SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                   FORM 10-KSB

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACTS OF 1934

           [] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACTS OF 1934

                    For the fiscal year ended: March 31, 2002

                        Commission File Number: 000-28287

                           KNOWLEDGE FOUNDATIONS, INC.
             (Exact name of registrant as specified in our charter)


     DELAWARE                                        88-0418749
     --------                                        ----------
(State  or  other  jurisdiction of                              (I.R.S. Employer
Identification  No.)
     incorporation  or  organization)

     7852  COLGATE  AVE.
WESTMINSTER,  CA                                   92683
----------------                                   -----
     (Address  of  principal  executive offices)                            (Zip
Code)

        Registrant's telephone number including area code: (626) 444-5494

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.001 par value
                                (Title of Class)

     Indicate  by  check  mark  whether the registrant (a) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.  Yes    X  No  ____
                                                     ----

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-K.  [     ]

     The number of shares of Common Stock, $0.001 par value, outstanding on June
30,  2002,  was  39,133,718  shares,  held  by  approximately  75  stockholders.

<PAGE>
                           KNOWLEDGE FOUNDATIONS, INC.
                               FOR THE YEAR ENDED
                                 MARCH 31, 2002

                                 INDEX TO REPORT
                                 ON FORM 10-KSB


PART  I                                                                Page
                                                                       ----

Item     1.     Business     2-5
Item     2.     Properties     5
Item     3.     Legal  Proceedings     5
Item     4.     Submission  of  Matters  to  a  Vote  of Security Holders     5

PART  II

Item     5.     Market  for  Registrant's  Common Equity and Related Stockholder
Matters     5
Item     6.     Management's  Discussion  and  Analysis  of Financial Condition
     and  Results  of  Operations     6
Item     7.     Financial  Statements  and  Supplementary  Data     11
Item     8.     Subsequent  Events     12
Item   9.     Changes  in  and  Disagreements With Accountants on Accounting and
     Financial  Disclosure     12

PART  III

Item     10.     Directors  and  Executive  Officers  of  the Registrant     12
Item     11.     Executive  Compensation     15
Item     12.     Security Ownership of Certain Beneficial Owners and Management
16
Item     13.     Certain  Relationships  and  Related  Transactions     17

PART  IV

Item     14.     Exhibits,  Financial  Statement  Schedules  and Reports on Form
8-K     17

Signatures          19

<PAGE>
     This  form 10-KSB contains forward-looking statements within the meaning of
the  federal  securities  laws. These forward-looking statements are necessarily
based  on  certain  assumptions  and  are  subject  to  significant  risks  and
uncertainties.  These  forward-looking  statements  are  based  on  management's
expectations  as  of  the  date  hereof,  and the Company does not undertake any
responsibility  to  update  any of these statements in the future. Actual future
performance  and  results  could  differ  from that contained in or suggested by
these  forward-looking  statements as a result of factors set forth in this Form
10-KSB  (including  those  sections  hereof incorporated by reference from other
filings with the Securities and Exchange Commission), in particular as set forth
in  the  "Management's  Discussion  and  Analysis"  under  Item  6.

     In  this  form 10-KSB references to "Knowledge", "The Company", "we", "us",
and  "our"  refer  to  Knowledge  Foundations,  Inc.

PART  I

ITEM  1.     BUSINESS
--------     --------

Overview
--------

     Knowledge  Foundations,  Inc. (formerly a private Delaware corporation) was
incorporated  in  Delaware  on  April  6, 2000 and on August 7, 2000 merged into
Calipso, Inc.  On September 18, 2000, the Company changed its name from Calipso,
Inc.  to  Knowledge  Foundations,  Inc.  Concurrently,  the  Company changed its
trading  symbol  on  the  OTCBB  from  CPSJ  to  KNFD.

     Knowledge  Foundations,  Inc.  ("KFI"  or the "Company") is a developer and
promoter  of  knowledge  engineering  software.  KFI has an exclusive license to
market  and  distribute  two generations of knowledge engineering software tools
developed  by  the  Company's  Chairman and Chief Science Officer, Dr Richard L.
Ballard.  Previous  versions  of  the  software  have  been used in a variety of
government applications for the US Navy, US Air Force, US Army Strategic Defense
Command,  NASA's  Johnson  Space  Center  and  others.  Knowledge  Foundations'
software  operates  transparently  within the MS-Windows environment and has the
capacity  to  capture and code knowledge for increased processing speed, storage
capacity  and  intuitive  access.

     KFI  acquired  the  rights  to its technology through a License and Royalty
Agreement  entered  into  on April 6, 2000 by and between Richard L. Ballard and
Janet  J. Pettitt (Ballard), husband and wife, and KFI.  The License and Royalty
Agreement  provides  KFI with exclusive and transferable rights to Dr. Ballard's
software.  Future  inventions  and  software  developments  using  this software
technology  developed  by  Dr.  Ballard  will  be the exclusive property of KFI.

     The  Company's  original  business plan was to further develop the software
for  additional  capabilities,  to  obtain  appropriate  intellectual  property
protection,  to  provide knowledge engineering services to clients and to market
its  software tools to software application developers under license agreements.
The Company's ability to develop the software and provide service to clients was
dependent  upon the Company successfully obtaining sufficient capital, which the
Company  has  not  been  able  to  do.  The  Company was unsuccessful in raising
capital  for  its  development  and  marketing activities during the fiscal year
ended  March  31,  2002.  However,  Dr. Ballard has continued to develop certain
segments  of the Mark III version of the Company's software in spite of the lack
of  capital  to  pay  him.

     Knowledge  Foundations'  software  products  are  best  described  as
knowledge-based  engineering  and application development tools. Whereas current
information  processing  applications  are limited to informational data content
with  predictable  outcomes,  KFI's  software  will use coded human knowledge to
assist  a  user  in  solving  and  managing  unpredictable problems by answering
complex  questions  such  as  how,  why,  and  most  important  -  what  if?

     The  computer  can  only  process  "information" - such as contextual data,
facts  and  figures, words, numbers, objects and pictures.  This is true because
all  computers  use  a machine coding language founded on design principles that
only  process  "information content."  Computers cannot learn and must depend on
the  brainwork  or  knowledge  of  their  user  to produce meaningful to maximum
results.

KFI's  proprietary  machine  coding  language should be capable of capturing and
storing  permanently  the  brainwork  that  could  only  previously be performed
separately  by  a  computer  user  -  using his or her personal knowledge.  This
coding language should be able to capture virtually every kind of knowledge from
original  sources  while  functioning  symbiotically  with  traditional
information-based  computing  systems.

     KFI's  technology  will  allow  organizations  to permanently store lessons
learned,  contracted  work  products,  and  intellectual capital as a "knowledge
base".  The Company's technology captures, codifies and integrates virtually any
form  of knowledge into easily accessed and marketable formats.  The application
of  KFI's software tools will provide a production process for building small to
large knowledge bases and assist companies in managing a most important asset --
knowledge.

     Software  developers  would  be  able  to license KFI's software to enhance
their  own  information-based  applications.  Individual  users  and  corporate
enterprises alike would be able to permanently store their intellectual capital,
work  products,  experience,  and  learning in a knowledge base. These knowledge
bases  would  then be able to grow through the introduction of new knowledge and
be  passed  on  from  generation  to  generation.

     Management  plans,  if  capital were available, to patent and establish its
technology as an "industry standard" for all knowledge-based computing and plans
to  market  its  technology  through  licensing  agreements.

Employees
---------

     As  of  March 31, 2002, we had three part time employees. The employees are
located  at  our  headquarters  in  California.

     We  are  dependent upon the services of Dr. Richard L. Ballard, Chairman of
the Company and Chief Technical Officer.  Our future success also depends on our
ability  to  attract and retain other qualified personnel, for which competition
is intense. The loss of Dr. Ballard or our inability to attract and retain other
qualified  employees  could  have  a  material  adverse  effect  on  us.

Risks
-----

     While  management believes that the Company can effectively compete because
of  its  technical  advances in the type of software created by Dr. Ballard, the
Company's ability to succeed will depend upon a number of factors, including its
ability  to  secure funding.  The Company's viability is substantially dependent
upon  the  ability  of current management to locate sources of capital either as
equity  or  loans  into  the  business.  Commencing  with the date of the merger
between  Calipso and Knowledge Foundations (the private company), management has
been unable to obtain any substantial funding source.  As the result of the lack
of  capital,  various  personnel  of the Company have been terminated, causing a
slowdown  of  Company  operations.  We  now believe that with the current market
downturn  and  resulting  inability  to  raise  capital that to retain value for
shareholders  it  is  in  our  best interest to consummate a merger with another
business  entity  with  the potential for revenue and long term growth potential
(see  Subsequent  Events  Section).

Additional  Information
-----------------------

     We are subject to the informational requirements of the Securities Exchange
Act  of  1934  (the  "Exchange  Act")  and,  in  accordance therewith, will file
reports,  proxy  statements  and  other  information  with  the Commission. Such
reports,  proxy  statements  and  other  information  may be inspected at public
reference  facilities  of  the  Commission  at Judiciary Plaza, 450 Fifth Street
N.W.,  Washington  D.C. 20549; Northwest Atrium Center, 500 West Madison Street,
Suite  1400,  Chicago, Illinois 60661; 7 World Trade Center, New York, New York,
10048;  and  5670  Wilshire  Boulevard, Los Angeles, California 90036. Copies of
such  material  can  be  obtained  from  the  Public  Reference  Section  of the
Commission  at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at
prescribed  rates.  For  further  information,  the SEC maintains a website that
contains  reports,  proxy  and  information  statements,  and  other information
regarding  reporting  companies  at  (http://www.sec.gov).
                                      ------------------


ITEM  2.     PROPERTIES
--------     ----------

     The Company's main offices are rented from a shareholder and are located at
7852  Colgate  Avenue,  Westminster,  CA 92683 and the telephone number is (626)
444-5494.  The  Company  pays  rent  at  the  rate  of  $1000  per  month.

