U.S. SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q





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


For the
quarterly period ended June 30, 2008




Or






TRANSITION REPORT UNDER 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 Small Business Issuer as specified in its charter)




Delaware
            03-0390855(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      employer identification no.)




15851
      Dallas Parkway-Suite 600
              Addison
      TX 75001(Address
      of principal executive offices) (Zip Code)Registrant's
      telephone number, including area code:
              (877)
      278-6672





Indicate
by check mark whether the Issuer:





(1) Has
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):




Yes xNo□





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      Accelerated Filer
            □
            Accelerated
      Filer
            □Non-Accelerated
      Filer
            □
            Smaller
      Reporting Company
            x




(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





66,775,630
shares of the registrant's Common Stock, $.0001 per share, were outstanding as
of June 30, 2008.















Table of
Contents







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
















PART I - FINANCIAL
INFORMATION





ITEM 1.
  FINANCIAL STATEMENTS







PAGEFINANCIAL
      STATEMENTSBalance
      Sheets
            F-2Statements
      of Operations
            F-3Statements
      of Cash Flows
            F-4Notes
      to Financial Statements
            F-5


F-1


ARTFEST
      INTERNATIONAL, INC.BALANCE
      SHEETJUNE
      30th (2007 & 2008)UNAUDITED




ASSETS
            
            
            June
      30, 2008
            
            
            Dec
      31, 2007Current
      AssetsCash
      and cash equivalents
            
            
            $
            10,518
            
            
            $
            315Prepaid
      Expenses
            
            
            
            -
            
            
            
            -Accounts
      Receivable
            
            
            
            351,000
            
            
            
            351,000Total
      Current Assets
            
            
            
            361,518
            
            
            
            351,315Non-Current
      AssetsInventory
            
            
            $
            10,000
            
            
            $
            -Notes
      Receivable
            
            
            
            91,500
            
            
            
            -Intangible
      Asset, net of accumulated amortization
            
            
            
            29,266
            
            
            
            8,000Total
      Non-Current Assets
            
            
            
            130,766
            
            
            
            8,000Property,
      Plant and Equipmentat
      cost, net of accumulated depreciation
            
            
            
            89,413
            
            
            
            75,435TOTAL
      ASSETS
            
            
            $
            581,697
            
            
            $
            434,750LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and Accrued Liabilities
            
            
            $
            420,260
            
            
            $
            159,725Current
      Portion of Notes Payable (Note 8)
            
            
            
            460,873
            
            
            
            226,620Deferred
      Revenue
            
            
            
            351,000
            
            
            
            351,000Rewards
      Payable
            
            
            
            475,361
            
            
            
            473,317Total
      Current Liabilities
            
            
            
            1,707,495
            
            
            
            1,210,662Non-current
      LiabilitiesLoans
      Payable (Note 8)
            
            
            
            784,497
            
            
            
            769,547TOTAL
      LIABILITIES
            
            
            $
            2,491,992
            
            
            $
            1,980,209Stockholders'
      Equity:Common
      Stock - $.001 par value - 250,000,000shares
      authorized, 66,775,630 issued andoutstanding
            
            
            $
            66,776
            
            
            $
            36,231Additional
      paid-in capital
            
            
            
            703,698
            
            
            
            253,243Retained
      earnings (deficit)
            
            
            
            (2,680,768
            )
            
            
            (1,834,933
            )TOTAL
      STOCKHOLDERS EQUITY
            
            
            $
            (1,910,295
            )
            
            $
            (1,545,460
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            
            $
            581,697
            
            
            $
            434,750




F-2


ARTFEST
INTERNATIONAL, INC.


