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

    |X| ANNUAL REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
            ACT OF 1934. For the fiscal year ended December 31, 2005.

|_| 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                                     23-2770048
         (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 $3,335,631 for the fiscal year ended December 31,
2005.

As of April 3, 2006 5,454,943,898 shares of the issuer's Common Stock were
outstanding. The aggregate market value of the voting stock held by
non-affiliates on April 3, 2006 was approximately $1,909,989 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|

                                     PART I

10KSB December 31, 2005 Restatement

The company is filing this amendment to restate the year ended December 31, 2005
financial statements. These changes have been made to the financial statements.
The company is increasing its net loss by $1,639,849. The company originally did
not amortize the debt discount correctly which has now been corrected. This
adjustment was for $1,285,828. Additionally the company corrected a misposting
in its books of $354,021 from change in accrued interest to interest expense.
These errors were found through the company's internal controls and procedures.

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.

<PAGE>

ITEM 1. Description of Business

Our Business

During 2005 the Company acquired CGM Security Solutions, Inc. as a wholly owned
subsidiary and changed it name to CGM Applied Security Technologies, Inc. In
conjunction with the acquisition the Company has changed its primary focus from
the law enforcement market to the security market in general as it believes that
the potential for revenue is much greater.

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 Trade Secret protection on its Secure Trac tape, super seals water gum
tape, and patent protection on the Button Memory Seal and Sentry Sensor. It also
has exclusive rights on all NAVATECH products and seals, and owns the rights to
the patented Topp Clip pallet security device. 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

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 signals 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.

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.

<PAGE>

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 three direct salespeople, two independent representatives and 5
distributors for domestic sales and over 12 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
International Cargo Security Council (ICSC) and a variety of legislators and key
accounts targeted by an Executive level PR campaign

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.

No other company competes 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 client's
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 a "needs based- threat-specific"
assessment and determines final product design 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 20 full time employees, of whom 15 are employed by CGM.

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.

<PAGE>

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.

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.

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, and 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.

<PAGE>

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

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.

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, which potentially over 1,000
agencies. DDSI believes with addition of the CGM subsidiary that it can now
capitalize and generate increased revenues from its existing customers by
offering them the products of CGM, many of which can be used in the law
enforcement environment...

Seek Acquisitions and Alliances

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, 2005, and 2004, the
percentage of revenues that DDSI has received from domestic customers has been
approximately 99.9%. Foreign sales for 2005 and 2004 were $4,220 and $4,927,
respectively or an aggregate for these years of approximately $9,147.

Competition

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

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

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

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

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.

<PAGE>

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 $106,505 and $21,759, respectively for the years ended December 31,
2005 and 2004 on research and development. 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 Compu-Capture
Product...

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
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 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.

ITEM 2. Description of Property

The Company operates at 2150 Highway 35, Sea Girt, New Jersey on a three-month
lease which ends in August 2006. 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 $184,706.76. The Company intends to negotiate a
settlement. The liability, net of the security deposit, is included in accrued
expenses at December 31, 2005.

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

None.

                                     PART II

ITEM 5. Market for Common Equity and Related Shareholder Matters

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 3, 2006 there were approximately 2,800
shareholders of record.

<PAGE>

                                                     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
            Second Quarter                       $0.0011     $0.0005
            Third Quarter                        $0.0036     $0.0001
            Fourth Quarter                       $0.0009     $0.0001

As of April 3, 2006, there were 5,454,943,898 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.

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.

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 28,500,000 shares of common stock.

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 14,682,540 shares of common stock.

During April 2005, $1,000 of the convertible debentures issued in September
2001, were converted into 15,000,000 shares of common stock.

During May 2005, $1,000 of the convertible debentures issued in September 2001
were converted into 15,000,000 of common stock.

During May 2005, $3,560 of the convertible debentures issued in September 2001
were converted in 17,800,000 shares of common stock.

During June 2005 $4,600 of the convertible debentures issued in September 2001
were converted into 23,000,000 shares of common stock

<PAGE>

During June 2005 $3,500 of the convertible debentures issued in September 2001
were converted into 17,500,000 shares of common stock.

During June 2005 the company issued 50,000,000 shares of stock for services
rendered by New Equities Publishing for Public Relations.

During July 2005 $10,163 of the convertible debentures issued in September 2001
were converted into 48,800,000 shares of common stock

During July 2005 $11,871 of the convertible debentures issued in September 2001
were converted into 53,039,211 shares of common stock.

During August 2005 $29,099.80 of the convertible debentures issued in September
2001 were converted into 221,570,000 shares of common stock.

During August 2005 $23,106 of the convertible debentures issued in September
2001 were converted into 178,782,781 shares of common stock.

During September 2005 $43,586.60 of the convertible debentures issued in
September 2001 were converted into 323,760,000 shares of common stock.

During September 2005 $20, 254 of the convertible debentures issued in September
2001 were converted into 299,410,794 shares of common stock.

During October 2005 $46,825 of convertible debentures issued in September 201
were converted into 470,000,000 shares of common stock.

During October 2005, $13,172.28 of convertible debentures issued in September
2001 were converted into 411,587,075 shares of common stock.

During November 2005, $14,260 of convertible debentures issued in September 2001
were converted into 401,500,000 shares of common stock

During November 2005 $16,388.33 of convertible debentures issued in September
2001 were converted into 401,623,645 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.

<PAGE>

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.

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 increase the market penetration of the
product line of its CGM subsidiary as the Company believes this is the area
where the greatest revenue growth exists. o Additionally, DDSI plans to execute
an acquisition strategy based upon fund availability.

