UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q/A


Amendment No. 1





(Mark One)





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


SECURITIES EXCHANGE ACT OF 1934


FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 of incorporation
(IRS Employer Identificationor organization)
No.)





13342 Midway Road, Suite 250Dallas, 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]





As of May 14, 2009, the Registrant had 261,763,003  shares of common stock outstanding.





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





Table of Contents





PART I.
FINANCIAL INFORMATION
PageItem 1.
Financial Statements
F-1ACCOUNTANT'S REVIEW REPORT
F-1FINANCIAL STATEMENTSBalance Sheets
F-2Statements of Operations
F-3Statements of Cash Flows
F-4Notes to Financial Statements
F-5Item 2.
Management's Discussion and Analysis and Plan of Operation
3PART II.
OTHER INFORMATION
11Item 1.
Legal Proceedings
11Item 2.
Unregistered Sales of Securities and Use of Proceeds
11Item 3.
Defaults Upon Senior Securities
11  Item 4.
Controls and Procedures
11Item 5.
Submission of Matters to a Vote of Security Holders
11Item 6.
Other Information
11Item 7.
Exhibits and Reports on Form 8-K
12Signatures

13Exhibit Index

14CERTIFICATIONS




















EUGENE M EGEBERG


CERTIFIED PUBLIC ACCOUNTANT


834 SOUTH MILTON AVENUE


BALTIMORE, MARYLAND  21224


Telephone (410) 218-1711  Fax (410) 374-8121








To the Board of Directors and Stockholders


Artfest International, Inc.


13342 Midway Road


Suite 250


Dallas, TX 75244





Report of Independent Registered Public Accounting Firm





I have audited the Balance Sheet of Artfest International, Inc. (A Development Stage Company) as of December 31, 2008 and  have reviewed the Balance Sheet of Artfest International, Inc for the quarter ended march 31, 2009 and the related Statements of Operations, Stockholders' Equity, and Cash Flows for the periods then ended. These interim financial statements are the responsibility of the company's management.





I conducted the review in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 US 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 principal operations.  The Company's financial position and operating results raise substantial doubt about its ability to continue as a going concern.  Management's plan regarding those matters also are described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.








Eugene M. Egeberg, C.P.A.


May 15, 2009




F-1




ARTFEST INTERNATIONAL, INC.


(A Development Stage Company)


BALANCE SHEETS


(Unaudited)




March 31,


December 31,2009


2008Current Assets:Cash

$
(4,146
)

$
(2196
)Prepaid Expenses


-



-Accounts Receivable


351,000



351,000Total Current Assets


346,854



348,804Non-Current AssetsInventory


555,210Other Assets


130,217



130,217Total Non-current Assets


685,427Property and Equipment, at cost lessaccumulated depreciation


54,221



58,464TOTAL ASSETS


1,086,502



537,485Current Liabilities:Accounts Payable and Accrued Liabilities

$
1,419,443


$
675,840Note Payable - Current Portion (Note 8)


460,873



460,873Deferred Revenue


351,000



351,000Loans Payable (Note 8)


-



475,317Total Current Liabilities


2,231,316



1,963,074Non-current LiabilitiesLoans Payable (Note 8)


690,103



784,497TOTAL LIABILITIES


2,921,419



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, 199,263,003 and 168,763,003


199,263



168,763shares issued and outstanding


-



-Additional Paid-in Capital


733,592



671,198Accumulated deficit


(2,767,772
)


(3,050,047
)TOTAL SHAREHOLDERS EQUITY


(1,834,917
)


(2,210,086
)TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
1,086,502


$
537,485




F-2


ARTFEST INTERNATIONAL, INC.


(A Development Stage Company)


STATEMENT OF OPERATIONS


(Unaudited)





For the ThreeMonths endedMarch 31,2009


2008Revenues

$
469,000


$
12Cost of Revenue


143,054



12,740Gross Profit (Loss)


325,946



(12,728)Sales, General and Administrative Expenses


355,671



726,701Net (Loss) From Operations


(29,725
)


(739,429
)Other Income (Expense) , Net


310,500



(6,448)(Deficit) - Development Stage

$
280,775


$
(745,876
)Weighted average number of common sharesoutstanding - basic and fully diluted


181,929,670



62,275,629Net (Loss) per share - basic and fully diluted

$
0


$
0
















F-3





ARTFEST INTERNATIONAL, INC.


