SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form SB-2
Amendment No. 2

Registration Statement
Under
The Securities Act of 1933

Digital Descriptor Systems, Inc.
(Name of small business issuer in its charter)

Delaware 7373 23-2770048
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

446 Lincoln Highway, Fairless Hills, PA 19030
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(Address of principal executive offices) (Zip code)

Registrant's Address and Telephone number, including area code:

Michael J. Pellegrino
President and Chief Operating Officer
446 Lincoln Highway
Fairless Hills, PA 19030
(267) 580-1075

(Name, address and telephone number of Agent for Service)

Copies of communications to:

Owen Naccarato, Esq.
Naccarato & Associates
19600 Fairchild, Suite 260
Irvine, California 92612
(949) 851-9261

Approximate date of commencement of proposed sale to the public: As
soon as practicable after the registration statement becomes effective.

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

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]

Calculation of registration fee

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Proposed Proposed
maximum maximum Exercise Amount of
Title of each class of Amount to be offering price aggregate price per Proceeds to registration
securities to be registered registered per share (1) offering price share (1) the Company fee
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Common Shares, par
value $.001 underlying 50,000,000 (2) $.02 $1,000,000 $92.20
secured convertible 1,820,634 (3) $.02 $ 36,413 $ 3.35
debenture

Shares underlying 111,000 (4)
warrants $.02 $ 2,220 $ .20
Restricted Common 10,253,207 (5) $.03 $ 228,064 $20.98
Shares par value $.001

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Total Registration Fee $116.73(6)
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(1) Estimated solely for the purpose of determining the registration fee
(2) Common stock issuable upon conversion of an aggregate of $500,000 in
convertible debentures issued in connection with a December 31, 2001
financing to various investors.
(3) Common stock issuable upon conversion of a $40,000 convertible note issued
in May, 2001. (4) Common stock issuable upon the conversion of warrants
issued in connection with the May, 2001 convertible note.
(5) Restricted Common stock issued with registration rights.
(6) Previously paid with original filing on 2/13/02 file # 333-82662
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effectiveness date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

PROSPECTUS
June 25, 2002
Digital Descriptor Systems, Inc.

62,184,841 Shares of Common Stock

o The 62,184,841 shares of Common Stock offered by this Prospectus
are being offered for resale by the stockholders listed in the
section of this Prospectus called "Selling Security Holders".

o Our Common Stock is traded on the OTC Bulletin Board under the
symbol "DDSI.OB".

o June 12, 2002 the closing bid price of our Common Stock on the OTC
Bulletin Board was $0.006.

o Investors should not purchase these shares unless they can afford
to lose their entire investment.

o Selling shareholders will sell at prices they fix or negotiate and
the selling shareholder will receive all proceeds from the sale.

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This investment involves a high degree of risk. See the "Risk Factors" beginning
on page 9 of this Prospectus.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Table of Contents

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Section Title Page No.
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Summary of Information in the Prospectus 5
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Risk Factors 6
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Dividend Policy 10
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Dilution 12
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Use of Proceeds 13
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Price Range of Common Stock 13
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Management's Discussion and Analysis of Financial Condition and Results of Operations 15
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Our Business 20
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Management 28
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Executive Compensation 30
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Certain Relationships and Related Transactions 33
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Security Ownership of Certain Beneficial Owners and Management 33
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Description of Securities 34
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Selling Stockholders 38
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Plan of Distribution 41
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Legal Proceedings 42
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Experts 43
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Legal Matters 43
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Other Available Information 43
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Financial Statements 44
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Indemnification 45
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Prospectus Summary

This summary contains all material terms of the offering. To understand this
offering fully, you should read the entire document carefully. Please pay
particular attention to the section entitled "Risk Factors" and the section
entitled "Financial Statements".

Unless otherwise indicated, this Prospectus assumes that any of our outstanding
options or warrants have not been exercised into shares of our Common Stock.

Digital Descriptor Systems, Inc.

Digital Descriptor Systems, Inc.("DDSI"), located at 446 Lincoln Highway,
Fairless Hills, PA,19030, phone number (267) 580-1075, was originally formed as
Compu-Color, Inc., in 1989 and was incorporated in Delaware in 1994.

DDSI develops, assembles and markets computer installations, consisting of
hardware and software, which capture video and scanned images, digitize the
image, link the digitized images to text and store the image and text on a
computer database which allows for transmitting the image and text by computer
or over telephone transmission lines to remote locations.

Technological Innovations
- -------------------------

Imaging technology enables computers to record, store and retrieve both textual
information and visual images. DDSI's software programs utilize technology to
link textual information with images so that customers can record and retrieve
related text and images. DDSI's software also addresses different information
retrieval needs such as reproducing line ups and producing housing badges
(jails), bar coded wristbands for identification which facilitates movement
within jails and courts and storing and retrieving hand written and computer
generated document images within arrest records. (see "Our Business" page 20).

Products
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The principal product of DDSI is the Compu-Capture(R) Law Enforcement Program,
which is marketed to law enforcement agencies and jail facilities. The program
captures a video or scanned image (mug shot) of a subject that is stored by
computer application along with the booking record, physical description and
other pertinent information about the subject. (see "Our Business" page 20).

DDSI's also markets its Fingerprint Matching System (FMS) and its Identify On
Demand System to both commercial and criminal justice markets. (see "Our
Business" page 22).

The Offering

Securities Offered 62,184,841 Selling Security Holder Shares
(see "Selling Shareholders" page 28) of
which 10,253,207 shares have previously been
issued as restricted stock

Common Stock Outstanding: Prior to the Offering 58,156,490
Shares as of June 12, 2002
After the Offering 110,088,124
Shares

Offering Price The selling shareholders can sell the shares
at any price.

Use of Proceeds This prospectus relates to shares of our
common stock that may be offered and sold
from time to time by the selling
stockholders. We will not receive any
proceeds from the sale of shares by the
selling shareholders. However, we will
receive proceeds upon the exercise of any
warrants that may be exercised by the
selling shareholders. These funds will be
used for ongoing operations.

Market for our Common Stock: Our Common Stock trades on the Over-the
Counter Bulletin Board, also called OTCBB,
under the trading symbol "DDSI.OB". The
market for our Common Stock is highly
volatile. We can provide no assurance that
there will be a market in the future for our
Common Stock.

Risk Factors

An investment in shares of DDSI's Common Stock involves a high degree of risk.
You should carefully consider the following information which summarizes all
material risks, together with the other information contained in this
prospectus, before you decide to buy DDSI's common stock. If any of the
following risks actually occur, DDSI's business would likely suffer. In these
circumstances, the market price of DDSI's common stock could decline, and you
may lose all or part of your investment.

Risks Relating to our Business:
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DDSI has sustained continuing losses making it a risky investment.

DDSI has a history of losses from operations and does not anticipate realizing a
profit during the next fiscal year, therefore investment in DDSI is at a risk of
being lost. Our financial statements highlight that we have a working capital
deficiency of $791,543 at December 31,2001 and $731,891 at December 31,2000,
plus recurring losses from operations which raise substantial doubt about our
ability to continue as a going concern. For the quarter ending March 31, 2002 we
have a working capital deficiency of $140,184. The financial statements do not
include any adjustments that might result from the outcome of this activity.

DDSI incurred a loss for the year ending December 31, 2001 of $2,982,510 and a
loss of $2,030,052 in the year ending December 31, 2000, and for the quarter
ending March 31, 2002 of $464,831 and a loss of $566,360 for the quarter ending
March 31, 2001. DDSI does not anticipate realizing a profit during the next
fiscal year.

In addition, any one of the following factors may affect the future
profitability of our business:

o The inability to develop new products to sell to the current customer base
o Failure to establish new outlets for sales of the current solutions and
products.
o Rejection of its modified criminal justice software solutions by the
commercial market.

DDSI may not be able to obtain sufficient capital to fund our operations and, as
a result, we may have to cut back or discontinue operations or limit our
business strategies.

DDSI does not have adequate financing arrangements in place. DDSI intends to
raise additional capital by looking for alternative financing solutions for its
long term needs and new development projects. If DDSI is unable to obtain
alternative financing solutions, it may have to rely on private placement or
convertible notes.

Future financing may also be difficult to obtain due to such factors as our
history of unfavorable operating results, and increased stockholder dilution. If
adequate funds are not available, we may be required to cut back on one or more
of our production locations, sales, marketing or distribution programs or plans
to reduce operating expenses, or attempt to obtain funds through strategic
alliances that may require us to relinquish rights to our technologies or
products, and further dilute our shareholders.

Our need for future capital requirements will depend on many factors, including:

o the future of our product sales, marketing and distribution
efforts;

o cost increases in the progress of filing for and obtaining
regulatory approvals;

o any market rejection of our products;

o any increase in the levels of administrative and legal
expenses

On the other hand, if debt financing is available, it may have several negative
effects on our future operations, including:

o a portion of our cash flow from operations will be
dedicated to payment of principal and interest and this
would reduce the funds available for operations and
capital expenditures;

o increased debt burdens will substantially increase our
vulnerability to adverse changes in general economic and
competitive conditions; and

o we may be subject to restrictive debt covenants and other
conditions in our debt instruments that may limit our
capital expenditures, limit our expansion or future
acquisitions, and restrict our ability to pursue our
business strategies.

DDSI's ability to produce revenue is dependent on its ability to attract new
customers, and it's inability to do so would result in DDSI trimming or shifting
down operations.

Once a customer has purchased a system from DDSI, any future revenue from that
customer will consist primarily of maintenance fees and upgrades to the system
unless the customer expands the system or DDSI develops new products for the
system. Thus DDSI's ability to produce revenue is dependent on the following:

o its ability to attract new customers
o its ability to develop new products and upgrade of
existing products to reflect current technology
o its ability to price products competitively.

The majority of DDSI's revenues are generated from one time sales to different
clients of its software product. These sales account for 59% of the business in
2001. If DDSI is unable to attract new customers, it would therefore suffer a
significant decrease in revenue resulting in a cut back or shut down of
operations.

The remaining revenue consists of contract sales in DDSI's maintenance and
services areas. Though these are recurring revenues, they are not enough to
sustain operations.

Purchases of DDSI's products can be delayed due to political and budgetary
processes within Law enforcement jurisdictions, which can hamper DDSI's ability
to operate.

Law enforcement jurisdictions are subject to political, fiscal and budgetary
constraints and purchases of DDSI's products may be delayed substantially due to
these political and budgetary processes. The nature of the public sector market
and the government procurement process often result in an irregular and
unpredictable revenue stream for DDSI. This irregular and unpredictable revenue
stream makes it difficult for the business to operate smoothly.

Satisfying public contract requirements can preclude sales, which may limit
DDSI's ability to succeed.

DDSI's Compu-Capture(R) product is being marketed primarily to law enforcement
agencies. As public agencies, these prospective purchasers are subject to public
contract requirements that vary from one jurisdiction to another. Some public
contract requirements may be onerous or even impossible for DDSI to satisfy,
such as large bonding requirements, and DDSI may be precluded from making sales
in these jurisdictions. In addition, public contracts frequently are awarded
only after a formal competitive bidding process. This process is usually a long
drawn out process.

The Compu-Scan 3000 may never achieve FBI certification, which could limit our
success.

Each time DDSI has submitted the Compu-Scan for certification, the FBI has
requested additional information. This has resulted in DDSI's decision to
investigate a redesign of the Compu-Scan 3000. There are no assurances by the
Company that the FBI will certify this latest technology and device should DDSI
submit a redesign.

During December 2001, the Company revised its anticipated certification date for
its Compu-Scan 3000 product indefinitely after its submission was not accepted
by the FBI. Additionally, there are no assurances that the FBI will ever certify
the technology. As such, and since the Company is unable to forecast any
revenues from the product, the Company wrote off the remaining investment in
Software Development of $298,714 in the fourth quarter of 2001.

DDSI may not be able to raise sufficient funding to complete the Compu-Scan 3000
project, resulting in terminating the project which would have a negative affect
on future operations of the company, thus putting the investors at risk

If DDSI is unable to raise sufficient funding to complete the Compu-Scan 3000
project, the Company will either continue with the original design of the
fingerprint slap. However, the Company has recently put a substantial amount of
funds into the project that could have been used to develop revenues in other
areas.

The pledge of substantially all of DDSI's assets could hinder the raising of
funds which would eventually result in the discontinuation of operations

Presently all of our assets have been pledged which could affect our operations
by precluding us from obtaining additional financing. The inability to gain
access to secured funding in the future could result in the abandonment of
projects, curtailment of operations and eventually the discontinuation of
operations.

If DDSI defaults in one of the conditions to the debenture agreement, at the
note holder's option, the full principal amount of the debenture(s) together
with interest and other amounts owed may become immediately due and payable in
cash. If this event were to occur, it would probably result in the shut down of
DDSI's operations.

DDSI would be in default if any one of the following occurs:
(i) failure in making a payment of the principal and interest;
(ii) files for bankruptcy or insolvency
(iii) defaults in any of its other debt obligations;
(iv) DDSI's Common Stock shall not be eligible for quotation and
trading on the OTC Bulletin Board;
(v) DDSI sells or disposes all or in excess of 33% of its assets in
one or more transactions;
(vi) if the effectiveness of the Underlying Shares Registration
Statement lapses;
(vii) the Company shall fail to deliver certificates to a Holder within
three days of conversion request.

We are presently in compliance with all conditions of the debenture agreement
and anticipate that we will stay in compliance with the conditions while this
prospectus is in use.

We have a "Going-Concern Qualification" in our independent auditors financial
statement report at December 31, 2001, which may make capital raising more
difficult and may require us to scale back or cease operations, putting an
investors funds at risk.

The report of our auditors includes a going concern qualification which
indicates an absence of obvious or reasonably assured sources of future funding
that will be required by us to maintain ongoing operations. To date we have
funded DDSI through equity investments and issues of debt. There is no guarantee
that DDSI will be able to attract additional equity and/or debt investors. If we
are unable to obtain additional funding, we may not be able to continue
operations. Additionally, we have a net worth deficit as of December 31, 2001.
This deficit indicates that we will be unable to meet our future obligations
unless additional funding sources are obtained.

DDSI's operating expenses for the year ended December 31, 2001 ran approximately
$2,681,080 with cash outflows of approximately $174,615 a month. A temporary cut
back in operations would lower the expenses dramatically, however, cash outflow
would still remain approximately $51,700 to $60,000 a month. Absent a plan to
obtain the necessary funds to maintain DDSI during a temporary shutdown, DDSI
would have to terminate all operations.

DDSI plans to raise additional funding by looking for alternative financing
solutions for its long term needs and new development projects. If DDSI is
unable to obtain alternative financing solutions, it may depend on private
placement or convertible notes.

Risks Relating to our Stock:
- ---------------------------

The issuance of these shares in this offering will result in dilution

There are a large number of shares underlying the convertible notes and warrants
in this offering that may be available for future sale and the sale of these
shares may depress the market price of our common stock and may cause
substantial dilution to our existing stockholders.

The number of shares of common stock issuable upon conversion of the convertible
notes and debentures in this offering may increase if the market price of our
stock declines. All of the shares, including all of the shares issuable upon
conversion of the notes and debentures and upon exercise of our warrants, may be
sold without restriction. The sale of these shares may adversely affect the
market price of our common stock. The issuance of shares upon conversion of the
convertible notes and debentures and exercise of outstanding warrants will also
cause immediate and substantial dilution to our existing stockholders and may
make it difficult to obtain additional capital.

The following gives examples of the number of shares that would be issued if the
debentures in this offering were converted at one time at prices representing
70%, 50%, and 25% of the current market price (assuming a market price of
$0.01): As of June 12, 2002, we had 58,156,490 shares of common stock
outstanding.

o 70% of current stock price:

DDSI's stock converted at 70% of current stock price would result in a
debenture conversion rate of $.007 cents. To convert the $500,000 of
convertible debentures would require 71,428,571 shares of DDSI's common
stock, or 123% of DDSI's current outstanding shares.

o 50% of current stock price:

DDSI's stock converted at 50% of current stock price would result in a
debenture conversion rate of $.005 cents. To convert the $500,000 of
convertible debentures would require 100,000,000 shares of DDSI's
common stock, or 172% of DDSI's current outstanding shares.

o 25% of current stock price

DDSI's stock converted at 25% of current stock price would result in a
debenture conversion rate of $.0025 cents. To convert the $500,000 of
convertible debentures would require 200,000,000 shares of DDSI's
common stock, or 344% of DDSI's current outstanding shares.

DDSI's overhang affect of the selling shareholders resale of their securities on
the market could result in lower stock prices when converted

Overhang can translate into a potential decrease in DDSI's market price per
share. The common stock underlying unconverted debentures represents overhang.
These debentures are converted into common stock at a discount to the market
price providing the debenture holder the ability to sell his or her stock at or
below market and still make a profit. If the share volume cannot absorb the
discounted shares, DDSI's market price per share will likely decrease. As the
market price decreases, each subsequent conversion will require a larger
quantity of shares.

Currently DDSI has reserved 100% of the estimated maximum number of shares of
common stock which would be issuable upon conversion in full of the debentures
and warrants in the current financing, amounting to 50,000,000 shares of
authorized and unissued common stock. These reserve amounts are our good faith
estimate of the number of shares that we believe we need to reserve. We can
provide no assurance as to how many shares we will ultimately need to issue upon
the conversion of the debentures. If we are required to issue additional shares,
we will be required to file an additional registration statement for those
shares.

Short selling common stock by warrant and debenture holders may drive down the
market price of our stock.

Warrant and debenture holders may sell shares of DDSI's common stock on the
market before exercising the warrant or converting the debenture. The stock is
usually offered at or below market since the warrant and debenture holders
receive stock at a discount to market. Once the sale is completed the holders
exercise or convert a like dollar amount of shares. If the stock sale lowered
the market price, upon exercise or conversion, the holders would receive a
greater number of shares then they would have absent the short sale. This
pattern may result in the spiraling down of our stock's market price.

DDSI's absence of dividends or the ability to pay them places a limitation on
any investors return.

DDSI anticipates that for the foreseeable future, earnings will be retained for
the development of its business. Accordingly, DDSI does not anticipate paying
dividends on the Common Stock in the foreseeable future. The payment of future
dividends will be at the sole discretion of DDSI's Board of Directors and will
depend the Company's general business condition.

DDSI's reliance on the exercise of common stock purchase options/warrants to
fund the operating needs of the Company. If these options/warrants were
unacceptable to the service provider, then DDSI may have to curtail operations.

DDSI often does not have the liquid fund to pay for services. In cases when
services are needed and funds are short, DDSI would issue stock purchase options
in lieu of cash. If options are not found acceptable by the service provider,
the needed service would not be completed. Depending on how critical the service
is, DDSI may have to curtail or shut down operations. DDSI's warrants would face
similar issues, in that if the underlying common stock is undesirable to the
service provider, then the warrants will not be exercised, resulting in the
service not being performed which could cause a curtailment or lead to an
eventual shutdown of operations.

DDSI's common stock is subject to the "Penny Stock" rules of the SEC and the
trading market in our securities is limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our stock.

Our shares of Common Stock are "penny stocks" as defined in the Exchange Act,
which are traded in the over-the-counter market on the OTC Bulletin Board. As a
result, an investor may find it more difficult to dispose of or obtain accurate
quotations as to the price of the shares of the Common Stock being registered
hereby. In addition, the "penny stock" rules adopted by the Commission under the
Exchange Act subject the sale of the shares of the Common Stock to certain
regulations which impose sales practice requirements on broker-dealers. For
example, broker-dealers selling such securities must, prior to effecting the
transaction, provide their customers with a document that discloses the risks of
investing in such securities. Included in this document are the following:

o The bid and offer price quotes for the penny stock, and the number of
shares to which the quoted prices apply.
o The brokerage firm's compensation for the trade.
o The compensation received by the brokerages firm's salesperson for the
trade.

In addition, the brokerage firm must send the investor:

o Monthly account statement that gives an estimate of the value of each
penny stock in your account.
o A written statement of your financial situation and investment goals.

Legal remedies which may be available to you are as follows:

o If penny stocks are sold to you in violation of your rights listed
above, or other federal or state securities laws, you may be able to
cancel your purchase and get your money back.
o If the stocks are sold in a fraudulent manner, you may be able to sue
the persons and firms that caused the fraud for damages.
o If you have signed an arbitration agreement, however, you may have to
pursue your claim through arbitration.

If the person purchasing the securities is someone other than an accredited
investor or an established customer of the broker-dealer, the broker-dealer must
also approve the potential customer's account by obtaining information
concerning the customer's financial situation, investment experience and
investment objectives. The broker-dealer must also make a determination whether
the transaction is suitable for the customer and whether the customer has
sufficient knowledge and experience in financial matters to be reasonably
expected to be capable of evaluating the risk of transactions in such
securities. Accordingly, the Commission's rules may limit the number of
potential purchasers of the shares of the Common Stock.

Resale restrictions on transferring "penny stocks" are sometimes imposed by some
states, which may make transactions in our stock cumbersome and may reduce the
value of an investment in our stock.