DDSI's long-term objective is as follows:

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

<PAGE>

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 Concentrate on increasing the sales of the CGM product line.

o Derive funds through investigating business alliances with other companies.

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

Results of Operations

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenues for the year ended December 31, 2005 of $3,335,631 increased $2,923,579
or 710% from the year ended December 30, 2004. DDSI generates its revenues
through software licenses, hardware, post customer support arrangements and
other services. The increase in DDSI's revenue is attributed to the purchase of
CGM Applied Security Technology, Inc in March 2005. During 2005, Maintenance
revenues increased $3,410 or 1% from the year ended December 31, 2004

Cost of revenue for the year ended December 31, 2005 was $1,108,904 an increase
of $1,064,122or 2376% from the prior year. The increase was attributable to the
purchase of CGM Applied Security Technology, Inc in March 2005. Cost of revenue
sold as a percentage of revenue for the year ended December 31, 2005 was 33% of
total revenues, versus 10% the year earlier.

Operating expenses increased $1,952,478 or 395% during the year ended December
31, 2005 versus the year ended December 31, 2004. This increase was mainly
attributable to the purchase of CGM Applied Security Technology, Inc in March
2005.

General and Administrative expenses for the year ending December 31, 2005 were
$2,208,216versus $407,642 for the prior year for an increase of $1,800,574 or
442%. This increase was mainly attributable to the purchase of CGM Applied
Security Technology, Inc in March 2005.

Sales and Marketing expenses increased $67,158 for the year ended December 31,
2005 from $65,014 or a 103% increase. This increase was mainly attributable to
an increase in professional services of $60,000 designated to investor
relations.

Research and development for the year ended December 31, 2005 was $106,505
compared to $21,759 for the same period prior year for an increase of $84,746 or
a 390% increase, which was due in part to the purchase of CGM Applied Security
Technology, Inc in March 2005.

Debt discount amortization expense was increased $1,285,828 from $428,566 to
$1,714,394 because of an error in the calculation. This error was found and
corrected through our internal controls.

The net (loss) for DDSI increased 95% or $(1,926,689) for the year ended
December 31, 2005 to $(3,949,021) from $(2,022,332) for the year ended December
31, 2004. This was primarily due to the increase in operating expenses.

Net cash (used in) operating activities for the year ended December 31, 2005 and
2004 was ($623,204) and ($296,038), respectively. The increase in cash (used in)
operating activities in the year ended December 31, 2005 of ($327,166) was
primarily due to the increase in operating expenses due in part to the purchase
of CGM Applied Security Technology, Inc. in March 2005.

Net cash provided by (used in) financing activities was $(531,691) and
$3,324,517 for the year ended December 31, 2005 and 2004, respectively,
reflecting a (decrease) of $(3,856,208). This decrease was primarily due to
decrease in proceeds from issuance of convertible debenture.

<PAGE>

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, 2005, DDSI had assets of $6,212,339 compared to $3,566,848 on
December 31, 2004 an increase of $2,645,491 and shareholder deficiency of
$(10,346,477) on December 31, 2005 compared to shareholder deficiency of
$(7,234,362) on December 31, 2004, an increase of ($3,112,115). This increase in
shareholder deficiency for the year ended December 31, 2005 resulted from the
net loss for the year ended December 31, 2005.

As of December 31, 2005, DDSI had decrease in working capital of $(8,559,687), a
change from negative working capital of $(6,100,203) at December 31, 2004. The
decrease in working capital was primarily a result of to the purchase of CGM
Applied Security Technology, Inc. in March 2005.

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

(a) On January 13, 2006, Digital Descriptor Systems, Inc. ("Registrant") was
notified by Rosenberg Rich Baker Berman & Co. ("Rosenberg") that it was
resigning as Registrant's certifying accountant, effective immediately.

During the two fiscal years ended December 31, 2004 and 2003, and any subsequent
period through January 13, 2006, (i) there were no disagreements between
Registrant and Rosenberg on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of Rosenberg would have caused Rosenberg to make
reference to the matter in its reports on Registrant's financial statements, and
(ii) Rosenberg's reports on Registrant's financial statements did not contain an
adverse opinion or disclaimer of opinion, and was not modified as to
uncertainty, audit scope or accounting principles. During the two fiscal years
ended December 31, 2004 and 2003 and through January 13, 2006, there were no
reportable events as the term is described in Item 304(a)(1)(iv) of Regulation
S-B.

(b) On January 13, 2006, Registrant engaged the firm of Bagell Josephs Levine,
LLC. to serve as its independent registered public accountants for the fiscal
year ending December 2005.

<PAGE>

During the two fiscal years ended December 31, 2005 and 2004, and through
January 13, 2006, Registrant has not consulted with Bagell, Josephs & Company
LLC. regarding either:

1. The application of accounting principles to any specific transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
Registrants' financial statements, and neither a written report was provided to
Bagell, Josephs, Levine & Company LLC. nor oral advice was provided that Bagell,
Josephs, Levine & Company LLC. concluded was an important factor considered by
Registrant in reaching a decision as to the accounting, auditing or financial
reporting issue; or

2. Any matter that was either subject of disagreement or event, as defined in
Item 304(a)(1)(iv) of Regulation S-B and the related instruction to Item 304 of
Regulation S-B, or a reportable event, as that term is explained in Item
304(a)(1)(iv) of Regulation S-B.

On January 19, 2006, Registrant provided Rosenberg with a copy of the
disclosures it is making in response to Item 4.01 on this Form 8-K, and has
requested that Rosenberg furnish it with a letter addressed to the Securities
and Exchange Commission stating whether it agrees with the above statements.

