As filed with the Securities and Exchange Commission on November 26, 2003

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1 TO THE FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

DELAWARE BSI2000, INC. 88-0418749
(State or Other Jurisdiction (Name of Registrant (I.R.S. Employer
of Incorporation or Organization) in Our Charter) Identification No.)

JACK HARPER
12600 W. COLFAX AVE., B410 7372 BSI2000, INC.
LAKEWOOD, COLORADO 80215 (Primary Standard 12600 W. COLFAX AVE., B410
(303) 231-9095 Industrial LAKEWOOD, COLORADO 80215
(Address and telephone number Classification (303) 231-9095
of Principal Executive Offices Code Number) (Name, address and
and Principal Place of Business telephone number of
Executive Offices and Principal agent for service)

Copies to:
Clayton E. Parker, Esq. Pablo S. Quesada, Esq.
Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart LLP
201 S. Biscayne Boulevard, Suite 2000 201 S. Biscayne Boulevard, Suite 2000
Miami, Florida 33131 Miami, Florida 33131
(305) 539-3300 (305) 539-3300
Telecopier No.: (305) 358-7095 Telecopier No.: (305) 358-7095

Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. |X|

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|

CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) PRICE (2) FEE (3)
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Common Stock, par value $0.001 per share 48,000,000 shares (2) $0.25 $12,000,000 $970.80
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TOTAL 48,000,000 shares $0.25 $12,000,000 $970.80
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<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. For the purposes
of this table, we have used a recent closing bid price for our common
stock.

(2) At a recent market price of $0.25 per share, the Company would have to
issue 60,606,061 shares of common stock to fully utilize the Equity Line of
Credit, however, given that 53,561,102 shares are currently issued and
outstanding and only 46,438,898 shares are available for issuance, the
Company and Cornell Capital Partners LP have agreed to register a total of
39,839,286 shares for issuance under the Equity Line of Credit. In
addition, 6,250,000 shares are being registered for conversion under
convertible debentures based on a recent market price of $0.25 per share,
and allowing for additional shares for conversion in the event of a
decrease in the market price of the common stock. Further, 1,875,000 shares
are being registered relating to shares previously issued to Cornell
Capital Partners LP in connection with the Equity Line of Credit and 35,714
shares are being registered by a consultant, Newbridge Securities
Corporation.

(3) Registration fee was paid with filing of initial registration statement on
November 4, 2003.
</FN>

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

PROSPECTUS

Subject to completion, dated November 26, 2003

BSI2000, INC.
48,000,000 SHARES OF COMMON STOCK

This prospectus relates to the sale of up to 48,000,000 shares of BSI's
common stock. The selling stockholders are Cornell Capital Partners, LP, which
intends to sell up to 47,964,286 shares of common stock and Newbridge Securities
Corporation, which intends to sell up to 35,714 shares of common stock. BSI is
not selling any shares of common stock in this offering and therefore will not
receive any proceeds from this offering. BSI will, however, receive proceeds
from the sale of common stock under the Equity Line of Credit which was entered
into between BSI and Cornell Capital Partners. All costs associated with this
registration will be borne by BSI.

The shares of common stock are being offered for sale by the selling
stockholders at prices established on the Over-the-Counter Bulletin Board during
the term of this offering. On November 17, 2003, the last reported sale price of
our common stock was $0.25 per share. Our common stock is quoted on the
Over-the-Counter Bulletin Board under the symbol "BSIO." These prices will
fluctuate based on the demand for the shares of common stock.

Cornell Capital Partners is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Equity Line of Credit Agreement. Cornell Capital Partners will effectively pay
BSI 95% of, or a 5% discount to, the lowest closing bid price of the common
stock during the five consecutive trading day period immediately following the
notice date. Cornell Capital Partners has also received 1,875,000 shares of
common stock of BSI as a one-time commitment fee. The discount and the one-time
commitment fee are underwriting discounts.

Brokers or dealers effecting transactions in these shares should confirm
that the shares are registered under the applicable state law or that an
exemption from registration is available.

THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.

PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 5.

With the exception of Cornell Capital Partners, which is an "underwriter"
within the meaning of the Securities Act of 1933, no other underwriter or person
has been engaged to facilitate the sale of shares of common stock in this
offering. This offering will terminate twenty-four months after the accompanying
registration statement is declared effective by the Securities and Exchange
Commission. None of the proceeds from the sale of stock by the selling
stockholders will be placed in escrow, trust or any similar account.

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is November 26, 2003.

TABLE OF CONTENTS

PROSPECTUS SUMMARY.............................................................1
THE OFFERING...................................................................3
SUMMARY CONSOLIDATED FINANCIAL INFORMATION.....................................4
RISK FACTORS...................................................................5
FORWARD-LOOKING STATEMENTS....................................................10
SELLING STOCKHOLDERS..........................................................11
USE OF PROCEEDS...............................................................13
DILUTION......................................................................14
EQUITY LINE OF CREDIT.........................................................15
PLAN OF DISTRIBUTION..........................................................17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AND PLAN OF OPERATION.......................................................19
DESCRIPTION OF BUSINESS.......................................................27
MANAGEMENT....................................................................32
DESCRIPTION OF PROPERTY.......................................................35
LEGAL PROCEEDINGS.............................................................35
PRINCIPAL STOCKHOLDERS........................................................36
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS.................................38
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS.................................39
DESCRIPTION OF SECURITIES.....................................................42
EXPERTS.......................................................................43
LEGAL MATTERS.................................................................43
HOW TO GET MORE INFORMATION...................................................43
PART II INFORMATION NOT REQUIRED IN PROSPECTUS.................................1
EXHIBIT 23.2...................................................................1
FINANCIAL STATEMENTS.........................................................F-1

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PROSPECTUS SUMMARY

OVERVIEW

MERGER

On March 31, 2003, Knowledge Foundations, Inc., now known as BSI2000, Inc.
("KFI"), closed its reverse triangular merger with BSI2000, Inc., a privately
held Colorado corporation. Immediately prior to the closing, KFI spun-off all of
its assets and liabilities (except for a $50,000 note payable and related
accrued interest of $6,825) to Dr. Richard Ballard, Jan Pettitt, Michael
Dochterman, Robert A. Dietrich, Joel Vest (directors, officers, and/or principal
shareholders of KFI) and certain other KFI shareholders. In connection with the
spin-off, 34,105,900 shares of the common stock of KFI surrendered by the
parties mentioned above were cancelled. After the spin-off, 5,027,818 shares of
KFI remained outstanding.

In closing the merger transaction, KFI issued 45,122,570 shares of its
common stock for all of the outstanding shares of common stock of BSI2000, Inc.
Immediately following the closing, KFI changed its name to BSI2000, Inc. and
BSI2000, Inc. ( a wholly owned subsidiary of KFI as a result of the merger)
changed its name to BSI Operating, Inc.

As a result of the transactions described above, KFI has divested itself of
its business and has acquired the business of BSI2000, Inc. For financial
reporting purposes the transactions have been accounted for as a
re-capitalization of BSI2000, Inc. Accordingly the net increase in the BSI2000,
Inc. outstanding shares of 41,363,488 shares (from 8,786,900 to 50,150,388
shares of common stock) has been reflected in the financial statements as shares
issued in the re-capitalization of BSI2000, Inc.

As a result of the accounting method adopted to record the merger, for
financial reporting purposes the historical financial statements of BSI2000,
Inc. have become the historical financial statements of the continuing entity.
The historical financial statements of KFI are not presented.

BUSINESS

BSI2000, Inc. was incorporated in Colorado under the name Unified Data
Link, Incorporated in July 1993, and changed its name to Bank Systems 2000, Inc.
in April, 1995. The company changed its name to BSI2000, Inc. on May 19, 1995.
It has a contract to buy optical cards, card reader heads, and software from
LaserCard Systems Corporation, a division of Drexler Technology (Nasdaq "DRXR")
under a value added reseller volume pricing agreement. See "CURRENT
CONTRACTS-LaserCard Systems." As a value added reseller, BSI develops
proprietary hardware and software adapting LaserCard's(R) optical card
technology for specific applications. BSI's products are designed as turnkey
solutions for identified commercial and governmental card-based information
needs. BSI has not had any significant revenue since inception. There is no
assurance that BSI will generate significant revenue or earn a profit in the
future.

FINANCIAL CONDITION

We had net losses of $973,635 and $338,679 for the years ended December 31,
2002 and December 31, 2001, respectively. For the nine months ended September
30, 2003, we had a net loss of $1,052,445. As of September 30, 2003, we had cash
of $208,972 and current liabilities of $564,834. We do not have sufficient cash
or other current assets to meet our current liabilities. In order to meet those
obligations, we will need to raise cash from the sale of securities or from
borrowings. Our independent auditors have added an explanatory paragraph to
their audit opinions issued in connection with the years 2002 and 2001 financial
statements, which states that our ability to continue as a going concern depends
upon our ability to resolve liquidity problems, principally by obtaining
capital, commencing sales and generating sufficient revenues to become
profitable. Our ability to obtain additional funding will determine our ability
to continue as a going concern.

GOING CONCERN

The extended period over which losses have been experienced is principally
attributable to two factors, lack of capital and long sales lead times. Lack of
capital has prevented BSI from quickly developing and aggressively marketing its
products. In addition, most of BSI's potential customers are large corporations
or governments. Adopting BSI's products will in many cases require changing the
way business is done. These circumstances can result in two years or more
elapsing from initial sales contact to delivery of product.

In order to fund activities until positive operating cash flow is achieved,
management recognizes that BSI must generate revenue from its operations and
must raise capital from the sale of its securities. The Company anticipates that
the capital raised in the transactions described in this registration statement
will be sufficient to fund BSI's activities until positive cash flow is
achieved. However, no assurances can be given that BSI will be successful in
these activities. Should any of these events not occur, the accompanying
financial statements will be materially affected.

ABOUT US

Our principal office is located at 12600 W. Colfax Ave., B410, Lakewood,
Colorado 80215. Our telephone number is (303) 231-9095.

THE OFFERING

This offering relates to the sale of common stock by certain persons who
are stockholders of BSI. The selling stockholders consists of Cornell Capital
Partners, who intends to sell up to 47,964,286 shares of common stock,
39,839,286 relate to the Equity Line of Credit, 1,875,000 shares issued as a
commitment fee under the Equity Line of Credit and 6,250,000 which underlie
convertible debentures issued to Cornell Capital Partners, and Newbridge
Securities Corporation, who intends to sell up to 35,714 shares of common stock.

Pursuant to the Equity Line of Credit, we may, at our discretion,
periodically issue and sell to Cornell Capital Partners shares of common stock
for a total purchase price of $15 million. The amount of each advance is subject
to a maximum advance amount of $210,000, and we may not submit any advance
within seven trading days of a prior advance. Cornell Capital Partners will pay
BSI 99% of, or a 1% discount to, the lowest closing bid price of the common
stock during the five consecutive trading day period immediately following the
notice date. Of each advance made by BSI, Cornell Capital Partners shall retain
4% of each advance. In addition, Cornell Capital Partners received 1,875,000
shares of common stock of BSI as a one-time commitment fee. Cornell Capital
Partners intends to sell any shares purchased under the Equity Line of Credit at
the then prevailing market price. Among other things, this prospectus relates to
the shares of common stock to be issued under the Equity Line of Credit.

We have engaged Newbridge Securities Corporation, a registered
broker-dealer, to advise us in connection with the Equity Line of Credit.
Newbridge Securities Corporation was paid a fee of 35,714 shares of BSI's common
stock. Newbridge Securities Corporation is not participating as an underwriter
in this offering.

COMMON STOCK OFFERED 48,000,000 shares by selling stockholders

OFFERING PRICE Market price

COMMON STOCK OUTSTANDING
BEFORE THE OFFERING 53,561,102 shares as of November 26, 2003

USE OF PROCEEDS We will not receive any proceeds of the shares
offered by the selling stockholders. Any
proceeds we receive from the sale of common
stock under the Equity Line of Credit will be
used for general working capital purposes. See
"Use of Proceeds."

RISK FACTORS The securities offered hereby involve a high
degree of risk and immediate substantial
dilution. See "Risk Factors" and "Dilution."

OVER-THE-COUNTER
BULLETIN BOARD SYMBOL BSIO

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected financial data of BSI for the years
ended December 31, 2002 and 2001 and as of and for the nine months ended
September 30, 2003 and 2002. The data for the December fiscal years has been
derived from the financial statements of BSI, which have been audited by
Ehrhardt Keefe Steiner & Hottman, PC, independent certified public auditors, and
which are included in this Prospectus. The data as of and for the nine months
ended September 30, 2003 and 2002 are derived from unaudited financial
statements of BSI which include all adjustments, consisting only of normal
recurring adjustments and accruals, that BSI considers necessary for a fair
presentation of its financial position and results of operations for these
periods. Interim operating results for the nine months ended September 30, 2003
are not necessarily indicative of the results that may be expected for the
entire fiscal year ended December 31, 2003 or any future period. The following
selected financial data of BSI should be read in conjunction with BSI's
financial statements and the notes thereto included herein.

CUMULATIVE
FROM INCEPTION
(JULY 30, 1993)
NINE MONTHS ENDED NINE MONTHS ENDED THROUGH
September 30, 2003 September 30, 2002 September 30, 2003
INCOME STATEMENT DATA:

Total revenue $ 34,290 $ 9,990 $ 95,580
Total expenses $ 1,086,735 $ 596,254 $ 4,812,861
------------ ---------- ------------
Net loss $ (1,052,445) $ (586,264) $ (4,763,756)
============ ========== ============
PER SHARE DATA:
Basic and diluted net loss
per share $ (0.03) $ (0.09) $ (1.26)
============ ========== ============

Cash dividends paid per
share $ -- $ -- $ --
============ ========== ============

Basic and diluted weighted
average shares outstanding 37,298,926 6,536,401 3,794,357
============ ========== ============

BALANCE SHEET DATA:
Current assets $ 344,805 $ 56,178 $ 344,805
Total assets $ 437,535 $ 105,548 $ 437,535
Current liabilities $ 564,834 $ 380,417 $ 564,834
Total liabilities $ 814,834 $ 380,417 $ 814,834
Stockholders' equity $ (377,299) $ (274,869) $ (377,299)

PER SHARE DATA:
Book value per share at
period end $ (0.0072) $ (0.036) $ (0.0072)
------------ ---------- ------------

INCEPTION
(JULY 30, 1993)
FOR THE YEAR ENDED FOR THE YEAR ENDED THROUGH
DECEMBER 31, 2002 DECEMBER 31, 2001 DECEMBER 31, 2002
INCOME STATEMENT DATA:

Total revenue $ 9,990 $ 18,980 $ 61,290
Total expenses $ 983,625 $ 357,659 $ 3,772,601
------------ ------------ ------------
Net loss $ (973,635) $ (338,679) $ (3,711,311)
============ ============ ============
PER SHARE DATA:
Basic and diluted net loss
per share $ (0.14) $ (0.09) $ (1.86)
============ ============ ============

Cash dividends paid per
share $ -- $ -- $ --
============ ============ ============

Basic and diluted weighted
average shares outstanding 6,872,849 3,603,837 1,991,222
============ ============ ============

BALANCE SHEET DATA:
Current assets $ 259,998 $ 17,094 $ 259,998
Total assets $ 341,385 $ 64,721 $ 341,385
Current liabilities $ 15,739 $ 585,251 $ 15,739
Total liabilities $ 15,739 $ 595,515 $ 15,739
Stockholders' equity $ 325,646 $ (530,794) $ 325,646

PER SHARE DATA:
Book value per share at
period end $ 0.04 $ (0.10) $ 0.04
------------ ------------ ------------

RISK FACTORS

WE ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. YOU SHOULD CAREFULLY CONSIDER THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS FILING
BEFORE DECIDING TO PURCHASE OUR COMMON STOCK. IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS,

FINANCIAL CONDITION OR OPERATING RESULTS COULD BE MATERIALLY HARMED. IN THAT
CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL
OR PART OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

BSI HAS HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE

Since our inception we have not been profitable and have lost money on both
a cash and non-cash basis. For the years ended December 31, 2002 and 2001, we
lost $973,635 and $338,679, respectively. For the nine months ended September
30, 2003, we had a net loss of $1,052,445. Our accumulated deficit was
$4,763,756 as at the end of September 30, 2003. Future losses are likely to
occur, as we are dependent on spending money to pay for the development and sale
of our products. No assurances can be given that we will be successful in
reaching or maintaining profitable operations. Accordingly, we may experience
liquidity and cash flow problems.

BSI MAY NEED TO RAISE ADDITIONAL CAPITAL OR DEBT FUNDING TO SUSTAIN OPERATIONS

Unless BSI can become profitable with the existing sources of funds it has
available and its sales efforts, we will require additional capital to sustain
operations and we may need access to additional capital or additional debt
financing to grow our sales. In addition, to the extent that we have a working
capital deficit and cannot offset the deficit from profitable sales we may have
to raise capital to repay the deficit and provide more working capital to permit
growth in revenues. We cannot assure you that financing whether from external
sources or related parties will be available if needed or on favorable terms.
Our inability to obtain adequate financing will result in the need to reduce the
pace of business operations. Any of these events could be materially harmful to
our business and may result in a lower stock price.

WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FOR OUR FISCAL YEARS ENDED
DECEMBER 31, 2002 AND DECEMBER 31, 2001 FROM OUR INDEPENDENT AUDITORS, WHICH
MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE CAN BECOME
PROFITABLE OR OBTAIN ADDITIONAL FUNDING

Our independent auditors have added an explanatory paragraph to their audit
opinions issued in connection with our financial statements for the years ended
December 31, 2002 and December 31, 2001, which states that the financial
statements raise substantial doubt as to BSI's ability to continue as a going
concern. Our ability to make operations profitable or obtain additional funding
will determine our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. Based on our current budget assessment, we believe that we may
need to obtain approximately $1.5 million in additional debt or equity capital
from one or more sources to fund operations for the next 12 months. These funds
are expected to be obtained from the sale of securities, including the sale of
stock under the equity line of credit.

WE ARE SUBJECT TO A WORKING CAPITAL DEFICIT, WHICH MEANS THAT OUR CURRENT ASSETS
ON SEPTEMBER 30, 2003 WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES

We had a working capital deficit of $220,029 at September 30, 2003, which
means that our current liabilities as of that date exceeded our current assets
on September 30, 2003 by $220,029. Current assets are assets that are expected
to be converted to cash within one year and, therefore, may be used to pay
current liabilities as they become due. Our working capital deficit means that
our current assets on June 30, 2003 were not sufficient to satisfy all of our
current liabilities on that date. If our ongoing operations do not begin to
provide sufficient profitability to offset the working capital deficit we may
have to raise capital or debt to fund the deficit.

OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY

Prior to this offering, there has been a limited public market for our
common stock and there can be no assurance that a more active trading market for
our common stock will develop. An absence of an active trading market could
adversely affect our shareholders' ability to sell our common stock in short
time periods, or possibly at all. Our common stock has experienced, and is
likely to experience in the future, significant price and volume fluctuations,
which could adversely affect the market price of our common stock without regard
to our operating performance. In addition, we believe that factors such as
quarterly fluctuations in our financial results and changes in the overall
economy or the condition of the financial markets could cause the price of our
common stock to fluctuate substantially. These fluctuations may also cause short
sellers to enter the market from time to time in the belief that BSI will have
poor results in the future. We cannot predict the actions of market participants
and, therefore, can offer no assurances that the market for our stock will be
stable or appreciate over time.

OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS

Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third parties or to otherwise dispose of
them. This could cause our stock price to decline. Penny stocks are stock:

o With a price of less than $5.00 per share;

o That are not traded on a "recognized" national exchange;

o Whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ listed stock must still have a price of not less than $5.00
per share); or

o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$10.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last three
years.

Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.

WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

Our success largely depends on the efforts and abilities of key executives,
including Jack Harper, our Chairman and President. The loss of the services of
Mr. Harper could materially harm our business because of the cost and time
necessary to replace and train a replacement. Such a loss would also divert
management attention away from operational issues. We do not presently maintain
any key-man life insurance policy on Mr. Harper. We also have other key
employees that manage our operations and if we were to lose their services,
senior management would be required to expend time and energy to replace and
train replacements. To the extent that we are smaller than our competitors and
have fewer resources we may not be able to attract the sufficient number and
quality of staff.

IF WE FAIL TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY
STANDARDS, OUR PRODUCTS COULD BECOME LESS COMPETITIVE OR OBSOLETE

The market for products, such as ours, is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs, intense
competition and frequent new product introductions. If we fail to modify or
improve our own products in response to changes in technology or industry
standards, our products could rapidly become less competitive or obsolete. A
portion of our future success will depend, in part, on our ability to:

o enhance and adapt current software products and develop new products
that meet changing customer needs;

o successfully advertise and market our products; and

o influence and respond to emerging industry standards and other
technological changes.

We need to respond to changing technology and industry standards in a
reasonably timely and cost-effective manner. We may not be successful in
effectively using new technologies, developing or enhancing our products on a
timely basis. Our pursuit of necessary technology may require time and expense.
We may need to license new technologies to respond to technological change.
These licenses may not be available to us on terms that give us a profit margin
with which to actively pursue reselling these products. Finally, we may not
succeed in adapting various products to new technologies as they emerge.

WE MAY NOT BE ABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, THE
FOUNDATION OF OUR BUSINESS, WHICH COULD HARM OUR BUSINESS BY MAKING IT EASIER
FOR OUR COMPETITORS TO DUPLICATE OUR SERVICES

We regard certain aspects of our products, processes, services and
technology as proprietary. Although we have taken steps to protect them, we
cannot be certain that third parties will not infringe or misappropriate our
proprietary rights or that third parties will not independently develop similar
products, services and technology. Any infringement, misappropriation or
independent development could cause us to cease operations.

