SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form SB-2

Amendment No. 1

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:

Garrett U. Cohn
Chief Executive 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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Title of each class of Amount to be Proposed Proposed Exercise Proceeds to Amount of
securities to be registered maximum maximum price per the Company registration
registered offering aggregate share (9) fee
price per offering
share price
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Common Shares, par value 21,200,000(1) $ .08(7) $1,696,000 $424.00
$.001 underlying secured
convertible debenture

Common Shares, par value 1,428,571(2) $.18(8) $257,143 $64.29
$.001 underlying a
convertible debenture

Common Shares, par value 214,286(3) $.18(8) $38,571 $9.64
$.001 underlying a
convertible debenture

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Shares underlying warrants 1,400,000(4) $.036 $50,400 $12.60
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Common Shares 1,000,000(5) $.18(8) $45.00
$.001 pare value 473,000(6) $.18(8) $21.29
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Total registration fee 25,715,857 $576.81(10)
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(1) Common stock issuable upon the conversion of an aggregate of $400,000 in
convertible debentures issued in connection with the December 23, 2000 and
March 9, 2001 financing to various investors, plus $400,000 in convertible
debentures to be issued on the tenth trading day following the effective
date of this registration statement.
(2) Common Stock issuable upon the conversion of a $100,000 convertible
debenture issued in April 2001. See "Selling Shareholders."
(3) Common Stock issuable upon the conversion of a $15,000 convertible
debenture issued in April 2001. See "Selling Shareholders."
(4) Common stock issuable upon conversion of warrants issued in connection with
the December 23, 2000 (400,000 warrants) and March 9, 2001 (200,000
warrants) financing to various investors, plus 800,000 warrants to be
issued on the tenth trading day following the effective date of this
registration statement.
(5) Represents restricted shares issued for services. See "Selling
Shareholders."
(6) Represents restricted shares issued for consulting services. See "Selling
Shareholders."
(7) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended
(the "Securities Act"); based on the of the price of $.08 as per the terms
indicated in Section 4 (c)(i) of the Convertible Debenture.
(8) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended
(the "Securities Act"); using the average of the high and low prices
reported for the company's Common Stock as of April 20, 2001 and rule
457(g)(1) with respect to the various shares issued for consulting
services. See "Selling Shareholders."

(9) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) of the Securities Act of 1933, as amended (the
"Securities Act"); based on the terms of the warrant agreements.
(10) $569.61 previously paid with original filing on May 1, 2001 registration
no. 333-59888

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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.

This prospectus is not an offer to sell these securities and is not an
offer to buy these securities in any state where such an offer or sale is not
permitted.

Subject to completion, dated June 6, 2001

Digital Descriptor Systems, Inc.

25,715,857 Shares of common stock

o The 25,715,857 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". We
will not receive any proceeds from the sale of these shares. We
will receive proceeds from the exercise of warrants, the underlying
shares of which we are registering in this Prospectus, by the
selling security holders, which proceeds would be used for general
corporate purposes. As of the date of this Prospectus, the warrants
have not been exercised.

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

o June 5, 2001, the closing bid price of our Common Stock on the OTC
Bulletin Board was $0.15.

The securities offered in this Prospectus involve a high degree of risk. You
should carefully consider the factors described under the heading "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 6
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Risk Factors 10
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Use of Proceeds 14
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Price Range of Common Stock 14
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Our Dividend Policy 15
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Management's Discussion and Analysis of Financial Condition and Results of Operations 15
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Our Business 19
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Management 29
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Executive Compensation 30
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Certain Relationships and Related Transactions 32
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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 37
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Plan of Distribution 39
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Legal Proceedings 41
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Experts 41
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Legal Matters 41
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Other Available Information 41
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Financial Statements 42
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Indemnification 71
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Prospectus Summary

This Prospectus summary highlights selected information contained in this
Prospectus. 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"), 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 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.

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.

DDSI anticipates that in the future it will need to adapt its imaging technology
software to new uses, such as security devices, employee and school
identification systems and access control systems. These potential applications
are currently in the discussion phase and there are no Company resources
budgeted for them at this time.

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. Compu-Capture(R) was introduced
into the market in 1989. Since that time, DDSI has installed approximately 350
systems in 46 states in the United States, Europe, South America, Canada, Mexico
and Bahamas. During the year ended December 31, 2000, 1999 and 1998, 93%, 95%
and 99%, respectively, of DDSI's revenues were to domestic customers.

DDSI has marketed the Compu-Color(R) Assessor Program that combines digitized
images from videotapes or photographs of real estate with buildings or other
improvements, together with relevant tax assessment information. Compu-Color(R)
was introduced in 1986. The program was designed for use by local tax assessors
as a method of maintaining a visual record of all assessed improved properties
that can be rapidly accessed with the relevant textual information. The
Compu-Color Assessor Program contributed approximately two percent of DDSI's
revenues in 1999. The market for this product is minimal, therefore, DDSI has
withdrawn from this portion of the market place.

The Offering

Securities Offered 25,715,857 Selling Security Holder Shares

Common Stock Outstanding:
Prior to the Offering 21,279,612 Shares as of June 5, 2001
After the Offering 45,522,469 Shares

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

Use of Proceeds Our company will not receive any proceeds upon
the issuance of the Common Stock that is the
subject of this registration. However, DDSI
received $200,000 on December 29, 2000 and
$200,000 on March 9, 2001 as bridge funding
through the issuance of Convertible Debentures
pursuant to the "First Amendment to Secured
Convertible Debenture Purchase Agreement"
dated March 5, 2001 and the original agreement
(the "Secured Convertible Debenture Purchase
Agreement") dated December 28, 2000. DDSI is
scheduled to receive approximately another
$400,000 in convertible debentures within ten
days after the effectiveness of this
registration statement from the issuance of
Convertible Debentures. If all the warrants in
this offering are exercised, the gross
proceeds to us from the exercise of warrants
will be approximately $50,400. DDSI intends to
use the net proceeds for working capital and
expand existing 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.

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
2000 1999
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Net sales $ 3,026,458 $ 2,847,183
Cost of revenues 1,615,286 987,931
General and administrative 1,843,336 1,593,846
Sales and marketing 917,381 984,691
Research and development 536,350 429,599
Depreciation 162,330 75,553
Other (income) expense, net (18,173) (18,920)
---------------------------
Net Loss $(2,030,052) $(1,205,517)
===========================
Weighted average Common
Shares outstanding 18,557,547 10,934,900
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Basic loss per share $ (.11) $ (.11)
===========================

Current Assets $ 1,000,415 $ 1,207,385
Total Assets 1,783,044 2,049,383
Current Liabilities 1,732,306 1,603,885
Total Liabilities 1,760,932 1,603,885
Shareholders' equity $ 1,783,044 $ 2,049,383

Risk Factors

An investment in our securities involves a high degree of risk. In addition to
the other information in this prospectus, you should carefully consider the
following risk factors before investing in our securities. If any of the
following risks were to actually occur, Digital Descriptor Systems, Inc.'s
business would likely suffer. Consequently, the price of Digital Descriptor
Systems, Inc.'s common stock could decline, and investors may lose all or part
of their investment in Digital Descriptor Systems, Inc.'s common stock.

Continuing operating losses and need for financing.

For years ending December 31, 2000, 1999 and 1998 Digital Descriptor Systems,
Inc. ("DDSI"), had operating losses of $2,030,052, $1,205,517 and 1,331,391,
respectively. The Company has never been profitable and continues to incur
losses from operations. There can be no assurance that sufficient revenue,
income and cash flows will be generated to support DDSI's operations or that
DDSI will ever operate profitably. DDSI is dependent upon receipt of the net
proceeds from the current financing to finance the continued operations of DDSI
and will need additional financing to fund its future operations and development
of new products.

DDSI is dependent on its ability to attract new customers

Once a customer has purchased a system from DDSI, the revenues from that
customer will decline significantly and 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. DDSI is dependent on its ability to
attract new customers or develop new products to market to existing customers.
DDSI's ability to make sales both to new customers and existing customers will
be significantly affected by DDSI's development of new products and upgrading of
existing products to reflect current technology and DDSI's ability to price
products competitively.

Customer purchasing restrictions.

DDSI is in highly competitive and speculative areas of business, each of which
involves a substantial degree of risk. Economic and political conditions and
competition in the industry will affect the success of DDSI. Law enforcement and
taxing 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 are expected to result in an irregular and
unpredictable revenue stream for DDSI. DDSI's performance in any one quarter is
not necessarily indicative of sales trends or future performance. Large
procurements by a single customer, allow DDSI to record significant revenues
only during the term of procurement.

Public contract requirements can preclude sales.

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 to date has been,
and may continue to be, protracted. Even following contract award, significant
delays in contract implementation are possible.

Compu-Scan 3000 FBI certification.

On May 22, 2001, DDSI announced that it received responses from the FBI
regarding its February 15, 2001 submission to the FBI of its patent pending
Compu-Scan Live Scan device. These comments contained engineering inquiries
which DDSI will respond to within the next 120 days. There are no assurances by
the Company that the FBI will certify this technology and device.

The success of DDSI depends significantly upon the efforts of the President

The success of DDSI depends significantly upon the efforts of the President,
Garrett U. Cohn. See "Management". The loss of services of Mr. Cohn would likely
have a materially adverse effect on the business and the future prospects of
DDSI. DDSI is the beneficiary of life insurance policies in the amount of
$2,000,000 on the life of Garrett U. Cohn.

