U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10-KSB/A
         (MarkOne)

|X|   ANNUAL REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934. For the fiscal year ended December 31, 2004.

|_|   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
    incorporation or organization)                 Identification No.)

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 Form10-KSB.

The issuer had revenues of $412,052 for the fiscal year ended December 31, 2004.

As of April 1, 2005 304,511,994 shares of the issuer's Common Stock were
outstanding. The aggregate market value of the voting stock held by
non-affiliates on April 1, 2004 was approximately $213,158 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|

<PAGE>

                                     PART I

ITEM 1.  Description of Business

General Business Development

      Digital Descriptor Systems, Inc. ("DDSI", the "Company", "us", "we", or
"our"), 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 $395,840 on an annual basis, or $1,187,519 over the
past three years from these services. Year to year, service revenue generally
accounts for an average of 52% 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.

<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
textual 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 ("NCIC2000" ), the standard adopted by Federal Bureau of
Investigation for the quality of mug shots and their transmission. NCIC2002 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, which 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

<PAGE>

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.


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.

<PAGE>

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
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.

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.

<PAGE>

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 are 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
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.

DDSI management plans to execute an acquisition strategy. The make-up of the
targeted acquisitions must include products and markets which complement and
expand its present client base. Profitable, niche companies will be integrated
into DDSI's growth through acquisition strategy. DDSI plans to use funding
derived from external investors.

On March 1, 2005, DDSI and its wholly-owned subsidiary, CGM Applied Security
Technologies, Inc. ("CGM Sub"), acquired substantially all of the assets of CGM
Security Solutions, Inc., a Florida corporation ("CGM"), for (i) $1,500,000 in
cash and (ii) a 2.86% promissory note (the "Note") in the principal amount of
$3,500,000, subject to adjustment (the "Acquisition"). The assets of CGM were
acquired pursuant to an Asset Purchase Agreement among DDSI, CGM Sub and CGM
dated as of February 25, 2005.

      The principal amount of the Note is subject to adjustment based upon the
average of (i) the gross revenues of CGM Sub for the fiscal year ending December
31, 2007 and (ii) an independent valuation of CGM Sub based upon the
consolidated audited financial statements of the Company and CGM Sub for the
fiscal years ended December 31, 2006 and 2007. In addition, the Company has
granted CGM a secondary security interest in substantially all of its assets and
intellectual property.

      In connection with the Acquisition, the Company entered into a letter
agreement with certain of its investors (the "Investors") which extended the
maturity date of debt instruments issued on November 30, 2004 until March 1,
2008, and amended the conversion price of the debt that is held by the Investors
to the lower of (i) $0.0005 or (ii) 60% of the average of the three lowest
intraday trading prices for the Company's common stock during the 20 trading
days before, but not including, the conversion date. In addition, the exercise
price of the warrants held by the Investors was amended to $.001 per share.

Sales by Geographic Area

      During each of the fiscal years ended December 31, 2004, 2003, and 2002,
the percentage of revenues that DDSI has received from domestic customers has
been approximately 99.9%. Foreign sales for 2004, 2003, and 2002 were $4,220,
$4,220, and $4,927, respectively, or an aggregate for these years of
approximately $13,367.

Competition

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

<PAGE>

         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 $21,759 in 2004 and $44,765 2003 for a total of $66,524 on
research and development in the last two years. This amount includes amounts
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.

Product Liability Insurance

         Although DDSI 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

<PAGE>

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 cash flows.

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)", all trademarks have
been registered with the United States Patent and Trademark Office.

Description of Business of CGM

      CGM is a manufacturer and distributor of indicative and barrier security
seals, security tapes and related packaging security systems, protective
security products for palletized cargo, physical security systems for tractors,
trailers and containers as well as a number of highly specialized authentication
products.

Products

      CGM has a patent on its Secure Tract tape, super seals water gum tape, and
sentry sensor. It also has exclusive rights on NAVATECH products and all seals.
In addition, CGM provides authentication technology and products to clients to
act as brand protection elements to finished goods. This brand protection
technology can help manufacturers reduce the incidences of "knock-offs" that are
common in the garment and accessory businesses. CGM's core products are: CGM
Tapes, Self-Wound Security Tape, Void Labels and Void Tape for Bag Closure,
SUPERSEALS(R), Custom Coated Products, CGM Conductive Inks and Membrane Switch
Components, EMAPS(R), Locks, Sentry Sensor(R) and other representative items.

      SUPERSEAL(R) and self-voiding carton sealing tape known as SECURE
T.R.A.C.(R) show a customized signature if attempts are made at removing them.
If cut and resealed, SUPERSEAL(R) further shows an "opened" legend on the seal's
center surface. With self-wound void tape, any attempt at resealing is negated
by the surface coating on the tape. An "opened" legend is also left on the tape
if removed. Since the products are manufactured in-house, CGM controls all
features and has the ability to customize the products to the customer's needs.
CGM also offers converted labels, seals, and money bags. CGM manufactures a
variety of adhesives, graphics and die cut label configurations for companies
whose logos always appear on the tape or label for security purposes. No generic
product can be substituted for this product since no one makes an identical
product.

      Uses for this product and technology include such items as:

      o     Aircraft and truck seals
      o     Fiber and Steel drum seals
      o     Motor Vehicle inspection seals
      o     Box or container closure seals
      o     Cash bag components
      o     Computer seals
      o     Validation devices
      o     General security products

<PAGE>

      Once CGM's products are applied to a particular surface, any attempt at
removal will leave a sign in the form of an indelible word or legend on the tape
and a removable or permanent legend on the enclosure. The EMAPS(R) or
Electro-Magnetic Asset Protection System, reflects entry by sending an
electronic signal if cut. EMAPS(R) products function without the need to
identify a cut visually. Both products, the labels and the scanners, are unique
and only manufactured by CGM. EMAPS(R) and SECURE T.R.A.C.(R) have been
patented.

Production Process

            The CGM manufacturing process can best be described as one of
      "converting". CGM takes highly processed materials, which are manufactured
      elsewhere, and converts them into finished products.

      CGM purchases processed materials from 6 to 8 key suppliers, including
Dupont, Adhesive Research, Sun Microsystems and Video Jet. For OEM products, CGM
purchases from approximately 15 different companies. CGM has an exclusive
distribution relationship in connection with some of these products, while for
other products CGM is one of few or many resellers.

Markets & Customers

      The primary factors behind the need for CGM's products are: (i) the
escalation of cargo theft and tampering, (ii) the need for enhanced cargo
security because of the fear of terrorism, (iii) damage control of freight and
cargo, (iv) the need for security products, (v) brand protection and
authentication requirements and (vi) governmental and regulatory requirements.

      CGM is certified by the Customs-Trade Partnership Against Terrorism
("C-TPAT"), a joint initiative between government and business designed to
protect the security of cargo entering the United States while improving the
flow of trade. C-TPAT requires importers to take steps to assess, evolve and
communicate new practices that ensure tighter security of cargo and enhanced
security throughout the entire supply chain. In return, their goods and
conveyances will receive expedited processing into the United States

Principal Customers

      CGM's current client base includes over 2000 national and international
companies, including producers of high value items such as perfumes, computers,
silicon chips, jewelry, cash and negotiable documents. The market for tamper
evidence includes flavors, fragrances, foodstuffs and components. CGM's products
are used by major airlines, pharmaceutical clients and numerous government
agencies. CGM's products have also been recommended by major insurance companies

Sales

      CGM has four salespeople for domestic sales and representative
distributors for sales abroad. CGM supplements its sales force with Internet
advertising, trade shows, and PR benefits from Erik Hoffer's chairmanship of
education for the National Cargo Security Council.

Competition

      Several other companies manufacture products that are similar to CGM's
self-voiding label stock. Their products are limited in scope and do not
adequately address the issues of tampering by virtue of their inability to
withstand the normal means of breaching adhesive products. However, new
innovations and better sales/marketing by other companies with a
product-solutions market approach could affect our ability to market our
products. Currently, no other company manufactures the self-voiding label stock

<PAGE>

vertically or sells the finished product in a customized tape or seal form like
CGM does. As both a manufacturer and converter, CGM delivers finished goods to
users in response to their individual needs. CGM can modify its products through
all phases of its development to make it user friendly and compatible with the
needs of its desired application.

         No other company in the industry offers the array of products that CGM
offers. There are approximately 12 seal manufacturers that offer seals and
compete with each other over price. CGM sells through threat assessment and
determines products on the basis of functionality.