(A Development Stage Company)


STATEMENT OF CASH FLOWS


(Unaudited)




For the ThreeMonths endedMarch 31,2009


2008Cash Flows from Operating Activities:Net Income (Loss)

$
280,775


$
(745,876
)Adjustments to reconcile net (loss) tonet cash (used) by operating activities:Depreciation


4,243



5,089Amortization


-(Increase) Decrease in other assets


-



50Increase in loan receivable


-



-Decrease in Rewards Payable


(54,236)



-Inventory


(555,210)



-Increase in accounts payable and accrued expenses


332,478



420,027Increase in prepaid expenses


-



-Net Cash (Used) by Operating Activities:


8,050



(320,710
)Cash Flows From Investing Activities:Intangible Assets


-



(21,500
)(Purchase ) Disposal of Equipment


-



(2,000
)Net Cash Used by Investing Activities:


-



(23,500
)Cash Flows From Financing Activities:Issuance of Common Stock


30,500



26,045Increase/(Decrease) in Notes payable


(102,894
)


62,753Increase in loans payable


-



6,730Increase in contributed capital


62,394



274,955Net Cash Used by Financing Activities:


(10,000
)


370,483Net Decrease in Cash


(1,950
)


26,274Cash at Beginning of Period


(2,196
)


315Cash at End of Period

$
(4,146
)

$
26,587







F-4





ARTFEST INTERNATIONAL, INC.


(A Development Stage Company)


NOTES TO FINANCIAL STATEMENTS


(Unaudited)








Note 1 - History and organization of the company





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





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





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





Note 2 - Accounting policies and procedures





Cash and cash equivalents





The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of March 31, 2009.





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


(46,371)Total PP&E (net of depreciation)

$
58,464





Total Depreciation Expense for Jan-March 31, 2009 was $4,243.


F-5


Intangible Assets





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





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  March 31, 2009.





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 March 31, 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.





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.


F-7


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 $3,050,047for the period from February 21, 2002 (inception) to March 31, 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.





The provisions for income taxes differ  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 March 31, 2009, the Company has a net operating loss carryforward of approximately $3,050,047for tax purposes, which will be available to offset future taxable income. This carryforward will expire in various years through 2027.





Note 5 - Stockholders' Equity





The Company was authorized to issue 500,000,000 shares of its $0.001 par value common stock and 2,000,000 shares of its $0.001 par value preferred stock as of March 31, 2009.





In February, 2009 the Company issued 12,500,000 restricted common shares to consultants and advisors in lieu of cash compensation.





On March 27, 2009 the Company issued 17,500,000 restricted common shares to a former employee, Jacob D. Cohen, as partial payment on a Convertible Promissory Note, dated June 1, 2008 in the amount of $87,250.00 bearing interest at 10% per annum in lieu of a cash payment.  The shares issued represented a partial principal payment of $43,500.00.





On April 1, 2009 the Company issued 14,500,000 restricted common shares to a former employee, Jacob D. Cohen, as final payment on a Convertible Promissory Note dated June 1, 2008 in the amount of $87,250.00 bearing interest at 10% per annum in lieu of a cash payment. The shares issued represented the final principal payment of $43,750.00 and accrued interest of $7,144.00.


F-8


Note 6 - Warrants and options





As of March 31, 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 Note payable has increased to $190,000.





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





In March of 2009, the company relocated to its new warehouse facility and office and conducted an extensive inventory of its portfolio of domestic and international art and discovered its inventory had been understated by $310,500. The company recorded this inventory adjustment to Other Income for the quarter ended March 31, 2009.


F-9


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





DESCRIPTION OF OUR BUSINESS





Introduction





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





Value Proposition





Art Channel Galleries combines the high margins and universal appeal of artistic reproductions with direct marketing.  Added legitimacy of the Art Channel Network to educate, promote awareness of the arts, entertain and promote product sales. According to Mac Report, a media company that provides a Web-based forum for public and private issuers, the worldwide market for collectibles is worth $120 Billion annually.  With the penetration of the personal computer and the Internet into most nations, this market is predicted to grow at a healthy pace over the next two decades.





