UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB





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





For
      the fiscal year endedSeptember 30, 2007





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





For
      the transition period from _______
      to _______





Commission
      File No.333-141201





V2K
      International, Inc.


(Name
      of
      small business issuer in its charter)





Colorado
            20-5614030(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





13949
                West Colfax Avenue, Suite 250, Lakewood, Colorado
            80401(Address
                of principal executive offices)
            (Zip
                Code)





Issuer’s
      telephone number: (303)
      202-1120





Securities
                registered under Section 12(b) of the Exchange Act:
            NoneSecurities
                registered under Section 12(g) of the Exchange Act:
            None





Check
      whether the issuer is not required
      to file reports pursuant to Section 13 or 15(d) of the Exchange
      Act. ̈





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.YesýNo ̈





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.  ý





Indicate
      by check mark whether the registrant is a shell company.  Yes ̈Noý





State
      issuer’s revenues for its most recent fiscal year: $8,335,583.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days:  $3,249,549.61 as of December
      17,
      2007





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date:  31,167,336 shares of common
      stock as
      of December 17, 2007





Transitional
      Small Business Disclosure Format:  Yes ̈Noý





SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
      annual report includes “forward-looking statements.”  All statements
      other than statements of historical facts included or incorporated by reference
      in this report, including, without limitation, statements regarding our future
      financial position, business strategy, budgets, projected costs and plans and
      objectives of management for future operations, are forward-looking
      statements.  In addition, forward-looking statements generally can be
      identified by the use of forward-looking terminology such as “may,” “will,”
“expect,” “intend,” “project,” “estimate,” “anticipate,” “believe,” or
“continue” or the negative thereof or variations thereon or similar
      terminology.  Although we believe that the expectations reflected in
      such forward-looking statements are reasonable, we cannot give any assurance
      that such expectations will prove to have been correct.  Important
      factors that could cause actual results to differ materially from our
      expectations (“Cautionary Statements”) include, but are not limited
      to:





·
            our
                ability to generate sufficient capital to complete planned business
                operations;


·
            the
                lack of liquidity of our common
                stock;


·
            the
                availability of capital;


·
            the
                strength and financial resources of our
                competitors;


·
            general
                economic conditions; and


·
            the
                securities or capital markets and other factors disclosed under
                “Management’s Discussion and Analysis or Plan of Operation,” “Business”
                and elsewhere in this report.





All
      subsequent written and oral forward-looking statements attributable to us,
      or
      persons acting on our behalf, are expressly qualified in their entirety by
      the
      cautionary statements.  We assume no duty to update or revise our
      forward-looking statements based on changes in internal estimates or
      expectations or otherwise.


2


V2K
      INTERNATIONAL, INC.





FORM
      10-KSB


FOR
      THE FISCAL YEAR ENDED


SEPTEMBER
      30, 2007





INDEX





PagePART
                IItem
                1.
            Description
                of Business
            4Item
                2.
            Description
                of Property
            15Item
                3.
            Legal
                Proceedings
            15Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            15PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities
            16Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            16Item
                7.
            Financial
                Statements
            23Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            23Item
                8A.
            Controls
                and Procedures
            23Item
                8B.
            Other
                Information
            23PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act
            24Item
                10.
            Executive
                Compensation
            26Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            29Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            31Item
                13.
            Exhibits
            32Item
                14.
            Principal
                Accountant Fees and Services
            33





3


PART
      I





Item
      1.               Description
      of Business





Overview





We
      were
      incorporated on March 13, 2006 in the State of Colorado.  On April 1,
      2006, in a share for share exchange, we acquired all of the issued and
      outstanding shares of V2K Window Fashions, Inc., a company incorporated in
      Colorado on July 24, 1996, and V2K Manufacturing, Inc., a company incorporated
      in Colorado on September 21, 1994.  On July 1, 2006, we transferred
      the software and our software development team into a separate entity named
      V2K
      Technology, Inc., a wholly-owned subsidiary and a Colorado
      corporation.  On April 6, 2007, we organized Marketing Source
      International LLC, a Colorado limited liability company.





Through
      our wholly-owned subsidiaries, V2K Window Fashions, Inc., V2K Technology, Inc.,
      and V2K Manufacturing, Inc., we sell and support franchises in the residential
      and commercial window fashion industry, develop and license proprietary software
      that allows users to decorate windows for both residential and commercial
      customers, and act as the primary supplier of soft window treatments to our
      franchisees by managing strategic alliances with outside
      vendors.  Marketing Source International LLC will endeavor to generate
      revenues by acting as a product development and sales agent for overseas window
      covering manufacturers.  As of the date of this filing, Marketing
      Source International LLC has engaged in only preliminary discussions with
      overseas window covering manufacturing sources.





Our
      current emphasis is in window fashions and accessories.  Our
      subsidiary, V2K Window Fashions, Inc. (“V2K Window Fashions”), sells and
      supports franchises in the window fashion industry.  We began selling
      franchises in March 1997.  Our first franchisee started operations in
      August 1997.  After selling several franchises, we halted our
      franchise sales activity while we refined our business plan and secured outside
      financing.  We began aggressively developing the franchise business
      model in November 2001, at which point we had 9 franchises.  As of
      September 30, 2007, we had 182 franchises, operating in thirty-nine states,
      two
      Canadian provinces and Aruba.





Using
      our
      proprietary software developed at V2K Technology, Inc. (“V2K Technology”), our
      franchisees sell window fashions of all kinds to both commercial and residential
      customers.  All sales orders made by our franchisees are sent to us
      for fulfillment.  Another subsidiary, V2K Manufacturing, Inc. (“V2K
      Manufacturing”), manages our strategic alliances with “soft” window fashion
      vendors, who manufacture fabric treatments, such as drapes and
      curtains.  “Hard” goods, such as blinds, cellular shades, and
      shutters, are sourced to third party vendors.  All items are shipped
      directly from the manufacturer or vendor to the franchisee.





We
      intend
      to become the dominant company in the window décor and accessory
      market.  We plan to accomplish this goal by:





·
            introducing
                our exclusive, three-dimensional proprietary software technology
                into the
                industry’s sales channel and supply
                chain;


·
            growing
                the business aggressively through the franchise business model and
                corporate license agreements;


·
            controlling
                the industry’s distribution channel;
                and


·
            acquiring
                hard product manufacturing capabilities to become vertically
                integrated.





Our
      long-term vision is to capture the majority of the home décor arena using our
      scalable, three-dimensional, graphic technology, allowing our sources of
      distribution to bring unique general economies of scale to flooring, wall
      coverings, art, and accessory furnishings, among others.  In addition,
      we have license opportunities in related fields, such as the casement window
      industry, paint industry, and other industries in the building and design
      trade.





Our
      corporate offices, which include V2K International and all its subsidiaries,
      are
      located at 13949 West Colfax Avenue, Suite 250, Lakewood, Colorado 80401, and
      our telephone number is (303) 202-1120.





4




Our
      Proprietary Software





We
      have
      developed proprietary software that enables the user to decorate interiors
      of
      homes and other buildings on a computer screen.  By using the same
      type of graphics engine utilized by computer games, the user “sees” a
      three-dimensional image of a room, drawn to scale, on the computer
      screen.  Window coverings and accessories can be placed in the room,
      allowing the user to see the end result of the decorating
      effort.  Moreover, our software prices the items and prints the
      necessary purchase orders.





As
      our
      current emphasis is in window fashions, the software has been customized to
      enable the user to:





·
            design
                virtually any window covering style to scale on a computer or digital
                TV
                screen;


·
            adjust
                or redraw the window covering;


·
            calculate
                the price of the window covering immediately;
                and


·
            print
                a customer sales order for the window covering, as well as purchase
                orders
                for the vendors, production orders for the workroom, and installation
                instructions for the installer.





We
      believe that our software is unique and provides users with two distinct
      advantages:





·
            Customers
                can see what the window coverings will look like on their windows
                before
                they buy.  A sales agent can stay with the customer, showing the
                customer exactly what the window treatment will look like, to scale,
                and
                how much it will cost, until the customer finds a satisfactory style
                and a
                price.


·
            The
                time-consuming calculation and paperwork commonly associated with
                the
                window covering business has been eliminated.  With one
                keystroke and no additional data entry, the sales agent can create
                the
                purchase orders for the vendors and the production order for the
                workroom.





We
      plan
      to develop a web-based version of the software that will allow customers to
      design their own window coverings on the Internet, and a kiosk version of our
      technology to be used in big box stores.  We also plan to expand the
      existing software to provide a variety of interior and exterior design
      functions.  We have not established any timetables for these
      plans.





Current
      Application of Software





Franchisees
      go into the homes or businesses of prospective customers equipped with a laptop
      computer.  In their vehicles are samples of fabrics that we
      offer.  After measuring the windows and entering the data into the
      computer, the franchisee can then put the whole room, including the ceiling,
      floor, windows, and walls to scale in the computer.  A window library
      resides in the software containing almost any shape or style of window that
      exists.  The franchisee may then enter the colors and texture of the
      walls, floor and ceiling, as well as show the room under a variety of lighting
      conditions.





The
      franchisee then begins to decorate the window electronically on the screen
      in
      the desired style specified by the customer.  The software contains a
      fabric library that the franchisee can retrieve to show on the window
      treatment.  While the windows are being decorated on the screen, the
      software computes the sales price of the treatment, gross margin, and percent
      of
      profit to the franchisee.  The customer can know immediately the sales
      price of each window treatment and the order as a whole.  The
      franchisee can see the margins and percent of profit and adjust the sales price
      down if necessary in order to get the sale.





Once
      the
      customer sees a design and price that is acceptable, the franchisee can bring
      in
      an actual sample of the fabric for the customer to see and touch.  The
      software generates a sales order for the customer to sign.  The
      franchisee generally collects 50% of the total purchase price as a
      deposit.  V2K offers 3-, 6- and 12-month, no-payment, deferred
      interest consumer financing plans through a national financial
      institution.  We receive from the national financial institution an
      amount agreed upon by the customer (gross financed) less a financing cost of
      approximately 8%.  We then deduct this financing cost from the amount
      sent to the franchisee plus a small administrative fee of up to
      1%.  Administrative fees that we earned for the years ended September
      30, 2007 and




5
 
 2006,
        were approximately $300 in each year, on amounts financed of $240,000 and
        $410,000, respectively. We do not guarantee any financing of the
        franchisees.





With
      an
      order in hand, the franchisee can send the order to us
      electronically.  One of our product specialists then reviews the order
      to make sure it conforms to the product being sold, and verifies the
      pricing.  Upon approval by a product specialist, the order is then
      broken down by vendor and the materials are ordered.  The vendor then
      processes the order and ships the finished products directly to the
      franchisee.  Upon receipt of the finished goods, the franchisee
      arranges for third party installation at the customer’s home or
      office.





The
      Interior Decorating Market





The
      U.S.
      market for interior décor, including window fashions, is fragmented in terms of
      competition and established distribution channels.  For example,
      according to a market research report, Window Treatments and Wallcoverings,
      by
      Catalina Research, published January 1, 2004, soft product window fashion sales
      were distributed as follows:


·
            discount
                or mass merchandising department stores –
27%


·
            conventional
                and national chain department stores –
10.8%


·
            window
                treatment stores – 15.3%


·
            warehouse
                clubs – 9.5%


·
            electronic,
                mail order and direct selling retailers –
6.4%


·
            other
                home furnishing stores – 6.3%


·
            home
                centers, other building material dealers –
6.2%


·
            specialty
                floor covering retailers – 4.5%


·
            family
                clothing stores – 4.3%


·
            general
                merchandisers – 2.6%


·
            paint
                and wallpaper stores – 2.1%


·
            furniture
                stores – 1.5%


·
            hardware
                stores – 0.9%


·
            piece
                goods stores – 0.8%


·
            other
                retailers – 1.8%





This
      fragmentation has limited the implementation of technology as a competitive
      component in the window fashion industry.  The industry is not
      automated at the point of sale and industry participants have, up to now, relied
      on antiquated manual systems for selling and administrating window fashions,
      resulting in quality control errors and higher operating costs.





Typically,
      a sales agent, decorator, or designer goes to a potential customer’s home and
      attempts to sketch or draw a treatment in which the customer is
      interested.  In the case of “hard” treatments involving non-fabric
      items, the agent uses a yellow pad and calculator to provide the customer an
      approximate price.  This is a long and tedious process.  If
      the customer objects to the price or wants to explore other alternatives, a
      different treatment is selected and the pricing process begins
      anew.  In the case of “soft” treatments involving the use of fabric,
      the agent will most likely have to meet with the manager of a workroom in order
      to calculate yardage, width cuts, repeats, and a variety of other variables,
      before he or she can get back to the customer with a price.  This
      process may take as many as 3 to 5 days.  If the customer objects to
      the price, the agent must either discount the price or start the entire process
      over again.  Once the customer decides on a treatment, the agent will
      literally spend hours writing purchase orders for the vendors, and in the case
      of soft treatments, production orders for the workroom.  It is
      inevitable that mistakes are made along the way.





Franchise
      and Licensing Operations





We
      do not
      sell window fashions directly to the customer.  Instead, we have
      chosen to grow our business by selling franchise and license
      agreements.





We
      started selling franchises in March 1997.  As of September 30, 2007,
      we had 182 franchises, operating in 39 states, the Canadian provinces of Alberta
      and Manitoba, and Aruba.  Entrepreneur magazine rated us 50th in




6
 
 its
        Top
        101 Homebased Franchises 2006 Rankings and 176th in its Franchise 500 2007
        Rankings.  Potential investors should not conclude from this preceding
        statement that the magazine is actively endorsing or promoting our
        company.





We
      sell
      franchise units based on a minimum territory size of 30,000
      households.  Franchisees may purchase one or more additional areas of
      primary responsibility if they are not in default under their franchise
      agreements, if the additional areas are available, and if we
      approve.  Additional areas may have more or less than 30,000
      households.  We will determine the fee for each additional area at the
      time of purchase, but it will be less than the initial franchise
      fee.  As of the date of this report, the current fee for each
      additional area is $1.05 per household, but we may change this fee at any
      time.





We
      also
      make available a Small Market Franchise, based on a territory size of up to
      15,000 households, in sparsely populated areas where a territory of 30,000
      households would be difficult to cover because of the distances
      involved.





We
      currently charge a franchise fee of $59,900 ($39,900 for a Small Market
      Franchise) for which the franchisee receives the following:


·
            a
                laptop computer, portable printer, and carrying
                case


·
            V2K’s
                proprietary software, including an exclusive price management
                program


·
            non-proprietary
                software


·
            samples
                of fabric, hard products and decorative
                hardware


·
            starter
                set of printed materials, including business cards, stationery, and
                promotional materials


·
            training
                manual, policy and procedure manual and marketing kit
                and


·
            the
                exclusive right to advertise in a designated
                area.





We
      also
      provide basic training for up to two persons for each franchise.  We
      reimburse the franchisee for travel expenses for one person (up to $300) and
      pay
      lodging expenses for one person to attend the training as part of the franchise
      fee.  The franchisee is liable for meals, travel, and lodging expenses
      for any additional person(s).





In
      addition to the franchise fee, we require franchisees to pay a non-refundable
      continuing royalty based on a percentage of the franchise’s annual gross sales
      in each franchise year, according to the following schedule:


·
            first
                $200,000 of gross sales – 8%


·
            next
                $100,000 of gross sales – 7%


·
            amount
                over $300,000 of gross sales – 4%





The
      first
      franchise year commences on the first day of the first full month following
      the
      franchisee’s satisfactory completion of basic training or on any other date we
      may designate.  Each subsequent one-year period is another franchise
      year.





The
      monthly minimum royalty fee in the first franchise year is $250/month,
      $500/month in the second franchise year, and $1,000/month in each franchise
      year
      thereafter.  In the case of a Small Market Franchise, the monthly
      minimum royalty fee is $125/month in the first year, $250/month in the second
      year, and $500/month in each year thereafter.





In
      addition, we require franchisees to pay us the following:





Type
                of Fee or Expense
            Amount
            Due
                Date
            RemarksNational/Regional/Local
                Advertising Fund1
            2%
                of total gross sales, which percentage may be increased by us to
                up
                to
            Payable
                every 30 days
            We
                and/or our contractors administer the Fund for the benefit of our
                system.  1
          These
          fees are imposed by and payable to us.  These fees are
          non-refundable.  Late payment interest of 18% may begin after the due
          date.  We may impose a late fee of $25.00 if the franchisee does not
          submit reports to us within 3 days of the due date.
  7
 
  Type
                    of Fee or Expense
                Amount
                Due
                    Date
                Remarks5%
                  of gross sales; subject to minimum monthly fees2
 Showroom
                    participation1
                Up
                    to $150 per month
                Monthly
                    as billed
                Note
                    3Central
                    telephone service1
                Varies4
                Monthly
                    as billed
                If
                    the franchise is located in a central telephone service area,
                    as
                    designated by us, the franchise must pay its proportionate share
                    of the
                    costs of maintaining the service.4Basic
                    training5
                Varies
                    – We estimate that the cost of travel, lodging and meals for each
                    person
                    attending Basic Training will range from $200 to $1,200.  The
                    actual cost for each person may be higher or lower depending
                    upon the
                    distance traveled, and the meals and lodging selected.
                As
                    incurred
                No
                    training fee is charged for up to two persons.6  The
                    training fee for
                    additional persons will be determined by us.  We reimburse the
                    franchisee for travel for one person (up to $300), and for lodging
                    expenses for one attendee.  The franchisee pays the cost of
                    meals for one attendee and pays all travel, lodging and meals
                    expenses for
                    any other attendees.Mandatory
                    meetings and additional mandatory training5
                Varies
                    – We estimate that the cost per person for travel, lodging and
                    meals to
                    attend a one-day meeting will be $20 to $600.  The actual cost
                    for each person may be higher
                As
                    incurred
                No
                    more than 1 mandatory meeting/training program will be scheduled
                    each
                    year.  No attendance fee is charged by us, but the franchisee
                    pays the cost of travel, lodging and meals.7
  2
            The
            Minimum National/Regional/Local Advertising Fund Fees are $62.50 per
            month in
            the first year, $125 per month in the second year, and $250 per month
            thereafter
            (including all months in any renewal terms); except if the franchisee
            qualifies
            for, and pays, the Small Market Franchise fee, the Minimum
            National/Regional/Local Advertising Fund Fees are $31.25 per month in
            the first
            year, $62.50 per month in the second year, and $125 per month thereafter
            (including all months in any renewal terms).  We may require
            franchises to participate in a regional advertising cooperative, in which
            case
            all or part of this fee will be paid to the cooperative.  To date,
            participation has not been required.  If a cooperative were to be
            established, the cooperative would determine the amount of the
            fee.
 3
              Upon 30
              days written notice, we may provide a showroom in the franchises’ metropolitan
              or regional area for the franchisee to show the products and services
              provided
              by the franchise.  In that case, the franchisees will be billed for
              its pro-rata rental fee, not to exceed $150 per month.
 4
              Central
              telephone service is available in some areas in some states.  With
              central telephone service, one telephone number is used for all franchises
              in
              the service area.  The provider’s software routes each call to the
              appropriate franchise based on the caller’s location.  The fee imposed
              by the provider of this service is split among the franchises in the
              service
              area.
 5
              Payable
              to third parties that provide goods or services to the
              franchise.
 6
              The
              training fee for each additional person the franchisee sends to basic
              training
              at any time is $250.
 7
              If a
              franchisee fails to attend a mandatory meeting that is designated by
              us as an
              annual meeting, we may,
 8
  Type
                    of Fee or Expense
                Amount
                Due
                    Date
                Remarks
 or
                    lower depending upon the distance traveled, the meals and lodging
                    selected, and the length of the meetings.Optional
                    training1,
                    5
                Varies1-
                    We estimate that the cost
                    person for travel, lodging and meals to attend a one-day optional
                    training
                    program will be $20 to $600 (plus the program fee).  The actual
                    cost for each person may be higher or lower depending upon the
                    distance
                    traveled, the meals and lodging selected, and the length of the
                    training
                    program.
                2
                    weeks prior to beginning of training
                We
                    may, but are not required to, offer optional training programs
                    that the
                    franchisee may attend.Product
                    sample updates
                Varies2
                As
                    incurred
                Note
                    9Technology
                    fee1
                $75
                    per month; subject to an annual increase at our sole determination,
                    but
                    not more than 10% per year.
                Monthly,
                    as billed.  As of the date of this filing, we do not charge this
                    fee, but may do so upon at least 30 days prior written notice
                    to the
                    franchisee.
                This
                    fee may be assessed by us for website and e-mail hosting by us,
                    for future
                    web-based system integration, and for other technology related
                    services.Transfer/training
                    fee1
                The
                    transfer fee is $7,000 plus
                    any brokerage commissions, finder’s fees or similar charges that we are
                    required to pay to any third party that is not an affiliate of
                    ours.  The training fee is $1,000.3
                Prior
                    to completing the transfer
                Payable
                    upon transfer of the franchise.  No charge if the franchisee
                    transfers to a business entity that it controls.Audit1
                Cost
                    of audit and underpayment amount, plus interest.
                Immediately
                    upon billing
                Payable
                    only if audit shows an understatement of at least 2% of gross
                    sales for
                    any month.
 
 at
            our
            sole determination, require the franchisee to pay a $500 missed annual
            meeting
            fee, which fee will be due within 30 days of notice by us to the
            franchise.
 8
              We will
              charge a fee for this training, which fee will depend on the training
              provided.  The franchisee will also be responsible for paying for
              his/her travel, lodging, and meals.
 9
              The
              amount can vary widely from one year to the next, but currently the
              amount is
              estimated to be from $600 to $1,000 per year.  As of the date of this
              filing, all updates are optional, but we may in the future mandate
              that the
              franchisee purchase certain updates.
 10
              The
              transferee pays all travel, food, and lodging expenses to attend
              training.  However, if the transferee is an existing V2K franchisee
              who has successfully completed basic training, we may waive the requirement
              that
              the transferee pay this fee and attend basic training.
 9
 Type
                      of Fee or Expense
                  Amount
                  Due
                      Date
                  Remarks
 Credit/debit
                      card authorization and administrative fee1
                  Varies
                      – We charge 3% of the amount of the debit or credit.
                  As
                      incurred
                  Note1Insufficient
                      funds fee1
                  Varies
                  As
                      incurred
                  Note2Insurance5
                  Varies
                      – Insurance in Denver costs about $50 per month.  The
                      franchisee’s cost may be higher or lower, depending upon its location
                      and
                      the insurance carrier selected
                  Varies
                  Franchisee
                      must obtain our approval of insurance carrier.  We have
                      appointed an approved carrier and established minimum required
                      covered
                      amounts.Indemnification
                  Varies
                      – The franchisee will pay the amount of the liability assessed
                      against us
                      plus the expenses incurred in defending us.
                  Varies
                  The
                      franchisee must reimburse us for any liability and costs incurred
                      by us by
                      reason of the franchise or our operation of the business on
                      the
                      franchisee’s behalf.
 Franchisees place all orders for products with us.  We in turn place
            them with our vendors.  Finished products are shipped to our
            franchisees, but billed to us, generally on terms of net 30
            days.  Terms of payment with our franchisees are net 15
            days.  We believe that this arrangement results in quality control of
            the products being sold to the customer and provides us with a way to
            monitor
            our franchisees’ operations.  In addition, franchisees commencing
            business do not have to identify and establish accounts with product
            vendors.