Industry Trends

         It is estimated that losses from cargo theft each year reach 30-50
billions dollars globally and 12 billion dollars in the US, and that these
numbers will continue to rise. (L.H. Gray, Facing the Growing Problem of Loss
and Theft).
Employees

         DDSI employs total of 17 full time employees, of whom 13 are employed
by CGM. CGM also employs one part-time employee.


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, PA19030, 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 three-month lease which ends in March 2005. Future
minimum lease commitment in connection with this lease is $1,500.

         CGM Applied Security Technologies operates from two locations. The
administrative offices are located in Somerset, NJ and the production facility
is located in Staten Island, NY.




ITEM 3.  Legal Proceedings


On October 16, 2003, in the Court of Common Pleas 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 $184,707. The Company intends to negotiate a
settlement. The liability, net of the security deposit, is included in accrued
expense at December 31, 2004.


ITEM 4.  Submission of Matters to a Vote of Securities Holders

None.


                                     PART II

ITEM 5.  Market for Common Equity and Related Shareholder Matters

<PAGE>

      DDSI's common stock has been quoted on the OTC Bulletin Board since July
7, 1997 under the symbol "DDSI". As of November 4, 1999 DDSI's shares traded on
the pink sheets. DDSI returned to trading on the OTC Bulletin Board effective
February 23, 2001, but as of June30, 2003 began trading on the pink sheets. The
following table set forth, the high and low bid prices for the common stock for
the quarters indicated. As of April 1, 2005 there were approximately 2,800
shareholders of record.

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

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

Calendar Year 2004
First Quarter                             $0.0010          $0.0055
Second Quarter                            $0.0015          $0.0085
Third Quarter                             $0.0004          $0.0027
Fourth Quarter                            $0.0004          $0.0009

Calendar Year 2005
First Quarter                             $0.0004          $0.0026

         As of April 1, 2005, there were 304,511,994 shares of common stock
issued and outstanding.

         We have never declared nor paid cash dividends and do not expect to pay
dividends in the foreseeable future.

Recent Issuances of Unregistered Securities

         During January 2005, $2,500 of the convertible debentures issued in
September 2001, were converted into 9,920,635 shares of common stock. And
9,920,635 shares were issued for liquidated damages relating to the notes issued
December 2001

         During January 2005, $1,400 of the convertible debentures issued in
September 2001, were converted into 7,000,000 shares of common stock.

         During February 2005, $3,100 of the convertible debentures issued in
September 2001, were converted into 19,375,000 shares of common stock. And
19,375,000 shares were issued for liquidated damages relating to the notes
issued December 2001

         During February 2005, $2,520 of the convertible debentures issued in
September 2001, were converted into 14,000,000 shares of common stock.

         During March 2005, $3,400 of the convertible debentures issued in
September 2001, were converted into 17,000,000 shares of common stock. And
17,000,000 shares were issued for liquidated damages relating to the notes
issued December 2001

<PAGE>

         During March 2005, $3,000 of the convertible debentures issued in
September 2001, were converted into 15,000,000 shares of common stock.

         During April 2005, $1,000 of the convertible debentures issued in
September 2001, were converted into 5,000,000 shares of common stock.

         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 or (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.

         On May 7, 2004, we entered into a Securities Purchase Agreement, with
four accredited investors that provides for the issuance of convertible notes
payable up to an aggregate face value of $250,000 with simple interest accruing
at the annual rate of 12% and warrants to acquire up to an aggregate 750,000
shares of our common stock. The convertible notes are due two years from the
date of issuance. Interest payable on the convertible notes shall be paid
quarterly commencing June 30, 2004. 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) $.0045 or (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 $0.0045 and expire on May 7, 2009.

         During July 2004, $4,900 of the convertible debentures issued in
September 2001, were converted into 7,000,000 shares of common stock.

         During August 2004, $3,500 of the convertible debentures issued in
September 2001, were converted into 14,000,000 shares of common stock and
7,222,222 shares of common stock were issued for liquidated damages relating to
the notes issued December 2001.

         During September 2004, $700 of the convertible debentures issued in
September 2001, were converted into 7,000,000 shares of common stock.

         During October 2004, $1,400 of the convertible debentures issued in
September 2001, were converted into 7,000,000 shares of common stock and
15,535,714 shares of common stock were issued for liquidated damages relating to
the notes issued December 2001.

         On November 30, 2004, we entered into a Securities Purchase Agreement,
with four accredited investors that provides for the issuance of convertible
notes payable up to an aggregate face value of $3,500,000 with simple interest
accruing at the annual rate of 12% and warrants to acquire up to an aggregate
6,195,000 shares of our common stock. The convertible notes are due three years
and three months from the date of issuance. Interest payable on the convertible
notes shall be paid quarterly commencing December 31, 2004. 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) $.0005 or (2) 60% 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 $0.001 and expire on January 31,
2012.

<PAGE>

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.

      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.
o
o     Additionally, DDSI plans to execute an acquisition strategy based upon
      fund availability.

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

DDSI's long-term objective is as follows:

<PAGE>

      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 2006.
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.
      o     Acquire and effectively add management support to profitable
            companies complementary to its broadened target markets.

Results of Operations

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

      Revenues for the year ended December 31, 2004 of $412,052 decreased
$238,598 or 37% from the year ended December 30, 2003. 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. SI-3000 products' largest revenue impact was
in software sales. During 2004, DDSI recognized revenue of $115,355 from
software sales and software maintenance agreements from previous installations
of SI-3000. Maintenance revenues decreased $79,856 or 24% from the year ended
December 31, 2003 primarily due to a decrease in DDSI's customer base and
contract dollar amount.

      Cost of revenue for the year ended December 31, 2004 was $44,783 a
decrease of $42,943 or 49% from the prior year. The decrease was attributable to
the decrease in SI-3000 projects. Cost of revenue sold as a percentage of
revenue for the year ended December 31, 2004 was 10% of total revenues, versus
13% the year earlier.

      Total costs and expenses decreased $573,136 or 30% during the year ended
December 31, 2004 versus the year ended December 31, 2003. This decrease was
mainly attributable to a decrease in General and Administrative expense as
explained below.

      General and Administrative expenses for the year ending December 31, 2004
were $407,642 versus $742,982 for the prior year for a decrease of $335,340 or

<PAGE>

45%. This decrease was mainly attributable to a decrease in rent and related
costs which totaled $209,373.

      Sales and Marketing expenses decreased $106,748 for the year ended
December 31, 2004 from $171,762 or a 50% decrease. This decrease was mainly
attributable to a decrease in professional services of $57,490 and a decrease in
salaries, benefits and payroll taxes in the aggregate of $38,502.

      Research and development for the year ended December 31, 2004 was $21,759
compared to $44,765 for the same period prior year for a decrease of $23,006,
which was due in part to a decrease in salaries, benefits and payroll taxes in
the aggregate of $23,818.

The net loss for DDSI decreased 26% for the year ended December 31, 2004 to
$972,319 from $1,306,857 for the year ended December 31, 2003. This was
principally due to the decrease in expense and costs.

      Net cash used in operating activities for the year ended December 31, 2004
and 2003 was $292,670 and $620,061, respectively. The decrease in cash used by
operating activities in the year ended December 31, 2004 of $327,391 was
principally due to the decrease in operating expenses discussed above.

      Net cash provided by financing activities was $3,321,149 and $655,799 for
the year ended December 31, 2004 and 2003, respectively, reflecting a decrease
of $2,665,350. This increase 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.

      At December 31, 2004, DDSI had assets of $5,314,704 compared to $553,946
on December 31, 2003 an increase of $4,760,758 and shareholder deficiency of
$1,643,840 on December 31, 2004 compared to shareholder deficiency of $2,605,403
on December 31, 2003, a decrease of $961,563. This decrease in shareholder
deficiency for the year ended December 31, 2004 resulted from the net loss for
the year ended December 31, 2004 offset by the issuance of Common Stock and the
debt discounts related to the issuance of convertible debentures.

      As of December 31, 2004, DDSI had a negative working capital of
$1,645,570, a change of $961,563 from a negative working capital of $2,607,133
at December 31, 2003. The decrease in negative working capital was a result of a
decrease in cash balances of $29,856, a decrease of accounts receivable of
$67,800, a reduction in prepaid expenses of $63,800, an increase in debt
discount and deferred financing cost asset of $1,863,679, a decrease in accounts
payable of $73,588, a decrease in accrued expenses of $1,187, a decrease in
deferred income of $193,425 and an increase in convertible debentures of
$3,781,000.