OTHER PARTIES MAY ASSERT THAT OUR TECHNOLOGY INFRINGES ON THEIR INTELLECTUAL
PROPERTY RIGHTS, WHICH COULD DIVERT MANAGEMENT TIME AND RESOURCES AND POSSIBLY
FORCE US TO REDESIGN OUR TECHNOLOGY

Technology-based industries, such as ours, are characterized by an
increasing number of patents and frequent litigation based on allegations of
patent infringement. From time to time, third parties may assert patent,
copyright and other intellectual property rights to technologies that are
important to us. While there currently are no outstanding infringement claims
pending by or against us, we cannot assure you that third parties will not
assert infringement claims against us in the future, that assertions by such
parties will not result in costly litigation, or that they will not prevail in
any such litigation. In addition, we cannot assure you that we will be able to
license any valid and infringed patents from third parties on commercially
reasonable terms or, alternatively, be able to redesign products on a
cost-effective basis to avoid infringement. Any infringement claim or other
litigation against or by us could have a material adverse effect on us and could
cause us to reduce or cease operations.

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT OR IMPOSSIBLE TO EVALUATE OUR
PERFORMANCE AND MAKE PREDICTIONS ABOUT OUR FUTURE

Based on our limited operating history and sales, it is difficult or
impossible for us to evaluate our operational and financial performance, or to
make accurate predictions about our future performance. While we believe that we
have refined our products and sales efforts, there is no assurance that we will
be successful or well received by potential customers.

RISKS RELATED TO THIS OFFERING

FUTURE SALES BY OUR STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND OUR
ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS

Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all. Of
the 53,561,102 shares of common stock outstanding as of November 26, 2003,
24,956,482 shares are, or will be, freely tradable without restriction, unless
held by our "affiliates." The remaining 28,604,620 shares of common stock which
are held by existing stockholders, including officers and directors, are
restricted securities. Some of these shares may be resold under Rule 144.

POSSIBLE LACK OF SUFFICIENT AUTHORIZED SHARES

There is a possibility that BSI may not currently have sufficient
authorized shares to convert all of the shares of common stock needed under the
Equity Line of Credit and a proposal may be required to be placed before the
shareholders to facilitate an increase in the number of authorized shares within
the next several years. For example, at a purchase price of $0.2475 (99% of
assumed stock price of $0.25), we would need 60,606,061 shares available to
fully utilize the $15 million available under the Equity Line of Credit.
Currently we have authorized 100,000,000 million shares of common stock, and as
of November 26, 2003, we have 53,561,102 shares outstanding. We also have
6,250,000 shares underlying convertible debentures, leaving approximately
40,000,000 shares available for issuance under the Equity Line of Credit.
Accordingly, at the current market price, we would need to authorize
approximately 20,000,000 additional shares to fully utilize the Equity Line of
Credit. We would have to receive the affirmative vote of a majority of our
outstanding shares to approve any increase in authorized shares.

EXISTING SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF
SHARES PURSUANT TO THE CONVERSION OF CONVERTIBLE DEBENTURES AND SHARES ISSUED
UNDER THE EQUITY LINE OF CREDIT

Cornell Capital may convert its convertible debentures into shares of BSI's
common stock, at a conversion price which is at a 20% discount to the market
price, and Cornell Capital may purchase BSI's shares of common stock under the

Equity Line of Credit, which purchase price is effectively at a 5% discount to
the market price. The subsequent sale of such shares by Cornell Capital could
cause significant downward pressure on the price of BSI's common stock. This is
especially the case if the shares being placed into the market exceed the
market's demand for the shares of BSI's common stock. As the stock price of
BSI's common stock declines, Cornell Capital will be entitled to receive an
increasing number of shares under the Equity Line of Credit Agreement and
convertible debentures. The sale of such increasing number of shares by Cornell
Capital could cause further downward pressure on the stock price to the
detriment and dilution of existing investors, as well as investors in this
offering.

Further, there is no maximum number of shares BSI might be required to
issue under securities with market-price based conversion or exercise prices,
such as securities issued in connection with the Equity Line of Credit and the
related convertible debentures, except for the 9.9% limitation on Cornell
Capital's ownership interest in BSI at any one time. However, Cornell Capital
may acquire a number of shares that far exceeds this limit, through the
continual purchase and sale of shares.

To illustrate the dilution that may result from the purchase of shares
under the Equity Line of Credit, assuming an offering price of $0.2475 per
share, the new stockholders would experience an immediate dilution in the net
tangible book value of $0.1511 per share. Dilution per share at prices of
$0.1856, $0.1238 and $0.0619 per share would be $0.1146, $0.0781 and $0.0416,
respectively.

As a result, our net income per share could decrease in future periods, and
the market price of our common stock could decline. In addition, the lower our
stock price, the more shares of common stock we will have to issue under the
Equity Line of Credit to draw down the full amount and to issue upon conversion
of the convertible debentures. If our stock price is lower, then our existing
stockholders would experience greater dilution.

UNDER THE EQUITY LINE OF CREDIT CORNELL CAPITAL PARTNERS WILL PAY LESS THAN THE
THEN-PREVAILING MARKET PRICE OF OUR COMMON STOCK

The common stock to be issued under the Equity Line of Credit will be
issued at a 1% discount to the lowest closing bid price for the five days
immediately following the notice date of an advance. In addition, Cornell
Capital Partners will retain 4% from each advance. These discounted sales could
cause the price of our common stock to decline.

THE SELLING STOCKHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK IN THE
MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE

The selling stockholders intend to sell in the public market 48,000,000
shares of common stock being registered in this offering. That means that up to
48,000,000 shares may be sold pursuant to this registration statement. Such
sales may cause our stock price to decline.

THE SALE OF OUR STOCK UNDER OUR EQUITY LINE OR THE CONVERTIBLE DEBENTURES COULD
ENCOURAGE SHORT SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE
DECLINE OF OUR STOCK PRICE

In many circumstances the provision of an equity line of credit or
convertible debentures for companies that are traded on the OTCBB has the
potential to cause a significant downward pressure on the price of common stock.
This is especially the case if the shares being placed into the market exceed
the market's ability to take up the increased stock or if BSI has not performed
in such a manner to show that the equity funds raised will be used to grow BSI.
Such an event could place further downward pressure on the price of common
stock.

Under the terms of our Equity Line of Credit, BSI may request numerous draw
downs pursuant to the terms of the equity line. In addition, our outstanding
convertible debentures are convertible at a discount to the market price of our
common stock. As a result, the opportunity exists for short sellers and others
to contribute to the future decline of BSI's stock price. Persons engaging in
short-sales first sell shares that they do not own, and thereafter, purchase
shares to cover their previous sales. To the extent the stock price declines
between the time the person sells the shares and subsequently purchases the
shares, the person engaging in short-sales will profit from the transaction, and
the greater the decline in the stock, the greater the profit to the person
engaging in such short-sales. Because the debentures are convertible at a
discount to market, it is possible that the debentures could be converted if the
market price of our common stock declines, thus, supplying any short sellers
with the opportunity to cover their short positions. By contrast, a person
owning a long position in a stock, such as an investor purchasing shares in this
offering, first purchases the shares at the then market price, if the stock
price declines while the person owns the shares, then upon the sale of such
shares the person maintaining the long

position will incur a loss, and the greater the decline in the stock price, the
greater the loss which is incurred by the person owning a long-position in the
stock.

If there are significant short sales of stock, the price decline that would
result from this activity will cause the share price to decline more so which in
turn may cause long holders of the stock to sell their shares thereby
contributing to sales of stock in the market. If there is an imbalance on the
sell side of the market for the stock the price will decline. It is not possible
to predict if the circumstances where by a short sales could materialize or to
what the share price could drop. In some companies that have been subjected to
short sales the stock price has dropped to near zero. This could happen to BSI.

THE PRICE YOU PAY IN THIS OFFERING WILL FLUCTUATE AND MAY BE HIGHER OR LOWER
THAN THE PRICES PAID BY OTHER PEOPLE PARTICIPATING IN THIS OFFERING

The price in this offering will fluctuate based on the prevailing market
price of the common stock on the Over-the-Counter Bulletin Board. Accordingly,
the price you pay in this offering may be higher or lower than the prices paid
by other people participating in this offering.

WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE EQUITY LINE OF CREDIT
WHEN NEEDED

We are dependent on external financing to fund our operations. Our
financing needs are expected to be partially provided from the Equity Line of
Credit. No assurances can be given that such financing will be available in
sufficient amounts or at all when needed, in part, because we are limited to a
maximum draw down of $210,000 during any seven trading day period. In addition,
based on an assumed offering price of $0.2475, we will only be able to draw
$9,860,223, utilizing the 39,839,286 shares being registered for the Equity Line
of Credit under this Registration Statement. At our current price of $0.2475, we
would need to authorize approximately 20,000,000 additional shares to fully
utilize the Equity Line of Credit. We would have to receive the affirmative vote
of a majority of our outstanding shares to approve any increase in authorized
shares.

THE SEQUENTIAL PURCHASE AND SALE OF MARKET-PRICE BASED SECURITIES IN THE CONTEXT
OF A DECLINING MARKET PRICE COULD RESULT IN A CHANGE OF CONTROL.

In the event of a decline in the market price of BSI's common stock,
through the purchase and conversion of shares under the Equity Line of Credit
and convertible debentures, the subsequent resale of such shares could result in
BSI issuing a sufficient number of shares of common stock registered in this
offering, which if held by one or more stockholders working together, could
result in a change of control.

WE MAY NOT BE ABLE TO DRAW DOWN UNDER THE EQUITY LINE OF CREDIT IF THE INVESTOR
HOLDS MORE THAN 9.9% OF OUR COMMON STOCK

In the event Cornell Capital holds more than 9.9% of the then-outstanding
common stock of BSI, we will be unable to draw down on the Equity Line of
Credit. Currently, Cornell Capital has beneficial ownership of 6.34% of our
common stock and therefore we would be able to draw down on the Equity Line of
Credit so long as Cornell Capital's beneficial ownership remains below 10%. If
Cornell Capital Partner's beneficial ownership increases above 9.9%, we would be
unable to draw down on the Equity Line of Credit. Because Cornell Capital
Partners is not limited by a percentage ownership limitation with respect to
converting the convertible debentures, a possibility exists that Cornell Capital
Partners may own more than 9.9% or BSI's outstanding common stock at a time when
we would otherwise plan to make an advance under the Equity Line of Credit. In
that event, if we are unable to obtain additional external funding or generate
revenue from the sale of our products, we could be forced to curtail or cease
our operations.

FORWARD-LOOKING STATEMENTS

Information included or incorporated by reference in this prospectus may
contain forward-looking statements. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "will," "should," "expect,"

"anticipate," "estimate," "believe," "intend" or "project" or the negative of
these words or other variations on these words or comparable terminology.

This prospectus contains forward-looking statements, including statements
regarding, among other things, (a) our projected sales and profitability, (b)
our growth strategies, (c) anticipated trends in our industry, (d) our future
financing plans and (e) our anticipated needs for working capital. These
statements may be found under "Management's Discussion and Analysis or Plan of
Operations" and "Description of Business," as well as in this prospectus
generally. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including, without
limitation, the risks outlined under "Risk Factors" and matters described in
this prospectus generally. In light of these risks and uncertainties, there can
be no assurance that the forward-looking statements contained in this prospectus
will in fact occur.

SELLING STOCKHOLDERS

The following table presents information regarding the selling
stockholders. The selling shareholders are the entities who have assisted in or
provided financing to BSI. A description of each selling shareholder's
relationship to BSI and how each selling shareholder acquired the shares to be
sold in this offering is detailed in the information immediately following this
table.

PERCENTAGE
OF PERCENTAGE OF
OUTSTANDING OUTSTANDING PERCENTAGE
SHARES SHARES SHARES TO BE SHARES TO BE OF SHARES
BENEFICIALLY BENEFICIALLY ACQUIRED ACQUIRED BENEFICIALLY
OWNED OWNED UNDER THE UNDER THE SHARES TO BE OWNED
BEFORE BEFORE EQUITY LINE OF EQUITY LINE OF SOLD IN THE AFTER
SELLING STOCKHOLDER OFFERING OFFERING (1) CREDIT CREDIT OFFERING OFFERING (1)
- ---------------------- ------------ ------------ -------------- -------------- ------------ ------------
SHARES ACQUIRED IN FINANCING TRANSACTIONS WITH BSI2000

Cornell Capital
Partners, L.P. 3,625,000(2) 6.34% 39,839,286(3) 42.65% 47,964,286(4) 0%
Newbridge Securities
Corporation 35,714 * -- -- 35,714 0%
TOTAL 3,660,714 6.34% 39,839,286 42.65% 48,000,000 0%
========= ===== ============= ===== ============= ====

- ----------------------------------
<FN>
* Less than 1%.

(1) Applicable percentage of ownership is based on 53,561,102 shares of common
stock outstanding as of November 26, 2003, together with securities
exercisable or convertible into shares of common stock within 60 days of
November 26, 2003, for each stockholder. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable
within 60 days of November 26, 2003 are deemed to be beneficially owned by
the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
Note that affiliates are subject to Rule 144 and Insider trading
regulations - percentage computation is for form purposes only.

(2) Consists of up to 1,250,000 shares of common stock which may be converted
under the convertible debentures at an assumed market price of $0.25,
1,875,000 shares issued to Cornell Capital as a commitment fee in
connection with the Equity Line of Credit and 500,000 shares (not being
registered in this offering) issued to Cornell Capital in connection with a
secured loan made by Cornell Capital to the Company on September 16, 2003.

(3) Represents up to 39,839,286 shares which are being registered for issuance
under the Equity Line of Credit.

(4) Represents the shares beneficially owned by Cornell Capital before the
offering (less 500,000 shares issued to Cornell Capital on September 16,
2003 and not being registered in this offering), shares being registered
for issuance under the Equity Line of Credit, and 5,000,000 additional
shares being registered for conversion under the convertible debentures in
the event of a decrease in the market price of our common stock.
</FN>

The following information contains a description of each selling
shareholder's relationship to BSI and how each selling shareholder acquired the
shares to be sold in this offering. None of the selling stockholders have held a
position or office, or had any other material relationship, with BSI, except as
follows:

SHARES ACQUIRED IN FINANCING TRANSACTIONS WITH BSI

CORNELL CAPITAL PARTNERS. Cornell Capital Partners is the investor under
the Equity Line of Credit and a holder of convertible debentures. All investment
decisions of Cornell Capital Partners are made by its general partner, Yorkville
Advisors, LLC. Mark Angelo, the managing member of Yorkville Advisors, makes the
investment decisions on behalf of Yorkville Advisors. Cornell Capital Partners
acquired all shares being registered in this offering in financing transactions
with BSI. Those transactions are explained below:

o EQUITY LINE OF CREDIT. On October 31, 2003, we entered into an Equity
Line of Credit with Cornell Capital Partners. Pursuant to the Equity
Line of Credit, we may, at our discretion, periodically sell to
Cornell Capital Partners shares of common stock for a total purchase
price of up to $15.0 million. For each share of common stock purchased
under the Equity Line of Credit, Cornell Capital Partners will pay BSI
99% of, or a 1% discount to, the lowest closing bid price of our
common stock on the Over-the-Counter Bulletin Board or other principal
market on which our common stock is traded for the five days
immediately following the notice date. Further, Cornell Capital
Partners will retain 4% of each advance under the Equity Line of
Credit. In connection with the Equity Line of Credit, Cornell Capital
Partners received 1,875,000 shares of common stock as a one-time
commitment fee. We are registering 39,839,286 shares in this offering
which may be issued under the Equity Line of Credit.

o CONVERTIBLE DEBENTURES. On July 7, 2003, Cornell Capital partners
purchased $250,000 of convertible debentures from BSI. The debentures
are convertible at the holder's option any time up to maturity at a
conversion price equal to the lower of (i) 120% of the closing bid
price of the common stock as of the closing date (ii) 80% of the
lowest closing bid price of the common stock for the five trading days
immediately preceding the conversion date. At maturity, BSI has the
option to either pay the holder the outstanding principal balance and
accrued interest or to convert the debentures into shares of common
stock at a conversion price equal to the lower of (i) 120% of the
closing bid price of the common stock as of the closing date or (ii)
80% of the lowest closing bid price of the common stock for the five
trading days immediately preceding the conversion date. BSI has the
right to redeem all or a portion of the debentures upon thirty days'
notice paying Cornell Capital Partners 120% of the amount redeemed
plus accrued interest. BSI is registering in this offering 6,250,000
shares of common stock underlying the convertible debentures.

There are certain risks related to sales by Cornell Capital Partners,
including:

o The outstanding shares will be issued based on discount to the market
rate. As a result, the lower the stock price, the greater number of
shares that will be issued to Cornell Capital Partners. This could
result in substantial dilution to the interests of other holders of
common stock.

o To the extent Cornell sells its common stock, the common stock price
may decrease due to the additional shares in the market. This could
allow Cornell to sell greater amounts of common stock, the sales of
which would further depress the stock price.

o The significant downward pressure on the price of the common stock as
Cornell sells material amounts of common stocks could encourage short
sales by Cornell or others. This could place further downward pressure
on the price of the common stock.

NEWBRIDGE SECURITIES CORPORATION. Newbridge Securities Corporation is an
unaffiliated registered broker-dealer that has been retained by us. For its
services in connection with the Equity Line of Credit, Newbridge Securities
Corporation received a fee of 35,714 shares of common stock equal to
approximately $10,000 based on BSI's stock price on July 7, 2003. These shares
are being registered in this offering. All investment decisions of Newbridge
Securities Corporation are made by its President, Guy Amico.

USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered
and sold from time to time by certain selling stockholders. There will be no
proceeds to us from the sale of shares of common stock in this offering.
However, we will receive the proceeds from the sale of shares of common stock to
Cornell Capital Partners under the Equity Line of Credit. The purchase price of
the shares purchased under the Equity Line of Credit will be equal to 99% of the
lowest closing bid price of our common stock on the Over-the-Counter Bulletin
Board for the five days immediately following the notice date. BSI will pay
Cornell Capital 4% of each advance as an additional fee.

Pursuant to the Equity Line of Credit, BSI cannot draw more than $210,000
every seven trading days or more than $15 million over twenty-four months.

For illustrative purposes only, we have set forth below our intended use of
proceeds for the range of net proceeds indicated below to be received under the
Equity Line of Credit. The table assumes estimated offering expenses of $85,000,
plus 4% retainage payable to Cornell Capital Partners. The figures below are
estimates only, and may be changed due to various factors, including the timing
of the receipt of the proceeds.

GROSS PROCEEDS $ 1,000,000 $ 7,500,000 $ 15,000,000

NET PROCEEDS $ 875,000 $ 7,115,000 $ 14,315,000

NO. OF SHARES ISSUED UNDER THE EQUITY LINE OF
CREDIT AT AN ASSUMED PRICE OF $0.2475 4,040,404 30,303,030 60,606,061(1)

USE OF PROCEEDS: AMOUNT AMOUNT AMOUNT
- ---------------------------------------------------------------------------------------------------

New Product Development $ -- $ 2,500,000 $ 2,500,000
Sales and Marketing $ 100,000 $ 720,000 $ 2,500,000
Administrative Expenses, Including Salaries . $ 500,000 $ 3,000,000 $ 7,200,000
Reduction of Accounts Payable $ 120,000 $ 120,000 $ 120,000
Accrued Expense $ 80,000 $ 80,000 $ 80,000
General Working Capital $ 75,000 $ 695,000 $ 1,915,000
----------- ----------- -------------

TOTAL $ 875,000 $ 7,115,000 $ 14,315,000
=========== =========== =============
<FN>
(1) At our current stock price, BSI has not registered sufficient shares of
common stock under this registration statement to obtain the full $15
million available under the Equity Line of Credit. Accordingly, this column
would only be applicable if our stock price increased sufficiently so that
more proceeds may be obtained under the Equity Line of Credit with the
39,839,286 shares that are being registered under the Equity Line of Credit
in the registration statement.
</FN>

DILUTION

The net tangible book value of our Company as of September 30, 2003 was
$(386,279) or ($0.0072) per share of common stock. Net tangible book value per
share is determined by dividing the tangible book value of our Company (total
tangible assets less total liabilities) by the number of outstanding shares of
our common stock. Since this offering is being made solely by the selling
stockholders and none of the proceeds will be paid to our Company, our net
tangible book value will be unaffected by this offering. Our net tangible book
value and our net tangible book value per share, however, will be impacted by
the common stock to be issued under the Equity Line of Credit. The amount of
dilution will depend on the offering price and number of shares to be issued
under the Equity Line of Credit. The following example shows the dilution to new
investors at an offering price of $0.2475 per share which is in the range of the
recent share price.

If we assume that our Company had issued 39,839,286 shares of common stock
under the Equity Line of Credit at an assumed offering price of $0.2475 per
(i.e., the number of shares registered in this offering under the Equity Line of
Credit), less retention fees of $394,408 and offering expenses of $85,000, our
net tangible book value as of September 30, 2003 would have been $9,473,944 or
$0.0964 per share. Note that at an offering price of $0.2475 per share, BSI
would receive gross proceeds $9,860,223, or $5,139,777 less than is available
under the Equity Line of Credit.

Such an offering would represent an immediate increase in net tangible book
value to existing stockholders of $0.1037 per share and an immediate dilution to
new stockholders of $0.1511 per share. The following table illustrates the per
share dilution:

Assumed public offering price per share $0.2475
Net tangible book value per share before this offering $(0.0072)
--------
Increase attributable to new investors $0.1037
Net tangible book value per share after this offering $0.0964
-------
Dilution per share to new stockholders $0.1511
=======

The offering price of our common stock is based on the then-existing market
price. In order to give prospective investors an idea of the dilution per share
they may experience, we have prepared the following table showing the dilution
per share at various assumed offering prices:

DILUTION
PER SHARE
ASSUMED NO. OF SHARES TO TO NEW
OFFERING PRICE BE ISSUED INVESTORS
-------------- --------- ---------
$0.2475 39,839,286(1) 0.1511
$0.1856 39,839,286(1) 0.1146
$0.1238 39,839,286(1) 0.0781
$0.0619 39,839,286(1) 0.0416

(1) This represents the maximum number of shares of common stock that will be
registered under the Equity Line of Credit.

