<PAGE>
                                   FORM 10-QSB
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the quarterly period ended March 31, 2001
                                                ---------------

                                       OR

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

        For the transition period from _______________ to _______________

                         Commission file number 0-21384
                                                -------

                        Digital Descriptor Systems, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                            23-2770048
-------------------------------                         ----------------------
(State or other jurisdiction of                            (I.R.S. employer
incorporation or organization)                          identification number)

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

       Registrant's Telephone number, including area code: (267) 580-1075
                                                           --------------

  ----------------------------------------------------------------------------
  (former, name, address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.        Yes X       No

State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.


                                                    Outstanding at
       Class of Common Stock                        April 30, 2001
       ---------------------                       ------------------
          $.001 par value                           21,279,612 shares

             Transitional Small Business Disclosure Format Yes    No  X
                                                              ---    ---



                                      -1-
<PAGE>

                                   FORM 10-QSB
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                        DIGITAL DESCRIPTOR SYSTEMS, INC.

                                      Index

PART I - FINANCIAL INFORMATION

     Item 1.  Financial Statements

              Balance Sheets at March 31, 2001 (Unaudited) and December 31, 2000

              Statements of Operations for the three months ended March 31, 2001
                 and 2000 (Unaudited)

              Statements of Cash Flows for the three months ended March 31, 2001
                 and 2000 (Unaudited)

              Notes to Financial Statements (Unaudited)

     Item 2.  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations.


PART II. - OTHER INFORMATION

     Item 1.  Legal Proceedings

     Item 2.  Changes in Securities and Use of Proceeds


     Item 3.  Defaults Upon Senior Securities:


     Item 4.  Submission of Matters of a Vote to Security Holders

     Item 5.  Other Information

     Item 6.  Exhibits and Reports on Form 8-K



SIGNATURES



                                      -2-
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

                         DIGITAL DESCRIPTOR SYSTEMS, INC
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                 March 31               December 31
                                                                                   2001                    2000
                                                                                  ------                  ------
                                                                                (Unaudited)
<S>                                                                             <C>                     <C>
Assets
Current assets:
   Cash                                                                         $   81,573               $  202,877
   Restricted cash                                                                  10,452                   10,452
   Investments                                                                       1,000                    1,000
   Account receivable, less allowance for uncollectible
      accounts of $107,000 and $114,000 in 2001 and 2000,
      respectively                                                                 487,806                  526,292
   Inventory                                                                        37,672                   22,596
   Prepaid expenses                                                                 64,469                    8,698
   Debt discount and deferred financing costs                                      630,454                  228,500
                                                                                ----------               ----------
Total current assets                                                            $1,313,426               $1,000,415


  Note receivable - Officer                                                        168,494                  165,525
  Software development costs at cost, net                                          402,115                  413,604
  Furniture and equipment, at cost, net                                            133,042                  172,046
  Deposits and other assets                                                         31,454                   31,454
                                                                                ----------               ----------
Total assets                                                                    $2,048,531               $1,783,044
                                                                                ==========               ==========

Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable                                                             $  550,408               $  481,163
   Accrued expenses                                                                 80,124                  189,209
   Deferred income                                                               1,066,755                  854,787
   Current portion of equipment loan                                                 7,147                    7,147
   Convertible debentures                                                          400,000                  200,000
                                                                                ----------               ----------
Total current liabilities                                                        2,104,434                1,732,306

   Equipment Loan                                                                   26,845                   28,626
                                                                                ----------               ----------
Total liabilities                                                               $2,131,279               $1,760,932
                                                                                ==========               ==========
</TABLE>

                                      -3-
<PAGE>
                         DIGITAL DESCRIPTOR SYSTEMS, INC
                           BALANCE SHEETS (continued)
<TABLE>
<CAPTION>

                                                                                 March 31               December 31
                                                                                   2001                    2000
                                                                                  ------                  ------
                                                                                (Unaudited)
<S>                                                                            <C>                       <C>
Shareholders' equity (deficit):
   Preferred Stock, $.01 par value, authorized shares - 1,000,000; issued and
     outstanding - none
   Common Stock, $.001 par value, authorized shares -                               20,111                   20,011
     50,000,000; issued and outstanding shares -
     21,111,612 and 20,011,612 at March 31, 2001
     and December 31, 2000, respectively
   Additional paid-in capital                                                   15,005,979               14,544,579
   Accumulated deficit                                                         (15,108,838)             (14,542,478)
                                                                                ----------               ----------
Total shareholder's equity (deficit)                                               (82,748)                  22,112
                                                                                ----------               ----------
Total liabilities and shareholders' equity (deficit)                            $2,048,531               $1,783,044
                                                                                ==========               ==========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      -4-
<PAGE>
                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                        Three Months Ended
                                                                                 March 31                 March 31
                                                                                   2001                     2000
                                                                                  ------                   ------
<S>                                                                            <C>                      <C>
Revenues:
   Software                                                                     $  160,314               $  362,204
   Hardware                                                                          5,975                  103,425
   Maintenance                                                                     130,724                  154,770
   Consulting                                                                            -                   99,132
   Other                                                                            13,035                   12,606
                                                                                ----------               ----------
                                                                                   310,048                  732,137