DDSI must continually advance its technology

The ability of DDSI to compete successfully in the digitized imaging market
which is characterized by rapidly changing technology, will depend in part upon
its ability to continually advance its technology and to develop new
applications and designs for its products.

DDSI's reliance upon sub-contractors can impair product installations.

Because DDSI's product applications are components of larger systems
applications, DDSI frequently must rely upon sub-contractors to supply hardware
and software used in the complete system installations. If the sub-contractors'
ability to implement the installation of their component is impaired, DDSI's
ability to successfully complete the project would be delayed or impaired.

The issuance of these shares will result in dilution.

The issuance of these shares will have a dilutive effect on our common stock and
may lower our stock price. We have reserved a significant number of shares of
our common stock for issuance upon the conversion of convertible debentures, and
the exercise of our warrants.

As of this offering we have outstanding $400,000 of convertible debentures that
can be converted into shares of our Common Stock. Within ten trading days after
the effective date of this registration additional debentures amounting to the
remaining $400,000 will be issued. The number of shares we will issue upon the
conversion of these debentures fluctuates with our Common Stock market price,
cannot be determined until the day of conversion. Additionally, there is no
limit on the number of shares of our Common Stock that may be issued upon the
conversion of these convertible debentures.

Certain terms and conditions must be met at the time of the closing of the
$400,000 convertible note that is to be to be issued within ten trading days
after the effective date of this registration statement. These terms and
conditions are summarized as follows:

o The representations and warranties given by the company are still
valid at the time of funding i.e.,
i) DDSI is in good standing under the laws of the state of
Delaware,
ii) the financing transaction is property authorized by the DDSI
Board of Directors and that the debentures are issued free of
encumbrances,
iii) that there are adequate authorized shares available to convert
the debentures as provided by the financing agreement,
iv) all disclosures provided by DDSI regarding DDSI, its business
and the current financing are true and DDSI did not omit any
statement that an investor may find significant.
o The registration statement shall be declared effective by June 11,
2001,
o DDSI has not broken any laws or incurred any other event which
would prevent this registration statement from becoming effective,
o The trading of DDSI's stock on the OTC Bulletin Board has not been
suspended,
o DDSI has not had in excess of 33% of its voting securities
acquired.

These convertible debentures have a conversion price that is the lesser of (1)
$0.08 and (2) 50% of the average of the lowest three inter-day prices (which
need not occur on consecutive trading days) during the twenty trading days
immediately preceding the applicable conversion date. Thus, the debentures will
be converted at prices below the current market price on the conversion date. If
conversions of the debentures occur, shareholders may be subject to an immediate
dilution in their per share net tangible book value. Two hundred thousand
dollars ($200,000) of the convertible debentures may be converted into Common
Stock at any time prior to their maturity date of December 28, 2001, with the
remaining two hundred thousand dollars ($200,000) convertible at any time prior
to their maturity date of March 4, 2002.

As of March 5, 2001, we had outstanding a total of 600,000 warrants to purchase
our Common Stock. 400,000 of these warrants have at an exercise price equal to
.036 per share. These warrants can be exercised at any time through December 28,
2003. 200,000 of these warrants have an exercise price equal to the lesser of
(i) $.036 per share and (ii) the average of the lowest three (3) closing sale
prices for the Common Stock during the twenty (20) trading days immediately
prior to the closing date. These warrants can be exercised any time through and
including March 4, 2004. Additionally, 800,000 warrants with an exercise price
equal to the lesser of (i) $.036 per share and (ii) the average of the lowest
three (3) closing sale prices for the Common Stock during the twenty (20)
trading days immediately prior to the closing date will be issued Within ten
trading days after the effective date of this registration.

As of March 5, 2000 DDSI has reserved for 200% of the minimum number of shares
of Common Stock, which would be issuable upon conversion in full of the
debentures, amounting to 10,000,000 shares of authorized and unissued common
stock. These reserve amounts are our good faith estimate of the number of shares
that DDSI believes the Company needs to reserve. DDSI can provide no assurance
as to how many shares DDSI will ultimately need to issue upon the conversion of
the debentures. If DDSI is required to issue additional shares DDSI will be
required to file an additional registration statement for those shares, a
process which will be costly and time consuming. The issuance of these shares
will dilute our common stock per share net tangible book value and may result in
a decline in our stock price.

You may have difficulties trading and obtaining quotations on "penny stock"
issues.

The shares of common stock offered are for "penny stocks" as defined in the
Exchange Act. These shares 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. In addition, the "penny stock" rules adopted by the SEC
under the Exchange Act make the sale of the shares of the common stock subject
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. Furthermore, 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 SEC's
rules may limit the number of potential purchasers of the shares of the common
stock.

If DDSI can meet the listing requirements in the future, management intends to
apply to include the shares of the Common Stock being registered hereby for
quotation on The NASDAQ Small Cap Market operated by The NASDAQ Stock Market.
Our Common Stock has not yet been approved for quotation on The NASDAQ Small Cap
Market and there can be no assurance that an active trading market will develop
or if such market is developed that it will be sustained. The NASDAQ Stock
Market recently approved changes to the standards for companies to become listed
on The NASDAQ Small Cap Market, including, without limitation, new corporate
governance standards, a new requirement that companies seeking listing have net
tangible assets of $4,000,000, market capitalization of $50,000,000 or net
income of $750,000 and other qualitative requirements. If we are unable to
satisfy the requirements for quotation on the NASDAQ Small Cap Market, trading
in the common stock being registered hereby would continue to be conducted on
the OTC Bulletin Board. Even if the shares of the Common Stock are listed for
quotation on The NASDAQ Small Cap Market, the market price of the shares must
remain above $4.00 per share or else such shares will be subject to the "penny
stock" rules of the Commission discussed above. If the market price of such
shares falls below $1.00 per share, such shares will be delisted from The NASDAQ
Small Cap Market and will once again be quoted on the OTC Bulletin Board.

Resale restrictions on transferring "penny stocks".

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.

Proceeds from the financing to be used for General Working Capital.

DDSI has allocated a portion of the net proceeds of this financing for use to
pay outstanding payables and as working capital. As to such funds, investors
will be relying on the judgment and discretion of DDSI's management without
specific information as to the uses that are proposed to be made of such funds.
See "Use of Proceeds."

Forward-Looking Statements and Associated Risks.

Management believes that this Prospectus contains forward-looking statements,
including statements regarding, among other items, DDSI's future plans and
growth strategies and anticipated trends in the industry in which DDSI operates.
These forward-looking statements are based largely on DDSI's control. Actual
results could differ materially from these forward-looking statements as a
result of factors described herein, including, among others, regulatory or
economic influences. In light of these risks and uncertainties, there can be no
assurance that the forward-looking information should not be regarded as a
representation by DDSI or any other person that the objectives and plans of DDSI
will be achieved.

Use of Proceeds

DDSI will not receive any proceeds upon the issuance of the Common Stock. That
is the subject of this registration. However, DDSI received $200,000 on December
29, 2000 and $200,000 on March 9, 2001 as bridge funding through the issuance of
Convertible Debentures pursuant to the "First Amendment to Secured Convertible
Debenture Purchase Agreement" dated March 5, 2001 and the original agreement
dated December 28, 2000. DDSI is scheduled to receive approximately another
$400,000 within ten days after the effectiveness of this registration statement
from the issuance of Convertible Debentures. If all the warrants in this
offering are exercised, the gross proceeds to us from the exercise of warrants
will be approximately $50,400. DDSI intends to use the net proceeds for working
capital.

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, 2000 there
were 2,192 shareholders of record. The source of the quotes is AOL Ticker.

Common Stock
Bid Price
-------------------------------

Calendar Year 1999 Low High
- ------------------ ----- ------

First Quarter $0.50 $1.25
Second Quarter $0.39 $0.93
Third Quarter $0.26 $0.42
Fourth Quarter $0.12 $0.30

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

As of June 5, 2001, there were approximately 21,279,612 shares of Common Stock
issued and outstanding.

Our Dividend Policy

DDSI anticipates that for the foreseeable future, earnings will be retained for
the development of is 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.

Management's Discussion and Analysis or Plan of Operation

Plan of Operations

The short-term objective of the Company is to continue to expand the sale and
acceptance of its core business solutions by adding more sales personnel and
demonstrating at more trade exhibits. The Company also is pursuing the FBI
certification and roll out of the Compu-Scan 3000 fingerprint capturing device
in order to capitalize on its unique patent pending technology. The Company
feels it has successfully passed the FBI requirement for certification; however,
there are no assurances by DDSI that the FBI will certify this technology and
device. Such certification is not required to sell this device for commercial
(non-government) applications.

The Company's long-term objectives are to obtain enough products to sell into
its basic business market--Criminal Justice -- so that sales will expand
adequately to allow for profits. Three such new products are the Compu-Scan
3000, FMS (Fingerprint Matching System), and Compu-Capture lite.

The FMS (Fingerprint Matching System) is a product that we licensed from Harris
Corporation (NYSE: "HAR"), Melbourne, FL to sell its product to the criminal
justice field. The Company anticipates additional development costs of
approximately $100,000 in 2001, which is required to prepare this product for
market. The FMS will need to be integrated as part of the Company's software
offerings and will also be introduced to large-project integrators. On February
15, 2000, the Company introduced the FMS to the criminal justice industry. The
Company also plans to develop a sales channel into the Federal government.

