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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.20549

                                   FORM 10-KSB
        (MarkOne)
         |X|      ANNUAL REPORT  PURSUANT  SECTION 13 or 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934.  For the fiscal year ended  December 31,
                  2003.

         |_|      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 0-26604

                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                 (Name of small business issuer in its charter)

          Delaware                                    23-27700048
-------------------------------                  ------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

2150 Highway 35, Suite 250, Sea Girt, New Jersey            08750
(Address of principal executive offices)                  (Zip Code)

Registrant's Telephone number, including area code: (732) 359-0260
                                                    --------------

Securities registered under 12(b) of the Exchange Act:   None

Securities registered under Section 12(g) of the Act:    Common Stock

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  |_|

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
Regulation S-B is not contained herein,  and will not be contained,  to the best
of  Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.

The issuer had revenues of $650,650 for the fiscal year ended December 31, 2003.

As of April 14,  2004  145,958,423  shares of the  issuer's  Common  Stock  were
outstanding.   The   aggregate   market  value  of  the  voting  stock  held  by
non-affiliates on December 31, 2003 was  approximately  $115,958.42 based on the
average  of the bid  and  asked  prices  of the  issuer's  common  stock  in the
over-the-counter market on such date as reported by the OTC Bulletin Board.

                       DOCUMENTS INCORPORATED BY REFERENCE
None

Transitional Small Business Disclosure Format        Yes |_|   No |X|

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                                      -1-

<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL BUSINESS DEVELOPMENT

      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.

OUR BUSINESS

      DDSI develops, assembles, markets and installs computer systems which
capture video, digitally captured images and scanned images, digitize the image,
link the digitized images to text/data and store the image and text on a
computer database which allows for transmitting the image and text by computer
or telecommunication links 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.

      Heightened sensitivity since 9/11 has caused an increase in awareness for
software and hardware programs related to digital identification. This awareness
is causing more resources to be allocated to the development of technologies in
this field. DDSI has a strong focus on developing, integrating or reselling
products to its client base as well as new markets.

      While the majority of DDSI's sales are one time software based sales, DDSI
does offer maintenance and support for their products. On a historical basis,
DDSI has generated approximately $495,622 on an annual basis, or $1,486,865 over
the past three years from these services. Year to year, Service revenue
generally accounts for an average of 41% of total revenue.

PRODUCT AND SERVICES

COMPU-CAPTURE(R)

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

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


                                      -2-
<PAGE>


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

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

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

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

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

COMPU-CAPTURE(R) 32SQL

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

COMPU-CAPTURE(R) ACTIVEX32SQL

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

COMPU-SKETCH(R)

      The Compu-Sketch(R) 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.


                                      -3-
<PAGE>


COMPU-SCENE

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

MAINTENANCE AND SUPPORT

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

NEW PRODUCTS

IDENTIFY ON DEMAND SYSTEM:

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

FMS  ("FINGERPRINT MATCHING SYSTEM")

      In December of 2001, DDSI secured a royalty license from AuthenTec Inc.,
located in Melbourne, Florida, for a software suite called PowerMatch(TM)
("FMS") that enables the end user to capture, digitize, store, retrieve and/or
match or sort fingerprints. DDSI subsequently renamed the software FMS
("Fingerprint Matching System"). DDSI does not have a relationship with
AuthenTec Inc.'s Officers or Directors.

      The agreement provides DDSI with a royalty bearing worldwide,
non-exclusive right and license to use the Power Match Software (FMS) in selling
or providing services to customers throughout the world. In exchange for the
non-exclusive FMS license, DDSI shall pay AuthenTec the following:

1. a one-time royalty payment of $5,000,
2. 10% royalty of the sales "Price" for each PowerMatch Product sale.
3. the royalty obligation shall continue for the duration of the Agreement
4. the agreement is an open ended contract.

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

COMPU-SCAN 3000

      During 1998, DDSI entered into a development contract with ISC/US to
develop a computerized inkless, non-contact fingerprint capture device. On July
25, 2000, DDSI entered into an agreement with DBA Systems, a division of Titan
Systems Corp., for technical assistance in achieving compliance with the FBI
certification process. We re-evaluated this product and determined that to see
the project to completion would cost an additional $400,000 to $600,000 dollars


                                      -4-
<PAGE>


plus an additional 12 to 18 month timeframe, with no guarantee of FBI
certification. As such, we decided not to pursue this project any further and
focus on developing the existing products.


                                      -5-
<PAGE>

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 one (1) full-time employee in sales, marketing or sales
management. Leads are generated 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 applications.

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(R) 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 41% of the installed software license
fee.

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

BUSINESS ALLIANCES

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

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

GREATER PENETRATION OF EXISTING CUSTOMERS

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

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

SEEK ACQUISITIONS AND ALLIANCES

      Depending on the availability of funds, DDSI intends to continue
developing software interfaces to make its products compatible with new and
expanded versions of systems offered by strategic alliances and other vendors of


                                      -6-
<PAGE>


criminal justice software. DDSI believes that expanding the number of law
enforcement systems with which the Compu-Capture(R) systems are compatible will
assist DDSI in maintaining its competitiveness.

SALES BY GEOGRAPHIC AREA

      During the fiscal years ended December 31, 2003, 2002, and 2001, 99.9%,
99.9%, and 89%, respectively, of DDSI's revenues have been from domestic
customers. Foreign sales for 2003, 2002, and 2001 were $4,927, $5,598, and
$70,856, or an aggregate for these years of approximately $81,381.

COMPETITION

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

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

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

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

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

SUPPLIERS

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

GOVERNMENT REGULATION OR GOVERNMENT APPROVAL

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

RESEARCH AND DEVELOPMENT

      DDSI spent $38,668 in 2003, $177,033 in 2002 and $383,217 in 2001 for a
total of $598,918 on pure research and development in the last three years. This
amount includes $297,471 spent on outside sources for assistance with Research &
Development projects. None of these costs have been borne directly by our
customers.

      The money spent was mainly on the continuing development of the FMS
(Fingerprint Matching System) software.


                                      -7-
<PAGE>


PRODUCT LIABILITY INSURANCE

      Although DDSI's believes its products are safe, it may be subject to
product liability claims from persons injured through the use of DDSI's marketed
products or services. DDSI carries no direct product liability insurance,
relying instead on the coverage maintained by its distributors and manufacturing
sources from which it obtains product. There is no assurance that this insurance
will adequately cover any liability claims brought against DDSI. There also can
be no assurance that DDSI will be able to obtain its own liability insurance
(should it seek to do so) on economically feasible terms. DDSI's failure to
maintain its own liability insurance could materially adversely affect its
ability to sell its products in the future. Although no product liability claims
have been brought against DDSI to date, if there were any such claims brought
against DDSI, the cost of defending against such claims and any damages paid by
DDSI in connection with such claims could have a materially adverse impact upon
DDSI, including its financial position, results of operations and cashflows.

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. Due to the
cessation of the development of the Compu-Scan product DDSI, does not intend to
pursue this patent application any further.

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

OTHER EVENTS

      On October 6, 2003, Mr. Michael J. Pellegrino resigned as President and
Chief Executive Officer of the Company and was named Chairman of the Board of
Directors. Mr. Anthony Shupin was named President and Chief Executive Officer.

      On March 18 and March 11, 2002, DDSI announced an array of upgrades,
additional licenses and the addition of new customers, which included the
successful installation of a multi-user solution in Illinois, five additional
workstations and an ID badging module to a Mississippi agency, as well as one of
New Jersey's largest counties Prosecutor's office.

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

      On January 23, 2002 DDSI announced the appointment of Anthony Shupin,
Vincent Moreno, Michael J. Pellegrino and Robert Gowell to DDSI's Board of
Directors. DDSI also announced that Myrna Marks-Cohn, Ph.D, resigned from the
Board of Directors for personal reasons.

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

EMPLOYEES

      DDSI employs a total of 4 full time employees.


                                      -8-
<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

      DDSI operates from a single location. In May 2000, DDSI entered into a
five-year operating lease for its office facility. The office facility was
located at 446 Lincoln Highway, Fairless Hills, PA.19030, and originally
contained 5,900 square feet of office space. In July 2002, DDSI downsized the
leased space to 4,460 square feet. In August of 2003 the Company abandoned this
office space. (See Legal Proceedings) The Company now operates at 2150 Highway
35, Sea Girt New Jersey on a six month lease which ends in May, 2004. The
Company has not decided whether to renew this lease for another six months.
Future minimum lease commitment in connection with this lease is $4,720.


ITEM 3.  LEGAL PROCEEDINGS

AccuSoft - Action to Terminate Product Licenses

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

      A.    The termination of the following license agreements: ImageGear 6.0,
            95 and 98.
      B.    A preliminary injunction enjoining DDSI from using the above
            licenses in the sales of their products.

      Since the initial filing of the action by AccuSoft Corporation, DDSI has
stopped using AccuSoft's ImageGear 6.0, 95 and 98 software and have replaced
AccuSoft's controls. The parties reached an agreement on October 28, 2002,
whereas DDSI agreed to pay AccuSoft $7,500. This was paid and a release signed
on November 1, 2002.

      On September 30, 2003 a judgment was entered against the Company by its
vendor, Primezone, Inc. in the amount of $3,134.50. The Company satisfied the
judgment on October 9, 2003.

      On October 16, 2003, in the Court of Common Please of Bucks County,
Pennsylvania, a judgment was entered against the Company by its landlord, BT
Lincoln L.P. for breach of lease in the amount of $184,706.76. The Company
intends to negotiate a settlement. The liability, net of the security deposit,
is included in accrued expense at December 31, 2003.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None.


                                      -9-
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      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, DDSI 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, 2003 there
were approximately 2,800 shareholders of record. The source of the quotes is AOL
Ticker and Nasdaq Charts.

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

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

Calendar Year 2002                                         Low          High
---------------------------
First Quarter                                              $0.009       $0.01
Second Quarter                                             $0.006       $0.011
Third Quarter                                              $0.004       $0.004
Fourth Quarter                                             $0.0021      $0.003

Calendar Year 2003                                         Low          High
---------------------------
First Quarter                                              $0.0003      $0.0032
Second Quarter                                             $0.0004      $0.005
Third Quarter                                              $0.001       $0.0026
Fourth Quarter                                             $0.0001      $0.002


      As of December 31, 2003, there were approximately 115,958,423 shares of
common stock issued and outstanding.


ISSUANCE OF SHARES

      A total of 10,915,484 shares of Common Stock, par value $.001 (the
"Shares"), were issued by DDSI from June 1999 through May 2000, for cash or
services rendered to DDSI, 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, DDSI 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."


                                      -10-
<PAGE>


      During December 2000, DDSI issued $200,000 of convertible debentures to
two investors. The debentures accrue interest at 12% per annum. The holder has
the right to convert the debentures to common shares at any time through
maturity at a conversion price the lesser 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 allowing purchase
of 400,000 common shares at an exercise price of $0.036 per share at any time
before December 28, 2003. During September 2001 through November 2001 the
debentures in the amount of $200,000 were converted into 5,241,754 shares of
Common Stock. In addition, $30,374 of accrued interest related to the debentures
was converted into 1,012,494 shares of Common Stock.

      During March 2001, DDSI issued $200,000 of convertible debentures to two
investors. These debentures matured on March 4, 2002; however, the parties have
entered into an agreement to extend the maturity date for another year, and
accrue interest at 12% per annum. The holder has the right to convert the
debentures to common shares at any time through maturity at the conversion price
as described in the agreement. The debenture holders received warrants to
purchase 200,000 common shares at an exercise price the lesser of: $0.36 per
share or the average of the lowest three trading prices during the 20 days
preceding the exercise date. The debentures are collateralized by substantially
all of DDSI's assets.

      During January through March 2001, DDSI 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, DDSI 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.

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

      During May 2001, DDSI issued one convertible note for $40,000 to Robert
Gowell, with interest at 10% per annum. Interest on these Notes shall be payable
quarterly commencing June 30, 2001. The holder has the right to convert the
debentures and interest accrued into shares of DDSI's common stock at a
conversion price per share that shall be an amount equal to 50% of the mean
average price of the common stock for the ten (10) trading days prior to notice
of conversion per share.

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

      During September 2001, $35,000 of the convertible debentures issued in
December 2000, were converted into 1,000,000 shares of Common Stock.

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


                                      -11-
<PAGE>


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

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

      In October 2001, $15,000 of the $40,000 convertible note issued to Robert
Gowell was paid. The parties have entered into an agreement to extend the
maturity date of the remaining balance of $25,000 for another year. Securities
were issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a public
offering."

