Artfest International, Inc (fka ARTS)

[Mustache_rider]

I couldn’t wait for the Q3 filing, so I read through the 2009 K and the June 2010 Q. Below are the items I thought were worth noting. I am also interested to see how these items change in the September 2010 Q.

June 2010 Q Filing: http://www.sec.gov/Archives/edgar/data/1168738/000121478210000177/artfest10q063010.htm

Picasso
1. If we truly “acquired” this piece of art, then there would have been a subsequent event disclosure within the March 2010 Q or a purchase commitment disclosure within the June 2010 Q.

Dividends
1. It doesn't sound like we are going to get our dividends anytime soon.

a. Directly from the Q2 2010 filing (Financial Notes page F-8): “The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception.”

Balance Sheet
1. Stockholder’s Equity – Shares Authorized versus Issued and Outstanding Shares, 9,995,000,000 and 2,462,953,303 respectively as of June 30.

a. The interesting thing about the increases in authorized shares is that apparently (per the Q page F-7) “the Board of Directors, upon the consent of the shareholders owning a majority of the shares then issued and outstanding, approved a resolution to amend the Articles of Incorporation of the Company to increase the number of authorized shares”

b. It would be interesting to know who the “majority” shareholders were. I could not find the amended Articles of Incorporation on the SEC EDGARS site. Here is the original Articles of Incorporation: http://www.sec.gov/Archives/edgar/data/1168738/000121478208000137/ex3-1.htm


Income Statement
1. MD&A explanations for increase in revenues of 748% and decrease in Net Income of 232% are very vague. Appears to all be attributed to its Charity Sports Distributors, Inc. (“CSD”) subsidiary. Nothing else was provided.

Cash Flows
1. It will be interesting to see if the current trend of using cash inflows from financing activities (primarily our hard earned money) to support our net cash outflows by operating activities continues. During Q2, we had $2.6M cash inflow from financing offset by cash outflows from operations of ($2.4M).


2009 K Filing: http://www.sec.gov/Archives/edgar/data/1168738/000121478210000071/artfest10k123109.htm

This is also worth a good look over.

It was interesting to note their change in independent auditors from Thomas Bauman, CPA to Eugene M. Egeberg, CPA in February of 2008 (Item 8, page 19 and 20). Bauman resigned as their independent auditor due to a financial statement qualification as to the Registrant’s (ARTS) ability to continue as a going concern (i.e.- bankruptcy). Apparently, the financial statements for the fiscal years ended December 31, 2005 and December 31, 2006, and thereafter through January 16, 2008, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified as to audit scope or accounting principles.

As of the June 2010 Q, there were no going concerns noted. These SEC letters and ARTS responses don’t exactly make me warm and fuzzy:
http://www.sec.gov/Archives/edgar/data/1168738/000000000009064499/filename1.pdf
http://www.sec.gov/Archives/edgar/data/1168738/000000000010000468/filename1.pdf
http://www.sec.gov/Archives/edgar/data/1168738/000121478210000020/filename1.htm
http://www.sec.gov/Archives/edgar/data/1168738/000000000010008806/filename1.pdf
http://www.sec.gov/Archives/edgar/data/1168738/000143209310000096/filename1.htm
http://www.sec.gov/Archives/edgar/data/1168738/000000000010015939/filename1.pdf
http://www.sec.gov/Archives/edgar/data/1168738/000000000010024467/filename1.pdf
http://www.sec.gov/Archives/edgar/data/1168738/000000000010037178/filename1.pdf