ITEM 8A. Control and Procedures

Evaluation of Disclosure Controls and Procedures

As of December 31, 2005, 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 were effective in ensuring that information required to be disclosed
by us in our periodic reports is recorded, processed, summarized and reported,
within the time periods specified for each report and that such information is
accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.

Changes in Internal Controls

There have been significant changes in our internal controls that could
significantly affect those controls subsequent to the date of their last
valuation. Specifically, we have hired a new controller and implemented a new
accounting system to integrate our subsidiary's financials. We believe that
these steps have enhanced our financial disclosures.

                                    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         51      Director, Chief Executive Officer, President
Michael Pellegrino     57      Senior Vice President, CFO and Director
Robert Gowell          38      Director
Vincent Moreno         63      Director
Erik Hoffer            59      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.

<PAGE>

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.

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.

<PAGE>

<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  sation($)   Award($)         Sar (#)    Payouts($)    sation ($)
<S>                <C>    <C>           <C>     <C>        <C>              <C>          <C>             <C>
Anthony Shupin     2005   $198,539      0       0          0                0            0               0
President & CEO    2004   $108,000      0       0          0                0            0               0
                   2003   $108,000      0       0          0                0            0               0
                   2002          0      0       0          0                0            0               0

Michael J          2005   $148,077      0       0          0                0            0               0
Pellegrino*        2004   $ 52,000      0       0          0                0            0               0
                   2003   $115,000      0       0          0                0            0               0
                   2002   $115,000      0       0          0                0            0               0
</TABLE>

*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.

Options/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                     Number of         % of Total
                                     Securities        Options/SARS
                                     Underlying        Granted to
                                     Options/SARS      Employees in    Exercise or Base
Name                                 Granted           Fiscal Year     Price ($/Sh)         Expiration Date
<S>                                     <C>             <C>            <C>                  <C>
Michael J. Pellegrino, CFO              0               N/A            N/A                  N/A
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 may be mutually agreed with the Board of
Directors. DDSI shall also furnish Mr. Pellegrino with monthly car allowance of
Six Hundred Dollars ($600.00) and related car expenses.

<PAGE>

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
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.

<PAGE>

<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                .0027%
2150 Hwy 35, Suite 250              President
Sea Girt, NJ 08750

Michael Pellegrino                  Senior Vice President,     15,335,000                .0028%
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)             .0055%
</TABLE>

* less than 1%

(1) Of the total Officers and Director's shares, 33,000 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

None

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)

<PAGE>

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)

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)

<PAGE>

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)

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

<PAGE>

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 2005 and 2004
were $83,012 and $41,480, 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 2005 and 2004 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.

                                   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:

<PAGE>

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.

Signature                        Title                               Date
---------                        -----                               ----
By:   /s/ Anthony Shupin         Chairman, President, and Chief,
      ------------------         Executive Officer
      Anthony Shupin

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

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

By:   /s/ Vincent Moreno         Director
      ------------------
         Vincent Moreno

By:                              Director
      ------------------
      Robert Gowell

<PAGE>

Digital Descriptor Systems, Inc. and Subsidiary Contents to Financial Statements
December 31, 2005

                                                                         Page(s)

Report of Independent Registered Public Accounting Firm - 2005                 1

Report of Independent Registered Public Accounting Firm -2004                  2

Audited Consolidated Financial Statements:

   Balance Sheet as of December 31, 2005 As restated                         3-4

   Statements of Operations for the Years Ended December 31, 2005
     and 2004, restated                                                        5

   Statements of Shareholders' Impairment for the Years Ended
     December 31, 2005 and 2004, as restated                                   6

   Statements of Cash Flows for the Years Ended December 31, 2005
     and 2004, restated                                                      7-8

Notes to Financial Statements, restated                                     9-19

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Digital Descriptor Systems, Inc. and Subsidiary
Sea Girt, NJ

We  have  audited  the  accompanying   consolidated  balance  sheet  of  Digital
Descriptor Systems,  Inc. and Subsidiary as of December 31, 2005 and the related
consolidated statements of operations,  changes in shareholders' impairment, and
cash flows for the year then ended. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We  conducted  our audit in  accordance  with  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
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We  believe  that our audit  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Digital Descriptor
Systems,  Inc. and  Subsidiary  as of December 31, 2005,  and the results of its
operations  and its cash  flows  for the year  then  ended  in  conformity  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements for the year ended December
31, 2005 have been  prepared  assuming that the Company will continue as a going
concern. As discussed in Note 12 to the consolidated  financial statements,  the
Company sustained operating losses and has had recurring  accumulated  deficits,
which raises substantial doubt about its ability to continue as a going concern.
Management's operating and financing plans with regard to these matters are also
discussed in Note 12. The consolidated  financial  statements do not include any
adjustments that might result from the outcome of these uncertainties.

The company has restated its  financial  statements as explained in note 14. The
company is increasing its (net loss) by ($1,639,849). The company originally did
not amortize the debt  discount  correctly  which has now been  corrected.  This
adjustment  was for  $1,285,828.  Additionally  the company  corrected  interest
expense for the year ended December 31, 2005 in the amount of $354,021 which was
incorrectly applied against accrued interest payable.


/s/ Bagell, Josephs, Levine & Company LLC
Bagell, Josephs, Levine & Company LLC
Certified Public Accountants
Gibbsboro, New Jersey
April 13, 2006, except for Note 14, 15 and 16 which is September 12, 2006

      MEMBER OF:  AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                  NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
                  PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                  FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

<PAGE>

             Report of Independent Registered Public Accounting Firm

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

We have audited the related statements of operations, shareholders' impairment
and cash flows for the year ended December 31, 2004. 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.

