we are in the early development of our company and that we have only generated limited revenues since our incorporation raises substantial doubt about our ability to continue as a going concern, as indicated in our independent auditors' report in connection with our audited financial statements.

We have generated limited revenues since our inception on December 11, 2003. Since we are still in the early stages of developing our company and because of the lack of business operations at June 30, 2007, our independent auditors' report includes an explanatory paragraph about our ability to continue as a going concern. We will, in all likelihood, continue to incur operating expenses without significant revenues until our automated photo service gains significant popularity. On July 25, 2006, we raised $104,000 through the sale of shares of our common stock. We estimate our average monthly operating expenses for the twelve-month period ending December 31, 2007, to be approximately $25,000 each month. At this rate we will not be able to maintain our operations at their present level beyond mid 2007 without generating additional revenues from our operations or incurring any non-operational expenses. We cannot assure that we will be able to generate enough interest in our automated photo services. If we cannot attract a significant number of customers, we will not be able to generate any significant revenues or income. In addition, if we are unable to establish and generate material revenues, or obtain adequate future financing, our business will fail and you may lose some or all of your investment in our common stock. These circumstances raise

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substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors' report on the financial statements for the six month period ended June 30, 2007.

We will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to scale back or cease operations or discontinue our business.

Although we intend to raise additional capital, we do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing when such funding is required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our automated photo services and our business model. Furthermore, there is no assurance that we will not incur further debt in the future, that we will have sufficient funds to repay our future indebtedness or that we will not default on our future debts, jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to maintain our operations, which might result in the loss of some or all of your investment in our common stock.

We anticipate that the funds we have raised in the last private placements will not be sufficient to satisfy our cash requirements for the balance of the year ended December 31, 2007. In addition, there is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

- we incur unexpected costs in expanding our products and photo booth location or encounter any unexpected technical or other difficulties;

- we incur delays and additional expenses as a result of technology failure;

- we are unable to create a substantial market for our products; or

- we incur any significant unanticipated expenses.

The occurrence of any of the aforementioned events could prevent us from pursuing our business plans for the expansions of our automated photo operations and ultimately achieving a profitable level of such operations.

We are dependent upon outside capital for our continued operations.

We will depend almost exclusively on outside capital to pay for the continued development and marketing of our products. Such outside capital may include the sale of additional stock and/or commercial borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may not be able to expand or continue our automated photo operations and so may be forced to scale back or cease operations or discontinue our business.

All of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

All of our assets are located outside the United States and we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.

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Limited Operating History In Providing Services to the Automated Photo Booth Industry

On September 4, 2001 our subsidiary, APK, commenced the operation of our current business in the instant photo booth market. As such, we have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development. Some of these risks and uncertainties relate to our ability to:

- establish and maintain relationships with key location providers for our instant photo booths;

- respond effectively to competitive and technological developments;

- build an infrastructure to support our business;

- attract, retain and motivate qualified personnel.

We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so may impair our ability to capture market share and generate revenues. In addition, our operating results are dependent to a large degree upon factors outside of our control, including the general strength, and acceptance of our instant photo booths in the German market.

Many of Our Competitors Have Greater Resources And Better Name Recognition

Many of our competitors are substantially larger than us and have significantly greater financial resources and marketing capabilities than we have, together with better name recognition. Competitors with superior resources and capabilities may be better able to utilize such advantages to market their services better, faster and/or cheaper than we can.

Increased competition from future or existing competitors in the instant photo booth market will likely impair our ability to establish and maintain market share. If we are unsuccessful in establishing and maintaining a sufficient number of instant photo booths in profitable locations, it is unlikely that we will be able to generate sufficient revenues to sustain operations

We lack working capital and due to the losses incurred since inception, our stockholders' deficits and lack of revenues, there is substantial doubt about our ability to continue as a going concern.

There is substantial doubt about our ability to continue as a going concern due to the losses incurred since inception, our stockholders' deficit, and lack of revenues.

We have not generated sufficient revenues to cover our operational expenses and do not anticipate doing so in the near future. If our business does not meet our intended income goals, we will require additional financing. If we are not successful in obtaining additional financing immediately, we may be required to reduce operations to a sustainable level until any such financing is obtained, or sufficient revenues are generated to sustain operations. There can be no assurances that additional equity or other financing will be available at all or available on terms acceptable to us.