ITEM  3.     LEGAL  PROCEEDINGS
--------     ------------------

     The  Company  has  a  potential claim threatened against it by a consultant
with  regard  to  a  finder's  fee  for potential equity financing.  The Company
believes that neither the merit nor future outcome of such a claim nor potential
damages  is  readily  determinable  as  of  March 31, 2002 and therefore has not
accrued  any  liability  in  the  accompanying  financial  statements.

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

     No  matter  was  submitted  to  a  vote  of  security  holders, through the
solicitation  of  proxies  or  otherwise,  during the fourth quarter of our year
ended  March  31,  2002.

PART  II

ITEM  5.     MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED STOCKHOLDER
--------     -------------------------------------------------------------------
MATTERS
-------

     Our  Common  Stock  is  traded  in  the  over-the-counter securities market
through  the  National  Association  of  Securities  Dealers Automated Quotation
Bulletin  Board System, under the symbol "KNFD".  The following table sets forth
the  high  and  low  prices for our Common Stock as reported by the OTC:BB.  The
quotations  reflect  inter-dealer  prices,  without  retail mark-up, markdown or
commission,  and  may  not  necessarily  represent  actual  transactions.

                    FISCAL  2002

Months               Average  Low          Average  High
                     ------------          -------------
April  2001               $0.56               $1.10
May  2001               $0.90               $1.02
June  2001               $0.90               $0.98
July  2001               $0.85               $0.90
August  2001               $0.85               $0.90
September  2001          $0.85               $0.85
October  2001               $0.65               $0.65
November  2001          $0.35               $0.65
December  2001          $0.36               $0.42
January  2002               $0.36               $0.36
February  2002               $0.43               $1.35
March  2002               $0.80               $1.05

     As of June 30, 2002, we had approximately 75 stockholders of the 39,133,718
shares  outstanding.


     We have never declared or paid dividends on our Common Stock.  We intend to
follow  a  policy  of  retaining  earnings, if any, to finance the growth of the
business  and  do  not  anticipate  paying any cash dividends in the foreseeable
future.  The  declaration  and  payment  of future dividends on the Common Stock
will  be at the sole discretion of the Board of Directors and will depend on our
profitability  and  financial  condition,  capital  requirements,  statutory and
contractual  restrictions,  future  prospects and other factors deemed relevant.

ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
--------     -------------------------------------------------------------------
RESULTS  OF  OPERATIONS
-----------------------

     The  following  discussion  and analysis should be read in conjunction with
our  Financial  Statements  and  the  notes  thereto appearing elsewhere in this
document.

RISK  FACTORS  AND  CAUTIONARY  STATEMENTS

Cautionary  Statement  Regarding  Forward-Looking  Statements
-------------------------------------------------------------

     The  Company  desires  to take advantage of the "safe harbor" provisions of
the  Private  Securities  Litigation  Reform  Act  of  1995  and  is filing this
cautionary  statement  in  connection  with  such  safe  harbor legislation. The
Company's  Form  10K-SB,  the  Company's Annual Report to Shareholders, any Form
10-QSB  or  any  Form 8-K of the Company or any other written or oral statements
made by or on behalf of the Company may include forward-looking statements which
reflect  the Company's current views with respect to future events and financial
performance. The words "believe," "expect," "anticipate," "intends," "estimate,"
"forecast,"  "project,"  and  similar  expressions  identify  forward-looking
statements.

     The Company wishes to caution investors that any forward-looking statements
made  by  or  on  behalf  of  the Company are subject to uncertainties and other
factors  that  could  cause  actual  results  to  differ  materially  from  such
statements.  These  uncertainties and other factors include, but are not limited
to the Risk Factors listed below (many of which have been discussed in prior SEC
filings  by  the  Company).  Though  the  Company  has  attempted  to  list
comprehensively these important factors, the Company wishes to caution investors
that  other  factors  could in the future prove to be important in affecting the
Company's  results of operations. New factors emerge from time to time and it is
not  possible  for  management to predict all of such factors, nor can it assess
the  impact  of  each  such  factor  on  the business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from  those  contained  in  any  forward-looking  statements.

     Readers  are  further  cautioned  not  to  place  undue  reliance  on  such
forward-looking  statements  as they speak only of the Company's views as of the
date  the  statement  was made. The Company undertakes no obligation to publicly
update  or  revise  any  forward-looking  statements, whether as a result of new
information,  future  events  or  otherwise.

Risk  Factors
-------------

FAILURE  TO  CONSUMMATE  PENDING  MERGER
----------------------------------------

     As  a  result of our belief that we could not raise the financing necessary
to  complete  the  research  and  development  necessary  to  bring our licensed
software  to  market  or  if  completed,  to  properly market and distribute the
licensed  software,  we  entered into a definitive merger agreement on April 23,
2002  to  merge  a newly-formed wholly-owned subsidiary of ours, KFI, Inc., with
and  into  BSI2000,  Inc.,  a  Colorado  corporation  ("BSI2000).  BSI2000  is a
marketer  of a proprietary family of integrated optical card devices designed to
run  control  software.  One  of the conditions to completing this merger is the
spin-out  to  certain  shareholders  of  ours of all our existing technology and
related  licenses.  Failure  to  consummate  the  merger  could  result  in  the
cessation  of  our  operations  and  the  termination  of  our  Company.

WE  PROBABLY  WILL  NOT  BE  ABLE  TO  RAISE FURTHER FINANCING OR IT MAY ONLY BE
--------------------------------------------------------------------------------
AVAILABLE  ON  TERMS  UNFAVORABLE  TO  OUR  STOCKHOLDERS  OR  US.
-----------------------------------------------------------------

     Our  available  cash  resources  are  insufficient  to meet our anticipated
working  capital  and  capital  expenditure  requirements.

     If  we raise additional funds through the issuance of equity or convertible
debt  securities, the percentage ownership of our stockholders would be reduced,
and  these  newly issued securities might have rights, preferences or privileges
senior  to  those  of  existing stockholders.  Additional financing might not be
available  on  terms  favorable  to  us,  or  at all. If adequate funds were not
available  or  were  not  available on acceptable terms, our ability to fund our
operations,  take  advantage  of unanticipated opportunities, develop or enhance
our  products  or  otherwise  respond  to  competitive  pressures  would  be
significantly  limited.

OUR  OPERATING  RESULTS  ARE  DIFFICULT  TO PREDICT IN ADVANCE AND MAY FLUCTUATE
--------------------------------------------------------------------------------
SIGNIFICANTLY,  AND  A  FAILURE  TO  MEET  THE  EXPECTATIONS  OF ANALYSTS OR OUR
--------------------------------------------------------------------------------
STOCKHOLDERS  WOULD  LIKELY  RESULT IN A SUBSTANTIAL DECLINE IN OUR STOCK PRICE.
--------------------------------------------------------------------------------

     There  is  little  historical  financial  information  that  is  useful  in
evaluating our business, prospects and future operating results.  You should not
rely  on  quarter-to-quarter  comparisons  of  our  results  of operations as an
indication of our future performance.  We expect our future operating results to
fluctuate  significantly from quarter to quarter.  If our operating results fail
to  meet  or  exceed  the expectations of analysts or investors, our stock price
would  likely  decline  substantially.  Factors  that  are  likely  to cause our
results  to  fluctuate  include  the  following:

     the  gain  or  loss  of  significant  customers  or  significant changes in
purchasing  volume;

     the  amount  and timing of our operating expenses and capital expenditures;

     changes  in  the  volume  of our licensing revenue and pricing concessions;

     the  timing,  rescheduling  or  cancellation  of  customer  orders;

     the  varying  length  of  our  licensing  cycles;

     the availability and pricing of competing products and technologies and the
resulting  effect  on  licensing  of  our  products;

     our  ability  to  specify,  develops,  complete,  introduce  and market new
licenses  and  technologies;

     the rate of adoption and acceptance of new industry standards in our target
markets;

     changes  in  the  mix  of  technology  we  license;  and

     changes  in  the  average  licensing  rate  of  our  products.

THERE  IS  A  LIMITED  CURRENT  PUBLIC  MARKET  FOR  OUR  COMMON  STOCK.
------------------------------------------------------------------------

     There is a limited public market for our common stock.  Although our common
stock  is  listed on the OTC Bulletin Board, there is a limited volume of sales,
thus  providing a limited liquidity into the market for our shares.  As a result
of  the  foregoing, stockholders may be unable to liquidate their shares for any
reason.

WE  ARE  HIGHLY DEPENDENT ON RICHARD BALLARD. THE LOSS OF RICHARD BALLARD, WHOSE
--------------------------------------------------------------------------------
KNOWLEDGE,  LEADERSHIP  AND  TECHNICAL  EXPERTISE  WE  RELY UPON, WOULD HARM OUR
--------------------------------------------------------------------------------
ABILITY  TO  EXECUTE  OUR  BUSINESS  PLAN.
------------------------------------------

     Our  success  depends  heavily  upon the continued contributions of RICHARD
BALLARD  whose  knowledge, leadership and technical expertise would be difficult
to  replace.  If  we  were  to  lose  their services, our ability to execute our
business  plan  would  be  harmed.

IF WE ARE UNABLE TO RECRUIT, HIRE, TRAIN AND RETAIN ADDITIONAL SALES, MARKETING,
--------------------------------------------------------------------------------
OPERATIONS,  SOFTWARE  ENGINEERING  AND  FINANCE  PERSONNEL,  OUR GROWTH WILL BE
--------------------------------------------------------------------------------
IMPAIRED.
---------

To  grow our business successfully and maintain a high level of quality, we will
need to recruit, retain and motivate additional highly skilled sales, marketing,
software  engineering  and  finance personnel. If we are not able to hire, train
and  retain  a  sufficient  number  of  qualified  employees, our growth will be
impaired.  In  particular,  we  will  need  to  expand  our  sales and marketing
organizations  in  order  to  increase  market  awareness of our products and to
increase  revenue.