The Company believes that it will reach profitability during the first half of
year 2002. The Company estimates that it will need to raise $2,000,000 in the
next 12 months to cover its operating costs until it can reach positive cash
flow and profitability. The Company may need to raise funds through the sale of
its common stock or issuance of convertible notes, if funds provided by
operations fall short. This estimate considers current operating and marketing
dollars plus the remaining costs required to complete for market both the
Compu-Scan and FMS solutions. There is no guarantee that DDSI will be able to
raise the required funds through the sale of its Common Stock or issuance of
convertible notes.

One key to the Company reaching profitability is the approval of the Compu-Scan
product. Though the Company cannot guarantee a date when the Compu-Scan will
receive certification, we are hopeful that the approval will be given sometime
within the next six months. We estimate that the Compu-Scan would add one
million dollars in revenues in the first twelve months on the market growing to
three million dollars in revenues during the second twelve months.

In conjunction with bringing the Compu-Scan 3000 online, the Company 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.
o Increase revenues through the introduction of a scaled down version
of our Compu-Capture product. The Compu-Capture lite is a low cost
product and will open up a greater portion of the criminal justice
market place for potential sales.

Results of Operations

Year Ended December 31, 2000 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 customer's 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.

Year Ended December 31, 1999 vs. Year Ended December 31, 1998

Revenues for the year ended December 31, 1999 were $2,847,183 versus $2,659,701
for the year ended December 31,1998, an increase of $187,482 or 7%. The Company
generates its revenues through software licenses, hardware, post customer
support arrangements and other services. The increase in the Company's software
and hardware revenues fees year over year is attributed to the continued
increase in the sales of the SI-3000 product line and an increase in revenues
relating to an upgrade of Compu-Capture. Maintenance revenues increased $49,625
or 10% from the prior year primarily from an increase in the Company's
customer's 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, 1999 versus the year ended December 31, 1998, which accounted for
the decrease of $204,326 or 56%. Gross profit as a percentage of revenues
modestly decreased from 66% to 65% from fiscal year 1998 to fiscal year 1999.

Costs and expenses increased $61,068 or 2% during the year ended December 31,
1999 versus the year ended December 31, 1998. This increase was principally due
to a modest increase in general and administrative costs of $150,973,
principally due to an increase in professional fees. This increase was offset by
a decrease in research and development costs of $187,386 or 30%. During 1999,
the Company capitalized $413,604 of software development costs relating to
Compu-Scan, as technological feasibility was reached, thus accounting for the
decrease in research and development costs from 1998 to 1999. Sales and
marketing costs increased by $92,412 or 10% from 1998 to 1999 principally due to
the hiring of additional sales personnel. Depreciation and amortization
decreased by $59,082 or 43% from 1998 to 1999. This decrease is principally due
to the amortization of intangible assets in the amount of $50,000 during 1998,
which was not recurring in 1999.

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.

December 31, 2000

At December 31, 2000, the Company had assets of $1,783,044 compared to
$2,049,383 on December 31, 1999, a decrease of $266,339 and stockholders' equity
of $22,112 on December 31, 2000 compared to a stockholders' equity of $445,498
on December 31, 1999, a decrease of $423,386. This decrease in stockholders'
equity for the year ended December 31, 2000 resulted from the issuance of the
Company's common stock totaling $1,164,006 offset by the net loss for the year
ended December 31, 2000 of $2,030,052.

As of December 31, 2000, the Company had a negative working capital of $731,891,
a change of $335,391 from a negative working capital of $396,500 at December 31,
1999, which was primarily a result of a decrease in cash and restricted cash of
$73,894 and an increase in accounts payable and accrued expenses of $384,421 and
an increase in convertible debentures of $200,000.

Other Events

During March 2001, DDSI issued two convertible notes for $200,000 each, with
simple interest accruing at the annual rate of 12%, in March 2001. Interest
payable on the Notes shall be payable quarterly commencing June 30, 2001. The
Holder shall have the right to convert the principal amount and interest due
under the notes into Shares of the DDSI's Common Stock. The note and the common
shares issuable upon conversion of the notes have not been registered under the
Securities Act of 1933. DDSI also issued Common Stock purchase warrants to the
note holders for the right to purchase 200,000 shares of Common Stock of DDSI at
the lesser of i) $.036 per share, and ii) the average of the three (3) closing
sales prices for the Common Stock during the twenty (20) days immediately prior
to the closing date.

It is anticipated that the $ 200,000 convertible debentures will be converted
into shares in accordance with the terms of these debentures.

During April 2001, DDSI issued two convertible notes for $100,000 and $15,000
respectively with simple interest accruing at the annual rate of 10%. Interest
payable on the Notes shall be payable quarterly commencing June 30, 2001. The
Holder shall have the right to convert the principal amount and interest due
under the notes into Shares of the DDSI's Common Stock. The note and the common
shares issuable upon conversion of the notes have not been registered under the
Securities Act of 1933.

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

Our Business

Product and Services

Digital Descriptor Systems, Inc. provides hardware and software computer
installations to law enforcement agencies, which installations utilize digitized
video and scanned images and text in order to record and retrieve information.
DDSI has developed and utilizes computer programs that digitize videotaped or
scanned images to a computer program medium and provide for rapid retrieval of
the information together with related textual information pertaining to the
property or subject.

Compu-Capture(R)
Compu-Capture(R) is the law enforcement application of DDSI's system which
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. A video image of the subject, a "mug shot", is
taken by the booking officer. One problem experienced by law enforcement
agencies in booking subjects is the risk to officers as a result of the physical
movement and transportation of subjects during the booking process. The
Compu-Capture(R) system allows the law enforcement agency to complete more than
one stage in the booking process, such as entering booking information and
taking a mug shot, at one location. In addition, 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 rapidly
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. The Compu-Capture(R) systems allow
the officer conducting a search to 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. In the requested search, 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.

Once entered into the Compu-Capture(R) system, the visual image and textual
material can be utilized in a variety of ways. 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.

To date, DDSI has installed approximately 350 Compu-Capture(R) systems.

The Compu-Capture(R) system's technology can be used in commercial applications
that are unrelated to law enforcement. DDSI believes that versions of this
system are suitable 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 various products that DDSI currently
provides are as follows:

Compu-Capture(R) 2000
Compu-Capture(R) 2000 (CPC2000) 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 to an existing records or jail management system.
The database allows for the capture of basic demographic system. The database
allows physical characteristics. This information can then be sorted for quick
and easy retrieval of a particular record or various records with similar
characteristics. CPC2000 can be used on a stand alone Personal Computer or
networked together. The price range for the Compu-Capture (R) 2000 is $12,000 to
$45,000. The price range varies depending on the size of the system ordered and
the jurisdictions specific requirements.

Compu-Capture(R) 2000/FE
Compu-Capture(R) 2000/FE is DDSI's "front end" product that image-enables any
host based records or jail management system. The advantage to this product is
it eliminates multiple databases and duplicate data entry from one system to
another. The price range for the Compu-Capture (R) 2000/FE $16,000 to $50,000.
The price range varies depending on the size of the system ordered and the
jurisdictions specific requirements.

Compu-Capture(R) 2000/API
DDSI is the only Company to offer its API's to system integrators with client
server applications. A systems integrator can make calls to these API's and
build a seamless interface from their records or jail management system to
DDSI's imaging system. The benefit for the end user is a self contained product
that has a consistent look and feel, eliminating the need to learn the
functionality of two separate systems. The price range for the Compu-Capture(R)
2000/API $16,000 to $50,000. The price range varies depending on the size of the
system ordered and the jurisdictions specific requirements.

Compu-Capture(R) lite
DDSI has developed a "lite" version of its software to address the needs of
smaller agencies of the arresting market. The "lite" version will provide an
entry-level system that the jurisdictions can build upon. The base price for the
Compu-Capture(R) lite is $3995.

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. The Compu-Sketch
is presently installed in approximately 500 jurisdictions worldwide. The base
price for the Compu-Sketch(R) $2495.

Compu-Scene
The Compu-Scene program makes accident and crime scene drawings easy. The
application uses a computer aided drafting program to compose the drawings with
simple drag-n-drop technology to place the specialized drawings or templates.
DDSI has created hundreds of templates including; weapons, body parts,
furniture, vehicles, shrubs, street signs, etc. The user simply draws a room or
intersection to scale with the CAD program and then simply drops in the
pre-drawn templates to complete the scene.

SI-3000
DDSI's management believes that the type and amount of information a company,
agency or jurisdiction collects and generates is growing at a fast pace. The
variety of information collected includes hand written documents, computer
generated reports, mugshots, fingerprints, photographs, video and digital
images. DDSI believes that most agencies have their information stored in
multiple formats and locations and is generally maintained in a stand-alone
environment (i.e. in file cabinets and non-networked computer databases). In
order for the information to be useful, it must be accurate and easily
accessible throughout the agency. Without an integrated information management
strategy, data integrity suffers while productivity diminishes. DDSI believes
that today's technology trend is moving towards client server applications in an
open environment (i.e. allowing access to information stored at multiple
locations) because system server applications provides agencies with a method to
share data while driving computing costs down.