Our ability to continue in business in part depends upon our continued ability to obtain financing. There can be no assurance that any such financing would be available upon terms and conditions acceptable to us, if at all. The inability to obtain additional financing in a sufficient amount when needed and upon acceptable terms and conditions could have a materially adverse effect upon us. Inadequate funding could impair our ability to compete in the marketplace and could result in our dissolution.

We have a history of net losses and a lack of established revenues, and as a result, we expect to incur more net losses in the future.

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We have had a history of losses and expect to continue to incur losses, and may never achieve or maintain profitability. As of June 30, 2007 we have an accumulated deficit of $920,530.

Risk of Termination of Site Contracts

All but one of the contracts pursuant to which we place instant photo booths on site locations are short-term, i.e. one year "evergreen" contracts that are subject to renewal on an annual basis and so are easily terminated by either party. There can be no assurance that contracts to place instant photo booths will not be terminated at any time. The termination of a contract or other arrangement with a provider of multiple sites, would significantly reduce our number of auto photo kiosk installations and limit access to prime site locations in the future. Such a termination could have a material adverse effect on our business, financial condition and results of operations.

Dependence on a Single Product; Rapid Technological Change

Going forward we will derive the majority of our revenues from the operation of our instant photo booths. The digital technology incorporated by our instant photo booths is characterized by rapid technological change, new products and services, evolving industry standards and changing client preferences. Our success will depend, in significant part, upon our ability to make timely and cost-effective enhancements and additions to the auto photo kiosk technology and to introduce new products and services that meet customer demands. We expect new products and services to be developed and introduced by other companies that compete with our products and services. The proliferation of new digital photographic technology may reduce demand for our instant photo booths. There can be no assurance that we will be successful in responding to these or other technological changes, to evolving industry standards or to new products and services offered by our current and future competitors. In addition, we may not have access to sufficient capital for our research and development needs in order to develop or acquire new products and services.

Disruption in Manufacturing and Repair; Inability to Manufacture or Service Instant Photo Booths

The supply, manufacture technical updates and servicing of the instant photo booths is provided exclusively by Vending Concepts GmbH. We are dependent on this one supplier for the provision, repair and servicing of the instant photo booths. Our reliance on this supplier, as well as industry supply conditions generally, subject us to various risks, including the possibility of a shortage or a lack of availability of instant photo booths, key components, quality control problems, increases in component costs and reduced control over delivery schedules, any of which could adversely affect our business and results of operations. In situations where we are unable to rectify supply or quality problems associated with our instant photo booths costly delays could result. Although we believe that our supplier has current manufacturing capabilities to enable it to produce sufficient instant photo booths for our purposes through fiscal 2007, there can be no assurance that this will be adequate for unanticipated future growth.

Uncertain Ability To Achieve, Manage Or Sustain Growth

It may be necessary for us to grow in order to remain competitive. Our ability to grow is dependent upon a number of factors including, but not limited to, our ability to hire, train and assimilate management and other employees, the adequacy of our financial resources, our ability to identify and efficiently provide new services as may be demanded by our customers in the future and our ability to adapt our services to accommodate necessary operational changes. In addition, there can be no assurance that we will be able to achieve such expansion or that we will be able to manage expanded operations successfully. Failure to manage growth effectively and efficiently could have an adverse effect on our ability to acquire sufficient market share and remain competitive.

Dependence Upon Ian S. Grant

Our key personnel is limited at present to Ian S. Grant, our President. The loss of the services of Mr. Grant, for any reason, may have a materially adverse effect on our prospects. Although we believe that the loss of any of our management (apart from Mr. Grant) will not have a material adverse impact upon us, there can be no assurance in this regard, nor any assurance that we will be able to find suitable replacements. In addition, competition for

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personnel is intense, making it difficult to find highly skilled employees with appropriate qualifications. Furthermore, we do not maintain "key man" life insurance on the lives of any of our management or other of our key employees. To the extent that the services of any key employee of ours becomes unavailable, we will be required to retain other qualified persons. However, there can be no assurance that we will be able to employ qualified persons upon acceptable terms.

We have accrued significant amounts of management fees that are payable on demand to our director and officer, Ian S. Grant. If a demand for payment was made we would be unable to satisfy any required payment.