<PAGE>

Recent Developments

      On March 1, 2005, DDSI and its wholly-owned subsidiary, CGM Applied
Security Technologies, Inc. ("CGM Sub"), acquired substantially all of the
assets of CGM Security Solutions, Inc., a Florida corporation ("CGM"), for (i)
$1,500,000 in cash and (ii) a 2.86% promissory note (the "Note") in the
principal amount of $3,500,000, subject to adjustment (the "Acquisition"). The
assets of CGM were acquired pursuant to an Asset Purchase Agreement among DDSI,
CGM Sub and CGM dated as of February 25, 2005.

      The principal amount of the Note is subject to adjustment based upon the
average of (i) the gross revenues of CGM Sub for the fiscal year ending December
31, 2007 and (ii) an independent valuation of CGM Sub based upon the
consolidated audited financial statements of the Company and CGM Sub for the
fiscal years ended December 31, 2006 and 2007. In addition, the Company has
granted CGM a secondary security interest in substantially all of its assets and
intellectual property.

      In connection with the Acquisition, the Company entered into a letter
agreement with certain of its investors (the "Investors") which extended the
maturity date of debt instruments issued on November 30, 2004 until March 1,
2008, and amended the conversion price of the debt that is held by the Investors
to the lower of (i) $0.0005 or (ii) 60% of the average of the three lowest
intraday trading prices for the Company's common stock during the 20 trading
days before, but not including, the conversion date. In addition, the exercise
price of the warrants held by the Investors was amended to $.001 per share.

ITEM 7.  Financial Statements

      The report of the independent registered public accounting firm 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

      Not applicable.

ITEM 8A. Control and Procedures

Evaluation of Disclosure Controls and Procedures

      As of December 31, 2004, 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.

<PAGE>

                                    PART III

ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act

      Set forth below is certain information regarding our directors and
executive officers. Our Board of Directors is comprised of four directors. There
are no family relationships between any of our directors or executive officers.
Each of our directors is elected to serve until our next annual meeting of our
stockholders and until his successor is elected and qualified or until such
director's earlier death, removal or termination.

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

Anthony Shupin         50      Director, Chief Executive Officer, President
Michael Pellegrino     56      Senior Vice President, CFO and Director
Robert Gowell          37      Director
Vincent Moreno         62      Director
Erik Hoffer            58      Executive Vice President and Director

         Anthony Shupin became CEO and President of DDSI in October 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.

         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.

         Michael Pellegrino became Senior Vice President & CFO in February 2005.
He originally joined DDSI in 1995 as Vice President & Chief Financial Officer.
In March 2002, he was appointed President, Chief Executive Officer and Chief
Financial Officer, Secretary and a Director of DDSI. From 1984 to 1995, Mr.
Pellegrino was Vice President and CFO of Software Shop Systems, Inc. From 1979
to 1984, he was a regional controller for Capital Cities/ABS, and from 1972 to
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.

         Robert Gowell has been a director of the Company since 2001. He was the
Company's Co-Chairman and Chief Executive Officer from January 2002 until June
2002. He is a retired Deputy U.S. Marshal who has worked out of the New York and
Pennsylvania offices from 1991 to 2001. 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.

         Vincent Moreno has been a director of the Company since January 2002.
Mr. 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.
Since 2002, Mr. Moreno has been doing consulting work for various software
development firms. From 1998- 2002, he was President and General Manager of
PayPlus Software, Inc., a provider of payroll software to the Professional
Employer Organization marketplace. He served as Vice President of Operations at
DDSI from 1996 to 1998. From 1989 to 1995, he served as President and CEO of
Mainstem Corporation, a national provider of software services.

<PAGE>

         Erik Hoffer was appointed as Executive Vice President and a director of
the Company and President of CGM Sub in March 2005. Prior to joining the
Company, Mr. Hoffer has been the president and chief executive officer of CGM,
which he created in 1977. Prior to starting CGM, Mr. Hoffer was the national
sales manager of Lamart Corporation from 1972-1977. For the past 37 years, Mr.
Hoffer has designed and patented a number of theft control, authentication,
barrier and theft detection products. He holds many patents and a considerable
amount on corporate trade secrets in manufacturing these products. He is
considered an expert in the areas of adhesive coating, conductive inks and cargo
security science. For the past four 4 years, Mr. Hoffer has been the chairman of
educational events for the National Cargo Security Council and previously the
co-chairman of the NCSC GMATS program. Mr. Hoffer received a B.S. in industrial
psychology from Northeastern University. He also holds an associates degree in
transportation and traffic management.

Code of Ethics

         The Company has not formally adopted a written code of ethics that
governs all of our officers, directors and finance and accounting employees. The
draft code of ethics is filed herewith as Exhibit 14.1

Section 16 Beneficial Ownership Compliance

         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, except that the following individuals have
filed their Form 3s late: Anthony Shupin, Vincent Moreno and Erik Hoffer and the
following individuals have filed their Form 4s late: Michael Pellegrino and
Robert Gowell.


ITEM 10. Executive Compensation

         The following table sets forth information concerning the total
compensation that we have paid or that has accrued on behalf of our Chief
Executive Officer and other executive officers with annual compensation
exceeding $100,000 during fiscal 2004, 2003 and 2002.

<TABLE>
<CAPTION>
                                                                  Long Term Compensation

                                    Annual Compensation          Awards            Payouts

Name and                                     Other                      Securities
Principal                                    Annual       Restricted    Underlying                  Other
Position                                     Compen-      Stock           Options/    LTIP          Compen-
                   Year    Salary     Bonus  ation($)     Award($)         Sar (#)    Payouts($)    sation ($)
<S>                <C>    <C>        <C>     <C>          <C>           <C>           <C>           <C>
Anthony Shupin     2004   $108,000      0       0          0                0            0               0
President & CEO    2003   $108,000      0       0          0                0            0               0
                   2002          0      0       0          0                0            0               0

Michael J.         2004   $ 52,000      0       0          0                0            0               0
Pellegrino*        2003   $115,000      0       0          0                0            0               0
                   2002   $115,000      0       0          0                0            0               0
</TABLE>

<PAGE>

*Mr. Pellegrino resigned as President and Chief Executive Officer effective
October 6, 2003. In 2004, Mr. Pellegrino served as Chairman of the Board and as
a consultant to the Company.


<TABLE>
<CAPTION>
Options/SAR Grants in Last Fiscal Year

                                     Number of         % of Total
                                     Securities        Options/SARS
                                     Underlying        Granted to
                                     Options/SARS      Employees in    Exercise or Base
Name                                 Granted           Fiscal Year     Price ($/Sh)              Expiration Date
<S>                                  <C>               <C>             <C>                       <C>
Michael J. Pellegrino, CFO              0               N/A            N/A                       N/A
Anthony Shupin, President & CEO         0               N/A            N/A                       N/A
</TABLE>

Aggregated Option/SAR Exercises

         None exercised

Employment Agreements

         Anthony R. Shupin, Chairman, President and Chief Executive Officer. Mr.
Shupin was re-appointed as Chairman, President and Chief Executive Officer
effective February, 2005. On February 25, 2005, DDSI entered into a five-year
employment agreement with Mr. Shupin, which entitled him to a base salary of
$215,000 per year, which may at the Board of Directors discretion adjust his
base salary (but not below $215,000 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 10% to 200% 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 25 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 Six Hundred Dollars ($600.00)
along with related car expenses.

         Michael J. Pellegrino, Senior Vice President and Chief Financial
Officer. Mr. Pellegrino was appointed as Senior Vice President and Chief
Financial Officer effective February 25, 2005. On February 25, 2005, DDSI
entered into a five-year employment agreement with Mr. Pellegrino, which
entitled him to a base salary of $175,000 per year which may at the Board of
Directors discretion adjust his base salary (but not below $175,000 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 10% to
200% 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 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 common shares of the Company (subject to the
vesting and the satisfaction of the other terms and conditions of such options).
Mr. Pellegrino will be entitled to 25 vacation days per year at such times as

<PAGE>

may be mutually agreed with the Board of Directors. DDSI shall also furnish Mr.
Pellegrino with monthly car allowance of Six Hundred Dollars ($60.00) and
related car expenses.