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

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

      During October through December 2001, DDSI issued Common Stock via
Subscription Agreements to various individuals. The Subscription Agreements
provided for the purchase of up to 13,333,333 shares of Common Stock of DDSI at
$0.03 per share, in $10,000.00 (U.S.) blocks, equaling 333,333 shares per block,
for an aggregate total of $400,000. Through January 2002, DDSI has raised
$229,000 (net of issuance costs) through these agreements and has issued
7,999,996 shares of Common Stock.

      On December 31, 2001, DDSI issued three convertible debentures for an
aggregate amount of $500,000, with simple interest accruing at the annual rate
of 12%. These debentures are due December 31, 2002. Interest payable on the
Debentures shall be paid quarterly commencing March 30, 2002. The holders shall
have the right to convert the principal amount and interest due under the
debentures into shares of DDSI's Common Stock. The conversion price in effect on
any Conversion Date shall be the lesser of (1) $.043 and (2) 50% of the average
of the lowest three inter-day sales prices of the Common Stock during the twenty
Trading Days immediately preceding the applicable Conversion Date. DDSI also
issued Common Stock purchase warrants for the right to purchase 1,500,000 shares
of Common Stock of DDSI at an exercise price per share equal to the lesser of
(i) $.02 and (ii) the average of the lowest three inter-day sales prices during
the twenty (20) Trading Days immediately prior to exercise.

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

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

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


                                      -12-
<PAGE>


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

      In June 2002, a 12% convertible promissory note for $75,000 was issued to
two investors. The conversion price is (i) 50% of the average of the lowest
three inter-day sales prices, or (ii) if the common stock is then traded on the
OTC Bulletin Board or Pink Sheets, the prices asked by any person or entity
acting as a market maker in the common stock during the twenty trading days
immediately preceding the relevant date upon which a conversion is effected.

      On September 30, 2002, DDSI issued two convertible debentures for an
aggregate amount of $100,000, with simple interest accruing at the annual rate
of 12%. These debentures are due September 30, 2003. Interest payable on the
Debentures shall be paid quarterly commencing December 31, 2002. The holders
shall have the right to convert the principal amount and interest due under the
debentures into shares of DDSI's common stock. The conversion price in effect on
any Conversion Date shall be the lesser of (1) $.005 and (2) 50% of the average
of the lowest three inter-day sales prices of the common stock during the twenty
Trading Days immediately preceding the applicable Conversion Date.

      During October 2002, $3,000 of the convertible debentures issued in March
2001 were converted into 1,639,344 shares of common stock. Additionally,
liquidated damages relating to these notes were converted into an additional
1,555,553 shares of common stock.

      On January 10, 2003, DDSI issued three convertible debentures for an
aggregate amount of $250,000, with simple interest accruing at the annual rate
of 10%. These debentures are due January 10, 2004. Interest payable on the
Debentures shall be paid quarterly commencing March 31, 2003. The holders shall
have the right to convert the principal amount and interest due under the
debentures into shares of DDSI's common stock. The conversion price in effect on
any Conversion Date shall be the lesser of (1) $.01 and (2) 50% of the average
of the lowest three inter-day sales prices of the common stock during the twenty
Trading Days immediately preceding the applicable Conversion Date.

      During February 2003, $1,000 of the convertible debentures issued in March
2001 were converted into 2,857,142 shares of common stock.

      On February 25, 2003, DDSI issued three convertible debentures for an
aggregate amount of $125,000, with simple interest accruing at the annual rate
of 10%. The debentures are due February 25, 2004. Interest payable on the
Debentures shall be paid quarterly commencing March 31, 2003. The holders shall
have the right to convert the principal amount and interest due under the
debentures into shares of DDSI's common stock. The conversion price in effect on
any Conversion Date shall be the lesser of (1) $.01 and (2) 50% of the average
of the lowest three inter-day sales prices of the common stock during the twenty
Trading Days immediately preceding the applicable Conversion Date.

      In March 2003, $1,600 of the convertible debentures issued in March 2001
were converted into 8,000,000 shares of common stock. In addition, liquidated
damages relating to the convertible debentures issued in December 2001 were
converted into 6,000,000 shares of common stock.

      On April 2, 2003 DDSI issued three convertible debentures for an aggregate
amount of $125,000, with simple interest accruing at the annual rate of 10%. The
debentures are due March 31, 2004. Interest payable on the Debentures shall be
paid quarterly commencing March 31, 2003. The holders shall have the right to
convert the principal amount and interest due under the debentures into shares
of DDSI's common stock. The conversion price in effect on any Conversion Date
shall be the lesser of (1) $.01 and (2) 50% of the average of the lowest three
inter-day sales prices of the common stock during the twenty Trading Days
immediately preceding the applicable Conversion Date.


                                      -13-
<PAGE>


      In April 2003, $1,130 of the convertible debentures issued in March 2001
were converted into 5,650,000 shares of common stock. Also in April $470 of the
convertible debentures issued in September 2001 were converted into 2,350,000 of
common stock. In addition, liquidated damages relating to the convertible
debentures issued in December 2001 were converted into 6,000,000 shares of
common stock.

      During May 2003, $1,600 of the convertible debentures issued in September
2001 were converted into 8,000,000 shares of common stock. Additionally,
liquidated damages relating to the convertible debentures issued in December
2001 were converted into 4,450,000 shares of common stock.

      In June 2003, $1,093 of the convertible debentures issued in September
2001 were converted into 5,468,010 shares of common stock. Additionally,
1,011,250 shares of common stock were issued for liquidated damages relating to
notes issued in December 2001.

      On October 1, 2003, we entered into a Securities Purchase Agreement, with
two accredited investors, that provides for the issuance of convertible notes
payable up to an aggregate face value of $300,000 and warrants to acquire up to
an aggregate 2,100,000 shares of our common stock. The agreement provides for
the funding of the notes in three tranches, of which the first, amounting to
$165,000 with 1,115,000 warrants were issued October 1, 2003. On the final
business day of each of the three (3) months beginning in October 2003 and
ending in December 2003, the Company will issue and sell to the investors an
aggregate of $45,000 principal amount of convertible notes and warrants to
purchase an aggregate of 315,000 shares.

      The convertible notes are due one year from the date of issuance. Interest
payable on the convertible notes shall be paid quarterly commencing December 30,
2003. The holders shall have the right to convert the principal amount and
interest due under the convertible notes into shares of DDS's common stock. The
conversion price in effect on any conversion date shall be the lesser of (1)
$.01 and (2) 40% of the average of the lowest three inter-day sales prices of
the common stock during the twenty trading days immediately preceding the
applicable conversion date. The warrants have an exercise price of $0.005 and
expire on September 30, 2008.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

      Except for historical matters contained herein, the matters discussed in
this Form 10-KSB are forward-looking and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that these forward-looking statements reflect numerous
assumptions, especially as regarding installation schedules and product mix, and
involves risks and uncertainties which may affect Digital Descriptor Systems,
Inc.'s business and prospects and cause actual results to differ materially from
these forward-looking statements, including sufficient funds to finance working
capital and other financing requirements of Digital Descriptor Systems, Inc.,
market acceptance of DDSI's products and competition in the computer industry.

CRITICAL ACCOUNTING POLICIES

      DDSI's critical accounting policies, including the assumptions and
judgments underlying them, are disclosed in the Notes to the Financial
Statements. These policies have been consistently applied in all material
respects and address such matters as revenue recognition and depreciation
methods. The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.

      DDSI 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.


                                      -14-
<PAGE>


      DDSI 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.

PLAN OF OPERATIONS

The short-term objective of DDSI is the following:

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

DDSI is also adding additional product lines as a Value Added Reseller.
Technologies related to DDSI's core business can bring additional cashflow with
relatively small internal development capital outlay.

DDSI's long-term objective is as follows:

      o     To seek additional products to sell into its basic business market -
            Criminal Justice - so that DDSI can generate sales adequate enough
            to allow for profits. New products include biometric devices such as
            FMS (Fingerprint Matching System) and our integrated digital image
            and fingerprint package, Identify on Demand.

      DDSI believes that it will not reach profitability until the year 2005.
Over the next twelve months, management is of the opinion that sufficient
working capital will be obtained from operations and external financing to meet
DDSI's liabilities and commitments as they become payable. DDSI has in the past
successfully relied on private placements of common stock securities, bank debt,
loans from private investors and the exercise of common stock warrants in order
to sustain operations. If DDSI is unable to obtain additional funding in the
future, it may be forced to curtail or terminate operations. A recent financing
has been obtained and the underlying shares are being registered in this
registration statement (see "Selling Shareholders" and "Recent Financing" on
page 40).

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

      o     Cut costs in areas that add the least value to DDSI.

      o     Derive funds through investigating business alliances with other
            companies who may wish to license the FMS SDK (software developer's
            kit).

      o     Increase revenues through the introduction of Compu-Capture(R),
            specifically towards kindergarten through twelfth grades, for the
            creation of ID cards.

      o     Increase revenues through the introduction of a scaled down version
            of our Compu-Capture(R) product.

      o     Increase revenues through the addition of innovative technologies as
            a Value Added Seller.


                                      -15-
<PAGE>


RESULTS OF OPERATIONS

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Revenues for the year ended December 31, 2003 of $650,650 decreased
$562,539 or 46% from the year ended December 30, 2002. DDSI generates its
revenues through software licenses, hardware, post customer support arrangements
and other services. The decrease in DDSI's revenue is attributed to discontinued
sales of the SI-3000 product line at the end of the first quarter in 2001.
SI-3000 products' largest revenue impact was in software sales. These revenues
are included in deferred revenue until the job has been completed and
"signed-off" by the client. Once that job is completed, revenue is then
recognized on the income statement. During 2003, DDSI recognized revenue of
$134,426 from software sales and software maintenance agreements from previous
installations of SI-3000. Maintenance revenues decreased $222,098 or 38% from
the year ended December 31, 2002 primarily due to a decrease in DDSI's customer
base and contract dollar amount.

      Cost of revenue for the period ended December 31, 2003 was $87,728 a
decrease of $343,108 or 80% from the same period, prior year. The decrease was
attributable to the decrease in SI-3000 projects. Cost of revenue sold as a
percentage of revenue for the period ended December 31, 2003 was 13% of total
revenues, versus 36% in the same period a year earlier.

      Costs and expenses decreased $772,798 or 28% during the year ended
December 31, 2003 versus the year ended December 31, 2002. The decrease is due
primarily to the cost containment efforts of DDSI. All facets of DDSI
experienced decreases in expense for the year ended December 31, 2003 versus the
year ended December 31, 2002.

      General and Administrative expenses for the year ending December 31, 2003
were $742,982 versus $946,934 for the same period prior year for a decrease of
$203,952 or 22%. This decrease was mainly attributable to a decrease in salaries
and related payroll expenses of ($226,462), a decrease in telephone expense
($24,668), a reduction in travel and entertainment expense of ($23,943), a
decrease in vehicle expense of ($14,719), a reduction in professional fees of
($16,143), a reduction in rent of ($33,574) and a decrease in miscellaneous
expenses of ($24,756). The offset to the decreases in expenditures is due to a
judgment against the Company of $160,313 (net of rent deposit) for breaking its
lease.

      Sales and Marketing expenses decreased $16,426 for the year ended December
31, 2003 from $188,188 (2002) to $171,762 (2003) or a 9% decrease. This decrease
was mainly attributable to a decrease in travel expenses of ($5,255), a decrease
in advertising costs of ($7,478), a reduction in trade show expenses of ($3,225)
and a decrease in miscellaneous expenses of ($468).

      Research and development for the year ended December 31, 2003 was $38,668
compared to $177,033 for the same period prior year for a decrease of $138,365,
which was due in part to a decrease in research and development consulting costs
of ($114,107). Also contributing to the overall decrease was the decline in
salaries, benefits and payroll taxes in the aggregate of ($19,119), temporary
help by ($4,475) and miscellaneous items of ($664).

      The net loss for DDSI decreased 14% for the year ended December 31, 2003
to ($1,306,857) from ($1,517,116) for the year ended December 31, 2002. This was
principally due to the decrease in expenses during the year.

      Net cash used in operating activities for the year ended December 31, 2003
and 2002 was ($564,441) and ($555,040), respectively. The increase in cash used
by operating activities in the year ended December 31, 2003 of $9,400 was
principally due to the increase in sales expense.


                                      -16-
<PAGE>


      Net cash provided by (used in) investing activities for the year ended
December 31, 2003 and 2002 was $87 and $5,289 respectively, reflecting a change
of $5,202. This change is due to the reduction of restricted cash for the year
ended December 31, 2003 as compared to the same period prior year.

      Net cash provided by financing activities was $600,179 and $129,528 for
the year ended December 31, 2003 and 2002, respectively, reflecting a decrease
of $470,651. This decrease was principally due to an increase in proceeds from
issuance of convertible debenture.

