UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934


FOR THE
QUARTERLY PERIOD ENDED June 30,
2009





OR





[  ]
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: 000-49676





ARTFEST
INTERNATIONAL, INC.


(Exact
name of registrant as specified in its charter)







Delaware
              03-0390855(State
      or jurisdiction
              (IRS
      Employerof
      incorporation or organization)
              Identification
      No.)





13342
      Midway Road, Suite 250
                Dallas,
      TX
              75244(Address
      of Principal Executive Offices)
              (Zip
      Code)





Issuer's
telephone number: 1-877-278-6672





Securities
registered pursuant to Section 12(b) of the Act: None





Securities
registered pursuant to Section 12(g) of the Act: Common Stock





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


Yes [ ]
No [ X]





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  Yes [ ]  No [ ].







As
of August 15, 2009, the Registrant had 712,852,963 shares of common
stock outstanding.





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










Table of
Contents







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














PART I - FINANCIAL
INFORMATION





ITEM 1.  FINANCIAL STATEMENTS







PAGEFINANCIAL
      STATEMENTSBalance
      Sheets
            F-1Statements
      of Operations
            F-2Statements
      of Cash Flows
            F-3Notes
      to Financial Statements
            F-4


















ARTFEST
INTERNATIONAL, INC.


(A
Development Stage Company)


BALANCE
SHEETS


(Unaudited)


June
      30,
                                    
                                    
                                    December
      31,2009
                                    
                                    
                                    2008Current
      Assets:Cash
                                    
                                    $
                                    (9,137
                                    )
                                    
                                    $
                                    (2196
                                    )Prepaid
      Expenses
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Accounts
      Receivable
                                    
                                    
                                    351,000
                                    
                                    
                                    
                                    351,000Total
      Current Assets
                                    
                                    
                                    341,863
                                    
                                    
                                    
                                    348,804Non-Current
      AssetsInventory
                                    
                                    
                                    543,624Other
      Assets
                                    
                                    
                                    130,217
                                    
                                    
                                    
                                    130,217Total
      Non-current Assets
                                    
                                    
                                    673,841Property and Equipment,
      at cost lessaccumulated
      depreciation
                                    
                                    
                                    49,978
                                    
                                    
                                    
                                    58,464TOTAL
      ASSETS
                                    
                                    
                                    1,065,682
                                    
                                    
                                    
                                    537,485Current
      Liabilities:Accounts
      Payable and Accrued Liabilities
                                    
                                    $
                                    1,641,412
                                    
                                    
                                    $
                                    675,840Note
      Payable - Current Portion (Note 8)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    460,873Deferred
      Revenue
                                    
                                    
                                    351,000
                                    
                                    
                                    
                                    351,000Loans
      Payable (Note 8)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    475,317Total
      Current Liabilities
                                    
                                    
                                    1,992,412
                                    
                                    
                                    
                                    1,963,074Non-current
      LiabilitiesLoans
      Payable (Note 8)
                                    
                                    
                                    661,976
                                    
                                    
                                    
                                    784,497TOTAL
      LIABILITIES
                                    
                                    
                                    2,654,388
                                    
                                    
                                    
                                    2,747,571Stockholders'
      Equity:
                                      Preferred
      Stock - $.001 par value – 2,000,000 shares authorized, no shares issued
      and outstanding,Common
      Stock - $.001 par value – 500,000,000shares
      authorized, 448,763,003 and 168,763,003
                                    
                                    
                                    448,763
                                    
                                    
                                    
                                    168,763shares
      issued and outstanding
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Additional
      Paid-in Capital
                                    
                                    
                                    1,123,092
                                    
                                    
                                    
                                    671,198Accumulated
      deficit
                                    
                                    
                                    (3,160,561
                                    )
                                    
                                    
                                    (3,050,047
                                    )TOTAL
      SHAREHOLDERS EQUITY
                                    
                                    
                                    (1,588,706
                                    )
                                    
                                    
                                    (2,210,086
                                    )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
                                    $
                                    1,065,682
                                    
                                    
                                    $
                                    537,485




F-1


ARTFEST
INTERNATIONAL, INC.