         DDSI has an employment agreement with Erik Hoffer, pursuant to which
Mr. Hoffer will be employed as Executive Vice President of the Company for an
initial term of three years, which may be extended, and President of CGM Sub for
an initial term of one year, which may be renewed for successive one-year terms.
Pursuant to the Employment Agreement, Mr. Hoffer will receive a base salary of
$200,000, a bonus of 5% of the gross margin sales increase over the prior year's
gross margin sales of CGM products and customary benefits and reimbursements.

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.

ITEM 11. Security Ownership of Certain Beneficial Owners and Management

The following table lists stock ownership of our common stock as of April 1,
2005. The information includes beneficial ownership by (i) holders of more than
5% of our common stock, (ii) each of our current directors and executive
officers and (iii) all of our directors and executive officers as a group. The
information is determined in accordance with Rule 13d-3 promulgated under the
Exchange Act based upon information furnished by the persons listed or contained
in filings made by them with the Commission. Except as noted below, to our
knowledge, each person named in the table has sole voting and investment power
with respect to all shares of our common stock beneficially owned by them.

Percentage of beneficial ownership is based upon 304,511,994 shares of common
stock outstanding at April 1, 2005, together with securities exercisable or
convertible into shares of common stock within 60 days of April 1, 2005 for each
stockholder. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock that are

<PAGE>

currently exercisable or exercisable within 60 days of April 1, 2005 are deemed
to be beneficially owned by the person holding such securities for the purpose
of computing the percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.


<TABLE>
<CAPTION>
                                                               Beneficial Ownership
Name and Address                                               of Common Stock
of Beneficial Owner                 Title                      No. of Shares             Percent of Class
-------------------                 -----                      -------------             ----------------
<S>                                 <C>                        <C>                       <C>
Anthony R. Shupin                   Chairman, CEO and          15,000,000                4.9%
2150 Hwy 35, Suite 250              President
Sea Girt, NJ 08750

Michael Pellegrino                  Senior Vice President,     15,335,000                5.0%
2150 Hwy 35, Suite 250              Chief Financial Officer
Sea Girt, NJ 08750                  & Director

Robert Gowell                       Director                   96,300                    *
2150 Hwy 35, Suite 250
Sea Girt, NJ 08750

Vincent Moreno                      Director                   0                         *
2150 Hwy 35, Suite 250
Sea Girt, NJ 08750

Erik Hoffer                         Executive Vice             0                         *
2150 Hwy 35, Suite 250             President and Director
Sea Girt, NJ 08750

All Officers  & Directors
As a Group                                                     30,431,300(1)             9.9%
</TABLE>


------------------------
* less than 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. For
the year ended December 31, 2003 the services amounted to $51,980. As of
December 31, 2003 the company owes the director $22,630 with no repayment terms.

<PAGE>

         A director to the Company provided consulting services during 2004. For
the year ended December 31, 2004 the services amounted to $52,000.

         The Company also owes the former chief executive officer of the Company
$18,260 at December 31, 2004 for back payroll and sundry expenses with no
repayment terms.


ITEM 13. Exhibits

Exhibit
Number     Description

3.1   Certificate of Incorporation of the Company. Incorporated June 13, 1994
      (1)
3.2   Restated Articles of Incorporation of the Issuer, May 21, 1997 (1).
3.3   Amended Articles of Incorporation (1)
3.4   Amended Articles of Incorporation dated October 9, 2001 (5)
3.5   By-Laws of the Company (1)
4.1   Warrant Agreement with AJW Partners, LLC (4)
4.2   Warrant Agreement with New Millennium Capital Partners II, LLC (4)
4.3   Stock Purchase Warrant Agreement with AJW Partners LLC (5)
4.4   Stock Purchase Warrant Agreement with New Millennium Capital Partners II
      LLC (5)
4.5   Stock Purchase Warrant Agreement with Bristol Investment Fund, Ltd. (5)
4.6   Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (8)
4.7   Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (8)
4.8   Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (January
      10, 2003) (9)
4.9   Stock Purchase Warrant Agreement with AJW Partners, LLC (January 10, 2003)
      (9)
4.10  Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (January 10,
      2003) (9)
4.11  Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC
      (February 27, 2003) (10)
4.12  Stock Purchase Warrant Agreement with AJW Partners, LLC (February 27,
      2003) (10)
4.13  Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (February 27,
      2003) (10)
4.14  Stock Purchase Warrant Agreement with AJW Qualified Partners, LLC (March
      31, 2003) (10)
4.15  Stock Purchase Warrant Agreement with AJW Partners, LLC (March 31, 2003)
      (10)
4.16  Stock Purchase Warrant Agreement with AJW Offshore, Ltd. (March 31, 2003)
      (10)
4.17  Secured Convertible Debenture Purchase Agreement (4)
4.18  12% Convertible Debenture with AJW Partners, LLC (4)
4.19  12% Convertible Debenture with New Millennium Capital Partners II, LLC (4)
4.20  Secured Convertible Debenture with AJW Partners LLC (5)
4.21  Secured Convertible Debenture with New Millennium Capital Partners II LLC
      (5)
4.22  Secured Convertible Debenture with Bristol Investment Fund, Ltd. (5)
4.23  Secured Convertible Debenture with AJW Qualified Partners, LLC (8)
4.24  Secured Convertible Debenture with AJW Offshore, Ltd. (8)
4.25  Secured Convertible Debenture with AJW Qualified Partners, LLC (January
      10, 2003) (9)
4.26  Secured Convertible Debenture with AJW Partners, LLC (January 10, 2003)
      (9)
4.27  Secured Convertible Debenture with AJW Offshore, Ltd. (January 10, 2003)
      (9)
4.28  Secured Convertible Debenture with AJW Qualified Partners, LLC (February
      27, 2003) (10)
4.29  Secured Convertible Debenture with AJW Partners, LLC (February 27, 2003)
      (10)
4.30  Secured Convertible Debenture with AJW Offshore, Ltd. (February 27, 2003)
      (10)
4.31  Secured Convertible Debenture with AJW Qualified Partners, LLC (March 31,
      2003) (10)
4.32  Secured Convertible Debenture with AJW Partners, LLC (March 31, 2003) (10)
4.33  Secured Convertible Debenture with AJW Offshore, Ltd. (March 31, 2003)
      (10)
4.34  Secured Convertible Debenture with AJW Qualified Partners, LLC (October 1,
      2003) (11)

