Newsletter

V2K International: New Parner, New Future

  March 24, 2008  
  Volume IX, Issue 22  
Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com

To OTC Journal Members:
 

V2K International (OTC BB: VTOK)

 
Check Out The V2K Video

You can watch today's video before or after reading the presentation. Simply go to the home page at www.otcjournal.com, and you will find it. Alternatively, you can click here  to go directly to the proper page. It should simply play on your computer without difficulty- don't forget to turn on your sound.

Today, V2K, as a simplified overview, is a company that sells window coverings through a network of franchisees. Not exactly a cure for cancer, but a sound business. Sound a little plain vanilla? If you think so, you would be wrong. When you drill down, you will find some robust growth drivers imbedded in their model, the kind of growth drivers that can yield substantial profits for early stage market investors.

I love transformational change for the better, and VTOK is transforming today. Here's the recipe: Find a company riding a megatrend, add in disruptive technology, and throw in highly combustible fuel for growth through transformational change - That's a recipe for profits. To understand today's new idea- V2K- you have to look at all three legs of their business, then understand the metamorphic change.
 

  Leg 1: The Megatrend  

In 1969, University of Oklahoma student Jim Cavanaugh recognized there was a significant need for overnight building maintenance services- commercial cleaning service Jani- King was born, and the company started franchising in 1974. Today, there are over 12,000 franchises operating on a world wide basis, mostly home based. Their growth has been enormous over the past five years.

Here's another one I'll bet you didn't know about- the creme de la creme of professional automotive repair tools- Snap On Tools- did you know the Snap On Tool guy was running a home based business? Yes, there are about 4,000 franchises.

The most current estimates I could find for small, home based businesses is 24 million- yes, in the US today there are about 24 million home based businesses. As manufacturing ratchets down, a long living population ages, and technology breakthroughs make us more virtual everyday, the home based business is growing, and growing dramatically. It's a major growth driver for V2K.
 

  Leg 2: Disruptive Technology  

One word: Software. I don't have the time to go out into the home design world and look at every piece of software imaginable. However, I have seen V2K's disruptional software, and it has impact.

It's just amazing how quickly a V2K representative can take the dimensions of a room, input them into a simple notebook computer, then have a working 3D image. From there, you can be put into the room with any changes you want to make. Today, their focus is on window coverings. However, the platform is easily expandable to any home improvement need- floor coverings, cabinets, fixtures, paint, furniture, etc.

It's one of the most powerful sales tools I've ever seen, and translates easily into on the spot sales as their customer gets a wonderful experience. Create the virtual room for the customer, get the bid on the spot, generate the paperwork, and get the sale. It's simply seamless.

The software also can be licensed, which could drive further revenue growth. An Australian company has already signed an LOI to be the first international licensee.
 

  Metamorphic Change: Driving Customer Interest  

Today, just after the market closed, VTOK made an announcement which reveals the final ingredient in the growth driving recipe. They have formed an alliance with Amerivon Holdings with a two fold purpose.

Have you ever walked into Costco, Wal-Mart, Sam’s Club, Target, or any of the like and walked past the Kiosk in the entry way or throughout the store? I have, and at my neighborhood Costco there are always consumers looking at the displays.

You are looking at an image of the kiosks that will start showing up in these big box stores over the coming months and years. A pilot program kicks off next month in two mega store locations, and the company plans to roll out many more on a go forward basis.

These kiosks will be there for the specific purpose of generating sales leads for the franchisees. They refer to it as a "Branding Campaign"- V2K will get its brand out in front of the thousands upon thousands of individual consumers who walk through those doors everyday. A pilot program kicks off next month in 2 big box stores. In the video, the company estimates it will be in 3,000 stores in the next 3 years.

I suspect the kiosk program will generate significant lead flow and be a real growth driver for additional franchisee sales. The program represents a real commitment to the success of the franchisees- after all, as one of the franchisees points out in the video, her close rate is 85%. If she can get a lead, she can close the sale.

As part and parcel of the new alliance, VTOK disclosed post close today it has executed a $6.1 million financing term sheet with Amerivon. Amerivon plans to help VTOK accelerate its growth very dramatically, and plans to provide the company with $6.1 million to insure VTOK can finance its growth. Amerivon will become an equity investor in the company, and make its money on the appreciation in the stock.

While not a household name, Amerivon is the 1200 lb gorilla in kiosk merchandising in big box stores. You can learn more about them by visiting their web site at www.amerivon.com
 

  History and Upside  

This is the part where I always give a quick overview of the financial history of the company, and take a look at the chart. I try to pick out issues that I believe are important for investors.

VTOK has only been publicly traded in November of 2007- much like SPKL, the company went public through a self underwritten IPO, which is a major positive on the technical side of the stock.

Unlike many other franchise companies, VTOK does indeed get to book the revenues from the products the franchisees sell. There are about 180 franchisees in their system, and I am expecting quite rapid growth in 2008. One of the beautiful parts of this franchise model- very low barriers to entry and the start up process is quick and painless. All you need is an office in your home to work out of, and about $75,000 in cash. $60,000 goes to the franchisee fee (a little less for smaller markets), and you need about $15k in working capital. Once you go through their training program, you are in business. 

Q4, which is typically their slowest quarter, yielded about $1.6 million in revs. $300k of it was franchise sales, which implies they only recruited 5 new franchisees for the quarter.