     In  addition,  as a company focused on the development of complex products,
we will need to hire additional software engineering staff of various experience
levels in order to meet our product roadmap. The market for skilled employees is
extremely  limited.  We  may  have  even greater difficulty recruiting potential
employees  if  prospective  employees  perceive  the  equity  component  of  our
compensation  package  to  be  less  valuable.

WE  ARE  SUBJECT TO VARIOUS RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE AND IF WE
--------------------------------------------------------------------------------
DO  NOT  ADAPT  OUR  PRODUCTS  TO  THE  CHANGES  OUR  BUSINESS WILL BE ADVERSELY
--------------------------------------------------------------------------------
AFFECTED.
---------

     The technology products market involves certain characteristics that expose
our  existing  and  future  technologies,  and  methodologies  to  the  risk  of
obsolescence.  These  characteristics  included  the  following:

     rapid  changes  in  technology;
     rapid  changes  in  user  and  customer  requirements;
     frequent  new  service or product introductions embodying new technologies;
and
     the  emergence  of  new  industry  standards  and  practices.

     Our  performance  will  partially  depend on our ability to license leading
technologies,  enhance  our  existing  services,  and  respond  to technological
advances  and  emerging  industry  standards  and  practices  on  a  timely  and
cost-effective  basis.  The  development  of  new technology entails significant
technical  and business risks. We cannot predict if we will use new technologies
effectively  or  adapt our products to consumer, vendor, advertising or emerging
industry  standards. If we were unable, for technical, legal, financial or other
reasons,  to  adapt in a timely manner in response to changing market conditions
or  customer  requirements,  our  business,  results of operations and financial
condition  could  be  materially  adversely  affected.

     This  report  contains  forward-looking  statements  within  the meaning of
Section  27A  of  the  Securities  Act of 1933 and Section 21E of the Securities
Exchange  Act  of  1934.  Actual results and events could differ materially from
those  projected, anticipated, or implicit, in the forward-looking statements as
a  result  of  the  risk  factors  set forth below and elsewhere in this report.

     With  the exception of historical matters, the matters discussed herein are
forward looking statements that involve risks and uncertainties. Forward looking
statements  include,  but  are not limited to, statements concerning anticipated
trends in revenues and net income, the date of introduction or completion of our
products,  projections concerning operations and available cash flow. Our actual
results  could  differ  materially  from  the  results  discussed  in  such
forward-looking  statements. The following discussion of our financial condition
and  results  of  operations  should  be  read in conjunction with our financial
statements  and  the  related  notes  thereto  appearing  elsewhere  herein.

OVERVIEW
--------

     The  following  discussion  regarding  the  financial  statements of KFI, a
development  stage  company,  should  be  read in conjunction with the financial
statements  and  notes  thereto  included  elsewhere  in  this  filing.

     Knowledge  Foundations,  Inc.  (a  development  stage  company)  ("KFI"), a
private  Delaware  corporation, was incorporated on April 6, 2000.  On September
18,  2000, KFI was merged into Calipso Inc. ("Calipso").  Under the terms of the
merger  agreement,  all  of KFI's outstanding common stock (33,618,500 shares of
$0.0001  per  value  stock)  was  converted into 33,918,400 shares of $0.001 per
value  stock  of  Calipso,  Inc.  common stock.  At the date of the transaction,
Calipso had 4,179,600 shares of common stock outstanding.  As part of the merger
agreement  Calipso  changed  its  name  to  Knowledge  Foundations,  Inc.  (the
"Company").  The  Company  had  treated the transaction as a reverse acquisition
for  accounting  purposes since the KFI stockholders had control of the combined
entity  before and after the transaction.  As Calipso had no substantive assets,
liabilities,  or  operations  as  of  or through September 18, 2000, the Company
recorded  the  reverse  acquisition  as  a  reorganization  of  the  Company's
stockholders'  equity,  with  the  Company  recording  the issuance of 4,179,600
shares  of  the  former  Calipso  stockholders  for  no  consideration.

The  Company  has been in the development stage since its inception.  During the
development  stage,  the  Company has been primarily engaged in raising capital,
obtaining  financing,  developing  its  knowledge-based  computing  technology,
advertising and marketing, and administrative functions.  The Company originally
intended  to  produce  a  knowledge-based  operating  system,  related tools and
applications,  and  system  integration  services.

FINANCIAL  STATUS  OF  KFI  FOR  THE  YEAR  ENDED  MARCH  31,  2002
-------------------------------------------------------------------

     Revenues.  KFI is a development stage enterprise as defined in SFAS #7, and
has  generated  no  revenues  during  the  audited period from inception. KFI is
devoting  substantially all of its present efforts in capital raising functions.
The lack of funds during the fourth quarter of FY 2001 resulted in the layoff of
programming personnel. Dr. Ballard, however, has continued to design and program
certain  segments  of  the  Mark  3  software.

     Costs  and  Expenses.  KFI  had operating expenses of $1,044,617 during the
audited  period  from  inception.

     Net Loss. KFI's net loss for the year ended March 31, 2002 was $182,439 and
$1,0437,623  from  inception.

LIQUIDITY  AND  CAPITAL  RESOURCES
----------------------------------

     KFI,  being a development stage enterprise, experienced negative cash flows
from  operations  during  its  initial  months  of  operations, which cash flows
resulted  in  a  net  loss  of  $1,047,623.  The lack of funds during the fourth
quarter of FY 2001 resulted in the layoff of programming personnel. Dr. Ballard,
however,  has  continued  to  design  and program certain segments of the Mark 3
software.  If  KFI  were  to  expand  its  technology  base it would continue to
experience  net  negative cash flows from operations, pending receipt of license
or  sales  revenues.

      Since  the  merger  consummated  in  September  2000, the Company has been
seeking  additional  financing.  Except  for  debt  financing of $281,000 raised
since  September  2000  the  Company  has  been  unsuccessful  in raising equity
capital.  The  Company  has signed a definitive agreement to merge with BSI2000,
in  which  BSI2000  shall  be the surviving entity. See discussion in Subsequent
Events  Section.

DESCRIPTION  OF  CAPITAL  STOCK  AND  VOTING  RIGHTS

     The  following  discussion is qualified in its entirety by reference to the
Delaware  Charter  Documents.

COMMON  STOCK
-------------

     The  Company's  Articles  of  Incorporation  authorizes  the  issuance  of
100,000,000  shares  of  Common  Stock,  $.001  par  value  per  share, of which
approximately  39,133,718  were  outstanding  as  of  March 31, 2002. Holders of
shares of common stock are entitled to one vote for each share on all matters to
be  voted  on  by  the stockholders.  Holders of common stock have no cumulative
voting  rights.  Holders of shares of common stock are entitled to share ratably
in  dividends,  if  any,  as  may be declared, from time to time by the Board of
Directors  in  its  discretion,  from  funds legally available therefor.  In the
event of a liquidation, dissolution or winding up of the Company, the holders of
shares of common stock are entitled to share pro rata all assets remaining after
payment  in  full  of  all  liabilities  including  distributions  to  preferred
stockholders,  if  any.  Holders  of  common  stock have no preemptive rights to
purchase  the  Company's  common  stock. All of the outstanding shares of common
stock  are  validly  issued,  fully  paid  and  non-assessable.PREFERRED  STOCK
                                                               ----------------
The  Company's  Articles  of  Incorporation  also  authorize  the  issuance  of
20,000,000  shares of Preferred Stock, $.001 par value per share, of which there
were  no  shares  outstanding  as  of  March  31,  2002.
ITEM  7.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA
--------     -----------------------------------------------

     See  Index  to  Financial  Statements  and  Financial  Statement  Schedules
appearing  on  page  F-1  through  F-10  of  this  Form  10-KSB

ITEM  8.     SUBSEQUENT  EVENTS
-------      ------------------

     Knowledge  Foundations, Inc. and BSI2000, Inc. announced on May 2, 2002 the
signing  of  an  agreement  to  effectuate  a  reverse triangular merger whereby
BSI2000,  Inc.  will  become  a  wholly-owned  subsidiary  of  the  Company.

     The  merger  is  subject  to  numerous  terms  and conditions including the
approval  of  BSI2000,  Inc.  shareholders,  the  effectiveness  of  a  Form S-4
Registration  Statement  registering shares of Knowledge Foundations, Inc. to be
received  by  the  shareholders  of  BSI2000, Inc., the receipt of not less than
$200,000  by  BSI2000,  Inc. of working capital on or before July 2, 2002 (which
has  been  received),  and  the  ongoing  accuracy  and  completeness of various
representations  and  warranties  being  given  by  the  parties,  among  other
conditions.  In  addition  the  Company  must  seek shareholder approval for the
distribution  of  its  knowledge  engineering  software and related software and
intellectual  properties  to  the  original developers and founders of Knowledge
Foundations,  Inc.  in exchange for the cancellation of approximately 35 million
shares  owned  by  certain shareholders. This reorganization and distribution of
the  intellectual property of Knowledge Foundations, Inc. is also a condition to
the  completion  of  the  merger and will be subject to the effectiveness of the
merger.

     BSI2000,  Inc.,  based  in  Lakewood, CO, is a marketer in the optical card
access, tracking and transaction control industry. BSI2000 markets a proprietary
family  of integrated optical card devices designed to run control software. The
card  provides secure storage of data such as name, address, social security and
taxpayer  information;  digitized identity photographs, signatures, fingerprints
and  medical  images;  updatable  account balances and transaction audit trails.
BSI2000  systems  integrate  into  existing  security,  tracking and transaction
control  systems.

     If  completed,  it  is  anticipated  that  the merger will not occur before
August  1,  2002.

ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
--------     -------------------------------------------------------------------
FINANCIAL  DISCLOSURE
---------------------

     No  Changes  to  Report


PART  III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
--------     -------------------------------------------------------------------
SECTION  16(A)  OF  THE  EXCHANGE  ACT.
---------------------------------------

     The  following  table  sets forth the names, positions with the Company and
ages  of  the executive officers and directors of the Company. Directors will be
elected  at  the Company's annual meeting of shareholders and serve for one year
or until their successors are elected and qualify. The Board elects officers and
their  terms  of  office  are,  excepting  to  the extent governed by employment
contract,  at  the  discretion  of  the  Board.

<TABLE>
<CAPTION>



<S>                     <C>  <C>
Name . . . . . . . . .  Age  Title
----------------------  ---  ------------------------------------------
Dr. Richard L. Ballard   61  Chairman, Chief Science Officer
Michael W. Dochterman.   47  CEO & President, Director
Robert A. Dietrich . .   56  CFO, Vice President - Operations, Director
Joel Vest. . . . . . .   55  Director
Janet J.  Pettitt. . .   62  Training Director, Director
</TABLE>

MANAGEMENT
----------

     DR.  RICHARD  BALLARD,  PH.D.  --  CHAIRMAN  AND CHIEF SCIENCE OFFICER: Dr.
Ballard  is  the  founder  and  creator of KFI's technology. From August 1995 to
March  2000,  Dr. Ballard has been the sole proprietor of Knowledge Research and
Knowledge  Foundations  developing and delivering knowledge based software tools
and  applications  primarily  to US Government Agencies and Software Publishers.
From April 2000 to present, Dr. Ballard has been Chairman of the Board and Chief
Scientist  of  KFI.  His  background  includes  hands-on executive management of
numerous  start-up  companies  including  Co-Director  and  Founder  of  Apple
Foundations  for  Steve  Jobs  &  Mike  Markula  and  Founder/Chairman of TALMIS
Division,  International Data Corporation for Patrick McGovern.  He has received
128  software  citations,  developed  3  Management  Software  Workshops  and 21
Educational  Software Workshops, been published in 35 publications and technical
reports.  As  a  University  of  California  professor  and  researcher,  he has
developed  and  taught  numerous classes over 15 years.  Dr. Ballard manages all
research  and  development functions as well as assisting with sales activities.
Dr.  Ballard  was  part  time during fiscal year 2002, while performing software
development  consulting  services  for  others.

     MR.  MICHAEL W. DOCHTERMAN - PRESIDENT, CEO AND DIRECTOR:  From August 1995
to  December  1995,  Michael  Dochterman  was an independent business consultant
developing  business  plans,  raising capital and providing executive management
for  startup  clients. From January 1996 to April 1999, Mr. Dochterman served in
various  executive  management  positions  launching  several  new  products and
Divisions  for  Sempra  Energy.  From  April  1999 to April 2000, Mr. Dochterman
developed  KFI's  business  plan  and  from  April  2000  to  present,  has been
CEO/President  and  a  Board member of KFI. Mr. Dochterman's background includes
hands-on  executive  management  and  business  consulting  experience providing
operational  guidance  for  numerous  start-ups.  He has more than fifteen years
experience as President or Vice President of private enterprises and three years
executive  management  experience  in a Fortune 500 company.  Mr. Dochterman was
part  time  during  the  fiscal  year.

     MR.  ROBERT  A.  DIETRICH  -VICE  PRESIDENT - OPERATIONS, CFO AND DIRECTOR:
From  August  1995  to  March  2000,  Robert Dietrich has been President/CEO and
Director  of Semper Resources Corporation (SRCR.OB) and CyberAir Communications,
Inc.,  from January 1998 to March 2000. From April 2000 to present, Mr. Dietrich
has  been  CFO,  Vice  President  of  Operations, and a Board member of KFI. His
background  includes  hands-on  executive  management;  investment  banking  and
financial  consulting  experience.  He has more than fifteen years experience as
vice  president  (finance  and  operations)  or  president of public and private
enterprises  and thirteen years with Big 5 and regional CPA firms and technology
based investment banking firms providing financial and operations consulting and
merger/acquisition  and financial structuring for clients. Mr. Dietrich is a CPA
with  a  B.B.A.  from Notre Dame and an MBA from the University of Detroit.  Mr.
Dietrich manages all financial and accounting activities.  Mr. Dietrich was part
time  during  the  fiscal  year

     MS.  JANET  J.  PETTITT  - DIRECTOR OF TRAINING DEVELOPMENT, DIRECTOR: From
August  1995  to  March  2000,  Jan Pettitt has been sole proprietor, founder of
Interactive  Productions,  a  proprietorship  that  provided  training for prior
customers  of  KFI's  technology.  She  has 16 years of hands on experience as a
Master Corporate Software Trainer delivering and training trainers and end users
of  published  and  proprietary software and hardware systems. Ms. Pettitt has a
B.A.  from  Fontbonne  College  and  years of teaching experience at Flourissant
Valley  Community  College  and  Holy  Names  Academy.

     MR.  JOEL  B.  VEST  -  DIRECTOR:  During the past five years, Mr. Vest has
consulted,  created,  produced,  directed  and  managed  community  events  and
consumer/trade  shows  from  concept  through  launch.

MANAGEMENT  CONTRACTS
---------------------

     KFI has employment agreements with three of its directors, Richard Ballard,
Robert  Dietrich  and  Michael  Dochterman.  None  of  the  above  were paid any
compensation  due  under  the employment agreements during the fiscal year ended
March  31,  2002.

LIMITATION  OF  LIABILITY  OF  DIRECTORS

     The  By-laws  of  the  Company  provide  as follows: "Except as hereinafter
stated  otherwise,  the  Corporation  shall  indemnify  all  of its officers and
directors,  past,  present  and future, against any and all expenses incurred by
them,  and  each  of them including but not limited to legal fees, judgments and
penalties  which may be incurred, rendered or levied in any legal action brought
against  any  or all of them for or on account of any act or omission alleged to
have been committed while acting within the scope of their duties as Officers or
Directors  of  this  Corporation."

BOARD  OF  DIRECTORS  COMMITTEES  AND  COMPENSATION

COMPENSATION  COMMITTEE  INTERLOCKS  AND  INSIDER  PARTICIPATION
----------------------------------------------------------------

     The  Board of Directors does not have a Compensation Committee.  Michael W.
Dochterman,  President  and  CEO,  oversaw  the  compensation  of  our executive
officers.

BOARD  OF  DIRECTOR'S  REPORT  ON  EXECUTIVE  COMPENSATION
----------------------------------------------------------

     General.  As  noted  above,  our  Board  of  Directors  does  not  have  a
Compensation  Committee  and, accordingly, during the year ended March 31, 2002,
the  Board  of  Directors,  through  the  Chairman  and  President, reviewed and
approved  the  compensation  of  our  executive  officers.

     Loans.  From  time  to time our Board of Directors may approve loans to our
officers  and  employees. The amounts and timing of these loans are based on our
financial  position  at the time of grant and made at the sole discretion of the
Board of Directors.  There were no loans to officers or employees outstanding as
of  March  31,  2002

     Overall  Policy:  Messrs.  Ballard,  Dochterman  and  Dietrich  are  all
compensated  under  employment agreements detailed above.  As the Company's cash
position  did  not  allow  adherence  to  minimum compensation as contracted per
employment agreements, the Company has accrued $144,000 as payroll liability for
the  officers  as  of  March  31,  2002.

     As  of March 31, 2002 the Board of Directors had not adopted a stock option
plan  for  employees.

Section  16(a)  Beneficial  Ownership  Reporting  Compliance
------------------------------------------------------------

     Section  16(a)  of  the  Securities  Exchange  Act of 1934, as amended (the
"Exchange  Act"),  requires  Knowledge  Foundations  executive  officers  and
directors, and persons who beneficially own more than ten percent of Knowledge's
common  stock,  to  file  initial reports of ownership and reports of changes in
ownership  with  the  SEC.  Executive  officers,  directors and greater than ten
percent  beneficial  owners are required by SEC regulations to furnish Knowledge
with  copies  of  all  Section 16(a) forms they file. Based upon a review of the
copies  of  such  forms  furnished  to  Knowledge  Foundations  and  written
representations  from  Knowledge  Foundations  executive officers and directors,
Knowledge  believes  that  during  fiscal 2002 all forms 3 and 4 were filed on a
timely  basis  for  Knowledge  Foundations  executive  officers  and  directors.

ITEM  11.     EXECUTIVE  COMPENSATION
---------     -----------------------

     The  following table sets forth the compensation of the Company's executive
officers  and  directors  during each of the fiscal years since inception of the
Company.  The  remuneration  described in the table does not include the cost to
the  Company  of  benefits  furnished to the named executive officers, including
premiums  for  health  insurance  and other benefits provided to such individual
that  are extended in connection with the conduct of the Company's business. The
value  of  such  benefits  cannot  be  precisely  determined,  but the executive
officers  named below did not receive other compensation in excess of the lesser
of  $50,000  or  10%  of  such  officer's  cash  compensation exclusive of loans
footnoted  herein.

SUMMARY  COMPENSATION  TABLE
----------------------------
<TABLE>
<CAPTION>



                                         Long Term
<S>                                 <C>                  <C>           <C>    <C>           <C>    <C>
                                    Annual Compensation  Compensation
                                    -------------------  ------------


                                    Other Annual         Restricted
Name and Principal Position. . . .  Year                 Salary        Bonus  Compensation  Stock  Options
                                                                       -----  ------------  -----  -------
Dr. Richard L. Ballard
Chairman and Chief Science Officer                 2002             0      0             0      0        0
----------------------------------  -------------------  ------------  -----  ------------  -----  -------
                                                   2001        92,400      0         4,500      0        0


Michael W. Dochterman
President & CEO, Director. . . . .                 2002             0      0             0      0        0
                                                   2001        77,400      0        19,500      0        0


Robert A. Dietrich
CFO, Vice President, Director. . .                 2002             0      0             0      0        0
                                                   2001        53,700      0         4,500      0        0


Joel Vest
Director . . . . . . . . . . . . .                 2002             0      0             0      0        0
                                                   2001             0      0        20,500      0        0


Janet J. Pettitt
Director, Training Director. . . .                 2002             0      0             0      0        0
                                                   2001        12,000      0             0      0        0


</TABLE>

COMPENSATION  OF  DIRECTORS
---------------------------

All  directors  will  be  reimbursed for expenses incurred in attending Board or
committee  meetings.