(A
Development Stage Company)


STATEMENT OF OPERATIONS


(Unaudited)




For
      the ThreeMonths
      endedJune
      302009
                          
                          
                          2008Revenues
                          
                          $
                          36,900
                          
                          
                          $
                          24,724Cost
      of Revenue
                          
                          
                          12,300
                          
                          
                          
                          2,670Gross
      Profit (Loss)
                          
                          
                          24,600
                          
                          
                          
                          22,054Sales,
      General and Administrative Expenses
                          
                          
                          417,389
                          
                          
                          
                          130,090Net
      (Loss) From Operations
                          
                          
                          (392,789
                          )
                          
                          
                          (108,036
                          )Other
      Income (Expense) , Net
                          
                          
                          -
                          
                          
                          
                          8,078(Deficit)
      - Development Stage
                          
                          $
                          (392,789
                          )
                          
                          $
                          (99,958
                          )Weighted
      average number of common sharesoutstanding
      - basic and fully diluted
                          
                          
                          369,131,502
                          
                          
                          
                          66,775,630Net
      (Loss) per share - basic and fully diluted
                          
                          $
                          0
                          
                          
                          $
                          0






F-2


ARTFEST
INTERNATIONAL, INC.


(A
Development Stage Company)


STATEMENT
OF CASH FLOWS


(Unaudited)


For
      the SixMonths
      endedJune
      30,2009
                                    
                                    
                                    2008Cash
      Flows from Operating Activities:Net
      Income (Loss)
                                    
                                    $
                                    (392,789
                                    )
                                    
                                    $
                                    (845,834
                                    )Adjustments
      to reconcile net (loss) tonet
      cash (used) by operating activities:Depreciation
                                    
                                    
                                    8,486
                                    
                                    
                                    
                                    8,251Amortization
                                    
                                    
                                    -
                                    
                                    
                                    
                                    234(Increase)
      Decrease in other assets
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Increase
      in loan receivable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Decrease
      in Rewards Payable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (10,000
                                    )Inventory
                                    
                                    
                                    (543,624
                                    )
                                    
                                    
                                    -Increase
      in accounts payable and accrued expenses
                                    
                                    
                                    965,572
                                    
                                    
                                    
                                    260,535Increase
      in prepaid expenses
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Net
      Cash (Used) by Operating Activities:
                                    
                                    
                                    37,645
                                    
                                    
                                    
                                    (586,814
                                    )Cash
      Flows From Investing Activities:Intangible
      Assets
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (21,500
                                    )Decrease
      in Notes Receivables
                                    
                                    
                                    
                                    
                                    
                                    
                                    (91,500
                                    )(Purchase
      ) Disposal of Equipment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (22,228
                                    )Net
      Cash Used by Investing Activities:
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (135,228
                                    )Cash
      Flows From Financing Activities:Issuance
      of Common Stock
                                    
                                    
                                    280,000
                                    
                                    
                                    
                                    30,545Increase/(Decrease)
      in Notes payable
                                    
                                    
                                    (-
                                    )
                                    
                                    
                                    234,253Increase
      in loans payable
                                    
                                    
                                    (776,480
                                    )
                                    
                                    
                                    16,994Increase
      in contributed capital
                                    
                                    
                                    451,894
                                    
                                    
                                    
                                    450,455Net
      Cash Used by Financing Activities:
                                    
                                    
                                    (44,586
                                    )
                                    
                                    
                                    732,247Net
      Decrease in Cash
                                    
                                    
                                    (6,941
                                    )
                                    
                                    
                                    10,205Cash
      at Beginning of Period
                                    
                                    
                                    (2,196
                                    )
                                    
                                    
                                    315Cash
      at End of Period
                                    
                                    $
                                    (9,137
                                    )
                                    
                                    $
                                    10,518







F-3


ARTFEST
INTERNATIONAL, INC.