Various state securities laws impose restrictions on transferring "penny stocks"
and as a result, investors in the Common Stock may have their ability to sell
their shares of the Common Stock impaired. For example, the Utah Securities
Commission prohibits brokers from soliciting buyers for "penny stocks", which
makes selling them more difficult.

Information about forward-looking statements
- --------------------------------------------

This Prospectus contains certain forward-looking statements, which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified because the context of the statement includes words such
as "may," "will," "except," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, this prospectus also contains
forward-looking statements about our future. Forward-looking statements include
statements about our:

Plans, Objectives, Goals, Strategies, Expectations for the future, Future
performance and events, Underlying assumptions for all of the above and Other
statements which are not statements of historical facts.

These forward-looking statements involve risks and uncertainties, which could
cause our actual results to materially differ from our forward-looking
statements. We make these forward-looking statements based on our analysis of
internal and external historical trends, but there can be no assurance that we
will achieve the results set forth in these forward-looking statements. Our
forward-looking statements are expressed in good faith and we believe that there
is a reasonable basis for us to make them.

In addition to other factors discussed in this prospectus, the following are
important factors that could cause our actual results to materially differ from
our forward-looking statements: - Our ability to respond to changes in the
marketplace - Competitive factors - The availability of financing on terms and
conditions acceptable to us - The availability of personnel with the appropriate
technical skills

We have no obligation to update or revise these forward-looking statements to
reflect future events.

Dilution

DDSI's net tangible deficit before taking this offering into consideration at
March 31, 2002 was ($1,794,761) or ($0.03) per share of Common Stock. The "net
tangible book value deficit" represents the amount of the total tangible assets
less the total liabilities of DDSI as of March 31, 2002. Our net tangible book
value (deficit) per share represents the net tangible book value (deficit) of
DDSI divided by the total number of shares of Common Stock outstanding as of
March 31, 2002. The holders of such shares of common stock are referred below as
the "Existing Stockholders."

Assuming there was no change in the net tangible book value (deficit) of DDSI
after March 31, 2002 and taking into consideration 459,000 net proceeds received
from the sale of debentures our adjusted net tangible book value as determined
after the receipt of net proceeds from such maximum offering amount, totaling
($1,335,761) will be ($0.02) per share of common stock. This represents an
immediate increase in our net tangible book value of $0.01 per share of Common
Stock to the Existing Stockholders, and an immediate dilution of $0.01 per share
to the investors purchasing shares of common stock in this offering (the "New
Stockholders").

The following table illustrates this per share dilution at March 31, 2002:

Offering Price per share of Common Stock................................ $0.02

Adjusted net tangible book value (deficit) per share of
Common Stock at March 31, 2002
Before this Offering.................................................... ($0.03)

Increase attributable to the Offering................................... $0.01

Adjusted net tangible book value (deficit)
per share of Common Stock
After this Offering..................................................... ($0.02)

Dilution in adjusted net tangible book
Value per share of Common Stock
to New Stockholders..................................................... $0.01

In addition, further dilution could occur in the future due to any contracts we
may enter into with third party entities for consulting or other services should
any additional Common Stock shares be issued for those consulting or other
services.

Use of proceeds
- ---------------

DDSI will not receive any of the proceeds from the sale of the shares of Common
Stock offered by the selling shareholders under this prospectus. If all
warrants, being registered, to purchase the shares of common stock offered for
resale in this offering were exercised, DDSI would receive aggregate gross
proceeds of approximately $2,220.

The proceeds, if any, that DDSI receives from the exercise of warrants will be
used for working capital in support of the growing business.

The foregoing represents DDSI's current best estimate of our use of the proceeds
derived from the exercise of the warrants to purchase the shares of Common Stock
offered in this prospectus, if any, based upon our present plans, the state of
our business operations and current conditions in the industry in which we
operate. DDSI reserves the right to change the use of the proceeds if
unanticipated developments in our business, business opportunities, or changes
in economic, regulatory or competitive conditions, make shifts in the
allocations of proceeds necessary or desirable.

Price Range of Common Stock
- ---------------------------

DDSI's Common Stock has been quoted on the OTC:BB since July 7, 1997 under the
symbol "DDSI". As of November 4, 1999 DDSI's shares traded on the pink sheets;
however, the Company returned to trading on the OTC Bulletin Board effective
February 23, 2001. The following table set forth, the high and low bid prices
for the Common Stock for the quarters indicated. As of December 31, 2001 there
were approximately 2,500 shareholders of record. The source of the quotes is AOL
Ticker.

Common Stock
Bid Price
------------------
Calendar Year 2000 Low High
- ---------------------------
First Quarter $0.21 $0.48
Second Quarter $0.25 $0.39
Third Quarter $0.21 $0.35
Fourth Quarter $0.06 $0.22

Calendar Year 2001 Low High
- ---------------------------
First Quarter $0.12 $0.40
Second Quarter $0.12 $0.20
Third Quarter $0.06 $0.19
Fourth Quarter $0.03 $0.28

Calendar Year 2002 Low High
- ---------------------------
First Quarter $0.007 $0.04

As of June 12, 2002, there were approximately 58,156,490 shares of Common Stock
issued and outstanding.

Summary Financial Information

The summary historical financial data should be read in conjunction with the
financial statements (and notes thereto) of our Company and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.

Year ended December 31 Three Months Ended March 31
2001 2000 2002 2001
------------------------- ---------------------------------
(Audited) (Unaudited)

Net sales $ 1,726,707 $ 3,026,458 $ 224,162 $ 310,048
Cost of revenues 708,703 1,615,286 68,325 129,014
General and administrative 1,705,242 1,843,336 271,300 333,230
Sales and marketing 454,169 917,381 23,846 235,610
Research and development 383,217 536,350 76,791 77,382
Write-off of software development costs 413,604 - - -
Provision for doubtful note receivable -
former officer 177,400 - - -
Depreciation 138,452 162,330 9,909 50,493
Interest & amortization of deferred
debt costs 753,029 1,775 259,765 -
Other (income) expense, net (24,599) (19,948) (20,943) 50,679
----------- ----------- ----------- -----------
Net Loss $(2,982,510) $(2,030,052) $ (464,831) $ (566,360)
=========== =========== =========== ===========

Weighted average Common
Shares outstanding 24,436,773 18,557,547 47,933,483 21,069,945
=========== =========== =========== ===========

Basic loss per share $ (0.12) $ (0.11) $ (0.01) $ (0.03)
=========== =========== =========== ===========

Current Assets $ 1,629,792 $ 1,000,415 $ 1,091,184 $ 1,313,426
Total Assets $ 1,691,277 $ 1,783,044 $ 1,141,760 $ 2,048,531
Current Liabilities $ 2,421,335 $ 1,732,306 $ 2,292,674 $ 2,104,434
Total Liabilities $ 2,441,401 $ 1,760,932 $ 2,310,944 $ 2,131,279
Shareholders' equity (deficit) $ (750,124) $ 22,112 $(1,168,184) $ (82,748)

Management's Discussion and Analysis or Plan of Operation

Plan of Operations
- ------------------

The short-term objectives of DDSI are the following:

1. The short-term objective of DDSI is to continue to expand the
sale and acceptance of its core solutions by offering new and
synergistic biometric (a measurable, physical characteristic
or personal behavioral trait used to recognize the identity,
or verify the claimed identity, of an individual) (i.e. FMS)
security products to its installed base in the criminal
justice market. The Company's objective is to expand with
these, and additional products, into much larger commercial
and federal markets.

DDSI's long-term objectives are as follows:

1. To seek additional products to sell into its basic business
market--Criminal Justice -- so that DDSI can generate sales
adequate enough to allow for profits. New products include FMS
(Fingerprint Matching System), and Identify on Demand.
2. Continue pursuing the FBI certification of the Compu-Scan 3000
fingerprint capturing device. This would include redesigning
the slap unit of the Compu-Scan to capture a palm print as
well as a fingerprint. In addition consideration will be given
to the creation of a contactless single digit reader that
would not require FBI certification. There is no guarantee
that the company will be able to raise sufficient funding to
complete this project or that it will ever be able to meet FBI
certification

DDSI believes that it will not reach profitability until the year 2003. Over the
next twelve months, management is of the opinion that sufficient working capital
will be obtained from operations and external financing to meet the Company's
liabilities and commitments as they become payable. DDSI has in the past
successfully relied on private placements of common stock securities, bank debt,
loans from private investors and the exercise of common stock warrants in order
to sustain operations. If DDSI is unable to obtain additional funding in the
future, it may be forced to curtail or terminate operations. A recent financing
has been obtained and the underlying shares are being registered in this
registration statement (see "Selling shareholders" and "Recent financing" on
page 36).

DDSI is doing the following in its effort to reach profitability:

o Cut costs in areas that add the least value to DDSI.
o Derive funds through investigating business alliances with
other companies who may wish to license the Compu-Scan device
or the FMS SDK (software developers kit).
o Increase revenues through the introduction of Compu-Capture,
specifically towards kindergarden through twelfth grades, for
the creation of ID cards.
o Increase revenues through the introduction of a scaled down
version of our Compu-Capture product.

Results of Operations
- ---------------------

Three Months Ended March 31, 2002 Compared to the Three Months Ended March 31,
2001

Revenues for the three months ended March 31, 2002 of $224,162 decreased $85,886
or 28% from the three months ended March 31, 2001. The Company generates its
revenues through software licenses, hardware, post customer support arrangements
and other services. The decrease in the Company's revenue is attributed to the
SI-3000 product line; in the first quarter of 2001, the Company was still
selling the SI-3000 product, however during the second quarter of 2001 the
Company stopped any new sales of this product. During the first quarter of 2002,
the Company saw amounts of deferred income recognized as revenues resulting from
SI-3000 projects started in previous years that are now being completed and
signed-off. Maintenance revenues increased $26,450 or 20% from the three months
ended March 31, 2001 primarily due to an increase in the Company's customer's
service and additional stations being purchased by customers which include
software maintenance agreements. Cost of goods decreased $60,689 or 47% due to
the decrease in SI-3000 projects and was reduced to 30% of total revenues from
42% in the same period a year earlier. The gross profit percentage per sale
increased by 12% compared to the same period a year earlier.

Costs and expenses decreased $126,726 or 17% during the three months ended March
31, 2002 versus the three months ended March 31, 2001. The decrease is due
primarily to the cost containment efforts of the Company. This decrease was
offset by an increase in interest and amortization of deferred debt cost of
$248,276 in connection with the convertible debentures issued in 2001. All other
expenses of the Company experienced decreases with the exception of the
development department that remained the same for the three months ended March
31, 2002 and 2001. Expenses for research and development for the three months
ended March 31, 2002 remain consistent with those of the same time period in
2001.

The net loss for the Company decreased 18% for the three months ending March 31,
2002 to $464,831 from $566,360 for the three months ending March 31, 2001. This
was principally due to the decrease in expenses during the period.

Year Ended December 31, 2001 versus Year Ended December 31, 2000
- ----------------------------------------------------------------

Revenues for the year ended December 31, 2001 of $1,726,707 decreased by 43%
from 2000. The Company generates its revenues through software licenses,
hardware, post customer support arrangements and other services. The decrease in
the Company's revenue for software and hardware during the period is attributed
to a decrease in the sales of the SI-3000 product, which the Company has ceased
to actively sell. Maintenance revenues decreased $62,512 or 11% from the year
ended December 31, 2000 primarily due to a decrease in the Company's customers
entering into such arrangements and the revenue sharing agreement with Itx on
maintenance of the SI-3000 product line. The original contract dated September
16, 1996 has been included as Exhibit 10.2.2. Since Itx provided the support,
there was a 90/10 revenue split. The 10% payment to DDSI covers the Company's
accounting and administrative efforts. Other revenues consist of sales of
supplies that the Company makes available to its customers, such as wristbands,
ID cards and print packs. More customers ordered such items in the year ended

December 31, 2001 versus December 31, 2000, which accounted for the modest
increase. Cost of goods decreased $906,583 or 56% due to the decrease in
revenues and was reduced to 41% of total revenues from 53% in the same period a
year earlier. Both the lower cost of sales and the higher gross margin are
attributed to the decrease in sales of the SI-3000.

Operating Costs and expenses decreased $754,439 or 23% during the year ended
December 31, 2001 versus the year ended December 31, 2000. The decrease is due
primarily to the strict cost containment measures the Company has put in place
and the reorganization of the sales department. Non-operating expenses increased
$413,604 due to the write-off of capitalized software development costs related
to the Compu-Scan device. Other expenses also increased $900,125 due to interest
expense in connection with the convertible debentures issued in 2001 and the
provision for doubtful note receivable of former officer recorded in 2001. The
increase in other expenses of $900,125 for the year ending December 31, 2001
versus the year ending December 2000 was attributable to $530,780 of the
amortization of beneficial conversion costs related to the convertible
debentures, $184,945 in amortization of debt discounts, $177,400 in allowance
for ex-officer loan, and $7,000 in late charges.

The net loss for the Company increased 47% for the year ending December 31, 2001
to $2,982,510 from $2,030,052 for the year ending December 31, 2000. This was
principally due to the decrease in revenues the period.

Net cash used in operating activities for the years ended December 31, 2001 and
2000 was $1,019,331 and $1,334,167, respectively. The change in cash from
operating activities in 2001 versus 2000 of $314,836 was principally due to the
increase in the net loss for the year ended December 31, 2001 versus 2000 of
$952,451 as well as due to amortization of debt discount of $676,486 for the
year ended December 31, 2001, offset by other changes in operating assets and
liabilities.

Net cash provided by (used in) investing activities was $(9,888) and $57,348 for
the years ended December 31, 2001 and 2000, respectively, reflecting a change of
$(67,236). This change is due to lesser purchases of furniture and equipment in
the year ended December 31, 2001, and less cash being released from restriction
in 2001.

Net cash provided by financing activities was $1,262,004 and $1,304,473 for the
years ended December 31, 2001 and 2000, respectively, reflecting a change of
$42,469. This decrease was principally due to only $229,000 in net proceeds
received from the issuance of the Company's common stock in 2001, versus
$1,164,066 received in 2000. The Company received net proceeds of $1,056,000
from the issuance of convertible debentures during the year ended December 31,
2001.

Year Ended December 31, 2000 versus Year Ended December 31, 1999
- ----------------------------------------------------------------
Revenues for the year ended December 31, 2000, $3,026,458, increased by 6% from
1999. The Company attributes this to the fact that the SI-3000 product line had
an increase in sales and the upgrade to Compu-Capture was completed. The Company
generates its revenues through software licenses, hardware, post customer
support arrangements and other services. The increase in the Company's software
fees during the period is attributed to the continued increase in the sales of
the SI-3000 product. Maintenance revenues increased $44,315 or 8% from the prior
period primarily due to an increase in the Company's customers entering into
such arrangements. Other revenues consist of sales of supplies that the Company
makes available to its customers, such as wristbands, ID cards and print packs.
Fewer customers ordered such items in the year ended December 31, 2000 versus
1999, which accounted for the decrease of $97,878 or 61%. The Company's gross
profit decreased 24% during the year ending December 31, 2000 versus the year
ending December 31, 1999, due to an increase in sales of the SI-3000 product
line which has lower margins. Overall the gross profit percentage per sale
decreased 19%.

Costs and expenses increased $376,455 or 12% during the year ended December 31,
2000 versus the year ended December 31, 1999. This increase is due to an
increase in general and administrative expenses in the amount of $249,490.
Additionally, research and development costs increased in the amount of $106,751
due principally to the continued upgrading of the Company's core software
packages to 32 bit code. Costs of revenues during this period increased as a
result of the corresponding increase in revenues as described above.

The net loss for the Company increased 68% for the year ending December 31, 2000
to $2,030,052 from $1,205,517 for the year ending December 31, 1999. This was
principally due to a lower percentage increase of revenues than the percentage
increase of costs and expenses during the year.

Net cash used in operating activities for the years ended December 31, 2000 and
1999 was $1,334,167 and $866,542, respectively. The change in cash from
operating activities of $467,625 was principally due to the increase in the net
loss for 2000.

Net cash provided by (used in) investing activities was $57,348 and ($699,570)
for the years ended December 31, 2000 and 1999 respectively, reflecting a change
of $756,918. This change was a result of decreased software development costs of
$413,604 in 2000, the purchase of furniture and equipment of $30,325 and
proceeds from the sale of restricted cash of $99,548.

Net cash provided by financing activities was $1,302,473 and $1,664,716 for the
years ended December 31, 2000 and 1999, respectively, reflecting a change of
$362,243. This decrease was principally due to less proceeds received from the
issuance of the Company's common stock in the 2000 year.

Liquidity and Capital Resources
- -------------------------------

The Company's revenues have been insufficient to cover the cost of revenues and
operating expenses. Therefore, the Company has been dependent on private
placements of its common stock and issuance of convertible notes in order to
sustain operations. In addition, there can be no assurances that the proceeds
from private or other capital will continue to be available, or that revenues
will increase to meet the Company's cash needs, or that a sufficient amount of
the Company's common stock or other securities can or will be sold or that any
common stock purchase options/warrants will be exercised to fund the operating
needs of the Company.

March 31, 2002

Net cash used in operating activities for the three months ended March 31, 2002
and 2001 was $370,656 and $285,554, respectively. The change in cash from
operating activities in 2002 versus 2001 of $85,102 was principally due to the
increase in the net loss for the 2002 first quarter.

Net cash used in investing activities was $13,539 and $2,969 for the three
months ended March 31, 2002 and 2001, respectively, reflecting a change of
$10,570. This change is due to a decrease in officer loan and an increase in
restricted cash.

Net cash provided by financing activities was ($1,796) and $167,219 for the
three months ended March 31, 2002 and 2001, respectively, reflecting a change of
$165,423. This decrease was principally due to the Company not issuing
convertible debentures during the three months ended March 31, 2002

December 31, 2001 and December 31, 2000

At December 31, 2001, the Company had assets of $1,691,277 compared to
$1,783,044 on December 31, 2000, a decrease of $91,767 and shareholder
deficiency of $(750,124) on December 31, 2001 compared to shareholder equity of
$22,112 on December 31, 2000, a decrease of $772,236. This decrease in
shareholder equity for the year ended December 31, 2001 resulted from the net
loss for the year ended December 31, 2001 of $2,982,510, offset by the issuance
of common stock and the debt discounts related to the issuance of convertible
debentures.

As of December 31, 2001, the Company had a negative working capital of $791,543,
a change of $59,652 from a negative working capital of $731,891 at December 31,
2000, which was primarily a result of an increase in cash, prepaid expenses and
debt discount as well as a decrease in accounts receivable with an overall
increase netting $647,308 and a decrease in accounts payable and accrued
expenses with increases in convertible debentures with the net result of
$689,134. The increase in prepaid expense is attributable to prepaid SI-3000
costs as of December 31, 2001. As of December 31, 2001, The Company had prepaid
expenses of approximately $260,000 for SI-3000 installation projects which had
not yet commenced compared to $-0- prepaid SI-3000 costs at December 31, 2000.
This amount, and the related deferred income, will be recognized as expense and
revenue respectively when the installations are substantially complete.

The Company expects that its monthly operating expenses should not exceed
$80,000 per month which it believes it can maintain until such time as
profitability and cash flow are sufficient to cover these monthly expenses.
Until the above can be attained the Company will have to seek additional
funding.

DDSI's monthly operating expenses are about $80,000 per month. Of this $61,000
is covered by operations and $19,000 is covered by outside financing. If unable
to sustain outside financing, DDSI would need $60,000 per month to maintain
operations on a bare bones basis.

Other Events
- ------------

1. During February through June 2002, $33,269 of the convertible debentures
issued in March 2001 were converted into 7,547,052 shares of Common Stock.
Additionally, accrued interest relating to these notes was converted into an
additional 703,828 shares of Common Stock.

2. During October 2001 through January 2002, the remaining $165,000 of the
convertible debentures issued in December 2000, as well as $160,000 of the
convertible debentures issued in March 2001 were converted into 10,551,280
shares of Common Stock. Additionally, accrued interest relating to these notes
was converted into an additional 2,512,494 shares of common stock.

3. During October 2001 through January 2002, the Company granted 3,070,831
shares of Common Stock to certain parties for consulting services performed and
to be performed. Such shares were valued at the fair market value on the date
granted.

Name Shares Project
- ---- ------ -------

NIR 150,000 financial consulting agreement
Anthony Hill 50,000 increase presence in commercial markets
Frank Guthart 25,000 increase recognition of DDSI through Federal Contracts
Stuart Johnson 30,000 installation and travel schedules
Randolph Hall 85,000 stock payment of sales commission
Scott McBride 200,000 increase sales of CPC Lite to criminal justice and commercial market
Jim Gilligan 2 00,000 increase sales of CPC Lite to criminal justice and commercial market
David Millery 25,000 advice regarding Compu-Capture Enterprise System
Ken Blessing 25,000 advice regarding Compu-Capture Enterprise System
Darlene Lazur 41,949 stock payment for company incurred expenses
Ralph Hallenbeck 105,882 SOLVPRO - FMS Contract with Authentic & Government Sales of FMS
George Rabine 100,000 recognition and contacts of DDSI in the Asian market
Don Brown 100,000 advice concerning program development for
federal contacts
Steve Randall 400,000 corporate matters
Advocacy Group 300,000 government and political matters
About Face 750,000 public relations and investor relations activities
Owen Nacarrato 123,000 legal services
NIR 360,000 financial consulting agreement

4 During October through December 2001, DDSI issued common stock via
Subscription Agreements to various individuals. The Subscription Agreements
provided for the purchase of up to 13,333,333 shares of common stock of DDSI at
$0.03 per share, in $10,000.00 (U.S.) blocks, equaling 333,333 shares per block,
for an aggregate total of $400,000. Through January 2002, the company has raised
$240,000 through these agreements and has issued 7,999,996 shares of common
stock.