As more fully  described in Notes 12 and 13,  subsequent  to the issuance of the
Company's  20054  financial  statements and our reports there on dated March 15,
2005 and July 15, 2005, the amortizations  period and the  classification of the
debt  discounts  associated  with  the  beneficial  conversion  features  of our
convertible debentures have been changed. In our original report we expressed an
unqualified  opinion on the 2004  financial  statements  and our  opinion on the
revised statements, as expressed here in, remains the same.

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 13, dated April 10, 2006

<PAGE>

Digital  Descriptor  Systems,  Inc. and  Subsidiary  Consolidated  Balance Sheet
December 31, 2005

                 Digital Descriptor Systems, Inc. and Subsidiary
                           Consolidated Balance Sheet
                                December 31, 2005
                                   As Restated

<TABLE>
<CAPTION>
Current Assets                                                            As Restated
<S>                                                                      <C>
   Cash                                                                  $    295,811
   Accounts receivable, less allowance for uncollectible accounts
     of $53,084                                                               611,423
   Inventory                                                                  414,151
   Prepaid Expenses                                                             4,266
                                                                         ------------

       Total Current Assets                                                 1,325,651

Property and Equipment, net                                                   382,049
                                                                         ------------

Other Assets
   Security deposit                                                             1,730
   Goodwill                                                                 4,054,998
   Intangible assets                                                          183,473
   Deferred financing costs, net                                              264,438
                                                                         ------------

       Total Other Assets                                                   4,504,639

       Total Assets                                                         6,212,339
                                                                         ============

Current Liabilities
   Accounts payable                                                           224,997
   Accrued expenses                                                           342,923
   Accrued Payroll and related expenses                                        38,269
   Accrued interest                                                         1,168,429
   Deferred income                                                            205,463
   Convertible debentures, net of debt discounts                            2,881,888
   Derivative Liability                                                     6,559,068
                                                                         ------------

       Total Current Liabilities                                           11,421,037

Long Term Liabilities
   Note Payable                                                             3,500,000
   Convertible debentures, net of debt discounts                            1,637,779
                                                                         ------------

       Total Long Term Liabilities                                          5,137,779

          Total Liabilities                                                16,558,816

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 -  3,267,568,040                         3,267,568
   Additional paid-in capital                                              13,530,761
   Accumulated deficit                                                    (27,144,806)
                                                                         ------------

       Total Shareholders' Impairment                                     (10,346,477)
                                                                         ------------

       Total Liabilities and Shareholders' Impairment                    $  6,212,339
                                                                         ============
</TABLE>

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

<PAGE>

                 Digital Descriptor Systems, Inc. and Subsidiary
                      Consolidated Statements of Operations
                 For the Years Ended December 31, 2005 and 2004
                                   As Restated

<TABLE>
<CAPTION>
                                                           --------------------------------
                                                                2005               2004
                                                                              -------------
                                                            As restated
                                                           --------------------------------
<S>                                                        <C>                  <C>
Revenues
   Software                                                $      30,326             43,839
   Hardware                                                        5,798            112,272
   Maintenance                                                   256,771            253,361
   CGM-AST Revenue/other                                       3,042,736              2,580
                                                                              -------------

Total revenue                                                  3,335,631            412,052
   Cost of revenues                                            1,108,904             44,782
                                                           -------------      -------------

Gross Profit                                                   2,226,727            367,270

Operating Expenses
   General and administrative                                  2,208,216            407,642
   Sales and marketing                                           132,172             65,014
   Research and development                                      106,505             21,759
                                                           --------------------------------

Total Operating Expenses                                       2,446,893            494,415

Other Income and (Expenses)
   Interest                                                   (1,826,962)          (326,853)
   Amortization of deferred financing cost                      (151,815)          (354,870)
   Amortization of debt discount                              (1,714,394)          (730,830)
   Change in fair market value of derivative liability           138,672           (426,507)
   Other income and expenses, net                               (174,356)           (56,127)

                                                                              -------------
Total Other Income and (Expenses)                             (3,728,855         (1,895,187)
                                                           --------------------------------

     Net Loss                                              $  (3,949,021)        (2,022,332)
                                                           ================================

     Net Loss Per Common Share (Basic and Diluted)         $       (0.00)             (0.01)
                                                           ================================

Weighted Average Number of Common Shares Outstanding
     Basic and Diluted                                       756,472,931        167,554,639
                                                           ================================
</TABLE>

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

<PAGE>

                 Digital Descriptor Systems, Inc. and Subsidiary
               Consolidated Statements of Shareholders' Impairment
                 For the Years Ended December 31, 2005 and 2004
                                   As Restated

<TABLE>
<CAPTION>
                                                             Common Stock            Additional
                                                    ------------------------------     Paid in       Accumulated    Shareholders'
                                                        Shares           Amount        Capital         Deficit       Impairment
                                                    -------------    -------------  -------------   -------------   -------------
<S>                                                 <C>              <C>            <C>             <C>             <C>
Balance at December 31, 2003                          115,958,423    $     115,958  $  15,780,762   $ (21,173,453)  $  (5,276,733)

   Issuance of common stock for accrued services -     30,000,000           30,000         12,000              --          42,000
     related party

   Issuance of common stock in payment of damages
     related to convertible debentures                 29,757,936           29,758        (17,555)             --          12,203

   Conversion of accrued interest related to
     convertible debentures to common stock            35,000,000           35,000        (24,500)             --          10,500

