- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

ACT OF 1934

For the quarterly period ended September 30, 2008

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _____ to ____

Commission File No. 000-27277

KALEIDOSCOPE VENTURE CAPITAL INC.

(Exact name of registrant as specified in its charter)

NEVADA	98-0207554
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

282 Katonah Ave, #200

Katonah, New York 10536

(Address of principal executive offices, zip code)

(914) 448-7600

(Registrant’s telephone number, including area code)

170 E. Post Road, Suite 206

White Plains, New York 10601

(Former name, former address and former fiscal year,

if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of November 18, 2008, there were 1,901,395 shares of the issuer’s common stock, par value $0.001 per share, outstanding, 350 shares of Series A Convertible Preferred Stock outstanding, and 100,000,000 shares of Class A Common Stock, par value $0.001 per share, outstanding.

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company x

(Do not check if a smaller reporting company)

KALEIDOSCOPE VENTURE CAPITAL INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2008

INDEX

Index		Page

Part I.	Financial Information
	Item 1. Financial Statements	F-1

	Consolidated Balance Sheet as of September 30, 2008 (unaudited)	F-2

	Consolidated Statements of Operations - for the three and nine months ended September 30, 2008 and 2007 (unaudited)	F-3

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (unaudited)	F-4

	Notes to Consolidated Financial Statements (unaudited)	F-5

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

	Item 3. Controls and Procedures	7

Part II.	Other Information
	Item 1. Legal Proceedings	7

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7

	Item 3. Defaults Upon Senior Securities	7

	Item 4. Submission of Matters to a Vote of Security Holders	7

	Item 5. Other Information	7

	Item 6. Exhibits	8

Signatures		9

Certifications

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements include, among other things, the company’s ability to (i) adapt to rules and regulations that may be promulgated that affect how Kaleidoscope Venture Capital must conduct its Voice-over-Internet Protocol business and operations; (ii) market and distribute its Voice-over-Internet Protocol services; (iii) secure capital to continue operations; (iv) achieve and manage growth; and (v) develop or acquire new technology to effectively provide new and/or better services. Additional factors that will impact the company’s success include the company’s ability to attract and retain qualified personnel; the voting decisions of Robert Koch, who controls approximately 50% of the voting power of all securities of Kaleidoscope Venture Capital; and other factors discussed in Kaleidoscope Venture Capital’s filings with the Securities and Exchange Commission (“SEC”).

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the Securities and Exchange Commission or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Kaleidoscope Venture Capital Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc)

Consolidated Financial Statements

For the Three and Nine Months ended September 30, 2008 and 2007

(Unaudited)

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Kaleidoscope Venture Capital Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc)

Index to Consolidated Financial Statements

	Page(s)

Consolidated Balance Sheets (Unaudited)	F-2

Consolidated Statements of Operations (Unaudited)	F-3

Consolidated Statements of Cash Flows (Unaudited)	F-4

Notes to Consolidated Financial Statements (Unaudited)	F-5

F-1

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Consolidated Balance Sheets

	September 30, 2008			December 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,780		$	236
Total current assets		1,780			236
Investment in non-marketable equity securities		19,148			18,656
Property and equipment, net		13,015			18,074
Total assets	$	33,943		$	36,966

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Loans and notes payable	$	1,867,000		$	1,767,000
Loans and notes payable, related parties		170,886			160,486
Loan payable due for software purchase		131,746			131,746
Accounts payable		317,563			285,379
Accounts payable, related parties		306,180			240,779
Accrued expenses		1,488,299			1,270,289
Accrued expenses, related parties		588,342			272,304
Convertible debentures		84,912			84,912
Payable to shareholder		900,027			900,027
Embedded conversion option liability		-			193,375
Other liablilities		14,289			14,289
Total current liabilities		5,869,244			5,320,586

Commitments and contingencies (Note 10)

STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 25,000,000 authorized Series A, voting convertible preferred stock, 100,000 shares authorized, 350 and 250 shares issued and outstanding (liquidation value $100.00 per share)		-			-
Common stock, $0.001 par value, 400,000,000 authorized, 1,901,395 and 1,364,680 issued and outstanding		1,901			1,365
Common stock issuable, at par value (550,025 and 40,025 shares)		550			40
Common stock , Class A non voting, $.001 par value, 100,000,000 shares authorized, 100,000,000 shares issued and outstanding		100,000			100,000
Common stock and Common Stock, Class A subscriptions receivable		(1,165,000	)		(1,165,000	)
Additional paid-in capital		11,250,021			7,881,916
Accumulated deficit		(16,022,773	)		(12,101,941	)
Total stockholders' deficit		(5,835,301	)		(5,283,620	)
Total liabilities and stockholders' deficit	$	33,943		$	36,966

See accompanying notes to consolidated financial statements

F-2

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc)

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007

Revenue	$	-		$	4,000		$	7,461		$	53,761
Cost of revenue		-			739			-			2,217
Gross profit		-			3,261			7,461			51,544

Costs and expenses:
Compensation		116,100			148,035			540,897			491,832
Consulting		6,311			51,876			1,136,159			307,229
Professional fees		31,314			24,050			791,299			72,453
General and administration		22,253			51,307			67,971			166,122
		175,978			275,268			2,536,326			1,037,636
Loss from operations		(175,978	)		(272,007	)		(2,528,865	)		(986,092	)

Other income (expense)
Interest expense		(62,907	)		(111,685	)		(235,763	)		(411,108	)
Change in fair value of embedded conversion option liability		-			1,028			(1,156,696	)		(62,752	)
Foreign currency transaction gain (loss), net		(1,480	)		-			492			(3,269	)
Total other income (expense)		(64,387	)		(110,657	)		(1,391,967	)		(477,129	)

Net loss	$	(240,365	)	$	(382,664	)	$	(3,920,832	)	$	(1,463,221	)

Net loss per share - basic and diluted	$	(0.11	)	$	(0.48	)	$	(2.09	)	$	(7.06	)

Weighted average shares outstanding during the period - basic and diluted		2,170,985			799,674			1,877,853			207,359

See accompanying notes to consolidated financial statements

F-3

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(3,920,832	)	$	(1,463,221	)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock options granted for services		490,816			14,175
Stock option exercises paid for with services		15,000			5,050
Deferred consulting amortization		-			146,667
Common stock granted for services		1,392,000			-
Preferred stock granted for services		2,500			-
Non-cash loan fee		25,000			20,000
Non-cash revenues		-			(17,290	)
Foreign currency transaction loss (gain)		(492	)		1,143
Amortization of debt discount to interest expense		-			220,607
Depreciation and amortization		5,059			7,276
Change in fair value of embedded conversion option liability		1,156,696			62,752
Changes in operating assets and liabilities:
Increase (Decrease) in:
Accounts payable		32,184			55,133
Accounts payable, related party		65,401			13,919
Accrued interest and expenses		144,472			-
Accrued expenses, related aprties		311,846			234,928
Accrued interest - related party		4,192			-
Other accrued liabilities		73,538			(93,883	)
Accrued expenses		-			104,737
Net cash used in operations		(202,620	)		(688,007	)