EQUITY LINE OF CREDIT

SUMMARY

On October 31, 2003, we entered into an Equity Line of Credit with Cornell
Capital Partners. Pursuant to the Equity Line of Credit, we may, at our
discretion, periodically sell to Cornell Capital Partners shares of common stock
for a total purchase price of up to $15.0 million. For each share of common
stock purchased under the Equity Line of Credit, Cornell Capital Partners will
pay 99% of, or a 1% discount to, the lowest closing bid price of our common
stock on the Over-the-Counter Bulletin Board or other principal market on which
our common stock is traded for the five days immediately following the notice
date. Further, Cornell Capital Partners will retain 4% of each advance under the
Equity Line of Credit. Cornell Capital Partners is a private limited partnership
whose business operations are conducted through its general partner, Yorkville
Advisors, LLC. In addition, we engaged Newbridge Securities Corporation, a
registered broker-dealer, to advise us in connection with the Equity Line of
Credit. For its services, Newbridge Securities Corporation received 35,714
shares of our common stock. The effectiveness of the sale of the shares under
the Equity Line of Credit is conditioned upon us registering the shares of
common stock with the Securities and Exchange Commission. The costs associated
with this registration will be borne by us.

EQUITY LINE OF CREDIT EXPLAINED

Pursuant to the Equity Line of Credit, we may periodically sell shares of
common stock to Cornell Capital Partners to raise capital to fund our working
capital needs. The periodic sale of shares is known as an advance. We may
request an advance every seven trading days. A closing will be held six trading
days after such written notice at which time we will deliver shares of common
stock and Cornell Capital Partners will pay the advance amount. There are no
closing conditions for any of the draws other than the written notice and
associated correspondence. We are limited however, on our ability to request
advances under the Equity Line of Credit based on the number of shares we have
registered on this registration statement and potentially the number of shares
we have authorized. For example, an assumed offering price of $0.2475 (99% of
our assumed stock price), we would be able to draw gross proceeds of $9,860,223
under the Equity Line of Credit utilizing

39,839,286 of the shares being registered. At our current stock price, we would
be required to authorize and register additional shares of our common stock to
fully utilize the Equity Line of Credit.

We may request advances under the Equity Line of Credit once the underlying
shares are registered with the Securities and Exchange Commission. Thereafter,
we may continue to request advances until Cornell Capital Partners has advanced
$15.0 million or 24 months after the effective date of the accompanying
registration statement, whichever occurs first.

The amount of each advance is subject to a maximum amount of $210,000, and
we may not submit an advance within seven trading days of a prior advance. The
amount available under the Equity Line of Credit is not dependent on the price
or volume of our common stock. Our ability to request advances is conditioned
upon us registering the shares of common stock with the SEC. In addition, we may
not request advances if the shares to be issued in connection with such advances
would result in Cornell Capital Partners owning more than 9.9% of our
outstanding common stock. Based on a recent average stock price of $0.2475,
Cornell Capital Partners' beneficial ownership of BSI common stock is 6.34%, and
therefore we would be permitted to make draws on the Equity Line of Credit so
long as Cornell Capital Partners' beneficial ownership of our common stock was
not greater than 9.9%. However, Cornell Capital Partners is not limited by a
percentage ownership limitation with respect to converting the convertible
debentures, and therefore a possibility exists that Cornell Capital Partners may
own more than 9.9% of BSI's outstanding common stock at a time when we would
otherwise plan to make an advance under the Equity Line of Credit.

We do not have any agreements with Cornell Capital Partners regarding the
distribution of such stock, although Cornell Capital Partners has indicated that
intends to promptly sell any stock received under the Equity Line of Credit.

We cannot predict the actual number of shares of common stock that will be
issued pursuant to the Equity Line of Credit, in part, because the purchase
price of the shares will fluctuate based on prevailing market conditions and we
have not determined the total amount of advances we intend to draw. Nonetheless,
we can estimate the number of shares of our common stock that will be issued
using certain assumptions. Assuming we issued the number of shares of common
stock being registered in the accompanying registration statement at a purchase
price of $0.2475 (99% of our assumed stock price of $0.25 per share), we would
issue 39,839,286 shares of common stock to Cornell Capital Partners for gross
proceeds of $9,860,226 under the Equity Line of Credit. These shares would
represent 42.65% of our outstanding common stock upon issuance. We are
registering 39,839,286 shares of common stock for the sale under the Equity Line
of Credit. At our current stock price, we would be required to authorize and
register additional shares of common stock in order to fully utilize the $15.0
million available under the Equity Line of Credit.

If our stock price declines, we would be required to issue a greater number
of shares under the Equity Line of Credit for a given advance or our net
proceeds from the advance would decline. This relationship is demonstrated by
the following table, which shows the reduction of our net proceeds under the
Equity Line of Credit assuming we issue the same number of shares but our recent
stock price of $0.2475 per share is discounted by 25%, 50% and 75%.

Purchase Price $.2475 $.1856 $.1238 $.0619
No. of Shares: 39,839,286(1) 39,839,286(1) 39,839,286(1) 39,839,286(1)
Total Outstanding Before Offering: 53,561,102 53,561,102 53,561,102 53,561,102
Percent Outstanding (2): 42.65% 42.65% 42.65% 42.645%
Gross Proceeds $9,860,223 $7,394,172 $4,932,104 $2,466,052

<FN>
(1) Represents the number of shares of common stock being registered for
issuance under the Equity Line of Credit.

(2) Represents the shares of common stock to be issued as a percentage of the
total number shares outstanding.
</FN>

Proceeds used under the Equity Line of Credit will be used in the manner
set forth in the "Use of Proceeds" section of this prospectus. We cannot predict
the total amount of proceeds to be raised in this transaction because we have
not determined the total amount of the advances we intend to draw.

We expect to incur expenses of approximately $85,000 in connection with
this registration, consisting primarily of professional fees. In connection with
the Equity Line of Credit, Cornell Capital Partners received 1,875,000 shares of
BSI common stock as a one-time commitment fee. In addition, we issued 35,714
shares of common stock to Newbridge Securities Corporation, an unaffiliated
registered broker-dealer, as compensation for its services as a placement agent.

PLAN OF DISTRIBUTION

The selling stockholders have advised us that the sale or distribution of
our common stock owned by the selling stockholders may be effected directly to
purchasers by the selling stockholders or by pledgees, donees, transferees or
other successors in interest, as principals or through one or more underwriters,
brokers, dealers or agents from time to time in one or more transactions (which
may involve crosses or block transactions) (i) on the over-the-counter market or
in any other market on which the price of our shares of common stock are quoted
or (ii) in transactions otherwise than on the over-the-counter market or in any
other market on which the price of our shares of common stock are quoted. Any of
such transactions may be effected at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at varying prices
determined at the time of sale or at negotiated or fixed prices, in each case as
determined by the selling stockholders or by agreement between the selling
stockholders and underwriters, brokers, dealers or agents, or purchasers. If the
selling stockholders effect such transactions by selling their shares of common
stock to or through underwriters, brokers, dealers or agents, such underwriters,
brokers, dealers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of common stock for whom they may act as agent (which discounts,
concessions or commissions as to particular underwriters, brokers, dealers or
agents may be in excess of those customary in the types of transactions
involved). The selling stockholders and any brokers, dealers or agents that
participate in the distribution of the common stock may be deemed to be
underwriters, and any profit on the sale of common stock by them and any
discounts, concessions or commissions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.

Cornell Capital Partners is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock under the
Equity Line of Credit. Cornell Capital Partners will pay us 99% of, or a 1%
discount to, the lowest closing bid price of our common stock on the
Over-the-Counter Bulletin Board or other principal trading market on which our
common stock is traded for the five days immediately following the advance date.
In addition, Cornell Capital Partners will retain 4% of the proceeds received by
us under the Equity Line of Credit, and received 1,875,000 shares of BSI common
stock as a one-time commitment fee. The 1% discount, the 4% retainage and the
one-time commitment fee are underwriting discounts. In addition, we engaged
Newbridge Securities Corporation, an unaffiliated registered broker-dealer, to
advise us in connection with the Equity Line of Credit. For its services,
Newbridge Securities Corporation received 35,714 shares of our common stock
equal to approximately $10,000 based on BSI's stock price on July 7, 2003.

Cornell Capital Partners was formed in February 2000 as a Delaware limited
partnership. Cornell Capital Partners is a domestic private equity fund in the
business of investing in and financing public companies. Cornell Capital
Partners does not intend to make a market in our stock or to otherwise engage in
stabilizing or other transactions intended to help support the stock price.
Prospective investors should take these factors into consideration before
purchasing our common stock.

Under the securities laws of certain states, the shares of common stock may
be sold in such states only through registered or licensed brokers or dealers.
The selling stockholders are advised to ensure that any underwriters, brokers,
dealers or agents effecting transactions on behalf of the selling stockholders
are registered to sell securities in all fifty states. In addition, in certain
states the shares of common stock may not be sold unless the shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.

We will pay all the expenses incident to the registration, offering and
sale of the shares of common stock to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents. We
have agreed to indemnify Cornell Capital Partners and its controlling persons
against certain liabilities, including liabilities under the Securities Act. We
estimate that the expenses of the offering to be borne by us will be
approximately $85,000. The offering expenses consist of: a SEC registration fee
of $970.80, printing expenses of $2,500, accounting fees of $15,000, legal fees
of $50,000 and miscellaneous expenses of $16,529.20. We will not receive any
proceeds from the sale of any of the shares of common stock by the selling
stockholders. We will, however, receive proceeds from the sale of common stock
under the Equity Line of Credit.

The selling stockholders should be aware that the anti-manipulation
provisions of Regulation M under the Exchange Act will apply to purchases and
sales of shares of common stock by the selling stockholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the shares. Under Registration M, the selling stockholders or their agents
may not bid for, purchase, or attempt to induce any person to bid for or
purchase, shares of our common stock while such selling stockholders are
distributing shares covered by this prospectus. Further, Cornell Capital
Partners is contractually prohibited under the Equity Line of Credit Agreement
from engaging in any "short sales," as such term is defined by the Securities
Exchange Act of 1934. The selling stockholders are advised that if a particular
offer of common stock is to be made on terms constituting a material change from
the information set forth above with respect to the Plan of Distribution, then,
to the extent required, a post-effective amendment to the accompanying
registration statement must be filed with the Securities and Exchange
Commission.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND PLAN OF OPERATION

GENERAL

The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, and the Notes thereto included herein.
The information contained below includes statements of BSI's or management's
beliefs, expectations, hopes, goals and plans that, if not historical, are
forward-looking statements subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated in the
forward-looking statements. For a discussion on forward-looking statements, see
the information set forth in the Introductory Note to this Annual Report under
the caption "Forward Looking Statements", which information is incorporated
herein by reference.

GOING CONCERN

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of our financial condition and results
of operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
that we make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. At each balance sheet date, management evaluates its estimates,
including but not limited to, those related to inventories, accrued liabilities,
and the valuation allowance offsetting deferred income taxes. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. The estimates
and critical accounting policies that are most important in fully understanding
and evaluating our financial condition and results of operations include those
listed below, as well as our valuation of equity securities used in transactions
and for compensation, and our revenue recognition methods for restaurant
operations and franchising methods.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents. The Company
continually monitors its positions with, and the credit quality of, the
financial institutions with which it invests.

INVENTORIES

Inventory consists of raw materials and is stated at the lower of cost or
market, determined using the first-in, first-out method (FIFO).

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is provided
utilizing the straight-line method over the estimated useful lives for owned
assets of 5 years. Leasehold improvements are amortized over a 5 1/2 year
period.

USE OF ESTIMATES

The preparation 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, disclosures 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.

REVENUE RECOGNITION

The Company recognizes revenue in compliance with SAB 101, "Revenue
Recognition in Financial Statements." Revenue is recognized when an order has
been placed by the customer, the product has been shipped and collectibility is
reasonably assured. Prices of the products are determined prior to entering into
a purchase agreement. From inception through September 30, 2003, revenues earned
represented sales to distributors of demonstration units of the Company's
products.

Transaction based revenue is recognized as transactions are completed and
are billed monthly based on service agreement rates in effect.

INTANGIBLE ASSETS

Intangibles include trademarks and patents, which are recorded at cost.
These patents are awaiting approval from the U.S. Patent office. Once accepted,
the Company will begin amortization over the life of the patent.

ADVERTISING COSTS

The Company expenses advertising costs as incurred.

SOFTWARE AND RESEARCH AND DEVELOPMENT COSTS

Expenditures made for research and development are charged to expense as
incurred.

Costs incurred to date for the development of the Company's products have
been charged to expense as incurred. Future costs may be capitalized to the
extent they meet the requirements of SFAS No. 86 "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed."

BASIC AND DILUTED EARNINGS PER COMMON SHARE

Basic earnings per share are computed by dividing net income by the number
of weighted average common shares outstanding during the year. Diluted earnings
per share is computed by dividing net income by the number of weighted average
common shares outstanding during the year, including potential common shares,
which consisted of warrants, options and convertible debt.

The Company recognizes revenue in compliance with SAB 101, "Revenue
Recognition in Financial Statements." Revenue is recognized when an order has
been placed by the customer, the product has been shipped and collectibility is
reasonably assured. Prices of the products are determined prior to entering into
a purchase agreement. From inception through December 31, 2002, revenues earned
represented sales to distributors of demonstration units of the Company's
products.

SEC INQUIRY

BSI recently received requests from the SEC's Central Regional Office for
certain documents including those concerning arrangements with certain strategic
partners, relationships with The Department of Homeland Security and the
Immigration and Naturalization Service, recent issuances of securities, investor
relations, and information relating to investment opinions distributed by third
parties. BSI responded promptly and fully and will cooperate with any further
requests. The SEC's letter states that the staff's inquiry should not be
construed as an indication that any violations of securities laws have occurred
or as an adverse reflection on any individuals, entities, or investments.

FINANCIAL CONDITION

We had net losses of $973,635 and $338,679 for the years ended December 31,
2002 and December 31, 2001, respectively. For the nine months ended September
30, 2003, we had a net loss of $1,052,445. As of September 30, 2003, we had cash
and cash equivalents of $208,972 and current liabilities of $564,834. We do not
have sufficient cash or other current assets to meet our current liabilities. In
order to meet those obligations, we will need to raise cash from the sale of
securities or from borrowings. Our independent auditors have added an
explanatory paragraph to their audit opinions issued in connection with the
years 2002 and 2001 financial statements, which states that our ability to
continue as a going concern depends upon our ability to resolve liquidity
problems, principally by obtaining capital, commencing sales and generating
sufficient revenues to become profitable. Our ability to obtain additional
funding will determine our ability to continue as a going concern.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial
statements and the related notes and the other financial information appearing
elsewhere in this report.

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2003 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2002

OVERALL RESULTS OF OPERATIONS

For the three months ended September 30, 2003 we incurred an overall loss
of ($369,083) or ($.01) per share, which was a $150,423 increase from the loss
of ($218,660) or ($0.03) per share for the comparable period in the prior year.

REVENUE

We had revenues of $29,290 during the three months ended September 30, 2003
as compared to revenues of $9,990 for the comparable period in the prior year.

OPERATING EXPENSES

Operating expenses for the three months ended September 30, 2003, were
$338,360 and represent an increase of $129,617 or a 62% increase in operating
expenses of $208,743 for the comparative period ended September 30, 2002.

The largest component of operating expenses for the periods ended September
30, 2003 and 2002 related to general and administrative expenses. For the period
ended September 30, 2003, general and administrative expense were $201,213, an
increase of $136,034 or a 209% increase in general and administrative
expenses of $65,179 for the comparative period ended September 30, 2002. The
general and administrative expenses for the period ended September 30, 2003
relate to salary expense of $37,891, contracted services in

the amount of $47,254, $8,845 for employee benefits, $57,323 for legal fees, and
office expenses of $26,636, as compared to salary expense of $34,507, contracted
services in the amount of $2,583, employee benefits of $9,538, $3,988 for legal
fees, and office expenses of $12,694 for the period ended September 30, 2002.

BSI had selling expenses for the three months ended September 30, 2003 of
$43,721, as compared to $113,376 for the period ended September 30, 2002. The
selling expenses are attributable to salary expense of $15,000, consulting fees
of $5,270, travel and entertainment expenses of $15,068 and advertising expenses
in the amount of $4,927 as compared to salary expense of $26,816, consulting
fees of $43,372, travel and entertainment expenses of $29,919 and advertising
expenses of $7,192 for the comparative period ended September 30, 2002.

BSI also had research and development expenses of $93,426 for the quarter
ended September 30, 2003, as compared to $30,188 for the period ended September
30, 2002, an increase of $63,238. This increase is attributable to salary
expense of $73,387, consulting fees of $3,072 and costs of components of
$(13,221).

OTHER EXPENSES

As to the other income and expenses, the Company had other expenses of
$13,538 for the three months ended September 30, 2003, as compared to other
expense of $19,907 for the three months ended September 30, 2002. BSI had
interest expense of $5,323 and $2,998 for the three months ended September 30,
2003 and 2002, respectively. BSI had interest income of $404 and $(16,909) for
the three months ended September 30, 2003 and 2002, respectively. The Company
also had financing costs of $8,619 and $0 for the three month period ended
September 30, 2003 and 2002, respectively.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2003 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2002

OVERALL RESULTS OF OPERATIONS

For the Nine months ended September 30, 2003 we incurred an overall loss of
($1,052,445) or ($.03) per share, which was an increase from the loss of
($586,264) or ($0.09) per share for the comparable period in the prior year.

REVENUE

We had revenues of $34,290 during the nine months ended September 30, 2003
and $9,990 for the comparable period in the prior year.

OPERATING EXPENSES

Operating expenses for the nine months ended September 30, 2003, were
$1,026,739 and represent an increase of $470,823 or nearly a 85% increase in
operating expenses of $555,916 for the comparative period ended September 30,
2002. The largest component of operating expenses for the nine month period
ended September 30, 2003 and 2002 related to general and administrative
expenses. For the nine month period ended September 30, 2003, general and
administrative expense were $504,145, an increase of $240,508 or nearly a 91%
increase in general and administrative expenses of $263,637 for the comparative
period ended September 30, 2002. The general and administrative expenses for the
nine month period ended September 30, 2003 relate to salary expense of $119,670,
contracted services in the amount of $129,371, $37,431 for employee benefits,
legal expenses of $69,018, office expenses of $60,250 and merger expenses of
$43,325, as compared to salary expense of $85,896, contracted services in the
amount of $27,199, employee benefits of $24,609, legal expenses of $25,840, and
office expenses of $57,022 for the nine month period ended September 30, 2002.

BSI had selling expenses for the nine months ended September 30,
2003 of $176,657, as compared to $235,950 for the same period ended September
30, 2002. The selling expenses are attributable to salary expense of $48,542,
consulting fees of $61,620, travel and entertainment expenses of $49,076 and
advertising expenses in the amount of $12,224 as compared to salary expense of
$81,091,

consulting fees of $43,372, travel and entertainment expenses of $72,949 and
advertising expenses of $13,100 for the comparative period ended September 30,
2002.

BSI also had research and development expenses of $345,937 for the nine
month period ended September 30, 2003, as compared to $56,329 for the same
period ended September 30, 2002, an increase of $289,608. This increase is
attributable to salary expense of $255,694, consulting fees of $53,637 and costs
of components of $(20,262).

OTHER EXPENSES

As to the other income and expenses, the Company had other expenses of
$13,521 for the nine months ended September 30, 2003, as compared to other
expense of $40,338 for the nine months ended September 30, 2002. BSI had
interest expense of $6,537 and $41,426 for the nine months ended September 30,
2003 and 2002, respectively. BSI had interest income of $1,635 and $1,088 for
the nine months ended September 30, 2003 and 2002, respectively. The Company
also had financing costs of $8,619 and $0 for the nine month period ended
September 30, 2003 and 2002, respectively.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2002 TO THE YEAR ENDED
DECEMBER 31, 2001

OVERALL RESULTS OF OPERATIONS

For the year ended December 31, 2002 we incurred an overall loss of
($973,635) or ($.14) per share, which was a material increase from the loss of
($338,679) or ($0.09) per share for the comparable period in the prior year.

REVENUE

We had revenues of $9,990 and $18,980 during the one-year periods ended
December 31, 2002 and 2001, respectively. Such revenues were from the sale of
demonstration units and software development kits to potential distributors of
our products.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 2002, were $1,025,247
and represent an increase of $703,564 or nearly a 320% increase in operating
expenses of $321,683 for the comparative period ended December 31, 2001.

The largest component of operating expenses for the periods ended December
31, 2002 and 2001 related to general and administrative expenses. For the period
ended December 31, 2002, general and administrative expense were $502,591, an
increase of $328,727 or nearly a 290% increase in general and administrative
expenses of $173,864 for the comparative period ended December 31, 2001. This
increase is attributable to fees of $65,024 incurred in connection with the
proposed merger with Knowledge Foundations, Inc., salary expense of $54,497,
payroll taxes and benefits of $14,382 and $21,746, respectively, fees paid for
temporary office help of $19,859, consulting fees of $133,500 and increases in
other expenses directly related to increased levels of activity.

BSI further had selling expenses for the year ended December 31, 2002
of $340,507, as compared to $86,605 for the comparative period ended December
31, 2001. The selling expenses are attributable to salary expense of $117,340,
consulting fees of $79,478, travel and entertainment expenses of $94,910,
advertising expenses of $43,129 and commissions of $5,650, as compared to salary
expense of $67,791, travel and entertainment expenses of $18,150 and advertising
expenses of $664 for the comparative period ended December 31, 2001.