ITEM  12.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT
---------     ------------------------------------------------------------------

Security  Ownership  of  Certain  Beneficial  Owners.
-----------------------------------------------------

          The  following  table  sets  forth certain information as of March 31,
2002 with respect to the beneficial ownership of common stock by (i) each person
who  to  the  knowledge  of  the Company, beneficially owned or had the right to
acquire more than 10% of the Outstanding common stock, (ii) each director of the
Company and (iii) all executive offices and directors of the Company as a group.

<TABLE>
<CAPTION>




<S>                                   <C>         <C>
                                      Number      Percent
Name of Beneficial Owner (1) . . . .  Of Shares   Of Class (2)
------------------------------------  ----------  ------------
Dr. Richard L. Ballard (3) . . . . .  21,377,516         54.7%
------------------------------------  ----------  ------------
Michael W. Dochterman. . . . . . . .   4,638,412         11.9%
Robert A. Dietrich . . . . . . . . .   2,576,884          6.6%
Janet J. Pettitt (3) . . . . . . . .   4,277,622         10.9%
Joel Vest. . . . . . . . . . . . . .     412,346          1.0%

All Directors & Officers as a Group.  33,282,980         85.1%
</TABLE>


(1)     As  used  in this table, "beneficial ownership" means the sole or shared
power  to  vote,  or  to direct the voting of, a security, or the sole or shared
investment  power  with respect to a security (i.e., the power to dispose of, or
to  direct  the  disposition of, a security).  In addition, for purposes of this
table, a person is deemed, as of any date, to have "beneficial ownership" of any
security  that  such  person  has the right to acquire within 60 days after such
date.
(2)     Figures are rounded to the nearest percentage. Less than 1% is reflected
as  0%.
(3)     Ms.  Pettitt  and  Dr.  Ballard  are  husband  and  wife.

ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
---------     --------------------------------------------------

Notes  Payable  to  Shareholders:
---------------------------------

     The  Company  borrowed  $206,000  from a shareholder, which obligation is a
demand  note  with  a  principal  balance  as of March 31, 2002 of $206,000 plus
$17,377  of accrued interest at 6% per annum, payable upon demand. Additionally,
shareholders  advanced  $50,132  during  the  year for the settlement of certain
trade  debts  of  the  Company  and  working  capital  needs.

Office  Rent  Expense
---------------------

     As  of March 31, 2002, the Company had a liability of $22,000 due to one of
the  principal  stockholders  for  renting  a  portion  of  his  residence (on a
month-to-month  basis)  used  as the Company's office for the period of April 6,
2000  through  March  31, 2002.  This amount is non-interest bearing.  The total
office  rent  expense  was  $12,000  for  the  period  ended  March  31,  2002.

ITEM  14.     EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES AND REPORTS ON FORM 8-K
---------     ------------------------------------------------------------------

(a)     Documents  filed  as  part  of  this  Report

     1.     Financial  Statements:

     A.     INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

          1.     Independent  Auditor's  Report
          2.     Financial  Statements:
                    Balance  Sheet
                    Statement  of  Operation
                    Statement  of  Changes  in  Stockholders'
                    Statement  of  Cash  Flows
                    Notes  to  Consolidated  Financial  Statements

     All  schedules  are omitted because they are not applicable or the required
information  is shown in the consolidated financial statements or notes thereto.

          2.     During  the  fiscal  year 2002, the Company filed the following
8-Ks.
None

          3.     Subsequent to the end of the fiscal year, the Company filed the
following                    reports  on  Form  8-K
Form  8-K  filed  May  9,  2002

<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To  the  Board  of  Directors
Knowledge  Foundations,  Inc.

We have audited the accompanying balance sheet of Knowledge Foundations, Inc. (a
development  stage company) (the "Company") as of March 31, 2002 and the related
statements of operations, stockholders' deficit and cash flows for the year then
ended  and  for  the  period April 6, 2000 (date of inception) through March 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 the Company as of March 31,
2002,  and  the  results  of its operations and its cash flows for the year then
ended  and  for  the  period April 6, 2000 (date of inception) through March 31,
2002  in  conformity with accounting principles generally accepted in the United
States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  As  shown  in  the accompanying
financial statements, the Company is a development stage company which has a low
cash  balance  at  March  31, 2002, and has experienced significant losses since
inception  with no revenues.  These factors, and other factors discussed in Note
2  to  the financial statements raise substantial doubt about the ability of the
Company  to  continue as a going concern.  Management's plans in regard to these
matters  are  described  in Note 2.  The financial statements do not include any
adjustments  that  might  result  from  the  outcome  of  this  uncertainty.

CORBIN  &  WERTZ

Irvine,  California
June  20,  2002

<PAGE>
                           KNOWLEDGE FOUNDATIONS, INC.
                                  BALANCE SHEET

<TABLE>
<CAPTION>



<S>                                                                               <C>
ASSETS

Current assets:
   Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $            22
   Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               60
                                                                                  ----------------
          Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .               82

Equipment, net of depreciation of $7,424 . . . . . . . . . . . . . . . . . . . .            7,651
                                                                                  ----------------

                                                                                  $         7,733
                                                                                  ================

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $        97,964
   Due to related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . .           57,632
   Accrued payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . .          225,709
   Accrued interest to stockholders. . . . . . . . . . . . . . . . . . . . . . .           17,377
   Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           53,054
   Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           75,000
   Notes payable to stockholders . . . . . . . . . . . . . . . . . . . . . . . .          206,000
   Convertible subordinated note payable . . . . . . . . . . . . . . . . . . . .          300,000
                                                                                  ----------------
          Total current liabilities. . . . . . . . . . . . . . . . . . . . . . .        1,032,736
                                                                                  ----------------

Commitments and contingencies

Stockholders' deficit:
   Preferred stock, $0.001 par value; 20,000,000 shares
      authorized; no shares issued or outstanding. . . . . . . . . . . . . . . .                -
   Common stock, $0.001 par value; 100,000,000 shares
      authorized; 39,133,718 shares issued and outstanding . . . . . . . . . . .           39,111
   Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . .          (16,491)
   Deficit accumulated during the development stage. . . . . . . . . . . . . . .       (1,047,623)
                                                                                  ----------------
          Total stockholders' deficit. . . . . . . . . . . . . . . . . . . . . .       (1,025,003)
                                                                                  ----------------

                                                                                  $         7,733
                                                                                  ================

See independent auditors' report and accompanying notes to financial statements.
</TABLE>

<PAGE>
                           KNOWLEDGE FOUNDATIONS, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>



<S>                                                                                <C>                    <C>
                                                                                   APRIL 6, 2000          APRIL 6, 2000
                                                                                    (DATE OF  INCEPTION)   (DATE OF  INCEPTION)
                                                                                   YEAR ENDED             THROUGH
                                                                                   MARCH 31, 2002         MARCH 31, 2001
                                                                                   ---------------------  ---------------------

Revenuse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $                  -   $                  -

Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               205,056                839,558

Other income (expense):
   Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     -                  3,244
   Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (41,560)               (28,870)
                                                                                   ---------------------  ---------------------

Loss before extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . .              (246,619)              (865,184)

Extraordinary item - gain on
   extinguishments of debt (net of income
   taxes) (Note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                64,180                      -
                                                                                   ---------------------  ---------------------

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $           (182,439)  $           (865,184)
                                                                                   ---------------------  ---------------------

Net loss available to common
   stockholders per common share. . . . . . . . . . . . . . . . . . . . . . . . .  $              (0.01)  $              (0.01)
                                                                                   ---------------------  ---------------------

Weighted average number of common
   shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            35,986,837             35,980,478

See independent auditors' report and accompanying notes to financial statements.


<S>                                                                                <C>

                                                                                   THROUGH
                                                                                   MARCH 31, 2002
                                                                                   ----------------

Revenuse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $             -

Operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,044,617

Other income (expense):
   Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            3,244
   Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (70,430)
                                                                                   ----------------

Loss before extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . .       (1,111,803)

Extraordinary item - gain on
   extinguishments of debt (net of income
   taxes) (Note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           64,180
                                                                                   ----------------

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    (1.047,623)
                                                                                   ----------------

Net loss available to common
   stockholders per common share


Weighted average number of common
   shares outstanding

See independent auditors' report and accompanying notes to financial statements.
</TABLE>

<PAGE>

                           KNOWLEDGE FOUNDATIONS, INC.
                       STATEMENTS OF STOCKHOLDERS' DEFICIT
     FOR THE PERIOD APRIL 6, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2002

<TABLE>
<CAPTION>



<S>                                                                                <C>           <C>
                                                                                   DEFICIT
                                                                                   ACCUMULATED
                                                                                   ADDITIONAL    DURING THE
                                                                                   COMMON STOCK  PAID-IN
                                                                                   SHARE         AMOUNT
                                                                                   ------------

Balance, April 6, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -  $               -

Sale of shares to founders at $0.0001 per share on
  April 6, 2000 (adjusted for change in par value to
  $0.001 per share as a result of the merger) . . . . . . . . . . . . . . . . . .    33,618,500             33,618

Shares issued in connection with merger on
  September 18, 2000: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -
      Stock dividend to founders. . . . . . . . . . . . . . . . . . . . . . . . .       299,900                300
      Shares issued for acquisition of Calipso, Inc.. . . . . . . . . . . . . . .     4,179,600              4,180
      Shares issued to service providers. . . . . . . . . . . . . . . . . . . . .     1,000,000              1,000

Shares issued to third party on January 9, 2001 for
  services rendered, valued at $1.00 per share. . . . . . . . . . . . . . . . . .        10,000                 10

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -                  -
                                                                                   ------------  -----------------

Balance, March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    39,108,100             39,108

Shares issued to a third party for extinguishment
  of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        25,718                  3

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -                  -
                                                                                   ------------  -----------------

Balance, March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    39,133,718  $          39,111
                                                                                   ============  =================

See independent auditors' report and accompanying notes to financial statements.