Cash Flows from investing activities:
Equipment purchase		-			-
Net cash used in investing activities		-			-

Cash flows from financing activities:
Bank overdraft		-			(180	)
Loan proceeds from related party, net		10,400			26,152
Loan proceeds		75,000			330,000
Loan repayments to related parties		-			-
Proceeds from common stock sales		118,764			317,338
Repayment of notes payable		-			-
Net cash provided by financing activities		204,164			673,310
Net increase (decrease) in cash and cash equivalents		1,544			(14,697	)
Cash and cash equivalents, beginning of period		236			14,697
Cash and cash equivalents, end of period	$	1,780		$	-

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	-		$	-
Income taxes	$	-		$	-
Supplemental disclosure of non-cash investing and financing activities :
Conversion of debt to common stock	$	-		$	120,000
Recording of beneficial conversion value to debt discount and APIC	$	-		$	60,000
Record initial fair value of embedded conversion option as debt discount	$	-		$	150,000
Exchange of accounts payable for common stock on exercise of options	$	-		$	37,900
Recording of deferred consulting	$	-		$	60,000
Sale of common stock Class A for subscription receivable	$	-		$	1,000,000
Reclassification of embedded conversion option liability to equity	$	1,350,071		$	-

See accompanying notes to consolidated financial statements

F-4

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

1.	NATURE OF BUSINESS AND GOING CONCERN

Organization - Kaleidoscope Venture Capital, Inc. (“KVI” or the “Company”) is a Nevada corporation, which was incorporated on June 12, 1998. On July 14, 2008 Vocalscape Networks, Inc. filed an amendment with the Nevada Secretary of State to change its name to Kaleidoscope Venture Capital, Inc.

Vocalscape Networks Operating Subsidiary, Inc. (VNOS), our wholly-owned subsidiary, is a Nevada corporation, which was incorporated on February 5, 2003.

KVI has announced a change in its current business direction after officially changing its name to Kaleidoscope Venture Capital Inc. KVI plans to take advantage of certain strategic business relationships and opportunities. While maintaining its interest in VNOS, Kaleidoscope Venture Capital Inc. plans to foster early-stage companies through the developmental phases until such time as these companies have sufficient financial, human and physical resources to function on their own."

Nature of Business and Current Operations - Our subsidiary, VNOS is a developer of Voice over Internet Protocol (VoIP) telephony solutions. VNOS provides VoIP telephony solutions and communications software for Internet Service Providers (ISPs), Internet Telephony Service Providers (ITSPs) and Telecommunications companies worldwide. VNOS develops VoIP and interactive communications software, including Soft phone applications, Customer Acquisition and Billing Systems, SIP Servers, Gatekeepers and Virtual Calling Cards. VNOS’s strategy is to focus on VoIP software and Long Distance termination solutions that bring together a full range of communications solutions and services thereby providing a turn-key VoIP infrastructure for ISP’s, ITSP’s and Telecommunications companies.

On July 14, 2008 Vocalscape Networks, Inc. filed an amendment with the Nevada Secretary of State to change its name to Kaleidoscope Venture Capital, Inc. and to do a 1 for 200 reverse split on both its common stock and its Series A Convertible preferred stock. The Class A Common Stock was not part of the reverse split. Due to the reverse split all share and per share data has been retroactively restated in the accompanying consolidated financial statements and footnotes to conform to the post split share amounts.

Going Concern - The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company had a net loss for the nine months ended September 30, 2008 of $3,920,832, net cash used in operations for the nine months ended September 30, 2008 of $202,620, and working capital deficit of $5,867,464, accumulated deficit of $16,022,773 and stockholders’ deficit of $5,835,301 at September 30, 2008. In addition, the Company was in default on $436,746 of promissory notes and loans at September 30, 2008.

F-5

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.

In order to execute its business plan, the Company will need to raise additional working capital and generate additional revenues. There can be no assurance that the Company will be able to obtain the necessary working capital or generate additional revenues to execute its business plan. During 2008, the Company generated revenues from customer consulting agreements and raised capital through initiating a Regulation S offering by VSI. Management believes the continuation of revenues combined with additional capital raises and additional promissory notes will provide the Company the ability to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Principles of Consolidation - The consolidated financial statements include the accounts of KVI and it’s wholly owned subsidiary VNOS. All material intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents - The Company classifies as cash equivalents any investments which can be readily converted to cash and have an original maturity of less than three months. At times cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions.

Investments - Certain securities that the Company may invest in may be determined to be non-marketable. Non-marketable securities where the Company owns less than 20% of the investee are accounted for at cost pursuant to APB No. 18, "The Equity Method of Accounting for Investments in Common Stock" ("APB 18").

Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. The cost of investments sold is based on the specific identification method.

The Company periodically reviews its investments in non-marketable securities and impairs any securities whose value is considered non-recoverable. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. GAAP requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments.

F-6

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

Fair Value of Financial Instruments - The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

·	Cash and cash equivalents: The carrying amount reported in the balance sheet for cash approximates its fair value.

·	Accounts payable: Due to their short-term nature, the carrying amounts reported in the balance sheet for accounts payable approximate their fair value.

·	Notes payable: The carrying amount of the Company’s notes payable approximate their fair value.

Property and Equipment - Property and equipment are recorded at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is five to seven years for all categories except for internal use computer software, which is depreciated over three years. Leasehold improvements are amortized over the life of the lease if it is shorter than the estimated useful life. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of property and equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded in operations.

Impairment of Long-Lived Assets - The Company evaluates its long-lived assets and intangible assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset.

Software Development Costs - Costs incurred in connection with the development of software products are accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins upon initial product shipment. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months), using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.

F-7

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

No software development costs were amortized during the years ended December 31, 2004 and 2003 as the product was not considered to be generally released until 2005. The sales recorded during 2004 occurred prior to the general release. Amortization was recorded in 2006 and 2007 and is included in cost of revenues.

Intangible Assets - The Company records goodwill and intangible assets arising from business combinations in accordance with SFAS No. 141 “Business Combinations” (“SFAS 141”) which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies the criteria applicable to intangible assets acquired in a purchase method business combination to be recognized and reported apart from goodwill.

The Company accounts for goodwill and intangible assets in accordance with SFAS 142. In accordance with SFAS 142, the Company does not amortize goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested at least annually for impairment. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and be reviewed for impairment.

Accounting for Derivatives - The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under Statement of Financial Accounting Standards 133 “ Accounting for Derivative Instruments and Hedging Activities ” and related interpretations including EITF 00-19 “ Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock ”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under SFAS 133 are reclassified to liability at the fair value of the instrument on the reclassification date.

F-8

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

Contingencies - Certain conditions may exist as of the date financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed.