BSI had research and development expenses of $132,149 for the year ended
December 31, 2002, as compared to $4,266 for the period ended December 31, 2001,
an increase of $127,883. This increase is attributable to the costs associated
with building additional prototypes of BSI's optical card units. These costs
were expenses as incurred.

BSI also had stock based compensation of $50,000 and $56,948 for the years
ended December 31, 2002 and 2001, respectively. Such expenses were the result of
paying accrued salaries and bonuses in stock.

OTHER EXPENSES

As to the other income (expenses), the Company had other income of $41,622
for the year ended December 31, 2002, as compared to other expense of $35,976
for the year ended December 31, 2001. BSI had interest expense of $46,993 and
$36,068 for the years ended December 31, 2002 and 2001, respectively. BSI had
interest income of $1,075 and $92 for the years ended December 31, 2002 and
2001, respectively. BSI had other income of $87,450 for the year ended December
31, 2002 resulting from settlement of notes and accounts payable at discounts.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2003, we had cash and cash equivalents of $208,972 and
current liabilities of $564,834. We do not have sufficient cash or other current
assets to meet our current liabilities. In order to meet those obligations, we
will need to raise cash from the sale of securities or from borrowings. Our
independent auditors have added an explanatory paragraph to their audit opinions
issued in connection with the years 2002 and 2001 financial statements, which
states that our ability to continue as a going concern depends upon our ability
to resolve liquidity problems, principally by obtaining capital, commencing
sales and generating sufficient revenues to become profitable. Our ability to
obtain additional funding will determine our ability to continue as a going
concern.

On July 7, 2003, BSI sold $250,000 convertible debentures to Cornell
Capital Partners. Cornell Capital Partners was the purchaser of the convertible
debentures. These debentures accrue interest at a rate of 5% per year and mature
two years from the issuance date. The debentures are convertible at Cornell
Capital Partners' option any time up to maturity at a conversion price equal to
the lower of (i) 120% of the closing bid price of the common stock as of the
closing date or (ii) 80% of the lowest closing bid price of the common stock for
the five trading days immediately preceding the conversion date. At maturity,
BSI has the option to either pay the holder the outstanding principal balance
and accrued interest or to convert the debentures into shares of common stock at
a conversion price equal to the lower of (i) 120% of the closing bid price of
the common stock as of the closing date or (ii) 80% of the lowest closing bid
price of the common stock for the five trading days immediately preceding the
conversion date. BSI has the right to redeem the debentures upon thirty days
notice for 120% of the amount redeemed.

On July 7, 2003, BSI entered into an Equity Line of Credit Agreement with
Cornell Capital Partners that was subsequently terminated by the mutual
agreement of the parties on October 30, 2003. On October 31, 2003, BSI entered
into a new Equity Line of Credit Agreement with Cornell Capital Partners. Under
this agreement, BSI may issue and sell to Cornell Capital Partners common stock
for a total purchase price of up to $15.0 million. Subject to certain
conditions, BSI will be entitled to commence drawing down on the Equity Line of
Credit when the common stock to be issued under the Equity Line of Credit is
registered with the Securities and Exchange Commission and the registration
statement is declared effective and will continue for two years thereafter. The
purchase price for the shares will be equal to 99% of, or a 1% discount to, the
market price, which is defined as the lowest closing bid price of the common
stock during the five trading days following the notice date. The amount of each
advance is subject to an aggregate maximum advance amount of $210,000, with no
advance occurring within seven trading days of a prior advance. Cornell Capital
Partners received 1,875,000 shares of BSI common stock as a one-time commitment
fee. Cornell Capital Partners is entitled to retain a fee of 4.0% of each
advance. In addition, BSI entered into a placement agent agreement with
Newbridge Securities Corporation, a registered broker-dealer. Pursuant to the
placement agent agreement, BSI paid to Newbridge Securities Corporation a
one-time placement agent fee of 35,714 shares of common stock.

During the period August 1, 2003 through October 31, 2003, BSI received
proceeds of $182,500 from the sale of 730,000 shares of its common stock in a
private placement to Pursuit Capital at $.25 per share.

During the period August 1, 2003 through October 31, 2003, BSI received
proceeds of $67,500 from the sale of 270,000 shares of its common stock to Doug
Dragoo in a private placement at $0.25 per share.

24% if the note is not paid when due. BSI paid cash fees of $45,000 in
connection with the issuance of the note and also issued 500,000 shares of its
common stock to Cornell Capital Partners LP. as additional consideration in the
transaction.

The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and liquidation of
liabilities in the ordinary course of business. BSI has experienced losses since
inception. The extended period over which losses have been experienced is
principally attributable to two factors, lack of capital and long sales lead
times. Lack of capital has prevented BSI from quickly developing and
aggressively marketing its products. In addition, most of BSI's potential
customers are large corporations or governments. Adopting BSI's products will in
many cases require changing the way business is done. These circumstances can
result in two years or more elapsing from initial sales contact to delivery of
product. In order to fund activities until positive operating cash flow is
achieved, Management recognizes that BSI must generate revenue from its
operations and must raise capital from the sale of its securities. However, no
assurances can be given that BSI will be successful in these activities. Should
any of these events not occur, the accompanying financial statements will be
materially affected.

CAPITAL RESOURCES

Pursuant to the Equity Line of Credit, BSI may issue and sell to Cornell
Capital Partners common stock for a total purchase price of up to $15.0 million.
Subject to certain conditions, BSI will be entitled to commence drawing down on
the Equity Line of Credit when the common stock to be issued under the Equity
Line of Credit is registered with the Securities and Exchange Commission and the
registration statement is declared effective and will continue for two years
thereafter. The purchase price for the shares will be equal to 99% of, or a 1%
discount to, the market price, which is defined as the lowest closing bid price
of the common stock during the five trading days following the notice date. The
amount of each advance is subject to an aggregate maximum advance amount of
$210,000, with no advance occurring within seven trading days of a prior
advance. Cornell Capital Partners received 1,875,000 shares of BSI common stock
as a one-time commitment fee. Cornell Capital Partners is entitled to retain a
fee of 4.0% of each advance. In addition, BSI entered into a placement agent
agreement with Newbridge Securities Corporation, a registered broker-dealer.
Pursuant to the placement agent agreement, BSI paid to Newbridge Securities
Corporation a one-time placement agent fee of 35,714 shares of common stock.

We are attempting to register shares of common stock to be issued in
connection with the Equity Line of Credit and upon conversion of the debentures.
We cannot predict the actual number of shares of common stock that will be
issued pursuant to the Equity Line of Credit, in part, because the purchase
price of the shares will fluctuate based on prevailing market conditions and we
have not determined the total amount of advances we intend to draw. Pursuant to
our Articles of Incorporation, we are authorized to issue up to 100,000,000
shares of common stock, of which 53,561,102 are outstanding. At a recent price
of $0.25 per share, we would be required to issue at $0.2475 (99% of $0.25),
60,606,061 shares of common stock in order to fully utilize the $15.0 million
available. At our current stock price, we would be required to authorize and
register additional shares of our common stock to fully utilize the amount
available under the Equity Line of Credit. At our current price of $0.25, we
would need to authorize approximately 20,000,000 additional shares to fully
utilize the Equity Line of Credit. We would have to receive the affirmative vote
of a majority of our outstanding shares to approve any increase in authorized
shares. Our inability to obtain such approval would prohibit us from increasing
our authorized shares of common stock and from issuing any additional shares
under the Equity Line of Credit or to otherwise raise capital from the sale of
capital stock.

PLAN OF OPERATIONS

We will continue to pursue sales of our Employee Tracking System and Access
Control and Site Security products to commercial customers. Upon closing of any
such sale we expect to increase our staff size by three employees.

Any award of a major contract would require us to immediately increase the
size of our staff to approximately 25 employees and consultants. We currently
have seven full time employees and three consultants.

CURRENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability for
an asset retirement obligation to be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived assets. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. The adoption of this statement had no material impact on the
Company's financial statements.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB No. 4, 44
and 64, Amendment of FASB No. 13, and Technical Corrections." SFAS rescinds FASB
No. 4 "Reporting Gains and Losses from Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements." This statement also rescinds SFAS No. 44 "Accounting
for Intangible Assets of Motor Carriers" and amends SFAS No. 13, "Accounting for
Leases." This statement is effective for fiscal years beginning after May 15,
2002. The adoption of this statement had no material impact on the Company's
financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value when the liability is incurred.
SFAS No. 146 is effective for exit or disposal activities that are initiated
after December 31, 2002, with early application encouraged. The adoption of this
statement had no material impact on the Company's consolidated financial
statements.

In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain
Financial Institutions". SFAS No. 147 amends FASB Statements No. 72 and 144 and
FAB Interpretations No. 9. The adoption of this statement had no material impact
on the Company's financial statements.

In November 2002, the FASB published interpretation No. 45 "Guarantor's
Accounting and Disclosure requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". The Interpretation expands on the
accounting guidance of Statements No. 5, 57, and 107 and incorporates without
change the provisions of FASB Interpretation No. 34, which is being superseded.
The Interpretation elaborates on the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies that at the time a company issues a guarantee, that company must
recognize an initial liability for the fair value, or market value, of the
obligations it assumes under that guarantee and must disclose that information
in its interim and annual financial statements. The initial recognition and
initial measurement provisions apply on a prospective basis to guarantees issued
or modified after December 31, 2002, regardless of the guarantor's fiscal
year-end. The disclosure requirements in the Interpretation are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of this statement had no material impact on the Company's
financial statements.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation- Transition and Disclosure". This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for an entity that voluntarily changes to the fair value method of
accounting for stock-based compensation. In addition, SFAS 148 amends the
disclosure provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's accounting policy decisions with respect to stock-based
employee compensation on reported net income. The effective date for this
Statement is for fiscal years ended after December 15, 2002. The adoption of
this statement had no material impact on the Company's financial statements.

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN No.
46)". This interpretation clarifies existing accounting principles related to
the preparation of consolidated financial statements when the equity investors
in an entity do not have the characteristics of a controlling financial interest
or when the equity at risk is not sufficient for the entity to finance its
activities without additional subordinated financial support from other parties.
FIN No. 46 requires a company to evaluate all existing arrangements to identify
situations where a company has a "variable interest" (commonly evidenced by a
guarantee arrangement or other commitment to provide financial support) in a
"variable interest entity" (commonly a thinly capitalized entity) and further
determine when such variable interests require a company to consolidate the
variable interest entities' financial statement with its own. The Company is
required to perform this assessment by December 31, 2003 and consolidate any
variable interest entities for which it will absorb a majority of the entities'
expected losses or receive a majority of the expected residual gains. Management
has not yet performed this assessment, however it does not have any variable
interest entities as of September 30, 2003.

In April 2003, FASB issued SFAS No. 149, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for contracts entered
into or modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. This statement amends and clarifies financial accounting
and reporting for derivative instruments including certain instruments embedded
in other contracts and for hedging activities under SFAS No. 133,

"Accounting for Derivative Instruments and Hedging Activities." The adoption of
this standard is not expected to have a material impact on the Company's
financial statements.

In May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity," which is
effective for financial instruments entered into or modified after May 31,2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. SFAS No. 150 establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The adoption of this standard is
not expected to have a material impact on the Company's financial statements.

SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

On March 12, 2003, the shareholders of Knowledge Foundations, Inc. approved
the spin-off of all of its assets to a group of its shareholders (including its
founder, Dr. Richard Ballard) and BSI2000, Inc.'s shareholders approved the
merger with Knowledge Foundations, Inc.

DESCRIPTION OF BUSINESS

GENERAL

MERGER

In closing the merger transaction, KFI issued 45,122,570 shares of its
common stock for all of the outstanding shares of common stock of BSI2000, Inc.
Immediately following the closing, KFI changed its name to BSI2000, Inc. and
BSI2000, Inc. (a wholly owned subsidiary of KFI as a result of the merger)
changed its name to BSI Operating, Inc.

BUSINESS

BSI was incorporated under the name Unified Data Link, Incorporated in July
1993, and changed its name to Bank Systems 2000, Inc. in April 1995. The company
changed its name to BSI2000, Inc. on May 19, 1995. It has a contract to buy
optical cards, card reader heads, and software from LaserCard Systems
Corporation, a division of Drexler Technology (Nasdaq "DRXR") under a value
added reseller volume pricing agreement. See "CURRENT CONTRACTS-LaserCard
Systems." BSI has developed and markets proprietary applications of optical card
technology, using the LaserCard products.

BSI's management believes that government agencies and companies in many
industries have interest in developing new identification systems and end user
data management techniques that integrate carried data that can be updated on
site. For example, BSI management has presented the BSI technology to the U.S.
INS, the new Transportation Security Administration, the U. S. Maritime
Administration, the United States Coast Guard, several port authorities, and
others that have expressed interest. In addition, BSI management has presented
the technology to commercial companies with the result that teaming and
strategic alliance agreements have resulted with three.

BSI has developed technology that integrates special hardware and
proprietary, patent-pending software, to provide turnkey optical card systems
for the national identification and other card markets. It develops software
applications for commercial and government customers. It expects to sell secure
encrypted optical cards for distribution to customers' end users (employees,
patients, immigrants, etc.), as well as reading/writing transaction processing
units that confirm the card carrier's identity with biometrics and allow
updating of the information on the card, as well as providing a complete audit
trail of the use of the card. Each optical card system is developed specifically
for the customer's needs. Categories of development for prospective customers
include government agencies, industrial companies, and health care providers.

The cards are designed to securely store identification data (name,
address, photograph, fingerprint, etc.), and other information desired by the
customer (for example, pension or health and medical data, police records, or
border crossing and employment dates) in an updateable digital form. Optical
cards are essential due to their extreme high data capacity (equivalent to 1,500
typewritten pages); reliability and high security; their ability to have data
partitioned to separate physical secure areas on the card; and ease of use and
updating.

The plastic cards (about the same size as routine credit cards) are
produced by the end user to a customer employee at a transaction station (in a
hospital, at a border crossing, etc.). The cards are first "read" at the
station: User identification is visually confirmed by display of a color
photograph (stored in the card) on the monitor, and digitally confirmed by
comparing the user's fingerprint (also stored in the card) to the optical
reading of the user's finger print at the station. Then, the station reads
extensive data from the card, and new information can be added with a computer
keyboard. The units run on AC current and are about the size of a shoebox. In
contrast to "smart card" systems in which the card reader usually runs off a
personal computer, all the optical card unit's computing power is contained in
the unit; the unit cannot be used for any other purpose, and usually is much
easier to operate than smart card systems, which require a reader unit and a
personal computer (not just the keyboard). Also, the card data is personal to
the carrier. The station manager cannot store or copy the card identification or
any other data, because the system is inherently off-line (no on-line
communications with a personal or main frame computer are needed to access the
card).

Other biometric verification procedures include digital signature
recognition and hand scanners.

In June 2002, BSI signed an exclusive contract to sell transaction
processing units for use in a foreign country in partnership with Titan Secure
Systems, a division of Titan Corporation. In May, 2000, BSI signed an exclusive
contract with Drug Intervention Services of America, Inc. ("DISA") giving DISA
and its agents the exclusive right to market and sell our products worldwide
into the drug and alcohol testing market. See "CURRENT CONTRACTS."

Optical cards provide about 1,000 times the memory, 30 times as fast update
speed, and far more security and reliability than smart chip cards. Optical
cards can store thousands of transaction records, account balances, audit
trails, medical and insurance information, digital photographs, and personal
databases. Any information that can be stored in a computer can be recorded and
managed on an optical card.

CURRENT PRODUCTS. BSI has developed three related products, each with
biometric verification procedures:

SECURUS 2000 ACCESS CONTROL AND SITE SECURITY. This product is designed to
meet the most demanding security needs. Any number of these units can be linked
together over an integrated and crypto-secure local network to cover any number
of doors and buildings in a site. The entire system may be linked over the
internet to a remote control site. Each security officer has an administrative
card to monitor and enable specific actions of controlling personnel.

DISA 2000 EMPLOYEE TRACKING SYSTEM. Developed for the compliance industry,
this product tracks gate entries/exits, drug and alcohol testing status, medical
and training records, and other status values. All information mandated by
federal or state laws, or company policies, is stored on the card, with the data
backed up at DISA's headquarters.

CIVILITAS 2000 GOVERNMENT ID. The Civilitas (Latin for citizen) card is for
government issue, to record identification data, and allows up to 16 separate
government programs to be tracked and monitored on a single card, including
border crossings, medical records, social pension eligibility and cash
transfers, medical records, police records, etc. Each partition has its own
crypto key. Border crossings also may be monitored and flagged by advanced
heuristic software techniques to automatically flag suspicious events for closer
inspection by personnel. Six units of a slightly modified version of Civilitas
2000 (the modified version is named SEGABA 2000) were sold to the INS.

TECHNICAL INFORMATION. BSI's systems use the optical cards to provide
automatic fingerprint and signature verification, and photographic confirmation,
to prevent card use by unauthorized person. The data is safe and secure, in
contrast to smart chip cards which can be unstable due to static electricity and
magnetic fields such as used in airport security.

The optical cards may be partitioned into separate physical areas, each
used for a different program: Basic identification information may be stored in
a common area; pension payments data in another; medical and health in another
(itself partitioned for sensitive information such as psychiatric, HIV/AIDS,
etc.). Each partitioned data area is protected by its own security system.

Permanent data storage capacity on the card allows a complete audit trail
to be maintained for all transactions. Such audit mechanisms are mandatory in
order to reconstruct events after fraudulent use or system malfunction. Laws in
many countries require such mechanisms to be in place.

The large card capacity means that if the end user wishes, almost all
sensitive information (such as digital fingerprints) can reside only on the card
and not in a central database, an important feature to gain citizen acceptance
of identification cards.

BSI's systems all use a specific variation or application of the standard
BSI developed transaction software and hardware protocol (named the "ToolKit
2000"). The ROM-resident real-time process control software, that is embedded in
the processing unit, consists of a combination of the standard BSI C/C++ coded
modules from the following list: Embedded Windows NT multitasking operating
system interface; optical drive interface and control; TCP/IP communications
control for partially on-line systems; digital I/O module control; external
interface control; printer formatting and control; database systems; crypto
system; magnetic stripe reader control; barcode scanner control; fingerprint
identification and control; signature verification and control; and components.
The optical card reader head and related software is purchased from LaserCard
Systems Corporation.

BSI continues to develop (and apply for patent protection covering)
software in the area of strong encryption techniques and high-performance data
management methods for optical card systems. These methods are required for
secure and efficient optical card systems to be safely used in the field. Other
patent applications cover the use of the technology.

The hardware for most applications is fairly straightforward and consists
of a metal or plastic shell, internal bracketry, power supply and switching,
control button and status LEDs, color LCD screen, single board process control
computer, integrated optical card device, sound transducer, thermal printer, and
others.

Devices integrated into BSI systems include fingerprint scanners, signature
verification pads, and external door lock controls. The device is about the same
size and shape as a shoebox.

PATENTS. BSI's business model is to contract with much larger companies to
develop or expand specific vertical markets for their products and sell our
products through them. In this way competitors must evaluate the cost of
overtaking the larger partner company which is already dominant in the market -
a significant barrier to entry. A primary value of BSI's patents, if awarded,
will be to attract larger companies to contract with BSI, and protect their
market share as well as protect BSI's technology from copying by its partners
and their competitors.

BSI has applied to the United States Patent & Trademark Office for a patent
covering the uses or methods of using certain technology which it has developed,
including methods for entering and storing medical records by using bar codes
and optical scanning to rapidly update records in less than several minutes; a
novel method of recording medical information with automatic analysis of
statistical trends of the data by using card-based heuristic software
techniques; drug testing, personnel access to controlled areas (for controlling
checkout of company or agency tools and equipment), and the use of biometric
data (digital fingerprint, signature and photograph) for controlling access. To
date the PTO has not issued a patent to the company.

Additional patent applications are expected to be filed in 2003 as new
technology is developed.

SALES AND MARKETING, AND SOURCES OF REVENUE. BSI's sales and marketing
strategy and its plan to create sources of revenue has three primary components:

1. Contract with a larger company that is dominant in a sector or country
(for examples, Drug Test, Inc. for drug testing worldwide, Titan Secure Systems
for foreign card project in an undisclosed country; and L.C. Sistemia for
Italy's national identification project).

2. Where possible, negotiate contracts to include ongoing transaction fees
which will be earned each time an optical card is used (e.g., $0.02 - $0.06 per
use). The contract with L.C. Sistemia does not include a transaction fee, but
BSI expects many future contracts to include this provision. Transaction fees
are priced in the contract to what the market will bear, and will vary from
application to application. Records of the accrued fees accumulate in processing
unit and will be transmitted to the company monthly. This data transmission does
not include any data from the individual cards.

3. Negotiate contracts to include the sale of transaction units, optical
cards, replacement optical cards, and maintenance fees. The transaction units
will be sold through the dominant companies with which we associate. BSI intends
to sell the systems with slim margins, because significantly more revenue can be
obtained through selling the cards and through transaction fees. In the typical
project, as much as 95% of the initial costs comes from the high margin cards.
In some instances BSI may sell units at or below cost to access the revenue
streams from cards and transactions. BSI will sell unique optical cards directly
to customers, which are then distributed to end users. The cost of optical cards
is almost always the dominant initial expense for the customer. BSI's systems
require BSI2000-supplied cards that must be cryptologically initialized and
embossed with our logo. In addition, BSI will sell replacement cards to
customers, who are used to replacing cards (like VISA cards) every two years or
so. BSI buys the stock cards from LaserCard Systems Corporation. BSI also
warrants the transaction units for one year, then charges for maintenance.