LIQUIDITY AND CAPITAL RESOURCES

      DDSI's revenues have been insufficient to cover the cost of revenues and
operating expenses. Therefore, DDSI 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 DDSI's cash needs, or that a sufficient amount of DDSI'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 DDSI.

      Over the next twelve months, management is of the opinion that sufficient
working capital will be obtained from operations and external financing to meet
DDSI's liabilities and commitments as they become payable. DDSI has in the past
relied on private placements of common stock securities, and loans from private
investors to sustain operations. However, if DDSI is unable to obtain additional
funding in the future, it may be forced to curtail or terminate operations.

DECEMBER 31, 2003

      At December 31, 2003, DDSI had assets of $553,946 compared to $338,385 on
December 31, 2002 an increase of $215,561 and shareholder deficiency of
($2,605,403) on December 31, 2003 compared to shareholder deficiency of
($2,070,867) on December 31, 2002, a decrease of ($534,536). This decrease in
shareholder deficiency for the year ended December 31, 2003 resulted from the
net loss for the year ended December 31, 2003 of ($1,306,857), offset by the
issuance of Common Stock and the debt discounts related to the issuance of
convertible debentures.

      As of December 31, 2003, DDSI had a negative working capital of
$2,607,133, a change of $512,479 from a negative working capital of $2,094,654
at December 31, 2002. The increase in negative working capital was a result of
an increase in cash balances of $35,738, a decrease in inventory of ($8,550), an
increase of accounts receivable of $107,838, a reduction in prepaid expenses of
($89,447), an increase in debt discount and deferred financing cost asset of
$204,805, a decrease in accounts payable of $176,296, an increase in accrued
expenses of ($310,569), a decrease in deferred income of $162,846, a decrease in
the equipment loan of $7,289 and an increase in convertible debentures of
($743,105).

ITEM 7.  FINANCIAL STATEMENTS

The report of independent auditors and financial statements are set forth in
this report beginning on Page F-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      DDSI replaces WithumSmith+Brown, P.C.

               WithumSmith+Brown, P.C. were previously the independent auditors
               for Digital Descriptor Systems, Inc. (the "Registrant"). On March
               5, 2004 WithumSmith+Brown, PC was replaced as independent
               auditors and Rosenberg Rich Baker Berman & Company were engaged


                                      -17-
<PAGE>


               as independent auditors. The decision to change was based on
               financial considerations and was approved by the audit committee
               and the full Board of Directors of the Registrant.

               The audit reports of WithumSmith+Brown, P.C. on the financial
               statements of Digital Descriptor Systems, Inc. as of and for the
               fiscal years ended December 31, 2002 and 2001 did not contain an
               adverse opinion or disclaimer of opinion and were not qualified
               or modified as to uncertainty, audit scope or accounting
               principles, except that such reports were modified with respect
               to the Company's ability to continue as a going concern.

               During the Registrant's two most recent fiscal years ended
               December 31, 2001, and the period ending December 31, 2002, there
               were no disagreements between the Registrant and
               WithumSmith+Brown, P.C. on any matter of accounting principles or
               practices, financial statement disclosure, or auditing scope and
               procedures, which if not resolved to the satisfaction of
               WithumSmith+Brown, P.C. would have caused WithumSmith+Brown, P.C.
               to make reference to the matter in their report.

               There were no other "reportable events" as that term is described
               in Item 304(a)(1)(v) of Regulation S-K occurring within the
               Registrant's two most recent fiscal years and the subsequent
               interim period ending February 4, 2004.

               During the Registrant's two most recent fiscal years ended
               December 31, 2001 and the subsequent interim period through
               December 31, 2002, the Registrant did not consult with
               WithumSmith+Brown, P.C. regarding any of the matters or events
               set forth in Item 304 (a)(2)(i) and (ii) of Regulations S-K

ITEM 8A. CONTROL AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         As of December 31, 2003, we carried out an evaluation, under the
         supervision and with the participation of our Chief Executive Officer
         and Chief Financial Officer, of the effectiveness of the design and
         operation of our disclosure controls and procedures. Based on this
         evaluation, our Chief Executive Officer and Chief Financial Officer
         concluded that our disclosure controls and procedures are effective in
         timely alerting them to material information required to be included in
         our periodic reports that are filed with the Securities and Exchange
         Commission. It should be noted that the design of any system of
         controls is based in part upon certain assumptions about the likelihood
         of future events, and there can be no assurance that any design will
         succeed in achieving its stated goals under all potential future
         conditions, regardless of how remote. In addition, we reviewed our
         internal controls, and there have been no significant changes in our
         internal controls or in other factors that could significantly affect
         those controls subsequent to the date of their last valuation.

CHANGES IN INTERNAL CONTROLS

         There were no significant changes in the Company's internal controls or
         in other factors that could significantly affect these controls during
         the year ended covered by this Report or from the end of the reporting
         period to the date of the 10-KSB.


                                      -18-
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         On October 6, 2003, The Board of Directors approved a restructuring of
the management of the Company. Mr. Pellegrino resigned as CEO and President and
was named Chairman of the Board of Directors. Mr. Anthony Shupin was named CEO
and President and remains as a Director of the Company.

         On January 25, 2002, the Board of Directors approved a restructuring of
management. Mr. Cohn resigned as CEO and President and Mr. Robert Gowell was
appointed as CEO and Co-Chairman of the Board of Directors. Mr. Michael J.
Pellegrino will serve as President and Chief Operating Officer of DDSI in
addition to his current position as CFO. Mr. Randolph Hall was appointed as Vice
President of Sales.

         Mr. Cohn resigned as Co-Chairman and Director of the Board of Directors
effective July 23, 2002 for personal reasons.

         Mr. Hall resigned from DDSI effective October 18, 2002.

         This reorganization occurred to fill the needs of DDSI i.e., to bring
in people with skill sets and experience that could assist DDSI in achieving
stability and growth. None of the above transactions fall within the provisions
of Rule 14f-1 in that the appointment of directors were to fill open slots and
were not part of an understanding with a person or persons acquiring securities.
These individuals were appointed due to their expertise in areas that would be
beneficial in growing the business of DDSI.

         Pursuant to the March 13, 2003 shareholder meeting Robert Gowell,
Michael Pellegrino, Anthony Shupin and Vincent Moreno were elected as directors.
The directors then subsequently appointed Michael Pellegrino as President, Chief
Executive Officer and Chief Financial Officer.

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

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

Robert Gowell              36      Director
Michael Pellegrino         55      Chairman & Director
Anthony Shupin             49      Director, Chief Executive Officer, President
                                   and Chief Financial Officer
Vincent Moreno             61      Director

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

         Michael Pellegrino joined DDSI in 1995. On March 13, he was appointed
President, Chief Executive Officer and Chief Financial Officer, Secretary and a
Director of DDSI. For eleven years prior (from 1984 to 1995), Mr. Pellegrino was
Vice President and CFO of Software Shop Systems, Inc. From 1979 to 1984 (5
years), he was a regional controller for Capital Cities/ABS, and for seven years
earlier (1972-1979) as Director of Financial Systems for ADP. Mr. Pellegrino has
a Bachelors degree in accounting from MSU and a Masters in Finance from Rutgers
University, after which he worked at Touche Ross for 3 years.


                                      -19-
<PAGE>


         Anthony Shupin was appointed to CEO and President of DDSI on October 6,
2003. His affiliation with DDSI began as a member of the Board of Directors in
January, 2002. His experience includes over 20 years of executive management,
sales and marketing management and project and program management with
technology computing, aerospace and professional services companies. Prior to
DDSI, Mr. Shupin served in several capacities in the Technology and Management
Consulting field. He founded TSHUPIN AND ASSOCIATES, a management consulting
firm focused on assisting clients in the areas of Sales and Marketing, New
Business Start-Up, Operational Analysis and Business/Technology Synchronization.
At DELOITTE CONSULTING, he directed activities as a Business Development
Executive in the Communications and Media practice. Mr. Shupin's background also
includes a role as Director of International Business Development at the world's
first commercial satellite aerospace company. EOSAT, a Hughes/Lockheed Martin
joint venture was acquired by SPACE IMAGING, L.P., a Lockheed/Raytheon joint
venture in 1996 and is the leading provider of high resolution satellite
imagery. His career there included responsibilities developing, managing and
directing the $100 million global sales channel network of six international
offices, 100+ worldwide distributors and over 16 international satellite data
reception stations. Management and Sales positions at WANG LABORATORIES and
XEROX CORPORATION round out his early career profile.

         A graduate of COLBY COLLEGE, Waterville, Maine, Mr. Shupin has extended
his education at RUTGERS UNIVERSITY, COOK COLLEGE in Geographic Information
Systems and Remote Sensing training as well as Business Management training at
Xerox, Wang and Deloitte Consulting. He has been an invited speaker at various
international symposiums and has published articles regarding market analysis
and access, education and technical assessment.

         Vincent Moreno provides DDSI with over 30 years of experience from a
technical and business environment, with the past 23 years at the executive
management level. He served as Vice President of Technology for ADP for 13 years
(1976 through 1989). For six years (from 1989 to 1995), as President and CEO, he
ran Mainstem Corporation, a national provider of software services. He was Vice
President of Operations at DDSI from 1996 to 1998 (2 years). Most recently (1998
to 2002, 4 years), he was President and General Manager of PayPlus Software,
Inc., a provider of payroll software to the Professional Employer Organization
marketplace. Mr. Moreno is adept in setting strategic direction and is
experienced in the reengineering of corporate operating units. As a member of
the board, he brings guidance, direction, and vision to the Companies' strategic
planning.

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

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

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

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

         o        Mr. Garrett U. Cohn resigned as Co-Chairman and Director of
                  the Board of Directors effective July 23, 2002 for personal
                  reasons.


                                      -20-
<PAGE>


         Section 16(a) of the Securities Exchange Act of 1934 requires DDSI's
directors and executive officers, and persons who own more than 10% of a
registered class of DDSI's equity securities to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of DDSI. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish DDSI with copies of all Section 16(a) forms they file.

         To DDSI's knowledge, based solely on its review of the copies of such
reports furnished to DDSI and written representations that no other reports were
required during the fiscal year ended December 31, 2002, all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.

ITEM 10. EXECUTIVE COMPENSATION

         The following table summarizes the compensation earned and paid by DDSI
to each Officer and to all Executive Officers as a group for services rendered
in all capacities during the year ended December 31, 2003:

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                           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($)  sation ($)

<S>                 <C>     <C>                <C>         <C>         <C>         <C>         <C>         <C>
Anthony Shupin      2003    $108,000           0           0           0           0           0           0
President & CEO
Michael J           2000    $109,000           0           0           0           0           0           0
Pellegrino          2001    $110,000           0           0           0           0           0           0
President & CEO*    2002    $115,000           0           0           0           0           0           0
Randy Hall**        2000    $ 70,000           0           0           0           0           0           0
    V/P             2001    $ 73,500           0           0           0           0           0           0
                    2002    $ 60,779           0           0           0           0           0           0
</TABLE>

*Mr. Pellegrino resigned as President and Chief Executive Officer effective
October 6, 2003. **Mr. Hall resigned as Vice President of Sales effective
October 18, 2002.


                                      -21-
<PAGE>


Options/Sar Grants in Last Fiscal Year
--------------------------------------

<TABLE>
<CAPTION>
                                      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
------------------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>                <C>                <C>
Michael J. Pellegrino, CFO            0                N/A                N/A                N/A
Randy Hall, VP Operations             0                N/A                N/A                N/A

Aggregated Option/Sar Exercises

         None exercised
</TABLE>

EMPLOYMENT AGREEMENTS

         Anthony R. Shupin, President and Chief Executive Officer. Mr. Shupin
was appointed as President and Chief Executive Officer effective October 6,
2003. In October 2003, DDSI entered into a two-year employment agreement with
Mr. Shupin, which entitled him to a base salary of $108,000 per year, which may
at the Board of Directors discretion adjust his base salary (but not below
$108,000 per year). Mr. Shupin is also entitled to participate in the Annual
Management Bonus Plan. As a participant in the Annual Management Bonus Plan, Mr.
Shupin will be eligible to receive bonuses, based on performance, in any amount
from 0% to 100% of the Base Salary. In addition, Mr. Shupin shall participate in
the Management Equity Incentive Plan. As a participant in the Management Equity
Plan, Mr. Shupin 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 DDSI.
The Company may grant Mr. Shupin, following the first anniversary of the date
hereof and at the sole discretion of the Board of Directors, options to purchase
common shares of the Company (subject to the vesting and the satisfaction of the
other terms and conditions of such options). Mr. Shupin will be entitled to 20
vacations days per year at such times as may be mutually agreed with the Board
of Directors. DDSI will provide Mr. Shupin a monthly car allowance of Four
Hundred Dollars ($400.00) along with related car expenses.