   Net Loss                                                    --               --             --      (2,022,332)     (2,022,332)
                                                    -------------    -------------  -------------   -------------   -------------

Balance at December 31, 2004                          210,716,359    $     210,716  $  15,750,707   $ (23,195,785)  $  (7,234,362)

   Issuance of common stock for  services -            50,000,000           50,000        (20,000)             --          30,000

   Issuance of common stock in payment of damages
     related to convertible debentures              1,422,224,681        1,422,225     (1,190,151)                        232,074

   Conversion of accrued interest related to
     convertible debentures to common stock         1,584,627,000        1,584,627     (1,544,232)                         40,395

Benificial interest recognized on common stock
  issuances                                                                               534,437                         534,437

   Net Loss, As originally reported                                                                    (2,309,172)     (2,309,172)

                                                    -------------    -------------  -------------   -------------   -------------
Balance at December 31, 2005, as originally
  reported                                          3,267,568,040    $   3,267,568  $  13,530,761   $ (25,504,957)  $  (8,706,628)
                                                    =============    =============  =============   =============   =============

Adjustment, increase in net loss                                                                       (1,639,849)     (1,639,849)
                                                                                                    -------------   -------------

Balance at December 31, 2005, as restated           3,267,568,040     $  3,267,568  $  13,530,761   $ (27,144,806)    (10,346,477)
</TABLE>

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

<PAGE>

                 Digital Descriptor Systems, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
                 For the Years Ended December 31, 2005 and 2004
                                   As Restated

<TABLE>
<CAPTION>
                                                                          2005             2004
                                                                       As Restated
<S>                                                                    <C>             <C>
Cash Flows from Operating Activities
   Net loss                                                            $(3,949,021)    $(2,022,332)
   Adjustments to reconcile net loss to net cash (used in)
     operating activities
       Depreciation and amortization                                       174,356              --
       Common stock issued in payment of damages                                          12,20301
       Common stock issued in payment of services                           30,000              --
       Amortization of deferred financing costs                            151,815         354,870
       Amortization of debt discount                                     1,714,394         730,830
       Amortization of Beneficial Interest                                 534,437              --
       Change in Fair Market value of derivatives                         (138,672)        426,507
       Bad debt expense                                                     15,000          21,200

   Changes in operating assets and liabilities
       Accounts receivable                                                (557,894)         46,600
       Inventory                                                           (79,398)             --
       Prepaid expenses, deposits and other assets                          (4,266)         63,600
       Accounts payable                                                     87,415         (77,189)
       Accrued expenses                                                     33,149           3,745
       Accrued interest                                                  1,349,471         337,353
       Deferred Income                                                      16,010        (193,425)

                Net Cash (used in) Operating Activities                $  (623,204)    $  (296,038)

Cash Flows from Investing Activities
       Purchase of equipment                                              (129,630)             --
       Acquisition of Business Assets                                   (1,500,000)             --

          Net Cash (used in) Investing Activities                      $(1,629,630)    $        --

Cash Flows from Financing Activities
    Proceeds from the issuance of convertible debentures, net costs             --       3,324,307
    Due to officers and directors                                               --             210
    Payment of convertible debentures                                     (531,691)             --
                                                                                       -----------

Net Cash provided by (used in) Financing Activities                    $  (531,691)    $ 3,324,517

Net Increase (Decrease) in Cash                                         (2,784,525)      3,028,479
Cash at Beginning of Year                                                3,080,336          51,857
                                                                                       -----------

Cash at End of Year                                                    $   295,811     $ 3,080,336
                                                                       ===========================
</TABLE>

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

<PAGE>

                 Digital Descriptor Systems, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
                 For the Years Ended December 31, 2005 and 2004
                                   As Restated

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                  ------------------------
                                                                     2005          2004
                                                                  ----------    ----------
<S>                                                               <C>           <C>
Supplemental Disclosure of Cash Flow Information:

   Cash paid during the year for

     Interest                                                     $       --    $       --
                                                                  ----------    ----------

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

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            $   97,402    $1,880,110
                                                                  ----------    ----------

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

    Conversion of debentures into common stock                    $       --    $       --
                                                                  ----------    ----------

    Conversion of damages related to convertible
    debentures into common stock                                  $       --    $   12,203
                                                                  ----------    ----------

    Accrued Interest converted into debt                          $  643,340    $       --
                                                                  ----------    ----------

    Conversion of accrued interest                                $  251,915    $   10,500
                                                                  ----------    ----------
</TABLE>

<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.

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.

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 $205,463 and $189,453, respectively, for
the years ended December 31, 2005 and 2004. 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
$106,505 and $21,759, respectively for the years ended December 31, 2005 and
2004.

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.

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. Accounts receivable was $611,423 in 2005 and
$68,529 in 2004.

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. The
allowance for doubtful accounts was $53,084 in 2005 and was $38,084 in 2004.

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.

<PAGE>

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.

The Company reviews the carrying value of intangibles and other long-lived
assets for impairment at least annually or whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of long-lived assets is measured by comparison of
its carrying amount to the undiscounted cash flows that the asset or asset group
is expected to generate. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the property, if any, exceeds its fair market value. Goodwill
represents the excess of the cost of the Company's acquired subsidiaries or
assets over the fair value of their net assets at the date of acquisition. Under
Statement of Financial Accounting Standards ("SFAS") No. 142, goodwill is no
longer subject to amortization over its estimated useful life; rather, goodwill
is subject to at least an annual assessment for impairment applying a fair-value
based test.