CURRENT CONTRACTS

It is important to note that BSI has not yet delivered product in any
significant quantity. However, BSI has received a limited order for its products
from an agency of the United States Federal Government and has also put into
place various strategic teaming and alliance agreements with substantial
external partner companies as follows:

TITAN CORPORATION. On July 25, 2002, BSI signed a strategic alliance
agreement with Titan Secure Systems, a division of Titan Corporation. Titan
provides secure information systems, systems support, and products on a global
basis and has been awarded a contract for the implementation of a card system
for an undisclosed country. Titan wishes to employ BSI's optical card
transaction processing units to satisfy the needs of the project.

During the term of the signed strategic alliance agreement, Titan has the
exclusive right to market and employ BSI's transaction processing units into the
country for the project. Also during the term of the agreement, Titan will not
market into the country any products that perform essentially similar functions
as the BSI product without preauthorization of BSI. The agreement will remain in
force as long as Titan has an active project in the country.

Titan will provide BSI with detailed product specifications based upon the
needs of the project. BSI will provide pricing to Titan on a per unit basis
based upon the resulting specifications. No purchase orders have yet to be
received from Titan for transaction processing units.

L.C. SISTEMIA. On May 7, 2001, BSI signed a strategic alliance agreement
with L.C. Sistemia ("LCS," an Italian systems engineering and project management
company with offices in Rome). Pursuant to legislation enacted in 2000 to
implement a secure national identification card system, the Italian government
awarded two contracts. One contract is held by Siemens A.G. (to install and
operate card initialization systems, i.e., issuance of secure optical cards for
ultimately up to 58,000,000 people). The second contract is held by LCS (to
supply the optical cards and card transaction units for use in passport offices,
medical clinics, police stations, post offices, and other government offices).

Until May 7, 2011, BSI has the exclusive right to develop and market the
transaction units into Italy through LCS, as required to satisfy LCS' contract
with the Italian government. LCS has agreed not to design, market or sell any
other company's optical card transaction units to the Italian government. The
price for the units will be BSI's actual direct cost plus 25%. Development costs
and changes in products will be borne by BSI. BSI will be paid an additional
amount equal to a one percent royalty on all amounts paid for optical cards sold
into Italy by LaserCard Systems Corporation, and this royalty

will be paid to BSI by LaserCard Systems Corporation. As of the date of this
filing, BSI has not received an initial order for transaction processing units
or an estimate of the amount of the initial order or the timing thereof.

BSI has the right to terminate the agreement with LCS if sales into Italy
are less than target levels.

BSI has developed the Civilitas 2000 national identification card system,
which will be used in the LCS portion of the encryption and data programming of
cards for the Italian government system. BSI retains all rights to this
technology, and intends to market similar systems to other governments in the
future.

DRUG INTERVENTION SERVICES OF AMERICA, INC. On May 4, 2000 BSI signed a
five year strategic alliance agreement with Drug Intervention Services of
America, Inc., based in Houston, Texas, to develop and market worldwide a family
of drug and alcohol testing optical card products (the "DISA 2000"). DISA
develops and administers federal, state, and company drug and alcohol testing
programs. Under the agreement, DISA has the exclusive right to market and sell
BSI products into the following segments: mandated government, company and
contractor drug and alcohol testing (including U.S. Dept. of Transportation
regulated personnel on federal highways, pipelines, airlines, coast guard,
railroads and nuclear plants); site access and control for the petroleum and
chemical industries; administration of worker's compensation for DISA customers
in these industries; and other segments. DISA's customers include Texaco, BP,
Shell and others, and BSI is working with DISA to develop card systems for
DISA's customers.

The DISA 2000 product will be purchased by DISA from BSI, at a discount
from DISA's resale price to customers, but BSI's selling price to DISA never
will be less than BSI's cost plus a reasonable markup. DISA will sell its
customers cards, transaction processing units, and software. BSI has the right
to change its minimum price from time to time, which would be effective not less
than 60 days after notice to DISA.

The agreement also provides BSI will receive a transaction fee for each use
by a DISA customer. DISA will pay BSI a percentage of the transaction fees it
collects from the DISA customers.

As of the date of this filing, DISA has purchased seven units for
demonstration purposes.

LASERCARD SYSTEMS. BSI signed a one year agreement with LaserCard Systems
Corporation on April 28, 2000 (renewed on June 3, 2003 for a term expiring in
June 4, 2004) to purchase optical cards, optical card drives and readers,
software and other items. LaserCard has the right to sell its products to other
resellers and end users. To date, BSI has bought a limited amount of products
from LaserCard but will rely upon this vendor for cards and parts to satisfy
orders received in the future.

COMPETITION

BSI has two sources of competition: The most serious competition comes from
chip cards which are plastic credit card sized cards that contain embedded
computer chips. Chip cards address markets where only very small amounts of
low-value data is manipulated (e.g., telephone cards). Applications that require
larger amounts of data manipulation (e.g., medical cards) or higher security
(e.g. Bank Cards) are better served by optical cards with their larger memory
(1,000x), greater speed (30x for writing in data), and more robust reliability
(impervious to static electricity and other environmental damage). However, most
consumers are familiar with chip cards but not with optical cards.

The other source of competition is tactical. BSI is aware of only one other
company (Zerco Systems, Inc.), a small company which markets embedded optical
card systems of any form. It believes it will compete effectively against Zerco;
Zerco sells to end users (to our knowledge, only in the United States), in
contrast to BSI's strategy of selling to larger companies like L.C. Sistemia and
DISA, on a worldwide basis. Also, to BSI's knowledge, Zerco has no competing
patents filed or awarded.

MANUFACTURING, SUPPORT AND FACILITIES

BSI outsources hardware manufacturing to one or more contract assembly
houses on a turn-key basis; the manufacturer manages all parts purchasing,
inventory control, quality control, fabrication and assembly, testing, as well
as burn-in operations.

Fully tested and finished hardware products will be shipped to BSI's office
in Lakewood where the proprietary control and security software is loaded and
crypto keys installed. After complete checkout, the finished software and
hardware units are packaged, inventoried, and shipped to the end user.

The primary advantages to this approach include the ability to control
inventory on an agile 30-day (or less) schedule; the ability to benefit from the
parts purchasing power of a large assembler; and the elimination of direct
purchasing and components overhead.

Except for the card reader drives and heads BSI buys from LaserCard
Systems, all purchased electronic components for the products are standard and
commercially available from multiple sources. A typical BSI machine has several
hundred inventoried components and subassemblies including a number of custom
machined pieces.

FACILITIES

BSI leases 2,800 square feet of space, under lease through January 31,
2003, at $4,231.50 per month plus its share of the building operating expenses
(real estate taxes, insurance and utilities). The offices house sales and
marketing, software and hardware research and development, as well as
manufacturing control, limited inventory, and other administrative tasks.

MANAGEMENT

As of November 26, 2003, the directors and executive officers of BSI, their
age, positions in BSI, the dates of their initial election or appointment as
directors or executive officers, and the expiration of the terms are as follows:

NAME OF DIRECTOR/
EXECUTIVE OFFICER AGE POSITION PERIOD SERVED (1)
- ----------------------- --- ---------------------- ---------------------

Jack Harper 51 Chairman and President 1995 to date
Richard A. Kirk 70 Director and Secretary 1995 to date
Adrian Bernard Ciazza 70 Director and Treasurer July 15, 2003 to date
Fritz Keefner 66 Director July 2, 1998 to date
Vincent Fulginiti, M.D. 71 Director May 7, 2001 to date
Marshall Kaplan 67 Director June 6, 2000 to date

(1) Period served includes the period served in same capacity with BSI2000,
Inc., a private Colorado corporation.

There are no family relationships between or among the directors, executive
officers or any other person. None of BSI's directors or executive officers is a
director of any company that files reports with the SEC. None of BSI's directors
have been involved in legal proceedings.

BSI's directors are elected at the annual meeting of stockholders and hold
office until their successors are elected. BSI's officers are appointed by the
Board of Directors and serve at the pleasure of the Board and are subject to
employment agreements, if any, approved and ratified by the Board.

JACK HARPER: PRESIDENT AND CHAIRMAN OF THE BOARD (age 50). Mr. Harper has
been President and Chairman of the Board of BSI2000, Inc. since late 1995.
Previously, from 1989 until 1994, Mr. Harper was President of Technology Fusion,
Inc., a company that specialized in low-cost add-in video hardware products for
the Apple Macintosh. Mr. Harper received an MBA from the University of Denver in
2000, having completed all studies therefore in 1992; in 1975, Mr. Harper
received a B.S. Electrical Engineering and a B.A. Mathematics with a Minor in
Russian Language from the University of Houston (1975).

RICHARD A. KIRK: SECRETARY AND DIRECTOR (age 70). Mr. Kirk has been a
director of BSI2000, Inc. since August 1995 and acting secretary since July
1999. He was Chairman of the Board of Access Long Distance, a long distance
provider which was sold in 2001. Mr. Kirk worked for United Bank of
Denver/Norwest Bank/Wells Fargo from 1958 through 1990, ultimately serving as
Chairman, President and Chief Executive Officer. In 1986, Mr. Kirk was elected
Vice Chairman of the

United Banks of Colorado, Inc. (now Wells Fargo). In 1992, he retired from the
Norwest Bank Denver but continues as chairman emeritus and serves on its
Advisory Board. He is a graduate of the Haverford College; the Advanced
Management Program of the Harvard Business School; and the Stonier Graduate
School of Banking at Rutgers University. Mr. Kirk serves on boards of several
nonprofit institutions and is an appointed Commissioner of the Denver Water
Board.

ADRIAN BERNARD CIAZZA. TREASURER AND DIRECTOR (age 70). Mr. Ciazza became a
director of BSI2000, Inc. in July 2003. He is the Treasurer of Arapahoe County
of Colorado which position he has held this position since 1995. He manages
approximately $900 million for the County and also serves as Chairman of the
Board of Directors of the $135 million pension fund of the County. From 1965
through 1987, Mr. Ciazza was an American diplomat and serviced in Europe,
Africa, the near East and Central Asia. He was employed as a public relations
counselor and financial advisor from 1987 through 1994. A graduate of George
Washington University, he holds a B.A. in Finance from the GWU School of
Business and Professional Management. He served in both the U.S. Navy and the
U.S. Army and belongs to several veterans' organizations and the Lions Club of
Denver.

FRITZ KEEFNER: DIRECTOR (age 66). Mr. Keefner has served as a director of
BSI2000, Inc. since January 1998. Mr. Keefner served from July 1997 to April
2000 as the principal of Peak Asset Management, L.L.C., a Louisville, Colorado
registered investment advisory company that manages in excess of $40-million of
assets. In 1986, Mr. Keefner founded and continues to serve as the president of
Vencap Resources, Inc., a private investment company that engages in seed-level
financing and private placements for early stage technology companies. Mr.
Keefner received a B.A. Sociology and Psychology from State University of Iowa.

VINCENT FULGINITI, M.D.: DIRECTOR (age 71). Dr. Fulginiti has served as a
director of BSI2000, Inc. since August 1996. He was, between 1993-1998,
Chancellor of the University of Colorado Health Sciences Center in Denver. In
addition, Dr. Fulginiti is Chairman of the University of Colorado Hospital
Authority Board of Directors and is also a Professor of Pediatrics at the Health
Sciences Center. Dr. Fulginiti was Dean of the Tulane University School of
Medicine (1989-1993); Vice Dean of the University of Arizona College of Medicine
(1985-1989); and Chief of Pediatrics at University Hospital (1971-1985). Dr.
Fulginiti is certified by the American Board of Pediatrics (1962) and is a
Fellow of the American Academy of Pediatrics (1966). Dr. Fulginiti received his
A.B. from Temple University in Philadelphia (1953); his M.D. (Pediatrics) from
Temple University Medical School (1957); and his M.S. from Temple University
(1961).

MARSHALL KAPLAN: DIRECTOR (age 67). Mr. Kaplan has served as a director of
BSI2000, Inc. since September 1995. He is Executive Director of the Institute
for Policy Research and Implementation at the University of Colorado in Denver.
He provides policy guidance to the Institute's several centers and programs: The
International Center for Administration and Policy; the Center for Public
Private Sector Cooperation; the Center for the Improvement of Public Management;
the Center for Human Investment Policy; the Norwest Public Policy Research
Program; and the University of Denver/Colorado University Consortium on Health
Ethics and Policy. Through its centers and programs, the Institute helps public,
non-profit, community, and private sector leaders translate policy studies into
effective action programs. Through the International Center at the Institute,
Mr. Kaplan has initiated the Aspen Global Forums, between key government and
business leaders from the United States, Russia, and Mexico, currently twice
each year with each nation. Prior to becoming head of the Institute, Mr. Kaplan
was Dean of the University of Colorado's Graduate School of Public Affairs.

SECTION 16(A) BENEFICIAL OWNERSHIP

REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require BSI2000's officers and directors, and persons who
beneficially own more than ten percent of a registered class of BSI2000's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and to furnish BSI with copies.

Based on its reviews of the copies of the Section 16(a) forms received by
it, or written representations from certain reporting persons, BSI believes
that, during the last fiscal year, the officers, directors and greater than
ten-percent beneficial owners of BSI failed to timely comply with the Section
16(a) filing requirements.

EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal year ended December 31,
2002, 2001 and 2000 certain information regarding the compensation earned by
BSI's President (the "Named Executive Officer"), with respect to services
rendered by him to BSI. No other officer of BSI has been paid or earned
compensation in excess of $100,000 in any such fiscal year.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------------------------
NAME AND PRINCIPAL OTHER RESTRICTED UNDERLYING OTHER
POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
- ------------------ ---- ---------- ----- ------------ ------------ ------- ------------

Jack Harper, 2002 $80,000 -- -- -- -- --
Chairman and 2001 $80,000(1) -- -- -- -- --
President 2000 $80,000 -- -- -- -- --

<FN>
(1) Mr. Harper was issued 2,500,000 shares in consideration for $2,500 and the forgiveness of accrued wages.
</FN>

OPTION GRANTS

No stock options were granted for the fiscal years ended December 31, 2001
and 2002. No stock appreciation rights were granted to these individuals during
any year.

On October 24, 1996, BSI adopted a Stock Option Plan whereby the Board of
Directors can issue both incentive and nonqualified options to directors,
employees and consultants. Currently, there are no outstanding stock options
issued under the plan.

COMPENSATION OF DIRECTORS

During the year 2002, BSI did not pay its directors any remuneration.

EMPLOYMENT AGREEMENTS

BSI presently has an oral employment contract with Jack Harper. The
employment agreement provides for an annual salary of $90,000 per year, as well
as group life, health, dental and disability insurance. The employment agreement
is for an indefinite period, but is terminable at will.

COMMITTEES OF THE BOARD OF DIRECTORS

Currently, BSI does not have any executive or standing committees of the
Board of Directors.

DESCRIPTION OF PROPERTY

BSI leases 2,800 square feet of space at 12600 W. Colfax Ave., B410,
Lakewood, Colorado 80215. The lease, which expires on January 31, 2003, provides
for rental payments of $4,231.50 per month plus its share of building operating
expenses (real estate taxes, insurance and utilities). The offices house sales
and marketing, software and hardware research and development as well as
manufacturing control, limited inventory and other administrative tasks.

LEGAL PROCEEDINGS

The Company currently has a claim against it by a consultant over
consideration with regard to a finder's fee for potential equity financing for
Knowledge Foundations, Inc. The Company believes that neither the merit or
future outcome of such a claim nor potential damages is readily determinable at
this time.

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect of the beneficial
ownership as of November 26, 2003 for each officer and director of BSI and for
each person who is known to BSI to be the beneficial owner of more than 5% of
BSI's common stock.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------------------------------------
AMOUNT AND
NATURE OF
NAME AND BENEFICIAL PERCENTAGE OF
TITLE OF CLASS ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS (4)
- -------------------------- -------------------------------------- ---------- -------------

Common Jack Harper 10,403,102 19.42%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215

Common Richard Kirk 4,351,340 8.12%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215

Common Adrian Bernard Ciazza 704,153 1.32%
5657 South Kenton Way
Englewood, Colorado 80111

Common Dr. Vincent Fulginiti 82,728 0.16%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215

Common Fritz Keefner -- --
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215

Common Marshall Kaplan -- --
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215

Common Cornell Capital Partners, LP 3,625,000 6.34%
101 Hudson Street -Suite 3606
Jersey City, NJ 07302

ALL OFFICERS AND DIRECTORS
AS A GROUP (6) PERSONS 15,641,323 29.20%

- ---------------

<FN>
* Less than 1%.

(1) Applicable percentage of ownership is based on 53,561,102 shares of common
stock outstanding as of November 26, 2003 for each stockholder. Beneficial
ownership is determined in accordance within the rules of the Commission
and generally includes voting of investment power with respect to
securities. Shares of common stock subject to securities exercisable or
convertible into shares of common stock that are currently exercisable or
exercisable within 60 days of November 26, 2003 are deemed to be
beneficially owned by the person holding such options for the purpose of
computing the percentage of ownership of such persons, but are not treated
as outstanding for the purpose of computing the percentage ownership of any
other person.

(2) All investment decisions of Cornell Capital, LP are made by its general
partner Yorkville Advisors, LLC. Mark Angelo, the managing member of
Yorkville Advisors, LLC, makes the investment decisions of Yorkville
Advisors, LLC. As such, Mark Angelo may be deemed the beneficial owner of
the shares of common stock owned by Cornell Capital, LP, since he has the
power to direct the voting and disposition of such shares. Mr. Angelo,
however, specifically disclaims beneficial ownership of all shares held by
Cornell Capital, LP.
</FN>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN

The following table sets forth the securities that have been authorized
under equity compensation plans as of December 31, 2002.

NUMBER
NUMBER OF SECURITIES
OF SECURITIES WEIGHTED- REMAINING AVAILABLE
TO BE ISSUED AVERAGE FOR FUTURE ISSUANCE
UPON EXERCISE EXERCISE PRICE UNDER EQUITY
OF OUTSTANDING OF OUTSTANDING COMPENSATION PLANS
OPTIONS, OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND WARRANTS AND REFLECTED
RIGHTS RIGHTS IN COLUMN (A))
--------------- -------------- ---------------------
(A) (B) (C)
- ----------------------------------------------------------- --------------- -------------- ---------------------

Equity compensation plans approved by security holders -- -- --
Equity compensation plans not approved by security holders -- -- --
--------------- -------------- ---------------------
TOTAL -- -- --
=============== ============== =====================

CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

STOCK ISSUED TO AN OFFICER AND EMPLOYEE. On September 11, 2001, BSI issued
2,500,000 shares of common stock to Jack Harper, president and director, for
$2,500.00 ($0.001 per share) and forgiveness of $59,643 accrued wages. Also in
2001, BSI issued 212,045 shares of common stock to Robert B. Lumen for $212.05
($0.001 per share). When these shares were issued, BSI was insolvent with
negative working capital, and unable to pay salaries to employees.

LOANS BY DIRECTOR. From March 30, 2000 through December 31, 2001, Richard
A. Kirk, director of BSI, had loaned $259,000 to BSI, all with annual interest
at 10% (accrued interest at March 31, 2002 was $19,935). Of the total debt,
$64,000 plus interest is currently due, and $195,000 is due when BSI has
received cumulative funding of $3,000,000. In December 2002, BSI issued 301,104
restricted shares of common stock to Mr. Kirk, for his cancellation of $301,104
of debt (principal and all interest) owed to him by BSI.

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS

BSI's common stock currently trades on the Over-The-Counter Bulletin Board
("OTC:BB") under the trading symbol "BSIO".

The following table sets forth the average high and low bid prices for the
common stock for each calendar quarter and subsequent interim period since
January 1, 2001, as reported by the National Quotation Bureau, and represent
interdealer quotations, without retail markup, markdown or commission and may
not be reflective of actual transactions.

BID PRICES
HIGH LOW

2001
First Quarter 2.375 .5000
Second Quarter 1.000 .5625
Third Quarter .9000 .6500
Fourth Quarter .6500 .3600

2002
First Quarter 1.0600 .3600
Second Quarter 2.4500 .7000
Third Quarter 1.8500 .8200
Fourth Quarter 1.1500 .2600

2003
First Quarter .6200 .1000
Second Quarter .5800 .2600
Third Quarter .4800 .2400
Fourth Quarter (Through November 21st) .3300 .2000

BSI presently is authorized to issue 100,000,000 shares of Common Stock
with $ 0.001 par value. As of November 26, 2003, there were 53,561,102 shares of
common stock issued and outstanding.

BSI is authorized to issue 20,000,000 shares of $0.001 par value preferred
stock, none of which is outstanding. The preferred stock is undesignated and may
not be designated or issued by the Board of Directors absent prior stockholder
approval.

DIVIDENDS

BSI has not declared or paid cash dividends on its Common Stock since its
inception and does not anticipate paying such dividends in the foreseeable
future. The payment of dividends may be made at the discretion of the Board of
Directors and will depend upon, among other factors, on BSI's operations, its
capital requirements, and its overall financial condition.

SALES OF UNREGISTERED SECURITIES

In the four years ended December 31, 2002 and from January 1, 2003 through
September 30, 2003, BSI has sold shares of common stock and warrants to purchase
shares of common stock in negotiated transactions or private offerings. All of
the securities were sold as restricted securities under the 1933 Act. Except as
set forth below, no commissions or other compensation was paid to anyone in
connection with these sales of securities.