Revenue Recognition - The Company is engaged as a seller of VoIP telephony solutions. The Company generally recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin 104, “Revenue Recognition” when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable. Specifically, the Company recognizes software revenue in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-4, “ Deferral of the Effective Date of a Provision of SOP 97-2 ,” and SOP 98-9, “ Modification of SOP 97-2 With Respect to Certain Transactions ” and EITF 00-21 “Revenue Arrangements with Multiple Deliverables”.

The Company sells bundled solutions which may consist of the software, configuration services, support services, customization and future upgrades. The Company defers recognition of the software sales until configuration is completed as they are considered one unit of accounting. Support services are considered a separate unit of accounting and such fees are recognized as services are provided. Future upgrades or enhancements and customizations are considered separate units of accounting and related fees are recognized as those upgrades or enhancements are provided.

Stock Based Compensation - On January 1, 2006, the Company implemented Statement of Financial Accounting Standard 123 (revised 2004) (“SFAS 123(R)”), “Share-Based Payment” which replaced SFAS 123 “Accounting for Stock-Based Compensation” and superseded APB Opinion No. 25, “Accounting for Stock Issued to Employees.” In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) regarding its interpretation of SFAS 123R. SFAS 123(R) and related interpretations requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at the date of adoption. The Company values any employee or non-employee stock based compensation at fair value using the Black Scholes Pricing Model. In adopting SFAS 123(R), the Company used the modified prospective application (“MPA”). MPA requires the Company to account for all new stock based compensation to employees using fair value, and for any portion of awards prior to January 1, 2006 for which the requisite service has not been rendered and the options remain outstanding as of January 1, 2006, the Company should recognize the compensation cost for that portion of the award that the requisite service was rendered on or after January 1, 2006. The fair value for these awards is determined based on the grant-date. There was no accounting effect of applying the MPA method.

F-9

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

Foreign Currency Transactions - The Company’s corporate offices are located in New York in the United States and its operating offices are located in Canada. Although the Company’s accounts are maintained in U.S. dollars, the Company did maintain one Canadian dollar bank account and engages in various transactions resulting in deposits and disbursements to and from that bank account. The Canadian dollar bank account was closed in the second quarter of 2007. The Company also holds one investment in non-marketable equity securities which is denominated in a foreign currency and translated to U.S dollars at each reporting date with any gain or loss recorded in operations.

Revenue and expense items transacted in Canadian dollars are translated using the average rate of exchange prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized in operations of the period incurred.

Income Taxes - The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance, if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Use of Estimates in Financial Statements - The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in 2008 and 2007 include the valuation of the investment in non-marketable equity securities, valuation of stock-based payments, valuation of beneficial conversion feature on convertible debt, fair value of the embedded conversion option liability, and valuation allowance on deferred tax assets.

F-10

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

Net Earnings (Loss) Per Share - Basic earnings (loss) per common share is based on the weighted-average number of all common shares and Class A Common Shares outstanding. The computation of diluted earnings (loss) per share does not assume the conversion, exercise or contingent issuance of securities that would have an anti-dilutive effect on earnings (loss) per share.

Class A Common Stock was issued in May and October 2007 with a majority of it issued into escrow. The subscription receivable has not been received as of November 14, 2008. Accordingly, for purposes of the computation of net loss per share, Class A Common Shares are not considered issued and outstanding and not included in the computation of weighted average shares outstanding for the period ended September 30, 2008.

As of September 30, 2008, there were warrants exercisable into 6 common shares and there were promissory notes convertible into 29,290 common shares that may dilute future earnings per share.

Recently Issued Accounting Standards -

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109, Accounting for Income Taxes” (FIN 48) to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized. FIN 48 also provides guidance on derecognizing, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of adopting FIN 48 and do not expect the adoption of FIN 48 will have a material impact on our Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value and applies to other accounting pronouncements that require or permit fair value measurements and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently evaluating the impact of adopting SFAS No. 157 on our Consolidated Financial Statements.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, to address diversity in practice in quantifying financial statement misstatements and the potential for the build up of improper amounts on the balance sheet. SAB No. 108 identifies the approach that registrants should take when evaluating the effects of unadjusted misstatements on each financial statement, the circumstances under which corrections of misstatements should result in a revision to financial statements, and disclosures related to the correction of misstatements. SAB No. 108 is effective for the fiscal year ending December 31, 2006. The adoption of SAB No. 108 did not have a material impact on our Consolidated Financial Statements.

F-11

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations , which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning January 1, 2009. We do not expect it to have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 , which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as non-controlling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for us beginning January 1, 2009 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. We do not expect it to have a material effect on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.

Reclassifications

Certain amounts in the 2007 consolidated financial statements have been reclassified to conform with the 2008 presentation.

F-12

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

3. INVESTMENT IN NON-MARKETABLE EQUITY SECURITIES

The composition of non-marketable securities at September 30, 2008 is as follows:

		Cost			Fair Value
Equity securities		$	19,148		$	19,148

During April 2007 the Company received 2.1 million equity securities of a customer based in Europe. These securities were received from this private company as payment for services rendered. The value of the securities could not be determined and the value of the services was also not determinable, therefore the Company valued the securities at a nominal value equal to the par value of the securities or $17,290 which the Company believes is below the value of services provided. This amount was recorded as revenues. At December 31, 2007 the cost and fair value were increased by $1,366 to reflect the increase due to changes in the exchange rates. At March 31, 2008 the cost and fair value were increased by $ 2,460 to reflect the increase due to changes in the exchange rates. At June 30, 2008 the cost and fair value were decreased by $488 to reflect the decrease due to changes in the exchange rates. At September 30, 2008 the cost and fair value were decreased by $1,480 to reflect the decrease due to changes in the exchange rates.

4. PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2008, consists of the following:

Office equipment	$	$ 35,854
Accumulated depreciation		(22,839	)
Property and equipment, net	$	13,015

Depreciation during the three and nine months ended September 30, 2008 were $1,686 and $5,059, respectively.

5. DEVELOPMENT COSTS

Capitalized software development cost consists of the following at September 30, 2008:

Cost	$	8,869
Accumulated amortization		(8,869	)
Software, net	$	0

F-13

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

During January 2004 the Company capitalized $136,538 relating to a suite of software products purchased by a related party and assigned to the Company with the related liabilities (see Note 7). The related non-interest bearing liabilities of $131,746 due to the seller are collateralized by the purchased software. These products had already reached the point of technological feasibility prior to the Company’s purchase and needed some modifications by the Company to bring the product to market. Accordingly, no amortization had been charged to operations as of December 31, 2004. Due to the lack of available resources during 2004 and subsequent, the Company did not allocate the resources to this project and instead allocated resources to other software projects being developed internally. Accordingly, since the Company could not reliably project any positive cash flows from this asset, the Company had recorded an impairment loss of $136,538 at December 31, 2004. During December 2004, the Company recorded $8,869 of software costs for certain VoIP products, which it had been developing internally and had reached technological feasibility. During the year ended December 31, 2004, the Company had no amortization expense. During 2005 the Company recognized $ 2,956 of amortization expense, upon general release of the software product. During 2006 the Company recognized $2,956 of amortization expense. During 2007 the Company recognized $2,956 of amortization expense.