<PAGE>

4.35  Secured Convertible Debenture with AJW Offshore, Ltd. (October 1, 2003)
      (11)
4.36  Secured Convertible Debenture with AJW Qualified Partners, LLC (November
      26, 2003) (11)
4.37  Secured Convertible Debenture with AJW Offshore, Ltd. (November 26, 2003)
      (11)
4.38  Secured Convertible Debenture with AJW Qualified Partners, LLC (December
      3, 2003) (11)
4.39  Secured Convertible Debenture with AJW Offshore, Ltd. (December 3, 2003)
      (11)
4.40  10% Convertible Note to Robert Gowell (4)
4.41  Second Amendment to Secured Convertible Debenture Purchase Agreement (4)
4.42  Callable Secured Convertible Note in the name of New Millennium Capital
      Partners II, LLC dated November 30, 2004 (12)
4.43  Callable Secured Convertible Note in the name of AJW Qualified Partners,
      LLC dated November 30, 2004 (12)
4.44  Callable Secured Convertible Note in the name of AJW Offshore, Ltd. dated
      November 30, 2004 (12)
4.45  Callable Secured Convertible Note in the name of AJW Partners, LLC dated
      November 30, 2004 (12)
4.46  Stock Purchase Warrant in the name of New Millennium Capital Partners II,
      LLC dated November 30, 2004 (12)
4.47  Stock Purchase Warrant in the name of AJW Qualified Partners, LLC dated
      November 30, 2004 (12)
4.48  Stock Purchase Warrant in the name of AJW Offshore, Ltd. dated November
      30, 2004 (12)
4.49  Stock Purchase Warrant in the name of AJW Partners, LLC dated November 30,
      2004 (12)
4.50  2.86% Secured Convertible promissory Note in the name of CGM Security
      Solutions, Inc. dated February 25, 2005 (13)
10.1  Employee 1997 Stock Option Plan adopted by the Board of Directors February
      24, 1998 and subject to stockholder ratification. (1)
10.2  Registration Rights Agreement (4)
10.3  Registration Rights Agreement (5)
10.4  Securities Purchase Agreement (5)
10.5  Security Agreement (5)
10.6  Amendment No. 1 to Securities Purchase Agreement dated December 31, 2001
      (6)
10.7  Private Placement Agreement Letter with AJW Qualified Partners, LLC and
      AJW Offshore, Ltd (8)
10.8  Securities Purchase Agreement (January 10, 2003) (9)
10.9  Registration Rights Agreement (January 10, 2003) (9)
10.10 Security Agreement (January 10, 2003) (9)
10.11 Intellectual Property Security Agreement (January 10, 2003) (9)
10.12 Securities Purchase Agreement dated November 30, 2004 by and among the
      Company and New Millennium Capital Partners II, LLC, AJW Qualified
      Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (12)
10.13 Registration Rights Agreement dated November 30, 2004 by and among the
      Company and New Millennium Capital Partners II, LLC, AJW Qualified
      Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (12)
10.14 Security Agreement dated November 30, 2004 by and among the Company and
      New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW
      Offshore, Ltd. and AJW Partners, LLC (12)
10.15 Intellectual Property Security Agreement dated November 30, 2004 by and
      among the Company and New Millennium Capital Partners II, LLC, AJW
      Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (12)
10.16 Guaranty and Purchase Agreement dated November 30, 2004 by and among the
      Company, New Millennium Capital Partners II, LLC, AJW Qualified Partners,
      LLC, AJW Offshore, Ltd. and AJW Partners, LLC and Anthony Shupin (12)
10.17 Guaranty and Purchase Agreement dated November 30, 2004 by and among the
      Company, New Millennium Capital Partners II, LLC, AJW Qualified Partners,
      LLC, AJW Offshore, Ltd. and AJW Partners, LLC and Michael Pellegrino (12)
10.18 Security Agreement dated February 25, 2005 by and between CGM Applied
      Security Technologies, Inc. and CGM Security Solutions, Inc. (13)
10.19 Intellectual Property Security Agreement dated February 25, 2005 by and
      between CGM Applied Security Technologies, Inc and CGM Security Solutions,
      Inc. (13)
10.20 Letter Agreement, by and among the Company, AJW Partners, LLC, New
      Millennium Capital Partners II, LLC, AJW Offshore, Ltd. and AJW Qualified
      Partners, LLC, dated January 31, 2005 (13)

<PAGE>

10.21 Asset Purchase Agreement dated February 25, 2005 by and among the Company,
      CGM Applied Security Technologies, Inc. and CGM Applied Security
      Solutions. (13)
10.22 Employment Agreement, dated February 25, 2005, by and among the Company,
      CGM Applied Security Technologies, Inc. and CGM Security Solutions, Inc.
      and Eric Hoffer (13)
10.23 Employment Agreement dated February 25, 2005 by and among the Company and
      Anthony Shupin
10.24 Employment Agreement dated February 25, 2005 by and among the Company and
      Michael J. Pellegrino
14.1  Code of Ethics
21.1  Subsidiaries
31.1  Certification by Chief Executive Officer pursuant to Sarbanes-Oxley
      Section 302
31.2  Certification by Chief Financial Officer pursuant to Sarbanes-Oxley
      Section 302
32.1  Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
      1350
32.2  Certification by Chief Financial Officer pursuant to 18 U.S.C. Section
      1350

(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
(11)  Previously filed on the Annual Report on Form 10-K, dated April 20, 2004
(12)  Previously filed on Form 8-K, dated December 6, 2004
(13)  Previously filed on Form 8-K dated March 3, 2005.

ITEM  14.   Principal Accountant Fees and Services

      Audit Fees. The aggregate fees billed by Rosenberg Rich Baker Berman &
Company, 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 2004 and 2003
were $41,480 and $33,855, 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 2004 and 2003 were $3,000 and $12,100,
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.

<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, Chairman, President, and
                                 Chief Executive Officer

                                 Dated:   July 20, 2005

      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>                                         <C>
By:      /s/ Anthony Shupin                 Chairman, President, and Chief,             July 20, 2005
         ------------------                 Executive Officer
         Anthony Shupin

By:      /s/ Michael Pellegrino             Senior Vice President and Chief             July 20, 2005
         ------------------------           Financial Officer, Director
         Michael Pellegrino

By:                                         Executive Vice President and
         ---------------                    Director
         Erik Hoffer

By:      /s/ Vincent Moreno                 Director                                    July 20, 2005
         ------------------
            Vincent Moreno

By:                                         Director
         ------------------
         Robert Gowell
</TABLE>


<PAGE>

                        Digital Descriptor Systems, Inc.
                              Financial Statements
                                December 31, 2004
                                  (As Restated)



<PAGE>


                        Digital Descriptor Systems, Inc.
                        Contents to Financial Statements
                                December 31, 2004
                                  (As Restated)


<TABLE>
<CAPTION>
                                                                                     Page
<S>                                                                                  <C>
Report of Independent Registered Public Accounting Firm                               1

Audited Financial Statements:

         Balance Sheet as of December 31, 2004                                        2

         Statements of Operations for the Years Ended December 31, 2004 and 2003      3

         Statements of Shareholders' Impairment for the Years Ended
            December 31, 2004 and 2003                                                4

         Statements of Cash Flows for the Years Ended December 31, 2004 and 2003     5-6

Notes to Financial Statements                                                        7-20
</TABLE>

<PAGE>

                         Report of Independent Registered Public Accounting Firm




      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, 2004, and the related statements of
      operations, shareholders' impairment and cash flows for the years ended
      December 31, 2004 and December 31, 2003. 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 the standards of the Public
      Company Accounting Oversight Board (United States). Those standards
      require that we plan and perform the audit to obtain reasonable assurance
      about whether the financial statements are free of material misstatement.
      An audit includes examining, on a test basis, evidence supporting the
      amounts and disclosures in the financial statements. An audit also
      includes assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our 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, 2004, and the results of its operations
      and its cash flows for the years ended December 31, 2004 and December 31,
      2003 in conformity with accounting principles generally accepted in the
      United States of America.


                                       /s/ Rosenberg Rich Baker Berman & Company

      Bridgewater, New Jersey
      March 25, 2005
        Except for Note 12, dated July 15, 2005

<PAGE>

                        Digital Descriptor Systems, Inc.
                                  Balance Sheet
                                December 31, 2004
                                  (As Restated)


<TABLE>
<CAPTION>
                                              Assets
Current  Assets
<S>                                                                                   <C>
   Cash                                                                               $     21,905
   Restricted cash                                                                       3,058,431
   Accounts receivable, less allowance for uncollectible accounts
     of $38,084                                                                             68,529
   Debt discount and deferred financing costs, net                                       2,164,109
                                                                                      ------------

       Total Current Assets                                                              5,312,974

Other Assets
   Security deposit                                                                          1,730
                                                                                      ------------

       Total Assets                                                                      5,314,704
                                                                                      ============

                    Liabilities and Shareholders' Impairment

Current Liabilities
   Accounts payable                                                                        137,582
   Accrued expenses                                                                        309,774
   Accrued interest                                                                        680,067
   Due to officer and director                                                              13,830
   Deferred income                                                                         189,453
   Convertible debentures                                                                5,627,838
                                                                                      ------------

     Total Current Liabilities                                                           6,958,544


Shareholders' Impairment
   Preferred stock, $.001 par value: authorized shares - 1,000,000;
     issued and outstanding shares - none                                                       --
   Common stock, $.001 par value: authorized shares - 9,999,000,000;
     issued and outstanding shares - 210,716,359                                           210,716
   Additional paid-in capital                                                           19,466,724
   Accumulated deficit                                                                 (21,321,280)
                                                                                      ------------

       Total Shareholders' Impairment                                                   (1,643,840)
                                                                                      ------------

       Total Liabilities and Shareholders' Impairment                                 $  5,314,704
                                                                                      ============
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       2
<PAGE>

                        Digital Descriptor Systems, Inc.
                            Statements of Operations
                                  (As Restated)


<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                          -----------------------------------
                                                               2004                 2003
                                                          --------------       --------------
<S>                                                       <C>                  <C>
Revenues
   Software                                               $       43,839       $       98,223
   Hardware                                                      112,272              187,350
   Maintenance                                                   253,361              333,217
   Other                                                           2,580               31,860
                                                          --------------       --------------

Total revenue                                                    412,052              650,650

Costs and Expenses
   Cost of revenues                                               44,782               87,726
   General and administrative                                    407,642              742,982
   Sales and marketing                                            65,014              171,762
   Research and development                                       21,759               44,765
   Interest and amortization of deferred debt costs              789,047              911,929
   Other income and expenses, net                                 56,127               (1,657)
                                                          --------------       --------------