Jan. 1, 2002 - On October 31, 2003, BSI entered into an Equity
to November 26, 2003 Line of Credit Agreement with Cornell Capital
Partners, L.P. Under the Equity Line of Credit
agreement, BSI may issue and sell to Cornell
Capital Partners common stock for a total purchase
price of up to $15.0 million. Subject to certain
conditions, BSI will be entitled to commence
drawing down on the Equity Line of Credit when the
common stock to be issued under the Equity Line of
Credit is registered with the Securities and
Exchange Commission and the registration statement
is declared effective and will continue for two
years thereafter. The purchase price for the shares
will be equal to 99% of the market price, which is
defined as the lowest closing bid price of the
common stock during the five trading days following
the notice date. The amount of each advance is
subject to an aggregate maximum advance amount of
$210,000, with no advance occurring within seven
trading days of a prior advance. Cornell Capital
Partners received 1,875,000 shares of common stock
as a one-time commitment fee. Cornell Capital
Partners is entitled to retain a fee of 4% of each
advance. In addition, BSI entered into a placement
agent agreement with Newbridge Securities
Corporation, a registered broker-dealer. Pursuant
to the placement agent agreement, BSI paid
Newbridge Securities Corporation a one-time
placement agent fee of 35,714 shares of common
stock.

During the period August 1, 2003 through October
31, 2003, BSI received proceeds of $182,500 from
the sale of 730,000 shares of its common stock in a
private placement to Pursuit Capital at $.25 per
share.

During the period August 1, 2003 through October
31, 2003, BSI received proceeds of $67,500 from the
sale of 270,000 shares of its common stock to Doug
Dragoo in a private placement at $0.25 per share.

On September 16, 2003, received the net proceeds of
$455,000 from a $500,000 secured promissory note
issued to Cornell Capital Partners, LP. The note is
due on the earlier of 90 days from the date thereof
or 60 days after BSI's registration statement on
From SB-2 is declared effective by the Securities
and Exchange Commission. The note is secured by
substantially all of BSI's non-cash assets. The
note bears no interest during its term, but bears a
default rate of interest of 24% if the note is not
paid when due. BSI paid cash fees of $45,000 in
connection with the issuance of the note and also
issued 500,000 shares of its common stock to
Cornell Capital Partners LP. as additional
consideration in the transaction.

On July 7, 2003, BSI sold $250,000 of convertible
debentures to Cornell Capital Partners, L.P.
Cornell Capital Partners was the purchaser of the
convertible debentures. These debentures accrue
interest at a rate of 5% per year and mature two
years from the issuance date. The debentures are
convertible at the Cornell Capital Partners' option
any time up to maturity at a conversion price equal
to the lower of (i) 120% of the closing bid price
of the common stock as of the closing date or (ii)
80% of the lowest closing bid price of the common
stock for the five trading days immediately
preceding the conversion date. At maturity, BSI has
the option to either pay the holder the outstanding
principal balance and accrued interest or to
convert the debentures into shares of common stock
at a conversion price equal to the lower of (i)
120% of the closing bid price of the common stock
as of the closing date or (ii) 80% of the lowest
closing bid price of the common stock for the five
trading days immediately preceding the conversion
date. BSI has the right to redeem the debentures
upon thirty days notice for 120% of the amount
redeemed.

On July 7, 2003, BSI entered into an Equity Line of
Credit Agreement with Cornell Capital Partners,
L.P. that was subsequently terminated by mutual
agreement of the parties on October 30, 2003.

(December 2002-February 2003) 1,072,386 shares at
$1.00 for $771,282 cash and $301,104 cancellation
of debt (total $1,020,886) were issued to eleven
accredited and twenty non-accredited investors. The
non-accredited investors are sophisticated. These
sales were exempt from SEC registration because
they were made in a private offering under Rule 506
of Regulation D. All information required to be
delivered to non-accredited investors concerning
BSI was delivered to all investors, including
audited financial statements.

(November 2002) 80,000 shares at $0.625 for $50,000
were issued to eight employees as stock bonuses. No
consideration was paid for these shares.

(July 2002) 800,000 shares at $0.625 were issued to
Pursuit Capital, an accredited investor, in
consideration of Pursuit's forgiving the $500,000
principal amount of the loan owed to Pursuit by
BSI. This transaction was exempt under section 4(2)
of the 1933 Act.

(June-July 2002) 529,191 shares at $0.625 for
$330,744.50 to 14 accredited investors and five
nonaccredited investors. The nonaccredited
investors are sophisticated. These sales were
exempt from SEC registration because they were made
in a private offering under Rule 506 of Regulation
D. All information required to be delivered to
non-accredited investors concerning BSI was
delivered to all investors, including audited
financial statements.

(July 2002) 300,000 shares to two individuals,
Bernie Ciazza and John Sloan (150,000 shares each)
for introducing BSI to investors. Mr. Ciazza and
Mr. Sloan are non-accredited sophisticated
investors. All information required to be delivered
to non-accredited investors concerning BSI was
delivered to all investors, including audited
financial statements. This transaction was exempt
from SEC registration because it was made in a
private transaction under Rule 506 of Regulation D.

(February 2002) warrants to purchase 800,000 shares
of common stock exercisable at $0.625 per share,
issued to Pursuit Capital LLC, in a negotiated
transaction exempt under section 4(2) of the
Securities Act of 1933. The warrants were issued in
exchange for Pursuit's $500,000 loan to BSI.
Pursuit is an accredited investor.

(January 2002) 500,000 shares to a business
consultant (D. David Breen) as a signing bonus for
entering into his consulting agreement with BSI.
The consultant is a non-accredited sophisticated
investor. All information required to be delivered
to non-accredited investors concerning BSI was
delivered to this person. These shares were issued
under the exemption from SEC registration provided
by Section 4(2) of the 1933 Act.

Jan. 1, 2001 - (January-August 2001) 46,600 shares at $0.625 for
Dec. 31, 2001 $29,125 to two accredited investors and two
nonaccredited sophisticated investors. These sales
were exempt from SEC registration because they were
made in a private offering under Rule 504 of
Regulation D.

(September 2001) 2,500,000 shares to Jack Harper in
payment of $59,643 accrued wages (See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS") in a
negotiated transaction exempt under section 4(2) of
the Securities Act of 1933; and 212,045 shares to
an employee for $212.50 cash. Mr. Harper is
accredited because he was and remains an executive
officer and director of BSI. The employee had
access to all material information about BSI, and
is a sophisticated investor.

Jan. 1, 2000 - 195,369 shares at $0.625 for $122,106 to six
Dec. 31, 2000 accredited and four nonaccredited sophisticated
investors. These sales were exempt from SEC
registration because they were made in a private
offering under Rule 504 of Regulation D..

Jan. 1, 1999 - 583,767 shares at $0.625 for $364,854 to 12
Dec. 31, 1999 accredited and 16 nonaccredited sophisticated
investors. These sales were exempt from SEC
registration because they were made in a private
offering under Rule 504 of Regulation D.

With respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated under the
1933 Act. In each instance, the purchaser had access to sufficient information
regarding BSI so as to make an informed investment decision. More specifically,
BSI had a reasonable basis to believe that each purchaser was an "accredited
investor" as defined in Regulation D of the 1933 Act and/or otherwise had the
requisite sophistication to make an investment in BSI2000' securities.

DESCRIPTION OF SECURITIES

GENERAL

BSI's authorized capital consists of 100,000,000 shares of common stock,
par value $0.001 per share and 20,000,000 shares of undesignated preferred
stock. At November 26, 2003, there were 53,561,102 outstanding shares of common
stock and no outstanding shares of preferred stock. Set forth below is a
description of certain provisions relating to BSI's capital stock.

COMMON STOCK

Each outstanding share of common stock has one vote on all matters
requiring a vote of the stockholders. There is no right to cumulative voting;
thus, the holder of fifty percent or more of the shares outstanding can, if they
choose to do so, elect all of the directors. In the event of a voluntary of
involuntary liquidation, all stockholders are entitled to a pro rata
distribution after payment of liabilities and after provision has been made for
each class of stock, if any, having preference over the common stock. The
holders of the common stock have no preemptive rights with respect to future
offerings of shares of common stock. Subject to the declaration and payment of
dividends upon any preferred stock at the time outstanding, to the extent of any
preference to which that preferred stock is entitled and after the provision for
any sinking or purchase fund or funds for any series of any preferred stock has
been complied with, the board of directors may declared and pay dividends on the
common stock, payable in cash or other consideration, out of the funds legally
available therefore. It is BSI's present intention to retain earnings, if any,
for use in its business. The payment of dividends on the common stock are,
therefore, unlikely in the foreseeable future.

PREFERRED STOCK

BSI is authorized to issue 20,000,000 shares of preferred stock, none of
which is outstanding. The preferred stock is undesignated. The Board of
Directors does not have the right to set forth the rights, designations,
preferences or other terms of the preferred stock. Such rights and preferences
must be authorized by the stockholders in accordance with Delaware law.

CONVERTIBLE DEBENTURES

BSI has outstanding convertible debentures, which were issued in the
original principal amount of $250,000. These debentures accrue interest at a
rate of 5% per year and mature two years from the issuance date. The debentures
are convertible at the holder's option any time up to maturity at a conversion
price equal to the lower of (i) 120% of the closing bid price of the common
stock as of the closing date (ii) 80% of the lowest closing bid price of the
common stock for the five trading days immediately preceding the conversion
date. At maturity, BSI has the option to either pay the holder the outstanding
principal balance and accrued interest or to convert the debentures into shares
of common stock at a conversion price equal to the lower of (i) 120% of the
closing bid price of the common stock as of the closing date or (ii) 80% of the
lowest closing bid price of the common stock for the five trading days
immediately preceding the conversion date. BSI has the right to redeem the
debentures upon thirty days notice for 120% of the amount redeemed.

TRANSFER AGENT

The Transfer Agent for the common stock is Corporate Stock Transfer, Inc.
located at 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209.

LIMITATION OF LIABILITY: INDEMNIFICATION

Our Articles of Incorporation include an indemnification provision under
which we have agreed to indemnify directors and officers of BSI from and against
certain claims arising from or related to future acts or omissions as a director
or officer of BSI. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of BSI pursuant to the foregoing, or otherwise, BSI has been advised
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION

AUTHORIZED AND UNISSUED STOCK

The authorized but unissued shares of our common are available for future
issuance without our stockholders' approval. These additional shares may be
utilized for a variety of corporate purposes including but not limited to future
public or direct offerings to raise additional capital, corporate acquisitions
and employee incentive plans. The issuance of such shares may also be used to
deter a potential takeover of BSI that may otherwise be beneficial to
stockholders by diluting the shares held by a potential suitor or issuing shares
to a stockholder that will vote in accordance with BSI's Board of Directors'
desires. A takeover may be beneficial to stockholders because, among other
reasons, a potential suitor may offer stockholders a premium for their shares of
stock compared to the then-existing market price.

The existence of authorized but unissued and unreserved shares of preferred
stock may enable the Board of Directors to issue shares to persons friendly to
current management which would render more difficult or discourage an attempt to
obtain control of our Company by means of a proxy contest, tender offer, merger
or otherwise, and thereby protect the continuity of our Company's management.

EXPERTS

The consolidated financial statements for the years ended December 31, 2002
and December 31, 2001 included herein, and incorporated by reference in the
Registration Statement, have been audited by Ehrhardt Keefe Steiner & Hottman
PC, independent certified public accountants, as stated in their report
appearing with the financial statements herein and incorporated by reference in
the Registration Statement, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.

With respect to the financial information for the periods ended September
30, 2003 and 2002, the independent certified public accountants have not audited
this information and do not express an opinion or any other form of assurance on
the financial information.

LEGAL MATTERS

Kirkpatrick & Lockhart LLP, Miami, Florida, will pass upon the validity of
the shares of common stock offered hereby for us.

HOW TO GET MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the exhibits for a complete
statement of their terms and conditions. The registration statement and other
information may be read and copied at the Commission's Public Reference Room at
450 Fifth Street N.W., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003

TABLE OF CONTENTS
-----------------

Page
----

Consolidated Financial Statements

Consolidated Balance Sheets F-2

Consolidated Statements of Operations F-3

Consolidated Statement of Changes in Stockholders' Equity F-4

Consolidated Statements of Cash Flows F-5

Notes to Consolidated Financial Statements F-7

F-1

CONSOLIDATED BALANCE SHEETS

September 30, December 31,
------------- ------------
(unaudited)
ASSETS

Current assets
Cash and cash equivalents $ 208,972 $ 228,617
Accounts receivable-trade 27,570 --
Inventories 56,182 27,124
Prepaid loan fees 33,778 --
Other current assets 18,303 4,257
----------- -----------
Total current assets 344,805 259,998
----------- -----------

Non-current assets
Property and equipment, net 56,915 68,915
Intangible assets 8,980 8,240
Prepaid loan fees 22,603 --
Other long-term assets 4,232 4,232
----------- -----------
Total non-current assets 92,730 81,387
----------- -----------

Total assets $ 437,535 $ 341,385
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
Accounts payable $ 62,436 $ 9,247
Accrued liabilities 2,398 6,492
Advances from shareholders -- --
Notes payable 500,000 --
----------- -----------
Total current liabilities 564,834 15,739
----------- -----------

Long-term liability-convertible debenture 250,000 --
----------- -----------

Commitments and contingencies

Stockholders' equity (deficit)
Preferred stock, $.001 par value, 20,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock, $.001 par value, 100,000,000 shares authorized,
53,421,102 and 8,652,400 shares issued and outstanding 53,421 4,036,957
Additional paid-in capital 4,333,036 --
Accumulated deficit 4,763,756) (3,711,311)
----------- -----------
Total stockholders' equity (deficit) (377,299) 325,646
----------- -----------

Total liabilities and stockholders' equity (deficit) $ 437,535 $ 341,385
=========== ===========

See notes to consolidated financial statements.

F-2

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

For the Period
from July 30,
1993
For the Nine Months Ended For the Three Months Ended (Inception)
September 30, September 30, through
------------------------------ ------------------------------ September 30,
2003 2002 2003 2002 2003
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Revenues $ 34,290 $ 9,990 $ 29,290 $ 9,990 $ 95,580
------------ ------------ ------------ ------------ ------------

Cost of goods sold 46,475 -- 46,475 -- 46,475
------------ ------------ ------------ ------------

Gross profit (loss) (12,185) 9,990 (17,185) 9,990 49,105
------------ ------------ ------------ ------------ ------------
Operating expenses
Selling expenses 176,657 235,950 43,721 113,376 940,532
General and administrative 504,145 263,637 201,213 65,179 2,328,317
Stock-based compensation expense -- -- -- -- 253,741
Research and development 345,937 56,329 93,426 30,188 1,260,221
------------ ------------ ------------ ------------ ------------
Total operating expenses 1,026,739 555,916 338,360 208,743 4,782,811
------------ ------------ ------------ ------------ ------------
Other income (expense)

Interest expense (6,537) (41,426) (5,323) (2,998) (127,750)
Interest income 1,635 1,088 404 (16,909) 23,043
Financing costs (8,619) -- (8,619) -- (8,619)
Other expense -- -- -- -- 83,276
------------ ------------ ------------ ------------ ------------
Total other income (expense) (13,521) (40,338) (13,538) (19,907) (30,050)
------------ ------------ ------------ ------------ ------------
Net loss $ (1,052,445) $ (586,264) $ (369,083) $ (218,660) $ (4,763,756)
============ ============ ============ ============ ============
Basic and diluted weighted
average common shares
outstanding 37,298,926 6,536,401 51,509,417 6,546,401 3,794,357
============ ============ ============ ============ ============

Basic and diluted loss per
common share $ (0.03) $ (0.09) $ (0.01) $ (0.03) $ (1.26)
============ ============ ============ ============ ============

See notes to consolidated financial statements.

F-3

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)

Accumulated
Common Stock Deficit During Total
------------------------- Additional the Development Stockholders'
Shares Amount Paid-in Capital Stage Equity (Deficit)
---------- ----------- --------------- --------------- ----------------

Balance - December 31, 2002 8,652,400 $ 4,036,957 $ -- $ (3,711,311) $ 325,646
Stock issued for cash 994,500 135,360 214,140 -- 349,500
Stock issued for equity line
of credit commitment and
placement fees 1,910,714 1,911 (1,911) -- --
Stock issued for note
payable fee 500,000 500 (500) -- --
Issuance of stock in connection
with reverse acquisition 41,363,488 (4,121,307) 4,121,307 -- --
Net loss -- -- -- (1,052,445) (1,052,445)
---------- ----------- -------------- ------------- --------------
Balance - September 30, 2003 53,421,102 $ 53,421 $ 4,333,036 $ (4,763,756) $ (377,299)
========== =========== ============== ============= ==============

See notes to consolidated financial statements.

F-4

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the Period
from July 30,
1993 (Inception)
Nine Months Ended September 30, through
------------------------------- September 30,
2003 2002 2003
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities

Net loss $ (1,052,445) $ (586,264) $ (4,763,756)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation expense 21,195 13,636 98,228
Gain on forgiveness of debt -- -- (65,485)
Discounts given on long-term debt -- (35,312) --
Stock based compensation -- 500 253,741
Changes in assets and liabilities
Accounts receivable-trade (27,570) -- (27,570)
Inventories (29,058) -- (56,182)
Other current assets (47,824) (15,538) (52,081)
Other long-term assets (22,603) 4,856 (26,835)
Accounts payable 53,189 (39,431) 116,499
Accrued liabilities (4,094) (27,911) 55,947
------------ ------------ ------------
(56,765) (99,200) 296,262
------------ ------------ ------------
Net cash used in operating activities (1,109,210) (685,464) (4,467,494)
------------ ------------ ------------

Cash flows from investing activities
Redemption of certificates of deposit -- -- 35,000
Purchase of certificate of deposit -- -- (35,000)
Purchase of fixed assets (9,935) (16,325) (107,529)
Patent application -- (3,910) (8,240)
------------ ------------ ------------
Net cash used in investing activities (9,935) (20,235) (115,769)
------------ ------------ ------------

Cash flows from financing activities
Proceeds from issuance of common stock 349,500 322,418 3,241,841
Repayment on long-term debt -- (93,173) (81,516)
Proceeds from long-term debt 250,000 500,000 1,169,500
Repayment on capital lease obligations -- -- (37,590)
Proceeds from short-term debt 500,000 -- 500,000
------------ ------------ ------------
Net cash provided by financing activities 1,099,500 729,245 4,792,235
------------ ------------ ------------

Net (decrease) increase in cash and cash equivalents (19,645) 23,546 208,972

Cash and cash equivalents - beginning of period 228,617 7,712 --
------------ ------------ ------------
Cash and cash equivalents - end of period $ 208,972 $ 31,258 $ 208,972
============ ============ ============

(Continued on following page.)

See notes to consolidated financial statements.

F-5

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(Continued from previous page.)

Supplemental disclosure of cash flow information:

The Company did not pay cash for interest expense or income taxes during
the years ended December 31, 2002 or 2001 or during the nine-month period ended
September 30, 2002. Cash paid for interest expense for the three months ended
September 30, 2003 was $7,575. Cash paid for interest expense from Inception
(July 30, 1993) through September 30, 2003 was $75,739.

Supplemental disclosure of non-cash activity:

Effective March 31, 2003, the Company entered into a merger agreement,
which has been accounted for as a reverse acquisition. No assets were acquired.
As a result of the merger, there has been an increase of 41,363,488 shares of
common stock outstanding in the surviving company.

As part of the merger, the Company assumed an existing liability of KFI of
$56,825 which will be funded through a note receivable from shareholders of the
Company.

During the nine month period ended September 30, 2002 (unaudited), the
Company repaid a note with cash of $1,938 and the issuance of 13,322 shares of
common stock valued at $8,326. Three additional notes were repaid with $91,235
cash and the remaining $35,312 was forgiven by the lenders. A lender used
$500,000 principal and $10,945 in accrued interest to exercise 800,000 warrants
at $.625 per warrant.

See notes to consolidated financial statements.

F-6

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BSI 2000, Inc., (the Company), was formed on July 30, 1993. The Company is a
value-added reseller ("VAR") of LaserCard's(R) optical cards and optical card
readers. As a VAR, the Company develops proprietary hardware and software
adapting LaserCard's(R) optical card technology for specific applications. The
Company's products are designed as turnkey solutions for identified commercial
and governmental card-based information needs.

The Company is a development stage company that has not had any significant
revenue since inception. There is no assurance that the Company will generate
significant revenue or earn a profit in the future.

PRINCIPLES OF CONSOLIDATION
- ---------------------------

The accompanying consolidated financial statements include the accounts of BSI
2000, Inc. and its subsidiary, BSI Operating, Inc. All inter company accounts
and transactions have been eliminated in consolidation.

GOING CONCERN
- -------------

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has experienced
losses since inception (July 30, 1993).

The extended period over which losses have been experienced is principally
attributable to two factors, lack of capital and long sales lead times. Lack of
capital has prevented the Company from quickly developing and aggressively
marketing its products. In addition, most of the Company's potential customers
are large corporations or governments. Adopting the Company's products will in
many cases require changing the way business is done. These circumstances can
result in two years or more elapsing from initial sales contact to delivery of
product.

The Company has made advances in the sales process with several potentially
large customers. In order to fund activities until positive operating cash flow
is achieved, the Company has implemented the plan described below.

During the first quarter of 2003, the Company merged with a small public
company. The transaction has been treated as a reverse acquisition with the
Company as the accounting acquirer. The Company has become a wholly owned
subsidiary of the public company, the Company's shareholders have become the
majority shareholders of the public company, and the public company has changed
its name to "BSI2000, Inc."

The Company plans to offer additional shares of the public company's common
stock to investors in a private placement of up to $15,000,000.

The Company expects that the capital raised in the transactions described above
will be sufficient to fund the Company's activities until positive operating
cash flow is achieved.

F-7

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS
- -------------------------

The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents. The Company continually
monitors its positions with, and the credit quality of, the financial
institutions with which it invests.

INVENTORIES
- -----------

Inventory consists of raw materials and is stated at the lower of cost or
market, determined using the first-in, first-out method (FIFO).

PROPERTY AND EQUIPMENT
- ----------------------

Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line method over the estimated useful lives for owned assets of 5
years. Leasehold improvements are amortized over a 5 1/2 year period.