SI-3000 is an information management strategy that capitalized on the above
referenced technology trend. The SI-3000 provides companies and agencies the
opportunity to purchase products and services that will move them in the
direction of "paperless environment".

The SI-3000 product creates an "Electronic file folder" that integrates hand
written documents, computer reports, photos, fingerprints, signatures and data
into a central repository. Once the information is indexed, it becomes
accessible to the end user in a multitude of ways, all with a single easy to use
interface. In addition, SI-3000 can be easily customized by non-programming
personnel. This provides a significant competitive advantage in the
labor-intensive systems integration business. The price for the SI-3000 $45,000
to $285,000. which is reflected by the scalability of the final design and
multi-jurisdictional requirements, i.e. state or county correctional locations.

Compu-Color(R) Assessor Program
The Compu-Color(R) Assessor Program has recently been discontinued by DDSI. A
lack of a national imaging standard has made this an unprofitable product to
carry. This product applies imaging technology to produce digitized images
related to textual information for use in tax assessment jurisdictions. Tax
assessors generally maintain pictures of all properties with buildings or other
improvements within their jurisdictions. The Compu-Color(R) Assessor Program
allows an assessor's office to electronically maintain this picture as part of a
computer system that links the image with relevant text about the property. The
image and text can be retrieved and viewed together on the computer screen or
printed out on an attached printer.

The Compu-Color(R) system processes a video or photographic image of improved
properties and stores the image to a computerized record, together with relevant
information from the assessor's records with respect to the improved properties.
The program can create a hard copy picture of the image, including images of any
comparable improved properties.

As an additional service that was provided for assessor's offices interested in
purchasing the Compu-Color(R) system, DDSI will process and store the assessor's
existing files on a Compu-Color(R) system. This service will enable assessors to
have all records on the same computerized system.

Maintenance and Support

In addition to the installation of DDSI's systems in an agency (tax assessor or
law enforcement), DDSI trains the personnel of the agency in the use and
operation of the system. After installation, 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. Over
ninety percent (90%) of DDSI's customers purchase ongoing maintenance and
support at the time of installation of the system.

New Products

FMS ("Fingerprint Matching System")
In February of 2000, DDSI secured a royalty license from Harris Corporation,
Melbourne, Florida for a software suite called PowerMatch(TM) that enables the
end user to capture, digitize, store, retrieve and/or match or sort
fingerprints. The Harris agreement provides DDSI with a worldwide, non-exclusive
license to use the Power Match Software (FMS). The FMS is a fingerprint matching
solution and can be utilized either as a stand alone unit or in conjunction with
the Compu-Scan Device.

DDSI renamed the software FMS ("Fingerprint Matching System"). DDSI has the
license for the systems use in the criminal justice field. The license calls for
DDSI to pay a sliding scale royalty fee to Harris Corporation on FMS gross
sales. To date no FMS sales have occurred.

The current Compu-Capture(R), Compu-Scan 3000 and SI 3000 can be integrated with
this software. It performs its matching, storage and capturing functions under
the FBI approved AINSI-NIST and NCIC 2000 regulations. This software has several
superior features that allows it to be installed on NT servers as well as PCs,
for example and thus is very flexible in jurisdiction's size. 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. Many of the current installed jurisdictions of
DDSI can use a positive ID system integrated to their mugshot and records
management modules.

The Company's current sales force will offer FMS along with the current
products. Additional sales personnel will be added as sales acceptance is
achieved.

Compu-Scan 3000
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. The commercialization of
this technology has been the primary focus of the Company's development
activities. 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 has worldwide rights to sell this product without a royalty fee. FBI
certification will be necessary to sell the Compu-Scan 3000 device to the state,
local and federal jurisdictions, but such certification is not required to sell
the device for commercial (non government) uses.

DDSI plans to distribute the Compu-Scan, a non-contact inkless direct reader
fingerprint system in conjunction with its Compu-Capture(R) products.
Additionally, DDSI intends to market the non-contact inkless fingerprint system
for commercial applications, such as in the security and biometric systems
industry, which can incorporate the product in access control devices. DDSI's
non-contact inkless fingerprint system electronically reads and creates a
digital image of a fingerprint. Competitive contact inkless fingerprint capture
devices 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. The optical image is then converted into a digital image by a
photo-imaging detector. In contrast, though DDSI's non-contact device operates
in a similar manner, there is no direct contact by the finger to the device. The
Compu-Scan captures the fingerprint in the following manner: the finger is
placed 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. DDSI 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.

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 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 such as IBM Business Partners and other hardware
suppliers. See below "IBM and other Partners" for more detail.

DDSI anticipates that its future marketing strategy for its Law Enforcement
products will focus on expanding the quality and size of sales to law
enforcement agencies and jail facilities of its existing Compu-Capture(R)
program and new compatible products in the same field, such as Compu-Sketch and
Compu-Scene and the new LiveScan (Compu-Scan 3000) device. In its latest survey
conducted by the Law Enforcement Management and Administrative Statistics
(LEMAS) program of the Bureau of Justice Statistics of the United States
Department of Justice (the "LEMAS Survey"), of a nationally representative
sample of state and local police departments indicated that there are
approximately 17,000 state and local law enforcement agencies. Of those
agencies, 52% of the agencies surveyed, employing 90% of all sworn officers,
were using one or more types of computers. Of local police departments surveyed,
30% use computers for criminal investigations, criminal histories and Uniform
Crime Reports. DDSI believes that as law enforcement agencies become more
familiar with available technology, and agencies like the FBI continue to
require certain standards of reporting crimes (NCIC2000), the market for
products using computer technology, such as Compu-Capture(R), Compu-Scan and
Compu-Capture(R) lite will increase.

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.

DDSI also relies on maintaining ongoing relationships with vendors, especially
IBM Business Partners, for continuing sales introductions to new customers. DDSI
has concentrated on expanding the compatibility of its Compu-Capture(R) system
with more computer software applications in order to expand the number of
vendors that may recommend DDSI's products.

Business Alliances
Currently approximately one-half of the revenues from DDSI's sales are generated
from business alliance relationships. For example, one such business alliance is
with IBM. IBM establishes a business alliance with certain vendors that sell
software applications that are compatible with IBM hardware. To increase its
sales through these alliances, DDSI has directed a portion of its research and
development efforts in the last five years to developing software interfaces
which enable the Compu-Capture(R) program to operate in conjunction with various
records and jail management applications and other law enforcement programs
using IBM compatible hardware. DDSI believes that part of its growth will
continue to come through these business alliances.

DDSI has recently begun exploring the market for its products in the European,
South and Central American and other international markets. DDSI is also working
in conjunction with IBM to develop some of these countries by displaying and
making its products available by IBM at their Electronic Institute for
Government, located in Washington D.C. and Shanghai, China. This facility brings
in IBM sales personnel and end users from around the world to preview IBM's
entire Public Sector offerings. IBM has duplicated this facility in Shanghai,
China and has ordered and installed a similar display to demonstrate DDSI's
products there.

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

Due to the high market penetration by the Company's strategic alliances, the
Company 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.

Strategic 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) and Compu-Color(R) systems are
compatible will assist DDSI in maintaining its competitiveness.

Sales by Geographic Area

During the fiscal years ended December 31, 2000, 1999 and 1998, 93%, 95% and
99%, respectively, of DDSI's revenues have been from domestic customers. The
sales for 2000, 1999 and 1998 were $205,953, $150,209 and $6,104, 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
two national competitors, Printrak Inc., Anaheim, CA (recently purchased by
Motorola which has approximately 200 video mug shot installations, and ImageWare
Systems of San Diego, California, which has approximately 65 installations.

The Compu-Scan 3000 Livescan device is not yet available to the industry and
consequently is behind its two main competitors, Digital Biometrics, Inc
(recently merged with Visionics), and Identix Incorporated market inkless
computerized fingerprint capture systems on a national basis and each have
received FBI certification. Both companies are publicly held corporations and
have been marketing their fingerprint systems for several years. DDSI intends to
market its Compu-Scan 3000 inkless fingerprint system in conjunction with its
Compu-Capture(R) system as well as in a network or a stand-alone mode.

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 not individually marketed. DDSI carries it in
order to provide to its customers a more complete package of products.

The SI-3000 Systems Integration solution has no direct competitors. The SI-3000
is marketed to large multi-jurisdiction counties.

The FMS solution resembles other fingerprint capture, store, retrieve 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, and
intends to package it with its Compu-Scan system.

Motorola's (NYSE:MOT) entrance into the Criminal Justice field by the purchase
of Printrak Inc., offers a suite of solutions from data transmission to MDT
(patrol cars) through bookings, fingerprint capture, mug shots and related
systems. Printrak's products are centered around records management, jail
management and AFIS solutions. AFIS is a large computerized installation used
generally at the state level, that compares fingerprints that are entered into
the system from different jurisdictions and identifies those prints within hours
versus days and weeks when done by hand. Printrak's main product by dollar
volume is AFIS. DDSI believes that Motorola would most likely specialize in
large installations, where as DDSI's target is the small and medium size
markets. Thus, we believe Motorola's entrance into the industry should have a
minimal negative affect on our Company and management believes Motorola's
entrance into the field will help advance product knowledge to the digitized
imaging market.