We
      believe the advantages to our franchisees are the following:


·
            Start-up
                costs are $40,170 - $82,300.


·
            The
                franchisee does not have to have any industry-specific knowledge
                or prior
                experience.


·
            We
                provide the franchisee with extensive training and
                support.


·
            The
                franchisee has no inventory to purchase or maintain, nominal receivables,
                and minimal general and administrative
                expenses.


·
            The
                franchisee receives a complete business start up
                package.


·
            Our
                software product allows franchisees to set themselves apart from
                the way
                others in the industry do business.  To the best of our
                knowledge and information there is no software product currently
                on the
                market that is comparable with that of
                V2K.


·
            Our
                software product provides franchisees with a marketing
                advantage.  Customers can determine what a treatment will look
                like on their windows before they
                purchase.


·
            Our
                software product provides franchisees with a sales and closing
                advantage.  Our franchisees can stay with a customer until that
                customer is satisfied.  Our franchisees do not have to check
                back with a workroom to calculate
                pricing.


·
            Our
                software product enables franchisees to administrate the sale of
                window
                treatments more efficiently and accurately than others in the
                industry.






11
        If the
        franchisee is more than 10 days late for payment of any fees, we may, upon
        48
        hours notice to the franchisee by facsimile, activate a direct charge to
        the
        franchisee’s credit or debit card for the fee, and bill the franchisee for any
        costs incurred by us in administering this program.
 12
          If any
          check the franchisee sends to us is returned to us by a financial institution
          (or other entity), or if we cannot charge the franchisee’s credit or debit card
          for the full amount owed to us (in accordance with Note 11 above), because
          of
          insufficient funds, the account being closed or otherwise, we may charge
          the
          franchise a fee of the lesser of $20, or the highest rate permitted by
          applicable law.





10


Our
      management believes that it takes the average franchisee two years to fully
      develop its franchise business.  At September 30, 2007,
      approximately 65% of our franchisees had been in business for two years or
      longer, as compared to September 30, 2006, at which approximately 60% of our
      franchisees had been in business for two years or longer.  Our
      franchisee retention rates were 84% and 96% for the years ended September 30,
      2007 and 2006, respectively.





We
      also
      propose to sell domestic and international license agreements for the use of
      our
      software to a limited number of major retailers who have shown interest in
      our
      system.  It is envisioned that our license agreements will include a
      one-time license fee and a monthly royalty or user fee.  As of the
      date of this report, we have entered into discussions and letters of intent
      with
      interested parties, but have not entered into any corporate license agreements
      or license agreements in related fields.





Manufacturing
      and Sourcing





Franchisees
      submit all purchase orders to us.  We place the orders for the
      products with a number of third party vendors, including soft product
      manufacturers with whom we have development strategic alliances.





For
      the
      years ended September 30, 2007 and 2006, approximately 64% and 68%,
      respectively, of materials and supplies were acquired from three major vendors
      (Lafayette Venetian Blind, Inc., Krohn’s Coverings, Inc., and DSC Window
      Fashions, Inc.), with the largest vendor, Lafayette Venetian Blind, Inc.,
      representing 34% of the total for each year.  The related accounts
      payable to the largest vendor was approximately $311,700 as of September 30,
      2007 and $309,900 as of September 30, 2006.  We believe that if we
      were to lose any of these vendors, we could replace the vendor(s) with others
      who provide the same materials and supplies.  However, we could incur
      disruption of processing orders from franchisees while transitioning from one
      vendor to another and this could negatively impact our business.





Research
      and Development





We
      incurred research and development expenses of $426,069 and $433,201 for the
      years ended September 30, 2007 and 2006, respectively.





Competition





We
      assess
      our competitive conditions as follows:


·
            We
                compete against other companies that offer franchise
                opportunities.  There are numerous franchise and business
                opportunities offered by others in all
                industries.


·
            We
                compete against other companies in the window fashion industry and
                others
                offering window fashions.  As described above, the market for
                window fashions is fragmented.  We compete with many different
                types of retailers that sell many or most of the items sold by us,
                including department stores, mass merchandisers, mail order, specialty
                retail stores, and other retailers.  In some cases these
                competitors have substantially greater financial and other resources
                than
                us, including, in some cases, more profitable retail economics or
                better
                name recognition.





Budget
      Blinds appears to be our closest competitor, in the sense that it is engaged
      in
      the window covering industry, and offers franchises.  Also, a few
      other companies are starting to offer custom window treatments.





We
      are
      aware of three other companies that offer a software product having some of
      the
      functions of our proprietary software:


·
            DreamDraper®
                by Evan Marsh Designs, Inc. is an application that a designer can
                use to
                create a visual two-dimensional representation.  DreamDraper®
                comes with hundreds of static two-dimensional line drawing graphics
                of
                windows and window treatments.  The designer can go to the
                catalog of two-dimensional line drawing pieces and manually create
                a
                representation of the window and window treatments utilizing the
                Microsoft
                PowerPoint application.  DreamDraper® has no integrated pricing
                component.  However, it did come out with a quick quote system
                recently, but the two systems are independent of each
                other.




11


·
            Minutes
                Matter is very similar to DreamDraper® in that it is used by designers to
                create a representation of windows and window
                treatments.  Minutes Matter does not rely on Microsoft
                PowerPoint, but has its own design environment.  It has a
                catalog of hundreds of static two-dimensional line drawing pieces
                that the
                user chooses from and then manually assembles the window and window
                treatments.  Minute Matters does not have a pricing
                component.


·
            Solatech,
                Inc. has introduced a software product similar in some ways to
                V2K’s.  Solatech is a two-dimensional photo rendering software
                that has very limited soft goods capability, with no scaling or visuals
                that represent what the product selection will look like in the customer’s
                home.





We
      cannot
      assure you that additional competitors will not enter our line of
      business.  Increased competition by existing or future competitors,
      resulting in our having to reduce prices in an effort to gain or retain market
      share, could result in reductions in our sales and profitability, which could
      have a material adverse effect on our business and financial
      condition.





Government
      Regulation





To
      offer
      and sell franchises, we must comply with the rules and regulations of the
      Federal Trade Commission, as well as the laws of the states in which offers
      and
      sales are made.  The Federal Trade Commission franchise rule requires
      that we furnish potential franchisees with written disclosures containing
      information about the franchised business, the franchise relationship, and
      us.  We have made these disclosures by following the Uniform Franchise
      Offering Circular Guidelines prepared by state franchise law
      officials.  We must provide a potential franchisee with the written
      disclosures upon the earliest of (1) the first personal meeting with the
      prospective purchaser; (2) ten business days before signing any binding
      agreement; or (3) ten business days before any payment to us.





The
      Federal Trade Commission does not review or approve any disclosures,
      advertising, or agreements.  However, 15 states have franchise
      investment laws that require us to provide pre-sale disclosures.  Of
      the 15 states, 13 treat the sale of a franchise like the sale of a security
      and
      generally prohibit the offer or sale of a franchise within their state until
      a
      franchise offering circular has been filed with, and registered by, the
      designated state agency.  We estimate that the registration renewal
      fees to maintain compliance with such state laws costs us approximately $7,500
      per year.





Employees





We
      had 41
      full-time and 2 part-time employees as of September 30, 2007.  None of
      our employees is covered by a collective bargaining agreement.





Risk
      Factors





We
      have incurred
      losses and cannot assure you of profitability.  With the
      exception of net income of $69,195 for the year ended December 31, 2003, we
      have
      incurred net losses, including a loss of $1,014,351 for our most recently
      completed fiscal year.  As of September 30, 2007, our accumulated
      deficit was $2,305,155.  To date, we have not generated revenues
      sufficient to fund our business and pay our ongoing expenses.  There
      can be no assurance that we will be profitable in the future.





We
      are dependent
      upon outside financing.  We rely upon external sources of
      financing to fund future growth and the implementation of our business
      plan.  Since our inception in July 1996, we have financed our
      operations through internally generated revenues, the sale of our stock and
      by
      borrowing from third parties and affiliates of our Company.  While we
      believe that our cash flow will provide sufficient capital to maintain all
      current operations and to implement our short-term plans, which would require
      approximately $200,000, we will likely require external financing for our
      long-term plans for growth and the development of our business
      plan.  We have not yet developed a budget or a timeframe within which
      to implement our long-term plans.  Sources of external financing may
      include short-term loans, bank borrowings, joint ventures, and future debt
      and
      equity offerings.  We do not know whether future financing will be
      available on acceptable terms, or at all.  Any additional financing
      may result in dilution to our shareholders.  Our failure to obtain
      external financing may have a material adverse effect on our ability to realize
      our long-term plans to expand the business.





12


Our
      current
      business plan is dependent upon our ability to sell franchises and to have
      successful franchisees.  Our growth is dependent upon our
      continued ability to sell franchises.  Our existing franchise base of
      approximately 180 is too small to produce enough royalty revenue and gross
      profit margin from sales of materials and supplies to support our
      operations.  Under our business plan, we plan to sell 51 franchises in
      fiscal 2008 and 80 franchises in fiscal 2009.  To be successful, we
      need to be able to identify suitable franchise candidates, provide them with
      adequate training, and manage competently the infrastructure to support the
      franchises.  In addition, our franchisees must be successful in their
      business operations.  If they are not successful, it will adversely
      impact our sales of franchises and we will not generate sufficient royalty
      income needed to operate.





We
      use
      franchise broker networks and Internet advertising to generate leads to identify
      suitable franchise candidates.  If prospective candidates indicate a
      sufficient amount of interest, we encourage them to travel to our offices for
      a
“discovery day” and reimburse them for $300 of airfare and one night of
      lodging.  After our franchisees attend a two-week basic training
      program, which includes instruction pertaining to operating our proprietary
      software, product knowledge and design, business management and sales and
      marketing, we provide them with a 30-day “quick start” marketing
      program.  We also assign a franchise support person to each new
      franchisee to follow-up on a franchisee’s progress.





We
      are affected
      by economic conditions and consumer trends.  Our success will
      depend upon a number of factors relating to consumer spending, including future
      economic conditions affecting disposable consumer income, such as employment,
      business conditions, interest rates, and taxation.  If existing
      economic conditions deteriorate, consumer spending may decline, thereby
      adversely affecting our business and results of operations.





We
      must
      be able to anticipate and respond to changing merchandise trends and consumer
      demands in a timely manner.  If we should miscalculate consumers’
purchasing habits and tastes, we will not be able to compete against other
      window covering businesses.





We
      face
      competition from existing and potential competitors.  We face
      substantial competition in the overall window covering industry, as well as
      competition from others offering franchises and business
      opportunities.  Due to our small size, it can be assumed that most if
      not all of our competitors have significantly greater financial, technical,
      marketing and other competitive resources.  Many of our competitors
      and potential competitors have greater name recognition and more extensive
      customer bases that could be leveraged, for example, to position themselves
      as
      being more experienced, having better products, and being more knowledgeable
      than us.  To compete, we may be forced to offer lower prices and
      narrow our marketing focus, resulting in reduced revenues.





Our
      success and
      ability to compete depends upon our ability to secure and protect our
      proprietary technology.  Our success depends on our ability to
      protect our proprietary technology.  In the event that a third party
      misappropriates or infringes on our intellectual property, our business would
      be
      seriously harmed.  Third parties may independently discover or invent
      competing technologies or reverse engineer our software.  We expect
      that if we should successfully market franchises and licenses to use our
      software, competitors may attempt to duplicate our technology.  While
      we have a pending patent application on the business process associated with
      our
      software, we would still have to enforce our rights against those who might
      attempt to infringe on our intellectual property.  Such enforcement
      efforts are likely to be expensive and time-consuming.





The
      loss of our
      officers and directors or our failure to attract and retain additional personnel
      could adversely affect our business.  Our success depends
      largely upon the efforts, abilities, and decision-making of our executive
      officers and directors.  Although we believe that we maintain a core
      group sufficient for us to effectively conduct our operations, the loss of
      any
      of our key personnel could, to varying degrees, have an adverse effect on our
      operations and system development.  We currently maintain “key-man”
life insurance on Victor Yosha, our president/chief executive officer, and
      Mike
      Lee, the chief operating officer of our technology
      subsidiary.  However, there is no contract in place assuring their
      services for any length of time.  The loss of either of them would
      have a material adverse affect on us.  We do not have assurance that
      the services of any member of our management will remain available to us for
      any
      period of time, or that we will be able to enter into employment contracts
      with
      any of our management, or that any of our plans to reduce dependency upon key
      personnel will be successfully implemented.





13


The
      knowledge and expertise of our officers and directors are critical to our
      operations.  There is no guarantee that we will be able to retain our
      current officers and directors, or be able to hire suitable replacements in
      the
      event that some or all of our current management leave our
      company.  In the event that we should lose key members of our staff,
      or if we are unable to find suitable replacements, we may not be able to
      maintain our business and might have to cease operations, in which case you
      might lose all of your investment.





We
      use outside
      suppliers to fulfill the orders placed with us by our
      franchisees.  Orders placed with us by our franchisees are
      filled by outside suppliers, with our three largest vendors constituting
      approximately 64% of materials and supplies for the year ended September 30,
      2007.  We have chosen to limit the number of suppliers that we use in
      order to obtain better pricing terms from them and to insure the quality of
      the
      products delivered to our franchisees’ customers.  We believe that if
      we were to lose any of these vendors, we could replace the vendor(s) with others
      who provide the same materials and supplies.  However, we could incur
      disruption of processing orders from franchisees while transitioning from one
      vendor to another and this could negatively impact our business.





A
      limited number
      of shareholders collectively own a majority of our common stock and may act,
      or
      prevent certain types of corporate actions, to the detriment of other
      shareholders.  As of December 17, 2007, our directors,
      officers, and more than 10% shareholders own beneficially 52% of our common
      stock.  Accordingly, these shareholders may, if they act together,
      exercise significant influence over all matters requiring shareholder approval,
      including the election of a majority of the directors and the determination
      of
      significant corporate actions.  This concentration could also have the
      effect of delaying or preventing a change in control that could otherwise be
      beneficial to our shareholders.





Outstanding
      warrants may negatively impact our ability to obtain future
      financing.  We have outstanding warrants to purchase 4,553,750
      shares of common stock at $0.50 through September 30, 2008 and outstanding
      warrants to purchase 1,000,000 shares of common stock at $0.30 through January
      5, 2009.  As long as these warrants remain unexercised and
      outstanding, the terms under which we may be able to obtain additional capital
      financing may be adversely affected.





We
      have a
      substantial number of shares that may become freely tradable and could therefore
      result in a reduced market price.  As of December 17, 2007, we
      had an aggregate of 31,167,336 shares of our common stock issued and
      outstanding, with 10,445,561 shares, currently owned by existing shareholders,
      registered for resale.  In addition, we registered the resale of
      1,000,000 shares issuable upon the exercise of warrants.  The sale of
      a significant number of these shares in the public market may adversely affect
      prevailing market prices of our shares.





Our
      common stock
      is subject to penny stock regulation that may affect the liquidity for our
      common stock.  Our common stock is subject to regulations of
      the Securities and Exchange Commission (“SEC”) relating to the market for penny
      stocks.  These regulations generally require that a disclosure
      schedule explaining the penny stock market and the risks associated therewith
      be
      delivered to purchasers of penny stocks and impose various sales practice
      requirements on broker-dealers who sell penny stocks to persons other than
      established customers and accredited investors.  The regulations
      applicable to penny stocks may severely affect the market liquidity for our
      common stock, as some brokers refrain from trades involving penny stocks to
      avoid the additional work to comply with these requirements.  As a
      result, your ability to sell your securities in the secondary market could
      be
      limited.





Future
      equity
      transactions, including exercise of options or warrants, could result in
      dilution.  From time to time, we intend to sell restricted
      stock, warrants, and convertible debt to investors in private
      placements.  Because the stock will be restricted, the stock will
      likely be sold at a greater discount to market prices compared to a public
      stock
      offering, and the exercise price of the warrants is likely to be at or even
      lower than market prices.  These transactions will cause dilution to
      existing shareholders.  Also, from time to time, options will be
      issued to officers, directors, or employees, with exercise prices equal to
      the
      then prevailing market price.  As of September 30, 2007, 29,180,660
      options had been granted to officers, directors and
      employees.  Exercise of in-the-money options and warrants will result
      in dilution to existing shareholders.  The amount of dilution will
      depend on the spread between the market and exercise price, and the number
      of
      shares involved.





Trading
      in our
      common stock may be limited thereby making it more difficult for investors
      to
      resell their shares of our common stock.  Our common stock is
      quoted on the OTC Bulletin Board.  The OTC Bulletin Board is not an
      exchange and, because trading of securities on the OTC Bulletin Board is often
      more sporadic than the




14
 
  trading
        of securities listed on an exchange or NASDAQ, you may have difficulty reselling
        any of the shares that you purchase from the selling
        shareholders.








Item
      2.             Description
      of Property





Facilities





Our
      principal offices are located at 13949 West Colfax Avenue, Suite 250, Lakewood,
      Colorado 80401.  We lease approximately 10,800 square feet under a
      five and half year lease that commenced August 1, 2007.





Trademarks
      and Copyrights





Our
      subsidiary, V2K Window Fashions, has registered our “V2K” logo with the United
      States Patent and Trademark office.  The registration date is April 9,
      2002, and our registration number is 2,559,601, for Computer Software and
      Business Services.  We also registered the logo for Retail Store
      Services and Design for Others of Window Coverings and Treatments on March
      29,
      2005, registration number 2,935,943.





Our
      subsidiary, V2K Window Fashions, is the owner of the V2K Window Fashions
      software, which is copyrighted with Certificate of Registration No. TX5200930,
      effective date noted as February 29, 2000.





In
      January 2005, our subsidiary, V2K Window Fashions, filed a patent application
      with the U.S. Patent and Trademark Office for its three-dimensional software
      technology, which application was subsequently assigned to another subsidiary,
      V2K Technology.  The patent application is pending, and has been
      assigned Serial # 11/030445.








Item
      3.             Legal
      Proceedings





There
      are
      no legal proceedings pending and, to the best of our knowledge, there are no
      legal proceedings contemplated or threatened that are deemed material to us
      or
      our business.








Item
      4.             Submission
      of Matters to a Vote of Security Holders





None.