(A
Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


(Unaudited)




Note 1 - History and
organization of Artfest International, Inc. (the “Company” or
“Artfest”)




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




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




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






Note 2 - Accounting policies
and procedures





Cash and cash
equivalents




The
Company has a cash balance in a non-interest-bearing account that currently does
not exceed federally insured limits. For the purpose of the statements of cash
flows, all highly liquid investments with an original maturity of three months
or less are considered to be cash equivalents. There were no cash equivalents as
of June 30, 2009.











F-4


Fixed
Assets




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









Computer
      equipment
            3
      yearsOffice
      equipment
            4
      yearsProprietary
      Software
            3
      yearsFurniture
      and Fixtures
            7
      years







Property
and Equipment consist of the following:




$
                -Office
      equipment
                
                $
                3,240Proprietary
      software
                
                $
                60,500Furniture
      and Fixtures- Art
                
                $
                41,095Less-accumulated
      depreciation
                
                
                (54,857
                )Total
      PP&E (net of depreciation)
                
                $
                49,978







Total
Depreciation Expense for the three months ended June 30, 2009 was
$4,243.




Intangible
Assets




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




Impairment of long-lived
assets




Long-lived
assets held and used by the Company are reviewed for possible impairment
whenever events or circumstances indicate the carrying amount of an asset may
not be recoverable or is impaired. No such impairments have been identified by
management at  June 30, 2009.






F-5


Revenue
recognition




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




Advertising
costs




The
Company expenses all costs of advertising as incurred. There were nominal
advertising costs included in selling, or general and administrative expenses in
2009 and 2008.




Loss per
share




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




Reporting on the costs of
start-up activities




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




Estimates




The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.




Fair value of financial
instruments




Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of June 30, 2009 and 2008
respectively. The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair values. These financial
instruments include cash and accounts payable. Fair values
are  assumed to approximate carrying values for cash and payables
because they are short term in nature and their carrying amounts approximated
fair values or they are payable on demand.









F-6


Income
Taxes




Deferred
income tax assets and liabilities are computed annually for differences between
the financial statement and tax basis of assets and liabilities that will result
in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable on the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.




Segment
reporting




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




Dividends




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




Recent
pronouncements




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




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




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







F-7


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




Stock-Based
Compensation




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




Year End




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






Note 3 - Going
concern




The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As shown in the accompanying financial statements,
the Company has incurred a net loss of $3,160,561 for the period from February
21, 2002 (inception) to June 30, 2009. The future of the Company is dependent
upon its ability to obtain financing and upon future profitable operations from
the development of its new business opportunities. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amount of the classification of liabilities that might
be necessary in the event the Company cannot continue in existence.






Note 4 - Income
taxes




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






F-8


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









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







As of
June 30, 2009, the Company has a net operating loss carryforward of
approximately $3,160,561  for tax purposes, which will be available to
offset future taxable income. This carry forward will expire in various years
through 2027.




Note 5 - Stockholders'
Equity




The
Company was authorized to issue 500,000,000 shares of its $0.001 par value
common stock and 2,000,000 shares of its $0.001 par value preferred stock as
of  June 30, 2009.





The
Company intends upon obtaining appropriate stockholder approval and complying
with requisite corporate and Securities and Exchange Commission procedures to
merge into a newly formed subsidiary of the Company formed in the State of
Nevada (the “Subsidiary”), which has one billion (1,000,000,000) shares of
common stock authorized for issuance.  In anticipation of the merger
into the Subsidiary, during the quarter ended June 30, 2009 the Company
issued 249,500,000 common shares to debt holders, investors, consultants and
advisors in lieu of cash compensation.








F-9


Note 6 - Warrants and
options




As of
June 30, 2009 and 2008, there were no warrants outstanding; there are 1,600,000
options outstanding to acquire  additional shares of common
stock.