DDSI believes its inkless non-contact technology is a superior technology
compared to the older generation inkless contact method. Our approach does away
with the expensive cost of replacing the glass platen as a result of wear and
tear, and the smearing of oily residue from fingers placed on the platen and
other contact related problems. In addition, DDSI's device provides for officer
safety by limiting physical contact (the positioning of suspects fingers by
holding his hand in place) with the suspect in the fingerprint capture sequence.
DDSI's inkless non-contact device is substantially smaller than the inkless
contact device (the size of two VCR's for the non-contact devices compared to
the size of a standard refrigerator for the contact device). The Compu-Scan 3000
also has no moving parts and therefore does not need frequent recalibration as
do the inkless contact devices. The price of the Company's device will range
between $25,000 and $45,000 depending on final configuration.

Suppliers

DDSI has sold most of its systems for use on IBM or other manufacturers'
personal computers. However, DDSI's programs are compatible with the IBM AS400
or IBM clones and also products of other 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 where 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 and has recently
completed the submission process.

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

DDSI is currently engaged in a development contract with ISC/US, an engineering
firm with a specialized background in fingerprint technology, to develop a
computerized non-contact inkless fingerprint capture device called the
Compu-Scan 3000. Under this agreement, DDSI paid ISC/US $635,000 in funds (non
reimbursable) to develop the Compu-Scan 3000 with DDSI receiving worldwide
marketing and production rights to this product. This engagement will be in
effect until FBI certification is received on Compu-Scan 3000. The agreement
provides that there is no royalty payment involved. FBI certification will be
necessary to sell the Compu-Scan device to the United States state, local and
federal jurisdictions; however, FBI certification is not required to sell the
device for commercial uses. FBI certification is a multi-step process. The
Company has successfully completed the application process, however there can be
no assurance that the FBI will certify this technology and device.

While there are current products that deploy inkless technology, none have the
capabilities or the footprint (approximately one-tenth the size of current
competitive products) that the DDSI LiveScan will have upon introduction.

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 primary
use of the device is a contactless fingerprinting system.

DDSI owns the proprietary rights to the software used in the Compu-Capture(R)
and Compu-Color(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.

The following names are trademarked by DDSI and are nationally
recognized by our marketplace and associated with DDSI: Compu-Capture 2000,
Compu-Scan, Compu-Scene, Compu-Color, Compu-Sketch, SI3000, Compu-Capture 2000
FE and Compu-Capture Activex32.

Other Events

During January 2001 through April 2001, the Company granted 1,268,000 shares of
restricted common stock for services performed. Such shares were valued at the
fair market value on the date the shares were granted.

On May 22, 2001, DDSI announced that it shifted its focus from the SI 3000 to
the products which management believe will bring DDSI to profitability, namely,
Compu-Scan, the FMS software and its traditional core products.

May 22, 2001, DDSI also announced that it received responses from the FBI
regarding it February 15, 2001 submission to the FBI of its patent pending
Compu-Scan Live Scan device. These comments contained engineering inquires which
DDSI will respond to within the next 120 days,

On May 17, 2001, DDSI announced an agreement with an internet based financial
communications consulting and marketing firm AFC Ventures.com. AFC will provide
marketing, M & A consulting, investor relations and corporate communications
services to DDSI.

On February 26, 2001, the Company announced the approval for the Company's
Common Stock to return to the OTC Bulletin Board.

On February 15, 2001, the Company announced the completion of its latest
submission to the FBI of its patent pending Compu-Scan 3000 Live Scan device for
FBI certification.

Employees

DDSI employs a total of 12 full time employees and 1 part time employee.

Management

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

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

Garrett U. Cohn 62 President, Chief Executive Officer, Treasurer
and Director
Michael Ott* 48 Vice President and Director
Myrna L. Cohn Ph.d. 61 Director
Michael Pellegrino 51 Chief Financial Officer, Secretary and Director
Randolph W. Hall 41 Vice President

*Mr. Ott resigned as a member of the Board of Directors effective February
26, 2001. He also resigned as an Officer effective March 30, 2001.

Garrett U. Cohn has been President, Chief Executive Officer, Treasurer and a
Director of the Company since July, 1994. 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 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,
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.

Michael Ott was a Vice President of Sales for the Company since July, 1994 and a
Director of the Company since August, 1994. Mr. Ott was previously employed by
Compu-Color, Inc. as sales manager since its incorporation in 1989. Prior to
that time he was sales manager for the Compu-Color division of ASI Computer
Systems, Inc. since 1986.

Myrna L. Cohn, Ph.d. has been President of Cohn Management Systems, Inc. since
1986. Cohn Management Systems, Inc. is a consulting Company wholly owned by Dr.
Cohn that specializes in the management of organizational transition and change
in mid-sized corporations. Dr. Cohn is the sole employee and in 1997 performed
consulting services on behalf of the Company. Prior to organizing Cohn
Management Systems, Inc., Dr. Cohn was a management consultant for various
companies and was a professor a Loyola University, Chicago, IL.. Dr. Cohn has
been a Director of the Company since August, 1994.

Michael Pellegrino joined the Company in 1995. He is the Vice President, Chief
Financial Officer, Secretary and a Director of the Company. For eleven years
prior, Mr. Pellegrino was vice president and CFO of Software Shop Systems, Inc.
and for six years earlier 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.

Randolph W. Hall joined the Company as the Vice President of Operations in 1996.
Prior to joining the Company, Mr. Hall successfully launched and subsequently
sold his ownership share of a Company that marketed a records management system
for law enforcement agencies called Protocal. Mr. Hall has a degree in Computer
Science plus five years of programming experience as well as being the Regional
and Training Manager for a software provider servicing a 10 state region.

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 2000 $160,000 0 $0 0 0 0 0
Secretary 2000 0 0 0 0 0 0 0
Michael Ott,
V.P/ Director 2000 110,000 0 0 0 0 0 0
Michael J. 2000 110,000 0 0 0 0 0 0
Pellegrino
V.P./Director
Randy Hall 2000 75,000 0 0 0 0 0 0
V.P.
Total: $455,000 $0 $0 $0 0 $0 $0
All Executive Officers
As a Group $455,000 $0 $0 $0 0 $0 $0

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 350,000 41.52% $0.10 12/15/10
Michael J. Pellegrino, CFO 150,000 17.79% 0.10 12/15/10
Randy Hall, VP Operations 150,000 17.79% 0.10 12/15/10

Aggregated Option/Sar Exercises

None exercised

Employment Agreements

Garrett U. Cohn, President, Chief Executive Officer and Director. 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 a new employment agreement is drafted. 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, Vice President, Chief Financial Officer and Director. In
July, 1998, the Company entered into a two year employment agreement with Mr.
Pellegrino, 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.
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).

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
The Company has instituted a search for a replacement for Mr. Ott

Randolph Hall, Vice President of Operations. In July, 1998, the Company entered
into a two year employment agreement with Mr. Hall, which entitled him to a base
salary of $75,000 per year which may at the Board of Directors discretion adjust
his base salary (but not below $75,000 per year). Though past the two-year
period, this employment agreement is to remain in affect until a new employment
agreement is drafted. Mr. 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).

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 not reimbursed for any 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 April 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. The note continues to accrue interest.

The Company's Audit Committee currently consists of Myrna Cohn, who is not an
outside director. The Company is actively pursuing the appointment of new
outside directors who will function as members of the Audit Committee.

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
20,011,612 shares of common stock outstanding at December 31, 2000.

Beneficial Ownership
Name and Address of Common Stock
Of Beneficial Owner No. of Shares (3) Prior to This Offering
- ------------------- ----------------- ----------------------

Garrett U. Cohn
249 Willow Parkway
Buffalo Grove, IL 60089 1,862,000(1) 9.3%

Michael Pellegrino
33 Maple Lane
Brielle, NJ 08730 335,000 1.7%

Michael Ott*
26415 212th Avenue
Delhi, IA 52223 215,000 1.0%

Randolph Hall
505 Northridge Rd.
Collegeville, PA 19426 313,000 1.6%

Myrna Cohn Ph.d.
249 Willow Parkway
Buffalo Grove, IL 60089 15,000 .7%

Norman Cohn
200 Pine Tree Road
Radnor, PA 19087 940,000 4.7%

All Officers & Directors
As a Group 3,680,000(2) 13.2%
- ----------------
*Was a Director at December 31, 2000.

(1) Garrett U. Cohn owns 142,000 shares of stock. In addition, Mr. Cohn has the
right to vote 940,000 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) 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.

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

Under the terms of the Voting Trust Agreement dated April 19, 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

The Company was incorporated on June 13, 1994 in Delaware. The Company has
authorized of 50,000,000 shares of Common Stock at $.001 par value, of which
21,279,612 shares are issued and outstanding at June 5, 2001, plus 1,000,000
authorized shares of $.01 par value per share Preferred Stock and no preferred
shares are issued and outstanding at June 5, 2001. 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.

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. A total of
14,380,127 shares of Common Stock were outstanding as of December 31, 1999.

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 21,279,612 as of June 5, 2001 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.

Shares Eligible for Future Sale

As of June 5, 2001, DDSI had 21,279,612 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 25,715,857 shares of common
stock for resale, all of which will be freely tradable without restriction or
further registration under the Securities Act. This includes:

o 10,600,000 shares representing the conversion of the 12% debentures
at a price of $.08 per share
o 10,600,000 shares representing reserve shares that may be needed to
account for market fluctuations in the price of the common stock
prior to the conversion of the debentures
o 3,115,857 of other selling shareholders
o 1,600,000 warrants to be registered in connection with the secured
convertible debenture purchase agreement.