<S>                                                                                <C>                 <C>                <C>

                                                                                   TOTAL
                                                                                   DEVELOPMENT         STOCKHOLDERS'
                                                                                   CAPITAL             STAGE              DEFICIT

Balance, April 6, 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. $ - $ - $ -

Sale of shares to founders at $0.0001 per share on
  April 6, 2000 (adjusted for change in par value to
$0.001 per share as a result of the merger) . . . . . . . . . . . . . . . . . .
(30,256) - 3,362

Shares issued in connection with merger on
  September 18, 2000:
Stock dividend to founders. . . . . . . . . . . . . . . . . . . . . . . . .
(300) - -
Shares issued for acquisition of Calipso, Inc.. . . . . . . . . . . . . . .
(4,180) - -
Shares issued to service providers. . . . . . . . . . . . . . . . . . . . .
(1,000) - -

Shares issued to third party on January 9, 2001 for
services rendered, valued at $1.00 per share. . . . . . . . . . . . . . . . . .
9,990 - 10,000

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. - (865,184) (865,184)
------------------ ----------------- -----------------

Balance, March 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. (25,746) (865,184) (865,822)

Shares issued to a third party for extinguishment
of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,255 - 9,258

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. - (182,439) (182,439)
------------------ ----------------- -----------------

Balance, March 31, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.. $ 16,491 $ (1,047,623 $ (1,025,003
================== ================= =================

See independent auditors' report and accompanying notes to financial statements.
</TABLE>

<PAGE>
                           KNOWLEDGE FOUNDATIONS, INC.
                            STATEMENTS OF CASH FLOWS
     FOR THE PERIOD APRIL 6, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2002

<TABLE>
<CAPTION>



<S>                                                     <C>                        <C>
                                                        APRIL 6, 2000              APRIL 6, 2000
                                                              (DATE OF INCEPTION)       (DATE OF INCEPTION)
                                                        YEAR ENDED                 THROUGH
                                                        MARCH 31, 2002             MARCH 31, 2001
                                                        -------------------------  ------------------------
Cash flows from operating activities:
   Net loss. . . . . . . . . . . . . . . . . . . . . .  $               (182,439)  $              (865,184)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
          Depreciation . . . . . . . . . . . . . . . .                     5,026                     2,398
          Common stock issued for services . . . . . .                     9,258                    10,000
          Gain on extinguishment of debt . . . . . . .                   (64,180)                        -
          Changes in operating assets and liabilities:
             Other assets. . . . . . . . . . . . . . .                         -                       (60)
             Accounts payable. . . . . . . . . . . . .                   (17,153)                  176,797
             Due to related parties. . . . . . . . . .                    50,132                    10,000
             Accrued payroll and payroll taxes . . . .                   156,409                    69,300
             Accrued interest. . . . . . . . . . . . .                    41,561                    28,870
                                                        -------------------------  ------------------------

   Net cash used in operating activities . . . . . . .                    (1,386)                 (567,879)
                                                        -------------------------  ------------------------

Cash flows used in investing activities:
   Purchase of equipment . . . . . . . . . . . . . . .                         -                   (15,075)
                                                        -------------------------  ------------------------

Cash flows from financing activities:
   Proceeds from borrowing on notes payable. . . . . .                         -                   581,000
   Proceeds from the sale of common stock. . . . . . .                         -                     3,362
                                                        -------------------------  ------------------------

   Net cash provided by financing activities . . . . .                         -                   584,362
                                                        -------------------------  ------------------------

Net change in cash . . . . . . . . . . . . . . . . . .                    (1,386)                    1,408

Cash at beginning of period. . . . . . . . . . . . . .                     1,408                         -
                                                        -------------------------  ------------------------

Cash at end of period. . . . . . . . . . . . . . . . .                       22                   1,408
                                                        =========================  ========================

Supplemental disclosure of cash flow information:
   Cash paid during the period for income taxes. . . .                     800                       800
                                                        =========================  ========================



<S>                                                     <C>

                                                        THROUGH
                                                        MARCH 31, 2002
                                                        -------------------------
Cash flows from operating activities:
   Net loss. . . . . . . . . . . . . . . . . . . . . .  $             (1,047,623)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
          Depreciation . . . . . . . . . . . . . . . .                     7,424
          Common stock issued for services . . . . . .                    19,258
          Gain on extinguishment of debt . . . . . . .                   (64,180)
          Changes in operating assets and liabilities:
             Other assets. . . . . . . . . . . . . . .                       (60)
             Accounts payable. . . . . . . . . . . . .                   159,644
             Due to related parties. . . . . . . . . .                    60,132
             Accrued payroll and payroll taxes . . . .                   225,709
             Accrued interest. . . . . . . . . . . . .                    70,431
                                                        -------------------------

   Net cash used in operating activities . . . . . . .                  (569,265)
                                                        -------------------------

Cash flows used in investing activities:
   Purchase of equipment . . . . . . . . . . . . . . .                   (15,075)
                                                        -------------------------

Cash flows from financing activities:
   Proceeds from borrowing on notes payable. . . . . .                   581,000
   Proceeds from the sale of common stock. . . . . . .                     3,362
                                                        -------------------------

   Net cash provided by financing activities . . . . .                   584,362
                                                        -------------------------

Net change in cash . . . . . . . . . . . . . . . . . .                        22

Cash at beginning of period. . . . . . . . . . . . . .                         -
                                                        -------------------------

Cash at end of period. . . . . . . . . . . . . . . . .                       22
                                                        =========================

Supplemental disclosure of cash flow information:
   Cash paid during the period for income taxes. . . .                  1,600
                                                        =========================

</TABLE>

<PAGE>
                           KNOWLEDGE FOUNDATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS
     FOR THE PERIOD APRIL 6, 2000 (DATE OF INCEPTION) THROUGH MARCH 31, 2002

NOTE  1  -  ORGANIZATION  AND  BUSINESS
---------------------------------------

Knowledge  Foundations,  Inc.  (a  development stage company) ("KFI"), a private
Delaware corporation, was incorporated on April 6, 2000 according to the laws of
Delaware.  On  September 18, 2000, KFI was merged into Calipso Inc. ("Calipso").
Under  the  terms of the merger agreement, all of KFI's outstanding common stock
(33,618,500  shares  of  $0.0001  per value stock) was converted into 33,918,400
shares  of $0.001 per value stock of Calipso, Inc. common stock.  At the date of
the  transaction,  Calipso had 4,179,600 shares of common stock outstanding.  As
part  of  the  merger agreement, KFI ceased to exist as a separate legal entity,
and  Calipso  changed  its  name to Knowledge Foundations, Inc. (the "Company").
The  Company had treated the transaction as a reverse acquisition for accounting
purposes  since  the  KFI stockholders had control of the combined entity before
and  after  the transaction.  As Calipso had no substantive assets, liabilities,
or  operations  as  of  or  through September 18, 2000, the Company recorded the
reverse  acquisition  as a reorganization of the Company's stockholders' equity,
with  the  Company  recording  the  issuance  of  4,179,600 shares of the former
Calipso  stockholders for no consideration.   Also the pro forma presentation of
the  Calipso  merger as if it occurred in April 6, 2000 are not presented as the
results  would  be  immaterial  to  the  Company's  results.

The  Company  has been in the development stage since its inception.  During the
development  stage,  the  Company  is  primarily  engaged  in  raising  capital,
obtaining  financing,  developing  its  knowledge-based  computing  technology,
advertising and marketing, and administrative functions.  The Company intends to
produce  a knowledge-based operating system, related tools and applications, and
system  integration services. The Company's primary target markets primarily are
knowledge owners, publishers, large commercial corporations, government agencies
and  end-users.

NOTE  2  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  PRINCIPLES

Risks  and  Uncertainties
-------------------------

The  Company is a start-up company subject to the substantial business risks and
uncertainties  inherent  to  such  an  entity,  including  the potential risk of
business  failure.

The accompanying financial statements have been prepared on the basis of a going
concern,  which  contemplates  the  realization  of  assets  and  liquidation of
liabilities  in  the  normal  course  of  business.

The  Company has a loss of $1,047,623 for the period from April 6, 2000 (date of
inception)  through  March  31,  2002  and  balances  in  cash  of  $22  and  in
stockholders'  deficit  of  $1,025,003  as  of  March  31,  2002.  Management is
pursuing  financing  initiatives  that  would  enhance  the  development  of the
Company's  products and provide sufficient capital for marketing. However, there
is  no  assurance  the  Company  will be able to generate sufficient revenues or
obtain  the  sufficient equity or debt funds when needed, or that such funds, if
available,  will  be  obtainable  on  terms  satisfactory  to  the Company.  The
accompanying  financial  statements  do  not  include any adjustments that might
result  from  the  outcome  of  this  uncertainty.

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  and disclosures of contingent assets and liabilities at the date of
the  financial  statements,  as  well  as  the  reported amounts of revenues and
expenses  during  the  reporting period.  Actual results could differ from those
estimates.

Fair  Value  of  Financial  Instruments
---------------------------------------

Financial  Accounting  Standards  Board  ("FASB")  issued Statement of Financial
Accounting  Standards  No.  107  ("SFAS  107"), "Disclosures About Fair Value of
Financial  Instruments."  SFAS 107 requires disclosure of fair value information
about  financial instruments when it is practicable to estimate that value.  The
carrying  amount  of  the  Company's  cash,  trade payables and accrued expenses
approximates  their  estimated  fair  values due to the short-term maturities of
those financial instruments.  For the notes payable, related-party notes payable
and  convertible  subordinated  note payable, it was not practicable to estimate
the  fair  value  as  no market currently exists for such financial instruments.