In February 2007, the Art Channel officially launched a 2-month test run that amassed over 350 members and experienced gross revenues of over $400,000. According to these numbers, on a per member basis, this translates into $571 per month or $6,857 a year in per member revenues to the Art Channel.





Direct Marketing and Sales & Independent Dealers: This model is centered on an Associate Rewards Referral / Party Plan System modeled after companies like Home Interiors, Tupperware, Pampered Chef and Avon.  This ARTI Virtual Commissions Reward Card System is patent-pending protected because of the new and exciting applications it brings to this direct-sales business model.  New Art Dealers receive special training from the artists themselves and a personalized e-commerce Art Channel Galleries website.





We intend to utilize three (3) sales strategies.





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


-3-


Description of Our Products and Services





We will be careful to set a limiting boundary on anything creative that may not be sold via Artfest. As long as it is creative, of quality and there is demand our creative managers will take it in consideration. Artfest will list museum quality reproductions, originals & collectables.





Quality Reproductions: The Giclée technique was designed to reproduce, and protect rare and valuable pieces of art.  The average person will not easily recognize a Giclée reproduction and original. The Giclée method is used to reproduce Signed and Numbered Limited Editions of Fine Art, and Autographed Limited-Edition Celebrity Art from existing photographs.  Images are generated from high resolution digital scans and printed with archival quality inks onto various substrates including canvas, fine art, and photo-base paper. The Giclée printing process provides better color accuracy than other means of reproduction.





RFID: Fraud is a big problem in the collectables and art community.   Artfest has engaged Prova, Inc. for access of state of the art RFID technology.  The Prova Company enables Artfest to validate reproduction numbers, replace damaged goods, and prove providence.  The relationship with Prova will allow for insurance underwriting on the Company’s goods.





Major products include original pictures, drawings, prints, photographs, and sculptures. Prints include lithographs, Giclées, serigraphs/silk-screens, posters, and etchings. Art dealers may also sell collectibles, books, or artist supplies. Services include framing, delivery, and hanging. Companies may provide appraisals, especially for expensive artwork. High-end dealers may help individuals or museum curators find specific pieces of art or develop collections.





Collectables: Artfest will offer collectables of all kinds from statues to reproductions.  The accelerate offerings of collectables, Artfest has partnered with CSD Sports.





Sports Memorabilia:We will start offering guaranteed authenticity sports memorabilia. We will look to engaging sports personalities and professional players.  Artfest recently entered into a distribution agreement with Celebrity Sports to gain access to sports memorabilia products.





Hero Art:What we call hero art is the artwork of the beloved. Shunned by the "high art" community, many famous and well liked people feel compelled to create. Though not master pieces of epic scale the adoring public would love to have a piece of their hero. Whether a music performer, sports star, business giant, fashion designer, author, actor or television personality, Artfest will be happy to create the distribution.





MyArtfest.com serves as a concierge, a referral service between artists, private collectors, interior designers, retailers, wholesalers, and gallery operators who buy, sell and trade valuable art and home décor. This subscriber service offers e-commerce visibility and convenience.  Subscribers can post items for sale or trade, search for their perfect item, and post information about themselves.  New items will be uploaded regularly and fresh artists and galleries constantly featured so buyers will have reason to return again and again to MyArtfest.com.





The Buyers Awards Program:We appreciate our buyers – and to support our sellers we are offering FREE art incentives to Buyers.  MyArtfest.com provides a gallery of art choices from which the buyer can choose. The procedure for claiming awards is easy and convenient.





Designer Members (Pending) will receive auto-renewed subscription fees that will pay for base services while add-on fees, such as premier placement of an item and attention-getting icons, color and bolding will be charged on an opt-in basis.


-4-


Buyers and sellers will find a simple, one page registration process that takes only a minute to sign up. Although it is not required to register if all they want to do is view listings on this site, the site will encourage them to take advantage of all the other free features that registering has to offer.