Costs and expenses:
   Cost of revenues                                                                129,014                  304,925
   General and administrative                                                      333,230                  286,865
   Sales and marketing                                                             235,610                  203,087
   Research and development                                                         77,382                  129,352
   Depreciation and amortization                                                    50,493                   25,237
   Other (income) expense, net                                                      50,679                    1,305
                                                                                ----------               ----------
                                                                                   876,408                  950,771
                                                                                ----------               ----------
Net loss                                                                        $ (566,360)              $ (218,634)
                                                                                ==========               ==========

Net loss per common share (basic and diluted)                                   $    (0.03)              $    (0.01)
                                                                                ==========               ==========

Weighted average number of common shares                                        21,069,945               16,638,687
   outstanding (basic and diluted)                                              ==========               ==========

</TABLE>
    The accompanying notes are an integral part of these financial statements


                                      -5-
<PAGE>
                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                 March 31                 March 31
                                                                                   2001                     2000
                                                                                  ------                   ------
<S>                                                                            <C>                      <C>
Cash flows from operating activities:
Net Loss                                                                         ($566,360)               ($218,634)
Adjustments to reconcile net loss to net cash
   used in operating activities:
      Depreciation and amortization                                                 50,493                   25,236
      Compensation expense in connection with issuance                               5,750                        -
          of  common stock
      Amortization of unearned compensation                                              -                    6,000
      Amortization of debt discount                                                 57,046                        -
   Changes in operating assets and liabilities:
      Accounts receivable                                                           38,486                  109,961
      Inventory                                                                    (15,076)                (143,027)
      Prepaid expenses, deposits and other assets                                  (28,021)                  (3,299)
      Accounts payable                                                              69,245                  (28,029)
      Accrued expenses                                                            (109,085)                 (76,724)
      Deferred income                                                              211,968                   54,442
                                                                                ----------               ----------
Net cash used in operating activities                                             (285,554)                (274,074)

Cash flows from investing activities:
   Purchase of furniture and equipment                                                   -                  (11,590)
   Increase in officer note receivable                                              (2,969)                       -
                                                                                ----------               ----------
Net cash used in investing activities                                               (2,969)                 (11,590)

Cash flows from financing activities:
   Proceeds from issuance of common stock                                                -                  698,496
   Net proceeds from issuance of convertible debentures                            200,000                        -
   Deferred financing costs                                                        (31,000)                       -
   Repayment of equipment loan                                                      (1,781)                       -
                                                                                ----------               ----------
Net cash provided by financing activities                                          167,219                  698,496
                                                                                ----------               ----------
Net increase  (decrease) in cash                                                  (121,304)                 412,832

Cash at beginning of period                                                        202,877                  177,223
                                                                                ----------               ----------
Cash at end of period                                                           $   81,573               $  590,055
                                                                                ----------               ----------

Supplemental disclosure of cash flow information:
  Cash paid during the year for interest                                        $       79               $    1,748
                                                                                ==========               ==========
</TABLE>

                                      -6-
<PAGE>
                        DIGITAL DESCRIPTOR SYSTESMS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                                 March 31, 2001

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 quarters ended March 31, 2001 and 2000. Substantially all of
the Company's revenues are derived principally from U.S. government agencies.

2. BASIS OF PRESENTATION

The financial statements and disclosures included herein for the three months
ended March 31, 2001 and, 2000 are unaudited. These financial statements and
disclosures have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of adjustments of a normal and
recurring nature) considered necessary for a fair presentation have been
included. Operating results for the three month periods ended March 31, 2001 and
2000 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2001.


3. ACCOUNTING POLICIES

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.

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.

                                      -7-
<PAGE>

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.

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 31, 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. Amortization expense of $11,489 was recorded
during the quarter ended March 31, 2001. 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.

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.

                                      -8-
<PAGE>
4. Convertible Debentures

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 note
agreement. The debenture holders received warrants to purchase 200,000 common
shares at an exercise price the lesser of: $0.036 per share or the average of
the lowest three trading prices during the 20 days preceding the exercise date.
Such warrants expire March 4, 2004. The debentures are collateralized by
substantially all of the Company's assets.

5. Equity Transactions

During the quarter ended March 31, 2001, the Company granted 1,100,000 shares of
restricted common stock to certain parties in connection with raising capital
and for services performed and to be performed. Such shares were valued at the
fair market value on the date the shares were granted. Subsequent to March 31,
2001, the Company granted an additional 168,000 shares of restricted common
stock for services to be performed.

During April 2001, the Company issued two convertible notes for $100,000 and
$15,000, respectively, with interest accruing at the annual rate of 10%.
Interest payable on these Notes shall be payable quarterly commencing June 30,
2001. The Holder of the Notes has the right to convert the principal amount and
interest due under the notes into shares of the Company's Common Stock at a
conversion price per share that shall be an amount equal to 50% of the mean
average price of the common stock of the borrower for the ten (10) trading days
prior to notice of conversion per share.