Customer  Concentration
-----------------------

Management's  intention  is that the Company will not be dependent on any single
customer  or  group  of customers for a significant portion of its annual sales.
The  Company's  customer base will change on a continuous basis as new customers
are  added  or  removed.

Concentration  of  Credit  Risk
-------------------------------

Cash  balances are maintained at a financial institution.  Accounts at this bank
are  insured  by  the  Federal  Deposit  Insurance  Corporation  ("FDIC")  up to
$100,000.  At  times,  the  Company may maintain funds at this bank in excess of
these  insured  amounts.

Equipment
---------

Equipment  is  stated at cost.  Depreciation is computed using the straight-line
method  over  an  estimated  useful  life  of  three  years.

Betterments,  renewals,  and  extraordinary repairs that extend the lives of the
assets  are  capitalized;  other repairs and maintenance charges are expensed as
incurred.  The  cost  and  related accumulated depreciation applicable to assets
retired  are  removed  from the accounts, and the gain or loss on disposition is
recognized  in  current  operations.

Long-Lived  Assets
------------------

The  Company accounts for the impairment and disposition of long-lived assets in
accordance  with  Statement  of  Financial  Accounting  Standards No. 121 ("SFAS
121"),  "Accounting  for  the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."  In accordance with SFAS 121, long-lived assets to be
held  are  reviewed  for events or changes in circumstances, which indicate that
their carrying value may not be recoverable.  At March 31, 2002, the Company has
determined  that  there  is  no  impairment  of  long-lived  assets.

Income  Taxes
-------------

The  Company  accounts  for income taxes under Statement of Financial Accounting
Standards  No. 109 ("SFAS 109"), "Accounting for Income Taxes."  Under SFAS 109,
deferred  tax  assets  and  liabilities  are  recognized  for  the  future  tax
consequences  attributable  to  differences  between  the  financial  statement
carrying  amounts  of  existing  assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to  apply  to  taxable  income  in  the years in which those temporary
differences  are  expected  to be recovered or settled. A valuation allowance is
provided  for  significant  deferred  tax assets when it is more likely than not
that  such  assets  will  not  be  recovered.

Earnings  Per  Share
--------------------

The  Company  has  adopted  Statement  of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings Per Share."  Under SFAS 128, basic earnings per share is
computed  by  dividing  income  available  to  common  stockholders  by  the
weighted-average  number  of  common shares assumed to be outstanding during the
period  of computation.  Diluted earnings per share is computed similar to basic
earnings  per  share  except  that  the  denominator is increased to include the
number  of  additional  common  shares  that  would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.  Because  the  Company has incurred net losses, basic and diluted loss
per  share  are  the  same  as  additional  potential  common  shares  would  be
anti-dilutive.

Comprehensive  Income
---------------------

The  Company  has  adopted  Statement  of Financial Accounting Standards No. 130
("SFAS  130"),  "Reporting Comprehensive Income." SFAS 130 establishes standards
for  reporting  and display of comprehensive income and its components in a full
set  of  general-purpose  financial  statements.  SFAS  130 had no impact on the
accompanying  financial  statements as the Company has no items of comprehensive
income.

Segments  of  Business
----------------------

The  Company  has  adopted  Statement  of Financial Accounting Standards No. 131
("SFAS  131"),  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information"  was  issued.  SFAS  131  changes  the  way public companies report
information  about  segments  of  their  business  in  their  annual  financial
statements  and  requires  them  to report selected segment information in their
quarterly  reports  issued  to  stockholders.  It  also  requires  entity-wide
disclosures  about  the  products  and services an entity provides, the material
countries in which it holds assets and reports revenues and its major customers.
The  Company currently operates in one segment, as disclosed in the accompanying
statement  of  operations.

New  Accounting  Pronouncements
-------------------------------

In  June  2001, the FASB approved two new pronouncements: Statement of Financial
Accounting  Standards  No.  141  ("SFAS  141"),  "Business  Combinations,"  and
Statement  of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and
Other  Intangible Assets."  SFAS 141 applies to all business combinations with a
closing  date  after  June  30,  2001.  This  statement  eliminates  the
pooling-of-interests method of accounting and further clarifies the criteria for
recognition  of intangible assets separately from goodwill.  SFAS 142 eliminates
the  amortization  of  goodwill  and  indefinite-lived  intangible  assets  and
initiates  an annual review for impairment.  Identifiable intangible assets with
a  determinable  useful  life  will  continue to be amortized.  The amortization
provisions apply to goodwill and other intangible assets acquired after June 30,
2001.  SFAS  141  and  SFAS  142  do not have a material impact on the Company's
financial  statements  because  no  intangible  assets  exist at March 31, 2002.

In  June  2001,  the FASB issued Statement of Financial Accounting Standards No.
143  ("SFAS  143"),  "Accounting  for  Asset  Retirement Obligations."  SFAS 143
establishes  standards  associated  with  the  retirement of tangible long-lived
assets  and  the  associated asset retirement costs. This statement is effective
for  financial statements issued for fiscal years beginning after June 15, 2002.
The  Company does not expect SFAS 143 to have a material impact on its financial
statements.

In  August 2001, the FASB issued Statement of Financial Accounting Standards No.
144  ("SFAS  144"),  "Accounting  for  the  Impairment or Disposal of Long-Lived
Assets."  SFAS 144 address financial accounting and reporting for the impairment
of  long-lived  assets  and  for  long-lived  assets  to  be  disposed  of.  The
provisions  of SFAS 144 are effective for financial statements issued for fiscal
years beginning after December 15, 2001, and interim periods within these fiscal
years,  with early adoption encouraged.  The Company does not expect SFAS 144 to
have  a  material  impact  on  its  financial  statements.

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

Equipment  consists  of  the  following  as  of  March  31,  2002:

<TABLE>
<CAPTION>



<S>                              <C>
Computer equipment and software  $14,106
Office equipment. . . . . . . .      969
                                 --------
                                  15,075

Less accumulated depreciation .   (7,424)
                                 --------

                                 $ 7,651
</TABLE>

NOTE  4  -  NOTES  PAYABLE

Convertible  Subordinated  Note  Payable

The  Company  borrowed  $300,000  from an unrelated third party in the form of a
convertible  subordinated  note  (the  "Note")  on  April  19, 2000. The Note is
subordinated  to  future  borrowings  from  financial  institutions. The Note is
unsecured  and  bears  interest  at  8% per annum which is payable semi-annually
beginning  six  months  after the date of this Note, with the principal together
with  all  accrued  but  unpaid  interest  due  on April 18, 2003.  If an equity
financing  event occurs where the Company issues common stock or preferred stock
to  one or more unrelated third parties in exchange for at least an aggregate of
$3,000,000  or  if  the  Company  merges  into a publicly traded company and the
stockholders  of  the Company own eighty percent (80%) of the Company on a fully
diluted basis after the merger, the holder of this note has the right to convert
all  or  any  portion  of  the  outstanding principal amount of this Note into a
stated  number  of  shares  computed  by  dividing  such principal amount by the
conversion  price  per  share offered in the equity financing.  In the event the
equity  financing  involves  a merger transaction, the conversion price shall be
$1.00 per share.  Since the Company completed a merger transaction (see Note 1),
the note is currently convertible at $1.00 per share. The outstanding balance on
this  note  payable  totaled  $300,000  at  March  31,  2002.  Interest  expense
incurred  during  the  year  ended March 31, 2002 and the period ended March 31,
2001  were $24,000 and $22,751, respectively.  Interest expenses are included in
accrued  interest  in  the  accompanying  balance  sheet  at  March  31,  2002.

Due  to  the  accrued  interest  not  being paid as of March 31, 2002, the total
accrued interest of $46,751, and the Note principal of $300,000 is considered to
be  in  default  of  the  Note  terms  as  of  March 31, 2002 and thus, has been
classified  as  a  current  liability  on  the  balance  sheet.

Notes  Payable
--------------

The  Company  borrowed funds from third parties totaling $75,000 under unsecured
notes  payable  during  the  period  ended  March 31, 2002.  These notes payable
accrue  interest  at  6%  per  annum,  and  principal  and  accrued interest are
originally  due  on or before January 1, 2002, or five days after receipt by the
Company  of  additional  debt  or equity financing in a sum of $500,000 or more.
These  notes are verbally extended.  Interest expense incurred during the period
ended  March  31,  2002 was $4,500, which is included in accrued interest in the
accompanying  balance  sheet  at  March  31,  2002.

NOTE  5  -  STOCKHOLDERS'  EQUITY
---------------------------------

Preferred  Stock
----------------

The  Company  has  authorized 20,000,000 shares of preferred stock to be issued.
These  shares  may be issued in one or more series as determined by the board of
directors.  At  the  time  of  determination,  the  rate  of  dividends (whether
cumulative  or  non-cumulative), redemption features and liquidation preferences
will  be established.  At March 31, 2002, no preferred stock determinations have
been  made  by  the  board  of  directors.

Common  Stock
-------------

On  April 6, 2000 (date of inception), KFI had issued an aggregate of 33,618,500
shares  of  common  stock at $0.0001 par value per share for $3,362.  During the
merger on September 18, 2000, the Company converted these shares into 33,918,400
shares  of  $0.001  par  value  common  stock  of  the Company (see Note 1).  In
addition,  2,000,000  shares  of  common  stock  were  issued  to  two unrelated
investment  companies  as  a  fee for providing services in the merger, of which
1,000,000 shares were escrowed and were to be earned upon delivery of $3,000,000
in  equity  financing cumulatively within 180 days of merger to the Company.  On
March  17, 2001, these 1,000,000 escrowed shares were canceled due to the equity
financing  requirements  not  being  accomplished  by  the investment companies.
These  shares were reflected in the accompanying financial statements as if they
were  never  issued,  as  they were granted and cancelled within the same fiscal
year  end  and  were  never  earned.