Art Investment Programs: Every financial advisor knows that collectables as an asset-class offer the highest risk to reward ratio. As Artfest creates a viable secondary market our newscasters will report on the business of art as auctions, trades and swaps take place. People will want to know how their assets that hang on their wall or in their vault are being traded.





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





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





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





Business Profitability Prospects





Our management believes that we have substantial potential for both short and long term profitability because our management believes that the fine art and autographed limited-edition celebrity collectable concept will offer a valued product for art collectors, art dealers, and fans of sports, movies and music.





With the proliferation of personal computers and Internet access in most nations, our management believes it is likely that the worldwide market for collectibles will grow at a healthy pace over the next two decades.





There are several companies which are experiencing phenomenal success in the art reproduction direct-sales industry.  One of these companies which uses a direct-sales approach has enjoyed $136 million in sales in less than 21 months.  Another company in 1996 sold 66.7% of its ownership for $930,000,000.  These figures are even more impressive considering that our management believes that the artists whose works were sold by these companies are relatively unknown.





The idea of limited-edition signed and numbered fine art and celebrity collectibles creates unlimited opportunities to quickly expand into International markets as well.  International access to the Internet allows us to expand to countries all around the world.  Our website, when completed, will support multiple languages, multiple payment methods used around the world and a global debit card system for commissions.





Our management believes that the art, music and sports collectibles industry as a whole has experienced unprecedented growth over the past two decades and the trend is for even more growth for the future.  Our management further believes that the ever changing and expanding world of fine art and celebrity memorabilia provides a never ending source of new and exciting product offerings.  Our management believes that our fine art and autographed and numbered celebrity collectibles appeal to all age groups, allowing us to maximize our penetration of this expanding market.





STRATEGIC PLAN





Our motive is to build value and increase market penetration with vertically integrated companies and service providers. The strategic acquisitions or “Roll Ups,” is a part of Artfest’s global expansion plan that includes Media, Art, Memorabilia and Distribution companies that will compliment and enhance Artfest's sophisticated business model.


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Direct Marketing and Sales & Independent Dealers: This model is centered on an Associate Rewards Referral / Party Plan System modeled after companies like Home Interiors, Tupperware, Pampered Chef and Avon.  This ARTI Virtual Commissions Reward Card System is patent-pending protected because of the new and exciting applications it brings to this direct-sales business model.  New Art Dealers receive special training from the artists themselves and a personalized e-commerce Art Channel Galleries website.





Internet Driver:This strategy offers Art Channel Associates and Members a state-of-the-art website that is a completely automated and turn-key online business building system that will create unlimited traffic SPAM FREE to the Art Channel Associate and Members websites.  This system uses Artfest’s proprietary technology process that is unmatched in the industry.





Art Channel Network:  Artfest International is in negotiations to set up its own television network which will be referred to as the Art Channel Network.  It will be an additional source of advertising revenue & art sales leveraged from the years of production experience of the management team.





THE MARKET





Total annual sales in the Art Industry: $120 Billion annually.





According to Daniel Gross of MoneyBox Magazine, "Fine art is making huge financial news this week, what with cosmetics-heir-turned-super-collector Ronald Lauder paying $135 million for a Gustav Klimt painting and Sotheby's and Christie's posting gigantic numbers at their Impressionist and Modern art auctions.





Consumer spending and home decorating trends drive demand. The profitability of individual companies depends on effective merchandising and marketing. Large companies have advantages in buying, financing, and marketing. Small companies can compete effectively by offering unique products, providing superior customer service, or serving a local market. Average annual revenue per worker is $200,000.





Art dealers compete with a wide range of retailers, including Internet retailers, auction houses, mass merchandisers, and home decor and framing service shops.





According to Mac Report, a media company that provides a Web-based forum for public and private issuers, the worldwide market for collectibles is worth $120 Billion annually. With the penetration of the personal computer and the Internet into most nations, this market is predicted to grow at a healthy pace over the next two decades.





The art dealer industry includes about 6,000 stores with combined annual revenue of $4 billion. The Thomas Kinkade Company is one of the largest art dealers in the US: most companies have only a single location. The industry is highly fragmented: the top 50 companies hold 30 percent of industry sales.





