Room 4561
June 14, 2005
Anthony Shupin
President and Chief Executive Officer
Digital Descriptor Systems, Inc.
2150 Highway 35, Suite 250
Sea Girt, NJ 08750
Re: Digital Descriptor Systems, Inc.
Form 10-KSB for year ended December 31, 2004
Filed April 15, 2005
File No. 000-26604
Dear Mr. Shupin:
We have reviewed your response to our prior comment letter
dated April 29, 2005 in connection with our review of the Form 10-
KSB
and have the following comments. Where indicated, we think you
should revise your document in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with supplemental information so we may better
understand your disclosure. After reviewing this information, we
may
or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-KSB
Note 4. Convertible Debentures, page F-15
1. We have reviewed your response to our prior comment no. 1 where
you indicate that you expensed the total amount of the beneficial
conversion features in fiscal 2004 because the holders of the
debentures had the right to convert the notes immediately at their
discretion. You also indicated that the holders have never held
the
Company to any of the stated redemption dates, rather they only
amended the redemption dates at your request., Your response,
however, does not change the fact that your accounting for the
beneficial conversion features is not in compliance with the
guidance
provided by paragraph 19 of EITF 00-27, which states that the
beneficial conversion feature should be accreted from the date of
issuance to the stated redemption date of the convertible
instrument
regardless of when the earliest conversion date occurs.
Additionally, we note that the beneficial conversion features
recognized from the convertible debentures issued in May 2004 and
November 2004 had a pre-tax impact of approximately a 5% and 146%
on
your net loss. As a result, please amend your 10-K and subsequent
10-Q to properly account for the recognition of the beneficial
conversion features related to these to debt issuances or tell us
why
such revision is not necessary.
2. Tell us what impact your extension of the maturity date to
March
2008, on the November 2004 convertible debentures, will have on
your
accounting treatment of the beneficial conversion feature
associated
with such debt instrument.
Note 11. Subsequent Events, page F-19
3. We have reviewed your response to our prior comment no. 5.
Provide us with your present value analysis supporting your
statement
that the modification of your debt instruments issued in November
2004 did not change the net present value of the cash flows by
more
than 10%.
General
4. In connection with our prior comment letter dated April 29,
2005,
we note that you did not provide, as previously requested, a
statement in writing that the company acknowledges that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please provide us with these acknowledgements. In addition,
please
be advised that the Division of Enforcement has access to all
information you provide to the staff of the Division of
Corporation
Finance in our review of your filing or in response to our
comments
on your filing.
* * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
You may contact Patrick Gilmore at (202) 551-3406, Kathleen
Collins, Accounting Branch Chief, at (202) 551-3499 or me at (202)
551-3730 if you have questions regarding comments on the financial
statements and related matters.
Sincerely,
Craig Wilson
Senior Assistant Chief
Accountant
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Mr. Anthony Shupin
Digital Descriptor Systems, Inc.
June 14, 2005
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