15


PART
      II





Item
                5.
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities





Our
      common stock is currently quoted on the OTC Bulletin Board (“OTCBB”)” under the
      symbol “VTOK.”  The trading symbol often appears as “VTOK.OB” in
      quotation requests on the Internet.  Priced quotations for our stock
      were not entered until November 2007.





On
      December 17, 2007, the closing bid price for the common stock on the OTCBB
      was
      $0.30 per share.





Holders
      and Dividends





As
      of
      November 30, 2007, there were 101 record holders of our common
      stock.  To date, we have not declared or paid any dividends on our
      common stock.  We do not intend to declare or pay any dividends on our
      common stock in the foreseeable future, but rather to retain any earnings to
      finance the growth of our business.  Any future determination to pay
      dividends will be at the discretion of our board of directors and will depend
      on
      our results of operations, financial condition, contractual and legal
      restrictions and other factors the board of directors deems
      relevant





Recent
      Sales of Unregistered Securities





During
      the quarter ended September 30, 2007, we did not issue or sell any unregistered
      securities.








Item
      6.             Management’s
      Discussion and Analysis or Plan of Operation





The
      following discussion should be read in conjunction with the financial statements
      and the related notes included in this annual report. This discussion contains
      forward-looking statements that involve risks and uncertainties. Our actual
      results could differ significantly from those projected in the forward-looking
      statements as a result of many factors, including those discussed in “Risk
      Factors,”  “Business” and elsewhere in this report.





History
      and Overview





V2K
      International, Inc. (“International”) was incorporated as a Colorado corporation
      on March 13, 2006.  Through our wholly owned subsidiaries, V2K Window
      Fashions, Inc., V2K Technology, Inc., V2K Manufacturing, Inc., and Marketing
      Source International, LLC, we sell and support franchises in the residential
      and
      commercial window fashion industry, develop and license proprietary software
      that allows users to decorate windows for both residential and commercial
      customers, manage strategic alliances with third party vendors and act as a
      product development and sales agent for overseas window covering
      manufacturers.





Details
      of the Company’s subsidiaries as of September 30, 2007 are described
      below:





Entity
                name
            Place
                of incorporation
              and
                legal entity
            Principal
                activities
            Effective
                interest heldV2K
                Window Fashions, Inc.
            Colorado
                corporation
            Franchise
                sales and support
            100%V2K
                Technology, Inc.
            Colorado
                corporation
            Development
                and licensing of software
            100%V2K
                Manufacturing, Inc.
            Colorado
                corporation
            Management
                of soft window covering vendors
            100%   16
 
  Entity
                      name
                  Place
                      of incorporation
                    and
                      legal entity
                  Principal
                      activities
                  Effective
                      interest held
 Marketing
                Source International,
              LLC
            Colorado
                limited
              liability
                company
            Product
                development
              and
                sales agent for
              overseas
                window
              covering
              manufacturers
            100%





In
      April
      2006, in a share for share exchange, we acquired all issued and outstanding
      shares of V2K Window Fashion’s preferred and common stock in exchange for shares
      of common stock in V2K International on a 1 for 35 basis and 1 for 10 basis,
      respectively.





In
      August
      2006, V2K Window Fashions opened its first company-owned franchise location,
      incorporated as Window Fashions Franchise LLC. In July 2007, V2K Window Fashions
      sold 100% of its ownership interest in Window Fashions Franchise LLC to a third
      party.  Window Fashions Franchise LLC had been a wholly owned
      subsidiary of V2K Window Fashions.





In
      April
      2006, V2K Window Fashions transferred legal ownership of V2K Manufacturing
      and
      the related equity interest to V2K International.  V2K Window Fashions
      had acquired V2K Manufacturing in January 2004.  In October 2007, we
      sold the inventory and fixed assets of V2K Manufacturing to a third
      party.  V2K Manufacturing continues to act as the primary supplier of
      soft window treatments to V2K Window Fashions and its franchisees, but does
      so
      by managing strategic alliances with several outside vendors.





In
      July
      2006, in order to further protect the intellectual property associated with
      the
      software and to facilitate future licensing agreements, the software and
      software development team formerly held by V2K Window Fashions were spun-off
      to
      form V2K Technology.  V2K Technology became a wholly owned subsidiary
      of V2K International and licenses a customized window fashions franchise
      software to V2K Window Fashions.





In
      April
      2007, we organized Marketing Source International LLC, a Colorado limited
      liability company.  This company will endeavor to generate revenues by
      acting as a product development and sales agent for overseas window coverings
      manufacturers.  Marketing Source International LLC has engaged in only
      preliminary discussions as of the date of this filing.





As
      of the
      date of this filing, V2K Window Fashions is our primary operating subsidiary,
      making franchising our primary operations. V2K Window Fashions was incorporated
      in July 1996 to offer licenses to use the “Pictures and Prices” software, which
      had been developed by an affiliated company, Pictures and Prices
      Corporation.  The assets of Pictures and Prices Corporation were later
      transferred to us in 1999.  We packaged the software license with our
      training manuals, policies, procedures, and knowledge and began selling
      franchises in March 1997.  After obtaining a core group of franchises
      in 1998, we focused our efforts on building our infrastructure to provide
      support to our franchises, refining our business model, and developing our
      business plan.




Since
      our
      inception through September 30, 2007, in order to fund the development of our
      proprietary software and to develop our franchising operations, we have obtained
      approximately $2,583,250 from: amounts contributed by our officers and directors
      ($487,000); the sale of stock ($1,746,250); and loans
      ($350,000).  During the year ended September 30, 2007, $300,000 of the
      $350,000 in loans were converted into equity.  We believe that our
      real value lies in our software.  However, that value is not reflected
      in our financial statements due to accounting policies (discussed below)
      pertaining to research and development costs.  We believe that our
      software has now been developed to the point where it can be used for a variety
      of niches within the home décor industry.





Critical
      Accounting Policies





Franchise
      Operations - Overview.  Franchisees are required to pay the
      Company an initial franchise fee, royalty fees aggregating between 4% and 8%
      of
      gross sales and an advertising contribution fee of 2% of gross sales. In
      addition, all materials and goods sold by franchisees are processed, billed
      and
      collected through the Company using approved vendors and suppliers.





17


As
      of
      September 30, 2007, we supported 182 independently owned franchises located
      in
      39 states, two Canadian provinces and Aruba.  A summary of franchise
      activity is as follows:





September
                30, 2007
            
            
            September
                30, 2006Franchises
                in operation - beginning of period
            
            
            182
            
            
            
            160Franchises
                sold during the period
            
            
            34
            
            
            
            30Franchises
                cancelled, terminated or repurchased during the period
            
            
            (34
            )
            
            
            (8
            )Franchises
                in operation - end of period
            
            
            182
            
            
            
            182




Franchise
      Operations - Reacquired Franchise Rights.We occasionally reacquire
      the rights to
      a franchise territory. When this occurs we contract with the franchisee to
      reacquire the territory for a specified amount that can consist of cash, a
      note
      payable, and/or forgiveness of debt. While these territories provide benefits
      to
      the Company, they lack physical substance, thus, under Statement of Financial
      Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”, we
      record reacquired franchise rights as intangible assets at fair value. Fair
      value is established as the total amount of consideration that changed hands,
      not to exceed the estimated resale amount of the territory less all related
      costs of sales. We have concluded that reacquired territories have indeterminate
      lives, so the resulting intangible assets are not amortized.  When
      reacquired territories are resold, the intangible assets are offset against
      the
      cost of the sale, and the related carrying value is reduced.  We
      assess impairment of intangible assets on an annual basis. If any impairment
      is
      found, the carrying amount of the asset is written down to the fair value.
      In
      the year ended September 30, 2007 we reacquired franchise rights from three
      franchises. No franchise rights were reacquired in the year ended September
      30,
      2006.





Franchise
      Operations - Repossessed Franchises.  We have the right to
      repossess (cancel) franchises. When this occurs we cancel a franchise agreement
      and take the franchise territory back from the franchisee. We cancel franchises
      for failure to abide by the terms and conditions of franchise agreements, and
      for failure to meet minimum performance standards pursuant to franchise
      agreements. Occasionally, franchises voluntarily surrender their territories.
      No
      consideration is exchanged in these situations, and none of the franchise fee
      is
      refunded, thus under SFAS No. 45, “Accounting for Franchise Fee Revenue,” no
      fair value is assigned to these transactions. In the years ended September
      30,
      2007 and September 30, 2006, we repossessed 31 and 8 franchises,
      respectively.





Revenue
      Recognition.  Initial franchise fees are recognized as revenue
      upon the commencement of operations by the franchisee, which is when we have
      performed substantially all initial services required by the franchise
      agreement.  Unearned income represents franchise fees received for
      which we have not yet performed all of our initial obligations under the
      franchise agreement.  Such obligations, consisting mostly of training,
      are generally fulfilled within 60 days of receipt of the initial franchise
      fee.  Royalties and advertising fees are recognized as
      earned.





Franchisees
      place all orders for materials and supplies with us.  We review each
      proposed purchase order to determine whether the products can be made as
      requested, make any necessary changes, and then place the corresponding orders
      with our vendors.  Accordingly, we determine all product
      specifications.  While the products are shipped directly to the
      franchisees by the vendors, we receive title to the shipped items and have
      the
      physical risk of loss upon shipment.  We are liable to the vendors for
      payment and collect the amounts due for the goods from the
      franchisees.  We negotiate all pricing with the vendors and have the
      ability to establish rebate programs with vendors, mark-ups or any other method
      of creating margin.  In addition, we are responsible to the
      franchisees for goods shipped by the vendors that do not meet
      specifications.  We have discretion in supplier
      selection.  Thus, we act as a principal as defined in the Emerging
      Issues Task Force, Issue 99-19, “Reporting Revenue Gross as a Principal versus
      Net as an Agent.”  Revenue from materials and supplies sales is
      recorded upon shipment to the franchisee by the vendor and represented
      approximately 65% and 72% of total revenue for the years ended September 30,
      2007 and 2006, respectively.




18


Intangible
      Asset
      Impairment.Intangible assets consist of reacquired franchise
      rights from the repurchase of franchise territories. We have determined that
      reacquired franchise rights have indefinite lives and are not subject to
      amortization.  Intangible assets with indefinite lives are reviewed
      for impairment annually or more frequently if events or circumstances indicate
      the carrying amount of the assets may be impaired. As of September 30, 2007,
      no
      impairment has been recorded.





Use
      of
      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 reported amounts of revenues and expenses during
      the reporting period.  At this time, our operations are such that
      there are two primary areas of estimates and assumptions that could potentially
      have a material impact to the financial statements if significantly
      miscalculated.  These areas are the allowance for doubtful accounts
      and share-based compensation.





Allowance
      for Bad
      Debts.  The allowance for doubtful accounts incorporates
      protection against write-offs for bad debt with respect to both notes receivable
      and accounts receivable.  This allowance is calculated based on
      historical write-offs as a percentage of these accounts and from current
      analysis of our existing franchise base.  We believe that the current
      allowance is adequate for these potential write-offs based on these
      assumptions.  This account is reviewed monthly and adjusted as
      needed.  At September 30, 2007 and 2006, allowance for doubtful
      accounts receivable was $40,057 and $43,150, respectively.  The
      allowance for uncollectible notes receivable was $27,574 and $0 as of September
      30, 2007 and September 30, 2006, respectively.





The
      potential risk of these estimates can be material to the financial statements,
      because the receivables are the largest assets on the balance
      sheet.  If we were to incur adjustments for write-offs that were not
      covered under the allowance it would be posted through operating expenses,
      and
      the offset would reduce the related receivables balance on the balance
      sheet.  Based on the average receivable balances for the last 24
      months, if the estimate was significantly miscalculated it could have a negative
      impact of $50,000 to $100,000 to the financial statements.  We believe
      based on our knowledge and ongoing review that the risk of miscalculating to
      this level is low, barring any unforeseen economic downturn.





Share-based
      Compensation.  Share-based compensation involves calculating
      the value of stock options granted under our stock option plan, following
      calculation methods prescribed by SFAS 123R.  We use the Black-Scholes
      stock option pricing model, which requires assumptions for expected option
      life,
      a risk-free interest rate, dividend yield, and volatility.  Expected
      option life represents the period of time that options granted are expected
      to
      be outstanding, the risk-free interest rate is based on the U.S. Treasury
      market, and volatility is derived from trading prices of the stock of a peer
      company.  For the years ended September 30, 2007 and 2006, share-based
      compensation was $237,000 and $11,955, respectively.  Share-based
      compensation is included in selling, general and administrative expenses as
      an
      operating expense and therefore has a significant impact on results of
      operations.





Variable
      Interest
      Entities.  The Financial Accounting Standards Board (“FASB”)
      issued Interpretation 46 (revised 2003), “Consolidation of Variable Interest
      Entities” and requires the primary beneficiary of a variable interest entity to
      consolidate that entity.  The primary beneficiary of a variable
      interest entity is the party that absorbs a majority of the variable interest
      entity’s expected losses, receives a majority of the entity’s expected residual
      returns, or both, because of ownership, contractual or other financial interests
      in the entity.





The
      primary entities in which we possess a variable interest are franchise
      entities, which operate our franchised window fashions retail
      operations.  We do not possess any ownership interests in franchise
      entities, other than one wholly-owned franchise which we owned and consolidated
      until its sale in July 2007 (see Item 6 – History and Overview). We do not
      generally provide financial support to the franchisees.  Management
      has reviewed the franchise entities and determined that, other than the former
      100% owned franchise, we are not the primary beneficiary of the entities, and
      therefore, these entities have not been consolidated.





19


Results
      of Operations





At
      this
      point in our development, our results of operations are impacted primarily
      by
      the sales of franchises, as our existing franchise base is too small to generate
      enough royalty revenue and gross profit margin from sales of materials and
      supplies to support our operations.  While revenues from sales of
      material and supplies comprise 65% and 72% of total revenues for the years
      ended
      September 30, 2007 and September 30, 2006, respectively, the margin on these
      sales averages approximately 4%.  We limit our mark-up to our
      franchisees so that they can be competitive in quoting prices to customers
      and
      also operate profitably.




Year
      Ended
      September 30, 2007 as Compared to Year Ended September 30,
      2006.  We sold 34 franchises for the year ended September 30,
      2007, as compared to 30 for the year ended September 30, 2006, and also sold
      a
      significant amount of additional territory to existing franchisees in fiscal
      2007, as reflected by the increase in sales of franchises of $580,830
      (40%).  Our margin on sales of franchises was 44% for 2007, as
      compared to 45% for 2006.  The most significant component of cost of
      franchise sales is the selling commission.  If we obtain the sale of a
      franchise through the assistance of a broker, we pay a commission equal to
      40%
      of the franchise purchase price, with an additional 7.2% commission paid to
      our
      in-house sales personnel.  If we obtain the sale of a franchise
      without the assistance of a broker, we pay a 12% commission to our in-house
      sales personnel.  Approximately 88% of our sales of franchises are
      generated through brokers.  Other components of cost of franchise
      sales are the costs of training that we provide (such as lodging and travel
      expenses), equipment provided to the franchisee (laptop computer, printer and
      carrying case), books of fabric samples, and starter sets of marketing
      materials.  The decrease in margin on the sale of franchise units in
      2007 was primarily the result of additional items we provided to new franchisees
      during the 2007 fiscal year.  These items included a business coaching
      program provided by a third party, an increased allotment of start-up marketing
      materials, and reimbursement of the franchisees’ marketing budget up to a
      certain amount.  There were also incremental increases in the cost of
      the other items we have always provided in conjunction with the purchase of
      a
      franchise.  The additional items were provided on a test basis and may
      not be continued through the current fiscal year.





In
      2007,
      royalty fees and sales of materials and supplies decreased by $11,811 (1%)
      and
      $391,978 (7%), respectively.  We believe that the decrease is due to
      the general slowdown in the economy, especially with respect to the downturn
      in
      the housing market, and our efforts to eliminate under-performing franchises
      from the system.  The 34 franchises that we cancelled, repurchased or
      who left the system voluntarily, were replaced by newer franchises that will
      increase their revenue generation over time.





While
      our
      revenues increased by $177,041 (2%), our operating expenses increased by
      $518,320 (6%), resulting in the operating loss of $1,065,017 in
      2007.





Selling,
      general and administrative expenses increased by $565,590 (28%), primarily
      due
      to an additional $225,000 of stock compensation
      expense,  approximately $31,000 in additional accounting expenses,
      approximately $72,000 for startup funding for Marketing Source International,
      LLC, approximately $25,000 in additional training expenses, $15,000 in moving
      expenses and approximately $190,000 for additional staffing.  Research
      and development costs were $426,069 in 2007, compared to $433,201 in
      2006.  Bad debt expense increased by $21,169 (30%) in
      2007.





Interest
      expense decreased by $9,620 (32%) in 2007, primarily due to $200,000 in bridge
      loans and $100,000 convertible debentures being converted to shares of common
      stock.  Interest accrued and paid on the bridge loans was $8,167 for
      2007, compared to $17,932 for 2006. Also, the interest accrued and paid on
      the
      convertible debentures was $2,313 for 2007, compared to $8,875 for 2006. These
      reductions were partially offset by interest charged of approximately $7,000
      on
      vendor payables, and draws on a line of credit.





As
      a
      result of the above, our net loss for the year ended September 30, 2007 was
      $1,014,351, as compared to a net loss of $732,205 for the year ended September
      30, 2006, an increase in the net loss of $282,146.





20


Liquidity
      and Financial Condition





We
      have
      incurred negative operating cash flows, operating losses, and negative working
      capital.  We have relied upon sales of our common stock and borrowing
      in the form of bridge loans and convertible debentures to address our liquidity
      needs.  To a lesser extent, we have also used bank
      financing.





Some
      of
      the key components to our operating cash flows are the changes in accounts
      receivable and accounts payable.  As we are essentially a product
      distributor, our level of activity is reflected in our accounts receivable
      and
      accounts payable.  We receive invoices from vendors for product and
      simultaneously bill our franchisees.  The Days Sales Outstanding
      (“DSO”) as of September 30, 2007 and September 30, 2006 was 29 days and 36 days,
      respectively.  We have hired a new accounts receivable clerk and have
      modified our credit policies and procedures.  These changes include
      putting franchisees on hold, charging interest on past due invoices, and
      consistently sending out statements to all franchisees.  We have
      cancelled six franchise agreements in this new environment and have turned
      these
      balances over to collections.  The total dollar amount on these
      accounts is less than $38,000.  We anticipate that these changes
      should allow us to improve our DSO even more, thereby improving our cash flows,
      while reducing the amount of write-offs when compared to previous
      years.





At
      September 30,
      2007.  At September 30, 2007, we had a working capital deficit
      of $366,059 as compared to a deficiency of $182,258 at September 30,
      2006.  While our current assets decreased by $283,085, our current
      liabilities decreased by only $99,284.  The most significant decreases
      in current assets were with respect to accounts receivable, which decreased
      by
      $178,910, and cash, both non-restricted and restricted, which decreased by
      a
      total of $135,852.  The decrease in cash was due to our operating
      loss. The decrease in restricted cash was due primarily to increased advertising
      and marketing on behalf of our franchises.





The
      most
      significant increases in current liabilities were as a result of an increase
      in
      accounts payable and accrued expenses of $28,324 and borrowing $100,000 on
      a
      line of credit, which remained outstanding at September 30,
      2007.  These increases were more than offset by the conversion of
      $200,000 in bridge loans to equity.





Unearned
      income, which represents franchise fees received for which we are performing
      our
      initial obligations under the franchise agreement, decreased by $3,346 from
      September 30, 2006.  Our primary obligation under the franchise
      agreement is providing training for two persons for each
      franchise.  We reimburse the franchisee for travel (up to $300) and
      pay lodging expenses for one person to attend the training as part of the
      franchise fee.  At the training, the franchisee receives equipment (a
      laptop computer, portable printer and carrying case), software (both V2K’s
      proprietary software and non-proprietary software such as Microsoft Office
      and
      QuickBooks), manuals (training, as well as policy and procedure), and an
      electronic marketing kit.  Samples of fabric and hard products and a
      starter set of printed materials (business cards, stationery and promotional
      materials) are shipped to the franchisee when training
      occurs.  Accordingly, since we perform substantially all initial
      obligations required by the franchise agreement once training is completed,
      we
      recognize initial franchise fees as revenues at that time.





Note
      payable – other increased by $15,833 from September 30, 2006.  This
      note consists of the currently deferred portion of our rent obligation under
      an
      office lease entered into effective September 15, 2002.  Under the
      terms of the lease, the landlord deferred a portion of the monthly rent
      aggregating $140,000 over the period from September 15, 2002 to August 15,
      2007.  The deferred portion is evidenced by a non-interest bearing
      promissory note, which is payable in cash or shares of our common stock at
      the
      option of the landlord.  We accrete the deferred portion of the
      monthly rent utilizing an imputed interest rate of 5.75%.  The balance
      at September 30, 2007 of $140,000 represents the remaining deferral and related
      imputed interest.