5 On December 31, 2001, DDSI issued three convertible debentures for an
aggregate amount of $500,000, with simple interest accruing at the annual rate
of 12%. These debentures are due December 31, 2002. Interest payable on the
Debentures shall be paid quarterly commencing March 30, 2002. The holders shall
have the right to convert the principal amount and interest due under the
debentures into shares of DDSI's common stock. The conversion price in effect on
any Conversion Date shall be the lesser of (1) $.043 and (2) 50% of the average
of the lowest three inter-day sales prices of the Common Stock during the twenty
Trading Days immediately preceding the applicable Conversion Date. The shares
that will be issued upon conversion of these debentures are being registered for
resale purposes by this registration statement.

Our Business

DDSI, a Delaware corporation incorporated in 1994, is the successor to
Compu-Color, Inc., an Iowa corporation. The operations of DDSI were started as a
division of ASI Computer Systems, Inc. of Waterloo Iowa in 1986. Compu-Color,
Inc. was formed in July 1989 and as of July 1, 1989 purchased the assets of the
Compu-Color division of ASI Computer Systems, Inc.

DDSI develops, assembles, markets and installs computer systems which capture
video and scanned images, digitize the image, link the digitized images to text
and store the image and text on a computer database which allows for
transmitting the image and text by computer or over telephone transmission lines
to remote locations.

Imaging technology enables computers to record, store and retrieve both textual
information and visual images. The common problem in imaging technology is how
to record, store, process and retrieve information and images within the same
system. DDSI's software programs utilize technology to link the textual
information with the images so that customers can record and retrieve related
text and images. DDSI originally developed the software to address the
information retrieval problems of tax assessors. DDSI subsequently adapted the
software for use by law enforcement agencies and management of jail facilities.
DDSI's software also addresses different information retrieval needs such as
reproducing line ups and producing housing badges (jails), bar coded wristbands
for identification which facilitates movement within jails and courts and
storing and retrieving hand written and computer generated document images
within arrest records.

While the majority of the Company's sales are one time only due to the fact that
they are software based, the Company does offer maintenance and support for
their products. On a historical basis, the company has generated approximately
$550,000 on an annual basis, or $1,650,000 over the past three years from these
services. Service revenue account for an average of 23% of total revenue.

Product and Services
- --------------------

Compu-Capture(R)

DDSI's principal product is the Compu-Capture(R) law enforcement program. This
program combines digitized image and textual information. The system has been
developed primarily for the criminal justice market, including law enforcement,
jail and correctional facilities.

Information is entered into the Compu-Capture(R) system at the time a subject is
booked or enters the facility, including a video image of the subject, a "mug
shot". The Compu-Capture(R) system reduces the time needed to take and process
mug shots and improves the quality of the mug shot. The booking officer can
preview each mug shot image on the computer screen before processing and storing
the image to insure accuracy and clarity. Once an acceptable image is obtained,
the booking officer can store the image through the computer application, along
with the booking record, physical characteristics and other pertinent text
material.

The information entered into the Compu-Capture(R) system can include names,
aliases, physical characteristics, such as size, hair color, facial scars or
physical deformities, and fingerprint codes.

Once the data is entered into the Compu-Capture(R) system, the visual image and
textual material can be utilized in a variety of ways. The officer conducting a
search can assign priorities or values to physical characteristics for the
computer's search of the database of existing subjects. Features that are
difficult to disguise or alter, such as facial scars, can be assigned higher
values than other characteristics such as hair color or facial hair. Mug shots
can be retrieved on the computer screen or printed individually, with or without
text information, or as part of a computer generated line-up. The digitized mug
shot and information can be transmitted to remote locations by telephone line or
radio frequency or through computer networks and can be retrieved rapidly from
central and/or remote locations.

The Compu-Capture(R) system produces images that meet or exceed the suggested
requirements of the Department of Justice National Crime Information Commission
2000 ("NCIC" 2000), the standard adopted by Federal Bureau of Investigation for
the quality of mug shots and their transmission. The NCIC does not certify or
otherwise approve any mug shot systems.

The Compu-Capture(R) system's technology can also be used in commercial
applications that are unrelated to law enforcement, such as for security or
access control, identification cards with photographs for employee
identification, voter registration cards, national welfare identification cards,
drivers' licenses, all with or without the use of fingerprints and/or
signatures.

The following versions of the Compu-Capture offered are as follows:

Compu-Capture(R) 32

Compu-Capture(R) 32 is DDSI's stand alone application. This version of the
Compu-Capture(R) product line contains its own database and can function on its
own without integration into law enforcement existing records or a jail
management system. The database allows for the capture of basic demographic
information such as physical characteristics. This information can then be
sorted for quick and easy retrieval of a particular record or various records
with similar characteristics. The CPC32 can be used on a Personal Computer or
networked together.

Compu-Capture(R) ActiveX32

Compu-Capture(R) ActiveX32 is a fully functioning executable product that
image-enables (the process by which a text-based system has images linked to its
data records by some unique identifier. This process eliminates the need to
re-key data and/or maintain multiple databases) any host based records or jail
management system without costly integration. The advantage to this product is
it eliminates multiple databases and duplicate data entry from one system to
another.

Compu-Sketch

The Compu-Sketch product is a composite sketching program, that allows an
individual with little to no artistic ability to draw a sketch of a persons face
as described by the witness. The program contains an interactive witness module
that asks the witness basic questions which are then used to create the
composite face. The application consists of over 40,000 features, that when
combined can create millions of different looking suspects. The user simply
selects a description of each face part from a menu and the system will then
assemble the parts to complete the composite. The user can manipulate each part
and/or add accessories, such as hats, jewelry and facial hair.

Compu-Scene

The Compu-Scene program uses a computer aided drafting program to compose
drawings with simple drag-n-drop technology, making accident and crime scene
drawings easy. The user simply draws a room or intersection to scale with the
CAD (Computer Assisted Design) program and then simply drops in the pre-drawn
templates to complete the scene.

Maintenance and Support

In addition to the installation of DDSI's systems, DDSI trains the personnel of
the system purchaser in the use and operation of the system. DDSI provides
maintenance and support for a limited period of time. DDSI also offers its
customers ongoing maintenance and support plus updates of the software, for an
annual fee.

New Products

Identify On Demand System:

The Identify On Demand System is a secure biometric ID application to be used in
buildings, small airports, offices, factories, apartments, etc. in order to
identify and verify individuals. The "Identify on Demand" system provides for a
PVC (Polyvinylchlorid) card to contain three or four lines of descriptive data,
a full color photo, and options for fingerprints, signature, magnetic stripe or
barcode applications. "Identify On Demand" is expandable to include fingerprint
matching, use as an access control card, and can integrate data and images to
other software.

FMS ("Fingerprint Matching System")

In December of 2001, DDSI secured a royalty license from AuthenTec Inc., located
in Melbourne, Florida, for a software suite called PowerMatch(TM) ("FMS") that
enables the end user to capture, digitize, store, retrieve and/or match or sort
fingerprints, and can be utilized either as a stand alone unit or in conjunction
with the Compu-Scan Device. DDSI subsequently renamed the software FMS
("Fingerprint Matching System"). The agreement provides DDSI with a worldwide,
non-exclusive license to sell the Power Match Software (FMS). Previously the
company utilized a limited license arrangement with Harris Corporation allowing
for sales to only the criminal justice market. AuthenTec Inc. owned all the
rights to PowerMatch (FMS). The company added all commercial markets to its
licensing arrangements by contract with AuthenTec Inc. Subsequently, the Company
terminated its limited license with Harris Corporation. DDSI does not have a
relationship with AuthenTec Inc.'s Officers or Directors. To date two FMS sales
have occurred. One of the referenced FMS sales was to Wake County, NC for
$23,910, which took place in December 2001. The second sale was to Bucks County,
Pennsylvania; the FMS is a portion of a deal that totals $235,000.

The FMS performs its matching, storage and capturing functions under the FBI
approved AINSI-NIST and NCIC 2000 regulations and the Compu-Capture(R) and
Compu-Scan 3000 can be integrated with this software. Since it is completely
scalable (from 500 to 500,000 files), DDSI can offer it for large national
databases such as voter registration, drivers license or national security
identification systems or to small jails.

Compu-Scan 3000

The Compu-Scan is a non-contact inkless direct reader fingerprint system. During
1998, The Company entered into in a development contract with ISC/US (Fort
Lauderdale, FL and Hamburg, Germany), an engineering firm having a specialized
background in fingerprint technology, to develop a computerized inkless,
non-contact fingerprint capture device called the Compu-Scan 3000. Under this
agreement, the Company granted ISC/US the funds (non reimbursable) to develop
the Compu-Scan 3000 based on certain specification requirements provided by
DDSI. The development process of the Compu-Scan 3000 will not be deemed complete
until FBI certification is achieved. In return, the Company received worldwide
rights to sell this product without a royalty fee. There are two parts to the
Compu-Scan unit; one is the single finger roll unit, which includes the "rolled"
fingerprints of the individual fingers and the other is a slap unit, which
captures the four fingers simultaneously from each hand and then the two thumbs.

The Compu-Scan electronically reads and creates a digital image of a
fingerprint. Contact inkless fingerprint capture devices typically record
fingerprint images by rolling (contacting) the fingers of a subject on the
surface of an optical assembly, creating an optical image of the fingerprint,
and then converts the optical image into a digital image by a photo-imaging
detector. The Compu-Scan operates in a similar manner, but without direct
contact by the finger to the device. The Compu-Scan captures the fingerprint by
placing the finger over an opening in the Compu-Scan which projects a light onto
the suspended finger upon which a camera captures the resulting reflected
fingerprint image.

Under federal regulation, law enforcement agencies in the United States may only
utilize fingerprint systems that have passed an extensive FBI certification
process. As a result any inkless fingerprint system developed by DDSI must pass
the FBI certification process before it can be distributed to law enforcement
agencies in the United States. The FBI Appendix F requirements are quite
voluminous and detailed; however they are available at the FBI Web Site
(http://www.fbi.gov/hq/cjisd/iafis/efts70/cover.htm) DDSI however, can supply an
inkless non-contact fingerprint system prior to FBI certification for commercial
business use, for example, for ATM machines, biometric identification for
universities, libraries, access control and any such commercial application,
which does not require a rolled fingerprint match.

On July 25, 2000, DDSI entered into an agreement with DBA Systems, a division of
Titan Systems Corp., for technical assistance in achieving compliance with the
FBI certification process. DDSI has no other relationship with Titan or its
officers and directors. The terms of the agreement are broken down in phases of
completion for the Compu-Scan certification project. The agreement with DBA
systems does not provide for any revenue. We are obligated to pay them to assist
us in obtaining FBI certification for the Compu-Scan 3000.

After discussions with Titan and other parties, it was recommended that DDSI
replace the system lens and possibly recast the structure of the single finger
roll unit to fit the new lens in order to meet FBI certification requirements.
Upgrading, testing and redesigning the Compu-Scan to meet FBI requirements could
take an additional 12 to 18 months, and will require additional funding of at
least $400,000. DDSI may not be able to raise sufficient funding to complete the
project which will result in either a delay or termination of the project.

The FBI has recently made available an acceptable palm print capture image. With
the possibility of enhancing the Compu-Scan slap unit (as discussed above), and
with the FBI rejecting DDSI's latest submission, DDSI put a temporary hold on
modifying its present Compu-Scan system. Given the ability to secure funding,
DDSI will continue its researching of what it would take to enhance its present
system to be able to scan both a fingerprint and/or a palm print plus meet FBI
Appendix F requirements, but for now this research is on hold.

It is estimated that this additional research will require approximately
$200,000 in funding to complete.
If the research information results are favorable, DDSI will redesign the unit
for FBI certification and commercial production. If the research is
unsuccessful, DDSI will revaluate at that time whether to go forward on this
project.

During December 2001, DDSI revised its anticipated certification date for its
Compu-Scan product indefinitely after its submission was not accepted by the
FBI. Additionally, there are no assurances that the FBI will ever certify the
technology. As such, and since DDSI is unable to forecast any revenues from the
product, DDSI has written off the remaining investment in Software Development
of $298,714 in the fourth quarter of 2001.

Marketing

Law Enforcement Applications

DDSI markets and sells its law enforcement product line through an internal
sales force, an independent dealer network and vendors of compatible software
applications.

DDSI employs three (3) full-time employees in sales, marketing or sales
management. Leads are generated by DDSI's marketing department and followed up
by the salesmen, who sell directly to the end user. The employees also work with
sales employees of other vendors in making sales calls and proposals.

Additionally, DDSI markets its Law Enforcement products through vendors of
compatible software application.

Customers

DDSI maintains a continuing relationship with its customers based upon support
services and periodic upgrades of the Compu-Capture(R) line and Compu-Sketch
software. Although the major revenue-generating event is the initial
installation and any significant expansion of that installation, the annual
sales of maintenance support services, which DDSI performs subsequent to the
installation, generates approximately 17% of the installed software license fee.

The Company does not rely on any particular customers or business partners for
the majority of their sales.

Business Alliances

Our business alliance relationships have changed over the years, however we
continue to generate the majority (approximately 50%) of our revenue though our
relationships with records management and jail management vendors (i.e, HTE,
Inc. located in Lake Mary, FL and FSG Software, Inc. located in Janesville, WI).
Since these vendors have written the necessary integration to use DDSI imaging
solutions, when a customer is looking to include an imaging system in their
program, the vendor will inform DDSI of the customers need. DDSI is responsible
for all marketing and sales efforts of our imaging solution. DDSI believes that
a substantial part of its growth will continue to come through these business
alliances.

DDSI supplies to its business partners a SDK (software developers kit) which
allows them to link our software to their software.

Greater Penetration of Existing Customers

In addition to seeking new customers, DDSI has recently established a marketing
program to focus on the existing customer base, which is potentially over 1,000
agencies. DDSI believes with this addition that it can now capitalize and
generate increased revenues from its existing customers.

Due to the high market penetration by DDSI's business alliances, DDSI believes
that it will be able to eliminate the formal bid process in many jurisdictions
where such strategic alliances are located. In these cases, add-on or
complimentary products can be purchased directly through the incumbent vendor.
This will help to expedite the normally long sales cycle and to eliminate the
costly and time-consuming proposal process.

Seek Acquisitions and Alliances

Depending on the availability of funds, DDSI intends to continue developing
software interfaces to make its products compatible with new and expanded
versions of systems offered by strategic alliances and other vendors of criminal
justice software. DDSI believes that expanding the number of law enforcement
systems with which the Compu-Capture(R) systems are compatible will assist DDSI
in maintaining its competitiveness.

Sales by Geographic Area

During the fiscal years ended December 31, 2001, 2000, and 1999, 89%, 93%, and
95%, respectively, of DDSI's revenues have been from domestic customers. Foreign
sales for 2001, 2000, and 1999 were $70,856, $205,953 and $150,209, or an
aggregate for these years of approximately $362,266.

Competition

DDSI has multiple solutions being sold to the Criminal Justice market with its
competitive position varying by product.

DDSI's Compu-Capture(R) system (video imaging mug shot solution) currently has
several competitors, including ImageWare Systems of San Diego, California.

The Compu-Scan 3000 if certified, will have two main competitors, CrossMatch and
Identix Incorporated All these competitors market inkless computerized
fingerprint capture systems on a national basis, and each competitor has
received FBI certification. There are no guarantees that the Company will be
able to successfully compete against these existing products.

The Compu-Sketch is a computerized, non-artistic, professional composite system.
Though there is significant competition is this field, DDSI believes that the
Compu-Sketch provides an easier system to use plus offers a larger database than
its competitors.

DDSI's Compu-Scene product is packaged with other DDSI systems. DDSI carries it
in order to provide to its customers a more complete package of products.

The FMS solution resembles other fingerprint capture, store, retrieval and
compare software, but is different in both the size of the database it can store
and search, and in the scalability of hardware requirements. DDSI plans to sell
the FMS as a stand-alone matching solution as well as to integrators where the
FMS would be packaged with its Compu-Scan system. Therefore its competition
would again be CrossMatch, Digital Biometrics, Inc. and Identix Incorporated.

Suppliers

DDSI's hardware are compatible with the IBM AS400 and other mainframe and mini
computer manufacturers. The peripheral equipment used in connection with DDSI's
system, such as video equipment, can be provided by a wide range of
manufacturers. As a result DDSI is not dependent on any particular supplier or
raw material.

Government Regulation or Government Approval

Most law enforcement agencies purchasing new or upgraded or expanded systems
require that the system meet the requirements of NCIC2000, ANSI-NIST standards
and standards issued by the National Crime Information Commission and by the
FBI. All DDSI products and solutions were required to meet these requirements.

The FBI has developed an extensive certifying process that an inkless
fingerprint system must pass before the FBI will accept cards produced by that
system. ISC/US, has agreed to grant DDSI the right to distribute an inkless
fingerprint system that has not been certified by the FBI. While there is no
assurance that the Compu-Scan inkless fingerprint system will successfully
complete the FBI certification process, the system produces fingerprint cards
similar in quality and type to other fingerprint systems that have been approved
by the FBI. DDSI believes that its Compu-Scan 3000 inkless fingerprint system
will meet the requirements of the FBI certification process, assuming it can
obtain the necessary funding to eventually complete development of the product.

ISC/US is a Delaware Corporation located in Ft. Lauderdale, Florida, and is not
related to any government agency. ISC/US also has development offices in
Hamburg, Germany.

Research and Development

As mentioned above (see page 23), DDSI has put a temporary hold on modifying its
present Compu-Scan system and started research on what it would take to upgrade
the present system to be able to scan both fingerprints and a palm print with
the slap unit, plus meeting FBI image requirements. This research should be
completed by September/October 2002. Titan Corporation is assisting DDSI in this
research.

The Company spent $536,350 in 2000 and $383,217 in 2001 for a total of $919,567
on pure research and development in the last two years. This amount includes
$388,591 spent on outside sources for assistance with Research & Development
projects. None of these costs have been borne directly by our customers.

The money spent was mainly on the continuing development of the Compu-Scan
product and FMS (Fingerprint Matching System) software.

Patents, Trademarks and Licenses

DDSI has one patent application, number 09/08/800, for a "Device and Method for
Scanning and Mapping a Surface", which was filed in October 1998. The
application is on hold until the product is completed. In addition there is a
possibility that this project may not be completed (see Compu-Scan risk factor).
The primary use of the device is a contactless fingerprinting system.

DDSI owns the proprietary rights to the software used in the Compu-Capture(R)
programs. In addition, DDSI owns the rights to the trademarks
"Compu-Capture(R)", "Compu-Color(R)" and "Compu-Scan(R)" both trademarks have
been registered with the United States Patent and Trademark Office.

Details of these trademarks are listed below:

Compu-Capture - registered June 1, 1993 as No. 1,774,106 (renewal due 6/1/2003)

Compu-Color - registered August 22, 1989 as No. 1,552,560 (renewed in 1999 with
next renewal due on 8/22/2009)

Compu-Sketch - registered April 28, 1998 as No. 2,153,713 (Combined Declaration
Under 8 & 15 due 4/28/2004)

Compu-QuickSketch - registered April 28, 1998 as No. 2,153,714 (Combined
Declaration Under 8 & 15 due 4/28/2004)

CPC2000 - registered January 14, 1997 as No. 2,029,964 (Combined Declaration
under 8 & 15 due 1/14/2003)

DDSI - registered September 9, 1997 as No. 2,094,821 (Combined Declaration under
8 & 15 due 9/9/2003)

Digital Descriptor Systems, Inc. - registered September 16, 1997 as No.
2,098,473 (Declaration Under Section 8 due 9/16/2003)

Important Events

On March 18, 2002 and March 11, 2002, DDSI announced an array of upgrades,
additional licenses and the addition of new customers which included the
successful installation of a multi-user solution in Illinois (this sale totaled
$12,000 and was completed in March 2002), five additional workstations and an ID
badging module to a Mississippi agency (this sale totaled $7,183 and was
completed in March 2002), one of New Jersey's largest county's Prosecutor's
office (this sale totaled $1,170 and was completed in September 2001).

On March 4, 2002, the Company announced the sale of an ID Badging System to one
of its existing customers. The ID Badging System will be used to accurately
identify all city employees including but not limited to Policeman, Fireman,
Security Guards, Crossing Guards, etc.

On February 22, 2002, DDSI announced the sale of a new countywide solution sold
in California. This sale will encompass 4 separate processing stations around
the county that will be integrated with the countywide CAD (Computer Assisted
Design) and RMS (Record Management System) systems. This sale totaled $36,077
and was completed in February 2002.