         Michael J. Pellegrino, President, Chief Executive Officer and Chief
Financial Officer. Mr. Pellegrino was appointed as President and Chief Executive
Officer effective March 13, 2003. In March 2002, DDSI entered into a two-year
employment agreement with Mr. Pellegrino, which entitled him to a base salary of
$115,000 per year which may at the Board of Directors discretion adjust his base
salary (but not below $115,000 per year). Mr. Pellegrino is also entitled to
participate in the Annual Management Bonus Plan. As a participant in the Annual
Management Bonus Plan, Mr. Pellegrino will be eligible to receive bonuses, based
on performance, in any amount from 0% to 100% of the Base Salary. In addition,
Mr. Pellegrino shall participate in the Management Equity Incentive Plan. As a
participant in the Management Equity Incentive Plan, Mr. Pellegrino will be
eligible to receive options, which vest over a period of time from the date of
the option's issue, to purchase common shares of DDSI. DDSI shall grant to Mr.
Pellegrino, within ninety days of the date of the Agreement, options to purchase
such number of common shares of DDSI equal to 1% of the number of common shares
of DDSI outstanding on the date of the Agreement (subject to the vesting and the
satisfaction of the other terms and conditions of such options). DDSI 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 DDSI equal to 0.25% of the number of
common shares of DDSI outstanding on the date of the Agreement (subject to the
vesting and the satisfaction of the other terms and conditions of such options).
DDSI shall also furnish Mr. Pellegrino with an automobile and automobile
expenses.


                                      -22-
<PAGE>


         Randolph Hall, Vice President Sales. Mr. Hall resigned from DDSI
effective October 18, 2002. Mr. Hall was appointed as Vice President of Sales
effective January 25, 2002. In March, 2002, DDSI entered into a two year
employment agreement with Mr. Hall, which entitled him to a base salary of
$73,500 per year which may at the Board of Directors discretion adjust his base
salary (but not below $73,500 per year). Mr. Hall was also entitled to
participate in the Annual Management Bonus Plan. DDSI also furnished Mr. Hall
with an automobile and automobile expenses.

EMPLOYEE AND DIRECTOR STOCK OPTION PLANS

         DDSI 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 DDSI and others who are making and are
expected to make substantial contributions to the successful management and
growth of DDSI are offered an opportunity to acquire common stock as an
incentive to remain with DDSI 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, DDSI
granted bonuses to various officers and employees in the form of 902,500 options
for shares of DDSI's common stock, fully vested, with an exercise price of $0.37
per share. On December 15, 2000, DDSI granted to various officers and employees
843,000 options for shares of DDSI'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

         Directors do not receive compensation for their services as members of
the Board of Directors. Directors will receive reimbursement for expenses in
attending directors meetings where applicable. Under the 1996 Director Option
Plan, each director who is not an officer or employee of DDSI automatically
receives a grant of an option to purchase 50,000 shares of DDSI's common stock
effective as of the date such person becomes a director and thereafter a grant
of an option to purchase 1,000 shares of DDSI's common stock on the date of each
of DDSI's regular annual meeting if he or she has served on the Board of
Directors for at least six months.


                                      -23-
<PAGE>


ITEM 11. 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 DDSI by (i) each person owning
beneficially more than 5 percent of the outstanding shares of common stock, (ii)
each Director of DDSI and (iii) all Executive Officers and Directors of DDSI as
a group: Percentage of beneficial ownership is based upon 145,958,423 shares of
common stock outstanding at April 14, 2004.

                                       Beneficial Ownership
Name and Address                          of Common Stock
Of Beneficial Owner                        No. of Shares
-------------------                        -------------

Michael Pellegrino
Brielle, NJ 08730                           15,335,000        10.5%

Robert Gowell
Allentown, PA  18104                            96,300        1.31%

Anthony R. Shupin
Sea Girt, NJ  08750                         15,000,000        10.3%

All Officers & Directors
As a Group                                  32,251,934(1)     22.1%

--------------------

(1) Of the total Officers and Director's shares, 43,000 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). The remaining 1,275,000 options
are 10-year options that are fully vested at varying strike prices.

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

         A director to the Company provided consulting services during 2003 and
2002. For the year ended December 31, 2003 and 2002, the services amounted to
$51,980 and $17,993 respectively. As of December 31, 203 the company owes the
director $22,630 with no repayment terms.

         The Company also owes the former chief executive officer of the Company
$33,260 at December 31, 2003 for back payroll and sundry expenses with no
repayment terms.


                                      -24-
<PAGE>


ITEM 13. Exhibits and Reports on Form 8-K

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number            Description
------            -----------
<S>               <C>
2.1  (1)          Certificate of Incorporation of the Company.  Incorporated June 13, 1994.
2.2  (1)          Restated Articles of Incorporation of the Issuer, May 21, 1997.
2.3  (1)          Amended Articles of Incorporation.
2.3.1(5)          Amended Articles of Incorporation dated October 9, 2001
2.4  (1)          By-Laws of the Company.
4.1. (3)          Form of Warrant Agreement with Form of Warrant Election to Purchase
4.1.1(4)          Executed Warrant Agreement with AJW Partners, LLC
4.1.2(4)          Executed Warrant Agreement with New Millennium Capital Partners II, LLC
4.2.1.1.1(5)      Executed Stock Purchase Warrant Agreement with AJW Partners LLC
4.2.1(5)          Executed Stock Purchase Warrant Agreement with New Millennium Capital Partners II LLC
4.2.2(5)          Executed Stock Purchase Warrant Agreement with Bristol Investment Fund, Ltd.
4.3(8)            Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC
4.3.1(8)          Stock Purchase Warrant Agreement with AJW Offshore, Ltd.
4.4 (9)           Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (January 10, 2003)
4.4.1 (9)         Stock Purchase Warrant Agreement with AJW  Partners, LLC (January 10, 2003)
4.4.2 (9)         Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (January 10, 2003)
4.5 (10)          Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (February 27, 2003)
4.5.1 (10)        Stock Purchase Warrant Agreement with AJW Partners, LLC (February 27, 2003)
4.5.2 (10)        Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (February 27, 2003)
4.6 (10)          Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (March 31, 2003)
4.6.1 (10)        Stock Purchase Warrant Agreement with AJW Partners, LLC (March 31, 2003)
4.6.2 (10)        Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (March 31, 2003)
4.7               Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (October 1, 2003)
4.7.1             Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (October 1, 2003)
4.8               Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (November 26, 2003)
4.8.1             Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (November 26, 2003)
4.9               Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (December 3, 2003)
4.9.1             Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (December 3, 2003)
5.1 (1)           Form of Voting Trust Agreement between Norman Cohn and Garrett U. Cohn.
5.1.3(5)          Legal Opinion to Investors
6.18 (1)          Security Agreement and Note dated as of August 14, 1996 in the principal Amount of
                  $125,000 made by Garrett U. Cohn in favor of the Company.
6.2 (1)           Resolution to Security Agreement between Norman Cohn and Garrett U. Cohn.
6.3 (1)           Employee 1997 Stock Option Plan adopted by the Board of Directors February 24, 1998
                  and subject to stockholder ratification.
6.5 (1)           Warrant Agreement dated May 1, 1995 between the Company and Jay Teitlebaum.
6.6 (1)           Warrant Agreement dated June 16, 1995 between the Company and Norman Cohn.
                  Incorporated by reference: Form 10-KSB, period December 31, 1996, File No. 0-26604,
                  Exhibit 4.4. 6.7 (1) Lease for the Premises dated May 16, 2000.
6.8 (1)           Cohn Employment and Non-competition Agreement of Garrett U. Cohn dated July 7, 1994.
                  Incorporated by reference:  Form 10-KSB, period December 31, 1996,
                  File No. 0-26604, Exhibit 10.1.
6.9(1)            Employment Agreement for Michael Pellegrino.
6.9.1(1)          Employment Agreement for Michael Ott.
6.9.2 (1)         Employment Agreement for Randolph Hall.
6.9.3(6)          Employment Agreement for Michael Pellegrino (2002)
6.9.4(6)          Employment Agreement for Randolph Hall (2002) 6.9.5 Employment Agreement for Anthony R.
                  Shupin (2003)
10.1 (2)          Software License and Royalty Agreement between Company and Harris Corporation

                                      -25-
<PAGE>

10.2 (2)          Agreement for Development of Finger/Slap Scanner Product between the Company and
                  ISC/U.S., Inc.
10.2.1(5)         Software License and Royalty Agreement between Company and AuthenTec
10.2.2(7)         Strategic Joint Venture Agreement between Company and i/tx.
10.3(3)           Form of Secured Convertible Debenture Purchase Agreement (December 28, 2000)
10.3.1(4)         Executed Secured Convertible Debenture Purchase Agreement
10.3.2(5)         Executed Securities Purchase Agreement
10.3.3            Securities Purchase Agreement (January 10, 2003)
10.4(3)           Form of First Amendment to Secured Convertible Debenture Purchase Agreement
                  (March 5, 2001)
10.4.1(6)         Executed Amendment No. 1 to Securities Purchase Agreement dated December 31, 2001
10.5(3)           Form of 12% Convertible Debenture
10.5.1(4)         Executed 12% Convertible Debenture with AJW Partners, LLC
10.5.2(4)         Executed 12% Convertible Debenture with New Millennium Capital Partners II, LLC
10.5.2.1(5)       Executed Secured Convertible Debenture with AJW Partners LLC
10.5.3(5)         Executed Secured Convertible Debenture with New Millennium Capital Partners II LLC
10.5.3.1(5)       Executed Secured Convertible Debenture with Bristol Investment Fund, Ltd.
105.5(8)          Secured Convertible Debenture with AJW Qualified Partners, LLC
10.5.5.1(8)       Secured Convertible Debenture with AJW Offshore, Ltd.
10.5.6 (9)        Secured Convertible Debenture with AJW Qualified Partners, LLC (January 10, 2003)
10.5.6.1 (9)      Secured Convertible Debenture with AJW Partners, LLC (January 10, 2003)
10.5.6.2 (9)      Secured Convertible Debenture with AJW Offshore, Ltd. (January 10, 2003)
10.5.7(10)        Secured Convertible Debenture with AJW Qualified Partners, LLC (February 27, 2003)
10.5.7.1(10)      Secured Convertible Debenture with AJW Partners, LLC (February 27, 2003)
10.5.7.2(10)      Secured Convertible Debenture with AJW Offshore, Ltd. (February 27, 2003)
10.5.8(10         Secured Convertible Debenture with AJW Qualified Partners, LLC (March 31, 2003)
10.5.8.1(10)      Secured Convertible Debenture with AJW Partners, LLC (March 31, 2003)
10.5.8.2(10)      Secured Convertible Debenture with AJW Offshore, Ltd. (March 31, 2003)
10.5.9            Secured Convertible Debenture with AJW Qualified Partners, LLC (October 1, 2003)
10.5.9.1          Secured Convertible Debenture with AJW Offshore, Ltd. (October 1, 2003)
10.5.10           Secured Convertible Debenture with AJW Qualified Partners, LLC (November 26, 2003)
10.5.10.1         Secured Convertible Debenture with AJW Offshore, Ltd. (November 26, 2003)
10.5.11           Secured Convertible Debenture with AJW Qualified Partners, LLC (December 3, 2003)
10.5.11.1         Secured Convertible Debenture with AJW Offshore, Ltd. (December 3, 2003)
10.6(3)           Form of Registration Rights Agreement
10.6.1(4)         Executed Registration Rights Agreement
10.6.2(5)         Executed Registration Rights Agreement
10.6.3            Registration Rights Agreement (January 10, 2003)
10.7 (3)          Form of Security Agreement
10.7.1(5          Executed Security Agreement
10.7.2 (9)        Security Agreement (January 10, 2003)
10.7.3 (9)        Intellectual Property Security Agreement (January 10, 2003)
10.8 (3)          Form of 10% Convertible Debenture
10.8.1(4)         10% Convertible Note to Robert Gowell
10.9(4)           Escrow Agreement
10.9.1(4)         Transfer Agent Instructions
10.9.2.1(5)       Executed Escrow Agreement
10.9.3(5)         Transfer Agent Instructions
10.9.4 (9)        Transfer Agent Instructions (January 10, 2003)
10.10 (4)         Contract with DBA Systems, a Division of Titan Industries
10.11 (4)         Executed Second Amendment to Secured Convertible Debenture Purchase Agreement
10.12 (6)         Form of Private Placement Subscription Agreement
10.13(8)          Private Placement Agreement Letter with AJW Qualified Partners, LLC and AJW Offshore, Ltd.
16.0 (1)          Letter re change in certifying accountant.
16.1              Letter re change in certifying accountant
31.1              Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Section 302:
32.1              Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
</TABLE>


                                      -26-
<PAGE>


(1)  Previously filed on Form 10-SB September 20, 2000, File No. 0-26604
(2)  Previously filed on Form 10-SB/A November 17, 2000, File No. 0-26604
(3)  Previously filed on Form SB-2 May 1, 2001, File No. 333-59888
(4)  Previously filed on Form SB-2, Amendment 2, August 29, 2001, File No.
     333-59888
(5)  Previously filed on Form SB-2, February 13, 2002, File No. 333-82662
(6)  Previously filed on Form SB-2, Amendment No. 1, May 9, 2002, File No.
     333-82662
(7)  Previously filed on Form SB-2, Amendment No. 2, Jun 25, 2002, File No.
     333-82662
(8)  Previously filed on Form SB-2, Amendment No. 5, October 10, 2002, File No.
     333-82662
(9)  Previously filed on Form SB-2, February 12, 2003, File No. 333-103143
(10) Previously filed on Form SB-2, Amendment No. 1, May 7, 2003, File No.
     333-103143


                                      -27-
<PAGE>


(b) Reports on Form 8-K:

March 5, 2004              Item 4
                           Change in Registrant's Certifying Accountants.


