SecProbe.io

CORRESP
1
filename1.htm

      Unassociated Document

      July
        8,
        2005

      VIA
        EDGAR AND U.S. MAIL

      Stephen
        Krikorian

      Accounting
        Branch Chief

      Division
        of Corporate Finance

      Mail
        Stop
        4561

      United
        States Securities and Exchange Commission

      Washington,
        DC 26549

      Re:
Form
        10-K for Fiscal Year Ended December 31, 2001

       Filed
        April 15,2005 (File No. 000-28287)

       Form
        10-Q for Fiscal Quarter Ended March 31, 2005

       Filed
        May 13, 2005 (File No. 000-28287)

      Dear
        Mr.
        Krikorian:

      This
        letter has been prepared in response to your request for BSI2000, Inc.
        (“BSI”
        or the
“Company”)
        to
        respond to the comments of the United States Securities and Exchange Commission
        (the “SEC”)
        as
        memorialized in your June 27, 2005 letter to me concerning the above-referenced
        filings by BSI (the “Comment
        Letter”)

      The
        following are the Company’s responses to the Comment Letter, which responses
        follow a recitation of the comment contained therein

            12600
              West Colfax Avenue . Suite B410 . Lakewood, Colorado 80215 . USA

            Tel:
              303.231.9095 . Fax: 303.231.9002 . www.bsi2000.com

            Mr.
              Stephen Krikorian

            July
              8,
              2005

            Page
              2

      Form
        10-K for the year ended
        December 3, 2004

      Consolidated
        Financial Statements

      Notes
        to Consolidated Financial Statements

      Note
        5 - Convertible Debt, page F-7

      General

      COMMENT
        1. We
        note
        the conversion features within the debt issued in October and December 2004.
        State whether the debt holder had the option to convert the debt on the same
        day
        as issuance. Explain what factors you considered when evaluating if the
        conversion feature for each debt issued is beneficial (i.e., has intrinsic
        value) to the holder. Refer to EITF 98-5 and EITF 00-27. If there is a
        beneficial conversions feature, tell us how you are accounting for this feature
        and indicate how your disclosure addresses this policy. See paragraph 4 of
        SFAS
        129. We also note the convertible debt issued on January 19, 2005.

              RESPONSE:

                Section
                  1.02 of the Secured Debenture provides in pertinent part as follows:

      “…the
        Holder is entitled, at its option, to convert, and sell on the same day,
        at any
        time and from time to time, until payment in full of this Debenture, all
        or any
        part of the principal amount of the Debenture, plus accrued interest, into
        shares (the “Conversion
        Shares”)
        of the
        Company’s common stock, par value $0.001 per share (“Common
        Stock”),
        at
        the price per share (the “Conversion
        Price”)
        equal
        to the lesser of (a) an amount equal to one hundred twenty percent
        (120%)
        of the Closing Bid price (the “Closing
        Bid Price”)
        of the
        Company’s Common Stock as listed on a Principal Market (as defined herein), as
        quoted by Bloomberg L.P., as of the date hereof (the “Fixed
        Price”),
        or
        (b) an amount equal to eighty (80%) of the lowest Closing Bid Price
        of the
        Company’s Common Stock, as quoted by Bloomberg, LP, for the five (5) trading
        days immediately preceding the Conversion Date (as defined
        herein).”

      Accordingly,
        the holder is entitled to convert the Secured Debenture into the Company’s
        common stock at the time of issuance at a amount equal to 80% of the lowest
        bid
        price.

      BSI
        believes that this conversion feature provided intrinsic value to the holder,
        and the Company has calculated the intrinsic value of each convertible debt
        as
        follows:

            Mr.
              Stephen Krikorian

            July
              8,
              2005

            Page
              3

      For
        the
        October 7, 2004 convertible debt, intrinsic value is equal to $0.0124, which
        is
        the difference between $0.062 (i.e., the price of the Company’s common stock) on
        October 7, 2004, as compared to 80% of that price, or $0.0496. The intrinsic
        value of $0.0124 per share is then multiplied by 10,080,645 shares of common
        stock (i.e., the $500,000 convertible debt divided by the conversion price
        of
        $0.0496), which equals an intrinsic value of $125,000.

      For
        the
        December 10, 2004 convertible debt, intrinsic value is equal to $0.009, which
        is
        the difference between $0.045 (i.e., the price of the Company’s common stock) on
        December 10, 2004, as compared to 80% of that price, or $0.036. The intrinsic
        value of $0.009 per share is then multiplied by 13,888,888 shares of common
        stock (i.e., $500,000 convertible debt divided by the conversion price of
        $0.036), which equals an intrinsic value of $125,000.

      For
        the
        January 19, 2005 convertible debt, intrinsic value is equal to $0.0084, which
        is
        the difference between $0.042 (i.e., the price of the Company’s common stock) on
        January 19, 2005, as compared to 80% of that price, or $0.0336. The intrinsic
        value of $0.0084 per share is then multiplied by 7,440,476 shares of common
        stock (i.e., $250,000 convertible debt divided by the conversion price of
        $0.0336), which equals an intrinsic value of $62,500.

      BSI
        did
        not account for these conversion features in its December 31, 2004 Form 10-KSB
        or March 31, 2005 Form 10-QSB. The Company is proposing to amend both of
        these
        filings by making adjustments that record an increase to interest expense
        of
        $250,000 at December 31, 2004, with a corresponding increase to additional
        paid-in capital, and an increase to interest expense of $62,500 at March
        31,
        2005, with a corresponding increase to additional paid-in capital. Please
        note
        that any future conversion features of this nature associated with future
        debt
        issuances by the Company, if any, will be accounted for in this
        manner.

            Mr.
              Stephen Krikorian

            July
              8,
              2005

            Page
              4

      Should
        you have any questions concerning this Response Letter, please contact me
        at
        303-291-9095.

                Very
                  truly yours,

                /s/
                  Jack Harper

                Jack
                  Harper

                President
                  and Chief Executive Officer

      cc: Clay
        Parker, Kirkpatrick & Lockhart Nicholson Graham, LLP (via
        facsimile)