For
      the
      year ended September 30, 2007, we used cash of $571,722 for operating
      activities, as compared to $380,683 for the year ended September 30,
      2006.  Financing activities provided cash of $435,783 in 2007,
      primarily through net proceeds from the sale of common stock of $341,608, and
      proceeds from a line of credit in the amount of $100,000.  In
      comparison, financing activities in 2006 provided cash of $456,227, from the
      sale of common stock and proceeds of a $200,000 bridge loan.





During
      the year ended September 30, 2007, holders of the $200,000 in bridge loans
      and
      $100,000 in convertible debentures converted their debt into
      equity.  A note payable to a commercial bank was completely satisfied
      at September 30, 2007.




21


Plan
      of Operations





We
      have recently completed a
      company-wide cost reduction program that we estimate will result in a monthly
      reduction of $55,000 in expenses and operating losses once the full effect
      of
      these measures is felt in January of 2008.





In
      October 2007, we sold the inventory and fixed assets of V2K Manufacturing to
      a
      third party.  This should result in a reduction of approximately
      $15,000 in consolidated monthly net operating losses and approximately $13,000
      per month in negative cash flow, and an increase in revenue from margin on
      sales
      of material and supplies of approximately $5,000 per month.  V2K
      Manufacturing continues to act as the primary supplier of soft window treatments
      to Windows and its franchisees, but does so by managing strategic alliances
      with
      outside vendors.  Our long-term goal is to become a vertically
      integrated company by reacquiring soft product manufacturing capabilities,
      and
      acquiring or merging with a manufacturer of hard products.





We
      have
      also decreased the monthly operating expenses at V2K Technology by approximately
      $5,000 per month, through salary reductions and a reduction in
      personnel.  In addition, since the version of the software for custom
      window treatments that is licensed to V2K Window Fashions is now complete,
      the
      costs associated with maintaining that system should incrementally
      decrease.  We will continue to pursue licensing opportunities with
      synergistic manufacturers, distributors and retailers in the commercial and
      home
      décor markets, and will propose that any license agreements we enter into will
      include an upfront fee for software customization.  We anticipate that
      development of new platforms for our technology, primarily an e-commerce/web
      based version of the software and a kiosk application, will not commence until
      fiscal 2009.





At
      V2K
      Window Fashions we have reduced monthly operating expenses by approximately
      $30,000, primarily via reductions in personnel and scaling back some of the
      items we provide in conjunction with the purchase of V2K
      franchise.  We do not believe that this will impair our ability to
      sell franchises.  Beginning in fiscal 2007, we also commenced a
      process of eliminating under-performing franchisees from our system, which
      will
      in turn lead to a reduction in our costs to maintain that
      system.  This process will continue in fiscal 2008.





We
      believe that our quickest path to profitability is franchising, and thus our
      primary focus in fiscal 2008 will be on improving our execution of the franchise
      business model.  We estimate that sales of 3.5 franchise units per
      month, and retail sales by our franchisees of $1,000,000 per month, will break
      the consolidated entity even on a monthly basis beginning in January
      2008.





Based
      on
      the cost reductions outlined above, and assuming we meet our projected results
      for both retail and franchise sales and maintain our current DSO on accounts
      receivable of 26 – 28 days, we anticipate that the company will have positive
      cash flow starting in January 2008.





Recently
      Issued Accounting Pronouncements





In
      December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests
      in Consolidated Financial Statements" (“SFAS No. 160”), which amends Accounting
      Research Bulletin No. 51, "Consolidated Financial Statements." SFAS
      No. 160 establishes accounting and reporting standards for the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. Additionally, SFAS No. 160 requires consolidated net income to
      be reported at amounts that include the amounts attributable to both the parent
      and the noncontrolling interest. SFAS No. 160 requires that net income
      attributable to the parent and the noncontrolling interest be reported
      separately on the income statement and requires the noncontrolling interest
      in a
      subsidiary to be disclosed as an ownership interest in the consolidated entity
      that should be reported as equity in the consolidated financial statements.
      SFAS
      No. 160 is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. Management currently does not expect
      that the adoption of SFAS No. 160 will have a material effect on the Company’s
      financial position or results of operations.





In
      February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities, including an amendment of FASB
      Statement No. 115” (“FAS 159”). FAS 159 permits entities to choose to measure
      many financial instruments and certain other items at fair value that are not
      currently required to be measured at fair value. Unrealized gains and losses
      on
      items for which the fair value option has been elected






22
 
 are
        reported in earnings. FAS 159 does not affect any existing accounting literature
        that requires certain assets and liabilities to be carried at fair value.
        FAS
        159 is effective for fiscal years beginning after November 15, 2007. Management
        currently does not expect adoption of FAS 159 will have a material effect
        on the
        Company’s financial position or results of operations.








Item
      7.              Financial
      Statements





See
      the pages beginning with
      F-1.








Item
      8.              Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure





None.








Item
      8A.           Controls
      and Procedures





As
      required by SEC rules, we have evaluated the effectiveness of the design and
      operation of our disclosure controls and procedures at the end of the period
      covered by this report.  This evaluation was carried out under the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer and takes into
      account the segregation of duties comment noted below.  Based on this
      evaluation, these officers have concluded that the design and operation of
      our
      disclosure controls and procedures are effective.  There were no
      changes in our internal control over financial reporting or in other factors
      that have materially affected, or are reasonably likely to materially affect,
      our internal control over financial reporting.





Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the SEC’s rules and
      forms.  Disclosure controls and procedures include, without
      limitation, controls and procedures designed to ensure that information required
      to be disclosed by us in the reports that we file under the Exchange Act is
      accumulated and communicated to our management, including principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.





It
      should
      be noted that the Company does not have a formal audit committee.  Its
      board of directors assumes the responsibilities of the audit
      committee.








Item
      8B.           Other
      Information





None.




23


PART
      III





Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(a) of the Exchange Act





Our
      officers, directors and key employees are as follows:


Name
            Age
            PositionVictor
                J. Yosha
            62
            President,
                Chief Executive Officer, and DirectorGordon
                E. Beckstead
            70
            Chairman
                of the Board of Directors and TreasurerSamuel
                Smith
            41
            Vice
                PresidentJerry
                A. Kukuchka
            40
            Chief
                Financial OfficerR.
                J. Wittenbrink
            72
            Secretary,
                General Counsel and DirectorTom
                Grimm
            61
            DirectorCarlyle
                Griffin
            62
            Director





The
      term
      of office of each director ends at the next annual meeting of our shareholders
      or when such director’s successor is elected and qualifies.  The term
      of office of each officer ends at the next annual meeting of our board of
      directors, expected to take place immediately after the next annual meeting
      of
      shareholders, or when such officer’s successor is elected and
      qualifies.  Our last annual meeting of shareholders was held on
      September 21, 2005 in Lakewood, Colorado.





Victor
      J. Yoshahas been our
      president and chief executive officer and a director since the inception of
      V2K
      Window Fashions in July 1996.  From 1994 to 1999, Mr. Yosha served
      initially as a consultant to, and later as the chief executive officer of,
      Pictures and Prices Corporation, a private corporation owned and controlled
      by
      Robert and Lynda Leo.  Pictures and Prices Corporation developed and
      distributed proprietary software technology for the window fashion
      industry.  From 1988 to 1994, Mr. Yosha and was president and chairman
      of Seattle Office Systems, Inc., a company which he co-founded to sell and
      service office equipment.  Seattle Office Systems eventually grew to
      80 employees with revenues in excess of $6,000,000 annually and was sold to
      a
      company now known as Danka Business Systems PLC.  In 1970, Mr. Yosha
      co-founded American Office Equipment Company, Denver, Colorado, which sold
      and
      serviced office equipment.  He was president of that company until
      1987.  That company eventually grew to 300 employees with annual
      revenues in excess of $25,000,000 and was one of the largest distributors of
      Minolta Copier products in the world.





Gordon
      E. Beckstead has been
      our chairman of the board of directors since May 2001.  He has been a
      business consultant since December 1984, providing financing and management
      advice.  From June 1984 to December 1986, Mr. Beckstead was the
      chairman of ATE, Inc., a long distance reseller based in Las Vegas, Nevada,
      with
      operations in Nevada, Idaho, Washington, and California.  In addition,
      he was a director of Citizens National Bank of Boise, Idaho, from April 1981
      to
      December 1986.  From 1977 to 1984, Mr. Beckstead was a partner in an
      accounting firm which he founded.  Prior to 1977 he was a partner in
      the international accounting firm then known as Deloitte Haskins &
Sells.  He received a bachelor’s degree from Utah State University in
      1959.





Samuel
      Smith has been our
      vice president since March 2006.  From November 2001 to March 2006, he
      was our chief financial officer.  Mr. Smith came to us in November
      2001 from the Horizons Real Estate Group, where he concentrated on brokering
      commercial loans, strategic planning, and website development.  From
      1997 to 2000, Mr. Smith owned and operated a small business consulting firm
      that
      specialized in writing business plans and financing proposals for start-up
      entities.  Mr. Smith received his bachelor’s degrees in economics and
      political science from Middlebury College in 1988, and an MBA from the Johnson
      Graduate School of Management at Cornell University in 1996.





Jerry
      A. Kukuchka, CPA,
      became our chief financial officer in March 2006.  From August 2004 to
      January 2006, he was the director of accounting for LMC Resources, Inc., Denver,
      Colorado, a human resources outsourcing company with approximately 4,000
      employees in 35 states.  Mr. Kukuchka provided consulting services in
      the areas of accounting and internal control documentation as an independent
      contractor from March 2004 to August 2004.  From June 1998 to February
      2004, he was the VP Finance for PW Eagle (formerly Extrusion Technologies,
      Inc.), Denver, Colorado, where he was responsible for all financial reporting
      functions, budgeting, forecasting, and tax compliance requirements for a PVC
      pipe manufacturer with 3 plants and 300 employees.  He was the
      regional






24
 
 controller
        for Pinon Management, Inc., Lakewood, Colorado, from February 1997 to March
        1998.  This company operated four nursing homes in the Denver area and
        had over 300 employees.  Mr. Kukuchka worked for a Denver area public
        accounting firm from October 1992 to June 1996.  He is a member of the
        Colorado Society of Certified Public Accountants and graduated from Metropolitan
        State College in 1989 with a bachelor’s degree in accounting.





R.
      J. Wittenbrinkhas been
      our secretary and general counsel since our inception and a director since
      April
      1997.  Mr. Wittenbrink has been practicing law in the Denver, Colorado
      area since 1963.  During the last 25 years, he has concentrated both
      as an attorney and principal in the formation and operation of small business
      and real estate development.  Mr. Wittenbrink received a bachelor’s
      degree from St. Louis University in 1959 and a juris doctor law degree from
      the
      University of Denver in 1963.





Tom
      Grimm has been a director
      since March 2006, and the owner of a V2K Window Fashions franchise since May
      2004.  Mr. Grimm currently sits on the Board of Directors of Naartjie
      children’s clothing store, and from March 2003 to March 2006 was the Chairman of
      the Board of Governors for Operation Smile.  From October 1998 to
      September 2002 he was Executive Vice President of Wal-Mart Stores, Inc. and
      President and CEO of Sam’s Club.  Prior to that Mr. Grimm served as
      President and CEO of the Pace Warehouse Club Division of Kmart Stores, Inc.
      in
      Denver, Colorado, and was the founder, President and CEO of Price Savers
      Wholesale Warehouse, Inc. in Salt Lake City, Utah.  Mr. Grimm is a
      graduate of Weber State University in Ogden, Utah.





Carlyle
      Griffin has been a
      director since October 2006.  Since his “retirement” in 1999, Mr.
      Griffin has started his own consulting firm and remains active in the business
      community.  During a thirty-one year career at IBM he held numerous
      marketing and marketing management positions, and managed a multi-state area
      for
      IBM Credit Corporation.  Mr. Griffin received his Bachelor of Science
      degree in Business Management from Penn State University in 1966, and an MBA
      from Penn Sate University in 1968.





No
      other
      directorships are held by each director in any company with a class of
      securities registered pursuant to Section 12 of the Securities Exchange Act
      of
      1934 or any company registered as an investment company, under the Investment
      Company Act of 1940.





Messrs.
      Yosha and Beckstead may be deemed to be organizers and “control persons” of the
      Company, as those terms are in defined in the Securities Act of
      1933.





Director
      Independence





As
      of the
      date of this report, our common stock is not listed on any exchange. As such,
      we
      are not currently subject to corporate governance standards of listed companies,
      which require, among other things, that the majority of the board of directors
      be independent.  Since we are not currently subject to corporate
      governance standards relating to the independence of our directors, we choose
      to
      define an “independent” director in accordance with the NASDAQ Global Market’s
      requirements for independent directors (NASDAQ Marketplace Rule 4200). The
      NASDAQ independence definition includes a series of objective tests, such as
      that the director is not an employee of the company and has not engaged in
      various types of business dealings with the company.





Tom
      Grimm
      and Carlyle Griffin are considered independent directors under the above
      definition.  We do not list that definition on our Internet
      website.





Conflicts
      of Interest





Our
      two
      non-officer directors, Tom Grimm and Carlyle Griffin, are associated with other
      firms involved in a range of business activities.  Consequently, there
      are potential inherent conflicts of interest in their acting as directors of
      our
      company.  While these directors are engaged in other business
      activities, we anticipate that such activities will not interfere in any
      significant fashion with the affairs of our business, in terms of having
      adequate time to devote to the business of the company.  Messrs. Grimm
      and Carlyle devote less than 10% of their working in their roles as
      directors.  All of our officers devote 100% of their working time to
      V2K.





Our
      officers and directors are now and may in the future become shareholders,
      officers or directors of other companies, which may be formed for the purpose
      of
      engaging in business activities similar to us.  Accordingly,






25
 
 additional
        direct conflicts of interest may arise in the future with respect to such
        individuals acting on behalf of us or other entities.  Moreover,
        additional conflicts of interest may arise with respect to opportunities
        which
        come to the attention of such individuals in the performance of their duties
        or
        otherwise.  Currently, we do not have a right of first refusal
        pertaining to opportunities that come to their attention and may relate to
        our
        business operations.





Our
      officers and directors are, so long as they are our officers or directors,
      subject to the restriction that all opportunities contemplated by our plan
      of
      operation which come to their attention, either in the performance of their
      duties or in any other manner, will be considered opportunities of, and be
      made
      available to us and the companies that they are affiliated with on an equal
      basis.  A breach of this requirement will be a breach of the fiduciary
      duties of the officer or director.  If we or the companies with which
      the officers and directors are affiliated both desire to take advantage of
      an
      opportunity, then said officers and directors would abstain from negotiating
      and
      voting upon the opportunity.  However, all directors may still
      individually take advantage of opportunities if we should decline to do
      so.  Except as set forth above, we have not adopted any other conflict
      of interest policy with respect to such transactions.








Item
      10.            Executive
      Compensation





The
      table
      below sets forth the remuneration of our chief executive officer during our
      last
      two completed fiscal years (the years ended September 30, 2007 and September
      30,
      2006).  There were no other executive officers whose total annual
      salary and bonus equaled or exceeded $100,000.





Summary
      Compensation Table


Name
                and Principal Position
            Year
            Salary
                ($)
            Bonus
                ($)
            Stock
                Awards ($)
            Option
                Awards
              ($)
            Non-Equity
                Incentive Plan Compensa-tion ($)
            Nonquali-fied
                Deferred Compensa-tion Earnings ($)
            All
                Other Compensation ($)
            Total
                ($)Victor
                J. Yosha, President and CEO
            2007
              2006
            50,000
              60,000
            -0-
              -0-
            -0-
              -0-
            58,997
                (1)
              37,454
                (2)
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-
            108,887
              97,454




(1)
            The
                options were valued using the Black-Scholes stock option pricing
                model
                with the following assumptions: Expected option
                life-years:  3.00; Risk-free interest rate:  5.25%;
                Dividend yield:  0;
                Volatility:  0.68.


(2)
            The
                options were valued using the Black-Scholes stock option pricing
                model
                with the following assumptions: Expected option
                life-years:  3.00 – 7.50; Risk-free interest
                rate:  5.125%; Dividend yield:  0;
                Volatility:  0.28.





Mr.
      Yosha
      was originally granted options to purchase 6,500,000 shares by V2K Window
      Fashions in July 2004.  Upon the reorganization of V2K Window Fashions
      into V2K International in April 2006, these options were replaced with options
      to purchase common stock of V2K International on comparable terms.  At
      the time of the replacement, options to purchase 2,500,000 shares had vested,
      options to purchase 2,000,000 shares vested in July 2006, and options to
      purchase 2,000,000 shares vested in July 2007.





We
      granted Mr. Yosha options to purchase 50,000 shares at $0.20 per share in May
      2006 for his service as a director.  These options vested in May 2007
      and are exercisable until May 2011.  In June 2006, we granted Mr.
      Yosha options to purchase 1,000,000 shares at $0.20 per
      share.  One-third of these options vested on June 30, 2007, one-third
      vest June 30, 2008 and the remaining one-third vest June 30,
      2009.  These options are exercisable until June 30,
      2011.  On August 9, 2007, we designated options to purchase 83,333
      shares at $0.05 per share, that had previously been granted and reserved for
      anticipated growth, to Mr. Yosha.  35,715 of these options had already
      vested, and the remaining 47,618 vest one-fourth each annually beginning July
      9,
      2008.  These options exercisable until July 9, 2014.








26








Outstanding
      Equity Awards At Fiscal Year-End


Option
                Awards
            Stock
                AwardsName
            Number
                of Securities Underlying Unexercised Options (#)
                Exercisable
            Number
                of Securities Underlying Unexercised Options (#)
                Unexercisable
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options (#)
            Option
                Exercise Price ($)
            Option
                Expiration Date
            Number
                of Shares or Units of Stock That Have Not Vested (#)
            Marked
                Value of Shares or Units of Stock That Have Not Vested ($)
            Equity
                Incentive Plan Awards: Number 0f Unearned Shares, Units or Other
                Rights
                That Have Not Vested (#)
            Equity
                Incentive Plan Awards:Market
                or Payout Value of Unearned Shares, Units or Other Rights That Have
                Not
                Vested
              (#)Victor
                J. Yosha
            6,500,000
              50,000
              333,333
              35,715
            -0-
              -0-
              666,667
                (1)
              47,618
                (2)
            -0-
              -0-
              -0-
              -0-
            0.05
              0.20
              0.20
              0.05
            07/09/2014
              05/02/2011
              06/30/2011
              07/09/2014
            N/A
            N/A
            N/A
            N/A-




(1)
            Half
                of these options vest on June 30, 2008, and the other half vests
                on June
                30, 2009.


(2)
            One
                quarter of these options vest annually beginning July 9,
                2008.





Compensation
      of Directors





Each
      of
      our non-employee directors receives reimbursement for expenses of attendance
      for
      each scheduled meeting that requires physical attendance.





Compensation
      for our directors for our last completed fiscal year is set forth below, with
      the exception of Victor J. Yosha, whose compensation has been disclosed
      above.





Director
      Compensation


Name
            Fees
                Earned or Paid in Cash ($)
            Stock
                Awards ($)
            Option
                Awards ($)
            Non-Equity
                Incentive Plan Compensation ($)
            Non-Qualified
                Deferred Compensation Earnings ($)
            All
                Other Compensation ($)
            Total
                ($)Gordon
                E. Beckstead
            -0-
            -0-
            61,151
                (1)
            -0-
            -0-
            -0-
            61,151Carlyle
                Griffin
            -0-
            -0-
            5,387
                (2)
            -0-
            -0-
            -0-
            5,387Tom
                Grimm
            -0-
            -0-
            1,517
                (3)
            -0-
            -0-
            -0-
            1,517R.J.
                Wittenbrink
            -0-
            -0-
            8,340(4)
            -0-
            -0-
            -0-
            8,340




(1)
            Mr.
                Beckstead was originally granted options to purchase 7,000,000 shares
                by
                V2K Window Fashions in July 2004. Upon the reorganization of V2K
                Window
                Fashions into V2K International in April 2006, these options were
                replaced
                with options to purchase common stock of V2K International on comparable
                terms. At the time of the replacement, options to purchase 2,666,670
                shares had vested, options to purchase 2,166,670 shares vested in
                July
                2006, and options to purchase 2,166,660 shares vested in July 2007.
                These
                options are exercisable at $0.05 per share until July 9, 2014. We
                granted
                Mr. Beckstead options to purchase 50,000 shares at $0.20 per share
                in May
                2006 for his service as a director. These options vested on May 2,
                2007
                and are exercisable until May 2, 2011. On June 30, 2006, we granted
                Mr.
                Beckstead options to purchase 1,000,000 shares at $0.20 per share.
                One-third of these options vested on June 30, 2007, one-third vest
                June
                30, 2008 and the remaining one-third vest June 30, 2009. These options
                are
                exercisable until June 30, 2011. On August 9, 2007, we designated
                options
                to purchase 83,333 shares at $0.05 per share, that had previously
                been
                granted and reserved for anticipated growth, to Mr. Beckstead. 35,715
                of
                these options had already vested, and the remaining 47,618 vest one-fourth
                each annually beginning July 9, 2008. These options exercisable until
                July
                9, 2014.