Note 7 - Related party
transactions




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




Note 8 - Loans and Notes
Payable




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




The
Company has $690,103 in loans payable to shareholders and $460,873 in short-term
notes. The notes call for varying interest rates ranging from 1% to 12% per
annum, and contain a stock payment option payable at the lender's
discretion.




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




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




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




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




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




On
January 31, 2008, the Company signed a Promissory Note payable to the TBF
Charitable Trust Foundation for $50,000 due on July 31, 2008. The loan accrues
an interest at 1.5% per month, or 18% per annum, and with interest and penalties
the total due pursuant to the Note was $190,000.  The Company then
entered into an Amended Agreement with TBF Charitable Trust Foundation, dated as
of April 30, 2009, which amended the Note so that as of April 30, 2009, the
outstanding principal amount of the Note was $220,000.




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




Note 9- Other
Income





None.




F-10


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





Results
of Operations





(a)
Revenues




We
generated operating revenues of $36,900 for the three months ended June 30,
2009, as compared to $24,724  for the same period in
2008.  We had a net operating loss $392,789 for the three months ended
June 30, 2008, as compared to a net operating  loss of $109,685 for
the same period in 2008.




We
generated operating revenues of $505,900 for the six months ended June 30, 2009,
as compared to $24,736  for the same period in 2008.  We had
a net operating loss of $422,514  as compared to a net operating loss
of $849,114for the same period in 2008.




(b) Costs
and Expenses




We
had $417,389 of selling general and administrative expenses in the three months
ended June 30, 2009 as compared to $131,739 of selling, general and
administrative expenses for the three months ended June 30,
2008.  .





We
had $773,060 of selling general and administrative expenses in the six months
ended June 30, 2009 as compared to $858,600 of selling, general and
administrative expenses for the six months ended June 30, 2008.





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





(c)
Depreciation, Depletion and Amortization




Depreciation  expense
totaled $4,243 as for the three months ended June 30, 2009.





(e) Net
Loss





The
Company had a net loss of $392,789 for the three months ended June 30, 2009 and
a net loss of $112,014 for the six months ended  June 30,
2009.  The Company had a net loss of $96,613 and $842,490 for the
three months and six months ended June 30, 2008, respectively. The
increase in net loss is the result of increased operating costs.





Forward
Looking Statements





The
foregoing Management’s Discussion and Analysis or Plan of Operation and comments
elsewhere herein may contain “forward looking statements” within the meaning of
Rule 175 under the Securities Act of 1933, as amended, and Rule 3b-6 under the
Securities Act of 1934, as amended, or may be amended, including statements
regarding, among other items, business strategies, continued growth in markets,
projections, and anticipated trends in business and the industry in which it
operates. The words “believe,” “expect,” “anticipate,” “intends,” “forecast,”
“project,” and similar expressions identify forward-looking statements. These
forward-looking statements are based largely on expectations and are subject to
a number of risks and uncertainties, certain of which are beyond control. The
Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
forward looking statements, including, among others, the following: reduced or
lack of increase in demand for products, competitive pricing pressures. In light
of these risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact transpire or prove to
be accurate. We disclaim any intent or obligation to update “forward looking
statements.”




ITEM
4T. CONTROLS AND PROCEDURES
  Evaluation of Disclosure
Controls and Procedures
  Our
principal executive and financial officer, after evaluating the effectiveness of
our "disclosure controls and procedures" (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered
by this report (the "Evaluation Date"), has concluded that as of the Evaluation
Date, our disclosure controls and procedures were effective to provide
reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act (i) is accumulated and
communicated to our management, including our Chief Executive Officer, as
appropriate to allow timely decisions regarding required disclosure, and (ii) is
recorded, processed, summarized and reported within the time periods specified
in the Commission's rules and forms.
  There has
been no change in our internal control over financial reporting identified
during the period covered by this report which have materially affected or is
likely to materially affect our internal control over financial
reporting.