Note 4 - Convertible Debentures

Based on the guidance in SFAS133 and EITF00-19, the Company concluded that the
conversion features of it convertible debentures were required to be accounted
for as derivatives. The imbedded derivative feature was bi-furcated and the fair
market value was determined using a convertible bond valuation model. The
derivative instruments are recorded at fair market value with changes in value
recognized during the period of change. For further discussion, see footnote #12
regarding restatement.

During May 2001, the Company issued three convertible notes for an aggregate
amount of $20,000. 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.

We recorded a derivative liability related to this convertible debenture. The
initial fair market value of the conversion option in the amount of $4,992 was
recorded as a debt discount and is being amortized over the stated maturities of
the notes using the effective interest method. The fair market value of the
conversion feature is also shown as a derivative liability on the company's
balance sheet and is being adjusted to fair market value each reporting period
with the change being reported as "other income and expenses" in the statement
of operations.

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.

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 was 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.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $59,407 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

<PAGE>

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 was 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 addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $388,800 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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.

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.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $59,430 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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. 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 addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $79,190 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

<PAGE>

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.

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. Financing
costs incurred of $56,750 were fully amortized at December 31, 2003.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $92,225 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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. 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 addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $47,850 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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. 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.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $68,250 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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.

<PAGE>

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. Amortization expense during 2004 was $147,469 and the costs were fully
amortized as of December31, 2004.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $326,733 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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. .
Amortization expense during 2004 was $47,469 and the costs were fully amortized
as of December31, 2004.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $72,572 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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.

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. .
Amortization expense during 2004 was $42,349 and the costs were fully amortized
as of December31, 2004.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $72,527 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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. In addition 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, which was
also recorded as a debt discount. The total debt discount is being amortized on
a straight line basis which approximates the effective interest method, over the
life of the note. $20,317 of this amount was charged to interest expense during
2004. Additional costs of $12,819 incurred with the issuance of the convertible
debentures were recorded as deferred financing cost and are being amortized on a
straight-line basis, which approximates the effective interest method, over the
term of the debentures. Unamortized costs as of December 31, 2004 amounted to
$1,068.

<PAGE>

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $172,265 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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. In addition 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, which was
also recorded as a debt discount. The total debt discount is being amortized on
a straight line basis which approximates the effective interest method, over the
life of the note. $35,911 of this amount was charged to interest expense during
2004.

Additional costs of $55,244 incurred with the issuance of the convertible
debentures were recorded as deferred financing cost and are being amortized on a
straight-line basis, which approximates the effective interest method, over the
term of the debentures. Unamortized costs as of December 31, 2004 amounted to
$36,829.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $327,750 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

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.. In addition 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,
which was also recorded as a debt discount. The total debt discount is being
amortized on a straight line basis which approximates the effective interest
method, over the life of the note.. $71,828 of this amount was charged to
interest expense during 2004

Additional costs of $391,569 with the issuance of the convertible debentures
were recorded as deferred financing cost and are being amortized on a
straight-line basis which approximates the effective interest method, over the
term of the debentures. Unamortized costs as of December 31, 2004 amounted to
$376,509.

In addition, we recorded a derivative liability related to this convertible
debenture. The initial fair market value of the conversion option in the amount
of $2,519,300 was recorded as a debt discount and is being amortized over the
stated maturities of the notes using the effective interest method. The fair
market value of the conversion feature is also shown as a derivative liability
on the company's balance sheet and is being adjusted to fair market value each
reporting period with the change being reported as "other income and expenses"
in the statement of operations.

In 2005 the company converted $643,340 of accrued interest into convertible
debentures. $97,402 was recorded as debt discount. In March 2005, $513,431 was
repaid on convertible debentures.

<PAGE>

Note 5 - Deferred Financing Costs

Deferred financing cost represent cost incurred in connection with the issuance
of the convertible debentures. Deferred financing costs are being amortized over
the life of the convertible debentures on the straight-line basis, which
approximates the effective interest method. In 2005 amortization expense of
$151,815 was recognized and the net financing cost at December 31, 2005 was
$264,438 and respectively at December 31, 2004 amortization expense of $354,870
was recognized and the net financing cost December 31, 2004 was $416,253.

Note 6 - Income Taxes

At December 31, 2005 , the Company had federal net operating loss carryforwards
of approximately $27,144,806 to offset future federal taxable income expiring in
various years through 2025. 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:

                                                         Year Ended December 31,
                                                         -----------------------
                                                             2005       2004
                                                            -----      -----
      Tax provision at the U. S. Federal Statutory rate        34%        34%
      Valuation allowance                                     (34)%      (34)%
                                                            -----      -----
      Effective tax rates                                      --%        --
                                                            =====      =====

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets at December 31, 2005 follows:

      Deferred tax asset
      Net approximate operating loss carryforwards            $ 5,748,727
         Bad debt reserves                                             --
                                                              -----------
      Deferred tax assets                                       5,748,727
      Valuation allowance                                      (5,748,727)
                                                              -----------
         Net deferred tax asset                               $        --

Note 7 - Commitments and Contingencies

Operating Lease

The Company rents office facilities under a rental agreement that is
automatically renewable every four months. The most recent renewal period
expired on December 31, 2005.

<PAGE>

Rental expense under such operating lease was approximately $32,790 and $18,570
during the years ended December 31, 2005 and 2004, respectively.

CGM leases two facilities, one in Somerset NJ and the other in Staten Island New
York under non-cancelable lease agreements that end in December 2007 and
December 2008 respectively.

Rental expense under such operating leases was approximately $81,595 and $81,595
during the years ended December 31, 2005 and 2004, respectively.