27


(2)
            Mr.
                Griffin was originally granted options to purchase 1,250,000 shares
                by V2K
                Window Fashions in July 2004. Upon the reorganization of V2K Window
                Fashions into V2K International in April 2006, these options were
                replaced
                with options to purchase common stock of V2K International on comparable
                terms. At the time of the replacement, options to purchase 416,670
                shares
                had vested, options to purchase 416,670 shares vested in July 2006,
                and
                options to purchase 416,660 shares vested in July 2007. These options
                are
                exercisable at $0.05 per share until July 9, 2014. We granted Mr.
                Griffin
                options to purchase 50,000 shares at $0.20 per share in October 2006
                for
                his service as a director. These options vested on October 17, 2007
                and
                are exercisable until October 17, 2011.


(3)
            We
                granted Mr. Grimm options to purchase 50,000 shares at $0.20 per
                share on
                May 2, 2006 for his service as a director. These options vested on
                May 2,
                2007 and are exercisable until May 2, 2011.


(4)
            Mr.
                Wittenbrink was originally granted options to purchase 1,500,000
                shares by
                V2K Window Fashions in July 2004. Upon the reorganization of V2K
                Window
                Fashions into V2K International in April 2006, these options were
                replaced
                with options to purchase common stock of V2K International on comparable
                terms. At the time of the replacement, options to purchase 500,000
                shares
                had vested, options to purchase 500,000 shares vested in July 2006,
                and
                options to purchase 500,000 shares vested in July 2007. These options
                are
                exercisable at $0.05 per share until July 9, 2014. We granted Mr.
                Wittenbrink options to purchase 50,000 shares at $0.20 per share
                in May
                2006 for his service as a director. These options vested on May 2,
                2007
                and are exercisable until May 2, 2011. On August 9, 2007, we designated
                options to purchase 83,333 shares at $0.05 per share, that had previously
                been granted and reserved for anticipated growth, to Mr. Wittenbrink.
                35,715 of these options had already vested, and the remaining 47,618
                vest
                one-fourth each annually beginning July 9, 2008. These options exercisable
                until July 9, 2014.





Employment
      Agreements





We
      do not
      have employment agreements with any of our executive officers.





Stock
      Option Plan





Our
      shareholders adopted the 2006 Stock Option Plan on March 31, 2006 that permits
      the granting of options to purchase up to 30,000,000 shares.  Options
      may be granted to officers, directors, employees, and consultants on a
      case-by-case basis.  This Plan will remain in effect until it is
      terminated by the board of directors or, if so appointed by the board, a
      committee of two or more disinterested directors administering the Plan, except
      that no incentive stock option will be granted after March 31,
      2016.





The
      2006
      Stock Option Plan is intended to (i) encourage ownership of shares by our
      employees and directors of and certain consultants to the company; (ii) induce
      them to work for the benefit of the company; and (iii) provide additional
      incentive for such persons to promote the success of the company.





The
      board
      of directors or committee may amend, suspend or discontinue the Plan at any
      time
      or from time to time; provided that no action of the board will cause incentive
      stock options granted under this Plan not to comply with Section 422 of the
      Internal Revenue Code unless the board specifically declares such action to
      be
      made for that purpose and provided further that without the approval of our
      shareholders, no such action may: (i) materially increase the maximum aggregate
      number of shares that may be issued under options granted pursuant to the Plan,
      (ii) materially increase the benefits accruing to Plan participants, or (iii)
      materially modify eligibility requirements for the
      participants.  Moreover, no such action may alter or impair any option
      previously granted under the Plan without the consent of the holder of such
      option.





The
      Plan
      contains provisions for proportionate adjustment of the number of shares for
      outstanding options and the option price per share in the event of stock
      dividends, recapitalizations, stock splits or combinations.





Each
      option granted under the Plan will be evidenced by a written option agreement
      between us and the optionee.  The option price of any incentive stock
      option or non-qualified option may be not less than 100% of the fair market
      value per share on the date of grant of the option; provided, however, that
      any
      incentive stock option granted to a person owning more than ten percent of
      the
      total combined voting power of the common stock will have an option price of
      not
      less than 110% of the fair market value per share on the date of
      grant.  “Fair Market Value” per share as of a particular date is
      defined in the Plan as the closing price of our common stock as reported on
      a






28
 
  national
        securities exchange or the last transaction price on the reporting system
        or, if
        none, the average of the closing bid and asked prices of our common stock
        in the
        over-the-counter market or, if such quotations are unavailable, the value
        determined by the board in its discretion in good faith.





The
      exercise period of incentive stock options or non-qualified options granted
      under the Plan may not exceed ten years from the date of grant
      thereof.  Incentive stock options granted to a person owning more than
      ten percent of the total combined voting power of our common stock will be
      for
      no more than five years.





To
      exercise an option, the optionee must pay the full exercise price in cash,
      by
      check or such other legal consideration as may be approved by the
      Committee.  Such other consideration may consist of shares of common
      stock having a fair market value equal to the option price, cashless exercise,
      a
      personal recourse note, or in a combination of cash, shares, cashless exercise
      and a note, subject to approval of the Committee.





An
      option
      may not be exercised unless the optionee then is an employee, consultant,
      officer, or director of our company or its subsidiaries, and unless the optionee
      has remained continuously as an employee, consultant, officer, or director
      of
      our company since the date of grant of the option.  If the optionee
      ceases to be an employee, consultant, officer, or director of our company or
      its
      subsidiaries other than by reason of death, disability, or for cause, all
      options granted to such optionee, fully vested to such optionee but not yet
      exercised, will terminate three months after the date the optionee ceases to
      be
      an employee, consultant, officer or director of our company.





If
      the
      employee is terminated “for cause” (as that term is defined in the Plan), such
      employee’s options will terminate immediately on the date the optionee ceases
      employment or association.





If
      an
      optionee dies while an employee, consultant, officer or director of our company,
      or if the optionee’s employment, consultant, officer, or director status
      terminates by reason of disability, all options theretofore granted to such
      optionee, whether or not otherwise exercisable, unless earlier terminated in
      accordance with their terms, may be exercised at any time within one year after
      the date of death or disability of said optionee, by the optionee or by the
      optionee’s estate or by a person who acquired the right to exercise such options
      by bequest or inheritance or otherwise by reason of the death or disability
      of
      the optionee.





As
      of
      September 30, 2007, 28,025,110 options were outstanding under the
      Plan.








Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters





The
      following table provides certain information as to our officers and directors
      individually and as a group, and the holders of more than 5% of our common
      stock, as of November 30, 2007.





Name
                and Address of Beneficial Owner
            Amount
                and Nature of Beneficial Ownership
            Percent
                of Class (1)Victor
                J. Yosha
              13949
                W. Colfax Avenue, Suite 250
              Lakewood,
                Colorado 80401
            12,069,528
                (2)
            31.5%Gordon
                E. Beckstead
              13949
                W. Colfax Avenue, Suite 250
              Lakewood,
                Colorado 80401
            12,176,668
                (3)
            31.4%Robert
                & Lynda Leo
              13949
                W. Colfax Avenue, Suite 250
              Lakewood,
                Colorado 80401
            5,366,346
                (4)
            16.2%R.J.
                Wittenbrink
              13949
                W. Colfax Avenue, Suite 250
              Lakewood,
                Colorado 80401
            4,100,755
                (5)
            12.4%Center
                Seed Partners LLC
              6915
                E. Mountain Bush Circle
              Highlands,
                Colorado 80130
            2,500,000
            8.0%   29
 
 Name
                      and Address of Beneficial Owner
                  Amount
                      and Nature of Beneficial Ownership
                  Percent
                      of Class (1)
 Carlyle
                Griffin
              16163
                Canyon Wren Way
              Morrison,
                Colorado 80465
            2,144,720
                (6)
            6.6%Lea
                Blohm
              P.O.
                Box 3740
              Parker,
                Colorado 80134
            2,060,535
                (7)
            6.6%Samuel
                Smith
              13949
                W. Colfax Avenue, Suite 250
              Lakewood,
                Colorado 80401
            977,719
                (8)
            3.1%Tom
                Grimm
              1895
                Stone Hollow Drive
              Bountiful,
                Utah 84010
            550,000
                (9)
            1.8%Jerry
                A. Kukuchka
              13949
                W. Colfax Avenue, Suite 250
              Lakewood,
                Colorado 80401
            150,000
                (10)
            0.5%All
                officers and directors as a group  (7 persons)
            32,169,390
                (11)
            63.7%




(1)
            Where
                persons listed on this table have the right to obtain additional
                shares of
                common stock through the exercise of outstanding options or warrants
                or
                the conversion of convertible securities within 60 days from December
                17,
                2007, these additional shares are deemed to be outstanding for the
                purpose
                of computing the percentage of class owned by such person, but are
                not
                deemed to be outstanding for the purpose of computing the percentage
                of
                any other person. Percentages are based on 31,167,336 shares outstanding.


(2)
            Includes
                6,919,048 shares issuable upon the exercise of vested stock options
                and
      250,000 shares issuable upon the exercise of warrants.


(3)
            Includes
                7,419,048 shares issuable upon exercise of vested stock options and
                250,000 shares issuable upon exercise of warrants.(4)
            Includes
              2,016,666 shares issuable upon vested stock
              options.


(5)
            Includes
                1,585,715 shares issuable upon the exercise of vested stock options
                and
                250,000 shares issuable upon the exercise of warrants.(6)
            Includes
              1,310,000 shares issuable upon exercise of vested stock
              options.(7)
            Incudes
              250,000 shares issuable upon exercise of
              warrants.


(8)
            Includes
                907,719 shares issuable upon exercise vested stock options and 25,000
                shares issuable upon the exercise of warrants.


(9)
            Includes
                50,000 shares issuable upon exercise of vested stock options and
                250,000
                shares issuable upon exercise of warrants.


(10)
            Includes
                50,000 shares issuable upon exercise of vested stock options and
                50,000
                shares issuable upon exercise of warrants.


(11)
            Includes
                18,241,530 shares issuable upon exercise of vested stock options
                and
                1,075,000 shares upon the exercise of warrants.





Changes
      in Control





There
      are
      no agreements known to management that may result in a change of control of
      our
      company.





30


Equity
      Compensation Plan Information





The
      following table sets forth information as of the end of the most recently
      completed fiscal year, September 30, 2007:





Plan
                category
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted
                average exercise price of outstanding options, warrants and
                rights
            Number
                of securities remaining available for future issuanceEquity
                compensation plans approved by security holders
            12,180,660
            $0.10
            17,819,340Equity
                compensation plans not approved by security holders
            17,000,000
            $0.05
            -0-Total
            29,180,660
            $0.07
            17,819,340








Item
      12.              Certain
      Relationships and Related Transactions, and Director Independence





None
      of
      our present directors, officers or principal shareholders, nor any family member
      of the foregoing, nor, to the best of our information and belief, any of our
      former directors, officers or principal shareholders, nor any family member
      of
      such former directors, officers or principal shareholders, has or had any
      material interest, direct or indirect, in any transaction, or in any proposed
      transaction which has materially affected or will materially affect
      us.





Promoters
      and
      Organizers.Gordon Beckstead and Victor J. Yosha may be deemed to be the
      organizers of V2K International, Inc. due to their role in organizing the
      business of the company and control persons due to their ownership of a
      significant percentage of voting securities.  Messrs. Beckstead and
      Yosha, together with all of the other shareholders of V2K Window Fashions,
      Inc.,
      received 35 shares of V2K International common stock for every share of V2K
      Window Fashions preferred stock and 10 shares of V2K International common stock
      for every share of V2K Window Fashions common stock owned by them in April
      2006
      when V2K International acquired V2K Window Fashions.  In addition,
      they, together with all of the other holders of stock options in V2K Window
      Fashions, received replacement stock options from V2K International in this
      acquisition transaction.  Other transactions between us and Messrs.
      Beckstead and/or Yosha are described below.





Convertible
      Debentures.In February 2005, Gordon Beckstead, an officer,
      director and principal shareholder, and one of our shareholders each loaned
      us
      $50,000 pursuant to the terms of a three-year convertible promissory
      note.  Interest accrues at the rate of one percent plus the prime rate
      as announced in the Wall
      Street Journal and is paid quarterly.  We paid Mr. Beckstead
      interest of $1,156 and $4,438 for the years ended September 30, 2007 and 2006,
      respectively.  The holders had the right to convert the notes at any
      time into shares of common stock at a price of $0.20 per share.  We
      agreed to register the shares issuable upon conversion.  On January
      31, 2007, Mr. Beckstead and the other lender each converted their debentures
      into 250,000 shares of common stock.





Bridge
      Loan.In January 2006, Gordon Beckstead, Victor J. Yosha, and
      R.J. Wittenbrink each loaned us $25,000 as part of a bridge loan we obtained
      in
      the aggregate amount of $200,000.  Messrs. Beckstead, Yosha and
      Wittenbrink are officer, directors, and principal shareholders of the
      company.  Their loans were made on the same terms as those received
      from non-affiliated third party lenders.  The associated loan
      agreement and promissory note called for quarterly interest payments in arrears
      at the rate of four percent plus the prime rate as published in the Money Rate
      Table of the Western Edition of the Wall Street Journal.  Repayment of
      the promissory note was to commence upon the earlier of (a) the completion
      of
      our private placement or (b) July 5, 2006.  At the option of the
      lenders, at any time prior to consummation of the private placement, the lenders
      could convert all or any of the principal amounts into the securities on the
      same terms as those offered in the private placement.  Upon the
      minimum portion of the private placement having been sold, the lenders were
      required to convert at least 50% of the note principal.  In August
      2006, all of the lenders entered into an amendment to the loan agreement and
      promissory note, whereby they agreed to convert the entire amount of the note
      immediately prior to the closing of the private placement, so long as the
      minimum offering was sold.  We further agreed that if we had failed to
      close the private




31
 
 placement
        by January 5, 2007, we would repay half of the principal amount of the notes
        by
        January 31, 2007 and the remainder by applying $3,000 from the sale of each
        franchise until the notes were paid in full.  Messrs. Beckstead, Yosha
        and Wittenbrink agreed to defer repayment of their loans until the
        non-affiliated lenders had been paid.  In January 2007, all of the
        lenders extended the deadline for closing the private placement to January
        31,
        2007.





Effective
      January 31, 2007, all of the lenders, including Messrs. Beckstead, Yosha, and
      Wittenbrink, converted their loans into securities on the same terms as those
      offered in our private placement.  Each of Messrs. Beckstead, Yosha
      and Wittenbrink received 125,000 shares of common stock and warrants to purchase
      125,000 shares of common stock.  The warrants are exercisable at $0.50
      per share until September 30, 2008.  We granted registration rights
      with respect to all of the shares purchased in the private
      placement.  Accordingly, the 125,000 shares issued to each of Messrs.
      Beckstead, Yosha and Wittenbrink were registered for resale.





For
      the
      years ended September 30, 2007 and 2006, we paid interest of $1,021 and $2,242,
      respectively to each of Messrs. Beckstead, Yosha and Wittenbrink,
      respectively.





We
      issued
      warrants to purchase an aggregate of 1,000,000 shares of common stock to all
      of
      the lenders when the loans were made.  The warrants are exercisable at
      $0.30 per share and expire January 5, 2009.  We granted piggyback
      registration rights (on a “best efforts” basis) with respect to the shares
      issuable upon exercise of these warrants.  The resale of these shares
      was registered in a registration statement that was declared effective in July
      2007.





The
      table
      below summarizes the shares and warrants that were issued:





Lender
            Amount
                of Loan
            Warrants
                @ $0.30 Issued When Loans were Made
            Shares
                Issued Upon Conversion of Loan
            Warrants
                @ $0.50 Issued Upon Conversion of LoanGordon
                E. Beckstead
            $25,000
            125,000
            125,000
            125,000Victor
                J. Yosha
            $25,000
            125,000
            125,000
            125,000Robert
                J. Wittenbrink
            $25,000
            125,000
            125,000
            125,000George
                A. Johnson
            $50,000
            250,000
            250,000
            250,000John
                D. Kucera
            $25,000
            125,000
            125,000
            125,000Robert
                M. Nieder
            $50,000
            250,000
            250,000
            250,000





Line
      of
      Credit.  In August 2007, we opened a line of credit with a
      commercial bank in the amount of $250,000.  The line of credit is
      collateralized with a first priority security interest in the personal property
      of V2K Window Fashions, and up to 125% of the amount is personally guaranteed
      by
      Messrs. Yosha, Beckstead and Wittenbrink.  Interest on the outstanding
      principal balance accrues at the bank’s prime rate and is payable
      monthly.  The line of credit is available until August 30, 2008, at
      which time any outstanding principal balance and accrued interest are
      due.  At September 30, 2007, we had drawn $100,000 against the line of
      credit.





Future
      Transactions.  All future affiliated transactions will be made
      or entered into on terms that are no less favorable to us than those that can
      be
      obtained from any unaffiliated third party.  A majority of the
      independent, disinterested members of our board of directors will approve future
      affiliated transactions.








Item
      13.            Exhibits





Regulation
              S-B
                Number
            Exhibit3.1
            Articles
                of Incorporation (1)3.2
            Bylaws
                (1)10.1
            2006
                Stock Option Plan (1)10.2
            Form
                of Franchise Agreement (2)10.3
            Software
                License Agreement from V2K Technology, Inc. to V2K Window Fashions,
                Inc.
                (1)10.4
            Office
                Lease and Note (2)   32
 
  Regulation
                    S-B
                      Number
                  Exhibit
 10.5
            Lease
                Agreement dated May 24, 2007 (3)10.6
            Wells
                Fargo Bank, N.A. Revolving Line of Credit dated August 28,
                200710.7
            Novation
                and Mutual/Partial Release and Promissory Note dated October 4,
                200721
            Subsidiaries
                of the registrant (1)31.1
            Rule
                15d-14(a) Certification of Chief Executive Officer31.2
            Rule
                15d-14(a) Certification of Chief Financial Officer32.1
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 of Chief Executive
                Officer32.2
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 of Chief Financial
                Officer




(1)
            Filed
              as an exhibit to the initial filing of the registration statement on
              March
              9, 2007.(2)
            Filed
              as an exhibit to Amendment No. 1 to the registration statement on May
              1,
              2007.(3)
            Filed
                as an exhibit to the quarterly report on Form 10-QSB for the period
                ended
                June 30, 2007 on August 27, 2007.








Item
      14.              Principal
      Accountant Fees and Services





The
      fees
      billed for professional services rendered by our principal accountant are as
      follows:





FISCAL
            
            AUDIT-RELATEDYEAR
            AUDIT
                FEES
            FEES
            TAX
                FEES
            ALL
                OTHER FEES2006
            $79,612
            -0-
            $8,495
            -0-2007
            $94,675
            -0-
            $8,795
            -0-





Pre-Approval
      Policies and Procedures





The
      Board of Directors must pre-approve
      any use of our independent accountants for any non-audit
      services.  All services of our auditors are approved by our whole
      Board and are subject to review by our whole Board.


33


SIGNATURES





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





V2K
                INTERNATIONAL,
                INC.Date:  December
                21, 2007
            /s/
              Victor J. YoshaVictor
                J. Yosha, President





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Signature
            Title
            Date/s/ Victor J. Yosha
            President,
                Chief Executive Officer and Director
            December
                21, 2007Victor
                J. Yosha
            (Principal
                Executive Officer)/s/
              Jerry A. Kukuchka
            Chief
                Financial Officer
            December
                21, 2007Jerry
                A. Kukuchka
            (Principal
                Financial Officer)/s/
              Gordon E. Beckstead
            Director
            December
                21, 2007Gordon
                E. BecksteadDirectorCarlyle
                Griffin/s/
              R.J. Wittenbrink
            Director
            December
                21, 2007R.J.
                WittenbrinkDirectorTom
                Grimm













34

























Report
      of Independent Registered Public Accounting Firm











To
      the
      Board of Directors and Stockholders


V2K
      International, Inc.


Lakewood,
      Colorado





We
      have
      audited the consolidated balance sheets of V2K International, Inc. and
      subsidiaries (the “Company”) as of September 30, 2007 and 2006 and the related
      consolidated statements of operations, stockholders’ equity (deficit), and cash
      flows for the years then ended. These consolidated financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States).  Those standards require
      that we plan and perform the audits to obtain reasonable assurance about whether
      the financial statements are free of material misstatement. The Company is
      not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audits included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that out audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of V2K
      International, Inc. and subsidiaries as of September 30, 2007 and 2006, and
      the
      consolidated results of their operations and cash flows for the years then
      ended
      in conformity with accounting principles generally accepted in the United States
      of America.