(A
Development Stage Company)


STATEMENTS
OF OPERATIONS


(Unaudited)





Three
      Months EndedJune
      30,
            
            
            Six
      Months Ended June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Revenue
            
            $
            24,724
            
            
            $
            38,000
            
            
            $
            24,736
            
            
            $
            218,143Cost
      of Revenue
            
            
            2,670
            
            
            
            80,225
            
            
            
            15,250
            
            
            
            110,890Gross
      Profit (Loss)
            
            
            22,054
            
            
            
            (42,225
            )
            
            
            9,486
            
            
            
            107,253Operating
      Expenses
            
            
            130,090
            
            
            
            135,924
            
            
            
            849,360
            
            
            
            308,200Net
      Income (Loss) from Operations
            
            
            (108,036
            )
            
            
            (178,150
            )
            
            
            (839,874
            )
            
            
            (200,947
            )Other
      Income (Expense), Net
            
            
            8,078
            
            
            
            92
            
            
            
            (5,961
            )
            
            
            92Net
      Income (Loss)
            
            $
            (99,958
            )
            
            $
            (178,057
            )
            
            $
            (845,834
            )
            
            $
            (200,854
            )Weighted
      average number of common sharesoutstanding
      - basic and fully diluted
            
            
            66,775,630
            
            
            
            28,060,629
            
            
            
            66,775,630
            
            
            
            28,060,629Net
      (Loss) per share - basic and fully diluted
            
            $
            0.001
            
            
            $
            0.006
            
            
            $
            0.013
            
            
            $
            0.007















F-3




ARTFEST
      INTERNATIONAL, INC.
              STATEMENT
      OF CASH FLOWS
              FOR
      THE SIX MONTHS ENDED JUNE 30th (2007 AND 2008)
              UNAUDITEDJune
      30, 2008
            
            
            June
      30, 2007Cash
      Flows From Operating ActivitiesNet
      income (loss)
            
            $
            (845,834
            )
            
            $
            (200,854
            )Adjustments
      to reconcile net income (loss) tonet
      cash (used) provided by operating activities:Increase
      in Depreciation
            
            
            8,251
            
            
            
            2,350Increase
      in Amortization
            
            
            234
            
            
            
            -Increase
      in Inventory
            
            
            (10,000
            )
            
            
            -Increase
      in Rewards Payable
            
            
            -
            
            
            
            -(Increase)
      in Accounts Receivable
            
            
            -
            
            
            
            (351,000
            )Increase
      in Accounts Payable and Accrued Expenses
            
            
            260,535
            
            
            
            20,462Increase
      in Deferred Revenue
            
            
            -
            
            
            
            351,000Increase
      in Prepaid Expenses
            
            
            -
            
            
            
            270Net
      cash (used) by operating activities
            
            
            (586,814
            )
            
            
            (177,772
            )Cash
      Flows From Investing ActivitiesIncrease
      in Intangible Assets
            
            
            (21,500
            )
            
            
            -Decrease
      in Notes Receivables
            
            
            (91,500
            )
            
            
            -Purchase
      of property, plant and equipment
            
            
            (22,228
            )
            
            
            (45,069
            )Net
      cash used in investing activities
            
            
            (135,228
            )
            
            
            (45,069
            )Cash
      Flows From Financing ActivitiesIssuance
      of Common Stock
            
            
            30,545
            
            
            
            -(Increase)
      Decrease in Notes Receivable
            
            
            -
            
            
            
            -Increase
      (Decrease) in Notes Payable
            
            
            234,253
            
            
            
            236,523Increase
      in Loans Payable
            
            
            16,994
            
            
            
            -Increase
      in Retained Earnings
            
            
            -
            
            
            
            -Increase
      in Contributed Capital
            
            
            450,455
            
            
            
            -Net
      cash used in financing activities
            
            
            732,247
            
            
            
            236,523Net
      decrease in cash and cash equivalents
            
            
            10,205
            
            
            
            13,682Cash
      and cash equivalents, Beginning of Period
            
            
            315
            
            
            
            255Cash
      and cash equivalents, June 30
            
            $
            10,518
            
            
            $
            13,938







F-4





ARTFEST
INTERNATIONAL, INC.




June 30,
2008




NOTES TO
FINANCIAL STATEMENTS






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 June 30, 2008.