Total expenses                                                 1,384,371            1,957,507
                                                          --------------       --------------

     Net Loss                                             $     (972,319)      $   (1,306,857)
                                                          ==============       ==============


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

Weighted Average Number of Common Shares Outstanding
     Basic and Diluted                                       167,554,639           99,857,314
                                                          ==============       ==============
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>

                        Digital Descriptor Systems, Inc.
                     Statements of Shareholders' Impairment
                 For the Years Ended December 31, 2004 and 2003
                                  (As Restated)

<TABLE>
<CAPTION>
                                                                               Common Stock               Additional
                                                                      ------------------------------        Paid in
                                                                         Shares            Amount           Capital
                                                                      ------------      ------------      ------------
<S>                                                                     <C>             <C>               <C>
Balance at January 1, 2003                                              61,351,387      $     61,351      $ 16,909,886

   Issuance of common stock in payment of damages
     related to convertible debentures                                  20,461,250            20,461           (15,860)

   Conversion of accrued interest related to convertible
     debentures to common stock                                          1,820,634             1,821             4,005

   Conversions of convertible debentures to common stock                32,325,152            32,325           (25,431)

   Debt discount relating to the beneficial conversion
     feature on convertible debentures                                          --                --           755,000

   Net Loss                                                                     --                --                --
                                                                      ------------      ------------      ------------

Balance at December 31, 2003                                           115,958,423           115,958        17,627,600

   Issuance of common stock for accrued services - related party        30,000,000            30,000            12,000

   Issuance of common stock in payment of damages
     related to convertible debentures                                  29,757,936            29,758           (17,555)


   Conversion of accrued interest related to convertible
     debentures to common stock                                         35,000,000            35,000           (24,500)


   Debt discount relating to the beneficial conversion
     feature on convertible debentures                                          --                --         1,869,179

   Net Loss                                                                     --                --                --
                                                                      ------------      ------------      ------------

Balance at December 31, 2004                                           210,716,359      $    210,716      $ 19,466,724
                                                                      ============      ============      ============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                                      Accumulated        Shareholders'
                                                                        Deficit           Impairment
                                                                      ------------       ------------
<S>                                                                   <C>                <C>
Balance at January 1, 2003                                            $(19,042,104)      $ (2,070,867)

   Issuance of common stock in payment of damages
     related to convertible debentures                                          --              4,601

   Conversion of accrued interest related to convertible
     debentures to common stock                                                 --              5,826

   Conversions of convertible debentures to common stock                        --              6,894

   Debt discount relating to the beneficial conversion
     feature on convertible debentures                                          --            755,000

   Net Loss                                                             (1,306,857)        (1,306,857)
                                                                      ------------       ------------

Balance at December 31, 2003                                           (20,348,961)        (2,605,403)

   Issuance of common stock for accrued services - related party                --             42,000

   Issuance of common stock in payment of damages
     related to convertible debentures                                          --
                                                                                               12,203

   Conversion of accrued interest related to convertible
     debentures to common stock                                                 --
                                                                                               10,500

   Debt discount relating to the beneficial conversion
     feature on convertible debentures                                          --          1,869,179

   Net Loss                                                               (972,319)          (972,319)
                                                                      ------------       ------------

Balance at December 31, 2004                                          $(21,321,280)      $ (1,643,840)
                                                                      ============       ============
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

                        Digital Descriptor Systems, Inc.
                            Statements of Cash Flows
                                  (As Restated)

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                        -----------------------------------
                                                                             2004                 2003
                                                                        --------------       --------------
<S>                                                                     <C>                  <C>
Cash Flows from Operating Activities
   Net loss                                                             $     (972,319)      $   (1,306,857)
   Adjustments to reconcile net loss to net cash used in
     operating activities

       Depreciation                                                                 --                6,117
       Common stock issued in payment of damages                                12,203                4,601
       Amortization of deferred financing costs                                348,045              112,057
       Beneficial conversion feature of convertible debentures                 128,015              586,603
         Bad debt expense                                                       21,200               40,000

       Gain on disposal of assets                                                   --               (6,833)
       Changes in operating assets and liabilities
        Accounts receivable                                                     46,600             (147,838)

        Inventory                                                                   --                8,550
        Prepaid expenses, deposits and other assets                             63,600              112,112
        Accounts payable                                                       (77,189)            (176,296)
        Accrued expenses                                                         3,747              187,536
        Accrued interest                                                       326,853              207,881

        Accrued payroll taxes                                                       --              (84,848)
        Deferred income                                                       (193,425)            (162,846)
                                                                        --------------       --------------

          Net Cash Used in Operating Activities                               (292,670)            (620,061)
                                                                        --------------       --------------

Cash Flows from Financing Activities
   Proceeds from the issuance of convertible debentures, net costs           3,324,439              608,207
   Due to officers and directors                                                   210               55,620
   Payment of convertible debentures                                            (3,500)              (5,000)
   Repayment of equipment loan                                                      --               (3,028)
                                                                        --------------       --------------

          Net Cash Provided by Financing Activities                          3,321,149              655,799
                                                                        --------------       --------------

Net Increase in Cash                                                         3,028,479               35,738

Cash at Beginning of Year                                                       51,857               16,119
                                                                        --------------       --------------

Cash at End of Year                                                     $    3,080,336       $       51,857
                                                                        ==============       ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>

                        Digital Descriptor Systems, Inc.
                            Statements of Cash Flows
                                  (As Restated)

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    ------------------------------
                                                                        2004              2003
                                                                    ------------      ------------
<S>                                                                 <C>               <C>
Supplemental Disclosure of Cash Flow Information:

   Cash paid during the year for

     Interest                                                       $         --      $        474
                                                                    ------------      ------------

     Income taxes                                                   $      2,546      $        971
                                                                    ------------      ------------



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             $  1,880,110      $    608,207
                                                                    ------------      ------------

     Conversion of amounts due to related parties                   $     42,000      $         --
                                                                    ------------      ------------

     Conversion of debentures into common stock                     $         --      $      6,894
                                                                    ------------      ------------

     Conversion of accrued interest into common stock               $     10,500      $      5,826
                                                                    ------------      ------------

     Conversion of damages related to convertible
    debentures into common stock                                    $     12,203      $      4,601
                                                                    ------------      ------------
</TABLE>

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




The accompanying notes are an integral part of these financial statements.


                                       6
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 1 - Description of 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 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:

         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.

         Revenue Recognition
         The Company derives revenue from the sale of hardware, software, post
         customer support, and other related services. Post customer support
         includes telephone support, bug fixes, and rights to upgrades. Other
         related services include basic training.

         The Company recognizes revenue upon delivery of the product to the
         end-user, when the fee is determinable and collectibility is probable.
         Revenue allocable to post customer support is recognized on a
         straight-line basis over the period which the service is to be
         provided. Revenue collected for future services is recorded as deferred
         income and totaled $189,453 and $382,878, respectively, for the years
         ended December 31, 2004 and 2003. Revenue allocable to other services
         is recognized as the services are provided.

         Software Development Costs
         All costs incurred in the research and development of new software
         products and costs incurred prior to the establishment of a
         technologically feasible product are expensed as incurred. Research and
         development of software costs were $21,759 and $44,254, respectively
         for the years ended December 31, 2004 and 2003.

         Cash and Cash Equivalents
         For the purpose of the statement of cash flows, cash and cash
         equivalents include time deposits, certificates of deposits, restricted
         cash, and all highly liquid debt instruments with original maturities
         or three months or less.


                                       7
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 2 - Summary of Significant Accounting Policies (continued)

         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.

         The carrying amount of accounts receivable is reduced by a valuation
         allowance that reflects management's best estimate of the amount 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.

         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 carry forwards,
         certain expenses, and differences in the depreciable lives and
         depreciation methods for certain assets.

         Accounting for Stock Options
         Financial Accounting Standards Board issued Statement No. 123 (SFAS
         123), "Accounting for Stock-Based Compensation" which 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 8.

         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.

         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.

         Fair Value of Financial Instruments
         The carrying value of cash and cash equivalents, accounts receivable,
         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.