Gordon,
      Hughes & Banks,
      LLP





Greenwood
      Village, Colorado


December
      11, 2007





F-1


V2K
      INTERNATIONAL, INC.


CONSOLIDATED
      BALANCE SHEETS


SEPTEMBER
      30, 2007 AND SEPTEMBER 30, 2006




ASSETSCURRENT
                ASSETS
            
            2007
            
            
            2006Cash
                and
                cash equivalents
            
            $
            270,389
            
            
            $
            330,547Cash
                -
                restricted
            
            
            42,289
            
            
            
            117,983Accounts
                receivable, net of allowance fordoubtful
                accounts of $40,057 (2007) and $43,150 (2006)
            
            
            581,808
            
            
            
            760,718Current
                portion of notes receivable
            
            
            117,999
            
            
            
            75,787Inventory
            
            
            8,343
            
            
            
            8,825Prepaid
                expenses and other
            
            
            91,151
            
            
            
            101,204Total
                Current Assets
            
            
            1,111,979
            
            
            
            1,395,064PROPERTY
                AND
                EQUIPMENT,at cost,
                net of accumulateddepreciation
                of $264,433 (2007)
                and $213,882 (2006)
            
            
            150,052
            
            
            
            90,544REACQUIRED
                FRANCHISE
                RIGHTS
            
            
            43,459
            
            
            
            -NOTES
                RECEIVABLE -net of
                current portion
            
            
            30,323
            
            
            
            21,370Total
                Assets
            
            $
            1,335,813
            
            
            $
            1,506,978LIABILITIES  AND
                STOCKHOLDERS’ EQUITY (DEFICIT)CURRENT
                LIABILITIESAccounts
                payable and accrued expenses
            
            $
            1,122,356
            
            
            $
            1,094,032Current
                portion of note payable - other
            
            
            109,211
            
            
            
            124,167Current
                portion of capital lease obligations
            
            
            3,642
            
            
            
            -Line
                of
                credit
            
            
            100,000
            
            
            
            -Current
                portion of note payable - bank
            
            
            -
            
            
            
            12,948Bridge
                loan
            
            
            -
            
            
            
            200,000Unearned
                income
            
            
            142,829
            
            
            
            146,175Total
                Current Liabilities
            
            
            1,478,038
            
            
            
            1,577,322LONG
                TERM
                LIABILITIESCapital
                lease obligations, net of of current portion
            
            
            3,481
            
            
            
            -Note
                payable - other, net of current portion
            
            
            30,789
            
            
            
            -Deferred
                rent
            
            
            115,058
            
            
            
            -Convertible
                debentures
            
            
            -
            
            
            
            100,000Total
                Long Term Liabilities
            
            
            149,328
            
            
            
            100,000Total
                Liabilities
            
            
            1,627,366
            
            
            
            1,677,322STOCKHOLDERS’
                EQUITYSubscriptions
                receivable (150,000 shares)
            
            
            -
            
            
            
            30,000Common
                stock - $.001 par value, authorized 100,000,000
                sharesIssued
                and outstanding - 31,147,336 shares (2007) and27,378,586
                shares (2006)
            
            
            31,147
            
            
            
            27,379Additional
                paid-in capital
            
            
            1,982,455
            
            
            
            1,077,617Accumulated
                (deficit)
            
            
            (2,305,155
            )
            
            
            (1,305,340
            )Total
                Stockholders' Equity (Deficit)
            
            
            (291,553
            )
            
            
            (170,344
            )Total
                Liabilities and Stockholders' Equity (Deficit)
            
            $
            1,335,813
            
            
            $
            1,506,978




The accompanying notes are an
      integral part of these consolidated financial statements.




F-2


V2K
      INTERNATIONAL, INC.


CONSOLIDATED STATEMENTS
      OF OPERATIONS


FOR
      THE
      YEARS ENDED SEPTEMBER 30, 2007 AND SEPTEMBER 30, 2006


2007
            
            
            2006REVENUESSales
                of
                franchises
            
            $
            2,044,822
            
            
            $
            1,463,992Royalty
                and advertising fees
            
            
            835,824
            
            
            
            847,635Sales
                of
                materials and supplies
            
            
            5,454,937
            
            
            
            5,846,915Total
                Revenues
            
            
            8,335,583
            
            
            
            8,158,542OPERATING
                EXPENSESCost
                of  franchise
                sales
            
            
            1,144,283
            
            
            
            799,277Cost
                of  materials and
                supplies
            
            
            5,239,864
            
            
            
            5,625,008Research
                and development expenses
            
            
            426,069
            
            
            
            433,201Selling,
                general and
                administrative expenses
            
            
            2,590,384
            
            
            
            2,024,794Total
                Operating Expenses
            
            
            9,400,600
            
            
            
            8,882,280(LOSS)
                FROM
                OPERATIONS
            
            
            (1,065,017
            )
            
            
            (723,738
            )OTHER
                INCOME
                (EXPENSES)Interest
                (expense)
            
            
            (20,230
            )
            
            
            (29,850
            )Other
                income
            
            
            62,564
            
            
            
            21,383(Loss)
                on
                disposition of assets
            
            
            (690
            )
            
            
            -Gain
                on
                sale of LLC
            
            
            19,179
            
            
            
            -Total
                Other Income (Expense)
            
            
            60,823
            
            
            
            (8,467
            )NET
                (LOSS) BEFORE INCOME
                TAXES
            
            
            (1,004,194
            )
            
            
            (732,205
            )PROVISION
                FOR INCOME
                TAX
            
            
            -
            
            
            
            -NET
                (LOSS) FROM CONTINUING
                OPERATIONS
            
            $
            (1,004,194
            )
            
            $
            (732,205
            )(LOSS)
                FROM DISCONTINUED
                OPERATIONS,NET
                OF INCOME
                TAX
            
            $
            (10,157
            )
            
            $
            -NET
                (LOSS)
            
            $
            (1,014,351
            )
            
            $
            (732,205
            )NET
                (LOSS) PER SHARE
                -Basic
                and
                diluted
            
            $
            (0.0338
            )
            
            $
            (0.0281
            )NET(LOSS)
                PER SHARE FROM
                DISCONTINUEDOPERATIONS
            
            $
            (0.0003
            )
            
            $
            -Basic
                and
                dilutedWEIGHTED
                AVERAGE NUMBER
                OFCOMMON
                SHARES OUTSTANDING
                -Basic
                and
                diluted
            
            
            30,000,774
            
            
            
            26,094,657




The accompanying notes are
        an
        integral part of these consolidated financial statements.


F-3


V2K
      INTERNATIONAL, INC.


CONSOLIDATED STATEMENT
      OF STOCKHOLDERS' EQUITY (DEFICIT)


FOR
      THE
      YEARS ENDED SEPTEMBER 30, 2007 AND SEPTEMBER 30, 2006


Additional
            SubsciptionsPreferred
                Stock
            
            Common
                Stock
            
            Paid-In
            
            Receivable
            
            AccumulatedShares
            
            Amount
            Shares
            
            Amount
            Capital
            
            Shares
            
            Amount
            (Deficit)
            
            TotalBalances,
                October 1,
                2005
            200,001
            
            $  200,001
            
            13,569,040
            
            $   13,570
            
            $  602,635
            
            -
            
            $            -
            
            $    (573,135)
            
            $  243,071Issuance
                of common
                stockin
                conjunction with there-capitalization
                of V2KInternational,
                Inc.
            -
            
            -
            
            5,391,811
            
            5,392
            
            -
            
            -
            
            -
            
            -
            
            5,392Issuance
                of common
                stockfor
                services at $0.20 per share
            -
            
            -
            
            71,500
            
            71
            
            14,229
            
            -
            
            -
            
            -
            
            14,300Stock
                options issued
                ascompensation
            -
            
            -
            
            -
            
            -
            
            4,300
            
            -
            
            -
            
            -
            
            4,300Exercise
                of stock
                optionsfor
                cash
                at $0.05 per share
            -
            
            -
            
            2,860
            
            3
            
            140
            
            -
            
            -
            
            -
            
            143Recision
                of common
                stockfor
                cash
                at $0.30 per share
            -
            
            -
            
            (116,660)
            
            (117)
            
            (34,883)
            
            -
            
            -
            
            -
            
            (35,000)Sale
                of common stock
                forcash
                at
                $0.20 per share
            -
            
            -
            
            175,000
            
            175
            
            34,825
            
            -
            
            -
            
            -
            
            35,000Warrants
                issued for
                services
            -
            
            -
            
            -
            
            -
            
            7,655
            
            -
            
            -
            
            -
            
            7,655Conversion
                of preferred
                stockinto
                common stock at $0.0286per
                share
            (200,001)
            
            (200,001)
            
            7,000,035
            
            7,000
            
            193,001
            
            -
            
            -
            
            -
            
            -Sale
                of common stock
                forcash
                at
                $0.20 per share
            -
            
            -
            
            1,285,000
            
            1,285
            
            255,715
            
            -
            
            -
            
            -
            
            257,000Subscriptions
                receivable
            -
            
            -
            
            -
            
            -
            
            -
            
            150,000
            
            30,000
            
            -
            
            30,000Net
                (loss)
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (732,205)
            
            (732,205)Balances,
                September 30,
                2006
            -
            
            -
            
            27,378,586
            
            27,379
            
            1,077,617
            
            150,000
            
            30,000
            
            (1,305,340)
            
            (170,344)Equity
                in entity no
                longerconsolidated
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            14,536
            
            14,536Balances,
                September 30,
                2006continuing
                entities
            -
            
            -
            
            27,378,586
            
            27,379
            
            1,077,617
            
            150,000
            
            30,000
            
            (1,290,804)
            
            (155,808)Sale
                of common stock
                forcash
                at
                $0.20 per share, netof
                offering costs of $82,413
            -
            
            -
            
            2,268,750
            
            2,268
            
            369,338
            
            (150,000)
            
            (30,000)
            
            -
            
            341,606Stock
                compensation
                expense
            -
            
            -
            
            -
            
            -
            
            237,000
            
            -
            
            -
            
            -
            
            237,000Conversion
                of bridge
                loaninto
                common stock at $0.20per
                share
            -
            
            -
            
            1,000,000
            
            1,000
            
            199,000
            
            -
            
            -
            
            -
            
            200,000Conversion
                of
                debenturesinto
                common stock at $0.20per
                share
            -
            
            -
            
            500,000
            
            500
            
            99,500
            
            -
            
            -
            
            -
            
            100,000Net
                (loss)
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            (1,014,351)
            
            (1,014,351)Balances,
                September 30,
                2007
            -
            
            $            -
            
            31,147,336
            
            $   31,147
            
            $1,982,455
            
            -
            
            $            -
            
            $
                (2,305,155)
            
            $(291,553)




The accompanying notes are
        an
        integral part of these consolidated financial statements.


F-4


V2K
        INTERNATIONAL, INC.
 CONSOLIDATED STATEMENTS
        OF CASH FLOWS
 FOR
        THE
        YEARS ENDED SEPTEMBER 30, 2007 AND SEPTEMBER 30, 2006


2007
            
            
            2006CASH
                FLOWS FROM OPERATING
                ACTIVITIESNet
                (loss)
            
            $
            (1,014,351
            )
            
            $
            (732,205
            )Adjustments
                to reconcile net
                (loss) to net cash (used)by
                operating activitiesDepreciation
                and amortization
            
            
            61,871
            
            
            
            73,653Bad
                debt
                provision
            
            
            90,582
            
            
            
            69,413Rent
                expense satisfied with debt
            
            
            15,833
            
            
            
            27,000Stock
                issued in re-capitalization
            
            
            -
            
            
            
            5,392Stock
                issued for services
            
            
            -
            
            
            
            14,300Stock
                compensation expense
            
            
            237,000
            
            
            
            11,955Loss
                on
                disposition of assets
            
            
            690
            
            
            
            -(Gain)
                on
                sale of LLC
            
            
            (19,179
            )
            
            
            -Changes
                in assets and
                liabilitiesDecrease
                (increase) in accounts receivable
            
            
            88,328
            
            
            
            (223,097
            )Decrease
                (increase) in prepaid expenses and other
            
            
            10,053
            
            
            
            (49,628
            )(Increase)
                decrease in notes receivable
            
            
            (51,165
            )
            
            
            43,173Decrease
                in inventory
            
            
            482
            
            
            
            3,138Increase
                in accounts payable and accrued expenses
            
            
            28,323
            
            
            
            311,549Proceeds
                from deferred rent
            
            
            26,616
            
            
            
            -Acquisition
                of franchises and interests therein
            
            
            (43,459
            )
            
            
            -(Decrease)
                increase in unearned income
            
            
            (3,346
            )
            
            
            64,674Net
                cash (used) by operating
                activities
            
            
            (571,722
            )
            
            
            (380,683
            )CASH
                FLOWS FROM INVESTING
                ACTIVITIESProceeds
                from sale of
                LLC
            
            
            29,950
            
            
            
            -Purchase
                of property and
                equipment
            
            
            (29,863
            )
            
            
            (36,755
            )Net
                cash provided (used) by
                investing activities
            
            
            87
            
            
            
            (36,755
            )CASH
                FLOWS FROM FINANCING
                ACTIVITIESExercise
                of stock
                  options
            
            
            -
            
            
            
            143Proceeds
                from sale of common
                stock
            
            
            371,608
            
            
            
            257,000(Decrease)
                increase in
                subscriptions receivable
            
            
            (30,000
            )
            
            
            30,000Proceeds
                from capital
                lease
            
            
            8,961
            
            
            
            -Proceeds
                from bridge
                loan
            
            
            -
            
            
            
            200,000(Payments)
                on capital lease
                obligation
            
            
            (1,838
            )
            
            
            (12,519
            )Proceeds
                from line of
                credit
            
            
            100,000
            
            
            
            -(Payments)
                on bank
                loan
            
            
            (12,948
            )
            
            
            (18,397
            )Net
                cash provided by financing
                activities
            
            
            435,783
            
            
            
            456,227NET
                INCREASE (DECREASE) IN
                CASH
            
            
            (135,852
            )
            
            
            38,789CASH,
                BEGINNING OF
                PERIOD
            
            
            448,530
            
            
            
            409,741CASH,
                END OF
                PERIOD
            
            $
            312,678
            
            
            $
            448,530




The accompanying notes are
        an
        integral part of these consolidated financial statements.   F-5
 V2K
                INTERNATIONAL, INC.
 CONSOLIDATED
                STATEMENTS OF CASH FLOWS
 FOR
                THE YEARS ENDED SEPTEMBER 30, 2007 AND SEPTEMBER 30, 2006
 (CONTINUED)


SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION





During
      the years ended September 30, 2007 and September 30, 2006, the Company paid
      cash
      of $29,763 and $22,791, respectively, for interest on debt.





SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES




During
      the year ended September 30, 2007, the Company: incurred $237,000 of stock
      compensation expense; converted $200,000 in bridge loans to 1,000,000 Units
      of a
      private placement, each Unit consisting of one share of common stock at $0.20
      and one warrant to purchase one share of common stock at $0.50 (see Note 1
–
Private Offering Memorandum and Note 8); converted $100,000 in debentures into
      500,000 shares of common stock ($0.20 per share, see Note 10); entered into
      leaseholds for debt of $91,855; and acquired $8,961 of equipment on a
      capitalized lease.




During
      the year ended September 30, 2006, the Company issued 71,500 shares of common
      stock for services, valued at $14,300 and incurred $4,300 of stock compensation
      expense.





CASH
      AND CASH EQUIVALENTS





Cash
      and
      cash equivalents at September 30, 2007 and September 30, 2006 consist
      of:





2007
            
            
            2006Cash
            
            $
            270,389
            
            
            $
            330,547Restricted
                cash (Note 1)
            
            
            42,289
            
            
            
            117,983$
            312,678
            
            
            $
            448,530



































The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-6
 V2K
            INTERNATIONAL, INC.
 NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)


NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





ORGANIZATION




V2K
      International, Inc. (“International”) was incorporated as a Colorado corporation
      on March 13, 2006. The Company, through its subsidiary companies, V2K Window
      Fashions, Inc., V2K Technology, Inc., V2K Manufacturing, Inc. and Marketing
      Source International, LLC, sells and supports franchises in the residential
      and
      commercial window fashion industry, develops and licenses proprietary software
      that allows users to decorate windows for both residential and commercial
      customers, manufactures and sells the resulting soft window treatment products
      and provides product development resources and acts as a sales agent for
      overseas window covering manufacturers.




International
      and subsidiaries are hereinafter collectively referred to as the
“Company”.




Details
      of the Company’s subsidiaries as of September 30, 2007 are described
      below:




Entity
                name
            Place
                of incorporation
              and
                legal entity
            Principal
                activities
            Effective
                interest
              heldV2K
                Window Fashions, Inc.
              (“Windows”)
            Colorado
                corporation
            Franchise
                sales and support
            100%V2K
                Technology, Inc.
              (“Technology”)
            Colorado
                corporation
            Development
                and licensing of software
            100%V2K
                Manufacturing, Inc. (“Manufacturing”)
            Colorado
                corporation
            Manufacture
                of soft window covering products
            100%Marketing
                Source International,
              LLC
                (“MSI”)
            Colorado
                limited
              liability
                company
            Product
                development
              and
                sales agent for
              overseas
                window
              covering
                manufacturers
            100%







In
      April
      2006, International, in a share for share exchange, acquired all issued and
      outstanding shares of Window’s preferred and common stock.  Shares of
      Window’s preferred and common stocks were exchanged for shares of common stock
      in International on a 1 for 35 basis and 1 for 10 basis, respectively. Windows
      sells and supports franchises in the residential and commercial window fashion
      industry.  Franchisees sell and install window treatments for retail
      and commercial clients using software licensed from Technology, training
      manuals, policies, procedures and knowledge.  Franchisees are located
      throughout the United States, in two Canadian provinces and in
      Aruba.




In
      August
      2006, Windows opened its first company-owned franchise location, incorporated
      as
      Window Fashions Franchise LLC (“Franchise LLC”). In July 2007, the Windows sold
      100% of its ownership interest in Franchise LLC to a third party. The Company
      has accounted for Franchise LLC as a discontinued operation (see Note
      16).







F-7


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)


NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





ORGANIZATION
      (CONTINUED)




In
      April
      2006, Windows transferred legal ownership of Manufacturing and the related
      equity interest to International.  Windows had acquired Manufacturing
      in January 2004.




In
      July
      2006, in order to further protect the intellectual property associated with
      the
      software and to facilitate future licensing agreements, the software and
      software development team formerly held by Windows were spun-off to form V2K
      Technology, Inc. Technology is a wholly owned subsidiary of International,
      and
      licenses a customized window fashions franchise software to
      Windows.





In
      April
      2007, the Company formed MSI to generate revenues by acting as a product
      development resource and sales agent for overseas window covering manufacturers.
      MSI is a wholly owned subsidiary of International.





PRIVATE
      OFFERING MEMORANDUM




In
      a
      Private Offering Memorandum dated September 6, 2006, the Company began offering
      for sale 3,750,000 Units, each Unit consisting of one share of common stock
      and
      one common stock purchase warrant, which are immediately detachable, at $0.20
      per Unit pursuant to exemptions from registration contained in Section 3(b)
      and
      Rule 506 of Regulation D of the Securities Act of 1933 and the securities laws
      of certain states, for a total of $750,000. Each warrant entitles the holder
      to
      purchase one share of common stock at an exercise price of $0.50 per share
      through September 30, 2008. All warrants are automatically redeemable by the
      Company at $0.001 if the common stock is then listed on a recognized stock
      exchange or trading at $1.00 per share for 20 consecutive trading
      days.




The
      minimum offering amount was $150,000, which was received and the escrow account
      was broken in the amount of $257,000 on September 29, 2006. As of September
      30,
      2006, the Company had received subscriptions totaling $287,000, including
      $15,000 from officers of the Company (see Note 14) and $30,000 for which the
      corresponding shares of common stock (150,000 shares) had not been
      issued.




On
      January 31, 2007, the Company closed the private placement, having sold
      3,553,750 Units for $710,750 ($0.20 per unit), including $15,000 to officers
      of
      the Company (see Note 14).  As of  July 11, 2007, the SEC
      declared the Company’s Form SB-2 registration statement effective, registering
      the shares underlying the private placement for resale.




BASIS
      OF
      PRESENTATION




The
      accompanying consolidated financial statements include the Company and its
      wholly owned subsidiaries. All significant inter-company transactions have
      been
      eliminated in consolidation.







