----

----

**JUNE      30, 2006**

**000-49676**

**ARTFEST      INTERNATIONAL, INC.**

| Delaware                                         |  03-0390855                   |
|--------------------------------------------------|------------------------------------|
| (State                or jurisdiction            | (IRS                Employer       |
| of                incorporation or organization) | Identification                No.) |

|                                                                 |                      |
|----------------------------------------------------------------------|---------------------------|
| 27758                Santa Margarita Parkway, # 281 Mission Viejo CA | 92691                     |
| (Address                of Principal Executive Offices)              | (Zip                Code) |

** 1-888-692-7833**

**None**

**Common      Stock**

----

| PART                I.         | FINANCIAL                INFORMATION                            |
|--------------------------------|---------------------------------------------------------------------------|
|       |                                                                      |
| Item                1.    | Financial                Statements                                       |
|       |                                                                      |
| Item                2.    | Management's                Discussion and Analysis and Plan of Operation |
|       |                                                                      |
| Item                3.    | Controls                and Procedures.                                   |
|       |                                                                      |
| PART                II.        | OTHER                INFORMATION                                          |
|       |                                                                      |
| Item                1.    | Legal                Proceedings                                          |
|       |                                                                      |
| Item                2.    | Unregistered                Sales of Securities and Use of Proceeds       |
|       |                                                                      |
| Item                3.    | Defaults                Upon Senior Securities                            |
|       |                                                                      |
| Item                4.    | Submission                of Matters to a Vote of Security Holders        |
|       |                                                                      |
| Item                5.    | Other                Information                                          |
|       |                                                                      |
| Item                6.    | Exhibits                and Reports on Form 8-K                           |
|       |                                                                      |
| Signatures                     |                                                                      |
|       |                                                                      |
| CERTIFICATIONS                 |                                                                      |

----

**PART      **
**I      - FINANCIAL INFORMATION**

|                                           | PAGE      |
|------------------------------------------------|-----------|
|                                           |      |
|                                           |      |
| ACCOUNTANT'S                  REVIEW REPORT    | F-1       |
|                                           |      |
| FINANCIAL                  STATEMENTS          |      |
|                                           |      |
| Balance                  Sheets                | F-2       |
|                                           |      |
| Statements                  of Operations      | F-3       |
|                                           |      |
| Statements                  of Cash Flows      | F-4       |
|                                           |      |
| Notes                  to Financial Statements | F-5  |
|                                           |      |

----

| To                  the Board of Directors and Stockholders                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|
| Artfest                  International, Inc.                                                                                                  |
| Mission                  Viejo, California                                                                                                    |
|                                                                                                                                          |
| ACCOUNTANT’S                  REVIEW REPORT                                                                                             |
|                                                                                                                                          |
| I                  have reviewed the Balance Sheet of Artfest International Inc. (A                  Development Stage                        |
| Company)                  as of June 30, 2006 and 2005 and the related Statements of Operations,                                              |
| Stockholders’                  Equity, and Cash Flows for the periods then ended in accordance                  with                    |
| Statements                  on Standards for Accounting and Review Services issued by the American                                            |
| Institute                  of Certified Public Accountants. All information included in these                  financial                      |
| statements                  is the representation of the management of Artfest International,                  Inc.                           |
|                                                                                                                                          |
| A                  review consists principally of inquiries of Company personnel and                  analytical procedures                   |
| applied                  to financial data. It is substantially less in scope than an examination                  in accordance              |
| with                  generally accepted auditing standards, the objective of which is                  the                  expression of an |
| opinion                  regarding the financial statements taken as a whole. Accordingly,                  I do not                  express |
| such                  an opinion.                                                                                                             |
|                                                                                                                                          |
| Based                  on my review, I am not aware of any material modifications that                  should be                  made to    |
| the                  accompanying financial statements in order for them to be in conformity                  with generally                  |
| accepted                  accounting principles.                                                                                              |
|                                                                                                                                          |
| The                  accompanying financial statements have been prepared assuming that                  the                  Company         |
| will                  continue as a going concern. As discussed in Note 3 to the financial                  statements, the                   |
| Company                  has had limited operations and has not commenced planned principle                  operations.                      |
| The                  Company’s financial position and operating results raise substantial doubt                  about                  |
| matters                  also are described in Note 3. The financial statements do not include                  any                           |
| adjustments                  that might result from the outcome of this uncertainty.                                                          |
|                                                                                                                                          |

|                                   |
|----------------------------------------|
| Thomas                  Bauman, C.P.A. |
| March 23,                  2007   |