Selling Shareholders

The Shares being offered for sale by our Selling Stockholders are issuable
pursuant to the "First Amendment to Secured Convertible Debenture Purchase
Agreement" dated March 5, 2001 and the original agreement dated December 28,
2000 (hereafter referred to as the "Financing Agreements").

This Offering is being made pursuant to the exemption from the registration
provisions of the Securities Act of 1933, as amended, afforded by Rule 506 of
Regulation D promulgated there under.

Recent Financing

The Financing Agreements provides for the issuance of $800,000 of convertible
debentures that can be converted into shares of our Common Stock. Bridge funding
of $400,000 in convertible notes has been issued with the remaining $400,000 in
convertible notes to be issued within ten trading days after the effective date
of this registration statement. The number of shares we will issue upon the
conversion of these debentures fluctuates with our Common Stock market price,
cannot be determined until the day of conversion. There is no limit on the
number of shares of our common stock that may be issued upon the conversion of
these convertible debentures. These convertible debentures have a conversion
price that is the lesser of (1) $0.08 and (2) 50% of the average of the lowest
three inter-day prices (which need not occur on consecutive trading days) during
the twenty trading days immediately preceding the applicable conversion date.
Thus, the debentures will be converted at prices below the current market price
on the conversion date.

The $400,000 in convertible notes to be issued within ten trading days after the
effective date of this registration statement, as stated above, have a
conversion price that is the lesser of (1) $0.08 and (2) 50% of the average of
the lowest three inter-day prices (which need not occur on consecutive trading
days) during the twenty trading days immediately preceding the applicable
conversion date. Thus, the debentures will be converted at prices below the
current market price on the conversion date.

o The representations and warranties given by the company are still
valid at the time of funding i.e.,
v) DDSI is in good standing under the laws of the state of
Delaware,
vi) the financing transaction is property authorized by the DDSI
Board of Directors and that the debentures are issued free
of encumbrances,
vii) that there are adequate authorized shares available to
convert the debentures as provided by the financing
agreement,
viii) all disclosures provided by DDSI regarding DDSI, its
business and the current financing are true and DDSI did not
omit any statement that an investor may find significant.
o The registration statement shall be declared effective by June 11,
2001,
o DDSI has not broken any laws or incurred any other event which
would prevent this registration statement from becoming effective,
o The trading of DDSI's stock on the OTC Bulletin Board has not been
suspended,
o DDSI has not had in excess of 33% of its voting securities
acquired.

If conversions of the debentures occur, shareholders may be subject to an
immediate dilution in their per share net tangible book value. The current
convertible debentures may be converted into Common Stock at any time prior to
their maturity date which is two years from date of execution.

The Financing Agreements provides for the issuing of 1,400,000 warrants to
purchase our Common Stock. 400,000 of the warrants have been issued on December
28, 2000 with an exercise price equal to $.036 and can be exercised at any time
through December 28, 2003. 200,000 of the warrants have been issued on March 4,
20001 with an exercise price equal to the lesser of (i) $.036 per share and (ii)
the average of the lowest three closing sale prices for the Common Stock during
the twenty trading days immediately prior to the closing date, and can be
exercised any time through March 4, 2004. Additionally, 800,000 warrants with an
exercise price equal to the lesser of (i) $.036 per share and (ii) the average
of the lowest three (3) closing sale prices for the Common Stock during the
twenty (20) trading days immediately prior to the closing date will be issued
Within ten trading days after the effective date of this registration.

As of March 5, 2001, DDSI has reserved for 200% of the minimum number of shares
of common stock which would be issuable upon conversion in full of the
debentures, amounting to 10,000,000 shares of authorized and unissued common
stock. These reserve amounts are our good faith estimate of the number of shares
that DDSI believe DDSI need to reserve. DDSI can provide no assurance as to how
many shares DDSI will ultimately need to issue upon the conversion of the
debentures. If DDSI are required to issue additional shares DDSI will be
required to file an additional registration statement for those shares, a
process which will be costly and time consuming. The issuance of these shares
will dilute our common stock per share net tangible book value and may result in
a decline in our stock price.

Selling Shareholders

The table below sets forth information concerning the sale of shares of Common
Stock by the Selling Stockholders. The table reflects: (1) the number of shares
issuable upon conversion of debentures pursuant to the Financing Agreements and
(2) shares issuable upon exercise of warrants pursuant to the Financing
Agreements. We will not receive any proceeds from the resale of the common stock
by the Selling Stockholders. We will receive proceeds from the exercise of the
warrants. 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.
Beneficial ownership is determined in accordance with SEC rules and generally
includes voting or investment power with respect to securities. Common shares
that are issuable upon the exercise of outstanding options, warrants,
convertible Preferred Stock or other purchase rights, to the extent exercisable
within 60 days of the date of this Prospectus, are treated as outstanding for
purposes of computing each Selling Shareholder's percentage ownership of
outstanding common shares.

Shares Beneficially Shares Shares Beneficially
Owned Offered After Offering
Selling Prior to the For If All Offered
Stockholder (1) Offering (2) Sale (3) Shares Are Sold (3)
- --------------- ------------------------------------ --------- -------------------
Number of Shares Percentage (4) Number of Shares

AJW Partners, LLC (5) 2,275,668(7) 4.999% 11,800,000(8) 0 0%
New Millennium Capital Partners, LLC(6) 2,275,668(7) 4.999% 11,800,000(8) 0 0%
Ralph G. Hallenbeck IRA 1,428,571 3.14% 1,428,571 0 0%
About Face Communications(9) 343,000 0.75% 343,000 0 0%
Anthony Vollaro 214,286 0.47% 214,286 0 0%
NIR Group(10) 105,000 0.23% 105,000 0 0%
David C. Likes 25,000 0.05% 25.000 0 0%
--------- ----------
Total 6,667,193 25,715,857

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.

(1) 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. AJW Partners was issued 3,108,742 shares of DDSI common stock between
June 10, 1999 and April 27, 2000, pursuant to a Regulation A registration
(file no. 24-4032). New Millennium Capital was issued 2,108,740 shares of
DDSI common stock between June 10, 1999 and April 27, 2000, pursuant to a
Regulation A registration (file no. 24-4032).

(2) Assumes that all convertible debentures have been converted and that all
warrants have been exercised into common stock.
(3) Assumes no sales are effected by the Selling Stockholder during the offering
period other than pursuant to this offering and that all shares offered will
be issued and sold.
(4) Percentages are based on 45,522,469 shares of our Common Stock outstanding
including all shares offered in this registration statement as of May 24,
2001.

(5) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, SMS
Group, LLC may be deemed a control person of the shares owned by such
entity. Corey S. Ribotsky is the fund manager of SMS Group, LLC.
(6) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
First Street Manager II, LLC may be deemed a control person of the shares
owned by such entity. Corey S. Ribotsky and Glenn A. Arbeitman are the fund
managers of First Street Manager II, LLC.

(7) Represents shares of common stock issuable upon conversion of debentures or
exercise of warrants of the selling shareholder, at an assumed conversion
price of $0.08 per share and at an exercise price of $.036 per warrant.
Because the number of shares of common stock issuable upon conversion of the
debentures is dependent in part upon the market price of the common stock
prior to a conversion, the actual number of shares of common stock that will
be issued upon conversion will fluctuate daily and cannot be determined at
this time. However, the selling shareholder has contractually agreed to
restrict its ability to convert its debentures or exercise its warrants and
receive shares of our common stock such that the number of shares of common
stock held by it and its affiliates after such conversion or exercise exceed
4.99% of the then issued and outstanding shares of common stock following
such conversion or exercise.

(8) Includes 200% of the shares issuable on conversion of the debentures, based
on the market price of our common stock on April 20, 2001, as required by
our agreement with the selling shareholder. The number of shares of common
stock issuable upon conversion of the debentures is dependent in part upon
the market price of the common stock prior to a conversion, the actual
number of shares of common stock that will be issued in respect of such
conversions and, consequently, offered for sale under this registration
statement, cannot be determined at this time. As a result of the contractual
agreement not to exceed 4.99% 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.
(9) Principal is Scott Gallagher who has not held any position or office, or has
had any material relationship with us or any of our affiliates within the
past three years.
(10) Principals are Corey S. Ribotsky and Glenn A. Arbeitman.

Plan of Distribution

The selling stockholders and any of their pledges, assignees, and
successors-in-interest 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 or any other lawful
method

o 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 Buying puts, which is a contract whereby the person buying the
contract may sell shares at a specified price by a specified date.

o Selling under Rule 144 under the Securities Act, if available,
rather than under this prospectus.

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.

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

Our Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.

Experts

The financial statements of Digital Descriptor Systems, Inc. at December 31,
2000 and 1999, and for each of the two years in the period ended December 31,
2000, appearing in the 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 does beneficially own shares of the company.

Other Available Information

We are subject to the reporting requirements of the Securities and Exchange
Commission (the "commission"). With the filing of our December 31, 2000 Form
10KSB,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.

You should rely only on the information contained in this Prospectus. 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 only as of the date of
this prospectus.