F-5


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:




Computer
      & Video
            
            $
            3,717Office
      equipment
            
            $
            3,240Proprietary
      software
            
            $
            60,500Furniture
      and Fixtures- Art
            
            $
            78,502Less-accumulated
      depreciation
            
            
            (56,296
            )Total
      PP&E (net of depreciation)
            
            $
            89,663





Total
Depreciation Expense for Jan-Jun 2008 was $8,251.






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.






Total
Amortization Expense for Jan–Jun 2008 was $234.38.






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, 2008.




F-6







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
2008 and 2007.






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, 2008 and 2007
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-7


Income
Taxes




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




Segment
reporting




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




Dividends




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






Recent
pronouncements




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




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




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







F-8


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 $4,172,519 for the period from February
21, 2002 (inception) to June 30, 2008. The future of the Company is dependent
upon its ability to obtain financing and upon future profitable operations from
the development of its new business opportunities. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amount of the classification of liabilities that might
be necessary in the event the Company cannot continue in existence.






Note 4 - Income
taxes




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




F-9


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, 2008, the Company has a net operating loss carryforward of
approximately $4,172,519 for 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
June 30, 2008.






On
November 19, 2002 the Company issued 19,832,000 shares of its $0.001 par value
common stock as founders' shares to acquire 100% of the outstanding shares of
Artfest International, Inc., a Delaware Corporation for a net book value of
$19,832.




As of
December 28, 2007 the Company issued 8,000,000 shares of its $0.001 par value
common stock as partial payment to shareholders of The Art Channel, Inc.
pursuant to an acquisition agreement.   As of December 31, 2007,
the Company’s authorized shares were 40,000,000.




In March
2008, the Company amended its Certificate of Incorporation to increase its
authorized shares to 502,000,000, of which 500,000,000 shares are common stock,
par value $0.001 and 2,000,000 shares are preferred stock, par value
$0.001.   The Company then issued an additional 20,000,000 shares
of common stock to shareholders of The Art Channel, Inc. and 1,500,000 shares of
common stock to Larry D. Ditto pursuant to an acquisition
agreement.




In
May 2008, the Company issued 4,500,000 shares of its $0.001 par value common
stock to Beryl Zyskind for consulting services.




F-10


Note 6 - Warrants and
options




As of
June 30, 2008 and 2007, there were no warrants outstanding; there are 1,600,000
options outstanding to acquire any 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 $784,497 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.




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.







F-11


References
in this document to "us," "we," "the Registrant" or "the Company" refer to
Artfest International, Inc., and its predecessors.
  This
report contains "forward-looking" statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are based on
certain assumptions and describe future plans, strategies and expectations of
the Company. They are generally identifiable by use of the words "believe",
"expect", "intend", "anticipate", "estimate", "project" or similar
expressions.
  These
statements are not guarantees of future performance, events or results and
involve potential risks and uncertainties. Accordingly, actual performance,
events or results may differ materially from such forward-looking statements. We
undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
  Factors
that could cause actual results to differ materially from current expectations
include, but are not limited to, changes in general economic conditions, changes
in interest rates, legislative and regulatory changes, the unavailability of
equity and debt financing, unanticipated costs associated with our potential
acquisitions, expanding a new line of business, ability to meet competition,
loss of existing key personnel, ability to hire and retain future personnel, our
failure to manage our growth effectively and the other risks identified in this
filing or other reports of the Company filed with the U.S. Securities and
Exchange Commission. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. Further information concerning us and our business, including
additional factors that could materially affect our financial results, is
included in our other filings with the U.S. Securities and Exchange
Commission.


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




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 creatings 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 available 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.





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





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.








Results
of Operations





(a)
Revenues





We
generated operating revenues of $24,724 for the three months ended June 30,
2008, as compared to $0 for the same period in 2007.  We had a net
operating loss $109,685 for the three months ended June 30, 2008, as compared to
a net operating loss of $57,995 for the same period in 2007.