                                      -9-
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

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 the Company 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 the Company
     o  Derive funds through investigating business alliances with other
        companies who may wish to license the Compu-Scan device.

                                      -10-
<PAGE>

     o  Increase revenues through the introduction of a scaled down version of
        our CompuCapture 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

Three Months March 31, 2001 Compared to the Three Months Ended March 31, 2000

Revenues for the three months ended March 31, 2001 of $310,048 decreased
$422,089 or 58% from the three months ended March 31, 2000. The Company
attributes this to the fact that the SI3000 product line and associated hardware
had a decrease in sales. The Company generates its revenues through software
licenses, hardware, post customer support arrangements and other services. The
decrease in the Company's revenue for software and hardware during the period is
attributed to a trend that the Company has noticed in a decrease in the sales of
the SI3000 product. Maintenance revenues decreased $24,046 or 16% from the three
months ended March 31, 2000 primarily due to a decrease in the Company's
customer's entering into such arrangements and the revenue sharing agreement
with IN on maintenance of the Sl3000 product. Other revenues consist of sales of
supplies that the Company makes available to its customers, such as wristbands,
ID cards and print packs. More customers ordered such items in the three months
ended March 31, 2001 versus 2000, which accounted for the modest increase. Cost
of goods decreased $175,911 or 58% due to the decrease in revenue and remained
at 42% of revenue. Overall the gross profit percentage per sale remained the
same at 58%.

Costs and expenses decreased $74,363 or 8% during the three months ended March
31, 2001 versus the three months ended March 31, 2000. This decrease is due to
an increase in general and administrative expenses in the amount of $46,365, due
mainly to an increase in depreciation of $25,256. All other areas of the Company
experienced decreases except for sales and marketing that had a one-time hiring
expense of $33,300.

The net loss for the Company increased 159% for the three months ending March
31, 2001 to $566,360 from $218,634 for the three months ending March 31, 2000.
This was principally due to the decrease in revenues and relative consistent
level of expenses during the period.

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.


                                      -11-
<PAGE>

Net cash used in operating activities for the three months ended March 31, 2001
and 2000 was $285,554 and $274,074, respectively. The change in cash from
operating activities of $11,480 was principally due to the increase in the net
loss for the 2001 first quarter offset by changes in operating assets and
liabilities.

Net cash used in investing activities was $2,969 and $11,590 for the three
months ended March 31, 2001 and 2000 respectively, reflecting a change of
$8,621. This change is due to no purchases of furniture and equipment in the
quarter ended March 31, 2001.


Net cash provided by financing activities was $167,219 and $698,496 for the
three months ended March 31, 2001 and 2000, respectively, reflecting a change of
$531,277. This decrease was principally due to less proceeds received from the
issuance of the Company's common stock in the first quarter of 2001.



                                      -12-
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.

None

Item 2. Changes in Securities and Use of Proceeds

         During April 2001, the Company 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 Company's Common Stock.

         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 note agreement. The debenture holders received warrants to purchase
200,000 common shares at an exercise price the lesser of: $0.036 per share or
the average of the lowest three trading prices during the 20 days preceding the
exercise date. Such warrants expire March 4, 2004. The debentures are
collateralized by substantially all of the Company's assets.

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

Item 3. Defaults Upon Senior Securities:

None.

Item 4. Submission of Matters of a Vote to Security Holders

         At the Annual Meeting scheduled for June 2001, shareholders will be
asked to approve and Consent to amend the Company's restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
50,000,000 to 100,000,000 shares.

            The principal purpose of the proposed amendment to the Certificate
is to authorize additional shares of Common Stock which will be available to
facilitate the current raising of additional capital through the sale of
securities, to grant options or other stock incentives to the Company's
employees, for a possible acquisition of another company or its business or
assets, or to seek to establish a strategic relationship with a corporate
partner. If the amendment is approved by the stockholders, the Board of
Directors does not intend to solicit further stockholder approval prior to the
issuance of any additional shares of Common Stock, except as may be required by
applicable law.

                                      -13-
<PAGE>

            Shareholders will also be asked to approve and consent to increase
the number of shares in the Digital Descriptor Systems, Inc. Employee Stock
Option Plan from 300,000 to 5,000,000 shares.


Item 5. Other Information

None


Item 6. Exhibits and Reports on Form 8-K:

None



                                      -14-
<PAGE>


                                   SIGNATURES

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

                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                        --------------------------------
                                  (Registrant)



Date:  May 15, 2001       By: /s/ GARRETT U. COHN
                              -------------------------------------------------
                                  Garrett U. Cohn
                                 (President & Chief Executive Officer)


Date:  May 15, 2001       By:  /s/ MICHAEL J. PELLEGRINO
                               ------------------------------------------------
                                   Michael J. Pellegrino
                                   (Vice President of Finance & Chief Financial
                                   Officer)


Date:  May 15, 2001       By:  /s/ MYRNA L. COHN, PH.D.
                               ------------------------------------------------
                                   Myrna L. Cohn Ph.D.




                                      -15-