----

|                                                         |       | **June 31,** | ** ** | **December                31,** | ** ** |
|--------------------------------------------------------------|------------|-------------------|------------|---------------------------------|------------|
| ** **                                                   | ** ** | ** **        | **2006**   | ** **                      | ** ** | **2005** |   |
| Current                Assets:                               |       |              |       |                            |       |   |   |
| Cash                                                         |       | $                 | 8,609      |                            | $          | 878 |   |
| Inventory                                                    |       |              | -          |                            |       | 21,410 |   |
| Prepaid                Expenses                              |       |              | 561        |                            |       | -  |   |
|                                                         |       |              |       |                            |       |   |   |
| Total                Current Assets                          |       |              | 9,170      |                            |       | 22,288 |   |
|                                                         |       |              |       |                            |       |   |   |
| Property                and Equipment, at cost less          |       |              |       |                            |       |   |   |
| accumulated                depreciation                      |       |              | 7,475      |                            |       | 21,039 |   |
| Long-Term                Assets                              |       |              | -          |                            |       | 19,895 |   |
|                                                         |       |              |       |                            |       |   |   |
| TOTAL                ASSETS                                  |       |              | 16,645     |                            |       | 63,222 |   |
|                                                         |       |              |       |                            |       |   |   |
|                                                         |       |              |       |                            |       |   |   |
| Current                Liabilities:                          |       |              |       |                            |       |   |   |
| Accounts                Payable and Accrued Liabilities      |       | $                 | 92,052     |                            | $          | 79,811 |   |
| Note                Payable - Current Portion                |       |              | 18,806     |                            |       | 8,929 |   |
| Loans                Payable (Note 11)                       |       |              | 583,982    |                            |       | 527,216 |   |
| Total                Current Liabilities                     |       |              | 694,840    |                            |       | 615,956 |   |
|                                                         |       |              |       |                            |       |   |   |
| Long                Term Liabilities:                        |       |              |       |                            |       |   |   |
| Note                Payable - Long Term                      |       |              | -          |                            |       | 7,610 |   |
|                                                         |       |              |       |                            |       |   |   |
| TOTAL                LIABILITIES                             |       |              | 694,840    |                            |       | 623,566 |   |
|                                                         |       |              |       |                            |       |   |   |
| Stockholders'                Equity:                         |       |              |       |                            |       |   |   |
| Common                Stock - $.00001 par value - 40,000,000 |       |              |       |                            |       |   |   |
| shares                authorized, 27,800,627                 |       |              |       |                            |       |   |   |
| shares                  issued and outstanding               |       |              | 198        |                            |       | 198 |   |
| Additional                Paid-in Capital                    |       |              | 264,490    |                            |       | 224,490 |   |
| Accumulated                deficit                           |       |              | (942,883   | )                               |       | (785,032 | ) |
|                                                         |       |              |       |                            |       |   |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS' EQUITY    |       | $                 | 16,645     |                            | $          | 63,222 |   |
|                                                         |       |              |       |                            |       |   |   |

----

|                                                             |       |       | **For                  the Three ** | ** ** | ** ** | **For                  the Six**  | ** ** |
|------------------------------------------------------------------|------------|------------|------------------------------------------|------------|------------|-----------------------------------|------------|
|                                                             | ** ** | ** ** | **Months                  ended**        | ** ** | ** ** | **Months                  ended** | ** ** |
|                                                             | ** ** | ** ** | **June                  30, **      | ** ** | ** ** | **June                  30,**     |       |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
|                                                             |       |       | **2006**                                 | ** ** | ** ** | **2005**                          | ** ** | ** ** | **2006** | ** ** | ** ** | **2005** |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Revenues                                                         |       | $          | 24,587                                   |       | $          | 36,637                            |       | $ | 11,257 |   | $ | 131,534 |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Cost                  of Revenue                                 |       |       | 36,962                                   |       |       | 13,017                            |       |   | 69,929 |   |   | 21,917 |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Gross                  Profit (Loss)                             |       |       | (12,375                                  | )          |       | 23,620                            |       |   | 21,328 |   |   | 109,617 |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Sales,                  General and Administrative Expenses      |       |       | 72,362                                   |       |       | 130,271                           |       |   | (161,605 | ) |   | 233,514 |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Net                  (Loss) From Operations                      |       |       | (84,737                                  | )          |       | (106,651                          | )          |   | (140,277 | ) |   | (123,897 | ) |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Other                  Income (Expense) , Net (Notes 5 & 12) |       |       | (17,573                             | )          |       | -                                 |       |   | (17,573 | ) |   | (41,505 | ) |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| (Deficit)-                  Development Stage                    |       | $          | (102,310                                 | )          | $          | (106,651                          | )          | $ | (157,850 | ) | $ | (165,402 | ) |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Weighted                  average number of common shares        |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| outstanding                  - basic and fully diluted           |       |       | 27,800,629                               |       |       | 26,168,629                        |       |   | 27,756,629 |   |   | 26,168,629 |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |
| Net                  (Loss) per share - basic and fully diluted  |       | $          | 0                                        |       | $          | 0                                 |       | $ | 0 |   | $ | 0 |   |
|                                                             |       |       |                                     |       |       |                              |       |   |   |   |   |   |   |