4


PART II -
OTHER INFORMATION





ITEM 1.
LEGAL PROCEEDINGS.





There
were no legal proceedings during the three months ended June 30,
2009.





ITEM 2.
UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS




Equity
Securities Sold Without Registration





During
the three months ended June 30, 2009, the Company issued 249,500,000 restricted
common shares to debt holders, investors, consultants and advisors in lieu of
cash compensation pursuant to available exemptions pursuant to the Securities
Act of 1933, as amended.




ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.





Not
Applicable.





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





None





ITEM 5.
OTHER INFORMATION.





In April
2009 the Company relocated its offices in the Expo Center, located in the
prestigious North Dallas design district. The Company has leased 52,000 square
feet of office and gallery space and the Expo Center will host gallery events,
charity auctions, retail sales, artistic shows and  be used as a
gathering center for retail in the central Texas region.  The Company
negotiated a three year lease term with payments beginning in September 2009
through December 2009 at $15,000.00 per month.  Monthly payments will
escalate to $22,208.33 for the period January 2010 to August 2012.





On April
6, 2009 the Company entered into a twelve month  consulting agreement
with Big Apple Consulting USA, Inc.  The total cash value of the
consulting agreement is $600,000.00 and will be paid monthly in Artfest common
shares.





In June
2009 the Company secured the licensing rights to the ostrich character, Rhupert,
created by D. Arthur Wilson.  Rhupert has been approved to be the
official logo and D. Arthur Wilson, the official artist, for World Peace
Project.  Art Channel Galleries, owned by Artfest, will fund and
produce four, 30 minute, pilot episodes of Rhupert.  The release of
the children’s book titled, “Little Red Rhupert,” which was written and
illustrated by D. Arthur Wilson, was officially at the Arfest Expo Center in
June at one of the Company’s Sizzling Summer Saturday event in June
2009.





Artfest
agreed on June 19, 2009 to utilize the investment banking services of Delaney
Equity Group, LLC (“Delaney”).  Delaney has secured  a
$5,000,000 equity line (12% Convertible Preferred Stock) , and an investor to
purchase $500,000 of convertible debt.  At the closing, Delaney will
receive 100% warrant coverage for every drawdown by the Company pursuant to a
put notice.  All warrants shall be exercisable for 5 years from the
issuance date, with 50% of the warrants with an exercise price equal to $0.05
per share and 50% of the placement agent's warrants are exercisable at a price
of $0.10 per share. All warrants shall contain certain antidilution provisions,
a piggyback registration right, and a cashless exercise provision.





On June
24, 2009, Artfest entered into a financing arrangement with Sunny Isles Venture,
LLC (the “Investor”).  Pursuant to the terms of an Investment
Agreement, the Investor has agreed to purchase from Artfest 12% Convertible
Preferred Stock from time to time in traunches of a minimum of fifty thousand
($50,000) dollars and a maximum of two hundred thousand ($200,000) dollars up to
an aggregate of five million ($5,000,000) dollars.  Artfest may, in
its sole discretion, deliver a put notice to the Investor which states the
dollar amount which Artfest intends to sell to the Investor.  The
Investor’s obligation to purchase the Convertible Preferred Stock is subject to
certain conditions, including, but not limited to, a minimum bid price
sufficient authorized shares and minimum average trading volume of Artfest’s
Common Stock.





5


The
Company has the option to buyback the preferred stock at any time until February
1, 2010 with a 25% prepayment premium, together with accrued and unpaid
dividends.





The
Investor shall also purchase and assume from a holder of Artfest’s debt, The
Ditto Family Trust, a four hundred fifty-four thousand nine hundred sixty-seven
($454,967) dollar obligation of Artfest (the “Debt”), provided that Artfest
agrees to convert the Debt at the higher of $0.001 or 10% of the lowest closing
bid price for 10 trading days prior to conversion.  As consideration
for such assignment, the Investor has agreed to pay or require Artfest to pay to
The Ditto Family Trust the amount of four hundred fifty-four thousand nine
hundred sixty-seven ($454,967) dollars.