Index to Financial Statements

Contents

Report of Independent Auditors...............................................F-1

Audited Financial Statements

Balance Sheets...............................................................F-2
Statements of Operations.....................................................F-3
Statements of Shareholders' Equity...........................................F-4
Statements of Cash Flows.....................................................F-5
Notes to Financial Statements................................................F-6

Report of Independent Auditors

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

We have audited the accompanying balance sheets of Digital Descriptor Systems,
Inc. as of December 31, 2000 and 1999, and the related statements of operations,
shareholders' equity, and cash flows for the years 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 audits.

We conducted our audits 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 audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Digital Descriptor Systems,
Inc. as of December 31, 2000 and 1999, and the results of its operations and its
cash flows for the years 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

F-1

Digital Descriptor Systems, Inc.

Balance Sheets

December 31
2000 1999
-------------------------------

Assets
Current assets:
Cash $ 202,877 $ 177,223
Restricted cash 10,452 110,000
Investment 1,000 1,000
Accounts receivable, less allowance for uncollectible accounts
of $114,000 and $213,000 in 2000 and 1999, respectively 526,292 856,595
Inventory 22,596 48,693
Prepaid expenses 8,698 13,874
Debt discount and deferred financing costs 228,500 -
-------------------------------
Total current assets 1,000,415 1,207,385

Note receivable - officer 165,525 153,650
Software development costs, at cost 413,604 413,604
Furniture and equipment, at cost, net 172,046 267,685
Deposits and other assets 31,454 7,059
-------------------------------
Total assets $ 1,783,044 $ 2,049,383
===============================

Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 481,163 $ 121,137
Accrued expenses 189,209 164,814
Deferred income 854,787 1,317,934
Current portion of equipment loan 7,147 -
Convertible debentures 200,000 -
-------------------------------
Total current liabilities 1,732,306 1,603,885

Equipment loan 28,626 -
-------------------------------
Total liabilities 1,760,932 1,603,885

Shareholders' equity:
Preferred stock, $.01 par value: authorized shares - 1,000,000;
issued and outstanding shares - none
Common stock, $.001 par value: authorized shares - 50,000,000;
issued and outstanding shares - 20,011,612 and 14,380,127 at
December 31, 2000 and 1999, respectively 20,011 14,380
Additional paid-in capital 14,544,579 12,957,544
Unearned compensation - (14,000)
Accumulated deficit (14,542,478) (12,512,426)
-------------------------------
Total shareholders' equity 22,112 445,498
-------------------------------
Total liabilities and shareholders' equity $ 1,783,044 $ 2,049,383
===============================

See accompanying notes.

F-2

Digital Descriptor Systems, Inc.

Statements of Operations

Year ended December 31
2000 1999
-------------------------------

Revenues:
Software $ 2,060,499 $ 1,189,439
Hardware 229,525 722,040
Maintenance 583,349 539,034
Consulting 91,249 236,956
Other 61,836 159,714
-------------------------------
3,026,458 2,847,183

Costs and expenses:
Cost of revenues 1,615,286 987,931
General and administrative 1,843,336 1,593,846
Sales and marketing 917,381 984,691
Research and development 536,350 429,599
Depreciation 162,330 75,553
Other (income) expense, net (18,173) (18,920)
-------------------------------
5,056,510 4,052,700
-------------------------------
Net loss $ (2,030,052) $ (1,205,517)
===============================

Net loss per common share (basic and diluted) $ (.11) $ (.11)
===============================

Weighted average number of common shares outstanding (basic and
diluted) 18,557,547 10,934,900
===============================

See accompanying notes.

F-3

Digital Descriptor Systems, Inc.

Statements of Shareholders' Equity

Years ended December 31, 2000 and 1999

Additional
Common Paid-in Unearned Accumulated
Shares Amount Capital Compensation Deficit Total
---------------------------------------------------------------------------------

Balance at December 31, 1998 7,891,128 $ 7,891 $11,299,317 $ (38,000) $(11,306,909) $ (37,701)
Issuance of common shares in connection with a
Reg. A Offering, net of offering costs 6,488,999 6,489 1,658,227 - - 1,664,716
Amortization of unearned compensation - - - 24,000 - 24,000
Net loss - - - - (1,205,517) (1,205,517)
---------------------------------------------------------------------------------
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
=================================================================================

See accompanying notes.

F-4

Digital Descriptor Systems, Inc.

Statements of Cash Flows

Year ended December 31
2000 1999
----------------------------

Cash flows from operating activities
Net loss $(2,030,052) $(1,205,517)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 162,330 75,553
Compensation expense in connection with issuance of common stock 261,100 -
Amortization of unearned compensation 14,000 24,000
Changes in operating assets and liabilities:
Accounts receivable 330,303 32,588
Inventory 26,097 (969)
Prepaid expenses, deposits and other assets (19,219) 14,524
Accounts payable 360,026 (143,538)
Accrued expenses 24,395 71,700
Deferred income (463,147) 265,117
----------------------------
Net cash used in operating activities (1,334,167) (866,542)

Cash flows from investing activities
Purchase of furniture and equipment (30,325) (164,091)
Increase in officer note receivable (11,875) (11,875)
Increase in software development costs - (413,604)
Proceeds from sale of restricted cash 99,548 -
Purchase of short-term investments, including restricted cash - (110,000)
----------------------------
Net cash provided by (used in) investing activities 57,348 (699,570)

Cash flows from financing activities
Net proceeds from issuance of Common Stock 1,164,066 1,664,716
Proceeds from the issuance of convertible debentures 200,000 -
Deferred financing costs (61,000) -
Repayment of equipment loan (593) -
----------------------------
Net cash provided by financing activities 1,302,473 1,664,716
----------------------------
Net increase in cash 25,654 98,604

Cash at beginning of year 177,223 78,619
----------------------------
Cash at end of year $ 202,877 $ 177,223
============================

Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 1,775 $ 5,615
============================
Acquisition of equipment with loan $ 36,366 $ -
============================
Debt discount in connection with convertible debentures and
issuance of warrants $ 167,500 $ -
============================
Conversion of debentures and related accrued interest to
Common Stock $ - $ 229,970
============================

See accompanying notes.

F-5

Digital Descriptor Systems, Inc.

Notes to Financial Statements

December 31, 2000

1. Business

Digital Descriptor Systems, Inc. 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, 2000 and 1999. Substantially all of
the Company's revenues are derived principally from U.S. government agencies.

2. Accounting Policies

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.
Accordingly, the financial statements do not include any adjustments that might
be necessary should the Company be unable to continue in existence. The Company
has never been profitable and has incurred substantial losses from operations of
approximately $2,030,000 and $1,206,000 during the years ended December 31, 2000
and 1999, respectively. Losses from operations are continuing through 2001 and
the Company anticipates that it will require additional financing in 2001, 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.

F-6

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

Basis of Financial Statement Presentation (continued)

Management is also actively working to raise capital through the sale of its
common stock and the exercise of its common stock purchase warrants and options
in the next twelve months to cover its operating costs. Additionally, the
following plans have been put in place to continue as a going concern: cutting
costs in areas that add the least value to the Company; deriving funds through
the establishment of business alliances with other companies who may wish to
license the Compu-Scan device; and increasing revenues through the introduction
of a scaled down version of the Compu-Capture product. There can be no
assurances that management will be successful in these planned capital raising
efforts or cost-cutting measures.

Use of Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Inventory

Inventory is stated at the lower of cost (first-in, first-out method) or market.

Revenue Recognition

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.

F-7

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

Revenue Recognition (continued)

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.

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.

Furniture and Equipment

Furniture and equipment are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets
ranging from 2 to 5 years.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, note
receivable, 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.

F-8

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

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. As of March 2001, the Company
believes the product meets the necessary specifications and is available for
general release to customers.

Amortization of software development costs will be calculated as the greater of
the amount computed using (i) the ratio that current gross revenues for a
product bear to the total of current and anticipated future gross revenues of
that product or (ii) the straight-line method over the remaining estimated
economic life of the product, including the period being reported on.
Amortization of such costs will commence when the software becomes available for
general release to customers. The Company reviews the unamortized software
development costs at each balance sheet date and, if necessary, will write down
the balance to net realizable value if the unamortized costs exceed the net
realizable value of the asset.

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

F-9

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

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's 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 6.

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 antidilutive.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to a concentration
of credit risk principally consist of cash, accounts receivable and a note
receivable. Concentration of credit risk, with respect to accounts and note
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.

F-10

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

2. Accounting Policies (continued)

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.

Impact of Recent Accounting Pronouncements

In June 1999, the Financial Accounting Standards Board issued Statement 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 will adopt SFAS 133 during the first quarter of
2001. Because the Company has never used or currently intends to use
derivatives, management does not anticipate that adoption of this new standard
will have a significant impact on the results of operations or the financial
position of the Company.

3. Furniture and Equipment

Furniture and equipment consists of the following:

December 31
2000 1999
----------------------------

Furniture and fixtures $186,705 $186,705
Computer equipment 271,449 242,289
Vehicles 59,049 22,682
Leasehold improvements 34,977 33,813
----------------------------
552,180 485,489
Less accumulated depreciation 380,134 217,804
----------------------------
$172,046 $267,685
============================

F-11

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

4. Debt

Convertible Debentures

During December 2000, the Company issued $200,000 of convertible debentures to
two investors. 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. 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 will be amortized over the term of the debentures
in 2001. The debentures are collateralized by substantially all of the Company's
assets.