                                      -28-
<PAGE>


ITEM  14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

            Audit Fees. The aggregate fees billed by WithumSmith+Brown, our
principal accountants, for professional services rendered for the audit of the
Company's annual financial statements for the last two fiscal years and for the
reviews of the financial statements included in the Company's Quarterly reports
on Form 10-QSB during the last two fiscal years 2002 and 2001 was $33,855 and
$50,273 respectively.

            Audit-Related Fees. The Company did not engage its principal
accountants to provide assurance or related services during the last two fiscal
years.

            Tax Fees. The aggregate fees billed by the Company's principal
accountants for tax compliance, tax advice and tax planning services rendered to
the Company during the last two fiscal years 2002 and 2001 was $12,400 and
$13,300 respectively.

            All Other Fees. The Company did not engage its principal accountants
to render services to the Company during the last two fiscal years, other than
as reported above.


                                      -29-
<PAGE>

                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                              FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

<PAGE>

                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                        CONTENTS TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                       PAGE
<S>                                                                                    <C>
Independent Auditors' Reports                                                          F-1-F-2

Audited Financial Statements:

         Balance Sheets as of December 31, 2003 and 2002                               F-3

         Statements of Operations For the Years Ended December 31, 2003 and 2002       F-4

         Statements of Shareholders' Deficiency For the Years Ended
            December 31, 2003 and 2002                                                 F-5

         Statements of Cash Flows For the Years Ended December 31, 2003 and 2002       F-6-F-7

Notes to Financial Statements                                                          F-8-F-22
</TABLE>


<PAGE>


                          INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying  balance sheet of Digital  Descriptor  Systems,
Inc.,  as of December  31,  2003,  and the  related  statements  of  operations,
shareholders' deficiency and cash flows for the year then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Digital  Descriptor  Systems,
Inc. as of December 31,  2003,  and the results of its  operations  and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 2A to the
financial statements,  the Company has limited operating revenue and substantial
losses in the past two years.  In  addition,  the Company  has  limited  capital
resources  and has  initiated  a new  phase  of  activity,  all of  which  raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these  matters are also  discussed in Note 2A. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

                      Rosenberg Rich Baker Berman & Company


Bridgewater, New Jersey
April 4, 2004


<PAGE>


                                                                             F-1

INDEPENDENT AUDITOR'S REPORT

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

We have audited the accompanying  balance sheet of Digital  Descriptor  Systems,
Inc.  as of  December  31,  2002,  and the  related  statements  of  operations,
shareholders' deficiency and cash flows for the year then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial statement presentation. We believe that our audit 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,  2002,  and the results of its  operations  and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  As more fully  described in Note 2 to
the financial statements, the Company has never been profitable and continues to
incur losses from  operations and  anticipates  that it will require  additional
debt and/or equity financing in 2003, which may not be readily available.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 2. The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.


/s/ WithumSmith+Brown, P.C.
Newtown, Pennsylvania
April 10, 2003


                                                                             F-2

<PAGE>



                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                                 BALANCE SHEETS
                           DECEMBER 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                              2003              2002
                                                                        ---------------   --------------
<S>                                                                     <C>               <C>
        Assets
Current  Assets
   Cash                                                                 $       51,264    $       15,439
   Restricted cash                                                                 593               680
   Accounts receivable, less allowance for uncollectible accounts
     of $46,841 and $117,560 in 2003 and 2002, respectively                    136,329            28,491
   Inventory                                                                        --             8,550
   Prepaid expenses                                                             63,600           153,047
   Debt discount and deferred financing costs, net                             300,430            95,625
                                                                        --------------    --------------

       Total Current Assets                                                    552,216           301,832

Other Assets
   Furniture and equipment, net                                                     --            12,158
   Deposits and other assets                                                     1,730            24,395
                                                                        --------------    --------------

       Total Assets                                                            553,946           338,385
                                                                        ==============    ==============

        Liabilities and Shareholders' Deficiency

Current Liabilities
   Accounts payable                                                     $      214,771    $      391,067
   Accrued expenses                                                            306,029           118,493
   Accrued interest                                                            353,214           145,333
   Accrued payroll taxes                                                            --            84,848
   Due to officer and director                                                  55,620                --
   Deferred income                                                             382,878           545,724
   Current portion of equipment loan                                                --             7,289
   Convertible debentures                                                    1,846,837         1,103,732
                                                                        --------------    --------------

     Total Current Liabilities                                               3,159,349         2,396,486

Equipment loan, net of current portion                                              --            12,766
                                                                        --------------    --------------

       Total Liabilities                                                     3,159,349         2,409,252

Shareholders' Deficiency
   Preferred stock, $.01 par value: authorized shares - 1,000,000;
     issued and outstanding shares - none                                           --                --
   Common stock, $.001 par value: authorized shares - 150,000,000;
     issued and outstanding shares - 115,958,423 at December 31, 2003
     and 61,351,387 at December 31, 2002                                       115,958            61,351
   Additional paid-in capital                                               17,627,600        16,909,886
   Accumulated deficit                                                     (20,348,961)      (19,042,104)
                                                                        --------------    --------------

       Total Shareholders' Deficiency                                       (2,605,403)       (2,070,867)
                                                                        --------------    --------------

       Total Liabilities and Shareholders' Deficiency                   $      553,946    $      338,385
                                                                        ==============    ==============
</TABLE>


See notes to the financial statements.


                                                                             F-3
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



<TABLE>
<CAPTION>
                                                            2003           2002
                                                       ------------    ------------
<S>                                                    <C>             <C>
Revenues
   Software                                            $     98,223    $    520,869
   Hardware                                                 187,350          69,931
   Maintenance                                              333,217         580,315
   Other                                                     31,860          42,074
                                                       ------------    ------------

                                                            650,650       1,213,189

Costs and Expenses
   Cost of revenues                                          87,726         430,836
   General and administrative                               742,982         946,934
   Sales and marketing                                      171,762         188,188
   Research and development                                  38,668         177,033
   Depreciation                                               6,097          24,932
   Interest and amortization of deferred debt costs         911,929       1,008,249
   Other (income), net                                       (1,657)        (45,867)
                                                       ------------    ------------

                                                          1,957,507       2,730,305
                                                       ------------    ------------

     Net Loss                                          $ (1,306,857)   $ (1,517,116)
                                                       ============    ============

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

Weighted Average Number of common Shares Outstanding
     Basic and Diluted                                   99,857,314      56,600,305
                                                       ============    ============
</TABLE>

See notes to the financial statements.


                                                                             F-4
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                     STATEMENTS OF SHAREHOLDERS' DEFICIENCY
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>

                                                                  Common Stock         Additional
                                                          ---------------------------    Paid in      Accumulated     Shareholders'
                                                             Shares         Amount       Capital        Deficit         Deficiency
                                                          ------------   ------------  ------------   ------------    ------------
<S>                                                         <C>          <C>           <C>            <C>             <C>
Balance at January 1, 2002                                  48,045,610   $     48,045  $ 16,726,819   $(17,524,988)   $   (750,124)
   Issuance of common stock for services                       360,000            360        14,040             --          14,400
   Issuance of common stock in payment of damages
     related to convertible debentures                       1,555,553          1,556           778             --           2,334
   Conversion of accrued interest related to convertible
     debentures to common stock                              2,203,828          2,204        16,167             --          18,371
   Conversions of convertible debentures to common stock     9,186,396          9,186        27,082             --          36,268
   Debt discount relating to the beneficial conversion
     feature on convertible debentures                              --             --       125,000             --         125,000
   Net Loss                                                         --             --            --     (1,517,116)     (1,517,116)
                                                          ------------   ------------  ------------   ------------    ------------

Balance at December 31, 2002                                61,351,387         61,351    16,909,886    (19,042,104)     (2,070,867)

   Issuance of common stock in payment of damages
     related to convertible debentures                      20,461,250         20,461       (15,860)            --           4,601
   Conversion of accrued interest related to convertible
     debentures to common stock                              1,820,634          1,821         4,005             --           5,826
   Conversions of convertible debentures to common stock    32,325,152         32,325       (25,431)            --           6,894
   Debt discount relating to the beneficial conversion
     feature on convertible debentures                              --             --       755,000             --         755,000
   Net Loss                                                         --             --            --     (1,306,857)     (1,306,857)
                                                          ------------   ------------  ------------   ------------    ------------

   Balance at December 31, 2003                            115,958,423   $    115,958  $ 17,627,600   $(20,348,961)   $ (2,605,403)
                                                          ============   ============  ============   ============    ============
</TABLE>

See notes to the financial statements.

                                                                             F-5


<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                         2003           2002
                                                                     -----------    -----------
<S>                                                                  <C>            <C>
Cash Flows from Operating Activities
   Net loss                                                          $(1,306,857)   $(1,517,116)
   Adjustments to reconcile net loss to net cash used in
     operating activities
       Depreciation                                                        6,117         24,932
       Common stock issued for services received                              --         14,400
       Common stock issued in payment of damages                           4,601          2,334
       Amortization of deferred financing costs and debt discounts
        related to the issuance of warrants and the beneficial
        conversion feature of convertible debentures                     698,660        874,639
       Gain on disposal of assets                                         (6,833)            --
       Changes in assets and liabilities
        Accounts receivable                                             (107,838)        79,457
        Inventory                                                          8,550         (2,885)
        Prepaid expenses, deposits and other assets                      112,112        114,487
        Accounts payable                                                (176,296)       (27,697)
        Accrued expenses                                                 187,536        (23,421)
        Accrued interest                                                 207,881        129,876
        Accrued payroll taxes                                            (84,848)        84,848
        Due to officers and directors                                     55,620             --
        Deferred income                                                 (162,846)      (308,894)
                                                                     -----------    -----------

          Net Cash Used in Operating Activities                         (564,441)      (555,040)
                                                                     -----------    -----------

Cash Flows from Investing Activities
   Decrease in restricted cash                                                87          5,289
                                                                     -----------    -----------

          Net Cash Provided by  Investing Activities                          87          5,289
                                                                     -----------    -----------

Cash Flows from Financing Activities
   Proceeds from the issuance of convertible debentures, net
     of issuance costs of $90,042 in 2003 and $38,250 in 2002            608,207        136,750
   Payment of convertible debentures                                      (5,000)            --
   Repayment of equipment loan                                            (3,028)        (7,222)
                                                                     -----------    -----------

          Net Cash Provided by Financing Activities                      600,179        129,528
                                                                     -----------    -----------

Net Increase (Decrease) in Cash                                           35,825       (420,223)
Cash at Beginning of Year                                                 15,439        435,662
                                                                     -----------    -----------
Cash at End of Year                                                  $    51,264    $    15,439
                                                                     ===========    ===========
</TABLE>

See notes to the financial statements.


                                                                             F-6

<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                  2003       2002
                                                                --------   --------
<S>                                                             <C>        <C>
Supplemental Disclosure of Cash Flow Information

   Cash paid during the year for
     Interest                                                   $    474   $  3,734
                                                                --------   --------

     Income taxes                                               $    971   $  3,689
                                                                ========   ========


Supplemental Disclosure of Non-Cash Investing
   and Financing Activities

   Debt discount relating to the issuance of warrants and the
     beneficial conversion features of convertible debt         $608,207   $125,000
                                                                ========   ========

Conversion of debentures into common stock                      $  6,894   $ 36,268
                                                                ========   ========

Conversion of accrued interest into common stock                $  5,826   $ 18,371
                                                                ========   ========

Conversion of damages related to convertible
   debentures into common stock                                 $  4,601   $     --
                                                                ========   ========
</TABLE>


The equipment loan payable was reduced by $12,896 in May 2003 when the Company
returned two vehicles.


See notes to the financial statements.

                                                                             F-7

<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 1 - Description of Business:

         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 test 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  generates  the
              majority  of  the  Company's  revenues.  Substantially  all of the
              Company's  revenues  are  derived  principally  from  governmental
              agencies in the United States.