                                       8
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 3 - Impact of Recent Accounting Pronouncements

         In December of 2004 the FASB issued a revision to Statement No. 123,
         Accounting for Stock-Based Compensation. This Statement supersedes APB
         Opinion No. 25, Accounting for Stock Issued to Employees, and its
         related implementation guidance. This Statement establishes standards
         for the accounting for transactions in which an entity exchanges its
         equity instruments for good or services. It also addresses transactions
         in which an entity incurs liabilities in exchange for goods or services
         that are based on the fair value of the entity's equity instruments or
         that may be settled by the issuance of those equity instruments. This
         Statement focuses primarily on accounting for transactions in which an
         entity obtains employee services in share-based payment transactions.
         This Statement does not change the accounting guidance for share-based
         payment transactions with parties other than employees as provided in
         Statement 123 as originally issued and EITF Issue No. 96-18,
         "Accounting for Equity Instruments That Are Issued to Other Than
         Employees for Acquiring, or in Conjunction with selling, Goods or
         Services." This Statement does not address the accounting for employee
         share ownership plans, which are subject to AICPA Statement of Position
         93-6, Employers Accounting for Employee Stock Ownership Plans. The
         revisions of this statement did not have a material impact upon the
         Company's financial statements.


Note 4 - Convertible Debentures

         During April 2001 and May 2001, the Company issued three convertible
         notes for an aggregate amount of $155,000. The debentures are
         collateralized by substantially all of the company's assets. The
         debentures accrue interest at the rate of 10% per annum.

         The holders have the right to convert the principal amount plus accrued
         interest into shares of the Company's common stock. 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. During 2003, $5,826 of
         accrued interest related to the debenture was converted into 1,820,634
         shares of common stock. Payments of principal in the amount of $3,500
         and $5,000 were paid in 2004 and 2003 respectively. The remaining
         balance of $16,500 is past due.


         During September 2001, the Company issued two convertible debentures
         for an aggregate amount of $400,000. The debentures are collateralized
         by substantially all of the company's assets. 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
         $187,600 is included in the accompanying financial statements.


                                       9
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 4 - Convertible Debentures (continued)

         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 were 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.

         During 2004, $10,500 of the debenture was converted into 35,000,000
         shares of common stock and during 2003, $3,164 of the debenture was
         converted into 15,818,010 shares of common stock.


         In December, 2001 the Company issued three convertible debentures for
         an aggregate amount of $500,000. The debentures are collateralized by
         substantially all of the company's assets. 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
         $210,000 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. 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 were 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.


         In June 2002, a 12% convertible promissory note for $75,000 was issued
         to two investors. The debentures are collateralized by substantially
         all of the company's assets. The debentures are in default as they were
         due in August 2003. 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. Quarterly interest on the
         debentures was not paid, and accordingly accrued interest and late fees
         payable related to the notes totaling $29,071 is included in the
         accompanying financial statements.


                                       10
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 4 - 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.


         In September 2002, the Company issued secured convertible debentures in
         the aggregate principal amount of $100,000. The debentures are
         collateralized by substantially all of the company's assets. The
         debentures are in default as they were due on September 30, 2003. 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. Quarterly interest on the debentures was not paid,
         and accordingly accrued interest and late fees payable related to the
         notes totaling $30,000 are included in the accompanying financial
         statements.

         The holders 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 or (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 300,000 shares of common stock of the Company at an exercise
         price per share equal to $.01. The estimated fair value of the warrants
         was zero. The intrinsic value of the beneficial conversion feature of
         $100,000 was allocated to paid-in capital and was amortized over the
         life of the debenture on a straight-line basis. Debt issuance costs of
         $27,500 were also amortized on a straight-line basis over the term of
         the debentures and were fully amortized at December 31, 2003.


         In January, 2003 the Company issued three convertible debentures for an
         aggregate amount of $250,000, with simple interest accruing at the
         annual rate of 10%. The debentures are collateralized by substantially
         all of the company's assets. These debentures are in default as they
         were due January 10, 2004. Quarterly interest was not paid and
         accordingly, accrued interest of $61,415 is included in the financial
         statements.

         The holders 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 or (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.


                                       11
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 4 - Convertible Debentures (continued)

         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 estimated fair value of the
         warrants was zero. The intrinsic value of the beneficial conversion
         feature of $250,000 was allocated to paid-in capital and was amortized
         over the life of the debenture on a straight-line basis. Financing
         costs incurred of $56,750 were fully amortized at December 31, 2003.


         In February, 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 collateralized by substantially
         all of the company's assets. The debentures are in default as they were
         due February 27, 2004. Quarterly interest due was not paid and
         accordingly accrued interest of $28,125 is included in the financial
         statements.

         The holders 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 or (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 estimated fair value of the
         warrants was zero. The intrinsic value of the beneficial conversion
         feature of $125,000 was allocated to paid-in capital and was amortized
         over the life of the debenture on a straight-line basis. Debt issuance
         costs of $10,843 were also amortized on a straight-line basis over the
         term of the debentures. Amortization expense during 2004 was $24,307
         and the costs were fully amortized as of December31, 2004.


         In April, 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 collateralized by substantially
         all of the company's assets. The debentures are in default as they were
         due March 31, 2004. Quarterly interest was not paid and accordingly
         accrued interest of $15,834 is included in the financial statements.

         The holders 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 or (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 estimated fair value of the
         warrants was zero. The intrinsic value of the beneficial conversion
         feature of $125,000 was allocated to paid-in capital and was amortized
         over the life of the debenture on a straight-line basis. Debt issuance
         costs of $20,844 were also amortized on a straight-line basis over the
         term of the debentures. Amortization expense during 2004 was $38,591
         and the costs were fully amortized as of December31, 2004.


                                       12
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 4 - Convertible Debentures (continued)

         In October, 2003, the Company issued two convertible debentures for an
         aggregate amount of $165,000, with simple interest accruing at the
         annual rate of 12%. The debentures are collateralized by substantially
         all of the company's assets. The debentures are in default as they were
         due October 1, 2004. Quarterly interest was not paid and accordingly
         accrued interest of $25,988 is included in the financial statements.

         The holders 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) $.005 or (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 $0.01 per share. The estimated fair
         value of the warrants was zero. The intrinsic value of the beneficial
         conversion feature of $65,000 was allocated to paid-in capital and was
         amortized over the life of the debenture on a straight-line basis.
         Amortization expense during 2004 was $147,469 and the costs were fully
         amortized as of December31, 2004.


         In November, 2003, the Company issued two convertible debentures for an
         aggregate amount of $45,000, with simple interest accruing at the
         annual rate of 10%. The debentures are in default as they were due
         November 27, 2004. Quarterly interest was not paid and accordingly
         accrued interest of $9,453 is included in the financial statements.

         The holders 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) $.005 or (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 315,000 shares of common stock of the Company at an exercise
         price per share equal to $0.01. The estimated fair value of the
         warrants was zero. The intrinsic value of the beneficial conversion
         feature of $45,000 was allocated to paid-in capital and was amortized
         over the life of the debenture on a straight-line basis. Amortization
         expense during 2004 was $47,469 and the costs were fully amortized as
         of December31, 2004.


         In December, 2003, the Company issued three convertible debentures for
         an aggregate amount of $45,000, with simple interest accruing at the
         annual rate of 12%. The debentures are collateralized by substantially
         all of the company's assets. These debentures are in default as they
         were due by December 3, 2004. Quarterly interest was not paid and
         accordingly accrued interest of $5,694 is included in the financial
         statements.


                                       13
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 4 - Convertible Debentures (continued)

         The holders 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) $.005 or (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 750,000 shares of common stock of the Company at an exercise
         price per share equal to $0.01. The estimated fair value of the
         warrants was zero. The intrinsic value of the beneficial conversion
         feature of $45,000 was allocated to paid-in capital and was amortized
         over the life of the debenture on a straight-line basis. Amortization
         expense during 2004 was $42,349 and the costs were fully amortized as
         of December31, 2004.


         In February, 2004, the Company issued two convertible debentures for an
         aggregate amount of $45,000, with simple interest accruing at the
         annual rate of 12%. The debentures are collateralized by substantially
         all of the company's assets. These debentures are due in February,
         2005. Quarterly interest was not paid and accordingly accrued interest
         of $4,906 is included in the financial statements.

         The holders 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) $.005 or (2) 67% 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 intrinsic
         value of this beneficial conversion feature of $22,614 was allocated to
         paid-in capital and recorded as deferred financing cost and is being
         amortized on a straight line basis over the life of the note. $20,317
         of this amount was charged to interest expense during 2004.