During February 1999 through April 1999, the Company issued $225,000 of
convertible debentures to 12 investors. These short-term debentures required
interest at 12% per annum. The holder had the option of receiving payment at the
end of a 50-day period or to convert the debenture to common shares of the
Company at a specified conversion price. The $225,000 of debentures plus accrued
interest of $4,970 were converted to 766,567 common shares in connection with a
Reg. A Offering (Note 9).

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 $7,147 in 2001, $7,211 in 2002 and $7,277 in 2003, $7,342 in
2004, and $6,796 in 2005.

F-12

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

5. Commitments

The Company leases certain facilities, vehicles and office equipment under
operating lease agreements that expire through various dates through 2005.
Rental expense under such operating leases was approximately $126,000 and
$108,000 during the years ended December 31, 2000 and 1999, respectively. Future
minimum lease payments at December 31, 2000 are as follows:

2001 $120,200
2002 115,400
2003 118,300
2004 111,600
2005 54,700

6. 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.

F-13

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

6. Stock Option and Other Plans (continued)

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

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

Outstanding at December 31, 1998 182,000 33,812 - 215,812 $.33-$3.81
Granted - - 902,500 902,500 .37
Canceled (3,000) - (6,000) (9,000) $.33-$ .37
----------------------------------------------------------------------
Outstanding at December 31, 1999 179,000 33,812 896,500 1,109,312 $.33-$3.81
----------------------------------------------------------------------
Granted 843,000 - - 843,000 $.10
Canceled - - (7,500) (7,500) .37
----------------------------------------------------------------------
Outstanding at December 31, 2000 1,022,000 33,812 889,000 1,944,812 $.10-$3.81
======================================================================

Exercisable options at December 31,
2000 971,498 33,812 889,000 1,894,310
========================================================

At December 31, 2000, the remaining contractual life of outstanding options was
9 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
2000 1999
------------------------------------
Net loss:
As reported $(2,030,052) $(1,205,517)
Pro forma (2,103,563) $(1,427,271)

Net loss per share:
As reported $ (.11) $ (.11)
Pro forma $ (.12) $ (.13)

F-14

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

6. Stock Option and Other Plans (continued)

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 and 1999, 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 Company's common stock of: 1.033 and .879, respectively.

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.

7. Income Taxes

At December 31, 2000 and 1999, the Company had federal net operating loss
carryforwards of approximately $9,271,000 and $7,633,000, respectively, to
offset future federal taxable income expiring in various years through 2020. The
Company also has state net operating loss carryforwards of $456,000 and
$409,000, respectively, to offset future state taxable income expiring in
various years through 2020. At December 31, 2000 and 1999, the Company recorded
a deferred tax asset of $3,318,232 and $3,005,120, respectively, which were
reduced by a valuation allowance in the same amount as the realization of these
deferred tax assets are not certain.

F-15

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

7. Income Taxes (continued)

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 are as follows:

December 31
2000 1999
------------------------------
Deferred tax assets:
Net operating loss carryforwards $3,453,113 $3,003,756
Bad debt reserves 43,519 81,455
Inventory reserves 200 1,454
Accrued expenses 1,755 -
Depreciation - 35,066
Unearned compensation - 40,830
------------------------------
Total deferred tax assets 3,498,587 3,162,561

Deferred tax liabilities:
Software development (157,441) (157,441)
Depreciation (22,914) -
------------------------------
Total deferred tax asset 3,318,232 3,005,120
Valuation allowance (3,318,232) (3,005,120)
------------------------------
Net deferred tax asset $ - $ -
==============================

8. Note Receivable - Officer

During 1996, the Company loaned the President 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, 2000 and 1999, accrued interest, included in the note receivable in
the accompanying balance sheet was $40,525 and $28,650, respectively.

F-16

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

9. Equity Transactions

During 2000, the Company issued 1,205,000 shares of restrictive common stock for
services performed. The Company recorded a charge for the issuance of such
shares during 2000 of $261,100, based on the fair market value of the Company's
common stock on the date of the stock grant.

During 1999, the Company offered up to 11,000,000 shares of its common stock at
an offering price of $.30 per share for a total proceeds of $3,300,000 in a
Regulation A offering. The minimum subscription was $10,000 for 33,344 shares.
Through December 31, 1999, 6,488,999 shares were sold generating net proceeds of
$1,664,716 ($1,946,699 less offering costs of $281,983). During 2000, an
additional 4,426,485 shares were sold generating net proceeds of $1,164,066
($1,327,944 less offering costs of $163,878).

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 30 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, 2000, there
are 1,483,750 Redeemable Class A Warrants outstanding and 1,483,750 Redeemable
Class B Warrants outstanding.

F-17

Digital Descriptor Systems, Inc.

Notes to Financial Statements (continued)

9. Equity Transactions (continued)

During July 1994, the Chairman was granted the right 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 in the statement of operations over the period of the
employment agreement. Amortization expense of $14,000 and $24,000 was recorded
during the years ended December 31, 2000 and 1999, respectively.

10. Shares Reserved for Future Issuance

At December 31, 2000, the Company has the following common shares reserved for
issuance:

Common stock options available to grant 4,144,188
Common stock options outstanding 1,944,812
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 2,500,000
----------
11,865,142
==========

11. Subsequent Events

During January 2001 through March 2001, the Company issued $200,000 of
convertible debentures to two investors. These debentures mature on March 4,
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 Note 4. The debenture holders received warrants to
purchase 200,000 common shares at an exercise price the lesser of: $.036 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.

During March 2001, the Company granted 1,100,000 shares of restricted common
stock for services performed. Such shares were valued at the fair market value
on the date the shares were granted.

F-18

Part II. Information Not Required In Prpspectus

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 $ 433.80
Printing and Engraving Expenses $ 2,000.00
Legal Fees and Expenses $ 55,000.00
Accounting Fees and Expenses $ 30,000.00
Transfer Agent Fees $ 2,000.00
Blue Sky Fees $ 2,000.00
Consulting Fees $ 80,000,00.
Miscellaneous $ 5,000.00
-------------
Total $ 176,433.80

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 and represented fair value for services rendered. 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 2001, the Company issued $200,000 of convertible debentures to two
investors. These debentures mature on March 4, 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
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.

During January through March 2001, the Company granted 1,100,000 shares of
restricted common stock for services performed. Such shares were valued at the
fair market value on the date the shares were granted.

During April 2001, the Company granted 168,000 shares of restricted common stock
for services performed. Such shares were valued at the fair market value on the
date the shares were granted.

Exhibits

Exhibit
Number Description
- ------ -----------
2.1 * Certificate of Incorporation of the Company. Incorporated June
13, 1994.
2.2 * Restated Articles of Incorporation of the Issuer, May 21, 1997.
2.3 * Amended Articles of Incorporation.
2.4 * By-Laws of the Company.
4.1. *** Form of Warrant Agreement with Form of Warrant Election to
Purchase
5.1 * Form of Voting Trust Agreement between Norman Cohn and Garrett
U. Cohn.
5.1.1*** Opinion re:Legality
6.18 * 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 * Resolution to Security Agreement between Norman Cohn and
Garrett U. Cohn.
6.3 * Employee 1997 Stock Option Plan adopted by the Board of
Directors February 24, 1998 and subject to stockholder
ratification.
6.5 * Warrant Agreement dated April 19, 1995 between the Company and
Jay Teitlebaum.
6.6 * 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 * Lease for the Premises dated May 16, 2000.
6.8 * 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 * Employment Agreement for Michael Pellegrino.
6.9.1* Employment Agreement for Michael Ott.
6.9.2* Employment Agreement for Randolph Hall.
10.1 ** Software License and Royalty Agreement between Company and
Harris Corporation
10.2 ** Agreement for Development of Finger/Slap Scanner Product
between the Company and ISC/U.S., Inc.
10.3*** Form of Secured Convertible Debenture Purchase Agreement
(December 28, 2000)
10.4*** Form of First Amendment to Secured Convertible Debenture
Purchase Agreement (March 5, 2001)
10.5*** Form of 12% Convertible Debenture
10.6*** Form of Registration Rights Agreement
10.7*** Form of Security Agreement
10.8*** Form of 10% Convertible Debenture
16.0 * Letter re change in certifying accountant.
23.1*** Consent of Counsel, Owen Naccarato (included in Exhibit 5.1.1)
23.2*** Consent of Ernst & Young LLP

* Previously filed on Form 10-SB September 20, 2000, File No. 0-26604
** Previously filed on Form 10-SB/A November 17, 2000, File No. 0-26604
***Previously filed on Form SB-2 May 1, 2001, File No. 333-59888

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)

Indemnification

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/Garrett U. Cohn Chief Executive Officer, June 6, 2001
------------------ Director - Chairman
Garrett U. Cohn

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/Garrett U. Cohn Chief Executive Officer, June 6, 2001
----------------------- Director - Chairman
Garrett U. Cohn

By: /s/ Michael Pellegrino Chief Financial Officer, June 6, 2001
----------------------- Secretary and Director
Michael Pellegrino

By: /s/ Myrna L. Cohn Ph.D Director June 6, 2001
-----------------------
Myrna L. Cohn Ph.D.