USE OF ESTIMATES
- ----------------

The preparation 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, disclosures 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.

REVENUE RECOGNITION
- -------------------

The Company recognizes revenue in compliance with SAB 101, "Revenue Recognition
in Financial Statements." Revenue is recognized when an order has been placed by
the customer, the product has been shipped and collectibility is reasonably
assured. Prices of the products are determined prior to entering into a purchase
agreement. From inception through September 30, 2003, revenues earned
represented sales to distributors of demonstration units of the Company's
products.

Transaction based revenue is recognized as transactions are completed and are
billed monthly based on service agreement rates in effect.

INTANGIBLE ASSETS
- -----------------

Intangibles include trademarks and patents, which are recorded at cost. These
patents are awaiting approval from the U.S. Patent office. Once accepted, the
Company will begin amortization over the life of the patent.

ADVERTISING COSTS
- -----------------

The Company expenses advertising costs as incurred.

F-8

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SOFTWARE AND RESEARCH AND DEVELOPMENT COSTS
- -------------------------------------------

Expenditures made for research and development are charged to expense as
incurred.

Costs incurred to date for the development of the Company's products have been
charged to expense as incurred. Future costs may be capitalized to the extent
they meet the requirements of SFAS No. 86 "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed."

BASIC AND DILUTED EARNINGS PER COMMON SHARE
- -------------------------------------------

Basic earnings per share are computed by dividing net income by the number of
weighted average common shares outstanding during the year. Diluted earnings per
share is computed by dividing net income by the number of weighted average
common shares outstanding during the year, including potential common shares,
which consisted of warrants, options and convertible debt.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires the fair value of a liability for an asset
retirement obligation to be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived assets.
SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The
adoption of this statement had no material impact on the Company's financial
statements.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB No. 4, 44 and
64, Amendment of FASB No. 13, and Technical Corrections." SFAS rescinds FASB No.
4 "Reporting Gains and Losses from Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements." This statement also rescinds SFAS No. 44 "Accounting
for Intangible Assets of Motor Carriers" and amends SFAS No. 13, "Accounting for
Leases." This statement is effective for fiscal years beginning after May 15,
2002. The adoption of this statement had no material impact on the Company's
financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (Including
Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value when the liability is incurred. SFAS No.
146 is effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. The adoption of this
statement had no material impact on the Company's consolidated financial
statements.

In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain Financial
Institutions". SFAS No. 147 amends FASB Statements No. 72 and 144 and FAB
Interpretations No. 9. The adoption of this statement had no material impact on
the Company's financial statements.

F-9

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
- -----------------------------------------------------

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" (FIN No. 46)". This
interpretation clarifies existing accounting principles related to the
preparation of consolidated financial statements when the equity investors in an
entity do not have the characteristics of a controlling financial interest or
when the equity at risk is not sufficient for the entity to finance its
activities without additional subordinated financial support from other parties.
FIN No. 46 requires a company to evaluate all existing arrangements to identify
situations where a company has a "variable interest" (commonly evidenced by a
guarantee arrangement or other commitment to provide financial support) in a
"variable interest entity" (commonly a thinly capitalized entity) and further
determine when such variable interests require a company to consolidate the
variable interest entities' financial statement with its own. The Company is
required to perform this assessment by December 31, 2003 and consolidate any
variable interest entities for which it will absorb a majority of the entities'
expected losses or receive a majority of the expected residual gains. Management
has not yet performed this assessment, however it does not have any variable
interest entities as of September 30, 2003.

In April 2003, FASB issued SFAS No. 149, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. This statement amends and clarifies financial accounting and reporting
for derivative instruments including certain instruments embedded in other
contracts and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The adoption of this standard is
not expected to have a material impact on the Company's financial statements.

UNAUDITED INTERIM FINANCIAL INFORMATION

The accompanying financial statements for the three-month and nine-month periods
ended September 30, 2003 and 2002 are unaudited but include all adjustments
(consisting of normal recurring accruals) which, in the opinion of management,
are necessary for a fair statement of the operating results and cash flows for
the periods presented.

F-11

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTE 2 - REVERSE ACQUISITION

On March 31, 2003 the reverse triangular merger between the Company and
Knowledge Foundation, Inc. closed. As a result of the closing BSI2000, Inc.
became a 100% owned subsidiary of Knowledge Foundations, Inc. Also as result of
the closing Knowledge Foundations, Inc.'s name changed to BSI2000, Inc. ("new
BSI") and BSI2000, Inc.'s name changed to BSI Operating, Corp. ("old BSI").

Immediately prior to the closing all of Knowledge Foundation, Inc.'s assets and
all but $56,825 of its liabilities (see below) were spun-off to certain of its
shareholders in exchange for 34,105,900 shares of common stock, which were then
canceled. After the spin-off 5,027,818 shares of Knowledge Foundations, Inc.
common stock ("new BSI stock") remained outstanding.

Knowledge Foundations, Inc. ("new BSI") acquired BSI2000, Inc. ("old BSI") by
issuing 45,122,570 of its common shares ("new BSI stock") to shareholders of
BSI2000, Inc. ("old BSI") in exchange for 100% of the outstanding 8,786,900
common shares of BSI2000, Inc. ("old BSI stock").

For financial reporting purposes the transaction has been accounted for as a
re-capitalization of the Company. Accordingly the net increase in the
outstanding shares of 41,363,488 resulting from the above transactions has been
reflected in the financial statements as shares issued in connection with the
re-capitalization of the Company. In recording the re-capitalization transaction
$4,121,307 has been reclassified from common stock to additional paid in
capital.

As a result of the accounting method adopted to record the merger, for financial
reporting purposes the historical financial statements of the Company, and only
the historical financial statements of the Company, have become the historical
financial statements of the continuing entity. Historical financial statements
of Knowledge Foundation, Inc. are not presented.

The terms of the merger agreement between the Company and Knowledge Foundations,
Inc. provided that the liabilities of Knowledge Foundation, Inc. at the closing
would not exceed $15,000. However, at the closing Knowledge Foundations, Inc.
had a note payable and accrued interest outstanding in the amount of $56,825. In
order to off set this liability certain shareholders of Knowledge Foundations
Inc. executed a note payable to the Company in the amount of $56,825. The
Knowledge Foundation, Inc. note and accrued interest have been recorded as a
reduction of additional paid in capital. The note receivable from the Knowledge
Foundation, Inc. shareholders has been recorded as an increase to additional
paid in capital.

NOTE 3-EQUITY AND DEBT TRANSACTIONS

On July 7, 2003, BSI sold $250,000 convertible debentures to Cornell Capital
Partners. Cornell Capital Partners was the purchaser of the convertible
debentures. These debentures accrue interest at a rate of 5% per year and mature
two years from the issuance date. The debentures are convertible at Cornell
Capital Partners' option any time up to maturity at a conversion price equal to
the lower of (i) 120% of the closing bid price of the common stock as of the
closing date or (ii) 80% of the lowest closing bid price of the common stock for
the five trading days immediately preceding the conversion date. At maturity,
BSI has the option to either pay the holder the outstanding principal balance
and accrued interest or to convert the debentures into shares of common stock at
a conversion price equal to the lower of (i) 120% of the closing bid price of
the common stock as of the closing date or (ii) 80% of the lowest closing bid
price of the common stock for the five trading days immediately preceding the
conversion date. BSI has the right to redeem the debentures upon thirty days
notice for 120% of the amount redeemed.

On October 31, 2003, BSI entered into an Equity Line of Credit Agreement with
Cornell Capital Partners. Under this agreement, BSI may issue and sell to
Cornell Capital Partners common stock for a total purchase price of up to $15.0
million. Subject to certain conditions, BSI will be entitled to commence drawing
down on the Equity Line of Credit when the common stock to be issued under the
Equity Line of Credit is registered with the Securities and Exchange Commission
and the registration statement is declared effective and will continue for two
years thereafter. The purchase price for the shares will be equal to 99% of, or
a 1% discount to, the market price, which is defined as the lowest closing bid
price of the common stock during the five trading days following the notice
date. The amount of each advance is subject to an aggregate maximum advance
amount of $210,000, with no advance occurring within seven trading days of a
prior advance. Cornell Capital Partners received 1,875,000 shares of BSI common
stock as a one-time commitment fee. Cornell Capital Partners is entitled to
retain a fee of

F-12

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

4.0% of each advance. In addition, BSI entered into a placement agent agreement
with Newbridge Securities Corporation., a registered broker-dealer. Pursuant to
the placement agent agreement, BSI paid a one-time placement agent fee of 35,714
shares of common stock equal to approximately $10,000 based on BSI's stock price
on July 7, 2003, the date BSI agreed to engage the placement agent.

During the period July 18, 2003 through September 30, 2003, BSI received
proceeds of $215,000 from the sale of 860,000 shares of its common stock in a
private placement at $.25 per share.

On October 3, 2003, BSI received proceeds of $35,000 from the sale of 140,000
shares of its common stock in a private placement at $.25 per share.

On September 16, 2003, BSI received the net proceeds of $455,000 from a $500,000
secured promissory note issued to Cornell Capital Partners, LP. The note is due
on the earlier of 90 days from the date thereof or 60 days after BSI's
registration statement on From SB-2 is declared effective by the Securities and
Exchange Commission. The note is secured by substantially all of BSI's non-cash
assets. The note bears no interest during its term, but bears a default rate of
interest of 24% if the note is not paid when due. BSI paid cash fees of $45,000
in connection with the issuance of the note and also issued 500,000 shares of
its common stock to Cornell Capital Partners, LP as additional consideration in
the transaction.

F-13

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 2002

TABLE OF CONTENTS
-----------------

Independent Auditors' Report F-15

Financial Statements

Balance Sheet F-16

Statements of Operations F-17

Statement of Changes in Stockholders' Equity (Deficit) F-18

Statements of Cash Flows F-19

Notes to Financial Statements F-21

F-14

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
BSI 2000, Inc.
Denver, Colorado

We have audited the accompanying balance sheet of BSI 2000, Inc. (A
Development Stage Company) (the Company) as of December 31, 2002, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the years ended December 31, 2002 and 2001 and for the cumulative period
from Inception (July 30, 1993) through December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BSI 2000, Inc. as of
December 31, 2002, and the results of its operations and its cash flows for the
years ended December 31, 2002 and 2001 and for the cumulative period from
Inception (July 30, 1993) through December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has experienced circumstances which raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matters also are described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
January 24, 2003
Denver, Colorado

F-15

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 2002

ASSETS

Current assets
Cash and cash equivalents $ 228,617
Inventories 27,124
Other current assets 4,257
-----------

Total current assets 259,998

Property and equipment, net 68,915
Intangible assets 8,240
Other long-term assets 4,232
-----------

Total assets $ 341,385
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable $ 9,247
Accrued liabilities 6,492
-----------

Total current liabilities 15,739
-----------

Commitments and contingencies

Stockholders' equity
Common stock, no par value, 11,000,000 shares
authorized, 8,652,400 shares issued and outstanding 4,036,957
Accumulated deficit (3,711,311)
-----------

Total stockholders' equity 325,646
-----------

Total liabilities and stockholders' equity $ 341,385
===========

See notes to financial statements.

F-16

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS

Inception
For the Years Ended (July 30, 1993)
December 31, through
--------------------------- December 31,
2002 2001 2002
----------- ----------- --------------

Revenues $ 9,990 $ 18,980 $ 61,290
----------- ----------- -----------

Operating expenses
Selling expenses 340,507 86,605 763,875
General and administrative 502,591 173,864 1,824,172
Stock based compensation expense 50,000 56,948 253,741
Research and development 132,149 4,266 914,284
----------- ----------- -----------

Total operating expenses 1,025,247 321,683 3,756,072
----------- ----------- -----------

Other income (expense)
Interest expense (46,993) (36,068) (121,213)
Interest income 1,075 92 21,408
Other 87,540 -- 83,276
----------- ----------- -----------

Total other income (expense) 41,622 (35,976) (16,529)
----------- ----------- -----------

Net loss $ (973,635) $ (338,679) $(3,711,311)
=========== =========== ===========

Basic and diluted weighted average
common shares outstanding 6,872,849 3,603,837 1,991,222
=========== =========== ===========

Basic and diluted loss per common share $ (0.14) $ (0.09) $ (1.86)
=========== =========== ===========

See notes to financial statements.

F-17

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND FOR
THE PERIOD FROM INCEPTION (JULY 30, 1993) TO DECEMBER 31, 2002

Accumulated
Deficit During
Common Stock the Total
------------------------ Development Stockholders'
Shares Amount Stage Equity
--------- ----------- -------------- -------------

Balance at Inception - July 30, 1993, -- $ -- $ -- $ --
Stock issued to founders for cash during the period
ended December 31, 1993 19,580 85,000 -- 85,000
Stock issued for cash during the year ended
December 31, 1993 2,701 57,500 -- 57,500
Stock issued to founders for services during the
period ended December 31, 1993 33,812 146,793 -- 146,793
Stock issued for cash during the year ended
December 31, 1994 12,904 65,000 -- 65,000
Stock issued for cash during the year ended
December 31, 1995 224,672 118,763 -- 118,763
Stock issued for cash during the year ended
December 31, 1996 616,989 227,872 -- 227,872
Stock issued for cash during the year ended
December 31, 1997 225,766 144,612 -- 144,612
Stock issued for cash during the year ended
December 31, 1998 831,118 788,309 -- 788,309
Stock issued for cash during the year ended
December 31, 1999 583,767 364,854 -- 364,854
Stock issued for cash during the year ended
December 31, 2000 195,369 122,106 -- 122,106
Net loss from Inception -- -- (2,398,997) (2,398,997)
--------- ----------- ----------- -----------

Balance - December 31, 2000 2,746,678 2,120,809 (2,398,997) (278,188)
Stock issued for cash 46,600 29,125 -- 29,125
Stock issued to officer for services 2,500,000 56,736 -- 56,736
Stock issued for services to an employee 212,045 212 -- 212
Net income -- -- (338,679) (338,679)
--------- ----------- ----------- -----------

Balance - December 31, 2001 5,505,323 2,206,882 (2,737,676) (530,794)
Stock issued for debt conversion 1,159,426 865,375 -- 865,375
Stock issued for cash 1,082,651 889,200 -- 889,200
Stock issued for services to finders of private
placement offering in June 2002 at $.01 per share,
net of expense 300,000 -- -- --
Stock issued for services 25,000 25,500 -- 25,500
Stock based compensation expense 580,000 50,000 -- 50,000
Net loss -- -- (973,635) (973,635)
--------- ----------- ----------- -----------

Balance - December 31, 2002 8,652,400 $ 4,036,957 $(3,711,311) $ 325,646
========= =========== =========== ===========

See notes to financial statements.

F-18

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

Inception
For the Years Ended (July 30, 1993)
December 31, to
---------------------------- December 31,
2002 2001 2002
------------ ------------ --------------

Cash flows from operating activities

Net loss $ (973,635) $ (338,679) $(3,711,311)
----------- ----------- -----------
Adjustments to reconcile
net loss to net cash used in operating activities
Depreciation expense 20,256 16,614 77,003
Gain on forgiveness of debt (65,485) -- (65,485)
Stock based compensation 50,000 56,948 253,741
Changes in assets and liabilities
Inventories (27,124) -- (27,124)
Other current assets 5,125 (2,499) (4,257)
Other long-term assets 4,856 (4,231) (4,232)
Accounts payable (26,447) 5,453 63,310
Accrued liabilities (78,969) 53,841 60,041
----------- ----------- -----------

(117,788) 126,126 353,027
----------- ----------- -----------

Net cash used in operating activities (1,091,423) (212,553) (3,358,284)
----------- ----------- -----------

Cash flows from investing activities
Redemption of certificates of deposit -- -- 35,000
Purchase of certificate of deposit -- -- (35,000)
Purchase of fixed assets (52,792) -- (97,594)
Patent application (6,080) -- (8,240)
----------- ----------- -----------

Net cash used in investing activities (58,872) -- (105,834)
----------- ----------- -----------

Cash flows from financing activities
Proceeds from issuance of common stock 889,200 29,125 2,892,341
Repayment on long-term debt (63,000) (4,222) (81,516)
Proceeds from long-term debt 545,000 184,000 919,500
Repayment on capital lease obligation -- -- (37,590)
----------- ----------- -----------

Net cash provided by financing activities 1,371,200 208,903 3,692,735
----------- ----------- -----------

Net increase (decrease) in cash and cash equivalents 220,905 (3,650) 228,617

Cash and cash equivalents - beginning of year 7,712 11,362 --
=========== =========== ===========

Cash and cash equivalents - end of year $ 228,617 $ 7,712 $ 228,617
=========== =========== ===========

F-19

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

Supplemental disclosure of cash flow information:

Cash paid for interest during the years ended December 31, 2002 and 2001 was
$41,349 and $0, respectively. Cash paid for interest expense from Inception
(July 30, 1993) through December 31, 2002 was $68,164.

Supplemental disclosure of non-cash activity:

During the year ended December 31, 2002, the Company converted $812,326 of notes
payable and $53,049 of accrued interest into 1,159,426 shares of common stock.

During the year ended December 31, 2002, the Company converted $25,500 of
accounts payable and accrued liabilities into 25,000 shares of common stock.

During the year ended December 31, 2001, the Company converted accrued wages
totaling $56,736 into 2,500,000 shares of common stock.

During the year ended December 31, 1999, the Company converted $29,063 from
accounts payable to notes payable.

In September 1998, the Company obtained fixed assets totaling $37,590 through a
capital lease. In addition, the Company financed leasehold improvements in the
amount of $16,000 through a note payable.

See notes to financial statements.

F-20

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------

BSI 2000, Inc., (the Company), was formed on July 30, 1993. The Company is a
value-added reseller ("VAR") of LaserCard's(R)optical cards and optical card
readers. As a VAR, the Company develops proprietary hardware and software
adapting LaserCard's(R)optical card technology for specific applications. The
Company's products are designed as turnkey solutions for identified commercial
and governmental card-based information needs.

CASH AND CASH EQUIVALENTS
- -------------------------

The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents. The Company continually
monitors its positions with, and the credit quality of, the financial
institutions with which it invests.

INVENTORIES
- -----------

Inventories consist of raw materials and are stated at the lower of cost or
market, using the first-in, first-out method (FIFO).

PROPERTY AND EQUIPMENT
- ----------------------

Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line method over the estimated useful lives for owned assets of 5
years. Leasehold improvements are amortized over a 5 1/2 year period.

USE OF ESTIMATES
- ----------------

The preparation 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, disclosures 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.

REVENUE RECOGNITION
- -------------------

The Company recognizes revenue in compliance with SAB 101, "Revenue Recognition
in Financial Statements." Revenue is recognized when an order has been placed by
the customer, the product has been shipped and collectibility is reasonably
assured. Prices of the products are determined prior to entering into a purchase
agreement. From inception through December 31, 2002, revenues earned represented
sales to distributors of demonstration units of the Company's products.

Transaction based revenue is recognized as transactions are completed and are
billed monthly based on service agreement rates in effect.

INTANGIBLE ASSETS
- -----------------

Intangibles include trademarks and patents which are recorded at cost. These
patents are awaiting approval from the U.S. Patent office. Once accepted, the
Company will begin amortization over the life of the patent.

F-21

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

ADVERTISING COSTS
- -----------------

The Company expenses advertising costs as incurred.

SOFTWARE AND RESEARCH AND DEVELOPMENT COSTS
- -------------------------------------------

Expenditures made for research and development are charged to expense as
incurred.

Costs incurred to date for the development of the Company's products have been
charged to expense as incurred. Future costs may be capitalized to the extent
they meet the requirements of SFAS No. 86 "Accounting for the Costs of Computer
Software to be Sold, Leased, or otherwise Marketed."

BASIC AND DILUTED EARNINGS PER COMMON SHARE
- -------------------------------------------

In accordance with FAS 128, basic earnings per share are computed by dividing
net income by the number of weighted average common shares outstanding during
the year. Diluted earnings per share is computed by dividing net income by the
number of weighted average common shares outstanding during the year, including
potential common shares, which consisted of warrants, options and convertible
debt.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------

In July 2001, the FASB issued SFAS Nos. 141 and 142 "Business Combinations" and
"Goodwill and other Intangible Assets". Statement 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method. Under the guidance of Statement 142, goodwill is no longer
subject to amortization over its estimated useful life. Rather, goodwill will be
subject to at least an annual assessment for impairment by applying a fair value
base test. Statement 142 is effective for financial statement dates beginning
after December 15, 2001. Management does not anticipate that this statement will
have an impact on the financial statements of the Company.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires the fair value of a liability for an asset
retirement obligation to be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived assets.
SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The
Company believes the adoption of this statement will have no material impact on
it financial statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 requires that long-lived assets be
measured at the lower of carrying amount or fair value, less cost to sell,
whether reported in continuing operations or discontinued operations. Therefore,
discontinued operations will no longer be measured at net realizable value or
include amounts for operating losses that have not yet occurred. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and, generally, is to be applied prospectively.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
Compensation- Transition and Disclosure". This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for an entity that voluntarily changes to the fair value method of
accounting for stock-based compensation. In addition, SFAS 148 amends the
disclosure provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's accounting policy decisions with respect to stock-based
employee compensation on reported net income. The effective date for this
Statement is for fiscal years ended after December 15, 2002. The Company does
not expect the adoption of this statement to have a material effect on the
Company's financial statements.

NOTE 2 - GOING CONCERN
- ----------------------

The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and liquidation of
liabilities in the ordinary course of business. The Company has experienced
losses since inception (July 30, 1993) through December 31, 2002 of $3,711,311.
The Company has working capital of $244,259 and stockholder's equity of $325,646
as of December 31, 2002 and used cash of $1,091,423 in its 2002 operations.