MARKETING PLAN





Artfest models its distribution strategy similar to Home Interiors Inc., www.homeinteriors.com,However, providing high quality, limited edition, signed and numbered fine art and celebrity endorsed collectibles.  Artfest operates and markets itself to its Members through four distinct sales channels that are associated with the following high quality and reputation orientated brands:





Initial Distribution is through the members of MyArtfest.com.  Four member types are structured with prices and features specific to their needs.





Business members can buy and sell.  They can post an unlimited number of items for durations of 1 to 90 days.  Their subscription-based membership runs for 90 day increments with an automatic renewal by credit card.  Members can opt-out at any time.  Business members are defined as those holding a retail license and a physical and/or Internet presence.





Artist Members can buy and sell.  They can post and unlimited number of items for durations of 1 to 90 days.  Their subscription-based membership runs for 90 day increments with an automatic renewal by credit card.  Members can opt-out at any time.  Artist members are defined as those only selling their own works.





Private Collectors can buy and sell.  There is no registration or subscription fee for these members.  They "pay as they go" for each 90-day posting and a referral fee when they wish to contact a Seller. The per occurrence-per item price is much higher than the subscription rates so private collectors are defined as buyers who primarily want to buy, but will also occasionally sell items that no longer fit in their home or matches their design plan.


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Artfest AUCTIONS – Online Auctions My Artfest TM (www.myartfest.com) is an internet auction website that operates and generates revenue similar to eBay. Through this online revenue medium, galleries, wholesalers, artists, dealers, and private collectors have an art focused venue to auction their fine art and collectibles.





Artfest also intends to operate and manage a full-scale television network which will broadcast to over 40,000,000 households via satellite and cable, full power and low power distribution, art and other creative related programming. It is also intended that this television medium, which will be referred to as the Art Channel Network, will be used as an additional premier marketing tool to market and sell Artfest’s products thus creating additional market share for the Company’s products.





Artfest NETWORKS – National TV Syndication and Art Channel Art Channel NetworkTM (www.artchannel.tv) provides a range of multi-cultural programming including artist documentaries, live paintings, artist collections, artist interviews, live concerts and other art centric content that is available online and that is syndicated to 20 million viewers in 218 independent TV markets nationwide. Artfest is working towards broadcasting its content via IP TV online and acquiring larger slivers of satellite time and such so that it can eventually broadcast art centric content 24 hours a day, 7 days a week realizing an Art Channel that is similar to the History Channel, Home & Garden Channel, etc.





The Art Channel will be yet another division of Artfest. We will capitalize upon our management experience in broadcasting and production. We already have content available and being in the sector of art/creativity, we will have endless subject matter. We have the ability to inexpensively have the ability to convert such content into valuable and entertaining shows.





We will feature short documentaries about movements in all aspects of the human drive to create from the pre-historic to the contemporary.





Artists who have signed on to Artfest will be featured on the Art Channel. This will allow for additional content, artist branding and a push for our members so they can show legitimacy as well as stir demand for the creative enterprise of each talent.





Being a full television station we will of course garner another revenue stream of those who wish to target the art consuming demographic through advertising. The larger the reach and better the content the more we can charge for add time.





Infomercials: The main revenue driver for Art Channel will be to feature contracted artists and their creations. Infomercials are inexpensive to produce and will drive a large portion of revenues.





Partnerships/Auctions: Having live TV capabilities give us the ability to have auctions and partnerships with auction houses, art dealers, antique dealers and private sellers. It will also be a prime place to showcase our artists.





Artfest DIRECT – Direct-Sales Model Art Channel GalleriesTM (www.artchannelgalleries.com) is a wholly owned subsidiary of Artfest functioning as a direct-sales proprietary self-replicating e-commerce venue. Membership is free and includes a member branded, direct-sales e-commerce website having full back office support including a merchant account, just-in-time inventory, and fulfillment. Fine art is available in high quality and popular formats including Giclée Lithography, and Serigraph.


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Artfest GALLERIES – Brick and Mortar Galleries and Celebrity Events Artfest GalleriesTM are brick and mortar galleries that showcase fine art and collectibles in a traditional gallery setting. On an ongoing basis, Artfest will have luncheons, and weekend gala’s locally in Dallas, Texas. Artfest will also showcase new artists, special exhibits, and celebrity events in different markets internationally all with the mindset of attracting new Members to www.artchannelgalleries.com.