NOTES PAYABLE, NOTES PAYABLE RELATED PARTIES AND CONVERTIBLE DEBENTURES

Notes payable to related and unrelated parties consists of the following at September 30, 2008:

Note payable to the related party principal shareholder and officer of the Parent and to companies owned or controlled by him; due on demand; unsecured; with interest at prime plus 2% to 3% (7.% to 8.% at September 30, 2008)	$	111,886
Note payable to law firm, due on demand, non-interest bearing		59,000
Subtotal - Notes payable related parties		170,886
Notes payable to two individuals - non interest bearing-in default		145,000
Notes payable to two individuals with interest at 10.50%-Due March 2008 - in default		160,000
Notes payable to two individuals with interest accruing at 10%		159,000
Notes payable to six individuals; due on demand; unsecured; with interest at prime plus 3% (8.0% at September 30, 2008)		1,403,000

Subtotal - Notes payable unrelated parties		1,867,000

Total Notes Payable	$	2,037,886

F-14

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

The weighted average interest rate on short term outstanding as of September 30, 2008 was 7.84 %.

At December 31, 2007, $145,000 of the above promissory notes were in default. At September 30, 2008, $405,000 of the above promissory notes were in default.

Convertible Debentures - In October 2005, upon recapitalization, the Company assumed four 10% one-year convertible debentures to four individuals for $11,698, $60,705, $6,121 and $6,388 cash. These debentures had been issued in October and November 2004. The debentures are convertible into 10 common shares based on a conversion rate of $8,000 per share. The embedded conversion options were determined not to be derivatives at the issuance date or as of September 30, 2008 since the debt qualifies as conventional convertible debt. Based upon the conversion rate at the issuance date, there was no beneficial conversion feature recorded.

Convertible Promissory Notes and Conversions

In March 2006, the Company issued a convertible promissory note for $150,000 with interest payable at maturity at 10.5% per annum. The note matures and is due March 3, 2008. The note principal is convertible to common stock at a fixed price of $23.60 per share which equates to 6,356 common shares. Management has determined that this note qualifies as conventional convertible debt pursuant to SFAS 133 and EITF 00-19 and accordingly the embedded conversion option is not a derivative. The convertible promissory note was converted into common stock in March 2006. The Company computed a beneficial conversion value of $150,000 based on the quoted stock price on the grant date of $120 per share. The $150,000 was recorded as a debt discount and credited to additional paid-in capital. The debt discount was amortized to interest expense in March 2006 when the note was converted. The note is guaranteed by Azatel Communications Inc. (the “Acquiree”) with the note holder holding a first security interest in substantially all assets of the Acquiree and the Company has guaranteed the conversion.

In March 2006, the Company issued a convertible promissory note for $10,000 with interest payable at maturity at 10.5% per annum. The note matures and is due March 15, 2008. The note principal is convertible to common stock at a fixed price of $23.60 per share which equates to 429 common shares. Management has determined that this note qualifies as conventional convertible debt pursuant to SFAS 133 and EITF 00-19 and accordingly the embedded conversion option is not a derivative. The convertible promissory note was converted into common stock in March 2006. The Company computed a beneficial conversion value of $10,000 based on the quoted stock price on the grant date of $120 per share. The $10,000 was recorded as a debt discount and credited to additional paid-in capital. The debt discount was amortized to interest expense in March 2006 when the note was converted.

F-15

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

In late 2007, the Company was notified by the above lenders that the lenders had not converted and the shares issued to them were pursuant to a collateral arrangement. Although management believes the conversion occurred, they have reclassified the $160,000 into loans payable and removed them from the issued and outstanding shares as of December 31, 2007

On January 9, 2007, the Company received cash and issued a promissory note for $30,000 which bears interest at prime plus three percent and is due within 90 day of written demand.

On January 10, 2007, the Company received cash and issued a promissory note for $30,000 which bears interest at prime plus three percent and due within 90 day of written demand.

In February 2007, the Company issued a convertible promissory note for $120,000 with no specified term or interest rate and thus it is considered due on demand. The note principal is convertible into 15,000 shares of common stock and collateralized by such shares which were to be issued as security. Management has determined that this note qualifies as conventional convertible debt pursuant to SFAS 133 and EITF 00-19 and accordingly the embedded conversion option is not a derivative. The Company computed a beneficial conversion value of $60,000 based on the quoted stock price on the grant date of $12 per share. The $60,000 was recorded as a debt discount and credited to additional paid-in capital and then charged to interest expensed immediately since the note is due on demand. The Company received proceeds on the note of $100,000 and they were charged $20,000 as a loan fee. The loan fee was charged to interest expense in March 2007 since the note is due on demand.

On April 30, 2007 the Company issued a convertible promissory note for $150,000. The Company received $100,000 of the proceeds from this note during the second quarter and $50,000 in July 2007 (see below). The note bears interest at prime plus three percent, is due on demand and is collateralized by non-marketable equity securities owned by the Company (see Note 3). The note holder has the option to convert the note into Common Stock of the Company within 365 days of the note date at the lessor of 50% of the closing market price of the Common Stock on the date the written notice is provided by the holder of the note or $0.10 per share. Management of the Company has determined that the note is a derivative and contains an embedded conversion option since the variable conversion rate causes an inability to guarantee that there will be enough authorized shares available if the holder elects to convert. The Company recorded an embedded conversion option liability on this note of $169,596. This created a change in fair value of the embedded conversion options of $69,596 that was recorded as an other expense. Since the note is due on demand, the Company recognized $100,000 of interest expense on the debt discount. At June 30, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $5,816 due to changes in market value. The $5,816 was credited to expense in June 2007. The embedded conversion option was valued using the Black-Scholes model with the following assumptions in May 2007 and June 30, 2007: stock price $4.00 and $3.00, exercise price of $2.00 and $1.50, volatility of 242%, term of 1 year and .83 years, and interest rate of 4.8%. At September 30, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $21,945 due to changes in market value. The $21,945 was credited to expense in September 2007. At December 31, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $12,918 due to changes in market value. The $12,918 was credited to expense in December 2007. At March 31, 2008 the Company adjusted the embedded conversion option liability to fair value and decreased it by $22,349 due to changes in market value. The $22,349 was credited to expense in March 2008. At April 30, 2008 the Company adjusted the embedded conversion option liability to fair value and increased it by $793,480 due to changes in market value. The $793,480 was charged to expense in April 2008. At April 30, 2008 the conversion option expired and the balance of the liability was reclassified to additional paid in capital.