F-22

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

During 2002, the Company signed an agreement to merge with a small public
company (Note 8). The transaction will be a reverse acquisition with the Company
as the accounting acquirer. The Company will become a wholly owned subsidiary of
the public company, the Company's shareholders will become the majority
shareholders of the public company, and the public company will change its name
to "BSI2000, Inc."

Subsequent to closing the merger transaction the Company plans to offer
additional shares of the public company's common stock to investors in a private
placement of up to $2,500,000.

The Company expects that the capital raised in the transactions described above
will be sufficient to fund the Company's activities until positive operating
cash flow is achieved.

NOTE 3 - PROPERTY AND EQUIPMENT
- -------------------------------

Property and equipment consist of the following at December 31, 2002:

Leasehold improvements $ 16,399
Software 5,107
Equipment 89,683
Furniture 34,759
----------

145,948

Less accumulated depreciation (77,033)
----------

$ 68,915
==========

NOTE 4 - LONG-TERM DEBT
- -----------------------

As of December 31, 2001, the Company had various notes payable totaling $395,811
with interest ranging from 8% to 18%. In the first two quarters of 2002, the
Company borrowed an additional $545,000 on a 10% note to fund operations
bringing total long-term debt to $940,811. Thereafter during 2002, the Company
repaid $63,000 and converted $812,326 into common stock of the Company. The
remaining debt of $65,485 which was payable to lenders who did not obtain common
stock in the Company was forgiven.

NOTE 5 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------

LITIGATION
- ----------

In the normal course of business, the Company is party to litigation from time
to time. The Company maintains insurance to cover certain actions and believes
that resolution of such litigation will not have a material adverse effect on
the Company.

F-23

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

CONSULTING AGREEMENT
- --------------------

On January 7, 2002, the Company entered into a consulting agreement for a term
of twenty four months. Under the term of the agreement, the Company is obligated
to pay a monthly fee of $5,000 for services performed. Beginning the earlier of
the seventh month of the engagement or the Company receiving cumulative funding
in excess of $1,000,000, the monthly fee will increase to $8,000. The Company
also issued the consultants 500,000 shares of common stock.

NOTE 6 - STOCKHOLDERS' EQUITY
- -----------------------------

REVERSE STOCK SPLIT
- -------------------

On March 10, 1998, the shareholders voted to affect a reverse stock split to
bring the then total share count (fully diluted) to 1,750,000 through a split of
68.5 shares to one. All common stock amounts included in these financial
statements have been adjusted to reflect the reverse stock split.

STOCK ISSUED TO FOUNDERS
- ------------------------

During the period from Inception (July 30, 1993) through December 31, 1993, the
Company issued shares of common stock to the founders for prior services at
$4.34 per share, which was the value similar to the cash sales of stock
immediately preceding the issuance.

STOCK ISSUED TO AN OFFICER AND EMPLOYEE
- ---------------------------------------

On September 11, 2001, BSI issued 2,500,000 shares of common stock to Jack
Harper, president and director, for $2,500 ($0.001 per share) and forgiveness of
accrued wages. Also in 2001, BSI issued 212,045 shares of common stock to Robert
B. Lumen for $212 ($0.001 per share). When these shares were issued, BSI was
insolvent with negative working capital, and unable to pay salaries to
employees.

PRIVATE OFFERINGS
- -----------------

During 2002, the Company sold 937,886 and 515,869 shares of common stock in
private placement offerings at $1.00 and $.625 per share, respectively. The
shares issued under the private placement for $1.00 per share include 371,104
shares issued in satisfaction of long-term debt. For the period from January 1,
2003 through January 24, 2003, the Company sold an additional 83,000 shares for
$1.00 per share.

STOCK OPTIONS
- -------------

On October 24, 1996, the Company adopted a Stock Option Plan ("the Plan")
whereby the Board of Directors can issue both incentive stock options and
nonqualified options to directors, employees, consultants for the purpose of
rewarding them for their past and future contributions to the growth of the
Company. Under the plan, 341,545 shares of the Company's stock are reserved for
options to be issued in the future. The purchase price per share of a
non-qualified stock option shall not be issued at less than 85% of the fair
market value at the date of grant. The purchase price per share of incentive
stock options shall not be issued at less than the fair market value at the date
of grant. All options issued under this plan terminate after five years. All
options issued under this plan were issued at the market price at the date of
issuance.

F-24

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

The following table presents the activity for options outstanding:

Weighted
Incentive Average
Stock Options Exercise Price
------------- --------------

Outstanding - December 31, 2000 414,486 $ 0.71
Granted -- --
Forfeited/canceled -- --
Exercised -- --
--------- -----------

Outstanding - December 31, 2001 414,486 0.71
Granted -- --
Forfeited/canceled (414,486) (0.71)
Exercised -- --
--------- -----------

Outstanding - December 31, 2002 -- $ --
========= ===========

The following table presents the composition of options outstanding and
exercisable:

Options Outstanding and Exercisable
------------------------------------------
Number Price* Life*
------ ------ -----
Range of exercise prices:
$.61-$.63 320,986 $ 0.62 2.54
$1.00 93,500 1.00 2.24
------- -------- ----

December 31, 2001 414,486 $ -- 2.47
======= ======== ====

*Price and Life reflect the weighted average exercise price and weighted average
remaining contractual life, respectively.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (as
amended by SFAS No. 148 "Accounting for Stock Based Compensation - Transition
and Disclosure"). Accordingly, no compensation cost has been recognized for the
stock option plans. Had compensation cost for the Company's option plan been
determined based on the fair value at the grant date for awards consistent with
the provisions of SFAS No. 123, the Corporation's net loss and basic loss per
common share would have been changed to the pro forma amounts indicated below:

Inception
For the Years Ended (July 30, 1993)
December 31, through
------------------------------ December 1,
2002 2001 2002
------------ ------------ ---------------

Net loss - as reported $ (973,635) $ (338,679) $ (3,711,311)
Net loss - pro forma $ (973,635) $ (338,679) $ (3,775,548)
Basic loss per common share - as reported $ (0.14) $ (0.09) $ (1.86)
Basic loss per common share - pro forma $ (0.14) $ (0.09) $ (1.86)

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used: expected life of 5 years, no volatility, risk free rate
interest rate of 4.75% and a 0% dividend yield.

F-25

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

WARRANTS
- --------

Warrants were issued to investors with certain private offerings. Each warrant
entitled the holder to one share of common stock at $.625 per share, terminating
five years after the date of issuance or as noted in the warrant certificate. As
permitted by the warrant agreements, in the case of a consolidation or merger,
the board of directors voted to expedite the expiration date to the day before
the merger closing. As a result, as of December 31, 2002, there were no warrants
outstanding in connection with private placement offerings.

The following table presents the activity for warrants outstanding:

Weighted
Number of Average
Warrants Exercise Price
-------- --------------

Outstanding - December 31, 2000 779,171 $ --
Issued 46,600 0.63
-------- ---------

Outstanding - December 31, 2001 825,771 $ 0.63
Forfeited/canceled (825,771) (0.63)
-------- ---------

Outstanding - December 31, 2002 -- $ --
======== =========

NOTE 7 - LOSS PER SHARE
- -----------------------

The following table sets forth the computation for basic and diluted earnings
per share:

Inception
(July 30, 1993)
through
December 31, December 31, December 31,
2002 2001 2002
------------ --------------- ------------

Numerator for basic earnings per share $ (973,635) $ (338,679) $(3,711,311)
=========== =========== ===========

Numerator for diluted income per common share $ (973,635) $ (338,679) $(3,711,311)
=========== =========== ===========

Denominator for basic earnings per share -
weighted average shares 6,872,849 3,603,837 1,991,222
=========== =========== ===========

Denominator for diluted earnings per share -
adjusted weighted average shares 6,872,849 3,603,837 1,991,222
=========== =========== ===========

Diluted income per common share $ (0.14) $ (0.09) $ (1.86)
=========== =========== ===========

Options and warrants exercisable into shares of commons stock were not included
in the computation of diluted loss per share because their effect was
anti-dilutive. These options and warrants could potentially dilute earnings per
share in future periods. Potentially dilutive shares outstanding are as follows:

Year ended December 31, 2001 1,385,169
Year ended December 31, 2000 1,269,186
Cumulative period from inception (July 30, 1993) through December 31, 2001 1,385,169

F-26

BSI 2000, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTE 8 - MERGER AGREEMENT
- -------------------------

On April 29, 2002, the Company and certain of its major shareholders executed an
agreement to merge with a small public company. The public company will divest
itself of 100% of its current operations and technology and acquire the Company
in a reverse triangular merger. Immediately prior to closing of the merger,
5,027,818 shares of the common stock of the public company will be outstanding.

Shareholders of the Company will be issued, on a pro-rata basis, 45,122,570
shares of the common stock of the public company in exchange for 100% of the
outstanding common stock of the Company. Immediately after the closing,
50,150,388 shares of the public company shall be outstanding.

Additional terms of the merger agreement require that the Company's total debt
not exceed $225,000 on the closing date.

As a condition of closing, the Company's shareholders will be required to
execute agreements, satisfactory to the public company, which limit the
Company's shareholders' access to public markets for the resale of their shares.

Closing is also subject to approval by the Company's shareholders, and by the
principal shareholders of the public company. If the merger is approved, the
public company will transfer existing intellectual property assets to its
principal shareholders in exchange for return of most of the stock held by those
individuals. The stock received in the exchange will be canceled at closing.

Closing also is subject to the fulfillment of customary representations and
warranties by the Company and the public company.

NOTE 9 - SUBSEQUENT EVENT (UNAUDITED)
- -------------------------------------

During the period from January 25, 2003 through February 17, 2003, the Company
sold 51,500 shares of common stock through a private placement offering for
$1.00 per share.

F-27

WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR OTHER PERSON TO
PROVIDE ANY INFORMATION OR MAKE
ANY REPRESENTATIONS ABOUT BSI2000,
INC. EXCEPT THE INFORMATION OR
REPRESENTATIONS CONTAINED IN THIS
PROSPECTUS. YOU SHOULD NOT RELY
ON ANY ADDITIONAL INFORMATION OR
REPRESENTATIONS IF MADE.

-----------------------

This prospectus does not constitute
an offer to sell, or a solicitation ----------
of an offer to buy any securities: PROSPECTUS
----------
* except the common stock offered
by this prospectus;

* in any jurisdiction in which the
offer or solicitation is not
authorized;
48,000,000 SHARES OF COMMON STOCK
* in any jurisdiction where the dealer
or other salesperson is not qualified
to make the offer or solicitation;

* to any person to whom it is unlawful
to make the offer or solicitation; or BSI2000, INC.

* to any person who is not a United
States resident or who is outside
the jurisdiction of the United States.

The delivery of this prospectus or any ______________, 2003
accompanying sale does not imply that:

* there have been no changes in the
affairs of BSI2000, Inc. after the
date of this prospectus; or

* the information contained in this
prospectus is correct after the date
of this prospectus.

-----------------------

Until _________, 2004, all dealers effecting
transactions in the registered securities,
whether or not participating in this
distribution, may be required to deliver a
prospectus. This is in addition to the
obligation of dealers to deliver a prospectus
when acting as underwriters.

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF DIRECTORS AND OFFICERS

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth estimated expenses expected to be incurred
in connection with the issuance and distribution of the securities being
registered. BSI will pay all expenses in connection with this offering.

Securities and Exchange Commission Registration Fee $ 970.80
Printing and Engraving Expenses $ 2,500.00
Accounting Fees and Expenses $ 15,000.00
Legal Fees and Expenses $ 50,000.00
Miscellaneous $ 16,529.20

TOTAL $ 85,000.00

SALES OF UNREGISTERED SECURITIES

In the four years ended December 31, 2002 and from January 1, 2003 through
November 26, 2003, BSI has sold shares of common stock and warrants to purchase
shares of common stock in negotiated transactions or private offerings. All of
the securities were sold as restricted securities under the 1933 Act. Except as
set forth below, no commissions or other compensation was paid to anyone in
connection with these sales of securities.

During the period August 1, 2003 through October
31, 2003, BSI received proceeds of $187,500 from
the sale of 730,000 shares of its common stock in a
private placement to Pursuit Capital at $0.25 per
share.

During the period August 1, 2003 through October
31, 2003, BSI received proceeds of $67,500 from the
sale of 270,000 shares of its common stock to Doug
Dragoo in a private placement at $0.25 per share.

II-1

On July 7, 2003, BSI entered into an Equity Line of
Credit Agreement with Cornell Capital Partners,
L.P. that was subsequently terminated by mutual
agreement of the parties on October 30, 2003.

(November 2002) 80,000 shares at $0.625 for $50,000
were issued to eight employees as stock bonuses. No
consideration was paid for these shares.

II-2

Jan. 1, 2000 - 195,369 shares at $0.625 for $122,106 to six
Dec. 31, 2000 nonaccredited sophisticated investors. These sales
were exempt from SEC registration because they were
made in a private offering under Rule 504 of
Regulation D..

II-3

EXHIBITS

EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ---------------------------------------------------- ---------------------------------------------

2.1 Agreement and Plan of Merger, dated August 7, 2000, Incorporated by reference to Exhibit 2(1) to
between Calipso and Knowledge Foundations, Inc. Form 8-K filed on September 27, 2000 to

2.2 Merger Agreement, dated April 23, 2002, between Incorporated by reference to Exhibit 99.2 to
BSI2000, Inc., Knowledge Foundations, Inc. and KFI, Form 8-K filed on May 9, 2002
Inc.

2.3 First Amendment to Merger Agreement dated August 8, Incorporated by reference to Form S-4 filed
2002, between BSI2000, Inc., KFI, Inc. and Knowledge on August 13, 2002
Foundations, Inc.

2.4 Separation and Distribution Agreement by and among Incorporated by reference to Form S-4 filed
Knowledge Foundations, Inc., Cyber Knowledge, Inc. on August 13, 2002
and CKI Group

2.5 Second Amendment to Merger Agreement dated November Incorporated by reference to Form S-4/A1
20, 2002 between BSI2000, Inc., KFI, Inc. and filed on November 27, 2002
Knowledge Foundations, Inc.

3.1 Certificate of Incorporation of Knowledge Incorporated by reference to Form 10-SB filed
Foundations, Inc. filed on May 31, 1994 on November 24, 1999

3.2 Certificate of Amendment of Certificate of Incorporated by reference to Exhibit 3(i)(a)
Incorporation re: 36:1 forward split to Form 8-K filed on September 27, 2000

3.3 Certificate of Amendment of Certificate of Incorporated by reference to Exhibit 3(i)(b)
Incorporation re: 35:1 forward split to Form 8-K filed on September 27, 2000

3.4 Certificate of Amendment of Certificate of Incorporated by reference to Exhibit 3(i)(c)
Incorporation re: increase in authorized shares to Form 8-K filed on September 27, 2000

3.5 Certificate of Amendment of Certificate of Incorporated by reference to Exhibit 3.3 to
incorporation re: name change Form 8-K filed on April 8, 2003

3.6 Bylaws of Knowledge Foundations, Inc. Incorporated by reference to Form 10-SB filed
on November 24, 1999

3.7 Certificate of Merger, dated August 17, 2000, filed Incorporated by reference to Exhibit 3(i) to
with the Secretary of State of Delaware Form 8-K filed on September 27, 2000

5.1 Legal Opinion of Kirkpatrick & Lockhart LLP re: Incorporated by reference to Exhibit 5.1 to
Legality Form SB-2 filed on November 4, 2003.

II-4

EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ---------------------------------------------------- ---------------------------------------------

10.1 Stock Repurchase Agreement dated September 18, 2002 Incorporated by reference to Exhibit 4(a) to
between Calipso and Wrights & Bleers and Ocean Way Form 8-K filed on September 27, 2000
Investments, Ltd.

10.2 Lock Up Agreement dated September 18, 2000 between Incorporated by reference to Exhibit 4(b) to
Calipso and Wright & Bleers and Ocean Way Form 8-K filed on September 27, 2000
Investments, Ltd.

10.3 License and Royalty Agreement dated April 6, 2000 Incorporated by reference to Exhibit 10(1) to
between Richard L. Ballard and Janet J. Pettitt and Form 8-K filed on September 27, 2000
Knowledge Foundations Inc.

10.4 Employment Contract of Michael W. Dochterman dated Incorporated by reference to Exhibit 10(2) to
May 1, 2000 Form 8-K filed on September 27, 2000

10.5 Employment Contract of Robert A. Dietrich dated May Incorporated by reference to Exhibit 10(3) to
1, 2000 Form 8-K filed on September 27, 2000

10.6 Strategic Alliance Agreement dated May 4, 2000 Incorporated by reference to Exhibit 10.4 to
between BSI2000, Inc. and Drug Intervention Services Form S-4 filed on August 13, 2002
of America, Inc.

10.7 Office Lease by and between BSI2000, Inc. and Golden Incorporated by reference to Exhibit 10.7 to
Hill Partnership, dated as of January 24, 2001. Form SB-2 filed on November 4, 2003.

10.8 Strategic Alliance Agreement dated May 7, 2001 Incorporated by reference to Exhibit10.5 to
between BSI2000, Inc. and L.C. Sistemia Form S-4 filed on August 13, 2002

10.9 Agreement to replace options with common stock dated Incorporated by reference to Exhibit 10.8 to
September 11, 2001 between BSI2000, Inc. and Jack Form S-4 filed on August 13, 2002
Harper and Bryan Luman

10.10 Certificate of LaserCard Systems Corporation Issued Incorporated by reference to Exhibit 10.10 to
to BSI2000, Inc. dated April 28, 2002 Form SB-2 filed on November 4, 2003.

10.11 Strategic Alliance Agreement between Titan Secure Incorporated by reference to Exhibit 10.9 to
Systems and BSI2000, Inc. dated July 25, 2002 Form S-4/A1 filed on November 27, 2002

10.12 Teaming Agreement between Science Applications Incorporated by reference to Exhibit 10.10 to
International Corporation and BSI2000, Inc. dated Form S-4/A1 filed on November 27, 2002
August 20, 2002

10.13 Solicitation/Contract/Order for Commercial Items Incorporated by reference to Exhibit 10.11 to
dated September 2, 2002, issued by U.S. Immigration Form S-4/A1 filed on November 27, 2002
and Naturalization Service with BSI2000, Inc. as
Contractor/Offeror 21

10.14 Form of Lock-Up Agreement between certain Incorporated by reference to Exhibit 4(c) to
shareholders of BSI2000, Inc. and Knowledge Form S-4/A3 filed on January 29, 2003
Foundations, Inc.

10.15 Securities Purchase Agreement dated July 7, 2003 Incorporated by reference to Exhibit 10.15 to
among the Registrant and the Buyers Form SB-2 filed on November 4, 2003

10.16 Escrow Agreement dated July 7, 2003 among the Incorporated by reference to Exhibit 10.16 to
Registrant, the Buyers, and Law Offices of Eric S. Form SB-2 filed on November 4, 2003
Hutner & Associates

II-5

EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ---------------------------------------------------- ---------------------------------------------

10.17 Debenture Agreement Dated July 7, 2003 between the Incorporated by reference to Exhibit 10.17 to
Registrant and Cornell Capital Partners LP Form SB-2 filed on November 4, 2003

10.18 Investor Registration Rights Agreement dated July 7, Incorporated by reference to Exhibit 10.18 to
2003 between the Registrant and the Investors Form SB-2 filed on November 4, 2003

10.19 Equity Line of Credit Agreement dated October 31, Incorporated by reference to Exhibit 10.19 to
2003 between the Registrant and Cornell Capital Form SB-2 filed on November 4, 2003
Partners LP

10.20 Registration Rights Agreement dated October 31, 2003 Incorporated by reference to Exhibit 10.20 to
between the Registrant and Cornell Capital Partners, Form SB-2 filed on November 4, 2003
LP

10.21 Escrow Agreement dated October 31, 2003 among the Incorporated by reference to Exhibit 10.21 to
Registrant, Cornell Capital Partners, LP, Law Offices Form SB-2 filed on November 4, 2003
of Eric S. Hutner & Associates

10.22 Placement Agent Agreement dated July 7, 2003 among Incorporated by reference to Exhibit 10.22 to
the Registrant, Newbridge Securities Corporation and Form SB-2 filed on November 4, 2003
Cornell Capital Partners LP

23.1 Consent of Kirkpatrick & Lockhart LLP Incorporated by reference to Exhibit 5.1

23.2 Consent of Ehrhardt Keefe Steiner & Hottman PC Provided herewith

UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Sections 10(a)(3) of the
Securities Act of 1933 (the "Act");

(ii) Reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;

(iii) Include any additional or changed material information on
the plan of distribution;

(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the bona fide offering thereof.

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(3) To remove from registration by means of a post-effective amendment
any of the securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, on November 25, 2003.

BSI2000, INC.

November 25, 2003 By: /s/ Jack Harper
-------------------------------------
Jack Harper,
President (Principal Executive
Officer and Principal Accounting
Officer) and Director

Pursuant to the requirements of the Securities Act of 1933 this
Registration Statement has been duly signed by the following persons on behalf
of the registrant and in the capacities and on the dates indicated

/s/ Jack Harper November 25, 2003
- ---------------------------------- ---------------------------------------
Jack Harper, President Date
and Director

/s/ Richard Kirk November 25, 2003
- ---------------------------------- ---------------------------------------
Richard Kirk, Director Date

/s/ Adrian Bernard Ciazza November 25, 2003
- ---------------------------------- ---------------------------------------
Adrian Bernard Ciazza, Director Date

/s/ Fritz Keefner November 25, 2003
- ---------------------------------- ---------------------------------------
Fritz Keefner, Director Date

/s/ Marshall Kaplan November 25, 2003
- ---------------------------------- ---------------------------------------
Marshall Kaplan, Director Date

/s/ Vincent Fulginiti November 25, 2003
- ---------------------------------- ---------------------------------------
Vincent Fulginiti, Director Date

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