As at June 30, 2007 we have accrued management fees of $450,534 that are due and owing to Ian Grant, our director and officer. These fees have no fixed payment terms and are due on demand. As at June 30, 2007 we had $4,370 in cash on hand and to date we have not generated any material revenues from operations and we have been dependent on sales of our equity securities to meet our cash requirements. We cannot anticipate when we will be able to generate significant revenues from sales, or when or if we will be able to raise additional funds. As a result, if Mr. Grant made a demand for payment of the accrued fees that are due and owing to him, we would be unable to make any payments in satisfaction of the accrued fees. If a demand for payment of the accrued fees is made we will not be able to maintain our operations and our business will fail.

Because our officers, directors and principal shareholders control a majority of our common stock, investors will have little or no control over our management or other matters requiring shareholder approval.

Our officers and directors and their affiliates, in the aggregate, beneficially own 56.18% of issued and outstanding shares of our common stock. As a result, they have the ability to control matters affecting minority shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors and principal shareholders control our company, investors will not be able to replace our management if they disagree with the way our business is being run. Because control by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

Risks Relating to Our Shares of Common Stock

There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares.

There is currently no active trading market for our common stock and such a market may not develop or be sustained. We currently plan to have our common stock quoted on the National Association of Securities Dealers Inc.'s OTC Bulletin Board. In order to do this, a market maker must file a Form 15c-211 to allow the market maker to make a market in our shares of common stock. At the date hereof, we are not aware that any market maker has any such intention. However, we cannot provide our investors with any assurance that our common stock will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize. Further, the OTC Bulletin Board is not a listing service or exchange, but is instead a dealer quotation service for subscribing members. If our common stock is not quoted on the OTC Bulletin Board or if a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment. If we establish a trading market for our common stock, the market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of developmental stage companies.

Sales of a substantial number of shares of our common stock into the public market by the selling stockholders may result in significant downward pressure on the price of our common stock and could affect the ability of our stockholders to realize any current trading price of our common stock.

Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock, when and if such market develops. Selling stockholders may be reselling up to

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33% of the issued and outstanding shares of our common stock. As a result of such registration statement, a substantial number of our shares of common stock which have been issued may be available for immediate resale when and if a market develops for our common stock, which would have the effect of decreasing the price of our common stock. As a result of any such decreases in price of our common stock, purchasers who acquire shares from the selling stockholders may lose some or all of their investment.

Any significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock could encourage short sales by the selling stockholders or others. Any such short sales could place further downward pressure on the price of our common stock, which may result in the loss of some or all of an investment in our common stock.

Our stock is a penny stock. Trading of our stock may be restricted by the SEC's penny stock regulations and the NASD's sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the NASD has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

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

N/A

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-B.

Exhibit Number and Exhibit Title

(3) Articles of Incorporation and Bylaws

3.1 Articles of Incorporation (incorporated by reference from our Registration Statement on Form SB-2 filed on September 15, 2006).

3.2 Bylaws (incorporated by reference from our Registration Statement on Form SB-2 filed on September 15, 2006).

3.3 Certificate of Amendment (incorporated by reference from our Registration Statement on Form SB-2 filed on September 15, 2006).

(10) Material Contracts

10.1 Asset Distribution Agreement between Spectre Industries Inc. and Spectre Holdings Inc., dated December 10, 2003 (incorporated by reference from our Registration Statement on Form SB-2 filed on September 15, 2006).

10.2 Form of Subscription Agreement (incorporated by reference from our Registration Statement on Form SB-2 filed on September 15, 2006).

(14) Code of Ethics

14.1 Code of Business Conduct and Ethics (incorporated by reference from an Annual Report on Form 10-KSB filed on July 5, 2007).

(21)	Subsidiaries
21.1		Auto Photo Kiosk GmbH, a German company
(31)		Section 302 Certification
31.1		Section 302 Certification (filed herewith).

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(32)	Section 906 Certification
32.1	Section 906 Certification (filed herewith).

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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.

AUTO PHOTO TECHNOLOGIES INC.

By: /s/ Ian S. Grant

Ian S. Grant, President, Treasurer, Secretary and Director

(Principal Executive Officer, Principal Financial

Officer and Principal Accounting Officer)

Date: August 14, 2007

CW1352820.3