On January 29, 2002, the Company announced a reorganization of DDSI's management
team. Mr. Robert Gowell was appointed as CEO and Co-Chairman of the Board of
Directors. Mr. Michael J. Pellegrino will serve as President and Chief Operating
Officer of the Company in addition to his current position as CFO. Mr. Randolph
Hall was appointed as Vice President of Sales.

On January 23, 2002 DDSI announced the appointment of Anthony Shupin, Vincent
Moreno, Michael J. Pellegrino and the reappointment Robert Gowell to the
Company's Board of Directors. These appointments were made to fill the vacancies
resulting from the resignations of Charles Saphos, John Boyle, Robert Gowell and
Robert Martin. The Company also announced the resignation of Ms. Myrna
Marks-Cohn, Ph.D, from the Board of Directors for personal reasons.

On January 3, 2002, the Company announced a new and expanded agreement with
privately held Authentec, Inc. to sell its Finger Print Matching System (FMS) to
commercial markets. DDSI had previously only held the rights to sell FMS to the
criminal justice markets.

On December 5, 2001, DDSI announced the formation of a new advisory board. The
focus of the new board will be to assist and advise management of the company in
all areas of its business.

On November 26, 2001, the Company announced the completion of recently awarded
purchase orders to integrate solutions in Haverhill and Stoneham, Massachusetts.
The contracts totaled $52,000 and provide over $2,000 annually in maintenance
fees.

On November 15, 2001, DDSI announced the first non-criminal justice market sale
of its new Fingerprint Matching System (FMS), which was acquired by a county's
Department of Health and Human Services (HHS) for the purposes of identifying
and tracking its homeless population.

On November 2, 2001, the Company announced the signing of a development contract
for the Compu-Capture Enterprise Suite (CCES), with Pennsylvania-based IT
developer, ImageVision.Net (IMV). This contract was cancelled on January 14,
2002 due to lack of funding.

On October 29, 2001, DDSI announced the availability of its new "Identify On
Demand" secure ID product, an ID System for the commercial market. This product
was developed by integrating FMS' core technology with the Compu-Capture(R) core
technology.

On October 11, 2001 the Company announced the first FMS sale for Bucks County,
PA and the Bucks County Correctional facility in Doylestown, PA. This marks the
first installation in the criminal justice market of DDSI's new Fingerprint
Matching Solution (FMS) and is scheduled for installation by the end of next
quarter.

On September 25, 2001, DDSI announced an agreement with Mr. Rudy Hallenbeck,
President of SOLVPRO Inc., a privately held high tech consulting firm, to
leverage DDSI products and technology into major contracts. The Company believes
SOLVPRO will bring to DDSI essential big project capability and partnering
knowledge which will complement DDSI's proprietary products and solutions.

On September 19, 2001, the Company announced the availability of its Fingerprint
Matching System, the only fully scalable fingerprint identification system in
the world designed to take full advantage of the Windows NT/2000 environment.

On September 18, 2001, DDSI announced that the Company received its first
purchase order for its livescan fingerprint capture device. This initial order
is scheduled to be delivered in early 2002.

Employees

DDSI employs a total of 8 full time employees and 1 part time employees.

Management

As indicated earlier, the Board of Directors approved a major management
restructuring on January 25, 2002. On January 25, 2002, Mr. Cohn resigned as CEO
and President to help resolve differences between Mr. Martin and the Company.
Mr. Robert Gowell was appointed as CEO and Co-Chairman of the Board of
Directors. Mr. Michael J. Pellegrino will serve as President and Chief Operating
Officer of the Company in addition to his current position as CFO. Mr. Randolph
Hall was appointed as Vice President of Sales.

This reorganization occurred to fill the needs of the Company i.e., to bring in
people with skill sets and experience that could assist the Company in achieving
stability and growth. None of the above transactions fall within the provisions
of Rule 14f-1 in that the appointment of directors were to fill open slots and
were not part of an understanding with a person or persons acquiring securities.

The Company's current officers and directors consist of the following persons:

Name Age Position with Company
- ---- --- ---------------------

Robert Gowell 34 Co-Chairman, Chief Executive Officer and Director
Michael Pellegrino 53 President, Chief Operating Officer and Chief Financial Officer
Garrett U. Cohn 63 Co-Chairman and Director
Anthony Shupin 47 Director
Vincent Moreno 59 Director
Randolph W. Hall 43 Vice President

Robert Gowell was appointed Co-Chairman and Chief Executive Officer on January
25, 2002. He is a retired Deputy U.S. Marshal who has worked out of the New York
and Pennsylvania offices from 1991-2001 (10 years). He earned his B.S. in
Management and Finance from the City University of New York. He is currently
working on his MBA at Kutztown University.

Michael Pellegrino joined the Company in 1995. On January 25, 2002 he was
appointed President, Chief Operating Officer and Chief Financial Officer,
Secretary and a Director of the Company. For eleven years prior (from 1984 to
1995), Mr. Pellegrino was Vice President and CFO of Software Shop Systems, Inc.
From 1979 to 1984 (5 years), he was a regional controller for Capital
Cities/ABS, and for seven years earlier (1972-1979) as Director of Financial
Systems for ADP. Mr. Pellegrino has a Bachelors degree in accounting from MSU
and a Masters in Finance from Rutgers University, after which he worked at
Touche Ross for 3 years.

Garrett U. Cohn has been a Director of the Company since July, 1994. Prior to
the change in management that took place effective January 25, 2002, Mr. Cohn
served as President and Chief Executive Officer (for 12 years). Garrett Cohn
graduated from the University of Iowa, Iowa City, Iowa in 1961. His degrees were
in Philosophy with a minor in Business. He went into in the merchandise
promotion business with International Merchandise Company from 1978 - 1984 (6
years) and designed many national programs for Playboy, Shell Oil Company,
Standard Oil Company, American Express, Polaroid Corporation, Fingerhut
Manufacturing and many other clients. He was awarded national recognition by
developing the largest selling single piece of promotional luggage during the
years 1983 to 1986 and was featured in Money Magazine. Following his successful
direct merchandising activities, he became President of Rockford Tool Company
(from 1984-1986), Hillside, Illinois which he rescued from bankruptcy and later
sold to an investment group. He then returned to his family's business and
developed the computer imaging ability into a national video imaging division of
ASI Computers called Compu-Color Inc. In 1995, a public Company named Digital
Descriptors Systems Inc. was formed.

Anthony Shupin's experience includes over 20 years of executive management,
sales and marketing management and project and program management with
technology computing, aerospace and professional services companies. As a
Business Development Executive in the Communications and Media practice at
Deloitte Consulting from 9/2000 to 9/2001, Mr. Shupin directed activities and
resources targeted at strategic global accounts. Prior to Deloitte, he served as
Vice President of John Richard Associates, Inc. a management consulting firm
specialized in telecommunications from 7/1999 to 9/2000. His background also
includes roles as Director of International Business Development at Space
Imaging for 10 years (from 1989 to 1999), L.P. where responsibilities included
supervising the International Groundstation Network and establishing global
strategic relationships concerning the acquisition and distribution of high
resolution satellite imagery. Mr. Shupin has also served as Vice President,
Sales and Marketing at Remark Industries, Inc. from 1986 to 1989 (3 years),
which marketed and manufactured products such as on-line lottery and electronic
gaming devices, medical monitoring and analysis devices. Prior to Remark
Industries, he held management and account management positions at Wang
Laboratories from 1981 to 1986 (5 years) and Xerox Corporation in Princeton, New
Jersey from 1978 to 1981 (3 years). A graduate of Colby College, Waterville,
Maine, Mr. Shupin has extended his education at Rutgers University, Cook College
in Geographic Information Systems and Remote Sensing training. He has been an
invited speaker at various international symposiums and has published articles
regarding market analysis and access, education and technical assessment.

Vincent Moreno provides DDSI with over 30 years of experience from a technical
and business environment, with the past 23 years at the executive management
level. He served as Vice President of Technology for ADP for 13 years (1976
through 1989). For six years (from 1989 to 1995), as President and CEO, he ran
Mainstem Corporation, a national provider of software services. He was Vice
President of Operations at DDSI from 1999 to 2001 (2 years). Most recently (1998
to Present, 4 years), he is President and General Manager of PayPlus Software,
Inc., a provider of payroll software to the Professional Employer Organization
marketplace. Mr. Moreno is adept in setting strategic direction and is
experienced in the reengineering of corporate operating units. As a member of
the board, he brings guidance, direction, and vision to the Companies' strategic
planning.

Randolph W. Hall joined the Company as the Director of Marketing in 1996 and in
1999 assumed the position of Vice President of Operations for 3 years (until
2002). Mr. Hall was appointed Vice President of Sales on January 25, 2002. Prior
to joining the Company (from 1990-1995), Mr. Hall successfully launched and
subsequently sold his ownership share of a Company that marketed a records
management system for local law enforcement agencies. Before that Mr. Hall
served as the Regional Installation and Training Manager from 1981 - 1989 (8
years),for a national solution provider of law enforcement systems. Mr. Hall has
a degree in Computer Science and is currently pursuing his Bachelors in Business
Administration from Ursinus College.

An overview of changes that occurred with the DDSI Board of Directors is as
follows:

o Mr. Ott resigned from the DDSI Board on February 26, 2001 for
personal reasons. He resigned as Vice President of Sales on March
30, 2001.

o Mr. Charles Saphos resigned from the Board on July 26, 2001 due to
the fact the Company could not provide Directors & Officers
insurance

o Mr. Boyle resigned as a Board Member on December 18, 2001 for
personal reasons.

o Mr. Gowell resigned as a Board Member on December 18, 2001 for
personal reasons. Mr. Gowell was later reappointed as Co-Chairman of
the Board, having changed his mind as a result of the addition of
other outside Board members.

o Mr. Robert Martin was appointed as a DDSI Board Member on December
11, 2001. Mr. Martin represented a group of investors that entered
into a Private Placement Offering. In view of his large holding of
DDSI stock, he requested, and was appointed, as a member of the
Board of Directors. Mr. Martin resigned from the Board effective
January 3, 2002 due to disagreements with Company operations,
policies and practices.

o Dr. Myrna Marks-Cohn resigned on January 14, 2002 for personal
reasons. She is the wife of Mr. Garrett U. Cohn.

o Mr. Robert Gowell was reappointed to the Board of Directors on
January 15, 2002. Mr. Anthony Shupin, Mr. Vincent Moreno and Mr.
Michael Pellegrino were appointed to the Board of Directors on
January 15, 2002.

Executive compensation

The following table summarizes the compensation earned and paid by the Company
to each Officer and to all Executive Officers as a group for services rendered
in all capacities during the year ended December 31, 2000:

Summary Compensation Table

Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (I)
Name Other Securities All
and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation($) Award($) Sar (#) Payouts($) sation ($)
Garrett Cohn*

President/CEO 1999 $160,000 0 0 0 0 0 0
2000 $160,000 0 0 0 0 0 0
2001 $160,000 0 0 0 0 0 0
Michael J. 1999 $109,000 0 0 0 0 0 0
Pellegrino 2000 $109,000 0 0 0 0 0 0
President & COO 2001 $110,000 0 0 0 0 0 0
Michael Ott** 1999 $110,000 0 0 0 0 0 0
V.P/ Director 2000 $110,000 0 0 0 0 0 0
2001 $110,000 0 0 0 0 0 0
Randy Hall 1999 $ 70,000 0 0 0 0 0 0
V/P 2000 $ 70,000 0 0 0 0 0 0
2001 $ 73,500 0 0 0 0 0 0

*Mr. Cohn resigned as President and Chief Executive Officer effective January
25, 2002.
**Mr. Ott resigned from the Company effective March 30, 2001

Options/Sar Grants in Last Fiscal Year

Number of % of Total
Securities Options/SARS
Underlying Granted to
Options/SARS Employees in Exercise or Base
Name Granted Fiscal Year Price ($/Sh) Expiration Date

Garrett U. Cohn, CEO 0 N/A N/A N/A
Michael J. Pellegrino, CFO 0 N/A N/A N/A
Randy Hall, VP Operations 0 N/A N/A N/A

Aggregated Option/Sar Exercises

None exercised

Employment Agreements

Garrett U. Cohn resigned as President and Chief Executive Officer effective
January 25, 2002. In July, 1994 the Company entered into a 5 year employment
agreement with Mr. Cohn which entitled him to a base salary of $150,000 per year
which may at the Board of Directors discretion adjust his base salary (but not
below $150,000 per year) or grant a bonus. Though past the five-year period, the
present employment agreement is to remain in affect until July 18, 2002. In the
interim, Mr. Cohn was granted an increase in his annual base salary of $10,000,
making his new base salary $160,000. The Company shall also furnish Mr. Cohn
with an automobile and automobile expenses. In addition, Mr. Cohn has received
non accountable expense allowances of $11,000, $49,713 and $81,450 in 2000, 1999
and 1998 respectively.

Michael J. Pellegrino, President, Chief Operating Office and Chief Financial
Officer. In March, 2002, the Company entered into a two-year employment
agreement with Mr. Pellegrino (see Exhibit 6.9.3), which entitled him to a base
salary of $115,000 per year which may at the Board of Directors discretion
adjust his base salary (but not below $115,000 per year). Mr. Pellegrino is also
entitled to participate in the Annual Management Bonus Plan. As a participant in
the Annual Management Bonus Plan, Mr. Pellegrino will be eligible to receive
bonuses, based on performance, in any amount from 0% to 100% of the Base Salary.
In addition, Mr. Pellegrino shall participate in the Management Equity Incentive
Plan. As a participant in the Management Equity Incentive Plan, Mr. Pellegrino
will be eligible to receive options, which vest over a period of time from the
date of the option's issue, to purchase common shares of the Company. The
Company shall grant to Mr. Pellegrino, within ninety days of the date of the
Agreement, options to purchase such number of common shares of the Company equal
to 1% of the number of common shares of the Company outstanding on the date of
the Agreement (subject to the vesting and the satisfaction of the other terms
and conditions of such options). The Company may also grant to the Employee,
following the first anniversary of the date of the Agreement and at the sole
discretion of the Board of Directors, options to purchase such number of common
shares of the Company equal to 0.25% of the number of common shares of the
Company outstanding on the date of the Agreement (subject to the vesting and the
satisfaction of the other terms and conditions of such options). The Company
shall also furnish Mr. Pellegrino with an automobile and automobile expenses.
Mr. Pellegrino was appointed as President and Chief Operating Officer effective
January 25, 2002.

Michael Ott**, Vice President of Sales and Director. In July, 1998, the Company
entered into a two-year employment agreement with Mr. Ott, which entitled him to
a base salary of $110,000 per year which may at the Board of Directors
discretion adjust his base salary (but not below $110,000 per year). Though past
the two-year period, this employment agreement is to remain in affect until a
new employment agreement is drafted. Mr. Ott is also entitled to participate in
the Annual Management Bonus Plan. As a participant in the Annual Management
Bonus Plan, Mr. Ott will be eligible to receive bonuses, based on performance,
in any amount from 0% to 100% of the Base Salary. In addition, Mr. Ott shall
participate in the Management Equity Incentive Plan. As a participant in the
Management Equity Incentive Plan, Mr. Ott will be eligible to receive options,
which vest over a period of time from the date of the option's issue, to
purchase common shares of the Company. The Company shall grant to Mr. Ott,
within ninety days of the date of the Agreement, options to purchase such number
of common shares of the Company equal to 1% of the number of common shares of
the Company outstanding on the date of the Agreement (subject to the vesting and
the satisfaction of the other terms and conditions of such options). The Company
may also grant to the Employee, following the first anniversary of the date of
the Agreement and at the sole discretion of the Board of Directors, options to
purchase such number of common shares of the Company equal to 0.25% of the
number of common shares of the Company outstanding on the date of the Agreement
(subject to the vesting and the satisfaction of the other terms and conditions
of such options).
**Mr. Ott resigned from the Company effective March 30, 2001

Randolph Hall, Vice President Sales. In March, 2002, the Company entered into a
two year employment agreement with Mr. Hall (see Exhibit 6.9.4), which entitled
him to a base salary of $73,500 per year which may at the Board of Directors
discretion adjust his base salary (but not below $73,500 per year). Mr. Hall is
also entitled to participate in the Annual Management Bonus Plan. As a
participant in the Annual Management Bonus Plan, Mr. Hall will be eligible to
receive bonuses, based on performance, in any amount from 0% to 100% of the Base
Salary. In addition, Mr. Hall shall participate in the Management Equity
Incentive Plan. As a participant in the Management Equity Incentive Plan, Mr.
Hall will be eligible to receive options, which vest over a period of time from
the date of the option's issue, to purchase common shares of the Company. The
Company shall grant to Mr. Hall, within ninety days of the date of the
Agreement, options to purchase such number of common shares of the Company equal
to 1% of the number of common shares of the Company outstanding on the date of
the Agreement (subject to the vesting and the satisfaction of the other terms
and conditions of such options). The Company may also grant to the Employee,
following the first anniversary of the date of the Agreement and at the sole
discretion of the Board of Directors, options to purchase such number of common
shares of the Company equal to 0.25% of the number of common shares of the
Company outstanding on the date of the Agreement (subject to the vesting and the
satisfaction of the other terms and conditions of such options). The Company
shall also furnish Mr. Hall with an automobile and automobile expenses.
Mr. Hall was appointed as Vice President of Sales effective January 25, 2002.

Employee and Director Stock Option Plans

The Company adopted the 1994 Stock Option Plan, (restated in 1997) (the "Plan")
in order to attract and retain qualified personnel. In October 1998, the Board
of Directors voted to amend the plan but has not formally established the
amended plan to date and will not do so this fiscal year. However, under the
proposed 1998 Plan, the Compensation Committee of the Board of Directors in its
discretion may grant stock options (either incentive or non-qualified stock
options) to officers and employees. The terms and conditions upon which the
options may be exercised will be set out in the Plan. The Plan is intended to
provide a method whereby employees of the Company and others who are making and
are expected to make substantial contributions to the successful management and
growth of the Company are offered an opportunity to acquire Common Stock as an
incentive to remain with the Company and advance its interests. Therefore, to
date, no options have been granted under the 1998 plan and none will be until
the plan is formalized some time during the next fiscal year. On August 31,
1999, the Company granted bonuses to various officers and employees in the form
of 902,500 options for shares of the Company's Common Stock, fully vested, with
an exercise price of $0.37 per share. On December 15, 2000, the Company granted
to various officers and employees 843,000 options for shares of the Company's
Common Stock, fully vested, with an exercise price of $0.10 per share, the then
fair market value of the underlying shares.

Compensation of Directors

The Directors who are employees of the Company receive no compensation for their
services as Directors, either on an annual basis or for each meeting. Directors
are reimbursed for travel expenses they may incur in attending meetings of the
Board of Directors. Directors who are not an employee of the Company, receive
$1,000 for each Board of Directors meeting attended.

Certain Relationships and Related Transactions

During May 1996, the Company loaned Mr. Cohn $125,000. Interest is accrued on
this amount at one point over prime and was payable together with the principal
on August 13, 1999. Accrued interest on this loan was $40,525 at December 31,
2000. Subsequently, the Company's Board of Directors agreed to extend the
maturity date of this note indefinitely. On February 22, 2002 Mr. Cohn made a
payment of $23,615.39. In 2001, due to uncertainty as to whether the Company
will collect the note, a reserve for uncollectible notes was recorded in the
amount of $177,400.

The Company's Audit Committee will review any future transactions with
affiliates and make its recommendation to the Board of Directors to ensure such
transactions are at arms length.

The Company's Board will follow the advice of the Audit Committee on
transactions that could have the potential appearance of not being at arms
length transaction.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth current information relating to the beneficial
ownership of the Common Stock of the Company by (i) each person owning
beneficially more than 5 percent of the outstanding shares of Common Stock, (ii)
each Director of the Company and (iii) all Executive Officers and directors of
the Company as a group: Percentage of beneficial ownership is based upon
58,156,490 shares of common stock outstanding at June 12, 2002.
Beneficial Ownership
Name and Address of Common Stock
Of Beneficial Owner No. of Shares
- ------------------- --------------------

Garrett U. Cohn
249 Willow Parkway
Buffalo Grove, IL 60089 1,695,000 (1) 3.0%

Michael Pellegrino
33 Maple Lane
Brielle, NJ 08730 335,000 0.6%

Michael Ott
26415 212th Avenue
Delhi, IA 52223 215,000(2) 0.04%

Randolph Hall
505 Northridge Rd.
Collegeville, PA 19426 398,000 0.07%

Robert P. Martin
521-5th Avenue W., #1104
Seattle, WA 98119 3,099,000(3) 5.3%

Robert Gowell
264 Susquehanna Trail
Allentown, PA 18104 96,300 0.02%

Myrna Cohn Ph.D.
249 Willow Parkway
Buffalo Grove, IL 60089 15,000(4) 0.006%

Norman Cohn
200 Pine Tree Road
Radnor, PA 19087 840,000 1.4%

All Officers & Directors
As a Group 6,693,300(5) 12.0%

- --------------------
(1) Garrett U. Cohn owns 60,000 shares of stock. In addition, Mr. Cohn has the
right to vote 840,000 shares of stock held of record by Norman Cohn pursuant to
a Voting Trust Agreement described below, and, as a result of such voting
rights, such shares are included in the shares shown as beneficially owned by
Garrett U. Cohn.