----

|                                                        | ** ** | ** ** | **For                  the SixMonths endedJune 30, ** |       |
|-------------------------------------------------------------|------------|------------|------------------------------------------------------------|------------|
|                                                        |       |       | **2006**                                                   | ** ** | ** ** | **2005** |   |
|                                                        |       |       |                                                       |       |   |   |   |
| Cash                  Flows from Operating Activities:      |       |       |                                                       |       |   |   |   |
| Net                  Income (Loss)                          |       | $          | (157,850                                                   | )          | $ | (165,401 | ) |
| Adjustments                  to reconcile net (loss) to     |       |       |                                                       |       |   |   |   |
| net                  cash (used) by operating activities:   |       |       |                                                       |       |   |   |   |
| Depreciation                                                |       |       | 2,350                                                      |       |   | 5,322 |   |
| (Increase)                  Decrease in other assets        |       |       | 21,410                                                     |       |   | (309 | ) |
| Increase                  in loan receivable                |       |       | 995                                                        |       |   | 50,000 |   |
| Increase                  (Decrease) in accounts payable    |       |       | 12,241                                                     |       |   | 30,462 |   |
| Increase                  in prepaid expenses               |       |       | (561                                                  | )          |   | - |   |
| Net                  Cash (Used) by Operating Activities:   |       |       | (121,415                                                   | )          |   | (79,926 | ) |
|                                                        |       |       |                                                       |       |   |   |   |
| Cash                  Flows From Investing Activities:      |       |       |                                                       |       |   |   |   |
| (Purchase                  ) Disposal of Equipment          |       |       | 30,114                                                |       |   | - |   |
| Net                  Cash Used by Investing Activities:     |       |       | 30,114                                                |       |   | - |   |
|                                                        |       |       |                                                       |       |   |   |   |
| Cash                  Flows From Financing Activities:      |       |       |                                                       |       |   |   |   |
|                                                        |       |       |                                                       |       |   |   |   |
| Issuance                  of Common Stock                   |       |       | -                                                          |       |   | - |   |
| Decrease                  in Notes payable                  |       |       | 2267                                                       |       |   | (3,108 | ) |
| Increase                  in loans payable                  |       |       | 56,765                                                     |       |   | 79,788 |   |
| Increase                  in contributed capital            |       |       | 40,000                                                |       |   | - |   |
|                                                        |       |       |                                                       |       |   |   |   |
| Net                  Cash Provided by Financing Activities: |       |       | 99,032                                                     |       |   | 76,680 |   |
|                                                        |       |       |                                                       |       |   |   |   |
| Net                  Increase in Cash                       |       |       | 7731                                                       |       |   | (3,246 | ) |
|                                                        |       |       |                                                       |       |   |   |   |
| Cash                  at Beginning of Period                |       |       | 878                                                        |       |   | (7,268 | ) |
|                                                        |       |       |                                                       |       |   |   |   |
| Cash                  at End of Period                      |       | $          | 8,609                                                      |       | $ | (10,514 | ) |
|                                                        |       |       |                                                       |       |   |   |   |