F-16

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

On July 2, 2007 the Company received the $50,000 balance of the above note payable. Management of the Company has determined that the note is a derivative and contains an embedded conversion option since the variable conversion rate causes an inability to guarantee that there will be enough authorized shares available if the holder elects to convert. The Company recorded an embedded conversion option liability on this note of $81,825. This created a change in fair value of the embedded conversion option of $31,825 that was recorded as an other expense. Since the note is due on demand, the Company recognized $50,000 of interest expense on the debt discount. At September 30, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $10,908 due to changes in market value. The $10,908 was credited to expense in September 2007. The embedded conversion option was valued using the Black-Sholes model with the following assumptions in July 2007 and September 2007: stock price of $2.80 and $5.20, exercise price of $1.40 and $2.60, volatility of 204%, term of .83 and .58 years, and interest rate of 4.80%. At December 31, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $6,459 due to changes in market value. The $6,459 was credited to expense in December 2007. At March 31, 2008 the Company adjusted the embedded conversion option liability to fair value and decreased it by $11,175 due to changes in market value. The $11,175 was credited to expense in March 2008. At April 30, 2008 the Company adjusted the embedded conversion option liability to fair value and increased it by $396,740 due to changes in market value. The $396,740 was charged to expense in April 2008. At April 30, 2008 the conversion option expired and the balance of the liability was reclassified to additional paid in capital.

The Company also determined that all other common stock equivalent securities including the convertible debentures, warrants and options, but excluding conventional convertible debt, may require classification as liabilities due to the authorized shares problem. However, due to the relatively large conversion and exercise prices of these other instruments, the fair value of the liabilities at all dates from April 2007 through September 30, 2008 was zero.

F-17

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

On October 11, 2007, the Company received $20,000 on a note payable. The Company was charged a $5,000 loan fee for the note. The note was due on November 11, 2007 and is in default at December 31, 2007. The note does not bear interest but is secured by a Pledge and Security agreement covering 7,500 shares of the capital stock of KVI.

On November 2, 2007, the Company received $100,000 and issued a promissory note for $120,000 which includes a $20,000 loan fee. The loan is non-interest bearing and due in 30-days or on December 2, 2007. At September 30, 2008 the loan was in default.

In May, 2008 the Company received $75,000 on a promissory note. The note is for $100,000, without interest, but with a loan fee of $25,000. The loan is due on July 13, 2008. The loan is currently in default.

7. LOAN PAYABLE FOR SOFTWARE PURCHASE

In 2004 a liability was recorded relating to a software purchase. The software purchase price was $200,000 Canadian dollars (“CA$”) payable with CA$26,096 down payment and CA$10,842 payable per quarter commencing May 1, 2004 and on August 1, November 1, February 1 and May 1 in each year thereafter until the purchase price is paid in full. In accordance with APB 21, “Interest on Receivables and Payables,” the Company imputed interest at 6% or CA$21,845 on this loan payable. This resulted in an initial loan payable balance translated to US dollars of $136,538, net of discount of $16,742, an initial payment made of $20,000 (recorded as a note payable to the related party assignor of the purchase agreement) and quarterly payments of approximately $8,309 as adjusted for foreign currency transaction gains or losses.

The loan payable balance at September 30, 2008 was as follows:

Loan payable	$	131,746
Debt discount		(0	)
Loan payable, net of discount	$	131,746

This loan payable is collateralized by the software asset. Additional interest in the amount of $7,698 was accrued in 2007. The loan is currently in default.

8. STOCKHOLDERS’ DEFICIT

Authorized Shares - In January 2007, the Company amended its Articles of Incorporation to increase the number of authorized common shares to 400,000,000. The Company also authorized 100,000,000 new Class A common shares at a par value of $0.001 per share. The Class A has the same rights, terms, and preferences, as common stock except it is non-voting. The changes in capitalization are reflected retroactively in the accompanying consolidated Balance Sheet.

F-18

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

Reverse Stock Split - On July 14, 2008 Vocalscape Networks, Inc. filed an amendment with the Nevada Secretary of State to change its name to Kaleidoscope Venture Capital, Inc. and to do a 1 for 200 reverse split on both its common stock and its Series A Convertible preferred stock. The Class A Common Stock was not part of the reverse split. Due to the reverse split all share and per share data has been retroactively restated in the accompanying consolidated financial statements and footnotes to conform to the post split share amounts.

Preferred Stock - The Company has authorized 25,000,000 shares of preferred stock. The Board of Directors at its discretion may determine the rights and preferences of the preferred stock. In December 2005 the Company designated 100,000 shares as Series A Convertible Preferred Stock (“Series A shares”). The Series A shares upon issuance and consideration received by the Company is convertible to common stock on a one-for-one basis at a minimum of 50 shares per conversion. The conversion rate is not adjustable except for standard anti-dilution provisions, such as stock splits, reorganization or recapitalizations. Upon liquidation the Series A stockholders would receive $100 per share plus any unpaid dividends. Each Series A share has voting rights equal to 25 common shares. On January 20, 2006 the Company accepted a subscription from its CEO to purchase 100 Series A shares in exchange for a $5,000 portion of a promissory note due to the CEO. Such note was previously due to a controlled affiliate of the CEO and assigned to the CEO by that affiliate. In October 2006, the CEO resigned and executed an employment agreement as Head of Business Development. Among other compensation the employment agreement grants 75 Series A preferred shares as compensation. The shares were valued at $50 per share, the same amount he previously paid and expensed immediately in 2006 since it was not material. In November 2007 another 50 Series A Preferred Shares were granted to this former CEO and 25 shares to another director for services rendered. The shares were valued at an estimated $100 per share based on their liquidation value and expensed immediately. In April, 2008 the Company sold 50 shares to the former CEO for $50 per share. In May 2008 another 50 shares were granted to the former CEO under his employment contract. The expense of $2,500 was not material.

Common Stock and Class A Common Stock Issued for Cash and Subscriptions Receivable

During 2007, the Company sold 1,033,401 common shares for net proceeds of $459,470 pursuant to a Regulation S Stock Purchase Agreement.

In May 2007, the Company entered into a subscription agreement with an individual to purchase 100,000,000 shares of the Class A non voting common stock of the Company. The total sales price is $1,000,000. It is to be paid in four blocks. The Company issued the first block of 25,000,000 shares on July 11, 2007. The remaining 75,000,000 shares were issued on October 1, 2007. All 100,000,000 shares are reflected in the accompanying balance sheet as common stock Class A non-voting and a subscription receivable at September 30, 2008.

F-19

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

In September 2007, the Company executed a settlement agreement with an individual who had subscribed to 15,000 common shares for a $120,000 promissory note in 2006, which shares were issued to him, and never paid the subscription price. The settlement resulted in the return of the shares to the Company and cancellation of the subscription promissory note.

During February and March 2008, the Company sold 321,715 common shares for net proceeds of $109,785 pursuant to a Regulation S Stock Purchase Agreement. In September 2008 the Company sold 300,000 common shares for $8,980.