On  January 9, 2001, the Company issued 10,000 shares of common stock to a third
party  for  consulting  services  valued  at  $10,000.

During  the  year  ended  March  31,  2002, the Company issued 25,718 shares for
services  rendered  valued  at  $25,718.  All  shares were issued at fair market
price  at  issuance  date.  The  Company recorded gain on extinguishment of debt
totaling  $64,180  for  the  issuance  (see  Note  8).

NOTE  6  -  RELATED  PARTIES
----------------------------

Office  Rent  Expense
---------------------

As  of  March 31, 2002, the Company had a liability of $22,115 due to one of the
principal  stockholders  for  renting  a  portion  of  his  residence  (on  a
month-to-month  basis)  used  as the Company's office for the period of April 6,
2000  through  March  31, 2002.  This amount is non-interest bearing.  The total
office  rent  expense  was  $12,000  for  the  year  ended  March  31,  2002.

Consulting  Services
--------------------

Consulting  services  that  were rendered by two officers who are also principal
stockholders  of  the Company  for the period April 6, 2000 (date of inceptions)
through  March  31, 2002 was $36,500.  Such consulting service charges were paid
in  full  during  the  period  ended  March  31,  2002.

Notes  Payable  to  Stockholders

The  Company  borrowed  funds  from  one  stockholder  totaling  $206,000  under
unsecured  notes  payable  during  the period ended March 31, 2002.  These notes
payable  accrue  interest  at  6%  per  annum,  and are due on demand.  Interest
expense  incurred  during  the period ended March 31, 2002 was $12,360, which is
included  in  accrued interest to stockholders in the accompanying balance sheet
at  March  31, 2002.  Additionally shareholders advanced $35,517 to the Company.

NOTE  7  -  INCOME  TAXES
-------------------------

The  tax  effects  of  temporary differences that give rise to deferred taxes at
March  31,  2002  are  as  follows:

<TABLE>
<CAPTION>



<S>                                 <C>
Deferred tax asset:
   Net operating loss carryforward  $             422,000
                                    ----------------------
                                                  422,000

Less valuation allowance . . . . .               (422,000)
                                    ----------------------

   Net deferred tax asset. . . . .                     -
                                    ======================
</TABLE>

No  current  provision  for  income taxes for the period ended March 31, 2002 is
required, except for minimum state taxes of $800 (which is recorded in operating
expenses  in  the accompanying financial statements), since the Company incurred
losses  during  the  period.

As  of  March  31,  2002,  the  Company  had net operating loss carryforwards of
approximately  $1,000,000  for  both  federal  and  state  income  tax reporting
purposes,  which  expire  in  2022  and  2007,  respectively.

Management  cannot determine if it is more likely than not that the deferred tax
asset  will  be utilized and as such has recorded a valuation allowance equal to
the  entire  asset.  For  the  year  ended  March  31,  2002 and the period from
inception  through  March  31, 2001, the increase in the valuation allowance was
$76,000  and  $346,000,  respectively.

NOTE  8  -  GAIN  ON  ESTINGUISHMENT  OF  DEBT
----------------------------------------------

The  Company  exchanged  its  common stock with a value of $9,255 for release of
$25,717 in accounts payable.  Additionally a shareholder advanced $10,517 to the
Company to settle a creditor obligation of $58,238.  The settlements resulted in
a  gain  on  extinguishments  of  debt  amounting  to  $64,180.

NOTE  9  -  COMMITMENT
----------------------

Royalty  Agreement
------------------

The  Company  has  entered into an agreement with regard to royalty fees between
the  Company  and  one  of  its  officers.  In this agreement rights relative to
certain  software  designs  have been assigned to the Company.  The officer will
receive  royalties  ranging  from 2% to 5% on net sales of such software designs
sold to others or deployed by the Company in a project for third parties.  As of
and  for  the  period  ended  March  31,  2002, the Company has not recorded any
royalties  due  to  the  officer  under  this  agreement.

Employment  Agreements
----------------------

The Company has four-year employment agreements with three of its employees, who
are  also executives and principal stockholders of the Company.  The agreements,
which will expire on March 31, 2004, provide each employee with a base salary of
approximately  $10,000  per  month.  Under the agreements, the Company has bonus
plans  whereby  these  executives can earn bonuses based on net income and other
factors.  In  addition,  the  Company  has stock repurchase rights to repurchase
shares  back  from  two  of  the three executives if either of these executives'
employment  is terminated.  During the year ended March 31, 2001, the executives
verbally  agreed  to  have their salaries reduced.  The total salary expense was
$144,000  for  the  year  ended  March  31,  2002.

NOTE  10  -  CONTINGENCY
------------------------

The  Company  has a potential claim threatened against them by a consultant over
consideration with regard to a finder's fee for potential equity financing.  The
Company  believes  that  neither the merit or future outcome of such a claim nor
potential damages is readily determinable as of March 31, 2002 and therefore has
not  accrued  any  liability  in  the  accompanying  financial  statements.

NOTE  11  -  SUBSEQUENT  EVENT
------------------------------

On  May  2,  2002,  the Company signed an agreement with an unrelated party (the
"Unrelated  Party") to effectuate a reverse merger subject to numerous terms and
conditions  including  the approval of shareholders, the effectiveness of a Form
S-4  Registration  Statement registering shares of the Company to be received by
the  shareholders  of the Unrelated Party, the receipt of not less than $200,000
by  the  Unrelated  Party  of working capital on or before July 1, 2002, and the
ongoing  accuracy  and  completeness  of  various representations and warranties
being  given  by  the  parties,  among  other  conditions.

In  addition, the Company must seek shareholder approval for the distribution of
its  engineering  software  and  related software to the original developers and
founders  of  the  Company  in  exchange  for  the cancellation of approximately
35,000,000  shares  owned  by  certain  shareholders.

The  liabilities  of  the Company shall be reduced to a total of $75,000 through
the  conversion  of  each  one  dollar  of  principal  and  interest  amount  of
outstanding  loans  to  the Unrelated Party to one dollar of the Unrelated Party
shares  at  a  price to be determined by the board of directors of the Unrelated
Party  as  approved  by the Company and all notes shall be canceled and rendered
null  and  void  (other  than  $500,000  due  to  a  third party, which shall be
converted  into  warrants  to  receive  1,666,600  shares of common stock of the
Company,  at  $.30  per  share,  expiring  may  1,  2007).

Immediately  prior  to  the  merger,  there shall not be greater than 22,924,072
shares  of  common  stock,  issued  and  outstanding  of the Company which shall
include:  5,022,100  shares issued to shareholders of the Unrelated Party; as of
the  merger,  there  shall  not be any Company derivative securities outstanding
other  than a warrant to receive 1,666,600 shares of common stock of the Company
as  stated  above.

ITEM  4.     EXHIBITS

<TABLE>
<CAPTION>



<S> <C> <C>
NUMBER. . .  DESCRIPTION

2.1** . . .  Agreement and Plan of Merger, dated August 7, 2000
 between Calipso and Knowledge Foundations, Inc.
2.2***. . . Merger Agreement dated April 23, 2002, by and among BSI2000, Inc.,
KFI, Inc. and Knowledge Foundations, Inc.
3 (i)** Certificate of Merger, dated August 17, 2000, filed with the Secretary
of State, Delaware RE: Merger between Calipso an
3 (i) (a)** Certificate of Amendment of Certificate of Incorporation, dated
August 17,2000, re: 36:1 forward split of shares
3 (i) (b)** Certificate of Amendment of Certificate of Incorporation, dated
August 17, 2000, re: 1.35:1 foward split of shares
3 (i) (c)** Certificate of Amendment of Certificate of Incorporation, dated
August 17, 2000, re: change authorized to 100,000,0
3.1* Articles of Incorporation of Knowledge Foundations, Inc. (formerly Calipso,
Inc.) filed on May 31, 1994 - Incorporated by
3.2* By-laws of Knowledge Foundations, Inc. (formerly Calipso, Inc.) -
Incorporated by reference from the Calipso 10SB filing i
4 (a)** Stock Repurchase Agreement - dated September 18, 2000 between Calipso
and Wright & Bleers and Ocean Way Investments, Lt
4 (b)** . . Lock Up Agreement - dated September 18, 2000 between Calipso and
Wright & Bleers and Ocean Way Investments, Ltd.
10.1** License and Royalty Agreement dated April 6, 2000 between Richard L.
Ballard and Janet J. Pettitt and Knowledge Foundati
10.2**. . . Employment Contract of Michael W. Dochterman dated May 1, 2000.
10.3**. . .  Employment Contract of Robert A. Dietrich dated May 1, 2000.
99.1**. . .  Text of Press Release dated September 21, 2000

* Incorporated by Reference
** Incorporated by Reference filed in Form 8-K on 9/27/2000
*** Incorporated by Referenced filed in Form 8-K on 5/9/2002
</TABLE>

<PAGE>
                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
our  behalf  by  the  undersigned,  thereunto  duly  authorized.

KNOWLEDGE  FOUNDATIONS,  INC.               DATED:  JUNE  28,  2002



By:
  -
     Michael  W.  Dochterman
     President


     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
registrant  and  in  the  capacities  and  on  the  dates  indicated.


SIGNATURE                         TITLE                    DATE
---------                         -----                    ----

/s/  Richard  L. Ballard                    Chairman, Director          June 27,
2002


/s/  Michael  W.  Dochterman               Chief  Executive Officer     June 27,
2002
                              Director

/s/  Robert A. Dietrich                    Chief Accounting Officer     June 27,
2002
                              Director

/s/  Joel  B.  Vest                    Director               June  27,  2002


/s/  Janet  Pettitt                         Director               June 27, 2002