We
generated operating revenues of $24,736 for the six months ended June 30, 2008,
as compared to $0 for the same period in 2007.  We had a net operating
loss of $849,114. as compared to a net operating loss of $108,713 for the same
period in 2007.







(b) Costs
and Expenses




We
had $131,739 of selling general and administrative expenses in the three months
ended June 30, 2008 as compared to $57,995 of selling, general and
administrative expenses for the three months ended June 30,
2007.  .





We
had $858,600 of selling general and administrative expenses in the six months
ended June 30, 2008 as compared to $108,713 of selling, general and
administrative expenses for the six months ended June 30, 2007.





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








(c)
Depreciation, Depletion and Amortization




Depreciation
totaled  $5,139 as of June 30, 2008, and  $1,175 in
2007.





(e) Net
Loss





The
company had a net loss of $96,613 and $842,490 for the three months and six
months ended June 30, 2008, respectively compared to a net loss of $57, 995 and
$108, 713 for the three months and six months ended June 30, 2007,
respectively.




-4-


Plan of
Operation





Our
current plan, in summary, as of August 18, 2008, is focused primarily on
corporate and securities law considerations in completing a process of updating
filings with both applicable state and Federal agencies, as needed, including
the SEC, and related efforts. Management believes the success of the business,
potential in the future, needs a stable foundation as a public company. The
first part is compliance with laws and regulations, primarily updating and
keeping current filings with the SEC which we have done, and next establishing
the business as a “trading” entity upon some stock exchange or similar trading
medium. At the same time, it is important to continue core business pursuits,
such as operational improvements, and become a profitable business. We
anticipate obtaining funding to address cash flow needs through private
placements, loans and similar matters. Our plan is subject to many risks. No
assurance of success can be given. We have, as of June, 2008, confirmed terms on
a loan and related arrangements. We may experience additional funding from this
source, with no guarantee, but also are subject to restrictions on obtaining
other funding, and undertaking both corporate level and operations level actions
while the agreement is in place. See Part III, Item 9, Loan Obligation and
Management Restructuring, and other information, contained in the Company Form
10-KSB report for the fiscal year ended December 31, 2004, and subsequent
filings and amendments, if any.








ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





This
information has been omitted, as the Company qualifies as a smaller reporting
company.








ITEM
4T.  CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures







Our
principal executive and financial officers, after evaluating the effectiveness
of our "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this report (the "Evaluation Date"), have concluded that as of the
Evaluation Date, our disclosure controls and procedures were effective to
provide reasonable assurance that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act (i) is accumulated and
communicated to our management, including our Chief Executive Officer, as
appropriate to allow timely decisions regarding required disclosure, and (ii) is
recorded, processed, summarized and reported within the time periods specified
in the Commission's rules and forms. Our auditors identified material
adjustments in the areas of valuation of marketable securities.





There
have been no changes in our internal controls or in other factors that could
affect these controls subsequent to the Evaluation Date.













-5-





PART II - OTHER INFORMATION





ITEM
1. LEGAL PROCEEDINGS.





On July
31, 2008, we agreed to a binding arbitration through the Fresno County Bar
Association in Fresno, California with respect to a dispute between us and our
former attorney, David Kahn, Esq. with respect to his fee for legal services
rendered.








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
June 30, 2008







ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.





None





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





None





ITEM 5.
OTHER INFORMATION.







On June 3, 2008, Mr. Jacob Cohen,
our Chief Operating  Officer resigned.  The duties of the
Chief Operating Officer are currently being performed by our CEO, Mr. Edward
Vakser.







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




Exhibits.





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




Form
8-K




None.





-6-







SIGNATURES





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




Artfest
      International, Inc.Date: August
      18, 2008
            By:
            /s/ Eddie VakserPresident
              (principal
      executive officer and principal financial
  officer)















-7-













ITEM 6. EXHIBITS AND REPORTS 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


















-8-