(2) Michael Ott Resigned as a Director on February 26, 2001.

(3) Mr. Martin holds 2,399,000 in direct holdings and 700,000 in indirect
holdings. Mr. Martin resigned from the Board of Directors on January 3, 2002.

(4) Myrna Cohn resigned from the Board as of January 14, 2002.

(5) Of the total Officers and Director's shares, 53,000 shares are options which
are 10 year options with a three-year vesting period, vesting 1/3 each year with
a strike price of thirty-three cents ($0.33). Also included is a ten-year option
for 15,000 shares that vest over four years at a strike price of three dollars
and eighty-one cents ($3.81). Additionally, there are 110,000 options which are
10 year options that vest over 4 years a strike price of $3.30. The remaining
1,480,000 options are 10 year options that are fully vested at varying strike
prices.

(6) Includes all options which are exercisable within the next sixty (60) days.

Under the terms of the Voting Trust Agreement dated May 1, 1995, between Norman
Cohn and Garrett U. Cohn, as Trustee, Norman Cohn has transferred to the trust
940,000 shares of Common Stock of the Company, representing all of the shares of
Common Stock owned by him. Under the terms of the Voting Trust Agreement,
Garrett U. Cohn, as the Trustee, has the right to vote the stock in the Voting
Trust, except as to certain actions, including, but not limited to, any
amendment to the certification of incorporation of the Company, merger or sale
of substantially all of the assets of the Company or any action which will cause
a dilution in the outstanding shares of Common Stock. The term of the Voting
Trust is 10 years and shall terminate in April, 2005.

There are no arrangements known to the Company that at a later date may result
in a change in control of the Company.

Description of Securities
General
- -------

As of the date of this registration statement, the Company has authorized of
150,000,000 shares of Common Stock at $.001 par value, of which 58,156,490
shares are issued and outstanding at June 12, 2002, plus 1,000,000 authorized
shares of $.01 par value per share Preferred Stock and no preferred shares are
issued and outstanding at June 12, 2002. The Company has authorized outstanding
Class A and Class B Warrants numbering one million four hundred eighty-three
thousand and seven hundred fifty (1,483,750) of each class. The Class A Warrants
have an exercise price of $1.00 per share and expire on August 15, 2002. The
Class B Warrants have an exercise price of $1.50 per share and expire on August
15, 2002. The Company has reserved an equal amount of shares against these
warrants.

The following is a description of the securities of DDSI taken from provisions
of our Company's Articles of Incorporation and By-laws, each as amended. The
following description is a summary and is qualified in its entirety by the above
referenced provisions of the Articles of Incorporation and By-laws as currently
in effect. The following description includes all material provisions of the
applicable sections of the underlying documents in the summary.

Each holder of Common Stock is entitled to receive ratable dividends, if any, as
may be declared by the Board of Directors out of funds legally available for the
payment of dividends. As of the date of this Offering Circular, the Company has
not paid any dividends on its Common Stock, and none are contemplated in the
foreseeable future. It is anticipated any earnings that may be generated from
operations of the Company will be used to finance the growth of the Company.

Holders of Common Stock are entitled to one vote for each share held of record.
There are no cumulative voting rights in the election of directors. Thus the
holders of more than 50% of the outstanding shares of Common Stock can elect all
of the directors of the Company if they choose to do so. No one shareholder
beneficially owns more than 50% of the Company's Common Stock.

The holders of Common Stock will have no preemptive, subscription, conversion or
redemption rights. Upon liquidation, dissolution or winding-up of the Company,
the holders of the Common Stock are entitled to receive pro rata the assets of
the Company.

Redeemable Class A Warrants and Redeemable Class B Warrants
- -----------------------------------------------------------

The outstanding shares of 58,156,490 as of June 12, 2002 excludes the authorized
and unissued Common Redeemable Class A and Class B Warrants numbering one
million four hundred eighty-three thousand and seven hundred fifty (1,483,750)
of each class. These warrants are publicly traded with the price generally
holding steady at $.02 per warrant.

Redeemable Class A Warrants
- ---------------------------

Each Class A Warrant entitles the holder to purchase one share of Common Stock
for a period of four years commencing August 15, 1996, subject to earlier
redemption, and will be exercisable at a price of $1.00 a unit. During July 2000
the Class A Warrants' expiration date was extended to August 15, 2002. The Class
A Warrants are subject to redemption by the Company at any time on not less then
30 days written notice, at a price of $0.10 per Warrant, provided that the per
share closing bid price of the Common Stock exceeds 175% of the exercise price
for at least 20 consecutive trading days. For these purposes, the closing bid
price of the Common Stock shall be determined by the closing bid price as
reported by NASDAQ so long as the Common Stock is quoted on NASDAQ and if the
Common Stock is listed on a national securities exchange, shall be determined by
the last reported sale price on the primary exchange on which the Common Stock
is traded. Holders of Class A Warrants will automatically forfeit all rights
hereunder except the right to receive the $0.10 redemption per Warrant unless
the Warrants are exercised before they are redeemed.

Redeemable Class B Warrants
- ---------------------------

Each Class B Warrant entitles the holder to purchase one share of Common Stock
for a period of four years commencing August 15, 1996, subject to earlier
redemption, and will be exercisable at a price of $1.50 a unit. During July
2000, the Class B Warrants' expiration date was extended to August 15, 2002. The
Class B Warrants are subject to redemption by the Company at any time on not
less then 30 days written notice, at a price of $0.10 per Warrant, provided that
the per share closing bid price of the Common Stock exceeds 200% of the exercise
price for at least 20 consecutive trading days. For these purposes, the closing
bid price of the Common Stock shall be determined by the closing bid price as
reported by NASDAQ so long as the Common Stock is quoted on NASDAQ and if the
Common Stock is listed on a national securities exchange, shall be determined by
the last reported sale price on the primary exchange on which the Common Stock
is traded. Holders of Class A Warrants will automatically forfeit all rights
hereunder except the right to receive the $0.10 redemption per Warrant unless
the Warrants are exercised before they are redeemed.

The holders of Warrants ("Warrant holders") are not entitled to vote, receive
dividends, or exercise any of the rights of holders of shares of Common Stock
for any purpose. In addition, the Company has a right to increase the Warrant
Exercise Price upon not less than 20 days' prior notice to the Warrant holders
if the Company extends the exercise period of the Warrants beyond the four year
period.

Change in Control
- -----------------

There are not provisions in the Articles of Incorporation or Bylaws that would
delay, defer or prevent a change in control of Digital Descriptor Systems, Inc.

Penny Stock Disclosure Requirements:
- -----------------------------------

See discussion in risk factor section, page 11, with the heading "Penny Stock
issues may be difficult for an investor to dispose of."

Shares Eligible for Future Sale

On the date of this offering, DDSI has 58,156,490 shares of Common Stock
outstanding. Sales of a substantial number of shares of DDSI's Common Stock in
the public market following this offering could adversely affect the market
price of the Common Stock. DDSI is registering with this document 62,184,841
shares of Common Stock for resale (of which 10,253,207 have been previously
issued as restricted stock), all of which will be freely tradable without
restriction or further registration under the Securities Act. This includes:

o 50,000,000 shares representing the conversion of the aggregate of
$500,000 of 12% debentures at a price of $.02 per share (includes
25,000,000 reserve shares).
o 1,820,634 shares representing the conversion of a $25,000 debentures
at 10 percent interest and 111,000 warrants at a price of $.015 per
share.
o 10,253,207 shares of other selling shareholders

Selling Shareholders
- --------------------

The Shares being offered for resale by our Selling Stockholders are issuable in
accordance with ss. 4(2) and Rule 506 under the Securities Act of 1933, as
amended (the "Securities Act"),

The offering includes shares required pursuant to a certain convertible
debenture date May 7, 2001 and the secured convertible debenture purchase
agreement dated December 31, 2001. Additionally, certain shares are being
offered for sale by our Selling Stockholders with piggyback registration rights.

Warrants and Options:
- ---------------------

In December, 2001, DDSI issued Warrants to purchase 1,500,000 common shares at
an exercise price the lesser of $.02 per share or the average of the lowest
three inter-day sales prices during the twenty (20) Trading Days immediately
prior to exercise. The Warrant provides that in no event shall the holder
beneficially own more than 4.999% of our outstanding common stock. These
Warrants are being canceled.

Recent Financing
- ----------------

o On December 31, 2001, DDSI entered into a Securities Purchase
Agreement (the "Agreement") that calls for the issuance of $500,000
of 12% Convertible Debentures that can be converted into shares of
common stock.

Each holder of the 12% convertible debenture may not convert its securities into
shares of the Company's common stock if after the conversion, such holders,
together with any of its affiliates, would beneficially own over 4.999% of the
outstanding shares of the Company's common stock. This percent ownership
restriction may be waived by each holder on not less than 61 days' notice to the
Company. Since the number of shares of the Company's common stock issuable upon
conversion of the debentures will change based upon fluctuations of the market
price of the Company's common stock prior to a conversion, the actual number of
shares of the Company's common stock that will be issued under the debentures,
and consequently the number of shares of the Company's common stock that will be
beneficially owned by AJW Partners, New Millennium Capital Partners II and
Bristol Investment Fund, Ltd. cannot be determined at this time. Because of this
fluctuating characteristic, we agreed to register a number of shares of the
Company's common stock that exceeds the number of the Company's shares of common
stock currently beneficially owned by AJW Partners, New Millennium Capital
Partners II and Bristol Investment Fund, Ltd. The number of shares of the
Company's common stock listed in the table below as being beneficially owned by
AJW Partners, New Millennium Capital Partners II and Bristol Investment Fund,
Ltd. includes the shares of the Company's common stock that are issuable to AJW
Partners, New Millennium Capital Partners and Bristol Investment Fund, Ltd.
subject to the 4.999% limitation, upon conversion of their debentures and
exercise of their warrants. However, the 4.999% limitation would not prevent AJW
Partners, New Millennium Capital Partners and Bristol Investment Fund, Ltd. from
acquiring and selling in excess of 4.999% of the Company's common stock through
a series of conversions and sales under the debentures and acquisitions.

SELLING SHAREHOLDERS

The table below sets forth information concerning the resale of shares of Common
Stock by the Selling Stockholders. We will not receive any proceeds from the
resale of the Common Stock by the Selling Stockholders nor will we receive
proceeds from the exercise of the warrants. Furthermore, we are registering more
shares of Common Stock than the amount of Common Stock that is currently
beneficially owned by AJW Partners, New Millennium Capital Partners II and
Bristol Investment Fund, Ltd.

Assuming all the shares registered below are sold by the Selling Stockholders,
none of the Selling Stockholders will continue to own any shares of our Common
Stock.

The following table also sets forth the name of each person who is offering
shares of common stock by this prospectus, the number of shares of common stock
beneficially owned by each person, the number of shares of common stock that may
be sold in this offering and the number of shares of common stock each person
will own after the offering, assuming they sell all of the shares offered.

Shares Beneficially Shares Shares Beneficially
Owned Offered Owned After Offering
Selling Prior to the For If All Offered
Stockholder Offering Sale (13) Shares Are Sold
- ----------- ----------------- --------- -------------------

Number of Shares Percentage (4) Number of Shares Percentage

AJW Partners, LLC (1)(6) 5,554,944 4.999% 12,500,000 (5) 0 0%
New Millennium Capital Partners, LLC (2)(6) 5,554,944 4.999% 12,500,000 (5) 0 0%
Bristol Investment Fund, Ltd. (3)(6) 5,554,944 4.999% 25,000,000 (5) 0 0%

Robert Martin (10) 1,300,000 0.912% 1,300,000 0 0%
Waikiki Beach Activities, Ltd. (10)(7) 700,000 0.490% 700,000 0 0%
Michael Gurin (10) 666,666 0.467% 666,666 0 0%
Vann Warren (10) 333,333 0.234% 333,333 0 0%
Barry Colman (10) 333,333 0.234% 333,333 0 0%
Steve Adams (10) 500,000 0.350% 500,000 0 0%
Majel Carroll (10) 333,333 0.234% 333,333 0 0%
Al Schibi (10) 333,333 0.234% 333,333 0 0%
Al Schili, Jr. (10) 333,333 0.234% 333,333 0 0%
Kenneth Ripley (10) 666,666 0.467% 666,666 0 0%
Patrick V. Bonsignore (10) 666,666 0.467% 666,666 0 0%
Ed Boot (10) 500,000 0.350% 500,000 0 0%
Anthony Vallaro (10) 500,000 0.350% 500,000 0 0%
Stanley Horn (10) 333,333 0.234% 333,333 0 0%
Baron Taylor (10) 500,000 0.350% 500,000 0 0%
Robert Gowell (8) 1,931,634 1.350% 1,931,634 0 0%
Rudy Hallenbeck (9) 1,252,069 0.878% 1,252,069 0 0%
Anthony Vallaro (9) 246,471 0.172% 246,471 0 0%
Stuart Beck (11) 394,671 0.276% 394,671 0 0%
The NIR Group (12) 360,000 0.252% 360,000 0 0%

The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable upon the conversion
of the debentures and exercise of the debenture warrants is subject to
adjustment depending on, among other factors, the future market price of the
common stock, and could be materially less or more than the number estimated in
the table.

It was represented to DDSI that none of the selling shareholders have existing
short positions.

No Selling Stockholder has held any position or office, or has had any material
relationship with us or any of our affiliates within the past three years with
the exception of Robert Martin and Robert Gowell. Mr. Martin was a Director in
2001 for approximately one month before resigning and Mr. Gowell recently was
placed on the Board of Directors by the present DDSI Board to fill a vacancy.

None of the selling shareholders are broker-dealers or affiliates of
broker-dealers.

(1) AJW Partners, LLC is a private investment fund that is owned by all its
investors and managed by SMS Group, LLC of which Corey S. Ribotsky is
the fund manager. As the control person of the shares owned by AJW
Partners, Mr. Ribotsky will be viewed by the staff as the owner of such
shares for purposes of calculating beneficial ownership as defined by
Rule 13d-3 under the Securities Exchange Act of 1934.

(2) New Millennium Capital Partners II, LLC is a private investment fund
that is owned by all its investors and managed by First Street Manager
II, LLC of which Glenn A. Arbeitman and Corey S. Ribotsky are the fund
managers. As the control persons of the shares owned by New Millennium
Capital Partners II, Glenn A. Arbeitman and Corey S. Ribotsky will be
viewed by the staff as the owners of such shares for purposes of
calculating beneficial ownership as defined by Rule 13d-3 under the
Securities Exchange Act of 1934.

(3) Bristol Investment Fund, Ltd is a private investment fund that is owned
by all its investors and managed by Bristol DLP, LLC of which Paul
Kessler and Diana Kessler are the fund managers. As the control persons
of the shares owned by Bristol DLP, LLC, Paul Kessler and Diana Kessler
will be viewed by the staff as the owners of such shares for purposes
of calculating beneficial ownership as defined by Rule 13d-3 under the
Securities Exchange Act of 1934.

(4) Percentages are based on 110,088,124 shares of our common stock
outstanding (includes the shares in this Offering) as of June 12, 2002.

(5) Pursuant to the Registration Rights Agreement between us and the
debenture holders, we are required to register such number of shares of
common stock equal to the sum of (i) 200% of the number of shares of
common stock issuable upon conversion in full of their debentures,
assuming for such purposes that all interest is paid in shares of our
common stock, that the Debentures are outstanding for one year and that
such conversion occurred at a price as specified in the debentures
respective agreements and (ii) the number of shares of Common Stock
issuable upon exercise in full of the warrants. As a result of the
contractual agreement not to exceed 4.999% beneficial ownership, the
selling shareholder does not believe it is a control person as defined
in the Securities Exchange Act of 1934 or is required to file a
Schedule 13D. If 110,088,124 shares are outstanding, these referenced
selling shareholders cannot own more than 5,554,944 shares each.

(6) Independent third parties who invested in our December 31, 2001 bridge
financing. In connection with our bridge financing of $500,000, we
issued convertible debentures and warrants to purchase 1,500,000 shares
of our common stock. These warrants are being canceled.

Convertible Notes
Issued on December 31, 2001

AJW Partners, LLC $125,000
NewMillennium Capital Partners, LLC $125,000
Bristol Investment Fund, Ltd. $250,000

=======================================================
Total $500,000

(7) The principal of this company is Robert P. Martin.

(8) Underlying shares of $25,000 convertible note issued May 7, 2001 to
Robert Gowell. Mr. Gowell is a Director of the Company.

(9) Represents an adjustment to the number of shares of common stock
required to be held in reserve to provide for the conversion of Mr.
Hallenbeck's and Mr. Vollaro's notes registered on August 29, 2001 file
number 333-59888.

(10) Represents private placement shares issued pursuant to Regulation D,
Sec 506, the Securities Act of 1933 (as "amended").

(11) Represents restricted shares for services performed.

(12) Represents restricted shares issued for services performed with
registration rights. The controlling person is Mr. Corey S. Ribotsky.

(13) This column represents the total number of shares of common stock that
each selling security holder intends to sell, based on the current
market price, regardless of the 4.999% limitation. AJW Partners, New
Millennium Capital Partners and Bristol Investment Fund, Ltd. may
acquire and sell more then 4.999% of common stock through the sale of
conversions under the debentures.

The following information provides the dates the shares were acquired and what
services or assets were exchanged for the value of each.

Selling
Stockholder Shares Offered Price Date Asset/Services

AJW Partners, LLC* 12,500,000 $0.02 12/31/2001 Convertible Debentures
New Millennium Capital Partners* 12,500,000 $0.02 12/31/2001 Convertible Debentures
Bristol Investment Fund, Ltd.* 25,000,000 $0.02 12/31/2001 Convertible Debentures
Robert Martin 1,300,000 $0.03 11/2/2001 Private Placement ($39,000)
Waikiki Beach Activities, Ltd. 700,000 $0.03 11/2/2001 Private Placement ($21,000)
Michael Gurin 666,666 $0.03 11/2/2001 Private Placement ($20,000)
Vann Warren 333,333 $0.03 11/2/2001 Private Placement ($10,000)
Barry Colman 333,333 $0.03 11/2/2001 Private Placement ($10,000)
Steve Adams 500,000 $0.03 11/2/2001 Private Placement ($15,000)
Majel Carroll 333,333 $0.03 11/2/2001 Private Placement ($10,000)
Al Schibi 333,333 $0.03 11/2/2001 Private Placement ($10,000)
Al Schibi, Jr. 333,333 $0.03 11/2/2001 Private Placement ($10,000)
Kenneth Ripley 666,666 $0.03 11/2/2001 Private Placement ($20,000)
Patrick V. Bonsignore 666,666 $0.03 11/2/2001 Private Placement ($20,000)
Ed Boot 500,000 $0.03 11/2/2001 Private Placement ($15,000)
Anthony Vollaro 500,000 $0.03 11/30/2001 Private Placement ($15,000)
Stanley Horn 333,333 $0.03 12/24/2001 Private Placement ($10,000)
Baron Tayler 500,000 $0.03 12/24/2001 Private Placement ($15,000)
Robert Gowell 1,931,634 $0.015 5/7/2001 Convertible Note ($25,000 + 111,000 Warrants)
Ralph Hallenbeck 1,252,069 $0.038 9/24/2001 Convertible Note**
Anthony Vollaro 246,471 $0.034 9/25/2001 Convertible Note**
Stuart Beck 394,671 $0.03 Accounts Payable/Legal Services

*Conversion price in effect on any conversion date shall be the lesser of (1)
$.043 and (2) 50% of the average of the lowest three inter-day sales prices of
the Common Stock during the twenty trading days immediately preceding the
applicable conversion date.
**This transaction is for the difference in price from the SB-2 Registration
(File#333-59888) to actual conversion date.

Plan of Distribution

Each selling stockholders will most likely sell their shares on the OTCBB
exchange.

Therefore, the selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market, or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. There is no assurance that the selling stockholders
will sell any or all of the common stock in this offering. The selling
stockholders may use any one or more of the following methods when selling
shares:

o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers.

o Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction.

o Purchases by a broker-dealer as principal and resale by the
broker-dealer for its own account.

o An exchange distribution following the rules of the applicable
exchange

o Privately negotiated transactions

o Short sales or sales of shares not previously owned by the
seller

o Broker-dealers may agree with the selling stockholders to sell
a specified number of such shares at a stipulated price per
share

o A combination of any such methods of sale any other lawful
method

The selling stockholders may also engage in:

o Short selling against the box, which is making a short sale
when the seller already owns the shares.

o Other transactions in our securities or in derivatives of our
securities and the subsequent sale or delivery of shares by
the stockholder.

o Pledging shares to their brokers under the margin provisions
of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer to sell
the pledged shares.

Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from selling stockholders in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission from the purchaser in amounts to be negotiated. The selling
stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.

The selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be considered to be "underwriters" within the meaning of
the Securities Act for such sales. An underwriter is a person who has purchased
shares from an issuer with a view towards distributing the shares to the public.
In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be considered to be
underwriting commissions or discounts under the Securities Act.

Because the following selling shareholders are "underwriters" within the meaning
of Section 2(11) of the Securities Act, they will be subject to the prospectus
delivery requirements:

o AJW Partners, LLC
o New Millennium Capital Partners, LLC
o Bristol Investment Fund, Ltd.

We are required to pay all fees and expenses incident to the registration of the
shares in this offering. However, we will not pay any commissions or any other
fees in connection with the resale of the common stock in this offering. We have
agreed to indemnify the selling shareholders and their officers, directors,
employees and agents, and each person who controls any selling shareholder, in
certain circumstances against certain liabilities, including liabilities arising
under the Securities Act. Each selling shareholder has agreed to indemnify the
Company and its directors and officers in certain circumstances against certain
liabilities, including liabilities arising under the Securities Act.

If we are notified by the selling stockholder that they have a material
arrangement with a broker-dealer for the resale of the common stock, then we
would be required to amend the registration statement of which this prospectus
is a part, and file a prospectus supplement to describe the agreements between
the selling stockholder and the broker-dealer.

Legal Proceedings

Robert Martin - Shareholder Threatened Lawsuit

On January 19, 2002, DDSI's Board of Directors received a letter threatening
legal action from Mr. Robert P. Martin who purchased shares pursuant to a
private placement offering in October 2001. The letter alleged false and
misleading representations made to Mr. Robert Martin by Mr. Garrett Cohn and Mr.
Scott Gallagher (About Face Communications) involving convertible debenture
funding.

The shareholder has threatened a direct and derivative action suggesting the
convertible debt was not legally authorized.

Upon receipt of the threatened complaint, DDSI's board of directors had a
discussion with Mr. Martin where DDSI represented that it was in compliance with
the company bylaws, state and federal securities laws and that the current board
of directors were unaware of any fraudulent representations.

Therefore, DDSI disputes the allegations made in the complaint for the following
reasons, 1) the Company is unaware of any false and misleading misrepresentation
made by Mr. Garrett Cohn, 2) the threatened complaints received contained
insufficient information to make a determination of any wrong doing and 3) the
convertible debt was legally authorized by DDSI Board of Directors. Concerning
the legality of the convertible debt, there were three members on the Board of
Directors at the time this issue was voted on. Two board members were present
and voted on behalf of accepting the convertible debenture. In addition,
corporate counsel was contacted prior to the vote and after review of the
corporate bylaws indicated that pursuant to DDSI bylaws there was a quorum
present, therefore the business transacted by the Board would be legal and
binding. Thus, DDSI would vigorously defend itself against the allegations if
such actions were pursued. Currently there has been no action filed.

AccuSoft - Action to Terminate Product Licenses

On July 16, 2001, AccuSoft Corporation filed a complaint against DDSI in the
United States District Court for the Central District of Massachusetts, Civil
Action No. 0140132-NMG. AccuSoft sought the following relief:

A. The termination of the following license agreements: ImageGear 6.0, 95
and 98.

B. A preliminary injunction enjoining DDSI from using the above licenses
in the sales of their products.

Since the initial filing of the action by AccuSoft Corporation, DDSI has stopped
using AccuSoft's ImageGear 6.0, 95 and 98 software and have replaced AccuSoft's
controls. In addition, there has been no further communication from Accusoft
concerning this matter.

Should this matter go to court and DDSI receive an unfavorable ruling for
failing to terminate the use of the licenses, there may be some monetary
damages. Assuming the damages would be based on the generic royalty agreement,
the amount of damages would be minimal, or approximately $5,000.

Experts

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2001 and 2000 as appears on the prospectus.

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2001, appearing in this Prospectus and Registration Statement have been audited
by Withum Smith&Brown, independent auditors, as set forth in their report
thereon.

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2000, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
(which contains an explanatory paragraph describing conditions that raise a
substantial doubt about the Company's ability to continue as a going concern as
described in Note 2 to the financial statements) appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

Legal Matters

Legal matters concerning the issuance of shares of common stock offered in this
registration statement will be passed upon by Owen Naccarato, Attorney at Law.
Owen Naccarato owns 123,000 shares of the company's common stock.

Other Available Information

We are subject to the reporting requirements of the Securities and Exchange
Commission (the "commission"). We file periodic reports, proxy statements and
other information with the commission under the Securities Exchange Act of 1934.
We will provide without charge to each person who receives a copy of this
prospectus, upon written or oral request, a copy of any information that is
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless the exhibits are themselves
specifically incorporated by reference). Requests should be directed to: Garrett
Cohn

We have filed a registration statement on Form SB-2 under the Securities Act of
1933 Act with the Commission in connection with the securities offered by this
Prospectus. This Prospectus does not contain all of the information that is the
registration statement, you may inspect without charge, and copy our filings, at
the public reference room maintained by the Commission at 450 Fifth Street, N.W.
Washington, D.C. 20549. Copies of this material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W. Washington,
D.C. 20549, at prescribe rates.

Information about the public reference room is available from the commission by
calling 1-800-SEC-0330.

The commission maintains a web site on the Internet that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the commission. The address of the site is www.sec.gov.
Visitors to the site may access such information by searching the EDGAR archives
on this web site.

We have not authorized anyone to provide you with any information that is
different.

The selling security holders are offering to sell, and seeking offers to buy,
shares of common stock only in jurisdictions where such offers and sales are
permitted.

The information contained in this Prospectus is accurate as of the date of this
prospectus. We will keep this prospectus up to date and accurate.

Financial Statements

Our Financial Statements begin on page F-1

Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

A Form 8-K was filed on February 7, 2002, and subsequently amended on February
19, 2002, respectively, reporting a change in accounting firms.

o Ernst & Young LLP was previously the independent auditors
for Digital Descriptor Systems, Inc. (DDSI). On February
4, 2002, Ernst & Young LLP resigned as independent
auditors and Withum, Smith & Brown, PC was engaged as
independent auditors. The decision to change was based on
financial considerations and was approved by the audit
committee and the full Board of Directors of DDSI.

o The audit reports of Ernst & Young LLP on the financial
statements of DDSI as of and for the fiscal years ended
December 31, 2000 and 1999 did not contain an adverse
opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting
principles, except that such reports were modified with
respect to DDSI's ability to continue as a going concern.

o During DDSI's two most recent fiscal years ended December
31, 2000, and the subsequent interim period ending
February 4, 2002, there were no disagreements between
DDSI and Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure,
or auditing scope and procedures, which if not resolved
to the satisfaction of Ernst & Young would have caused
Ernst & Young to make reference to the matter in their
report. DDSI has requested Ernst & Young to furnish it a
letter addressed to the Commission stating whether it
agrees with the above statements. A copy of that letter,
dated February 19, 2002, is filed as Exhibit 16 to the
Form 8-K, Amendment No. 1.

o There were no other "reportable events" as that term is
described in Item 304(a)(1)(v) of Regulation S-K
occurring within DDSI's two most recent fiscal years and
the subsequent interim period ending February 4, 2002.

o During DDSI's two most recent fiscal years ended December
31, 2001 and the subsequent interim period through
February 4, 2002, DDSI did not consult with Withum, Smith
& Brown, PC regarding any of the matters or events set
forth in Item 304 (a)(2)(i) and (ii) of Regulations S-K.

Part II. Information Not Required In Prospectus
- -------------------------------------------------

Indemnification of Directors and Officer

The Company's Certificate of Incorporation provides that a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.

The Company's Certificate of Incorporation provides that the Company shall
indemnify to the fullest extent permitted by law any person made or threatened
to be made a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative (a "legal action"), whether such legal Action be
by or in the right of the corporation or otherwise, by reason of the fact that
such person is or was a director or officer of the Company, or serves or served
at the request of the Company as a director or officer, of another corporation,
partnership, joint venture, trust or any other enterprise. In addition, the
Company's Certificate of Incorporation provides for indemnification of any
person made or threatened to be made a party to any Legal Action by reason of
the fact that such person is or was a director or officer of the Company and is
or was serving as a fiduciary of, or otherwise rendering to, any employee
benefit plan of or relating to the Company. The indemnification obligation of
the Company in the Certificate of Incorporation is permitted under Section 145
of the General Corporation Law of the State of Delaware.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore unenforceable.

Other Expenses of Issuance and Distribution

Related to the securities being registered. The expenses shall be paid by the
Registrant.

SEC Registration Fee $ 490.12
Printing and Engraving Expenses $ 5,000.00
Legal Fees and Expenses $10,000.00
Accounting Fees and Expenses $15,000.00
Transfer Agent Fees $ 5,000.00
Blue Sky Fees $ 1,000.00
Miscellaneous $ 5,000.00
----------
Total $41,490.12

Recent Sales of Unregistered Securities

A total of 10,915,484 shares of common stock, par value $.001 (the "Shares"),
were issued by the Company from June 1999 through May 2000, for cash or services
rendered to the Company, absent registration under the Securities Act. These
shares were offered pursuant to the exemption provided by Regulation A where
such offering price was valued at $.30 per share.

From September through December 2000, the Company issued 1,205,000 restricted
shares of its common stock for services performed. These shares were valued at
market price. These shares were allocated as follows:

o 9/29/00: 500,000 shares were issued to AJW Partners LLC,
o 9/29/00: 500,000 shares were issued to New Millennium Capital
Partners II, LLC,
o 10/27/00: 100,000 shares were issued to About Face Communications, LLC, and
o 12/28/00: 105,000 shares were issued to NIR Group LLC.

These four investors were sophisticated as defined by Section 4(2) in that they
each had sufficient knowledge and experience in financial and business matters
to be capable of evaluating the merits and risks of the proposed investment.
Furthermore, all four investors had access to information on the Company
necessary to make an informed investment decision. Thus, these shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

During December 2000, the Company issued $200,000 of convertible debentures to
two investors. A $100,000 note was issued to AJW Partners, LLC and a $100,000
note to New Millennium Capital Partners II, LLC. The debentures mature on
December 28, 2001 and accrue interest at 12% per annum. The holder has the right
to convert the debentures to common shares at any time through maturity at a
conversion price the lessor of: $0.08 per share or 50% of the average of the
lowest three trading prices during the 20 days preceding the conversion date.
The debenture holders also received warrants to purchase 400,000 common shares
at an exercise price of $0.036 per share at any time before December 28, 2003.
These debentures were issued under the exemption to registration provided by
Regulation D Rule 506.

During March 2001, the Company issued $200,000 of convertible debentures to two
investors. A $100,000 note was issued to AJW Partners, LLC and a $100,000 note
to New Millennium Capital Partners II, LLC. These debentures mature on March 4,
2002; however, the parties have entered into an agreement to extend the maturity
date for another year, and accrue interest at 12% per annum. The holder has the
right to convert the debentures to common shares at any time through maturity at
the conversion price as described in the agreement. The debenture holders
received warrants to purchase 200,000 common shares at an exercise price the
lesser of: $0.36 per share or the average of the lowest three trading prices
during the 20 days preceding the exercise date. The debentures are
collateralized by substantially all of the Company's assets. These debentures
were issued under the exemption to registration provided by Regulation D Rule
506.

During January through March 2001, the Company granted 1,100,000 shares of
restricted common stock for services performed to three consultants. Such shares
were valued at market price. These shares were allocated as follows:

o 1/23/01: 1,000,000 shares were issued to Capital Corporation,
o 2/1/01: 75,000 shares were issued to About Face Communication, and
o 3/1/01: 25,000 shares were issued to David Likes.

All three investors were sophisticated as defined by Section 4(2) of the
Securities Act of 1933, as amended, in that they each had sufficient knowledge
and experience in financial and business matters to be capable of evaluating the
merits and risks of the proposed investment. Furthermore, all three investors
had access to information on the Company necessary to make an informed
investment decision. Thus, these shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."

During March 29, 2001 through April 10, 2001, the Company granted 93,000 shares
and 75,000 shares respectively of restricted common stock for services performed
to About Face Communication. These shares were issued at market price. About
Face Corporation is sophisticated as defined by Section 4(2) in that it had
sufficient knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of the proposed investment.
Furthermore, they had access to information on the Company necessary to make an
informed investment decision. Thus, these shares were issued pursuant to the
exemption provided for under Section 4(2) of the Securities Act of 1933, as
amended, as a "transaction not involving a public offering."

During April 2001, the Company issued two convertible notes for $100,000 and
$15,000 respectively. Interest on these Notes shall be payable quarterly
commencing June 30, 2001. The holder has the right to convert the debentures and
interest accrued into shares of the Company's Common Stock at a conversion price
per share that shall be an amount equal to 50% of the mean average price of the
Common Stock for the ten (10) trading days prior to notice of conversion per
share. The underlying shares were registered on August 29, 2001, file number
33359888.
These shares were allocated as follows:

o A $100,000 note to Ralph Hallenbeck
o A $15,000 note to Anthony Vollaro

These investors were sophisticated as defined by Section 4(2) of the Securities
Act of 1933, as amended, in that they each had sufficient knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of the proposed investment. Furthermore, both investors had
access to information on the Company necessary to make an informed investment
decision. Securities were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction not
involving a public offering."

During May 2001, the Company issued one convertible note for $40,000 to Robert
Gowell, with interest at 10% per annum. Interest on these Notes shall be payable
quarterly commencing June 30, 2001. The holder has the right to convert the
debentures and interest accrued into shares of the Company's Common Stock at a
conversion price per share that shall be an amount equal to 50% of the mean
average price of the Common Stock for the ten (10) trading days prior to notice
of conversion per share. In October 2001, $15,000 of the convertible note was
paid. The parties have entered into an agreement to extend the maturity date of
the remaining balance of $25,000 for another year. Securities were issued
pursuant to the exemption provided for under Section 4(2) of the Securities Act
of 1933, as amended, as a "transaction not involving a public offering."

During September 2001, the Company issued $400,000 of convertible debentures to
two investors. $200,000 was issued to AJW Partners, LLC and $200,000 to New
Millennium Capital Partners II, LLC. These debentures mature on September 30,
2002 and accrue interest at 12% per annum. The holder has the right to convert
the debentures to common shares at any time through maturity at the conversion
price as described in the note agreement. The debenture holders received
warrants to purchase 800,000 common shares at an exercise price the lesser of:
$0.036 per share or the average of the lowest three trading prices during the 20
days preceding the exercise date. Such warrants expire September 30, 2004. The
debentures are collateralized by substantially all of the Company's assets.
These debentures were issued under the exemption to registration provided by
Regulation D Rule 506.

During September 2001, $35,000 of the convertible debentures issued in December
2000 were converted into 1,000,000 shares of Common Stock. The underlying shares
were registered August 29, 2001 file number 33359888.

During September 2001, Ralph Hallenbeck the holder of the $100,000 note issued
in April 2001 converted his note into 1,428,571 shares of free trading Common
Stock and 1,252,069 shares of restricted stock. The conversion price was valued
at $.03895 per share in accordance with the agreement terms. See above.

Ralph Hallenbeck is sophisticated as defined by Section 4(2) of the Securities
Act of 1933, as amended, in that he had sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the proposed investment. Furthermore, he had access to information on the
Company necessary to make an informed investment decision. These securities were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

During September 2001, Anthony Vollaro, the holder of the $15,000 note issued in
April 2001 also converted his shares into 214,286 shares of free trading Common
Stock and 246,471 shares of restricted stock. The conversion price for this
transaction was valued at $.034 per share in accordance with the agreement
terms.

Anthony Vollaro is sophisticated as defined by Section 4(2) of the Securities
Act of 1933, as amended, in that he had sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the proposed investment. Furthermore, he had access to information on the
Company necessary to make an informed investment decision. These securities were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

During the quarter ended September 30, 2001, the Company granted 350,000 shares
of restricted Common Stock to certain parties in connection with raising capital
and for services performed. Such shares were valued at the fair market value on
the date the shares were granted.

During October 2001 through January 2002, the remaining $165,000 of the
convertible debentures issued in December 2000, as well as $160,000 of the
convertible debentures issued in March 2001 were converted into 10,551,280
shares of common stock. Additionally, accrued interest relating to these notes
was converted into an additional 2,512,494 shares of common stock. The
underlying shares were registered August 29, 2001 file number 33359888.

During October 2001 through January 2002, the Company granted 3,070,831 shares
of Common Stock to certain parties for consulting services performed and to be
performed. Such shares were valued at market price.

These shares were allocated as follows:

o 10/17/01: 150,000 shares were issued to NIR Group
o 12/10/01: 300,000 shares were issued to Advocacy Group
o 12/10/01: 85,000 shares were issued to Randy Hall
o 12/10/01: 105,882 shares were issued to Rudy Hallenbeck
o 12/10/01: 200 ,000 shares were issued to Jim Gilligan
o 12/10/01: 200,000 shares were issued to Scott McBride
o 12/10/01: 25,000 shares were issued to David Millery
o 12/10/01: 25,000 shares were issued to Ken Blessing
o 12/10/01: 25,000 shares were issued to Frank Guthart
o 12/10/01: 100,000 shares were issued to George Rabine
o 12/10/01: 50,000 shares were issued to Anthony Hill
o 12/10/01: 400,000 shares were issued to Steve Randall
o 12/10/01: 100,000 shares were issued to Don Brown
o 12/10/01: 750,000 shares were issued to Scott Gallagher
o 12/10/01: 41,949 shares were issued to Darlene Lazur
o 12/10/01: 30,000 shares were issued to Stuart Johnson
o 12/10/01: 123,000 shares were issued to Owen Naccarato
o 1/02/02 : 360,000 shares were issued to NIR Group

All of the above investors were sophisticated as defined by Section 4(2) in that
they each had sufficient knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of the proposed
investment. Furthermore, all investors had access to information on the Company
necessary to make an informed investment decision. Thus, these shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

During October through December 2001, DDSI issued common stock via Subscription
Agreements to various individuals. Through January 2002, the company has raised
$240,000 through these agreements and has issued 8,000,000 shares at $0.05 per
share of common stock. These shares were issued under the exemption to
registration provided by Regulation D Rule 506. (See Selling Shareholders
schedule on page 38, footnote 10).

On December 31, 2001, DDSI issued three convertible debentures for an aggregate
amount of $500,000, with simple interest accruing at the annual rate of 12%. A
$125,000 note was issued to New Millennium Capital Partners II, LLC, a $125,000
note to AJW Partners, LLC and a $250,000 note to Bristol Investment Fund, Ltd.
These debentures are due December 31, 2002. Interest payable on the Debentures
shall be paid quarterly commencing March 30, 2002. The holders shall have the
right to convert the principal amount and interest due under the debentures into
shares of DDSI's common stock. The conversion price in effect on any Conversion
Date shall be the lesser of (1) $.043 and (2) 50% of the average of the lowest
three inter-day sales prices of the Common Stock during the twenty Trading Days
immediately preceding the applicable Conversion Date. The shares that will be
issued upon conversion of these debentures are being registered for resale
purposes by this registration statement. DDSI also issued common stock purchase
warrants for the right to purchase 1,500,000 shares of Common Stock of DDSI at
an exercise price per share equal to the lesser of (i) $.02 and (ii) the average
of the lowest three inter-day sales prices during the twenty (20) Trading Days
immediately prior to exercise. These shares were issued under the exemption to
registration provided by Regulation D Rule 506. These warrants are being
canceled.

It is anticipated that the $ 500,000 of convertible debentures will be converted
into shares in accordance with the terms of these debentures.