F-8


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)






NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




FRANCHISE
      OPERATIONS




Franchise
      Overview




The
                Company currently supports independently owned franchises located
                in
                thirty-nine states, two provinces in Canada and Aruba. A summary
                of
                franchise activity is as follows:




September
                30,
              2007
            
            September
                30,
              2006Franchises
                in operation - beginning of period
            182
            
            160Franchises
                sold during the period
            34
            
            30Franchises
                cancelled, terminated or repurchased during the period
            (34)
            
            (8)Franchises
                in operation - end of period
            182
            
            182







Franchisees
                are required to pay the Company an initial franchise fee, royalty
                fees
                aggregating between 4% and 8% of gross sales and an advertising
                contribution fee of 2% of gross sales. In addition, all materials
                and
                goods sold by franchisees are processed, billed and collected through
                the
                Company using approved vendors and suppliers.





Reacquired
      Franchise
      Rights





The
      Company occasionally reacquires the rights to a franchise territory. When this
      occurs the Company contracts with the franchisee to reacquire the territory
      for
      a specified amount that can consist of cash, a note payable, and/or forgiveness
      of debt. While these territories provide benefits to the Company, they lack
      physical substance, thus, under Statement of Financial Accounting Standards
      (SFAS) No. 142, “Goodwill and Other Intangible Assets”, the Company records
      reacquired franchise rights as intangible assets at fair value. Fair value
      is
      established as the total amount of consideration that changed hands, not to
      exceed the estimated resale amount of the territory less all related costs
      of
      sales. The Company has concluded that reacquired territories have indeterminate
      lives, so the resulting intangible assets are not amortized. When reacquired
      territories are resold, the intangible assets are offset against the cost of
      the
      sale, and the related carrying value is reduced. The Company assesses impairment
      of intangible assets on an annual basis. If any impairment is found, the
      carrying amount of the asset is written down to the fair value.  In
      the twelve months ended September 30, 2007 the Company reacquired franchise
      rights from three franchises.  No franchise rights were reacquired in
      the twelve months ended September 30, 2006, and the nine months ended September
      30, 2005.





Repossessed
      Franchises





The
      Company has the right to repossess (cancel) franchises. When this occurs the
      Company cancels a franchise agreement and takes the franchise territory back
      from the franchisee. The Company cancels franchises for failure to abide by
      the
      terms and conditions of franchise agreements, and for failure to meet minimum
      performance standards pursuant to franchise agreements. Occasionally,
      franchisees voluntarily surrender their territories. No consideration is
      exchanged in these situations, and none of the franchise fee is refunded, thus
      under SFAS No. 45, “Accounting for Franchise Fee Revenue”, no fair value is
      assigned to these transactions.  In the twelve months ended September
      30, 2007 and September 30, 2006, and the nine months ended September 30, 2005,
      the Company repossessed 31, 8 and 9 franchises, respectively.





F-9


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)





NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




REVENUE
      RECOGNITION




Initial
                franchise fees are recognized upon the commencement of operations
                by the
                franchisee, which is when the Company has performed substantially
                all
                initial services required by the franchise agreement. Unearned incomerepresents
                franchise
                fees received for which the Company has not completed its initial
                obligations under the franchise agreement. Such obligations, consisting
                mostly of training, are generally fulfilled within 60 days of receipt
                of
                the initial franchise fee. Royalties and advertising fees are recognized
                as earned.




Franchisees
      place all orders for materials and supplies with the Company. The Company
      reviews each proposed purchase order to determine whether the products can
      be
      made as requested, makes any necessary changes, and then places the
      corresponding orders with its vendors. Accordingly, the Company determines
      all
      product specifications. While the products are shipped directly to the
      franchisees by the vendors, the Company receives title to the shipped items
      and
      has the physical risk of loss upon shipment.  The Company is liable to
      the vendors for payment and collects the amounts due for the goods from the
      franchisees. The Company negotiates all pricing with the vendors and has the
      ability to establish rebate programs with vendors, mark-ups or any other method
      of creating margin. In addition, the Company is responsible to the franchisees
      for goods shipped by the vendors that do not meet specifications. The Company
      has discretion in supplier selection. Thus, the Company acts as a principal
      as
      defined in the Emerging Issues Task Force, Issue 99-19, “Reporting Revenue Gross
      as a Principal versus Net as an Agent.” Revenue from materials and supplies
      sales is recorded upon shipment to the franchisee by the vendor and represents
      approximately 65% and 72% of total revenue for the years ended September 30,
      2007 and September 30, 2006, respectively.




INVENTORY




Inventory
      is valued at the lower of cost, using the first in first out method, or market
      and consists of manufacturing materials and supplies.




PROPERTY
      AND EQUIPMENT




Property
                and equipment is recorded at cost. Depreciation of equipment is provided
                by use of the straight-line method over the estimated useful lives
                of the
                related assets of three to five years. Leasehold improvements are
                amortized using the straight-line method over the life of the lease.
                Expenditures for replacements, renewals and betterments are capitalized.
                Maintenance and repairs are charged to operations as incurred.




INTANGIBLE
      ASSET IMPAIRMENT




Intangible
      assets consist of reacquired franchise rights from the repurchase of franchise
      territories. The Company has determined that reacquired franchise rights have
      indefinite lives and are not subject to amortization.  Intangible
      assets with indefinite lives are reviewed for impairment annually or more
      frequently if events or circumstances indicate the carrying amount of the assets
      may be impaired. As of September 30, 2007, no impairment has been
      recorded.







F-10


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)







NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




IMPAIRMENT
      OF LONG-LIVED ASSETS




The
      Company has adopted Statement of Financial Accounting Standards (SFAS) 144,
      “Accounting for the Impairment and Disposal of Long-Lived Assets,” which
      requires that long-lived assets to be held and used be reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      an asset may not be recoverable. The Company will assess the recoverability
      of
      the carrying cost of long-lived assets based on a review of projected
      undiscounted cash flows related to the asset held for use.  If assets
      are determined to be impaired, then the asset will be written down to its fair
      value based on the present value of the discounted cash flows of the related
      asset or other relevant measures. As of September 30, 2007, no impairment has
      been recorded.





ADVERTISING
      COSTS




The
                Company expenses all costs of advertising as incurred. Total advertising
                expense for the years ended September 30, 2007 and September 30,
                2006 was
                $196,603 and $196,292, respectively. Advertising expense does not
                include
                expenditures on behalf of franchisees from the National/Regional/Local
                Advertising Fund (see Note 1 – Cash Equivalents).




INCOME
      TAXES




The
                Company has adopted the provisions of SFAS 109, “Accounting for Income
                Taxes.” SFAS 109 requires recognition of deferred tax liabilities and
                assets for the expected future tax consequences of events that have
                been
                included in the financial statements or tax returns. Under this method,
                deferred tax liabilities and assets are determined based on the difference
                between the financial statement and tax basis of assets and liabilities
                using enacted tax rates in effect for the year in which the differences
                are expected to reverse.




Temporary
      differences between the time of reporting certain items for financial and tax
      reporting purposes consist primarily of depreciation of equipment and allowance
      for uncollectible receivables.




USE
      OF 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
      reported amounts of revenues and expenses during the reporting period. Actual
      results could differ from those estimates.





RESEARCH
      AND DEVELOPMENT
      COSTS





The
      Company has adopted the provisions of SFAS 86, “Accounting for the Costs of
      Computer Software to be Sold, Leased, or Otherwise Marketed,” which requires
      capitalization of certain software development costs subsequent to the
      establishment of technological feasibility. Based on the Company’s product
      development process, technological feasibility is established upon completion
      of
      a working model. Since the Company does not incur any costs between the
      completion of the working model and the point at which the product is ready
      for
      general release, all research and development costs are charged to expense
      as
      incurred. Research and development expenses for the years ended September 30,
      2007 and September 30, 2006 were $426,069 and $433,201,
      respectively.





F-11


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)


NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




VARIABLE
      INTEREST ENTITIES





The
      Financial Accounting Standards Board (“FASB”) issued Interpretation 46 (revised
      2003), “Consolidation of Variable Interest Entities” and requires the primary
      beneficiary of a variable interest entity to consolidate that
      entity.  The primary beneficiary of a variable interest entity is the
      party that absorbs a majority of the variable interest entity’s expected losses,
      receives a majority of the entity’s expected residual returns, or both, because
      of ownership, contractual or other financial interests in the
      entity.





The
      primary entities in which the Company possesses a variable interest are
      franchise entities, which operate our franchised window fashions. The Company
      does not possess any ownership interests in franchise entities, other than
      one
      wholly-owned franchise which we owned and consolidated until its sale in July
      2007 (see Note 1 – Organization and Note 16). The Company does not generally
      provide financial support to the franchises.  Management has reviewed
      the franchise entities and determined that, other than the former 100% owned
      franchise, the Company is not the primary beneficiary of the entities, and
      therefore, these entities have not been consolidated.





INCOME
      (LOSS) PER SHARE





Basic
      income (loss) per share is computed based on the weighted average number of
      common shares outstanding during each period. The computation of diluted
      earnings per share assumes the conversion, exercise or contingent issuance
      of
      securities only when such conversion, exercise or issuance would have a dilutive
      effect on income per share. The dilutive effect of convertible securities is
      reflected in diluted earnings per share by application of the “as if converted
      method.” The dilutive effect of outstanding options and warrants and their
      equivalents is reflected in diluted earnings per share by application of the
      treasury stock method.





For
      the
      years ended September 30, 2007 and September 30, 2006 all outstanding options
      were excluded from the computation of diluted loss per share as the effect
      of
      the assumed exercise and conversions would be anti-dilutive.





SHARE
      BASED
      COMPENSATION





Prior
      to
      October 1, 2006, the Company accounted for its share based compensation plans
      under the recognition and measurement provision of APB Opinion No. 25,
“Accounting for Stock Issued to Employees” (APB 25), and related
      Interpretations, as permitted by FASB Statement No. 123, “Accounting for
      Share-Based Compensation” (SFAS 123).  Effective October 1, 2006, the
      Company adopted the fair value recognition provisions to SFAS 123(R), using
      the
      modified-prospective transition method.  Under that transition method,
      employee compensation cost of $237,000 was recognized in the year ended
      September 30, 2007. Results from prior periods have not been
      restated.








F-12


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)


NOTE
      1 - SUMMARY OF
      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





SHARE
                BASED COMPENSATION (CONTINUED)





Had
      compensation cost for the Company’s stock-based compensation plan been
      determined based on the fair value at the grant dates for awards under those
      plans consistent with the method prescribed in SFAS 123, the Company’s net
      (loss) per share for the year ended September 30, 2006 would have been increased
      to the pro forma amount indicated below:





2006Net
                (loss) as reported
            
            $
            (732,205
            )Add
                stock based compensation included inreported net (loss)
            
            
            11,955Deduct
                stock based compensation expensedetermined under fair value
                method
            
            
            (158,884
            )Pro
                forma net (loss)
            
            $
            (879,134
            )Net
                (loss) per shareAs
                reportedBasic
                and
                diluted
            
            $
            (0.0281
            )Pro
                formaBasic
                and
                diluted
            
            $
            (0.0337
            )








The
      calculated value of stock options granted under these plans, following
      calculation methods prescribed by SFAS 123, uses the Black-Scholes stock option
      pricing model with the following assumptions used:





2007
            
            2006Expected
                option life-years
            3.00
            
            3.00
                – 7.50Risk-free
                interest rate
            5.25%
            
            5.125%Dividend
                yield
            -
            
            -Volatility
            68%
            
            28%








CASH
                EQUIVALENTS





For
      purposes of reporting cash flows, the Company considers as cash equivalents
      all
      highly liquid investments with a maturity of three months or less at the time
      of
      purchase. At September 30, 2007 and September 30, 2006, there were no cash
      equivalents.





Cash
      at
      September 30, 2007 and September 30, 2006 includes $42,289 and $117,983,
      respectively, of cash restricted for advertising and marketing. Such funds
      were
      contributed by franchisees to a National/Regional/Local Advertising Fund
      pursuant to franchise agreements, and may not be used for the general operations
      of the Company.





SHIPPING
      AND HANDLING FEES AND COSTS





All
      amounts billed to a customer in a sales transaction related to shipping and
      handling represent revenues earned and are reported as revenue, and the costs
      incurred by the Company for shipping and handling are reported as an
      expense.





F-13


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




FAIR
      VALUE





The
      carrying amount reported on the balance sheet for cash, accounts receivable,
      inventory, accounts payable and accrued liabilities approximates fair value
      because of the immediate or short-term maturity of these financial
      instruments.





The
      carrying amounts of notes receivable approximate fair value as the effective
      rates for those instruments are comparable to market rates at year
      end.





Based
      upon the borrowing rates currently available to the Company for loans with
      similar terms and average maturities, the fair value of long-term debt
      approximates its carrying value.





CONCENTRATIONS
      OF CREDIT RISK





Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist of cash, trade accounts receivable and notes
      receivable.





The
      Company maintains cash accounts at a single financial institution. At September
      30, 2007, the Company had $57,758 on deposit in excess of the federally insured
      amount. The Company periodically evaluates the credit worthiness of financial
      institutions, and maintains cash accounts only in large high quality financial
      institutions, thereby minimizing exposure for deposits in excess of federally
      insured amounts. The Company believes that credit risk associated with cash
      is
      minimal.





The
      Company has recorded trade accounts receivable from business operations. The
      Company periodically evaluates the collectibility of trade receivables and
      has
      provided an allowance for potentially uncollectible accounts.





The
      Company has recorded notes receivable from business operations.  The
      Company periodically evaluates the collectibility of its notes receivable and
      has provided an allowance for potentially uncollectible notes.





For
      the
      years ended September 30, 2007 and September 30, 2006, approximately 64% and
      68%, respectively, of materials and supplies were acquired from three major
      vendors, the largest vendor’s activity representing 35% and 34%, respectively,
      of the total. The related accounts payable to the largest vendor was
      approximately $311,704 as of September 30, 2007, and $309,927 as of September
      30, 2006.





SEGMENT
      REPORTING




SFAS 131,
      “Disclosures about Segment Reporting of an Enterprise and Related Information,”
establishes standards for the way public business enterprises report information
      about operating segments in annual financial statements and requires that those
      enterprises report selected information about operating segments in interim
      financial reports issued to stockholders. It also establishes standards for
      related disclosure about products and services, geographic areas and major
      customers. The Company and its subsidiaries operate in five industry segments,
      as disclosed in footnote 13.








F-14


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)





NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




RECENT
      PRONOUNCEMENTS





In
      December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements – an amendment of Accounting Research Bulletin
      No. 51” (“SFAS 160”).  SFAS 160 establishes accounting and reporting
      standards for ownership interests in subsidiaries held by parties other than
      the
      parent, the amount of consolidated net income attributable to the parent and
      to
      the noncontrolling interest, changes in a parent’s ownership interest and the
      valuation of retained noncontrolling equity investments when a subsidiary
      deconsolidated.  The Statement also establishes reporting requirements
      that provide sufficient disclosures that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners.  SFAS No. 160 is effective as of the beginning of an entity’s
      fiscal year that begins after December 15, 2008, which will be the Company’s
      fiscal year beginning October 1, 2009.  The Company is currently
      evaluating the potential impact, if any, of the adoption of SFAS No. 160 on
      our
      consolidated financial position, results of operations and cash
      flows.





In
      February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities, including an amendment of FASB
      Statement No. 115” (“FAS 159”). FAS 159 permits entities to choose to measure
      many financial instruments and certain other items at fair value that are not
      currently required to be measured at fair value. Unrealized gains and losses
      on
      items for which the fair value option has been elected are reported in earnings.
      SFAS 159 does not affect any existing accounting literature that requires
      certain assets and liabilities to be carried at fair value. SFAS 159 is
      effective for fiscal years beginning after November 15, 2007. Management
      currently does not expect adoption of FAS 159 will have a material effect on
      the
      Company’s financial position or results of operations.








NOTE
      2 – ACCOUNTS AND NOTES RECEIVABLE





Accounts
      receivable consists of amounts due from franchisees for sale of merchandise
      at
      September 30, 2007 and September 30, 2006, as follows:





2007
            
            
            2006Accounts
                receivable – trade
            
            $
            621,865
            
            
            $
            803,868Less
                allowance for doubtful accounts
            
            
            (40,057
            )
            
            
            (43,150
            )$
            581,808
            
            
            $
            760,718





The
      Company performs ongoing credit evaluations of its franchisees and has not
      required collateral or other forms of security for product sales or franchisee
      fees. The Company maintains an allowance for potential losses based on its
      estimate of uncollectible accounts. The Company’s allowance for doubtful
      accounts decreased by $3,093 from September 30, 2006 to September 30, 2007,
      and
      the Company charged directly to operations $90,582 and $69,413 of uncollectible
      accounts in the years ended September 30, 2007 and September 30, 2006,
      respectively.








F-15


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)





NOTE
      2 – ACCOUNTS AND NOTES RECEIVABLE (CONTINUED)





Notes
      receivable consists of balances due from franchisees. The notes are interest
      and
      non-interest bearing and are payable in monthly installments of $414 to $33,317,
      maturing at various dates through October 2009. The Company has recorded
      interest on the non-interest bearing notes, discounted at an imputed interest
      rate of 5.75%. At September 30, 2007 and September 30, 2006, notes receivable
      are comprised of:





2007
            
            
            2006Notes
                receivable, fair value
            
            $
            175,896
            
            
            $
            97,157Less
                allowance
            
            
            (27,574
            )
            
            
            -148,322
            
            
            
            97,157Less
                current portion
            
            
            (117,999
            )
            
            
            (75,787
            )Long
                term portion
            
            $
            30,323
            
            
            $
            21,370





The
      Company performs ongoing credit evaluations of its creditors and has not
      required collateral or other forms of security for promissory notes. The Company
      maintains an allowance for potential losses based on its estimate of
      uncollectible amounts. The Company’s allowance for uncollectible notes
      receivable increased by $27,574 from September 30, 2006 to September 30,
      2007.




NOTE
      3 - PROPERTY AND EQUIPMENT





Property
      and equipment at September 30, 2007 and September 30, 2006 consists of the
      following:








2007
            
            
            2006Furniture
                and equipment
            
            $
            99,162
            
            
            $
            85,262Computer
                equipment
            
            
            88,060
            
            
            
            82,478Software
            
            
            86,490
            
            
            
            85,229Leasehold
                improvements
            
            
            131,812
            
            
            
            51,457Assets
                under capital lease
            
            
            8,961
            
            
            
            -414,485
            
            
            
            304,426Less
                accumulated depreciation and amortization
            
            
            (264,433
            )
            
            
            (213,882
            )$
            150,052
            
            
            $
            90,544








Depreciation
      and amortization expense for the years ended September 30, 2007 and September
      30, 2006 was $61,871 and $73,653, respectively.








F-16


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)





NOTE
      4 – NOTE PAYABLE - OTHER





Note
      payable – other at September 30, 2007 and September 30, 2006 consists of the
      currently deferred portion of the Company’s monthly rent obligation under an
      office lease entered into effective September 15, 2002. Under the terms of
      the
      lease, the landlord has deferred a portion of the monthly rent aggregating
      $140,000 over the period September 15, 2002 to August 15, 2007. The deferred
      portion is evidenced by a non-interest bearing promissory note. The note is
      payable in cash or shares of the Company’s common stock at the option of the
      holder. The Company accretes the deferred portion of the monthly rent utilizing
      an imputed interest rate of 5.75%. The note increased $15,833 and $27,000 during
      the years ended September 30, 2007 and September 30, 2006, respectively. The
      balance at September 30, 2007 and September 30, 2006 of $140,000 and $124,167,
      respectively, represents the accretion of the note.




Future
      minimum payments under the terms of the note are as follows:




Year
                ending September 30, 2008
            
            $
            109,211Year
                ending September 30, 2009
            
            
            30,789$
            140,000







NOTE
      5 – CAPITAL LEASE OBLIGATIONS




Capitalized
      lease obligations at September 30, 2007 consist of a lease for office equipment,
      repayable in monthly installments of $316, and bearing an interest rate of
      16.3%.




Future
      minimum payments on capitalized leases are as follows:




Year
                ending September 30, 2008
            
            $
            4,477Year
                ending September 30, 2009
            
            
            3,7968,273Less
                amount representing interest
            
            
            (1,150
            )Present
                value of net minimum lease payments
            
            
            7,123Less
                current maturity
            
            
            (3,642
            )Long-term
                portion
            
            $
            3,481




NOTE
      6 – LINE OF CREDIT




In
      August
      2007, the Company opened a line of credit with a commercial bank in the amount
      of $250,000. The line of credit is collateralized with a first priority security
      interest in the personal property of Windows, and up to 125% of the amount
      is
      personally guaranteed by officers of the Company (see Note 14). Interest on
      the
      outstanding principal balance accrues at the Prime Rate, as set by the bank,
      and
      is payable monthly. The line of credit is available until August 30, 2008,
      at
      which time any outstanding principal balance and accrued interest are due.
      There
      is no prepayment penalty on the principal balance.




At
      September 30, 2007, the Company had drawn $100,000 against the line of
      credit.