Note 2 - Summary of Significant Accounting Policies

         Significant   accounting  policies  followed  by  the  Company  in  the
         preparation  of the  accompanying  financial  statements are summarized
         below:

              A.  Basis  of  Financial  Statement   Presentation  The  financial
                  statements  of the Company  have been  prepared  assuming  the
                  Company will continue as a going concern,  which  contemplates
                  the realization of assets and the  satisfaction of liabilities
                  in the normal  course of business.  The Company has never been
                  profitable and has incurred substantial losses from operations
                  of $1,306,857  and $1,517,116 for the years ended December 31,
                  2003 and 2002,  respectively.  The Company expects that losses
                  from  operations  will  continue  through 2004 and the Company
                  anticipates that it will require additional financing in 2004,
                  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  completion  of a new  product
                  called Fingerprint Matching Systems (FMS) and its introduction
                  to the marketplace.  However,  there can be no assurances that
                  the Company will be  successful  in their  efforts to generate
                  profitable operations. The financial statements do not include
                  any  adjustments  that might  result  from the outcome of this
                  uncertainty.

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

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

              D.  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  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-8

<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies, 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.

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

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

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

              F.  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.

                  Research and development costs incurred in connection with the
                  development   of  software   totaled   $38,668  and  $177,033,
                  respectively for the years ended December 31, 2003 and 2002.


                                                                             F-9
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies, Continued

              G.  Accounts Receivable
                  Accounts receivable are uncollateralized  customer obligations
                  due under normal trade terms requiring  payment within 30 days
                  from the invoice  date. No interest is charged on any past due
                  accounts.  Accounts receivable are stated at the amount billed
                  to the customer.  Payments on customer  accounts are allocated
                  to the specific invoices identified on the customer remittance
                  advice, or, if unspecified, are applied to the earliest unpaid
                  invoices.  Customers  with  account  balances  past the normal
                  credit terms are considered delinquent.

                  The  carrying  amount of accounts  receivable  is reduced by a
                  valuation  allowance that reflects  management's best estimate
                  of the amounts that will not be collected.  Management reviews
                  all  accounts  receivable  balances  that  exceed 90 days from
                  invoice   date   and   based   on    assessment   of   current
                  creditworthiness,  estimates  the  portion,  if  any,  of  the
                  balance that will not be collected.

              H.  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 net
                  operating   loss   carryforwards,    certain   expenses,   and
                  differences  in  the  depreciable  lives  and/or  methods  for
                  certain assets.

              I.  Accounting for Stock Options
                  Financial  Accounting Standards Board issued Statement No. 123
                  (SFAS 123),  "Accounting for Stock-Based  Compensation."  SFAS
                  123 provides  companies with a choice to follow the provisions
                  of  SFAS  123 in  determination  of  stock-based  compensation
                  expense  or to  continue  with the  provisions  of  Accounting
                  Principles  Board  Opinion  No. 25 (APB 25).  The  Company has
                  elected to follow the  provisions  of APB 25. Under APB 25, if
                  the  exercise  price of the Company  stock  options  equals or
                  exceeds the market price of the underlying Common Stock on the
                  date of grant,  no  compensation  expense is  recognized.  The
                  effect  of  applying  SFAS  123 to the  Company's  stock-based
                  awards  results in net loss and net loss per common share that
                  are disclosed on a pro forma basis in Note 10.

              J.  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 exercises of common stock  equivalents  were assumed during
                  any period  because the assumed  exercise of these  securities
                  would be anti-dilutive.

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


                                                                            F-10
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 2 - Summary of Significant Accounting Policies, Continued

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

              M.  Impact of Recent Accounting Pronouncements

                  In January 2003, the FASB issued FASB  Interpretation  No. 46,
                  Consolidation  of  Variable  Interest  Entities  (FIN  46) and
                  amended it in October 2003,  such that it is now effective for
                  the  Company in the first  fiscal  quarter  of 2004.  Variable
                  interest  entities  (VIEs) are entities  that lack  sufficient
                  equity  to  finance  their   activities   without   additional
                  financial  support from other parties or whose equity  holders
                  lack adequate  decision  making  ability based on criteria set
                  forth in the interpretation.  All VIEs, with which the Company
                  is  involved,  must be  evaluated  to  determine  the  primary
                  beneficiary  of the risks and rewards of the VIE.  The primary
                  beneficiary is required to  consolidate  the VIE for financial
                  reporting  purposes.  The  adoption  of FIN 46 did not  have a
                  significant impact on the Company.

                  In April  2003,  the  FASB  issued  SFAS  Statement  No.  149,
                  "Amendment  of Statement  133 on  Derivative  Instruments  and
                  Hedging  Activities",  which  amends and  clarifies  financial
                  accounting and reporting for derivative instruments, including
                  certain  derivative  instruments  embedded in other  contracts
                  (collectively  referred  to as  derivatives)  and for  hedging
                  activities  under  FASB  Statement  No.  133,  Accounting  for
                  Derivative Instruments and Hedging Activities.  This Statement
                  is effective for contracts entered into or modified after June
                  30, 2003,  except for certain hedging  relationships  designed
                  after June 30, 2003. Most provisions of this Statement  should
                  be applied  prospectively.  The adoption of this  statement is
                  not  expected to have a  significant  impact on the  Company's
                  results of operations or financial position.

                  In May 2003, the Financial  Accounting  Standards Board issued
                  Statement of Financial  Accounting  Standard 150,  "Accounting
                  for Certain Financial Instruments with Characteristics of both
                  Liabilities and Equity".  This Statement establishes standards
                  for how an issuer  classifies and measures  certain  financial
                  instruments  with  characteristics  of  both  liabilities  and
                  equity.  It  requires  that an  issuer  classify  a  financial
                  instrument  that is  within  its scope as a  liability  (or an
                  asset in some  circumstances).  Many of those instruments were
                  previously  classified  as equity.  Some of the  provisions of
                  this Statement are consistent  with the current  definition of
                  liabilities  in FASB  Concepts  Statement  No. 6,  Elements of
                  Financial   Statements.   The  remaining   provision  of  this
                  statement are consistent  with the board's  proposal to revise
                  that  definition  to  encompass  certain  obligations  that  a
                  reporting  entity can or must settle by issuing its own equity
                  shares,   depending   on  the  nature  of  this   relationship
                  established  between the holder and the issuer. This Statement
                  is  effective  for  financial   instruments  entered  into  or
                  modified after May 31, 2003, and otherwise is effective at the
                  beginning of the first interim period beginning after June 15,
                  2003.  The Company  does not believe that the adoption of SFAS
                  150  had  a  material  impact  upon  the  Company's  financial
                  statements.


                                                                            F-11
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 3 - Note Receivable - Former Officer

         During  1996,  the Company  loaned a former  President/Director  of the
         Company $125,000 evidenced by a promissory note. The note bore interest
         at the prime rate plus 1%, and was payable  together with the principal
         on August 13, 1999. The Company's  Board of Directors  agreed to extend
         the  maturity  date of this note  indefinitely.  At December  31, 2001,
         accrued  interest,  included in the note receivable in the accompanying
         balance sheet was $52,400.  In 2001,  due to  uncertainty as to whether
         the Company would collect the note, a reserve for  uncollectible  notes
         was  recorded  in the amount of  $177,400.  During  2002,  a payment of
         $22,615 was received on this note, and is reflected in the accompanying
         financial  statements as other income.  The remaining unpaid balance of
         $154,785 plus additional  accrued interest of $5,938 was written off in
         2002 as uncollectible.

Note 4 - Furniture and Equipment

         Furniture and equipment  consists of the following at December 31, 2003
         and 2002, respectively:

                                                   2003       2002
                                                 --------   --------
Furniture and fixtures                           $     --   $186,705
Computer equipment                                     --    274,945
Vehicles                                               --     59,049
Leasehold improvements                                 --     34,977
                                                 --------   --------
                                                       --    555,676
Less accumulated depreciation                          --    543,518
                                                 --------   --------
                                                 $     --   $ 12,158
                                                 ========   ========

         Depreciation  and  amortization  included  as a  charge  to  operations
         amounted to $6,097 and $24,932  for the years ended  December  31, 2003
         and 2002, respectively.

Note 5 - Convertible Debentures

         During April 2001 and May 2001,  the Company  issued three  convertible
         notes  for an  aggregate  amount of  $155,000.  The  debentures  accrue
         interest at the rate of 10% per annum. Interest on the debentures shall
         be paid quarterly  commencing June 30, 2001. The holders have the right
         to convert the  principal  amount plus accrued  interest into shares of
         the Company's  common stock thirty days prior to the maturity date. The
         conversion  price in effect on any  Conversion  Date shall be an amount
         equal to 50% of the mean average  price of the common stock for the ten
         trading days prior to notice of conversion.  The intrinsic value of the
         beneficial  conversion  feature of $155,000  was  allocated  to paid-in
         capital.  This resulting debt discount was amortized on a straight-line
         basis  over the term of the  debentures,  and was  fully  amortized  at
         December 31, 2002. The debentures are  collateralized  by substantially
         all of the company's  assets.  During 2003,  $5,826 of accrued interest
         related to the debenture was converted into 1,820,634  shares of common
         stock.  During  2002,  $5,078 of accrued  interest was  converted  into
         132,027 shares of common stock. In 2002, the unamortized portion of the
         debt discount in the amount of $11,329 was charged to interest expense.
         An additional $5,000 was paid in October 2003. In October 2001, $15,000
         of the  convertible  debentures  was paid.  The  remaining  balance  of
         $20,000 is past due.


                                                                            F-12
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 5 - Convertible Debentures, Continued

         During  September 2001, the Company issued two  convertible  debentures
         for an aggregate amount of $400,000. These debentures are in default as
         they were due on September 30, 2002. The debentures  accrue interest at
         the rate of 12% per annum.  A late fee equal to 15% of the  accrued and
         unpaid interest is also assessed during the default period. Interest on
         the debentures was not paid quarterly, and accordingly accrued interest
         and late  fees  payable  related  to the  notes  totaling  $133,233  is
         included in the accompanying financial statements. The holders have the
         right to convert the principal amount plus accrued interest into shares
         of the Company's common stock at anytime after issuance. The conversion
         price in effect on any Conversion  Date shall be the lesser of $.08 per
         share or 50% of the average of the lowest three  inter-day sales prices
         during  the ten  trading  days  immediately  preceding  the  applicable
         Conversion Date. The Company also issued common stock purchase warrants
         for the right to purchase 800,000 shares of common stock of the Company
         at an  exercise  price  per  share  equal to the  lesser of $.36 or the
         average of the lowest three  closing  sales prices for the common stock
         during the twenty  Trading  Days  immediately  prior to  exercise.  The
         estimated fair value of the warrants of $48,000 and the intrinsic value
         of the beneficial conversion feature of $262,000 have been allocated to
         paid-in capital. This resulting debt discount plus $90,000 of financing
         charges were  amortized on a  straight-line  basis over the term of the
         debentures,  and  were  fully  amortized  at  December  31,  2002.  The
         debentures are  collateralized  by  substantially  all of the Company's
         assets.

         During 2003  $3,164 of the  debenture  was  converted  into  15,818,010
         shares of common stock.

         On December 31, 2001 the Company  issued three  convertible  debentures
         for an aggregate  amount of $500,000.  The debentures are in default as
         they were due December 31,  2002.  Interest  accrues at the rate of 12%
         per annum through  maturity,  and increased to 15% per annum during the
         default  period.   Quarterly  interest  payments  were  not  made,  and
         accordingly  accrued  interest  payable  related to the notes  totaling
         $135,000 is  included in the  accompanying  financial  statements.  The
         holders  have the right to convert the  principal  amount plus  accrued
         interest into shares of the Company's  common stock at any time through
         maturity.  The conversion  price in effect on any Conversion Date shall
         be the  lesser of $.043 per share or 50% of the  average  of the lowest
         three inter-day sales prices during the twenty Trading Days immediately
         preceding  the  applicable  Conversion  Date.  The Company  also issued
         common  stock  purchase  warrants  for the right to purchase  1,500,000
         shares of common  stock of the Company at an  exercise  price per share
         equal  to the  lesser  of  $.02  or the  average  of the  lowest  three
         inter-day sales prices during the twenty Trading Days immediately prior
         to exercise.  The  estimated  fair value of the warrants of $90,000 and
         the intrinsic  value of the beneficial  conversion  feature of $332,500
         have been  allocated to paid-in  capital.  This resulting debt discount
         plus $77,500 of financing  charges  were  amortized on a  straight-line
         basis  over the term of the  debentures,  and were fully  amortized  at
         December 31, 2002. The debentures are  collateralized  by substantially
         all of the Company's assets.