I've done extensive interviews with the management on this project. I can tell you that 2007 was a transition year for the company. After a couple years of early success, they took a step back to go through the SEC regulatory process and take a look at their franchisees. Some territories were taken back where franchisees weren't performing. This is the sort of business people could go into on a whim. The company wants a network of professionals seriously committed to robust businesses.

Betting on VTOK is a bet on the change that will come with the Amerivon relationship, financing, and the new kiosk program. A couple of years from now, investors will look back as this event as the spring board to success.

There are 30 million I&O- in the $.25 to $.30 range, the entire market value of the company is only about $7.5 million to $10 million within that same range. The stock hasn't been trading that long, but on the plus side, it is on the low end of its brief history at about the $.30 mark.

The big change- a huge strategic partner is investing $6.1 million and using its resources to help this caterpillar grow into a butterfly. I'm looking for a $50 million valuation, which could translate to about a $1 stock price(allowing for some dilution) somewhere down the road in concert with a great growth year on the horizon. 

In the franchise arena, I found you Spicy Pickle (OTC BB:SPKL) in the early stages, and it did extremely well for early investors- running from $.70 to $2 in six weeks before the current Bear knocked it down. SPKL was the last idea with a video presentation as well. In the home based business arena, I found Commerce Planet (OTC BB: CPNE) before anyone knew about it. I found it in '05 at $1, and it went to $2. Then, in '06, it went from $.30 to $3.50 before the flaws in their business model drove the stock back down.

Own it today at or below $.35 with a $1 price target over the next 6 to 18 months.
 

Check Out The V2K Video

You can watch today's video before or after reading the presentation. Simply go to the home page at www.otcjournal.com, and you will find it. Alternatively, you can click here  to go directly to the proper page. It should simply play on your computer without difficulty- don't forget to turn on your sound.

Here is the complete text of today's news for your review:
 

Press Release Source: V2K International, Inc.

V2K Executes $6.1 Million Financing Term Sheet from Strategic Investment Partner

Monday March 24, 4:15 pm ET

LAKEWOOD, Colo., March 24 /PRNewswire-FirstCall/ -- V2K International, Inc. (OTC Bulletin Board: VTOK - News), announced today that it has received and executed a $6,100,000 financing term sheet from Amerivon Holdings, LLC. (The transaction with Amerivon is subject to the completion of its due diligence and execution of appropriate definitive agreements covering the terms described in the term sheet.) Amerivon helps companies accelerate growth opportunities in mass market retail channels by providing access to distribution, consulting, and capital. The primary use of the investment will be the implementation of V2K's kiosk marketing program into the retail market. V2K has identified over 16,000 retail locations that are potential clients for its kiosk marketing concept.

One of Amerivon's greatest attributes is providing clients an introduction to retail executive decision makers. A few notable introductions have included a partnership with Car Toys, where their company now provides wireless phones and accessories to Costco members from kiosks in all of Costco's US warehouses. Amerivon also assisted a media group in obtaining a distribution agreement with Wal-Mart in over 4,500 stores covering nearly 14,000 kiosks. Amerivon has two other groups in pilots in Sears, Home Depot and Costco with cutting edge kiosk marketing retail programs.

"This is a significant milestone in our company's history," stated Vic Yosha, President & CEO of V2K. "The additional capital is obviously a vital element of our plan to launch our kiosk marketing program. However, receiving the investment capital from Amerivon, who is widely recognized within the industry as a leading expert in this field, and having them be directly involved in the planning, development, and execution of our business plan, is the best investment partner we could have secured."

Kiosk and self-service technology services are a rapidly expanding market. As new technologies bolster and enable the widespread acceptance of interactive kiosk systems, the market is poised for tremendous and significant growth. Specifically, end users have become well-accustomed to interactive kiosk systems and expect self-serve solutions that offer speed, convenience, and functionality.

V2K will launch its kiosk marketing program initially with a large-box retailer at two test sites beginning April 15, 2008. Testing is anticipated to expand thru the summer with an additional 25 kiosks to be rolled out at other locations throughout the US. Concurrently, with the assistance of Amerivon, additional retail concepts are expected to commence utilizing the kiosk marketing program. For more information, please visit us at our web site http://www.v2k.com.

About V2K International, Inc.

Through its wholly owned subsidiary, V2K Technology, V2K develops and licenses proprietary software that is designed to be used in the commercial and home decor markets. Almost anything can be done to the interior of a room utilizing its software. In a three dimensional view, where everything is 100% to scale, the user can add, adjust, color and texture walls, windows, doors, ceilings and floors, and then drag and drop items from a library of products into the scene. V2K Technology licenses a version of the software for custom window treatments to another wholly-owned subsidiary, V2K Window Fashions, which operates the franchise system, V2K Window Decor & More. Using the technology as the centerpiece of a franchise offering, V2K Window Fashions sells and supports franchises in the window fashion industry. V2K currently has approximately 180 franchisees operating in the United States, Canada and Aruba.

Forward Looking Statement Notice: This press release includes "forward-looking statements" as defined by the Securities and Exchange Commission (the "SEC"). All statements, other than statements of historical fact, included in the press release that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the company and may not materialize. Investors are cautioned that any such statements are not guarantees of future performance. The contents of this release should be considered in conjunction with the warnings, risk factors and cautionary statements contained in the company's recent filings with the SEC, including its Annual Report on Form 10-KSB and Quarterly Report on Form 10-QSB. Furthermore, the company does not intend (and is not obligated) to update publicly any forward-looking statements, except as required by law.

Source: V2K International, Inc.

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