I met exaclty the same problem,  the client is not in the same domain with K2 server ,  at the configure "Host Server Database" step during installing k2 for Visual Stuio,   if can't use the "Windows authentication", How can I use "SQL authentication " to connect the HostServer?  if need to create a new SQL account, but what database rights need to set for this new sql account? 

 Thanks in  advance!