         The debenture holders also received warrants to purchase 315,000 shares
         at an exercise price of $0.005 per share anytime before February 28,
         2009. The estimated fair value of the warrants was $504. The warrants
         and the debt issuance costs of $12,819 are being amortized on a
         straight-line basis over the term of the debentures. Unamortized costs
         as of December 31, 2004 amounted to $1,194.


         In May, 2004, the Company issued four convertible debentures for an
         aggregate amount of $250,000, with simple interest accruing at the
         annual rate of 12%. The debentures are collateralized by substantially
         all of the company's assets. These debentures are due in May 2005.
         Quarterly interest was not paid and accordingly accrued interest of
         $19,555 is included in the financial statements.

         The holders 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) $.005 or (2) 67% 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 intrinsic
         value of this beneficial conversion feature of $123,124 was allocated
         to paid-in capital and recorded as deferred financing cost and is being
         amortized on a straight line basis over the life of the note. $35,911
         of this amount was charged to interest expense during 2004


                                       14
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 4 - Convertible Debentures (continued)

         The debenture holders also received warrants to purchase 750,000 shares
         at an exercise price of $0.005 per share anytime before May 31, 2009.
         The estimated fair value of the warrants was $5,175. The warrants and
         the debt issuance costs of $55,244 are being amortized on a
         straight-line basis over the term of the debentures. Unamortized costs
         as of December 31, 2004 amounted to $40,708.


         In November, 2004, the Company issued four convertible debentures for
         an aggregate amount of $3,500,000, with simple interest accruing at the
         annual rate of 12%. The debentures are collateralized by substantially
         all of the company's assets. These debentures are due in November,
         2005. Quarterly interest was not paid and accordingly accrued interest
         of $36,151 is included in the financial statements.

         The holders 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) $.0005 or (2) 67% 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 intrinsic
         value of this beneficial conversion feature of $1,723,881 was allocated
         to paid-in capital and recorded as deferred financing cost and is being
         amortized on a straight line basis over the life of the note. $71,828
         of this amount was charged to interest expense during 2004

         The debenture holders also received warrants to purchase 10,500,000
         shares at an exercise price of $0.005 per share anytime before November
         30, 2009. The estimated fair value of the warrants was $5,250. The
         warrants and the debt issuance costs of $391,569 are being amortized on
         a straight-line basis over the term of the debentures. Unamortized
         costs as of December 31, 2004 amounted to $381,616.




Note 5 - Debt Discount and Deferred Financing Costs

         Debt discount and deferred financing costs consist of the following as
of December 31, 2004:

          Debt discounts                          $    1,869,169
          Deferred financing costs                       470,462
                                                  --------------
                                                       2,339,731
          Less accumulated amortization                 (175,622)
                                                  --------------
                                                  $    2,164,109
                                                  ==============


                                       15
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 6 - Income Taxes

         At December 31, 2004, the Company had federal net operating loss
         carryforwards of approximately $10,650,000 to offset future federal
         taxable income expiring in various years through 2024. 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 differences between income tax provisions in the financial
         statements and the tax expense (benefit) computed at the U.S. Federal
         Statutory rate are as follows:
<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                             ----------------------------
                                                                 2004            2003
                                                             ------------    ------------
         <S>                                                 <C>             <C>
         Tax provision at the U. S. Federal Statutory rate             34%             34%
         Valuation allowance                                          (34)%           (34)%
                                                             ------------    ------------
         Effective tax rates                                            -%              -
                                                             ============    ============
</TABLE>

         The tax effects of temporary differences that give rise to significant
         portions of deferred tax assets at December 31, 2004 follows:


            Deferred tax assets
              Net operating loss carryforwards         $      3,621,000
              Bad debt reserves                                       -
                                                       ----------------
            Deferred tax assets                               3,621,000
            Valuation allowance                              (3,621,000)
                                                       ----------------
               Net deferred tax asset                  $              -

         The deferred tax asset and offsetting valuation allowance, each
         decreased by $1,684,000 for the year ended December 31, 2004.


Note 7 - Commitments and Contingencies

         Operating Lease
              The Company leases office facilities and office equipment under a
              non-cancelable operating lease agreement that is automatically
              renewable every four months. The most recent renewal period
              expired on December 31, 2004.

              Rental expense under such operating lease was approximately
              $18,570 and $2,360 during the years ended December 31, 2004 and
              2003, respectively.


                                       16
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 7 - Commitments and Contingencies (continued)


         Employment Contract:
              During 2002, 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.




Note 8 - 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.


                                       17
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 8 - Stock Option and Other Plans (continued)


         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, 2004            33,000                 --                 --             33,000       $.10 - $.365
                                      ============       ============       ============       ============       ============
</TABLE>


      At December 31, 2004, the remaining contractual life of outstanding
      options was 5 years.

      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 would result in the same amounts reported.




Note 9 - 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, 2004.

      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 could 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.

      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, 2004.


                                       18
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 10 - Related Parties

      A Director of the Company provided consulting services during 2004 and
      2003 that amounted to $53,000 and $51,980, respectively. As of December
      31, 2004, the Company owes this Director $9,000 with no repayment terms.

      In 2004, The Company issued 15,000,000 shares of common stock to an
      Officer of the Company in repayment of $21,000 that was due the Officer
      for accrued auto allowance. The Company also issued 15,000,000 shares of
      common stock to a Director of the Company in repayment of $21,000 that was
      due to the Officer for accrued consulting fees.



Note 11 - Subsequent Events

      On March 1, 2005, the Company acquired substantially all of the assets of
      CGM Security Solutions, Inc., a Florida corporation ("CGM"), for (i)
      $1,500,000 in cash and (ii) a 2.86% promissory note (the "Note") in the
      principal amount of $3,500,000, subject to adjustment (the "Acquisition").
      The assets of CGM were acquired pursuant to an Asset Purchase Agreement
      among the Company and CGM dated as of February 25, 2005. In connection
      with the acquisition, the Company and CGM, each entered into an employment
      agreement with Erik Hoffer (the "Employment Agreement"). CGM is a
      manufacturer and distributor of barrier security seals, security tapes and
      related packaging security systems, protective security products for
      palletized cargo, physical security systems for tractors, trailers and
      containers.

      The principal amount of the Note is subject to adjustment based upon the
      average of (i) the gross revenues of CGM for the fiscal year ending
      December 31, 2007 and (ii) an independent valuation of CGM Sub based upon
      the consolidated audited financial statements of the Company and CGM Sub
      for the fiscal years ending December 31, 2006 and 2007. In addition, the
      Company has granted CGM a secondary security interest in substantially all
      of its assets and intellectual property.

      In connection with the Acquisition, the Company entered into a letter
      agreement with certain of its investors (the "Investors") which extended
      the maturity date of debt instruments issued on November 30, 2004 until
      March 1, 2008, and amended the conversion price of the debt that is held
      by the Investors to the lower of (i) $0.0005 or (ii) 40% of the average of
      the three lowest intraday trading prices for the Company's common stock
      during the 20 trading days before, but not including, the conversion date.
      In addition, the exercise price of the warrants held by the Investors was
      amended to $.001 per share.


                                       19
<PAGE>

                        Digital Descriptor Systems, Inc.
                        Notes to the Financial Statements

Note 12 - Restatement


      We have restated the Financial Statements for the fiscal year ended
      December 31, 2004 as a result of changes made to the amortization period
      for the intrinsic value of the beneficial conversion feature of notes
      payable.

      The intrinsic value of the beneficial conversion feature of the notes was
      previously recorded as interest expense of $1,869,179 during 2004. This
      amount has been reclassified to deferred financing costs and is being
      amortized over the life of the notes. $128,056 of this amount was then
      expensed in 2004.


      The impact of this adjustment on the financial statement as originally
      reported is summarized below:


<TABLE>
<CAPTION>
                                                                   December 31, 2004

                                                             As Reported        As Restated
                                                            --------------------------------

      <S>                                                   <C>                <C>
      Debt discount and deferred financing costs, net       $    422,946       $  2,164,109
      Total Assets                                             3,573,541          5,314,704
      Accumulated deficit                                    (23,062,433)       (21,321,280)
      Total Liabilities and Shareholders Impairment            3,573,541          5,314,704

      Interest and amortization of deferred debt costs         2,530,210            789,047
      Total Expenses                                           3,125,534          1,384,371
      Net Loss                                                (2,713,482)          (972,319)

      Net loss per
      share                                                         (.02)              (.01)
</TABLE>

                                       20