Exhibits
Exhibit
Number Description
- ------ -----------

2.1 (1) Certificate of Incorporation of the Company. Incorporated June 13, 1994.
2.2 (1) Restated Articles of Incorporation of the Issuer, May 21, 1997.
2.3 (1) Amended Articles of Incorporation.
2.3.1(5) Amended Articles of Incorporation dated October 9, 2001
2.4 (1) By-Laws of the Company.
4.1. (3) Form of Warrant Agreement with Form of Warrant Election to Purchase

4.1.1(4) Executed Warrant Agreement with AJW Partners, LLC
4.1.2(4) Executed Warrant Agreement with New Millennium Capital Partners II, LLC

4.2.1.1.1(5) Executed Stock Purchase Warrant Agreement with AJW Partners LLC
4.2.1(5) Executed Stock Purchase Warrant Agreement with New Millennium Capital Partners II LLC
4.2.2(5) Executed Stock Purchase Warrant Agreement with Bristol Investment Fund, Ltd.
5.1 (1) Form of Voting Trust Agreement between Norman Cohn and Garrett U. Cohn.
5.1.1 Opinion re: Legality
5.1.3(5) Legal Opinion to Investors
6.18 (1) Security Agreement and Note dated as of August 14, 1996 in the principal
Amount of $125,000 made by Garrett U. Cohn in favor of the Company.
6.2 (1) Resolution to Security Agreement between Norman Cohn and Garrett U. Cohn.
6.3 (1) Employee 1997 Stock Option Plan adopted by the Board of Directors February 24, 1998
and subject to stockholder ratification.
6.5 (1) Warrant Agreement dated May 1, 1995 between the Company and Jay Teitlebaum.
6.6 (1) Warrant Agreement dated June 16, 1995 between the Company and Norman Cohn.
Incorporated by reference: Form 10-KSB, period December 31,
1996, File No. 0-26604, Exhibit 4.4.
6.7 (1) Lease for the Premises dated May 16, 2000.
6.8 (1) Cohn Employment and Non-competition Agreement of Garrett U. Cohn dated July 7, 1994.
Incorporated by reference: Form 10-KSB, period December 31, 1996,
File No. 0-26604, Exhibit 10.1.
6.9 (1) Employment Agreement for Michael Pellegrino.
6.9.1 (1) Employment Agreement for Michael Ott.
6.9.2 (1) Employment Agreement for Randolph Hall.
6.9.3(6) Employment Agreement for Michael Pellegrino (2002)
6.9.4(6) Employment Agreement for Randolph Hall (2002)
10.1 (2) Software License and Royalty Agreement between Company and Harris Corporation
10.2 (2) Agreement for Development of Finger/Slap Scanner Product between the Company and
ISC/U.S., Inc.
10.2.1(5) Software License and Royalty Agreement between Company and AuthenTec

10.2.2 Strategic Joint Venture Agreement between Company and i/tx.

10.3(3) Form of Secured Convertible Debenture Purchase Agreement (December 28, 2000)
10.3.1(4) Executed Secured Convertible Debenture Purchase Agreement
10.3.2(5) Executed Securities Purchase Agreement
10.4(3) Form of First Amendment to Secured Convertible Debenture Purchase Agreement
(March 5, 2001)
10.4.1(6) Executed Amendment No. 1 to Securities Purchase Agreement dated December 31, 2001
10.5(3) Form of 12% Convertible Debenture
10.5.1(4) Executed 12% Convertible Debenture with AJW Partners, LLC
10.5.2(4) Executed 12% Convertible Debenture with New Millennium Capital Partners II, LLC
10.5.3.1 (5) Executed Secured Convertible Debenture with AJW Partners LLC
10.5.4 (5) Executed Secured Convertible Debenture with New Millennium Capital Partners II LLC
10.5.4.1 (5) Executed Secured Convertible Debenture with Bristol Investment Fund, Ltd.
10.6(3) Form of Registration Rights Agreement
10.6.1(4) Executed Registration Rights Agreement
10.6.2(5) Executed Registration Rights Agreement
10.7 (3) Form of Security Agreement
10.7.1(5 Executed Security Agreement
10.8 (3) Form of 10% Convertible Debenture
10.8.1(4) 10% Convertible Note to Robert Gowell
10.9(4) Escrow Agreement
10.9.1(4) Transfer Agent Instructions
10.9.2.1 (5) Executed Escrow Agreement
10.9.3 (5) Transfer Agent Instructions
10.10 (4) Contract with DBA Systems, a Division of Titan Industries
10.11 (4) Executed Second Amendment to Secured Convertible Debenture Purchase Agreement
10.12 (6) Form of Private Placement Subscription Agreement
16.0 (1) Letter re change in certifying accountant.
23.1 Consent of Counsel, Owen Naccarato (included in Exhibit 5.1.1)
23.2 Consent of independent auditors Ernst & Young
23.3 Consent of independent auditors WithumSmith&Brown

(1) Previously filed on Form 10-SB September 20, 2000, File No. 0-26604
(2) Previously filed on Form 10-SB/A November 17, 2000, File No. 0-26604
(3) Previously filed on Form SB-2 May 1, 2001, File No. 333-59888
(4) Previously filed on Form SB-2, Amendment 2, August 29, 2001, File No.
333-59888
(5) Previously filed on Form SB-2, February 13, 2002, File No. 333-82662

(6) Previously filed on Form SB-2, Amendment No. 1, May 9, 2002, File No.
333-82662

UNDERTAKINGS

The undersigned registrant hereby undertakes that it will:

Undertaking (a)

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

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

(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement; and arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) ('230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of the
Registration Fee" table in the effective registration statement.

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

(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

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

Undertaking (e)

Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

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

Signatures
- ----------

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Fairless
Hills, PA 19030.

Registrant: Digital Descriptor Systems, Inc.

Signature Title Date
- --------- ----- ------------

By: /s/Michael J. Pellegrino President, Chief Operating Officer June 25, 2002
--------------------------- Director
Michael J. Pellegrino

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated:

Signature Title Date
- --------- ----- ------------

By: /s/Robert Gowell Chief Executive Officer June 25, 2002
---------------- Director - Co-chairman
Robert Gowell

By: /s/ Garrett U. Cohn Director - Co-chairman June 25, 2002
-------------------
Garrett U. Cohn

By: /s/ Michael J. Pellegrino President, Chief Operating Officer June 25, 2002
------------------------- Director
Michael J. Pellegrino

By: /s/ Anthony Shupin Director June 25, 2002
------------------
Anthony Shupin

By: /s/ Vincent Moreno Director June 25, 2002
------------------
Vincent Moreno

DIGITAL DESCRIPTOR SYSTEMS, INC.

FINANCIAL STATEMENTS

DECEMBER 31, 2001 and 2000

DIGITAL DESCRIPTOR SYSTEMS, INC.
CONTENTS TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 and 2000

Contents

Independent Auditors' Reports: F-1

Audited Financial Statements

Balance Sheets F-3

Statements of Operations F-4

Statements of Shareholders' Equity (Deficiency) F-5

Statements of Cash Flows F-6

Notes to Financial Statements F-8

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders,
Digital Descriptor Systems, Inc.

We have audited the accompanying balance sheet of Digital Descriptor Systems,
Inc., as of December 31, 2001, and the related statements of operations,
shareholders' equity (deficiency) and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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 Digital Descriptor Systems,
Inc. as of December 31, 2001, and the results of its operations and its cash
flows for the year then ended 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 more fully described in Note 2 to
the financial statements, the Company has never been profitable and continues to
incur losses from operations and anticipates that it will require additional
debt and/or equity financing in 2002, which may not be readily available. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

WithumSmith+Brown
Newtown, Pennsylvania
March 23, 2002

Report of Independent Auditors

The Board of Directors and Shareholders
Digital Descriptor Systems, Inc.

We have audited the accompanying balance sheet of Digital Descriptor Systems,
Inc. as of December 31, 2000, and the related statements of operations,
shareholders' equity, and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 Digital Descriptor Systems,
Inc. as of December 31, 2000, and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.

The accompanying financial statements have been prepared assuming that Digital
Descriptor Systems, Inc. will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has never been profitable and
continues to incur losses from operations and anticipates that it will require
additional debt and/or equity financing in 2001, which may not be readily
available. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans relating 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.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
March 23, 2001

DIGITAL DESCRIPTOR SYSTEMS, INC.
BALANCE SHEETS

ASSETS December 31 March 31
2001 2000 2002
---- ---- ----
Current Assets: (Audited) (Unaudited)

Cash $ 435,662 $ 202,877 $ 50,131
Restricted cash 5,969 10,452 39,155
Investment -- 1,000
Accounts receivable, less allowance
for uncollectible accounts of $87,930 and $114,000
in 2001 and 2000, respectively and $74,410 (unaudited) in 2002, respectively 107,948 526,292 33,475
Inventory 5,665 22,596 8,160
Prepaid expenses 267,534 8,698 385,262
Debt discount and deferred financing costs 807,014 228,500 575,001
------------ ------------ ------------
Total current assets 1,629,792 1,000,415 1,091,184

Note Receivable - Former Officer, Less Allowance
for Uncollectible Notes of $177,400 and $-0-
in 2001 and 2000, and $157,753 (unaudited) in 2002, respectively -- 165,525 --
Software Development Costs -- 413,604 --
Furniture and Equipment, Net 37,090 172,046 27,181
Deposits and Other Assets 24,395 31,454 23,395
------------ ------------ ------------
TOTAL ASSETS $ 1,691,277 $ 1,783,044 $ 1,142,760
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
Accounts payable $ 418,764 $ 481,163 $ 302,161
Accrued expenses 175,742 189,209 $ 133,999
Deferred income 854,618 854,787 898,303
Current portion of equipment loan 7,211 7,147 7,211
Convertible debentures 965,000 200,000 951,000
------------ ------------ ------------
Total Current Liabilities 2,421,335 1,732,306 2,292,674

Equipment Loan, Net of Current Portion 20,066 28,626 18,270
------------ ------------ ------------
Total Liabilities 2,441,401 1,760,932 2,310,944

Shareholders' Equity (Deficiency):
Preferred stock, $.01 par value: authorized shares - 1,000,000;
issued and outstanding shares - none -- -- --
Common stock, $.001 par value: authorized shares - 150,000,000;
issued and outstanding shares - 48,045,610 at December 31, 2001 48,045 20,011 53,065
Additional paid-in capital 16,726,819 14,544,579 16,768,570
Accumulated deficit (17,524,988) (14,542,478) (17,989,819)
------------ ------------ ------------
Total Shareholders' Equity (Deficiency) (750,124) 22,112 (1,168,184)
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) $ 1,691,277 $ 1,783,044 $ 1,142,760
============ ============ =============

The Notes to Financial Statements are an integral part of these statements.

F-3

DIGITAL DESCRIPTOR SYSTEMS, INC.
STATEMENTS OF OPERATIONS

Year Ended December 31 Three Months Ended March 31
2001 2000 2002 2001
---- ---- ---- ----
(Audited) (Unaudited)

Revenues:
Software $ 938,654 $ 2,060,499 $ 39,592 $ 160,314
Hardware 94,350 229,525 13,104 5,975
Maintenance 520,837 583,349 157,174 130,724
Consulting 68,863 91,249 -- --
Other 104,003 61,836 14,292 13,035
------------ ------------ ------------ ------------
Total Revenues 1,726,707 3,026,458 224,162 310,048

Costs and Expenses:
Cost of revenues 708,703 1,615,286 68,325 129,014
General and administrative 1,705,242 1,843,336 271,300 333,230
Sales and marketing 454,169 917,381 23,846 235,610
Research and development 383,217 536,350 76,791 77,382
Write-off of software development costs 413,604 -- -- --
Provision for doubtful note receivable - former officer 177,400 -- -- --
Depreciation 138,452 162,330 9,909 50,493
Interest and amortization of deferred debt costs 753,029 1,775 259,765
Other (income) expense, net (24,599) (19,948) (20,943) 50,679
------------ ------------ ------------ ------------
Total Costs and Expenses 4,709,217 5,056,510 688,993 876,408
------------ ------------ ------------ ------------

Net Loss $ (2,982,510) $ (2,030,052) $ (464,831) $ (566,360)
============ ============ ============ ============

Net Loss Per Common Share (Basic and Diluted) $ (0.12) $ (0.11) $ (0.01) $ (0.03)
============ ============ ============ ============

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted 24,436,773 18,557,547 47,933,483 21,069,945
============ ============ ============ ============

The Notes to Financial Statements are an integral part of these statements.

F-4

DIGITAL DESCRIPTOR SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND THE THREE MONTHS ENDED MARCH 31, 2002

Common Stock Shareholders'
-------------------- Additional Unearned Accumulated Equity
Shares Amount Paid-in Capital Compensation Deficit (Deficiency)
---------- ------- --------------- ------------ ------------ -----------

Balance at December 31, 1999 14,380,127 $14,380 $12,957,544 $(14,000) $(12,512,426) $ 445,498
Issuance of common shares in connection
with a Reg. A Offering, net of offering
costs 4,426,485 4,426 1,159,640 -- -- 1,164,066
Issuance of common stock for services 1,205,000 1,205 259,895 -- -- 261,100
Debt discount relating to the beneficial
conversion feature on convertible
debentures and issuance of warrants -- -- 167,500 -- -- 167,500
Amortization of unearned compensation -- -- -- 14,000 -- 14,000
Net loss -- -- -- -- (2,030,052) (2,030,052)
---------- ------- ----------- -------- ------------ -----------
Balance at December 31, 2000 20,011,612 20,011 14,544,579 -- (14,542,478) 22,112

Issuance of common shares in connection
with a Reg. A Offering, net of offering
costs 7,999,996 8,000 221,000 -- -- 229,000
Issuance of common stock for services 4,328,831 4,329 409,993 -- -- 414,322
Conversions of convertible debentures to
common stock 15,705,171 15,705 494,747 -- -- 510,452
Debt discount relating to the beneficial
conversion feature on convertible
debentures and issuance of warrants -- -- 1,056,500 -- -- 1,056,500
Net loss -- -- -- -- (2,982,510) (2,982,510)
---------- ------- ----------- -------- ------------ -----------
Balance at December 31, 2001 48,045,610 48,045 16,726,819 -- (17,524,988) (750,124)
---------- ------- ----------- -------- ------------ -----------

Issuance of common stock for services (Unaudited) 360,000 360 14,040 -- -- 14,400
Conversions of convertible debentures to
common stock (Unaudited) 4,659,968 4,660 27,711 -- -- 32,371
Net loss (Unaudited) -- -- -- -- (464,831) (464,831)
---------- ------- ----------- -------- ------------ -----------
Balance at March 31, 2002 (Unaudited) 53,065,578 $53,065 $16,768,570 -- $(17,989,819) $(1,168,184)
========== ======= =========== ======== ============ ===========

F-5

DIGITAL DESCRIPTOR SYSTEMS, INC.
STATEMENTS OF CASH FLOWS

Year Ended December 31 Three Months Ended March 31
2001 2000 2002 2001
---- ---- ---- ----
(Audited) (unaudited)
--------- -----------

Cash Flows from Operating Activities:
Net loss $(2,982,510) $(2,030,052) $(464,831) $(566,360)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 138,452 162,330 9,909 50,493
Write-off of software development costs 413,604 --
Provision for doubtful note receivable - former officer 177,400 -- (19,647) --
Compensation expense in connection with issuance of Common Stock -- -- 5,750
Common stock issued for services received 414,322 261,100 14,400 --
Amortization of deferred financing costs and debt discounts related
to the issuance of warrants and the beneficial conversion
feature of convertible debentures 676,486 -- 232,013 57,046
Amortization of unearned compensation -- 14,000 -- --
Changes in assets and liabilities:
Accounts receivable 418,344 330,303 74,473 38,486
Inventory 16,931 26,097 (2,495) (15,076)
Prepaid expenses, deposits and other assets (251,777) (19,219) (117,728) (28,021)
Accounts payable (62,399) 360,026 (116,603) 69,245
Accrued expenses 21,985 24,395 (23,372) (109,085)
Deferred income (169) (463,147) 43,685 211,968
----------- ----------- --------- ---------
Net Cash Used in Operating Activities (1,019,331) (1,334,167) (370,156) (285,554)

Cash Flows from Investing Activities:
Proceeds from sale of investment 1,000 -- -- --
Purchase of furniture and equipment (3,496) (30,325) -- --
(Increase) Decrease in note receivable - former officer (11,875) (11,875) 19,647 (2,969)
(Increase) Decrease in restricted cash 4,483 99,548 (33,186) --
----------- ----------- --------- ---------
Net Cash Provided by (Used in) Investing Activities (9,888) 57,348 (13,539) (2,969)

Cash Flows from Financing Activities:
Net proceeds from issuance of common stock 229,000 1,164,066 -- --
Proceeds from the issuance of convertible debentures, net
of issuance costs of $198,500 in 2001 and $61,000 in 2000 1,056,500 139,000 -- 200,000
Payment of convertible debentures (15,000) -- -- --
Deferred financing costs -- -- -- (31,000)
Repayment of equipment loan (8,496) (593) (1,796) (1,781)
----------- ----------- --------- ---------
Net Cash Provided by Financing Activities 1,262,004 1,302,473 (1,796) 167,219
----------- ----------- --------- ---------

Net Increase (Decrease) in Cash 232,785 25,654 (385,531) (121,304)

Cash at Beginning of Year/Period 202,877 177,223 435,662 202,877
----------- ----------- --------- ---------

Cash at End of Year/Period $ 435,662 $ 202,877 $ 50,131 $ 81,573
=========== =========== ========= =========

The Notes to Financial Statements are an integral part of these statements.

F-6

DIGITAL DESCRIPTOR SYSTEMS, INC.
STATEMENTS OF CASH FLOWS

Year Ended December 31 Three Months Ended March 31
2001 2000 2002 2001
---- ---- ---- ----
(Audited) (unaudited)

Supplemental Disclosure of Cash Flow Information:
- -------------------------------------------------

Cash paid during the year for:
Interest $ 7,263 $ 1,775 $ 1,691 $ 79
========== ======== ======== =======
Income taxes $ -- $ -- $ -- $ --
========== ======== ======== =======

Supplemental Disclosure of Non-Cash Investing
and Financing Activities:

Acquisition of equipment with loan $ -- $ 36,366 $ -- $ --
========== ======== ======== =======

Debt discount relating to the issuance of warrants
and the beneficial conversion features of convertible debt $1,056,500 $167,500 $ -- $ --
========== ======== ======== =======

Conversion of $475,000 of debentures and $35,452 of accrued
interest into common stock $ 510,452 $ -- $ -- $ --
========== ======== ======== =======

Conversion of $14,000 of debentures and $18,371 of accrued
interest into common stock $ -- $ -- $ 32,371 $ --
========== ======== ======== =======

The Notes to Financial Statements are an integral part of these statements.

F-7

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 1 - Description of Business:
Digital Descriptor Systems, Inc. (the "Company") incorporated in
Delaware in 1994, develops, assembles and markets computer
installations consisting of hardware and software, which capture
video and scanned images, link the digitized images to text and store
the images and text on a computer database and transmit this
information to remote locations. The principal product of the Company
is the Compu-Capture Law Enforcement Program, which is marketed to
law enforcement agencies and jail facilities and generated the
majority of the Company's revenues during the years ended December
31, 2001 and 2000, and for the three months ended March 31, 2002 and
2001. Substantially all of the Company's revenues are derived
principally from state and local governments.

Note 2 - Summary of Significant Accounting Policies:
Significant accounting policies followed by the Company in the
preparation of the accompanying financial statements are
summarized below:

A. Basis of Financial Statement Presentation
The financial statements of the Company have been prepared
assuming the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has
never been profitable and has incurred substantial losses from
operations of $2,982,510 and $2,030,052 for the years ended
December 31, 2001 and 2000, respectively and, $464,831 and
$566,360 for the three months ended March 31, 2002 and 2001,
respectively. The Company expects that losses from operations
will continue through 2002 and the Company anticipates that it
will require additional financing in 2002, which may not be
readily available. These factors raise substantial doubt about
the Company's ability to continue as a going concern. The
Company's plans include expanding the sale and acceptance of
its core business solutions by hiring additional sales
resources and increased marketing activities. The Company is
also pursuing FBI Certification and introduction to the
marketplace of the Compu-Scan 3000 fingerprint-capturing
device. However, there can be no assurances that the Company
will be successful in their efforts to generate profitable
operations. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty. Financial presentation may have been changed due
to reclassifications of certain items.

B. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.

C. Interim Financial Information
The financial statements and disclosures included herein for
the three months ended March 31, 2002 and 2001 are unaudited.
These financial statements and disclosures have been prepared
by the Company in accordance with accounting principles
generally accepted in the United States for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments
(consisting of adjustments of a normal and recurring nature)
considered necessary have been included. Operating results for
the three month periods ended March 31, 2002 and 2001 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 2002.

D. Inventory
Inventory is valued at the lower of cost (determined on a
first-in, first-out basis) or market.

E. Revenue Recognition

F-8

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

The Company derives revenue from the sale of hardware,
software, post customer support (PCS), and other related
services. PCS includes telephone support, bug fixes, and rights
to upgrades on a when-and-if-available basis. Other related
services include basic consulting and training. Included with
the hardware is software that is not considered to be
incidental. Revenue from transactions with customers where the
software component is not considered to be incidental is
allocated between the hardware and software components based on
the relative fair value of the respective components.

The Company also derives revenue from the sale of software
without a related hardware component. Revenue allocable to
software components is further allocated to the individual
deliverable elements of the software portion of the arrangement
such as PCS and other services. In arrangements that include
rights to PCS for the software and/or other services, the
software component arrangement fee is allocated among each
deliverable based on the relative fair value of each of the
deliverables determined using vendor-specific objective
evidence, which has been established by the separate sales of
these deliverables.

F-9

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies (Cont'd):

E. Revenue Recognition (Cont'd)
The Company recognizes the revenue allocable to hardware and
software licenses upon delivery of the product to the end-user,
unless the fee is not fixed or determinable or collectibility
is not probable. If collectibility is not considered probable,
revenue is recognized when the fee is collected. Revenue
allocable to PCS is recognized on a straight-line basis over
the period the PCS is provided. Revenue allocable to other
services is recognized as the services are provided.

F. Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization is computed using the straight-line method over
the estimated useful lives of related assets. Depreciable lives
of the Company's property and equipment are presented below:

Years
Furniture and fixtures 5
Computer equipment 2
Vehicles 3
Leasehold improvements Estimated useful life of
the asset or term of the
lease whichever is shorter

Repair and maintenance costs are expensed when incurred, while
additions and improvements are capitalized. The cost and
related accumulated depreciation or amortization of assets sold
or retired is eliminated from the accounts and any gains or
losses are reflected in income.