Artfest plans to leverage the many diverse skills and marketing opportunities that present themselves.  Since Artfest has a multi-dimensional sales platform and product line there will be an appearance of complication. They will add synergies, positive feedback loops and diversify revenues. It will be our job here to simplify and give an orderly account on how best to proceed.





In all aspects of business we will seek to widen and deepen our economic moat.  By leveraging our strengths in multiple lines of business we will create a fully diversified art and collectables company. Below are tactics that we will use to increase market dominance, diversify revenue streams and expand internationally.





Artist Lockdown: Success breeds success and as we reach a tipping point more artists will see others have been successful with our program.  They will start to seek us out.  Most artists struggle to make any kind of living.  We offer a program where they can take control of their destiny and find the rewards of their creative genius.  As first to market we will be able to be first in the land rush of artists, affording us the most liked and top selling artists. Once we have them and they are receiving payment very few leave. They will tell their artists friends and word spreads throughout this small community quickly.





Direct Artist Education: Artists now have a vested interest to educate and help the members sell. At our Galleries the artists themselves (with our help) will teach and instruct members on the qualities, motivations and expiations to the art. Selling art is telling a story. Who better to tell the story then the artist? This also has many effects as the members then build an emotional connection to not just the art but the artist themselves.





International expansion: It is the goal of Artfest to expand globally. As of now we already have by signing some of the hottest Russian artists and are beginning to market in Moscow. However our intention is to have a true global company with the majority of sales outside the US. Art is the only median that breaks through the language barrier. We will continue to exploit our Russian and European sales and the focus our expansion on China, the United Kingdom and South America.





OUR SALES CHANNELS AND ASSOCIATED COMPANY BRANDS





The Company operates and markets itself to our Associate Members through four distinct sales channels which are associated with the following high quality and reputation orientated brands:





Artfest DIRECT – Direct-Sales Model





Art Channel GalleriesTM (www.artchannelgalleries.com),our wholly owned subsidiary, is our direct-sales proprietary Internet-based company where Associate Members can buy, sell, and trade limited edition signed and numbered fine art and collectibles.  Membership is free and Associate Members will be able to create their own website which will bear our brand name.  People who become Associate Members will have full support from us; including help setting up their own website, utilizing our software which allows the Associate Member to utilize a global debit card system, and place and fulfill orders for limited edition signed and numbered fine art and collectibles from customers.  Fine art is available in high quality and popular formats including Giclée, lithography, and serigraph, which uses a stencil to create sharp lines upon the medium.


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Artfest NETWORKS – National TV Syndication and Art Channel





Art Channel NetworkTM (www.artchannel.tv), our wholly owned subsidiary,provides a range of multi-cultural programming including artist documentaries, live paintings, artist collections, artist interviews, live concerts and other art centric content which is available online and which is syndicated to twenty million viewers in 218 independent television market nation-wide.  We are working towards broadcasting our content via Internet Protocol television (“IPTV”) online and acquiring larger slivers of satellite time so that we can eventually broadcast art centric content 24 hours per day, 7 days per week, creating an Art Channel Network which is similar to the History Channel, Home & Garden Channel, etc.





Artfest GALLERIES – Brick and Mortar Galleries and Celebrity Events





Artfest GalleriesTMcurrently consists of one brick and mortar gallery which showcases fine art and collectibles in a traditional gallery setting. On an ongoing basis, we will have luncheons and weekend gala’s locally in Dallas, Texas. We anticipate that we will soon open additional brick and mortar galleries to expand Artfest GalleriesTM.  We will also showcase new artists, special exhibits, and celebrity events in different markets in the United States and internationally in order to attract new Associate Members to www.artchannelgalleries.com.





Artfest AUCTIONS – Online Auctions





My Artfest TM (www.myartfest.com)is an internet auction website which operates and generates revenue similar to eBayTM. Through this online revenue medium, galleries, wholesalers, artists, dealers, and private collectors have an art-focused website to auction their fine art and collectibles.