----

| **Note                  1 - History and organization of the company**                                                                                |
|------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                 |
| The                  Company was organized February 21, 2002 (Date of Inception) under                  the laws                  of the             |
| state                  of Delaware to operate a retailing business through its wholly-owned                  subsidiary.                             |
|                                                                                                                                                 |
| **Note                  2 - Accounting policies and procedures**                                                                                     |
|                                                                                                                                                 |
| Cash                  and cash equivalents                                                                                                           |
| The                  Company maintains a cash balance in a non-interest-bearing account                  that                  currently does        |
| not                  exceed federally insured limits. For the purpose of the statements                  of cash                  flows, all highly  |
| liquid                  investments with an original maturity of three months or less are                  considered to be cash                     |
| equivalents.                  There were no cash equivalents as of June 30, 2006.                                                                    |
|                                                                                                                                                 |
| Fixed                  Assets                                                                                                                        |
| Property                  and equipment are recorded at historical cost. Minor additions                  and                  renewals are          |
| expensed                  in the year incurred. Major additions and renewals are capitalized                  and                  depreciated       |
| over                  their estimated useful lives. Depreciation is calculated using                  the                  straight-line method over |
| the                  estimated useful lives as                  follows:                                                                             |

| Computer                  equipment | 3                  years |
|-------------------------------------|--------------------------|
| Office                  equipment   | 4                  years |

| Office                    equipment              |   |   | 15,928 |   |
|--------------------------------------------------|--------|--------|--------|--------|
| Less-accumulated                    depreciation |        |   | (8,453 | )      |
|                                                  |        | $      | 7,475  |        |

| 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, 2006.                                                                                                          |
|                                                                                                                                          |
| 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 2006 or                  2005.                                           |
|                                                                                                                                                     |
| 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, 2006 or 2005.                                                                               |
|                                                                                                                                                     |
| 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, 2006 and 2005 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.          |
|                                                                                                                                                     |
| 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.                                         |
|                                                                                                                                                  |

| 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 $942,883 for the period from February 21,                  2002                  (inception) to           |
| June                  30, 2006. 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.                       |
| Management                  has plans to seek additional capital through a public offering                  of its                  common stock.     |
| 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.                                                                                                              |

----

| 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, 2006, the Company has a net operating loss carryforward                    of                    approximately      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| $942,883                    for tax purposes, which will be available to offset future taxable                    income.                             |
| This                    carryforward will expire in 2026.                                                                                             |
|                                                                                                                                                  |
| **Note                    5 - Loan Receivable**                                                                                                       |
|                                                                                                                                                  |
| On                    June 23, 2002, the Company loaned $50,000 to an affiliated company.                    The                    note is due       |
| upon                    demand and bears no interest rate (See related party transactions).                    The                    loan was deemed |
| uncollectible                    in 2005 and was written off and charged to other                    expense.                                         |
|                                                                                                                                                  |
| **Note                    6 - Stockholders' Equity**                                                                                                  |
|                                                                                                                                                  |
| The                    Company is currently authorized to issue 40,000,000 shares of                    its $0.00001                    par value     |
| common                    stock.                                                                                                                      |
|                                                                                                                                                  |
| On                    November 19, 2002 the Company issued 19,685,000 shares of its                    .00001 par                    value            |
| common                    stock as founders' shares to acquire 100% of the outstanding                    shares of                    Artfest, Inc., |
| a                    Delaware Corporation for a net book value of $197. Artfest provides                    sales,                    marketing,      |
| financial                    and e-commerce systems to the industries of Arts, Antiques, Collectibles                    and                          |
| Luxury                    Goods. The markets are serviced by artists, dealers, galleries,                    and                    manufacturers of  |
| reproductions                    and luxury goods.                                                                                                    |
|                                                                                                                                                  |
| **Note                    7 - Warrants and options**                                                                                                  |
|                                                                                                                                                  |
| As                    of June 30, 2006 and 2005, there were no warrants or options                    outstanding                    to acquire       |
| any                    additional shares of common stock.                                                                                             |
|                                                                                                                                                  |