         In June 2002, a 12% convertible  promissory note for $75,000 was issued
         to two investors.  These  debentures are in default as they were due in
         August  2002.  The  debentures  accrue  interest at the rate of 12% per
         annum.  A late fee equal to 15% of the accrued  and unpaid  interest is
         also assessed during the default period. Interest on the debentures was
         not paid  quarterly,  and  accordingly  accrued  interest and late fees
         payable  related  to the notes  totaling  $17,136  is  included  in the
         accompanying financial statements.


                                                                            F-13
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 5 - Convertible Debentures, Continued

         The holders have the right to convert the principal  amount plus unpaid
         accrued  interest into shares of the Company's common stock at any time
         through  repayment.  The conversion  price is equal to fifty percent of
         the average of the lowest three (i) inter-day  trading prices,  or (ii)
         if the common stock is traded on the OTC Bulletin Board or Pink Sheets,
         the prices  asked by any person or entity  acting as a market  maker in
         the common stock during the twenty trading days  immediately  preceding
         the relevant  date upon which a conversion  is effected.  The intrinsic
         value  of  the  beneficial  conversion  feature  of  $25,000  has  been
         allocated to paid-in  capital.  The  resulting  debt discount was fully
         amortized in 2002,  based on the term of the debentures.  Debt issuance
         costs  of  $10,750  were  incurred  and  fully  amortized  in  2002  in
         connection with this loan.

         During   September   2002,  the  Company  issued  secured   convertible
         debentures in the aggregate principal amount of $100,000. The debenture
         is in default  as it was due on  September  30,  2002.  The  debentures
         accrue  interest at the rate of 12% per annum.  A late fee equal to 15%
         of the accrued and unpaid  interest is also assessed during the default
         period.  Interest  on  the  debentures  was  not  paid  quarterly,  and
         accordingly accrued interest and late fees payable related to the notes
         totaling $15,000 is included in the accompanying  financial statements.
         Interest  shall be payable either  quarterly or upon  conversion at the
         option of the holder.  The holder may at any time from issuance through
         the earlier of the (i) maturity date or (ii) the date of payment of the
         default,  convert  all or any  part of the  outstanding  principal  and
         unpaid  accrued  interest into common  stock.  If the  conversion  will
         result  in  ownership  to  the  holder  in  excess  of  4.9%  of  total
         outstanding  stock,  the holder must provide 61 days written  notice to
         the Company of their plans to convert.  The  conversion  price shall be
         the lesser of the  variable  conversion  price or the fixed  conversion
         price. The variable  conversion price is equal to 50% of the average of
         the lowest  three  intra-day  prices for the  common  stock  during the
         twenty-day  period  ending  one  trading  day  prior  to the  date  the
         conversion  notice is sent via  facsimile  to the  borrower.  The fixed
         conversion  notice is sent via  facsimile  to the  borrower.  The fixed
         conversion  price is $.005 per share.  The Company  also issued  common
         stock  purchase  warrants for the right to purchase  300,000  shares of
         common  stock of the  Company at an  exercise  price per share equal to
         $.01.  If the  exercise of the warrant  will result in ownership to the
         holder in excess of 4.9% of total  outstanding  stock,  the holder must
         provide  61 days  written  notice  to the  company  of  their  plans to
         exercise.  The  warrants  are  exercisable  at anytime from the date of
         issuance,  September 30, 2002 through September 30, 2005. the estimated
         fair  value  of the  warrants  was  zero.  The  intrinsic  value of the
         beneficial conversion feature of $100,000 has been allocated to paid-in
         capital  and is being  amortized  over the life of the  debenture  on a
         straight-line  basis.  The unamortized  beneficial  conversion  feature
         amounted  to $75,000 at  December  31,  2002.  Debt  issuance  costs of
         $27,500 are being amortized on a  straight-line  basis over the term of
         the debentures and were fully amortized at December 31, 2003.

         On January 10, 2003 the Company issued three convertible debentures for
         an aggregate amount of $250,000,  with simple interest  accruing at the
         annual rate of 10%. These debentures are due January 10, 2004. Interest
         payable on the Debentures shall be paid quarterly  commencing March 31,
         2003.  Interest  due was not paid  quarterly  and  accordingly  accrued
         interest of $24,251 is included in the financial statements.

         The Company also issued common stock purchase warrants for the right to
         purchase  750,000  shares of common stock of the Company at an exercise
         price per share equal to $0.01.  The  warrants are  exercisable  at any
         time  before  September  30,  2008.  The  estimated  fair  value of the
         warrants was zero.  The intrinsic  value of the  beneficial  conversion
         feature of $250,000 has been allocated to paid-in  capital and is being
         amortized  over the life of the  debenture  on a  straight-line  basis.
         Financing  costs  incurred  of  $56,750  were also fully  amortized  at
         December 31, 2003.


                                                                            F-14
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 5 - Convertible Debentures, Continued

         On February 27, 2003, the Company issued three  convertible  debentures
         for an aggregate amount of $125,000,  with simple interest  accruing at
         the annual rate of 10%.  The  debentures  are due  February  27,  2004.
         Interest payable on the Debentures  shall be paid quarterly  commencing
         March 31, 2003.  Interest due was not paid  quarterly  and  accordingly
         accrued interest of $10,417 is included in the financial statements.

         The holders  shall have the right to convert the  principal  amount and
         interest  due under the  debentures  into shares of common  stock.  The
         conversion  price in effect on any Conversion  Date shall be the lesser
         of (1) $0.005 and (2) 40% of the average of the lowest three  inter-day
         sales  prices of the  common  stock  during  the  twenty  Trading  Days
         immediately preceding the applicable Conversion Date.

         The Company also issued common stock purchase warrants for the right to
         purchase  375,000  shares of common stock of the Company at an exercise
         price per share equal to $0.01.  The  warrants are  exercisable  at any
         time  before  September  30,  2008.  The  estimated  fair  value of the
         warrants was zero.  The intrinsic  value of the  beneficial  conversion
         feature of $125,000 has been allocated to paid-in  capital and is being
         amortized over the life of the debenture on a straight-line  basis. The
         unamortized  beneficial  conversion  feature  amounted  to  $20,833  at
         December 31, 2003.  Debt issuance costs of $10,843 are being  amortized
         on a  straight-line  basis of the term of the  debentures.  Unamortized
         costs at December 31, 2003 amounted to $3,474.

         On April 2, 2003, The Company issued three  convertible  debentures for
         an aggregate amount of $125,000,  with simple interest  accruing at the
         annual rate of 10%. The  debentures  are due March 31,  2004.  Interest
         payable on the Debentures  shall be paid quarterly  commencing June 30,
         2003.  Interest  due was not paid  quarterly  and  accordingly  accrued
         interest of $9,028 is included in the financial statements. The holders
         shall have the right to convert the  principal  amount and interest due
         under the debentures into shares of common stock.  The conversion price
         in effect on any Conversion  Date shall be the lesser of (1) $0.005 and
         (2) 40% of the average of the lowest  three  inter-day  sales prices of
         the common stock during the twenty Trading Days  immediately  preceding
         the applicable Conversion Date.

         The Company also issued common stock purchase warrants for the right to
         purchase  375,000  shares of common stock of the Company at an exercise
         price per share equal to $0.01.  The  warrants are  exercisable  at any
         time  before  September  30,  2008.  The  estimated  fair  value of the
         warrants was zero.  The intrinsic  value of the  beneficial  conversion
         feature of $125,000 has been allocated to paid-in  capital and is being
         amortized over the life of the debenture on a straight-line  basis. The
         unamortized  beneficial  conversion  feature  amounted  to  $31,250  at
         December 31, 2003.  Debt issuance costs of $20,844 are being  amortized
         on a  straight-line  basis of the term of the  debentures.  Unamortized
         costs at December 31, 2003 amounted to $7,341.

         On October 1, 2003, the Company issued three convertible debentures for
         an aggregate amount of $300,000,  with simple interest  accruing at the
         annual rate of 12%. The  debentures  are due October 1, 2004.  Interest
         payable on the Debentures shall be paid quarterly  commencing  December
         30,  2003.  The holders  shall have the right to convert the  principal
         amount  and  interest  due  under  the  debentures  into  shares of the
         Company's   common  stock.  The  conversion  price  in  effect  on  any
         Conversion  Date  shall  be the  lesser  of (1) $.01 and (2) 40% of the
         average of the lowest three  inter-day sales prices of the common stock
         during the twenty  Trading Days  immediately  preceding the  applicable
         Conversion  Date.  The  debenture  holders  also  received  warrants to
         purchase  1,505,000  shares at an  exercise  price of $0.005  per share
         anytime before September 30, 2008.


                                                                            F-15
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 5 - Convertible Debentures, Continued

         The estimated fair value of the warrants was zero. The intrinsic  value
         of the beneficial  conversion  feature of $65,000 has been allocated to
         paid-in  capital and is being  amortized over the life of the debenture
         on a straight-line basis. The unamortized beneficial conversion feature
         amounted to  $123,750 at December  31,  2003.  Debt  issuance  costs of
         $31,625 are being amortized on a straight-line basis of the term of the
         debentures. Unamortized costs at December 31, 2003 amounted to $23,719.

         On November 27, 2003, the Company issued three  convertible  debentures
         for an aggregate amount of $250,000,  with simple interest  accruing at
         the annual rate of 10%.  These  debentures  are due  November 27, 2004.
         Interest payable on the Debentures  shall be paid quarterly  commencing
         December  31,  2003.  The  holders  shall have the right to convert the
         principal  amount and interest due under the debentures  into shares of
         the  Company's  common  stock.  The  conversion  price in effect on any
         Conversion  Date  shall  be the  lesser  of (1) $.01 and (2) 40% of the
         average of the lowest three  inter-day sales prices of the common stock
         during the twenty  Trading Days  immediately  preceding the  applicable
         Conversion  Date.  The  debenture  holders  also  received  warrants to
         purchase  1,505,000  shares at an  exercise  price of $0.005  per share
         anytime before September 30, 2008.

         The Company also issued common stock purchase warrants for the right to
         purchase  315,000  shares of common stock of the Company at an exercise
         price per share equal to $0.01.  The  warrants are  exercisable  at any
         time  before  September  30,  2008.  The  estimated  fair  value of the
         warrants was zero.  The intrinsic  value of the  beneficial  conversion
         feature of $45,000 has been  allocated to paid-in  capital and is being
         amortized over the life of the debenture on a straight-line  basis. The
         unamortized  beneficial  conversion  feature  amounted  to  $41,250  at
         December 31, 2003. Debt issuance costs of $7,011 are being amortized on
         a straight-line basis of the term of the debentures.  Unamortized costs
         at December 31, 2003 amounted to $6,464.

         On December 3, 2003,  the Company issued three  convertible  debentures
         for an aggregate  amount of $45,000,  with simple interest  accruing at
         the annual  rate of 12%.  These  debentures  are due  December 3, 2004.
         Interest payable on the Debentures  shall be paid quarterly  commencing
         December  31,  2003.  The  holders  shall have the right to convert the
         principal  amount and interest due under the debentures  into shares of
         the  Company's  common  stock.  The  conversion  price in effect on any
         Conversion  Date  shall  be the  lesser  of (1) $.01 and (2) 40% of the
         average of the lowest three  inter-day sales prices of the common stock
         during the twenty  Trading Days  immediately  preceding the  applicable
         Conversion  Date.  The  debenture  holders  also  received  warrants to
         purchase  315,000  shares  at an  exercise  price of  $0.005  per share
         anytime before September 30, 2008.

         The Company also issued common stock purchase warrants for the right to
         purchase  750,000  shares of common stock of the Company at an exercise
         price per share equal to $0.01.  The  warrants are  exercisable  at any
         time  before  September  30,  2008.  The  estimated  fair  value of the
         warrants was zero.  The intrinsic  value of the  beneficial  conversion
         feature of $45,000 has been  allocated to paid-in  capital and is being
         amortized over the life of the debenture on a straight-line  basis. The
         unamortized  beneficial  conversion  feature  amounted  to  $41,250  at
         December 31, 2003. Debt issuance costs of $1,199 are being amortized on
         a straight-line basis of the term of the debentures.  Unamortized costs
         at December 31, 2003 amounted to $1,099.


                                                                            F-16
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 6 - Debt Discount and Deferred Financing Costs

         Debt discount and deferred financing costs consist of the following:

                                               2003         2002
                                            ---------    ---------
 Debt discounts                             $ 555,000    $ 100,000
 Deferred financing costs                      90,043       27,500
                                            ---------    ---------
                                              645,043      127,500
Less accumulated amortization                (344,613)     (31,875)
                                            ---------    ---------
                                            $ 300,430    $  95,625
                                            =========    =========

         The net debt discount and deferred  financing costs of $300,430 will be
         fully amortized during the year ended December 31, 2004.