Common Stock Issued as Settlement

In late 2007, the Company agreed to issue an investor 10,000 shares that had been paid for in 2006 but never issued but had been reflected as issuable in prior financial statements. As settlement compensation, the Company also issued the investor another 5,000. These were valued at the quoted trading price of $4.60 on the settlement date resulting in an expense of $23,000. The total 15,000 were issued by the transfer agent in 2008.

Common Stock Issued for Services

During the third quarter of 2006, 1,000 shares were issued pursuant to a consulting agreement that runs from July 15, 2006 through January 15, 2007. These shares were valued at $80 per share based on the quoted trading price on the agreement date and $33,333 was recorded as expense in the quarter and $46,667 was recorded as Deferred Consulting Fees. The Deferred Consulting was fully amortized during 2007.

In March 2008 the Company granted 17,500 common shares to a consultant for services rendered. The shares were valued at the $4.80 quoted trading price on the grant date resulting in an expense of $84,000. The shares are reflected as issuable as of June 30, 2008.

In April 2008, the Company issued 37,500 and 80,000 common shares to two consultants, respectively, pursuant to consulting agreements. The shares were valued at the $4.20 quoted trading price for a total of $493,500 to be recognized over the service period. The consulting agreements have not been finalized at this time so the total amount of $493,500 was recorded as an expense in the second quarter of 2008.

F-20

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

In April 2008 the Company issued 50,000 options and 50,000 common shares and another 100,000 options to a related party director for services his law firm rendered. The options were valued at $469,814 using the Black-Sholes method with volatility of 214%, expected term of 5 years and interest rate of 4.8%. The shares were valued at the $4.20 quoted trading price or $210,000 and expensed immediately pursuant to the services agreement with the related party (see Note 9)

In April 2008 the Company granted 232,500 common shares to various employees and lenders. The shares were valued at the $2.60 quoted trading price or $604,000 and expensed. As of September 30, 2008 these shares have not been issued and are shown in the accompanying consolidated financial statements as issuable shares.

Common Stock Issued for Exercise of Stock Options

In January 2007, the Company issued 1,125 common shares upon exercise of a stock option at $8.00 per share. The exercise price of $9,000 was paid for with a payable that was due to the option holder. In May 2007, the company issued 2,875 common shares to the same option holder upon exercise of a stock option at $2.00 per share in exchange for a payable of $5,750.

In March 2007, the Company issued 15,000 common shares upon exercise of stock options at $2.00 per share and received the $30,000 exercise price in cash.

In March 2007, the Company issued 5,000 common shares upon exercise of stock options at $4.00 per share which was paid for $18,150 with a payable due to the option holder and the remaining $1,850 was expensed as a professional fee.

In June 2007, the Company issued 2,500 common shares upon exercise of stock options at $2.00 per share in exchange for a payable of $5,000.

In August 2007, the Company issued 1,000 common shares upon exercise of stock options at $3.20 per share in exchange for a payable of $3,200.

In April 2008 a consultant exercised an option for 7,500 common shares and paid for them with $15,000 of services which were expensed.

Grants of Options to Purchase Common Stock

In January 2007, the Company granted 1,125 common stock options to a law firm for services provided. The options were valued at $7,876 ($7 per option) using a Black-Scholes option pricing model with the following assumptions: stock price $15, exercise price of $8.00, volatility of 282%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. (See above) The Company recognized $7,876 in expense.

F-21

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

In March 2007, the Company granted options for 15,000 common shares at an exercise price of $2.00 per share pursuant to a consulting agreement. The options were valued at $60,000 ($4.00 per option), using a Black-Scholes option pricing model with the following assumptions: stock price $6.00, exercise price of $2.00, volatility of 282%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date (see above). The value is to be recognized over the requisite service period and accordingly, $50,000 was deferred as of March 31, 2007. During the second quarter of 2007 $50,000 of the deferred consulting was expensed.

In March 2007, the Company granted 5,000 common stock options to a consultant for services. The options were valued at $0.36 per option or $1,763 using a Black-Scholes option pricing model with the following assumptions: stock price $4.20, exercise price of $4.00, volatility of 282%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. (See above) The Company recognized $1,763 in expense.

In May 2007, the Company granted 2,875 options to a law firm for services provided. The options were valued at $2,877 ($1.00 per option) using a Black-Scholes option pricing model with the following assumptions: stock price $3.00, exercise price of $2.00, volatility of 242%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. The Company recognized $2,877 in expense

In June 2007, the Company granted 2,500 options to a consultant for services provided. The options were valued at $0.60 per option or $1,513 using a Black-Sholes Option Pricing Model with the following assumptions: stock price $2.60, exercise price of $2.00, volatility of 242%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. The Company recognized $1,513 in expense.

In August 2007, the Company granted 1,000 options to a consultant for services provided. The options were valued at $1.40 per option or $146 using a Black-Sholes Option Pricing Model with the following assumptions: stock price of $3.20, exercise price of $3.20, volatility of 220%, term of 1 day and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. The Company recognized $146 in expense.

In March 2008, the Company granted 7,500 options and 17,500 common shares to a consultant for services rendered. The options were valued at $21,002 using a Black-Sholes option pricing model with the following assumptions: stock price of $4.80 and exercise price of $2.00, volatility of 214%, term of 1 day and interest rate of 4.8%. The term of 1 day was used since the recipient exercised their options shortly after the grant date in April 2008. The shares were valued at the $4.80 quoted trading price or $84,000 and both amounts were expensed as compensation

F-22

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

Warrants - Upon the recapitalization in October 2005, the Company assumed outstanding warrants. As of December 31, 2006, all warrants had expired except for 6 warrants at an exercise price of $20,000 which expire December 31, 2009.

Options - On September 30, 2008, 11 common stock options expired. There were no options outstanding at September 30, 2008.

9. RELATED PARTY TRANSACTIONS

In October 2006, the Company accepted a $165,000 subscription promissory note from a Director (former officer) as payment for the exercise of his 15,000 stock options. Management believes this amount may be materially offset, with the director’s approval, against loans and accrued compensation due to this director or his controlled affiliates. Loans and accrued compensation due to this director at September 30, 2008 was $620,947.

Notes payable to a related party director or his affiliates were $111,886 at September 30, 2008

At September 30, 2008, accrued expenses to related parties amounted to $588,342 which includes $28,403 of accrued interest

Certain officers and directors of the Company remain as officers and directors of the former parent, Vocalscape, Inc. now known as Nevstar.