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 may be mutually agreed with the Board of
Directors. DDSI shall also furnish Mr. Pellegrino with monthly car allowance of
Six Hundred Dollars ($600.00) 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.

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.

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
                                      ============       ============       ============       ============       ============

Outstanding at December 31, 2005            33,000                                                   33,000       $.10 -  .365
                                       ===========       ============       ============       ============       ============
</TABLE>

<PAGE>

At December 31, 2005, the remaining contractual life of outstanding options was
5 years. This is Ok we are going to cancel all options anyway

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

There were two 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, 2005 and 2004.

Note 10 - Related Parties

A Director of the Company provided consulting services during 2005 and 2004 that
amounted to $4,000 and $53,000, respectively. As of December 31, 2005, the
Company owes this Director $0.

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 - Purchase of CGM Applied Security Technology, Inc.

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.

<PAGE>

Note 12 - Going Concern

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going concern. The
Company has sustained operating losses and has accumulated large deficits for
the years ended December 31, 2005 and 2004. These factors raise substantial
doubt about its ability to continue as a going concern.

Management has formulated and is in the process of implementing its business
plan intended to develop steady revenues and income, as well as reducing
expenses in the areas of operations. This plan includes the following management
objectives:

      o     Soliciting new customers in the U.S.

      o     Expanding sales in the international market

      o     Expanding sales through E-commerce

      o     Adding new distributor both in the U.S and internationally

      o     The introduction of new products into the market

      o     Seeking out possible merger candidates

Presently, the Company cannot ascertain the eventual success of management's
plan with any degree of certainty. The accompanying consolidated financial
statements do not include any adjustments that might result from the eventual
outcome of the risks and uncertainties described above.

Note 13 - Restatement , 2004 and 2003

We have restated the Financial Statements for the fiscal year ended December 31,
2004 and 2003 and for the years then ended. Based upon the guidance in SFAS133
and EITF00-19, the Company concluded that the conversion features of it
convertible debentures were required to be accounted for as derivatives. The
imbedded derivative feature was bi-furcated and the fair market value was
determined using a convertible bond valuation model. The derivative instruments
are recorded at fair market value with changes in value recognized during the
period of change.

The impact on the financial statements is summarized below.

<TABLE>
<CAPTION>
                                                                December 31, 2003

                                                           As Reported      As Restated
                                                          -----------------------------
<S>                                                       <C>              <C>
      Debt discount and deferred financing costs, net     $    300,430     $    300,430
      Total Assets                                             553,946          553,946
      Accumulated deficit                                  (20,348,961)     (21,173,453)
      Total Liabilities and Shareholders Impairment            553,946          553,946

      Interest and amortization of deferred debt costs         911,929        2,770,123
      Total Expenses                                         1,957,507        4,686,884
      Net Loss                                              (1,306,857)      (3,165,051)

      Net loss per share                                          (.01)            (.03)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                December 31, 2004

                                                           As Reported      As Restated
                                                          -----------------------------
<S>                                                       <C>              <C>
      Debt discount and deferred financing costs, net     $    422,946          416,253
      Total Assets                                           3,573,541        3,566,848
      Accumulated deficit                                  (23,062,433)     (23,195,785)
      Total Liabilities and Shareholders Impairment          3,573,541        3,566,848

      Interest and amortization of deferred debt costs       2,530,210        1,839,060
      Total Expenses                                         3,125,534        1,895,187
      Net Loss                                              (2,713,482)      (2,022,332)

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

Note 14 - Restatement 2005

The company is filing this amendment to restate the year ended December 31, 2005
financial statements. These changes have been made to the financial statements.
The company is increasing its (net loss) by ($1,639,849). The company originally
did not amortize the debt discount correctly which has now been corrected. This
adjustment was for $1,285,828. Additionally the company corrected a misposting
in its books of $354,021 from change in accrued interest to interest expense.
These errors were found through the company's internal controls and procedures.

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

Total Assets                                          6,212,339       6,212,339
Accrued Interest                                        814,408       1,168,429
Convertible debenture, net of debt discount           1,727,210       2,881,888
Total Current Liabilites                              9,912,338      11,421.037
Long Term
Convertible debenture, net of debt discount           1,506,629       1,637,779
Total Liabilities                                    14,918,967      16,558,816

Accumulated deficit                                 (25,504,957)    (27,144,806)
Total Shareholders Impairment                        (8,706,628)    (10,346,477)
Total Liabilities and Shareholders Impairment         6,212,339       6,212,339

Interest                                             (1,472,941)     (1,826,962)
Amortization of debt discount                          (428,566)     (1,714,394)
Total Other Income and (Expenses)                    (2,089,006)     (3,728,855)
Net Loss                                             (2,309,172)     (3,949,021)

Net loss per share                                         (.00)           (.00)

Note 15 - Restatement 2004 -Year-End and Quarterly

We have restated the Financial Statements for the fiscal year ended December 31,
2004 and each of the 2004 quarter as a result of changes made to the
amortization period for the intrinsic value of the beneficial conversion feature
of notes payable, as discussed further in Note 4. Also, Note 4 has been expanded
to more fully describe the terms and conditions of these convertible debentures.

<PAGE>

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 as a debt discount 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          416,253
      Total Assets                                           3,573,541        3,566,848
      Accumulated deficit                                  (23,062,433)     (23,195,785)
      Total Liabilities and Shareholders Impairment          3,573,541        3,566,848

      Interest and amortization of deferred debt costs       2,530,210        1,839,060
      Total Expenses                                         3,125,534        1,895,187
      Net Loss                                              (2,713,482)      (2,022,332)

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

For the quarter ending March 31, 2004 the intrinsic value of the beneficial
conversion feature of the notes was previously recorded as interest expense of
$643,975 . This amount has been reclassified as a debt discount and is being
amortized over the life of the notes. $108,878 of this amount was then expensed
for the three months ended March 31, 2004.