Results of Operations





(a) Revenues





The Company generated operating revenues of $469,000 for the three months ended March 31, 2009 and recorded a net profit of $280,775. Operating revenues for the quarter ended March 31, 2008 were $12 with an operating loss of $12,728.





(b) Costs and Expenses





Selling, General and Administrative expenses of $355,671 increased in the subject fiscal quarter compared to $726,701 for the year preceding. The increase is primarily due to the increase in salary accrual and interest on the notes payable.





(c) Depreciation, Depletion and Amortization





Depreciation totaled $4,243 as of March 31, 2009 compared to $5,089 in 2008.





(e) Net Loss





The company had a net profit of $280,775 for the three months ended March 31, 2009 compared to a net loss of $745,876 for the prior year three month period. The decrease in net loss is the result of decreased operating costs.


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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.”

















































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PART II - OTHER INFORMATION




ITEM 1.LEGAL PROCEEDINGS.





There were no legal proceedings during the three months ended March 31, 2009.





ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS





Equity Securities Sold Without Registration





There were no securities issued without registration during the three months ended March 31, 2009





ITEM 3.DEFAULTS UPON SENIOR SECURITIES.





Not Applicable.





ITEM 4. CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures —The Company has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as definedin Rule 13a-15(e) under the Securities and Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer, who also serves as the Company’s Chief Financial Officer,concluded that our disclosure controls and procedures are effective as of March 31, 2009 in all material respects in (a) causing information required to be disclosed by us in reports thatwe file or submit under the Securities Exchange Act of 1934 to be recorded, processed, summarized and reported within the time periods specified in the Securities and ExchangeCommission’s rules and forms and (b) causing such information to be accumulated and communicated to our management as appropriate to allow timely decisions regarding requireddisclosure.





Changes in Internal Control of Financial Reporting— There have been no changes in our internal control over financial reportingthat occurred during the quarter ended March 31,2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





ITEM 5.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None





ITEM 6.OTHER INFORMATION.





Proposed Charity Sports Distributor Acquisition





In February 2009 the Company entered into a Letter of Intent to acquire Charity Sports Distributor, Inc. (d.b.a. CSD Sports Framing and Memorabilia) 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.





The Company expects to complete the acquisition during the Second Quarter of 2009 and 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 Second Quarter 2009. The addition of CSD’s product line in the Second Quarter would compliment and expand the Company’s ongoing product promotions and special purchase packages that are directed towards introducing a select number of acclaimed artists to our members. Presently, the Company is reviewing several financing options in order to complete this synergistic acquisition as efficiently as possible in light of the Company having completed its required due diligence.





CSD recorded revenues in calendar year 2008 of $3.3 million. Upon closing, CSD will operate as a wholly owned subsidiary of Artfest International, Inc.





The Company believes that the acquisition of CSD 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 joining teaming with Artfest International, CSD would posses one of the most expansive product portfolios in the autographed collectibles industry.


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Artists Licensing Agreements





As of March 31, 2009, the Company has signed Licensing Agreements with 40 artists and is in various stages of signing Licensing Agreements with an additional 215 artists.





Noteholder Discussions





During the quarter ending March 31, 2009 the Company has initiated discussions to convert approximately $700,000 of notes into common shares of the Company at an average price of $.10 per share.





ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.





Exhibits.





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





None




























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SIGNATURES





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





Artfest International, Inc.Date: September 30, 2009
By:
/s/ Eddie VakserChairman and CEO

(principal executive officer and principal financial officer)










































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ITEM 6. EXHIBITS ANDREPORTS ON FORM 8-K.








EXHIBIT INDEX





Number
Description3.1



3.2



3.3
Articles of Incorporation [1]



Articles of Amendment of the Articles of Incorporation [3]



Bylaws [1]10.1



10.2
Agreement and Plan of Reorganization, Soldnet, Inc. and Artfest, Inc. [2]



Loan Agreement (form) with Promissory Note (form), December, 2005 [3]31 **



32 **
Certifications pursuant to Sarbanes - Oxley Act of 2002



Certifications of Officers pursuant to Section 1350, of the Sarbanes - Oxley Act of 2002


** Filed Herewith


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


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


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










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