SICHENZIA ROSS FRIEDMAN FERENCE LLP
1065 AVENUE OF THE AMERICAS NEW YORK NY 10018
TEL 212 930 9700 FAX 212 930 9725 WEB WWW. SRFF.COM
January 6, 2006
BY FEDERAL EXPRESS
Securities and Exchange Commission
450 Fifth Street, NW
Washington D.C 20549
Attention: Patrick Gilmore
Room 4561
Re: Digital Descriptor Systems, Inc. (the "Company")
Form 10-KSB for year ended December 31, 2004
Form 10-QSB for the quarter ended March 31, 2005
Form 10-QSB for the quarter ended June 30, 2005
Form 10-QSB for the quarter ended September 30, 2005
File No. 000-26604
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Dear Sir:
On behalf of the Company, we are hereby enclosing for your review two copies of
amendment No. 2 to the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2004 (the "Annual Report"), its Quarterly Report on Form
10-QSB for the quarter ended March 31, 2005, its Quarterly Report on Form 10-QSB
for the quarter ended June 30, 2005, and its Quarterly Report on Form 10-QSB for
the quarter ended September 30, 2005 (collectively, the "Quarterly Reports").
One copy of each document has been marked to show changes.
On October 28, 2005, the staff of the Securities and Exchange Commission (the
"Staff") issued comments on the Annual Report, as amended, and the Quarterly
Reports. Following are the Company's responses to the Staff's comments. For ease
of reference, we have set forth the Staff's comments in their entirety.
Form 10-KSB/A filed July 21, 2005
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Report of Independent Registered Public Accounting Firm, page 1
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1. Tell us why the auditor's opinion does not refer to the restatement
as noted in note 12 of your financial statements. In your response,
tell us how they considered the guidance provided under AU 561.06.
The Company has revised the Annual Report by including an auditor's
opinion that includes a reference to the restatement as noted in
note 12 to the financial statements.
Balance Sheet, page 2
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2. We note that you classified the fair value of the warrants and the
beneficial conversion feature from your convertible debentures as an
asset on your balance sheet. Tell us your basis for recording the
fair value of the warrants and beneficial conversion feature as an
asset as opposed to a debt discount that reduces the face value of
your convertible debentures on your balance sheet. Refer to
paragraph 15 of APB 14 and paragraphs 6 through 9 of EITF 98-5.
In accordance with the Staff's comment, the Company has restated its
balance sheet to properly record the fair value of the warrants and the
beneficial conversion feature as a debt discount.
Item 8A. Controls and Procedures
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3. Tell us how you considered the revisions to you financial statements
in disclosing information relating to your disclosure controls and
procedures and your internal controls, pursuant to Item 307 and 308
of Regulation S-K in your periodic Exchange Act reports. In this
regard, we note you disclose in your Form 10-KSB and subsequent
10-QSB's that your Chief Executive Officer and Chief Financial
Officer have concluded that your disclosure controls and procedures
were effective. Tell us how you concluded that your disclosure
controls and procedures were effective as of the end of the periods
covered by these reports notwithstanding the recent restatement in
your 10-KSB fore the year ended December 31, 2004 and tell us how
you considered Exchange Act Rule 13a-15(e) and the requirement that
you controls and procedures ensure that information required to be
disclosed by you in the reports that are filed or submitted under
the Exchange Act are recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and
forms. If necessary, please revise to expressly identify any
material weaknesses in your internal controls over financial
reporting and any significant deficiency that, when combined with
other significant deficiencies, is determined to be a material
weakness of conversely state that even as a result of the internal
control concerns that caused your recent restatement, you did not
have a material weakness or significant deficiencies.
The Company has revised the Annual Report and the Quarterly Reports to
disclose that it was required to restate certain of its financial
statement. Therefore, the Company's controls and procedures were not
effective.
2
Form 10-QSB filed August 22, 2005
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Note 5. Convertible Debentures, page 5
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4. We note in your disclosure that you are currently in default on
several convertible debentures and that you continue to consider
these debentures long term as you do not believe that they will be
settled within one year even though they may have earlier redemption
dates. Note that the current liability classification is intended to
include obligations that are due on demand or will be due on demand
within one year from the balance sheet date, even though liquidation
may not be expected within that period. Tell us how you considered
the guidance in paragraph 7 of ARB 43 in your classification of
these convertible debentures.
The Company has restated the financials to include debentures that are in
default as current liabilities.
General
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5. Tell us why you have not amended your 10-QSB for the quarter ended
March 31, 2005 to restate your financial statements related to your
expense recognition of the beneficial conversion features associated
with your convertible debentures. Please advise.
The Company has amended its Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2005 in accordance with the Staff's comment.
6. Please refer to comment 4 of our letter dated June 14, 2005. Please
be advised that a letter signed by counsel would not satisfy the
requirement of this comment. As a result, provide the
acknowledgments, in writing, referred to in prior comment 4 of our
letter dated June 14, 2005 that includes a signature of a
representative of the Company.
Please see the attached statement signed by the Company.
Please do not hesitate to contact the undersigned at 212-981-6766 with any
questions or comments with respect to the foregoing.
Very truly yours,
/s/
Louis A. Brilleman
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DDSI Digital Descriptor Systems, Inc.
December 28, 2005
BY FEDERAL EXPRESS
Securities and Exchange Commission
450 Fifth Street, NW
Washington D.C 20549
Attention: Patrick Gilmore
Room 4561
Re: Digital Descriptor Systems, Inc. (the "Company")
Form 10-KSB for year ended December 31, 2004
Form 10-QSB for the quarter ended March 31, 2005
Form 10-QSB for the quarter ended June 30, 2005
Form 10-QSB for the quarter ended September 30, 2005
File No. 000-26604
----------------------
Dear Sir:
In response to a comment letter dated October 28, 2005, by the staff of the
Securities and Exchange Commission, the Company hereby acknowledges that:
a. The company is responsible for the adequacy and accuracy of the
disclosures on the filing;
b. Staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action with
respect to the filing; and
c. The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Very truly yours,
/s/
Anthony R. Shupin
President
Chief Executive Officer
Digital Descriptor Systems, Inc., 2150 Highway 35, Suite 250, Sea Girt,
New Jersey 08750
Phone - 732.359.0260 Fax - 732.359.0265 www.ddsi-cpc.com