The Company has an agreement with a related party director dated August 25, 2005 for legal services with his law firm whereby the related party is periodically issued vested non-forfeitable common shares of the Company so the director shall hold 4.9% of the issued and outstanding common shares and any proceeds from the sale of such shares by the related party are credited against invoice amounts due to that related party for legal services. The agreement has no stated term. Due to the contingent nature of the proceeds and the unstated term of the legal service agreement, the fair value of any shares issued will be expensed when issued. The related party invoices are accrued to accounts payable, periodically paid in cash and the accounts payable and legal expenses are credited for any proceeds in the period the proceeds are received by the related party and reported to the Company. As of September 30, 2007 proceeds in the amount of $ 42,871 were reported to the Company in 2007. These proceeds were credited to legal expenses and reduced the payable to the related party. No additional shares were issued as the director held in excess of 4.9% of the common stock of the Company. At December 31, 2007 and September 30, 2008 accounts payable to this law firm were $240,779 and $306,180 and included in accounts payable, related parties. In addition a loan payable to the law firm was $59,000 and included in loans and notes payable, related parties. Expenses incurred by the Company during 2007 to this law firm were $33,352 after the $42,871 credit above. Expenses in 2008 were $65,400 primarily relating to interest on outstanding invoice balances. See Note 8 for common share grants to this related party.

F-23

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

10. COMMITMENTS AND CONTINGENCIES

Commitments

The Company is a party to a five-year office lease agreement covering 2,238 square feet, which commenced July 1, 2005, for the office in Vancouver, British Columbia. The lease provides for 22 monthly payments of $2,238 Canadian dollars (“CDN”) with two free months during the first 24 months of the agreement; 24 monthly payments of $2,331 CDN during the third and fourth years of the agreement; and 12 monthly payments of $2,425 CDN during the final year of the agreement. In addition, the agreement provides for a monthly common area maintenance charge of $1,585 CDN. The Company moved out of this office in April 2008. The office has been leased by the landlord and the Company is negotiating the final amounts due under the lease.

The Company is a party to a second office lease agreement, with a two-year term, covering 1,435 square feet, which commenced March 1, 2005, for the office in White Plains, New York. The agreement calls for monthly rental of $2,350. The lease expired on February 28, 2007 and the Company pays $2,500 per month, on a month to month basis. The Company moved out of this office in September 2008.

The Company enters into sales agent and distributor agreements to sell its products. These agreements are primarily commission based. There were no commissions payable as of September 30, 2008.

Legal Matters

The Company continues to receive claims from a prior director of Dtomi, Inc. relating to periods prior to the October 2005 recapitalization transaction with the Company. The cash amounts the director claims he is due total approximately $520,000 and the total shares he claims he is due are estimated by the Company to be approximately 6,300. These amounts appear to relate to prior license or other alleged agreements between the director and the Company. The Company has accrued $86,000 in prior license fees due and has accounted for, in a prior period of Dtomi, Inc. approximately 15,278 common shares issued by the transfer agent in the director’s name. The director claims he never received 2,778 of the 15,278 shares or other anti-dilution shares. Management of the Company disputes the remaining cash amounts and believes no anti-dilution shares are due (which would account for the remaining 3,522 shares) since the license agreement was terminated in early 2005 by the licensor. Management believes it will prevail in this matter. Accordingly, no accruals have been made for the disputed amounts. The termination of the Patent License Agreement terminates these and other obligations during 2005. In May of 2006 the director entered into an agreement with a third party whereby the director assigned his rights to any financial obligations made by the Company. In consideration of such assignment to such third party, the director was to receive a payment of $15,000.

F-24

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

In July and August 2005, the Company received correspondence from a former officer and former employee regarding threatened material litigation relating to alleged compensation due to each employee. Although the Company disputes such amounts, these amounts aggregating $ 687,407 had been previously accrued in a period prior to 2005 and are included in accrued expenses.

In late 2007, the Company was notified by the certain lenders of $160,000 that the lenders had not converted and the shares issued to them were pursuant to a collateral arrangement. Although management believes the conversion occurred, they have reclassified the $160,000 into loans payable and removed them from the issued and outstanding shares as of December 31, 2007 and September 30, 2008. (see Note 6) The lenders have threatened litigation, however, as of the date of this report, the Company has not been served.

11. ACCRUED EXPENSES

Accrued expenses at September 30, 2008 consist of the following:

Accrued license fees	$	$ 36,000
Accrued interest		585,003
Accrued compensation		687,407
Accrued expenses - other		179,889
Total	$	1,488,299

12. PAYABLE TO SHAREHOLDER

During the second quarter of 2006 one of the shareholders of the Company, who is a former director who resigned during the second quarter, was assigned certain debts of the company pursuant to assignment agreements between the shareholder and creditors as follows:

Payable to Vocalscape, Inc. former parent (n.k.a. Nevstar)	$	265,617
Former officer note payable and accrued compensation		214,410
Accounts payable to related party attorney		420,000
Total	$	900,027

There was no consideration given by the Company to assign these debts. They were assigned from the vendors directly to the shareholder in a private transaction between those parties.

F-25

Kaleidoscope Venture Capital, Inc. and Subsidiary

(Formerly known as Vocalscape Networks, Inc.)

Notes to Consolidated Financial Statements

September 30, 2008

(Unaudited)

13.

SUBSEQUENT EVENTS

On October 14, 2008 the Board of Directors of the Company approved the issuance of 18,500,000 common shares of stock for consulting and advisory services and 2,000,000 common shares for payment against debt of the Company. The shares issued for the consulting and advisory services will be expensed in the fourth quarter for $1,110,000.

F-26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MANAGEMENT’S DISCUSSION AND ANALYSIS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

The following discussion relates to the business of Kaleidoscope Venture Capital Inc., which includes the operations of its wholly owned subsidiary Vocalscape Operating Subsidiary, Inc., which holds assets through which Kaleidoscope provides services in connection with its business. Kaleidoscope is a next generation communications provider that provides Voice over Internet Protocol (“VoIP”) solutions. We were named “Vocalscape Networks, Inc.” until July 14, 2008, at which time we changed our name to “Kaleidoscope Venture Capital Inc.”

PRODUCTS AND SERVICES

Kaleidoscope provides VoIP telephony solutions and communications software for Internet Service Providers (“ISPs”), Internet Telephony Service Providers (“ITSPs”) and telecommunications companies worldwide. Kaleidoscope develops VoIP and interactive communications software including Softphone applications, Customer Acquisition and Billing Systems, SIP Servers, Gatekeepers and Virtual Calling Cards. Kaleidoscope’s strategy is to focus on VoIP software and long distance termination solutions that bring together a full range of communications solutions and services thereby providing a turn-key VoIP infrastructure for ISPs, ITSPs and Telecommunications companies. Additionally, Kaleidoscope is actively seeking and negotiating strategic alliances with companies.

COMPETITION

The market for VoIP telephony software and services is relatively new and is quickly evolving and subject to rapid technological change. The VoIP telephony market has also seen significant consolidation and this trend is projected to continue. The companies following companies are not meant to be an exhaustive list of competitors to Kaleidoscope, but represent the largest and most active participants in this market: Deltathree, VocalTec Communications Ltd. and Net2Phone.

Kaleidoscope’s software solutions operate on the customer’s choice of hardware. Our software solutions support our customer’s choice of business models including, pre-paid, post-paid or monthly subscriber billing systems. Kaleidoscope’s product offerings are designed to streamline subscriber provisioning and subscriber services online.