Charity
Sports Distributor Acquisition




On June
30, 2009 the Company completed the acquisition of Charity Sports Distributor,
Inc. (d.b.a. CSD Sports Framing and Memorabilia; “CSD”) which was founded in
1996.  CSD is a vertically integrated Texas based custom framing
company which specializes in the design, production, and distribution of
authentic framed autographed sports and entertainment collectibles and art
pieces.  CSD’s distribution avenues include B2B and B2C sales, charity
fundraising auctions, professional and college sports team’s pro shops,
e-stores, online auctions and a revolutionary in-game silent auction concept
known as Home Game Auction.  CSD’s thirteen (13) year experience in
the professional and college sports marketplace has developed an extensive
client list which consists of hundreds of private charities and over forty (40)
professional and college teams, including the Dallas Cowboys, Washington
Redskins, Oakland Raiders, Houston Rockets, Dallas Mavericks, Cleveland
Cavaliers, Phoenix Suns, Arizona Diamondbacks, Dallas Stars, Ohio State, Texas,
Texas A&M, Oklahoma, Alabama, Georgia, Auburn, Florida State and
UCLA.  Artfest will be in a position to launch the distribution of
CSD’s product line through Art Channel Galleries, the marketing arm and wholly
owned subsidiary of Artfest International, Inc., during the Third Quarter 2009.
The addition of CSD’s product line will complement and expand Artfest’s ongoing
product promotions and special purchase packages that are directed towards
introducing a select number of acclaimed artists to our members.




CSD
recorded revenues in calendar year 2008 of $3.3 million.  CSD will
operate as a wholly owned subsidiary of Artfest, and Artfest will consolidate
results beginning with the Third Quarter 2009.




The
Company believes that with the acquisition of CSD it will result in the
immediate expansion and enhancement of our current product offerings and will
lead to an expansion of the Company’s current audience.  Furthermore
the acquisition will enable the Company to vertically integrate framing and
canvas stretching operations and enable the Company to increase the overall
profitability of our existing product lines.




CSD’s
innovative framing is widely regarded as the premier quality brand in the
autographed memorabilia marketplace, and by teaming with Artfest International,
CSD would posses one of the most expansive product portfolios in the autographed
collectibles industry.









6


Artists
Licensing Agreements




As of
June 30, 2009 the Company has signed Licensing Agreements with 51 artists and
are in various stages of signing Licensing Agreements with an additional 113
artists.




Noteholder
Discussions




During
the quarter ending June 30, 2009 the Company  converted $489,967.00 of
notes into common shares of the Company at an average price of $.10 per
share.





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




(A).  Exhibits.





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





None





(B)  Reports
on Form 8-K.





1.           Filed
Form 8-K on June 30, 2009, the Company announced that it entered into a
financing agreement with Sunny Isles Venture, LLC.






7


SIGNATURES





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




Artfest
      International, Inc.Date: August
      19, 2009
              By:
              /s/ Eddie
      VakserChairman
      and CEO
                (principal
      executive officer and principal financial
  officer)







8


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








EXHIBIT INDEX


Number
                                Description3.1
                                Articles
      of Incorporation [1]3.2
                                Articles
      of Amendment of the Articles of Incorporation [3]3.3
                                Bylaws
      [1]10.1
                                Agreement
      and Plan of Reorganization, Soldnet, Inc. and Artfest, Inc.
      [2]10.2
                                Loan
      Agreement (form) with Promissory Note (form), December, 2005
      [3]31
      **
                                Certifications pursuant to Sarbanes - Oxley Act of
      200232
      **
                                Certifications
      of Officers pursuant to Section 1350, of the Sarbanes - Oxley Act of
      2002





** Filed
Herewith


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


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


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












9