G. Long-Lived Assets
The Company evaluates impairment of its intangible and other
long-lived assets in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
In making such determination, management compares the estimated
future cash flows, on an undiscounted basis, of the underlying
operations or assets with their carrying value to determine if
any impairment exists. If impairment exists, any adjustment is
determined by comparing the carrying amount to the fair value
of the impaired asset.

H. Software Development Costs
The Company capitalizes software development costs after
technological feasibility of the software is established and
through the product's availability for general release to the
Company's customers. Technological feasibility of the Company's
software development costs is determined when the planning,
designing, coding, and testing activities are completed, and
the Company has established that the product can be produced to
meet its design specifications. All costs incurred in the
research and development of new software products and costs
incurred prior to the establishment of technological
feasibility are expensed as incurred. During 1999, $413,604 was
capitalized as software development costs in connection with
the Company's new product entitled Compu-Scan, a computerized
inkless fingerprint device. During 2000, the Company submitted
this product for approval to the FBI. In 2001, due to
uncertainty as to whether the Company will be able to obtain
funding needed to complete development and the FBI approval
process, the Company wrote down the asset to a net realizable
value of $-0-.

I. Income Taxes

The Company provides for income taxes under the liability
method. Deferred income taxes reflect the net tax effects of
temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Such differences result from

F-10

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies (Cont'd):

differences in the timing of recognition by the Company of
certain expenses, the periods of depreciation of certain assets
and net operating loss carryforwards.

J. Accounting for Stock Options
Financial Accounting Standards Board issued Statement No. 123
(SFAS 123), "Accounting for Stock-Based Compensation." SFAS 123
provides companies with a choice to follow the provisions of
SFAS 123 in determination of stock-based compensation expense
or to continue with the provisions of Accounting Principles
Board Opinion No. 25 (APB 25). The Company has elected to
follow the provisions of APB 25. Under APB 25, if the exercise
price of the Company stock options equals or exceeds the market
price of the underlying Common Stock on the date of grant, no
compensation expense is recognized. The effect of applying SFAS
123 to the Company's stock-based awards results in net loss and
net loss per common share that are disclosed on a pro forma
basis in Note 9.

K. Net Loss Per Common Share
Basic loss per share is calculated by dividing the net loss by
the weighted average common shares outstanding for the period.
Diluted loss per share is calculated by dividing the net loss
by the weighted average common shares outstanding of the period
plus the dilutive effect of common stock equivalents. No
exercise of common stock equivalents were assumed during any
period because the assumed exercise of these securities would
be anti-dilutive.

L. Concentration of Credit Risk
Financial instruments which potentially subject the Company to
a concentration of credit risk principally consist of cash and
accounts receivable. Concentration of credit risk, with respect
to accounts receivable, is limited due to the Company's credit
evaluation process. The Company does not require collateral
from its customers. The Company sells its principal products to
end users and distributors principally in the United States.

M. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts
receivable, note receivable, and accounts payable, accrued
expenses and convertible debentures approximates their fair
value based on the liquidity of these financial instruments or
based on their short-term nature.

N. Impact of Recent Accounting Pronouncements
In August 2001, the FASB issued SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets, which
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets and supercedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets to be
Disposed Of. Statement 144 is effective for the Company
beginning on January 1, 2002. The Company does not expect that
the adoption of SFAS No. 144 will have a significant impact on
the Company's financial position or results of operations.

In June 2001, the FASB issued SFAS No. 141, Business
Combinations, and No. 142 Goodwill and Other Intangible Assets,
effective for fiscal years' beginning after December 15, 2001.
Under the new rules goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be
amortized over their useful lives. The adoption of this
statement will have not have a significant impact on the
Company's financial position or results of operations.

In June 1999, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivatives and Hedging Activities" (SFAS 133),
which established accounting and reporting standards for
derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred
to as derivatives), and for hedging activities. SFAS 133 is
effective for fiscal years beginning after June 15, 2000. Under
SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and destination. The Company
adopted SFAS 133 during the first quarter of 2001. The adoption
did not have a significant impact on the Company's financial
position or results of operations.

F-11

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 3 - Note Receivable - Former Officer:

During 1996, the Company loaned the former President (departed
January 25, 2002) of the Company $125,000 evidenced by a promissory
note. The note bore interest at the prime rate plus 1%, and was
payable together with the principal on August 13, 1999. The Company's
Board of Directors agreed to extend the maturity date of this note
indefinitely. At December 31, 2001 and 2000, and March 31, 2002,
accrued interest, included in the note receivable in the accompanying
balance sheet was $52,400, $40,525 and $32,753 (unaudited),
respectively. In 2001, due to uncertainty as to whether the Company
will collect the note, a reserve for uncollectible notes was recorded
in the amount of $177,400. In the first quarter of 2002, the Company
received $19,647 of payments (unaudited) on the loan.

Note 4 - Furniture and Equipment:
Furniture and equipment consists of the following:

December 31 March 31, 2002
2001 2000 (Unaudited)
---- ---- -----------

Furniture and fixtures $186,705 $186,705 $186,705
Computer equipment 274,945 271,449 274,945
Vehicles 59,049 59,049 59,049
Leasehold improvements 34,977 34,977 34,977
-------- -------- --------
555,676 552,180 555,676
Less accumulated depreciation 518,586 380,134 528,495
-------- -------- --------
$ 37,090 $172,046 $ 27,181
======== ======== ========

Depreciation and amortization included as a charge to operations
amounted to $138,452 and $162,330 for the years ended December 31,
2001 and 2000, and $9,909 and $39,004 for the three months ended
March 31, 2002 and 2001, respectively.

Note 5 - Convertible Debentures:

During January through March 2002, $14,000 (unaudited) of the
convertible debentures issued in March 2001 were converted into
2,456,140 (unaudited) shares of Common Stock. Additionally, accrued
interest of $18,371 (unaudited) relating to these notes was
converted into an additional 2,203,828 (unaudited) shares of Common
Stock.

On December 31, 2001 the Company issued three convertible debentures
for an aggregate amount of $500,000. The debentures are due December
31, 2002 and accrue interest at the rate of 12% per annum. Interest
on the debentures shall be paid quarterly commencing March 31, 2002.
The holders have the right to convert the principal amount plus
accrued interest into shares of the Company's common stock at any
time through maturity. The conversion price in effect on any
Conversion Date shall be the lesser of $.043 per share or 50% of the
average of the lowest three inter-day sales prices during the twenty
Trading Days immediately preceding the applicable Conversion Date.
The Company also issued common stock purchase warrants for the right
to purchase 1,500,000 shares of common stock of the Company at an
exercise price per share equal to the lesser of $.02 or the average
of the lowest three inter-day sales prices during the twenty Trading
Days immediately prior to exercise. The estimated fair value of the
warrants of $37,500 and the intrinsic value of the beneficial
conversion feature of $385,000 have been allocated to paid-in
capital. This resulting debt discount plus $77,500 of financing
charges is being amortized on a straight-line basis over the term of
the debentures. The debentures are collateralized by substantially
all of the Company's assets.

F-12

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

During September 2001, the Company issued two convertible debentures
for an aggregate amount of $400,000. These debentures are due on
September 30, 2002 and accrue interest at the rate of 12% per annum.
Interest on the debentures shall be paid quarterly commencing
December 31, 2001. The holders have the right to convert the
principal amount plus accrued interest into shares of the Company's
common stock at any time through maturity. The conversion price in
effect on any Conversion Date shall be the lesser of $.08 per share
or 50% of the average of the lowest three inter-day sales prices
during the ten Trading Days immediately preceding the applicable
Conversion Date. The Company also issued common stock purchase
warrants for the right to purchase 800,000 shares of common stock of
the Company at an exercise price per share equal to the lesser of
$.36 or the average of the lowest three closing sales prices for the
common stock during the twenty Trading Days immediately prior to
exercise. The estimated fair value of the warrants of $48,000 and the
intrinsic value of the beneficial conversion feature of $262,000 have
been allocated to paid-in capital. This resulting debt discount plus
$90,000 of financing charges is being amortized on a straight-line
basis over the term of the debentures. The debentures are
collateralized by substantially all of the Company's assets.

During April 2001 and May 2001, the Company issued three convertible
notes for an aggregate amount of $155,000 and accrue interest at the
rate of 10% per annum. Interest on the debentures shall be paid
quarterly commencing June 30, 2001. The holders have the right to
convert the principal amount plus accrued interest into shares of the
Company's common stock thirty days prior to the maturity date. The
conversion price in effect on any Conversion Date shall be an amount
equal to 50% of the mean average price of the common stock for the
ten trading days prior to notice of conversion. The intrinsic value
of the beneficial conversion feature of $155,000 has been allocated
to paid-in capital. This resulting debt discount is being amortized
on a straight-line basis over the term of the debentures. The
debentures are collateralized by substantially all of the Company's
assets. During September 2001, $115,000 of the notes were converted
into 1,498,540 shares of free trading common stock and 1,252,069
shares of restricted stock at conversion prices ranging between of
$.03895 and $.034 per share. In addition, $5,078 of accrued interest
related to the debentures was converted into 132,827 shares of common
stock. On the conversion date, the unamortized portion of the debt
discount related to the converted debt, in the amount of $11,329, was
charged to interest expense. In October 2001, $15,000 of the
convertible debentures were paid. The parties have entered into an
agreement to extend the maturity date of the remaining balance of
$25,000 for another year.

During March 2001, the Company issued two convertible debentures for
an aggregate amount of $200,000 with a maturity date of March 4,
2002. The debentures accrue interest at the rate of 12% per annum.
The holders have the right to convert the principal amount plus
accrued interest into shares of the Company's common stock at any
time through maturity. The conversion price in effect on any
Conversion Date shall be the lesser of $.08 per share or 50% of the
average of the lowest three inter-day sales prices during the ten
Trading Days immediately preceding the applicable Conversion Date.
The Company also issued common stock purchase warrants for the right
to purchase 200,000 shares of common stock of the Company at an
exercise price per share equal to the lesser of $.36 or the average
of the lowest three closing sales prices during the twenty Trading
Days immediately prior to the date of exercise. The estimated fair
value of the warrants of $64,000 and the intrinsic value of the
beneficial conversion feature of $105,000 have been allocated to
paid-in capital. This resulting debt discount plus $31,000 of
financing charges is being amortized on a straight-line basis over
the term of the debentures. The debentures are collateralized by
substantially all of the Company's assets. During November 2001
through December 2001, $160,000 of the debentures were converted into
6,309,526 shares of common stock. On the conversion date, the
unamortized portion of the debt discount and deferred financing costs
related to the converted debt, in the amount of $40,479, was charged
to interest expense.

F-13

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 5 - Convertible Debentures (Cont'd):

During December 2000, the Company issued $200,000 of convertible
debentures to two investors. The debentures accrue interest at 12%
per annum. The holder has the right to convert the debentures to
common shares at any time through maturity at a conversion price the
lessor of: $0.08 per share or 50% of the average of the lowest three
trading prices during the 20 days preceding the conversion date. The
debenture holders also received warrants to purchase 400,000 common
shares at an exercise price of $0.036 per share at any time before
December 28, 2003. The estimated fair value of the warrants of
$40,000 and the intrinsic value of the beneficial conversion feature
of $127,500 have been allocated to paid-in capital. This resulting
debt discount plus the $61,000 of financing charges was amortized on
a straight-line basis over the term of the debentures. During
September 2001 through November 2001 the debentures in the amount of
$200,000 were converted into 5,241,754 shares of common stock. In
addition, $30,374 of accrued interest related to the debentures was
converted into 1,012,494 shares of common stock. On the conversion
date, the unamortized portion of the debt discount and deferred
financing costs related to the converted debt, in the amount of
$41,756, was charged to interest expense.

F-14

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Note 6 - Equipment Loan
During 2000, the Company entered into a $36,366 automobile loan,
maturing in November 2005. The loan requires monthly installments of
$620, including interest at .9%. The loan is collateralized by the
automobile. Future maturities of the loan are as follows:

2002 $ 7,211
2003 7,276
2004 7,342
2005 5,448
2006 and Thereafter -
---------
$ 27,277
=========

Note 7 - Income Taxes:
At December 31, 2001, the Company had federal net operating loss
carryforwards of approximately $11,124,000 to offset future federal
taxable income expiring in various years through 2021. The Company
also has state net operating loss carryforwards of approximately
$621,500 to offset future state taxable income expiring in various
years through 2021.

The timing and extent in which the Company can utilize future tax
deductions in any year may be limited by provisions of the Internal
Revenue Code regarding changes in ownership of corporations due to
certain ownership changes of the Company.

The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax
liabilities at December 31, 2001 and 2000 are as follows:

2001 2000
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 3,838,269 $ 3,453,113
Bad debt reserves 37,810 43,519
Inventory reserves 1,868 200
Accrued expenses -- 1,755
Depreciation 67,848 --
----------- -----------
Total deferred tax assets 3,945,795 3,498,587

Deferred tax liabilities:
Software development -- (157,441)
Depreciation -- (22,914)
----------- -----------
Total deferred tax asset 3,945,795 3,318,232
Valuation allowance (3,945,795) (3,318,232)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========

Note 8 - Commitments and Contingencies:
The Company leases certain facilities, vehicles and office equipment
under non-cancelable operating lease agreements that expire at
various dates through 2005. Future minimum lease payments at December
31, 2001 are as follows:

2002 $ 118,194
2003 118,194
2004 118,486
2005 56,462
2006 and thereafter --
----------
$ 411,336

F-15

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

Rental expense under such operating leases was approximately $104,100
and $126,000 during the years ended December 31, 2001 and 2000,
respectively.

Note 9 - Stock Option and Other Plans:
The Company maintains the 1994 Restated Stock Option Plan (the 1994
Plan) pursuant to which the Company reserved 5,000,000 shares of
common stock. The options granted have a term of ten years and are
issued at or above the fair market value of the underlying shares on
the grant date. The Company also maintains the 1996 Director Option
Plan (the Director Plan) pursuant to which the Company reserved
200,000 shares of common stock. Under the Director Plan, each outside
director is automatically granted an option to purchase 15,000 shares
of common stock (first option) upon adoption of the Director Plan or
the date such person becomes a director. Every year thereafter, each
outside director is automatically granted an option to purchase 1,000
shares (subsequent option) on each date of the annual meeting if a
minimum of six months were served on the Board of Directors. Options
granted under the Director Plan are issued at or above the fair
market value of the underlying shares on the grant date. A portion of
the first option vests at the six-month anniversary of the date of
the grant and continues over a four-year period. Subsequent options
vest on the first anniversary of the grant date. The options expire
ten years from the date of the grant.

The following is a summary of option activity under all plans:

Weighted
1996 Total Average
Director Number of Exercise
1994 Plan Plan Nonqualified Options Price
--------------------------------------------------------------------------

Outstanding at December 31, 1999 179,000 33,182 896,500 1,109,312 $.33-$3.81
Granted 843,000 -- -- 843,000 .10
Expired -- -- (7,500) (7,500) .37
--------------------------------------------------------------------------
Outstanding at December 31, 2000 1,022,000 33,812 889,000 1,944,812 $.10-$3.81
Granted -- -- -- -- --
Expired (103,500) (7,500) (208,000) (319,000) $.10-$3.81
--------------------------------------------------------------------------
Outstanding at December 31, 2001
and March 31, 2002 918,500 26,312 681,000 1,625,812 $.10-$3.81
==========================================================================
Exercisable options at
December 31, 2001
and March 31, 2002 918,500 26,312 681,000 1,625,812
=========================================================

At December 31, 2001, the remaining contractual life of outstanding
options was 8 years.

Pro forma information regarding net loss and net loss per common
share determined as if the Company accounted for stock options
granted under the fair value method of SFAS 123 is as follows:

December 31 March 31
----------- --------
2001 2000 2002 2001
---- ---- ---- ----

Net loss: (Unaudited) (Unaudited)
As reported $(2,982,510) $(2,030,052) $464,831 $566,360
Pro forma $(2,993,559) $(2,103,563) $464,831 $529,554
Net loss per share:
As reported $ (.12) $ (.11) $ (.01) $ (.03)
Pro forma $ (.12) $ (.12) $ (.01) $ (.03)

The Company estimated the fair value of stock options at the date of
grant by using a Black Scholes option pricing model with the
following weighted-average assumptions for grants in 2000 as follows:
risk-free interest rate of 5.5% for all years; expected life of the
option of 5 years; no expected cash dividend payments on common
stock, and volatility factors of the expected market price of the

F-16

Note 9 - Stock Option and Other Plans (Cont'd):

Company's common stock of: 1.033. The weighted average estimated fair
value of stock options granted during 2000 was $.01. There were no
options issued in 2001.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. As noted above, the
Company's stock options are vested over an extended period. In
addition, option models require the input of highly subjective
assumptions including future stock price volatility. Because the
Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimates, in
management's opinion, the Black-Scholes model does not necessarily
provide a reliable measure of the fair value of the Company's stock
options.

During 1997, the Company adopted the Consultants and Advisors
Compensation Plan (the Plan). Persons eligible under this Plan
include any consultant or advisor of the Company who has provided
bona fide services to the Company, except for services provided in
connection with the offer or sale of securities in an equity
transaction. The Company reserved 300,000 shares of common stock for
issuance under this Plan of which 211,357 shares have been awarded
through December 31, 2000. Awards may be granted in the form of stock
options or stock grants. No awards shall be made after December 31,
2001. The Company has not awarded any stock options or stock grants
under this Plan since 1998.

Note 10 - Equity Transactions:
During October 2001 through December 2001, the Company received
$229,000 net of $11,000 of issuance costs, from the issuance of
7,999,996 shares of common stock at $.03 per share via subscription
agreements to various individuals.

During 2001 and 2000, the Company issued 4,328,831 and 1,205,000
shares, respectively, of restrictive common stock for services
received. The Company recorded a charge for the issuance of such
shares during 2001 and 2000 of $414,322 and $261,100, respectively,
based on the fair market value of the Company's common stock on the
date of the stock grant.

In connection with the Company's initial public offering in 1995, the
Company issued to each unit holder one Redeemable Class A Warrant and
one Redeemable Class B Warrant. The Warrants were immediately
detachable and separately transferable. Each Class A Warrant entitled
the holder to purchase one share of common stock for $6.00 subject to
adjustment, during the four-year period commencing one year from the
date of the offering. Each Class B Warrant entitled the holder to
purchase one share of common stock for $7.25 subject to adjustment,
during the four-year period commencing one year from the date of the
offering. The Class A and Class B Warrants are subject to redemption
by the Company at any time, (within thirty days notice) at $.10 per
warrant provided that the per share closing bid price of the common
stock exceeds 175% of the exercise price for the Class A Warrant, and
200% of the exercise price for the Class B Warrant, for at least 20
consecutive trading days. During July 2000, the Company's Board of
Directors reduced the exercise price of the Class A Warrants from
$6.00 to $1.00, and reduced the exercise price of the Class B
Warrants from $7.50 to $1.50. The expiration date for the Class A and
Class B Warrants was extended from August 15, 2000 to August 15,
2002. At December 31, 2001 and 2000, there were 1,483,750 Redeemable
Class A Warrants outstanding and 1,483,750 Redeemable Class B
Warrants outstanding.

During July 1994, the Chairman excercised rights to purchase 119,999
shares of Common Stock at $.001 per share in connection with an
employment agreement. The Company recorded $120,000 in unearned
compensation, based on the fair value of the restricted stock at the
date of issuance. Such unearned compensation has amortized to expense

F-17

DIGITAL DESCRIPTOR SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS

in the statement of operations over the period of the employment
agreement. Amortization expense of $-0- and $14,000 was recorded
during the years ended December 31, 2001 and 2000, respectively.

At December 31, 2001, the Company has the following common shares
reserved for issuance:

Common stock options available to grant 4,255,188
Common stock options outstanding 1,625,812
Common stock purchase rights 119,999
Class A warrants outstanding 1,483,750
Class B warrants outstanding 1,483,750
Common stock available for grant:
Employee stock purchase plan 100,000
Consultants and advisors compensation plan 88,643
Convertible debentures 12,846,668
----------
Total 22,003,810
==========

Note 11 - Subsequent Events:
During January 2002, the Company issued 360,000 shares of restricted
common stock for consulting services received. Such shares were
valued at the fair market value on the date the shares were granted.

During January 2002, the Company issued 1,500,000 shares of common
stock in payment of $12,600 accrued interest on convertible
debentures. During February 2002, the Company issued 703,828 shares
of common stock in payment of $5,771 of accrued interest on
convertible debentures.

During February 2002, $14,000 of debentures were converted into
2,456,140 shares of common stock.

In April 2002, the Company entered into an agreement to extend the
maturity date of the convertible debentures issued in March 2001 in
the amount of $200,000 with a maturity date of March 4, 2002 for an
additional year.

Note 12 - Subsequent Events (unaudited)
During April through June 2002, $19,269 of the convertible debentures
issued in March 2001 were converted into 5,090,912 shares of Common
Stock.

F-18