DISTRIBUTION & MARKETING

Kaleidoscope has a direct sales team and will build an indirect or reseller sales force. Direct resources will target the ISP’s, ITSP’s and Alternative Providers with the residential VoIP solution. Indirect channels will include VARs that supply the growing VoIP provider market with IP PBX solutions.

The direct sales force will also utilize web based leads (generated by search engine, blog, publication and email marketing) and outbound telemarketing to go directly after the solution sales clients. A select number of tradeshows will be attended to build the Kaleidoscope brand and the awareness of the solutions and product offerings from the company.

GOING CONCERN

Our company has nominal revenues and has incurred net losses in the third quarter of $240,365 and net cash used in operations of $202,620 in the nine months ended September 30, 2008. Our current liabilities exceed our current assets by $5,867,464 and we have an accumulated deficit and stockholder’s deficit of $16,022,773 and $5,835,301 respectively, at September 30, 2008. These conditions give rise to substantial doubt about Kaleidoscope’s ability to continue as a going concern. Kaleidoscope’s ability to continue developing its operations and generate revenues or its ability to obtain additional funding will determine its ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

RESULTS OF OPERATIONS

The Company recorded revenues of $0 for the quarter ending September 30, 2008, as compared to revenues of $4,000 for the quarter ending September 30, 2007.

General and administrative expenses decreased to $22,253 for the quarter ending September 30, 2008, a decrease of 56% over expenses of $ 51,307 for the quarter ending September 30, 2007. General and administrative expenses in this third quarter of 2008 consist primarily of rent, telephone, travel sales and other general corporate and office expenses.

Interest expense was $62,907 for the quarter ending September 30, 2008, an decrease of 43% over expense of $111,685 for the quarter ending September 30, 2007. This interest expense consists of interest on various loans, and convertible debentures.

Compensation expense for the quarter ending September 30, 2008, was $116,100, as compared to $148,035 for the quarter ending September 30, 2007. Compensation expense for the current quarter consists of salaries paid to the Company’s employees and officers.

Professional fees increased to $31,314 for the quarter ending September 30, 2008, compared to $24,050 for the quarter ending September 30, 2007. These expenses consist primarily of legal and accounting fees in 2008 as a result of the Company being a reporting issuer under the Securities Exchange Act of 1934, as amended.

Consulting fees expense for the quarter ending September 30, 2008 was $6,311, a decrease of --88% over expenses of $51,876 for the quarter ending September 30, 2007. The consulting fees in this third quarter of 2008 primarily relate to amounts paid to non-officer and director persons performing services on behalf of Kaleidoscope and includes $0 of stock based expenses.

Depreciation expense for the nine months ending September 30, 2008 was $5,059 compared to $7,276 for the nine months ending September 30, 2007.

The net loss for the quarter ending September 30, 2008 is $240,365 (net loss per share of $--0.11) compared to a net loss for quarter ending September 30, 2007 of $382,664 (net loss per share of $0.48).

LIQUIDITY AND CAPITAL RESOURCES

The Company has cash and cash equivalents of $1,780, total current liabilities of $5,869,244 and total assets of $33,943 at September 30, 2008. The Company continues to incur costs, but has not secured adequate new revenue to cover the costs. The Company does not currently have an adequate source of reliable, long-term revenue to fund operations. As a result, Kaleidoscope is completely dependent on outside sources of capital funding to continue operations. There can be no assurances that the company will in the future achieve a consistent and reliable revenue stream adequate to support continued operations. In addition, there are no assurances that the Company will be able to secure adequate sources of new capital funding, whether it is in the form of share capital, debt, or other financing sources.

PLAN OF OPERATION FOR THE NEXT 12 MONTHS

Kaleidoscope has limited cash and will only be able to satisfy its cash requirements through raising additional funds in the next 12 months.

The company recognizes that, without additional financing, the success of Kaleidoscope’s VOIP business is highly uncertain and Kaleidoscope must adapt its business operations to this reality. We are therefore seeking to broaden and transform our business base through the acquisition of innovative, value-differentiated products and services. Our focus is on revenue generating businesses poised for rapid growth that can benefit from being part of a public company and benefit from the sharing of resources and the sharing of costs associated with public filings and compliance.

We have limited funds with which to pursue the acquisition of new business opportunities, as we have generated losses since our inception. In our pursuit of acquiring new business opportunities, we anticipate needing additional funds to cover legal and accounting expenses, due diligence expenses and other costs. Subject to the availability of adequate financing, Kaleidoscope will continue to focus on providing services to our existing customers, marketing and selling our products to new customers and the continuous development of our products and services.

EVENTS SUBSEQUENT TO THE QUARTER ENDED SEPTEMBER 30, 2008

None.

ITEM 3. CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our President, who also acts as our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our President and principal financial officer, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our President, who also acts as our principal financial officer, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report for the purpose of gathering, analyzing and disclosing of information that Kaleidoscope is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is not currently subject to any legal proceedings. From time to time, the Company may become subjected to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit

Number

Description

3.1.1

Articles of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999).

3.1.2

Certificate of Amendment to Articles of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999).

3.1.3

Certificate of Amendment to Articles of Incorporation of the Company filed October 25, 2001 (incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed on December 18, 2001).

3.1.4

Certificate of Amendment to Articles of Incorporation of the Company filed November 6, 2005 (incorporated by reference to the Company’s Annual Report on Form 10-KSB filed on May 18, 2006).

3.1.5

Certificate of Amendment to Articles of Incorporation of the Company filed January 3, 2007 (incorporated by reference to the Company’s Annual Report on Form 10-KSB filed on April 17, 2007).

3.1.6

Certificate of Amendment to Articles of Incorporation of the Company effective July 14, 2008 (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 15, 2008).

3.1.7

Certificate of Change (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 15, 2008).

3.2.1

Bylaws (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999).

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Kaleidoscope Venture Capital Inc. (Name of Registrant)

Date: November 19, 2008	By:	/s/ Ron McIntyre
		Ron McIntyre
		President

EXHIBIT INDEX

Exhibit

Number

Description

3.1.1

Articles of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999).

3.1.2

Certificate of Amendment to Articles of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999).

3.1.3

Certificate of Amendment to Articles of Incorporation of the Company filed October 25, 2001 (incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed on December 18, 2001).

3.1.4

Certificate of Amendment to Articles of Incorporation of the Company filed November 6, 2005 (incorporated by reference to the Company’s Annual Report on Form 10-KSB filed on May 18, 2006).

3.1.5

Certificate of Amendment to Articles of Incorporation of the Company filed January 3, 2007 (incorporated by reference to the Company’s Annual Report on Form 10-KSB filed on April 17, 2007).

3.1.6

Certificate of Amendment to Articles of Incorporation of the Company effective July 14, 2008 (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 15, 2008).

3.1.7

Certificate of Change (incorporated by reference to the Company’s Current Report on Form 8-K filed on July 15, 2008).

3.2.1

Bylaws (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999).

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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