NOTE
      7 – NOTE PAYABLE – BANK




In
      May
      2004, the Company entered into a loan agreement with a commercial bank for
      equipment in the amount of $54,103. The loan was satisfied during the year
      ended
      September 30, 2007.




F-17


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      8 – BRIDGE LOAN




In
      January 2006, the Company issued $200,000 of convertible promissory notes for
      cash, including $75,000 to officers of the Company (see Note 14).  The
      notes require quarterly interest payments in arrears at the rate of four percent
      plus the prime rate as published in the Money Rate Table of the Western Edition
      of the Wall Street Journal. Repayment of the notes was to commence upon the
      earlier of (a) the completion of a private placement or (b) July 5,
      2006.  If repayment were to commence pursuant to the completion of the
      private placement, the entire amount of the notes, except for any amounts that
      had been converted (see below) would be repaid from the proceeds of the private
      placement (see Note 5).  At the option of the lenders, at any time
      prior to the consummation of the private placement, the lenders could convert
      all or any of the principal amounts into the securities in the private
      placement.  Upon the minimum portion of the private placement having
      been sold, the lenders were required to convert at least fifty percent of the
      note into the private placement.




On
      January 31, 2007, the Company closed the private placement (see Note 1 – Private
      Offering Memorandum) and all of the bridge loan lenders converted the entire
      amount of the note into 1,000,000 units ($0.20 per unit), consisting of
      1,000,000 shares of common stock and 1,000,000 warrants to purchase shares
      of
      common stock at $0.50 per share.




Interest
      accrued and paid on the bridge loan for the years ended September 30, 2007
      and
      September 30, 2006 was $8,167 and $17,932, respectively.




The
      lenders were issued warrants to purchase a total of 1,000,000 shares of common
      stock in International at $0.30 per share. The warrants expire January 5, 2009.
      The Company granted piggyback registration rights (on a “best efforts” basis)
      with respect to the shares issuable upon exercise of these warrants. The fair
      value of the warrants was estimated as of the issue date under the Black-Scholes
      pricing model, with the following assumptions: common stock based on a market
      price of $0.20 per share, zero dividends, expected volatility of 28% (as derived
      from an analysis of trading prices of the stock of a peer company), risk free
      interest rate of 6.00% and expected life of 1.5 years. The fair value of the
      warrants of $7,655 was included as other expense during the fiscal year ended
      September 30, 2006.  Included in the shares registered with the SEC on
      the Company’s Form SB-2 registration statement were the shares underlying these
      warrants.






NOTE
      9 – DEFERRED RENT




In
      July
      2007, the Company entered into a non-cancelable lease for office facilities
      (see
      Note 15 – Leasehold Commitments). The lease agreement contains a tenant
      improvement allowance of $108,570, of which the Company has capitalized $91,206
      as leasehold improvements. The unused amount of $17,364 will be used as rent
      reduction for February and March 2008, in the amounts of $14,024 and $3,340,
      respectively. As of September 30, 2007, $88,442 of the capitalized leasehold
      improvements remains unamortized.  The Company recognizes a deferred
      rent liability for the utilized tenant improvement allowances within other
      long-term liabilities and amortizes these amounts over the term of the lease
      as
      a reduction of rent expense. The lease also contains a rent escalation clause.
      The Company records rental expense on a straight-line basis over the term of
      the
      lease, with $26,616 deferred as of September 30, 2007.  Total deferred
      rent at September 30, 2007 was $115,058.







F-18


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      10 – CONVERTIBLE DEBENTURES




In
      2005,
      the Company issued $100,000 of convertible debentures for cash, including
      $50,000 to an officer of the Company (see Note 14). The debentures have a
      three-year term maturing in February 2008, require quarterly interest only
      payments at the Wall Street Journal prime rate plus 1%, and are redeemable
      at
      the option of the Company in whole or in part prior to the due
      date.  The holder(s) of the convertible debentures have the option, at
      any time, to convert all or any portion of the debentures into common stock
      of
      the Company at $0.20 per share.





On
                January 31, 2007, the debenture holders converted $100,000 in debentures
                into 500,000 shares of common stock ($0.20 per share).





Interest
      accrued and paid on the debentures for the years ended September 30, 2007 and
      September 30, 2006 was $2,313 and $8,875, respectively.







NOTE
      11– STOCKHOLDERS’ EQUITY




SUBSCRIPTIONS
      RECEIVABLE




Subscriptions
      receivable at September 30, 2006 consist of 150,000 Units ($30,000) purchased
      pursuant to the Company’s private placement (see Note 1 – Private Offering
      Memorandum). Common stock was issued to satisfy the receivable upon closing
      of
      the private placement.




COMMON
      STOCK




During
      the year ended September 30, 2007, the Company: sold 2,268,750 shares of common
      stock for cash of $453,750 ($0.20 per share); accepted the conversion of a
      $200,000 bridge loan (see Note 8) into 1,000,000 shares of common stock ($0.20
      per share); and accepted the conversion of $100,000 of convertible debentures
      (see Note 10) into 500,000 shares of common stock ($0.20 per
      share).




Prior
      to
      the share for share exchange with Windows (see Note 1 – Organization), the
      Company issued 5,391,811 shares of common stock in conjunction with the
      recapitalization of V2K International, Inc.




During
      the year ended September 30, 2006, the Company: issued 71,500 shares of common
      stock for services valued at $14,300 ($0.20 per share); issued 2,860 shares
      of
      common stock for the exercise of stock options for cash of $143 ($0.05 per
      share); accepted the recision of sale of 116,660 shares of common stock for
      cash
      of $35,000 ($0.30 per share); sold 175,000 shares of common stock for cash
      of
      $35,000 ($0.20 per share); issued 7,000,035 shares of common stock for the
      conversion of the Company’s preferred stock ($0.286 per share); and sold
      1,285,000 shares of common stock for cash of $257,000 ($0.20 per
      share).




STOCK
      OPTION PLAN




The
      Company has adopted the V2K International, Inc. 2006 Stock Option Plan (the
      Plan). Under the Plan, the Board of Directors, in its discretion, may issue
      options to officers, directors, employees, and consultants on a case-by-case
      basis. In general, options may be exercised by payment of the option price
      by
      either (i) cash, (ii) tender of shares of its common stock which have a fair
      market value equal to the option price, or (iii) by such other consideration
      as
      the Board of Directors may approve at the time the option is granted. The
      Company has reserved an aggregate 30,000,000 shares of its common stock for
      options granted under the Plan.




F-19


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      11 – STOCKHOLDERS’ EQUITY (CONTINUED)




STOCK
      OPTION PLAN (CONTINUED)




A
      summary
      of the status of the Company’s stock option plans as of September 30, 2007 and
      September 30, 2006, and changes during the years then ended is presented
      below:




2007
              
              
              2006Weighted
              
              
              
              
              
              WeightedAverage
              
              
              
              
              
              AverageExercise
              
              
              
              
              
              ExerciseShares
              
              
              Price
              
              
              Shares
              
              
              PriceOutstanding
                  at
                  beginningof
                  period
              
              
              29,180,660
              
              
              $
              0.069
              
              
              
              29,925,660
              
              
              $
              0.051Granted
              
              
              50,000
              
              
              
              0.200
              
              
              
              28,045,110
              
              
              
              0.070Exercised
              
              
              -
              
              
              
              -
              
              
              
              (2,860
              )
              
              
              0.050Cancelled
              
              
              (50,000
              )
              
              
              0.140
              
              
              
              (24,337,250
              )
              
              
              0.050Expired
              
              
              -
              
              
              
              -
              
              
              
              (4,450,000
              )
              
              
              0.057Outstanding
                  at
                  endof
                  period
              
              
              29,180,660
              
              
              
              0.070
              
              
              
              29,180,660
              
              
              
              0.069Options
                  exercisable
                  atperiod
                  end, option pricerange
                  $0.05 - $0.20
              
              
              23,476,785
              
              
              
              0.058
              
              
              
              15,468,990
              
              
              
              0.050Weighted
                  average
                  remainingcontractual
                  life of optionsexercisable
                  at period end
              
              
              6.32
              
              
              
              
              
              
              
              7.47Weighted
                  average of
                  fairvalue
                  of
                  options grantedduring
                  the
                  period
              
              $
              0.097
              
              
              
              
              
              
              $
              0.070


Prior
      to
      October 1, 2006, the Company accounted for its share based compensation plans
      under the recognition and measurement provision of APB Opinion No. 25,
“Accounting for Stock Issued to Employees” (APB 25), and related
      Interpretations, as permitted by FASB Statement No. 123, “Accounting for
      Share-Based Compensation” (SFAS 123).  Effective October 1, 2006, the
      Company adopted the fair value recognition provisions to SFAS 123(R), using
      the
      modified-prospective transition method.  Under that transition
      method, the employee compensation cost of $237,000 recognized in the year ended
      September 30, 2007 includes: (i) compensation cost for all share-based payments
      granted prior to, but not yet vested as of October 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123; and (ii) compensation cost for all share-based payments granted subsequent
      to October 1, 2006 based on the grant date fair value estimated in accordance
      with the provision of SFAS 123(R). Results from prior periods have not been
      restated.







F-20


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      11 – STOCKHOLDERS’ EQUITY (CONTINUED)




STOCK
      OPTION PLAN (CONTINUED)




In
      the
      year ended September 30, 2007, 50,000 new options were issued under the
      Plan.




The
      calculated value of stock options granted under the Plan, following calculation
      methods prescribed by SFAS 123, uses the Black-Scholes stock option pricing
      model with the following assumptions:





2007Expected
                option life-years
            3.00Risk-free
                interest rate
            5.25%Dividend
                yield
            -Volatility
            68%







NOTE
      12 - INCOME TAXES




The
                Company accounts for income taxes under SFAS 109, which requires
                use of
                the liability method. SFAS 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 effective 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 reconciliation of enacted rates the years ended September 30, 2007 and
      September 30, 2006 is as follows:





2007
            
            2006Federal
            34%
            
            34%State
            4%
            
            4%Net
                operating loss carryforward
            -
            
            -Increase
                in valuation allowance
            (38%)
            
            (38%)-
            
            -







At
      September 30, 2007, the Company had a net operating loss carryforward of
      approximately $1,800,000 that may be offset against future taxable income
      subject to limitations imposed by the Internal Revenue Service. This
      carryforward is subject to review by the Internal Revenue Service and, if
      allowed, may be offset against taxable income through 2027.  A portion
      of the net operating loss carryovers begin expiring in 2019.







Deferred
                tax assets are as follows:





2007
            
            
            2006Deferred
                tax asset due to net operating loss
            
            $
            691,000
            
            
            $
            421,000Valuation
                allowance
            
            
            (691,000
            )
            
            
            (421,000
            )-
            
            
            
            -





F-21


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)


NOTE
      12 - INCOME TAXES (CONTINUED)





The
                deferred tax asset relates principally to the net operating loss
                carryforward. A valuation allowance was established at September
                30, 2007
                and September 30, 2006 to eliminate the deferred tax benefit that
                existed
                at that time since it is uncertain if the tax benefit will be realized.
                The deferred tax asset (and the related valuation allowance) increased
                by
                $270,000 and $258,000 for the years ended September 30, 2007 and
                September
                30, 2006, respectively.





Effective
                October 1, 2007, the Company must adopt the provisions of Financial
                Interpretation 48 (FIN 48), “Accounting for Uncertainty in Income
                Taxes.”  Management does not believe the adoption will have a
                material impact on future results of operations.





NOTE
      13 – SEGMENT INFORMATION





The
                Company and its subsidiaries (see Note 1 – Organization), operate in five
                industry segments. Parent Holding (International) provides the corporate
                vehicle for raising capital for the subsidiaries and fulfills the
                Company’s existence as a public reporting company; Windows sells and
                supports franchises in the residential and commercial window fashion
                industry; Technology develops and licenses proprietary software that
                allows users to decorate windows for both residential and commercial
                customers; Manufacturing manufactures soft product window treatments
                exclusively for Windows franchisees; and MSI acts as product development
                resource and sales agent for overseas window covering manufacturers.





Identified
                assets by industry are those assets that are used in our operations
                in
                each industry. The Company’s assets are principally cash, accounts
                receivable and equipment.





The
                Company has adopted SFAS No. 131, “Disclosures about Segments of an
                Enterprise and Related Information”, which requires the presentation of
                descriptive information about reportable segments which is consistent
                with
                that made available to the management of the Company to assess
                performance.





Windows
                derives its revenues from sales of franchises, royalty and sales
                of
                materials and supplies to franchisees. Manufacturing receives its
                income
                from the sale of labor on soft product window treatments to Window’s
                franchisees. MSI derives its revenues by acting as a product development
                resource and sales agent for overseas window covering manufacturers.





During
      the years ended September 30, 2007 and September 30, 2006, inter-segment
      revenues were $558,088 and $647,704, respectively.  The accounting
      policies applied by each segment are the same as those used by the Company
      in
      general. Inter-segment revenues are appropriately eliminated in
      consolidation.





There
                have been no material changes in the amount of assets of any operating
                segment since the last annual report.








F-22


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      13 – SEGMENT INFORMATION (CONTINUED)





Segment
      information for the years ended September 30, 2007 and September 30, 2006
      consists of the following:





Parent
              
              
              
              
              
              
              
              
              Manu-Holding
              
              
              Windows
              
              
              Technology
              
              
              facturing
              
              
              MSI
              
              
              TotalRevenues2007
              
              
              -
              
              
              
              8,334,983
              
              
              
              -
              
              
              
              -
              
              
              
              600
              
              
              
              8,335,5832006
              
              
              -
              
              
              
              8,158,542
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,158,542Inter-segment
                  revenues2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              558,088
              
              
              
              -
              
              
              
              558,0882006
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              647,704
              
              
              
              -
              
              
              
              647,704Net
                  (loss)2007
              
              
              (237,450
              )
              
              
              (104,461
              )
              
              
              (426,069
              )
              
              
              (174,762
              )
              
              
              (71,609
              )
              
              
              (1,014,351
              )2006
              
              
              (1,399
              )
              
              
              (541,855
              )
              
              
              (110,084
              )
              
              
              (78,867
              )
              
              
              -
              
              
              
              (732,205
              )Identifiable
                  assets
                  (net)2007
              
              
              1,680,554
              
              
              
              1,280,045
              
              
              
              -
              
              
              
              42,396
              
              
              
              600
              
              
              
              3,003,5952006
              
              
              1,089,096
              
              
              
              1,401,032
              
              
              
              -
              
              
              
              91,011
              
              
              
              -
              
              
              
              2,581,139Depreciation
                  and
                  amortizationcharged
                  to identifiable
                  assets2007
              
              
              -
              
              
              
              39,759
              
              
              
              -
              
              
              
              22,112
              
              
              
              -
              
              
              
              61,8712006
              
              
              -
              
              
              
              53,977
              
              
              
              -
              
              
              
              19,676
              
              
              
              -
              
              
              
              73,653Interest
                  revenue2007
              
              
              -
              
              
              
              22,837
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              22,8372006
              
              
              -
              
              
              
              6,506
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6,506Interest
                  expense2007
              
              
              -
              
              
              
              19,988
              
              
              
              -
              
              
              
              242
              
              
              
              -
              
              
              
              20,2302006
              
              
              -
              
              
              
              28,700
              
              
              
              -
              
              
              
              1,150
              
              
              
              -
              
              
              
              29,850





Reconciliation
      of segment totals to consolidated amounts:





2007
            
            
            2006Total
                revenues for reportable segments
            
            $
            8,893,670
            
            
            $
            8,806,246Elimination
                of inter-segment revenues
            
            
            (558,088
            )
            
            
            (647,704
            )Total
                Consolidated Revenues
            
            $
            8,335,583
            
            
            $
            8,158,542







Reconciliation
      of segment totals to consolidated amounts (continued):





2007
            
            
            2006Identifiable
                assets (net)
            
            $
            3,003,595
            
            
            $
            2,581,139Elimination
                of intercompany assets
            
            
            (1,667,782
            )
            
            
            (1,074,161
            )Total
                Consolidated Assets
            
            $
            1,335,813
            
            
            $
            1,506,978








F-23


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      14 - RELATED PARTY TRANSACTIONS





During
                the year ended September 30, 2007: officers of the Company personally
                guaranteed up to 125% of a line of credit with a commercial bank
                (see Note
                6); $75,000 in bridge loans held by officers of the Company were
                converted
                into 375,000 shares of common stock ($0.20 per share) and 375,000
                warrants
                to purchase shares of common stock at $0.50 per share (see Note 8);
                $50,000 in debentures held by an officer of the Company were converted
                into 250,000 shares of common stock ($0.20 per share) (see Note 10);
                and
                $65,000 in commissions related to sales of the Company’s private placement
                (see Note 1 – Private Offering Memorandum) were paid to an existing
                shareholder.





During
      the year ended September 30, 2006: $15,000 in subscriptions (see Note 1 –
Private Offering Memorandum) were received from officers of the Company; 75,000
      shares of common stock at $0.20 per share and 75,000 warrants to purchase shares
      of common stock at $0.50 per share were issued to officers of the Company for
      their participation in a private placement (see Note 1 – Private Offering
      Memorandum); and $75,000 in bridge loans (see Note 8) were issued to officers
      of
      the Company.








NOTE
      15 – COMMITMENTS AND CONTINGENCIES





LEASEHOLD
      COMMITMENTS





In
      July
      2007 the Company entered into a non-cancelable lease for office facilities
      in
      Lakewood, Colorado.  The lease began August 1, 2007 and ends January
      31, 2013.  The lease terms call for six months of free rent, followed
      by escalating rents over the life of the lease.  Minimum payments due
      under the lease are as follows:





Year
                ending September 30, 2008
            
            $
            94,826Year
                ending September 30, 2009
            
            
            171,903Year
                ending September 30, 2010
            
            
            177,331Year
                ending September 30, 2011
            
            
            182,760Year
                ending September 30, 2012
            
            
            188,188Thereafter
            
            
            63,333$
            878,341





OPERATING
                LEASE COMMITMENTS





The
                Company leases equipment under operating leases. The future minimum
                lease
                payments due under non-cancelable operating leases is as follows:





Year
                ending September 30, 2008
            
            $
            7,260Year
                ending September 30, 2009
            
            
            7,260Year
                ending September 30, 2010
            
            
            7,260Year
                ending September 30, 2011
            
            
            7,260Year
                ending September 30, 2012
            
            
            5,746$
            34,786








F-24


V2K
        INTERNATIONAL, INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 (CONTINUED)




NOTE
      15 – COMMITMENTS AND CONTINGENCIES (CONTINUED)





CONTINGENCIES





Under
                the terms of the member purchase agreement of Franchise LLC (see
                Note 1 –
                Organization and Note 16), the Company may be liable for an amount
                of any
                unsatisfied debt obligation that was incurred on behalf of Franchise
                LLC
                through July 31, 2007.  These potential contingent liabilities
                have been estimated to be approximately $22,500.





NOTE
      16 – DISCONTINUED OPERATIONS





In
      July
      2007, the Company divested its entire interest in Franchise LLC (see Note 1
–
Organization). The Company has accounted for Franchise LLC as a discontinued
      operation. The Company accepted a promissory note in the amount of $29,950,
      bearing interest at 8%, with twenty-four monthly payments of $1,355 commencing
      in November 2007. The divestment resulted in a gain on the sale of
      $19,179.




The
      Company recorded a net loss from discontinued operations, net of tax, of $10,157
      for the year ended September 30, 2007.




NOTE
      17 – SUBSEQUENT EVENTS





In
      October 2007, the Company entered into an agreement amending the deferred
      portion of monthly rent obligations at its previous location (see Note
      4).  The Novation and Mutual/Partial Release agreement provides that
      the landlord waive its conversion rights and the principal amount of the
      original non-interest bearing promissory note, and that the Company remit
      payment of $51,583 to the landlord and enter into a new promissory note in
      the
      amount of $92,367, bearing interest at 8%, with twelve monthly payments of
      $8,035 commencing in February 2008.




In
      October 2007, the Company sold the inventory and fixed assets of Manufacturing
      (see Note 1 – Organization), at cost, to a third party. The Company accepted a
      promissory note in the amount of $13,827, bearing interest at 8%, with
      twenty-four monthly payments of $625 commencing in February 2008. All financial
      statement reporting for Manufacturing for the year ended September 30, 2007
      is
      included in these consolidated financial statements. There has been no allowance
      posted for this transaction because the assets have been sold at cost, and
      there
      are no anticipated closing costs related to this transaction. Manufacturing
      has
      not been classified as a discontinued operation in these consolidated financial
      statements as it continues as a legal entity and wholly owned subsidiary of
      the
      Company, and has been included in the segment reporting footnote (see Note
      13).
      Manufacturing continues to act as the primary supplier of soft window treatments
      to Windows and its franchisees, but does so by managing strategic alliances
      with
      outside vendors.







F-25