Note 7 - Equipment Loan

         At December 31, 2002 $20,055 was  outstanding  related to an automobile
         loan.  During 2003 the automobile  was  repossessed in order to satisfy
         the loan.  At December 31, 2003 $4,130 is included in accrued  expenses
         for related charges.

Note 8 - Income Taxes

         At December  31,  2003,  the Company  had  federal net  operating  loss
         carryforwards  of  approximately  $12,299,000  to offset future federal
         taxable income expiring in various years through 2023. The Company also
         has state net operating loss  carryforwards  in various  states,  which
         approximate  the federal  amount to offset future state taxable  income
         expiring in various years,  generally 7 to 10 years  following the year
         the loss was incurred.

         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 at December  31, 2003 and 2002 are as
         follows:

                                                      2003           2002
                                                   -----------    -----------
Deferred tax assets
  Net operating loss carryforwards                 $ 5,288,000    $ 5,049,432
  Bad debt reserves                                     17,000         50,551
  Inventory reserves                                        --          1,347
  Depreciation                                              --         51,678
                                                   -----------    -----------
Deferred tax assets                                  5,305,000      5,153,008
Valuation allowance                                 (5,305,000)    (5,153,008)
                                                   -----------    -----------
   Net deferred tax asset                          $        --    $        --
                                                   ===========    ===========


                                                                            F-17

<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 9 - Commitments and Contingencies

         Operating Lease
              The Company leases office  facilities and office equipment under a
              non-cancelable  operating  lease  agreement  that expires at April
              2004.  Future  minimum lease  payments at December 31, 2003 are as
              follows:

                        2004                            $4,720
                                                        ======

              Rental  expense  under such  operating  leases  was  approximately
              $2,360 and $93,724  during the years ended  December  31, 2003 and
              2002, respectively.

         Employment Contract:
              During 2003, the Company entered into an employment agreement with
              one of the officers. The agreement is for a three-year period that
              terminates  on October 6, 2005.  Pursuant  to the  agreement,  the
              officer will receive a base salary of $108,000 per year, which may
              be increased by the Board of  Directors  annually.  The officer is
              also eligible to participate in the Annual  Management  Bonus Plan
              under  which he may  receive a bonus in any amount from 9% to 100%
              of his base  salary  based on his  performance  and the  Company's
              performance  for the  immediately  preceding  calendar year. He is
              also  eligible  to  receive  options  to  purchase  shares  of the
              Company's common stock under the Management Equity Incentive Plan.
              In  addition,  the officer is entitled to a monthly car  allowance
              totaling $400 and to be reimbursed for reasonable  expenses in the
              discharge of his services,  including travel,  lodging and similar
              items.

              If the  officer's  employment  is  terminated  because  of  death,
              discharge  by the  Company  other than for just  cause,  or if the
              officer  resigns with good reason as defined in the agreement,  he
              shall  receive his base salary and benefits for the greater of (i)
              one year from the date of  termination  or  resignation,  (ii) the
              remaining term of the  agreement.  If employment is terminated for
              any other reason than the aforementioned, the Company's obligation
              under the agreement ceases on the date of termination.

              In March 2002, DDSI entered into a two-year  employment  agreement
              with  another  officer  which  entitled  him to a base  salary  of
              $115,000 per year which may at the Board of  Directors  discretion
              adjust his base salary (but not below  $115,000  per year).  He is
              also entitled to participate in the Annual  Management Bonus Plan.
              As a participant in the Annual  Management  Bonus Plan, he will be
              eligible to receive bonuses,  based on performance,  in any amount
              from  0% to  100%  of the  Base  Salary.  In  addition,  he  shall
              participate  in  the  Management   Equity  Incentive  Plan.  As  a
              participant in the Management  Equity  Incentive  Plan, he will be
              eligible to receive options,  which vest over a period oftime from
              the date of the option's issue, to purchase common shares of DDSI.
              DDSI  shall  grant to him  within  ninety  days of the date of the
              Agreement options to purchase such number of common shares of DDSI
              equal to 1% of the number of common shares of DDSI  outstanding on
              the  date  of the  Agreement  (subject  to  the  vesting  and  the
              satisfaction  of the other terms and  conditions of such options).
              DDSI  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 DDSI  equal to 0.25% of the  number of
              common  shares of DDSI  outstanding  on the date of the  Agreement
              (subject to the vesting  and the  satisfaction  of the other terms
              and conditions of such options).  DDSI shall also furnish him with
              an automobile and automobile expenses.


                                                                            F-18

<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 10 - 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.  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  or 90  days  after
         termination of employment, whichever comes first.

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

<TABLE>
<CAPTION>
                                                                                                          Weighted
                                                                 1996                        Total         Average
                                                               Director                    Number of      Exercise
                                                1994 Plan        Plan      Nonqualified     Options        Price
                                                ----------    ----------    ----------    ----------    ------------

<S>                                             <C>           <C>           <C>           <C>           <C>
Outstanding at December 31, 2001                   918,500        26,312       681,000     1,625,812    $.10 - $3.30
Granted                                                 --            --            --            --              --
Expired                                           (693,000)           --      (150,000)     (843,000)   $.10 - $.63
                                                ----------    ----------    ----------    ----------    ------------

Outstanding at December 31, 2002                   225,500        26,312       531,000       782,812    $.10 - $3.30
Granted                                                 --            --            --            --              --
Expired                                           (192,500)      (26,312)     (531,000)     (749,812)   $.10 - $3.30
                                                ----------    ----------    ----------    ----------    ------------

Outstanding at December 31, 2003                    33,000            --            --        33,000    $.10 - $.365
                                                ==========    ==========    ==========    ==========    ============

Exercisable optons at  December                    225,500        26,312       531,000       782,812
                                                ==========    ==========    ==========    ============
Exercisable options at December 31, 2003            33,000            --            --       564,000
                                                ==========    ==========    ==========    ============
</TABLE>


         At December 31, 2003,  the remaining  contractual  life of  outstanding
         options was 6 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
                                                     2003             2002
                                                -------------    -------------
         Net loss:
          As reported                           $  (1,306,857)   $  (1,517,117)
          Pro forma                             $  (1,306,857)   $  (1,529,742)
         Net loss per share:
          As reported                           $       (0.01)   $       (0.03)
          Pro forma                             $       (0.01)   $       (0.03)

         The Company  estimated  the fair value of stock  options at the date of
         grant by using a Black Scholes  option pricing model with the following
         weighted-average  assumptions  for grants in 2000 and 1999 as  follows:
         risk-free interest rate of 3.29% for 2003 and 5.50% for 2002;  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 .10 and 1.033, respectively.


                                                                            F-19
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 10 - Stock Option and Other Plans (Continued)

         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  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.

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

         At December  31,  2003,  the Company has the  following  common  shares
         reserved for issuance:

         Common stock available for grant:
         Consultants and advisors compensation plan        139,000
         Convertible debentures                          2,681,608
                                                         ---------

            Total                                        2,820,608
                                                         =========

Note 11 - Equity Transactions

         During  2002,  the Company  issued  360,000  shares of common stock for
         services and  1,555,553  shares of common stock as payment of penalties
         incurred in connection with the late filing of a registration statement
         and late receipt of an effective  registration  in connection  with the
         convertible  debentures  issued  on  December  31,  2001.  The  Company
         recorded  charges of $14,400 and $2,334  respectively  in 2002 based on
         the fair market value of the Company's  common stock on the date of the
         stock grant.

         During February 2003,  $1,000 of the convertible  debentures  issued in
         March 2001 was converted into 2,857,142 shares of common stock.

         In March 2003,  $1,600 of the  convertible  debentures  issued in March
         2001 was converted into 8,000,000 shares of common stock. Additionally,
         accrued interest relating to the note dated May 2001 was converted into
         an additional 1,820,634 shares of common stock.

         During  April  2003,  $1,130 of the  convertible  debentures  issued in
         December 2001 was converted into 5,650,000 shares of common stock.


                                                                            F-20
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note 11 - Equity Transactions, Continued

         During  April  2003,  $470  of the  convertible  debentures  issued  in
         September 2001 was converted into 2,350,000 shares of common stock.

         During  May  2003,  $1,600  of the  convertible  debentures  issued  in
         September 2001 was converted into 8,000,000 shares of common stock.

         During  June  2003  $1,094  of the  convertible  debentures  issued  in
         September 2001 was converted into 5,468,010 shares of common stock.

         During April,  May and June 2003,  liquidated  damages in the amount of
         $4,601 relating to the convertible  debentures  issued in December 2001
         were converted into 20,461,250 shares of common stock.

         During March 2003 accrued  interest of $5,826 relating to a convertible
         debenture  issued in May 2001 was converted  into  1,820,634  shares of
         common stock.

Note 12 - Related Party Transactions

         One of the  directors  has a contract with the Company to provide sales
         and marketing consulting services.  The effective date of the agreement
         was October 17, 2002, and renews  automatically on a semi annual basis.
         Minimum  fees of $1,100 are paid weekly.  For the years ended  December
         31, 2003 and 2002, fees totaling $51,980 and $17,993, respectively were
         incurred of which  $31,262 and $8,093 were payable at December 31, 2003
         and 2002, respectively.

Note 13 - Contingency

         During the year ended  December 31, 2002,  the Company failed to timely
         file a registration statement, and failed to timely obtain an effective
         registration in connection with the  convertible  debentures  issued on
         December 31, 2001.  As a result,  pursuant to the  Registration  Rights
         Agreement,  damages of $35,834 were sought by one of the three  holders
         of the December 31, 2001  series.  Of this amount,  $2,334 was paid via
         the issuance of common  stock,  and the balance of $33,500 is reflected
         in the accompanying financial statements as a liability at December 31,
         2002.

         There were two other holders of  convertible  notes dated  December 31,
         2001 who could  potentially  seek  similar  damages  from the  Company.
         Should  they seek these  damages,  the Company  would incur  additional
         expense of $71,668.  Management feels however, that the likelihood that
         the other holders will seek the damages is remote,  and  therefore,  no
         provision for this expense has been made in the accompanying  financial
         statements.

         The  Company's  remaining  unauthorized  common  stock is less than the
         amount the  Company  could be  required  to issue upon  exercise of the
         convertible  debentures  and/or  warrants  outstanding  (see Subsequent
         Event Note).  If all  convertible  debentures and warrants  outstanding
         were  converted  into common stock,  it would require the issuance of a
         greater  number  of  shares  of  common  stock  that  the  Company  has
         authorized by approximately 2,000,000,000 shares.

         On October 16, 2003, a judgment was entered  against the Company by its
         landlord,  BT  Lincoln  L.P.  for  breach  of  lease in the  amount  of
         $184,706.76.  The  Company  intends  to  negotiate  a  settlement.  The
         liability, net of the security deposit, is included in accrued expenses
         at December 31, 2003.


                                                                            F-21
<PAGE>


                        DIGITAL DESCRIPTOR SYSTEMS, INC.
                          NOTES TO FINANCIAL STATEMENTS


Note 14 - Subsequent Events

         During February 2004 the Company issued two convertible  debentures for
         an  aggregate  amount of  $45,000  with  simple  interest  at 12%.  The
         debentures  are due February  2005.  Interest  shall be paid  quarterly
         commencing  March 2004.  The holder shall have the right to convert the
         principal  amount and interest due into common  stock.  The  conversion
         price in effect on any Conversion Date shall be the lesser of (1) $.005
         and (2) 40% of the average of the lowest three  inter-day  sales prices
         of  the  common  stock  during  the  twenty  Trading  Days  immediately
         preceding the applicable Conversion Date.

         During  February 2004, the Company filed a Preliminary  Proxy Statement
         with the U. S. Securities and Exchange  Commission in order to increase
         the  authorized   shares  of  common  stock  to   10,000,000,000   from
         150,000,000.



                                                                            F-22

<PAGE>

         SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        Digital Descriptor Systems, Inc.


                                        By: /s/  Anthony Shupin
                                            -----------------------
                                            Anthony Shupin, President,
                                            Chief Executive Officer and
                                            Chief Financial Officer.

                                            Dated:   April 20, 2004

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
Signature                               Title                                       Date
---------                               -----                                       ------------
<S>                                     <C>                                         <C>
By:  /s/ Anthony Shupin                 Chief Executive Officer,                    April 20, 2004
     ------------------                 Director - Chairman
     Anthony Shupin


By:  /s/ Michael Pellegrino             President and Chief Operating Officer,      April 20, 2004
     ----------------------             Director
        Michael Pellegrino


By:  /s/ Vincent Moreno                 Director                                    April 20, 2004
     ------------------
        Vincent Moreno


By:  /s/ Robert Gowell                  Director                                    April 20, 2004
     ------------------
     Robert Gowell
</TABLE>


                                      -33-