| **Note                  8 - Leases**                                                                                                                  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                  |
| On                  March 23, 2003 the Company executed a lease agreement that calls                  for the                  issuance of            |
| Company                  stock to the landlord in exchange for rent. The lease will expire                  five                  years from the      |
| commencement                  date. The terms of the lease call for a base rent of $54,660 per                  year                  for             |
| the                  first two years in exchange for 1,000,000 shares of the Company's                  stock,                  and $72,880           |
| per                  year for 3 through 5. The shares are transferrable at the landlord's                  discretion and will be                     |
| tendered                  upon landlord's completion of leasehold improvements. The lease                  also calls                  for            |
| additional                  rent of 10% of gross sales in excess of $500.000 for years 1 and                  2, and 5%                  of           |
| gross                  sales in excess of $1,457,600 for years 3 through 5.                                                                           |
|                                                                                                                                                  |
| In                  May 2006 the Company terminated its lease agreements and vacated                  the above                  properties.          |
|                                                                                                                                                  |
| **Note                  9 - Related party transactions**                                                                                              |
|                                                                                                                                                  |
| Office                  space and services were provided without charge by the Chief Executive                  Officer.                              |
| Such                  costs are immaterial to the financial statements and, accordingly,                  have                  not been reflected    |
| therein.                                                                                                                                              |
|                                                                                                                                                  |
| 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                  10 - Loans 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                  has been returned to  |
| to                  GMAC for sale. As a result the balance due to GMAC has been classified                  as                  a current liabiliaty. |
|                                                                                                                                                  |

| **Note                  11 - Short term notes payable**                                                                                          |
|--------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                             |
| The                  Company has $377,008 short term notes payable to shareholders.                  The                  notes                  |
| call                  for varying interest rates ranging from 1% to 8% per annum, and                  contain a                  stock          |
| payment                  option payable to the lender's discretion.                                                                              |
|                                                                                                                                             |
| As                  of the report date, the Company is in default on all of its short                  term                  notes payable to    |
| non-shareholder                  investors. Management has not formulated a repayment plan, and                  no                              |
| contingency                  plan has been established in the event that the lenders seek legal                  remedies.                       |
|                                                                                                                                             |
| **Note                  12 - Other Income (Expense), Net**                                                                                       |
|                                                                                                                                             |
| Included                  in this caption is a loan receivable from an affiliated company                  for                  $50,000 that was |
| deemed                  uncollectible and written off to bad debt expense in 2005.                                                               |
|                                                                                                                                             |

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**Evaluation        of Disclosure Controls and Procedures **

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**Equity      Securities Sold Without Registration**

| **Period**             | **Shares              Issued** | **Purpose**                           | **Amount              Received** |
|------------------------|--------------------------------|---------------------------------------|----------------------------------|
|                   |                           |                                  |                             |
| Q1                2005 | 2,100,000                      | Gifts                / Services       | *                                |
| Q2                2005 | *                              | *                                     | *                                |
| Q3                2005 | 50,000                         | Capital                Contribution   | $35,000                          |
| Q4                2005 | 10,000                         | Capital                Contribution   | $15,000                          |
|                   | 40,000                         | Gifts                / Services       | *                                |
|                   |                           |                                  |                             |
|                   |                           |                                  |                             |
| Q1                2006 | 132,000                        | Capital                  Contribution | $40,000                          |
| Q2                2006 | *                              | *                                     | *                                |
| Q3                2006 | 200,000                        | Services                              | *                                |
| Q4                2006 | *                              | *                                     | *                                |

**General      Information**

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|                                        |                                                                                                 |                                              |
|---------------------------------------------|------------------------------------------------------------------------------------------------------|---------------------------------------------------|
|                                        | **Artfest              International, Inc.**                                                         |
|                                   |                                                                                            |                                         |
| Date: March 23,              2007 | By:                                                                                        | /s/ Larry              D.              Ditto |
|                                        |                                                                                                      |
|                                        | President(principal                executive officer and principal financial                officer) |

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

**EXHIBIT      INDEX**

| **Number**                                                                            | **Description**                                                                                                                                                                                                                                                                                                           |
|------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1    3.2    3.3                                            | Articles                of Incorporation [1] Articles                of Amendment of the Articles of Incorporation [3] Bylaws                [1]                                                                                                                                                                          |
| 10.1 10.2                                                                                       | Agreement                and Plan of Reorganization, Soldnet, Inc. and Artfest, Inc.                [2] Loan                Agreement (form) with Promissory Note (form), December, 2005                [3]                                                                                                                         |
|  23.1** 31                ** 32                **       | Consent                  of Thomas Bauman C.P.A., Independent Registered Public                  Accountant Certifications                pursuant to Sarbanes - Oxley Act of 2002  Certifications                of Officers pursuant to Section 1350, of the Sarbanes - Oxley Act                of                2002 |

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