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

<TABLE>
<CAPTION>
      -----------------------------------------------------------------------------------
                                                                  March 31, 2004

                                                           As Reported      As Restated
                                                          -----------------------------
<S>                                                       <C>               <C>
      Debt discount and deferred financing costs, net     $    212,006     $     50,476
      Total Assets                                             409,662          248,132
      Accumulated deficit                                  (20,601,297)     (23,162,972)
      Total Liabilities and Shareholders Impairment            409,662          248,132

      Interest and amortization of deferred debt costs         211,445          203,523
      Change in Fair Market Value of Derivative Liability           --        1,745,105
      Total Expenses                                           350,490        2,087,673
      Net Loss                                                (252,336)      (1,989,519)

      Net loss per share                                          (.00)            (.00)
      -----------------------------------------------------------------------------------
</TABLE>

For the quarter ending June 30, 2004 the intrinsic value of the beneficial
conversion feature of the notes was previously recorded as interest expense of
$817,610. This amount has been reclassified as a debt discount and is being
amortized over the life of the notes. $154,116 of this amount was then expensed
in for the three months ended June 30 2004.

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

<PAGE>

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------------------
                                                                     June 30, 2004

                                                              As Reported      As Restated
                                                             -----------------------------
<S>                                                          <C>              <C>
      Debt discount and deferred financing costs, net        $    380,169     $     78,162
      Total Assets                                                650,872          348,865
      Accumulated deficit                                     (20,891,442)     (29,109,628)
      Total Liabilities and Shareholders Impairment               650,872          348,865

      Interest and amortization of deferred debt costs            210,090          264,580
      Change in Fair Market Value of Derivative Liability              --        3,612,502
      Total Expenses                                              364,216        6,118,881
      Net Loss                                                   (290,145)      (5,946,656)

      Net loss per share                                             (.00)            (.00)
      --------------------------------------------------------------------------------------
</TABLE>

For the quarter ending September 30, 2004 the intrinsic value of the beneficial
conversion feature of the notes was previously recorded as interest expense of
$636,182. This amount has been reclassified as a debt discount and is being
amortized over the life of the notes. $181,428 of this amount was then expensed
in for the three months ended September 30 2004.

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

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------------------
                                                                   September 30, 2004

                                                              As Reported      As Restated
                                                             -----------------------------
<S>                                                          <C>              <C>
      Debt discount and deferred financing costs, net        $    279,610     $     56,802
      Total Assets                                                460,550          237,742
      Accumulated deficit                                     (21,065,673)     (22,539,211)
      Total Liabilities and Shareholders Impairment               460,550          237,742

      Interest and amortization of deferred debt costs            173,259          290,508
      Change in Fair Market Value of Derivative Liability              --       (5,581,572)
      Total Expenses                                              247,329       (5,390,253)
      Net Income (Loss)                                          (174,231)       6,570,417

      Net Income(Loss)per share                                      (.00)             .04
      --------------------------------------------------------------------------------------
</TABLE>

Note 16 - Restatement 2005 -Quarterly

For the quarter ending March 31, 2005 the intrinsic value of the beneficial
conversion feature of the notes was previously recorded as interest expense of
$2,428,319 . This amount has been reclassified as a debt discount and is being
amortized over the life of the notes. $440,755 of this amount was then expensed
for the three months ended March 31, 2005.

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

<PAGE>

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------------------
                                                                     March 31, 2005

                                                              As Reported      As Restated
                                                             -----------------------------
<S>                                                          <C>              <C>
      Debt discount and deferred financing costs, net        $    889,544     $    376,113
      Total Assets                                              6,899,025        6,385,594
      Accumulated deficit                                     (21,964,299)     (24,947,486)
      Total Liabilities and Shareholders Impairment             6,899,025        6,385,594

      Interest and amortization of deferred debt costs            457,531          935,511
      Change in Fair Market Value of Derivative Liability              --          630,702
      Total Expenses                                              747,192        1,855,874
      Net Loss                                                   (643,019)      (1,751,701)

      Net loss per Share                                             (.00)            (.00)
      --------------------------------------------------------------------------------------
</TABLE>

For the quarter ending June 30, 2005 the intrinsic value of the beneficial
conversion feature of the notes was previously recorded as interest expense of
$1,825,345. This amount has been reclassified as a debt discount and is being
amortized over the life of the notes. $602,975 of this amount was then expensed
in for the three months ended June 30 2005.

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

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------------------
                                                                      June 30, 2005

                                                              As Reported      As Restated
                                                             -----------------------------
<S>                                                          <C>              <C>
      Debt discount and deferred financing costs, net        $    809,533     $    338,888
      Total Assets                                              6,599,160        6,128,515
      Accumulated deficit                                     (22,615,854)     (26,755,606)
      Total Liabilities and Shareholders Impairment             6,599,160        6,128,515

      Interest and amortization of deferred debt costs            437,433          901,701
      Change in Fair Market Value of Derivative Liability              --          655,070
      Total Expenses                                            1,097,610        2,500,925
      Net Loss                                                   (651,557)      (1,808,120)

      Net loss per Share                                             (.00)            (.00)
      --------------------------------------------------------------------------------------
</TABLE>

For the quarter ending September 30, 2005 the intrinsic value of the beneficial
conversion feature of the notes was previously recorded as interest expense of
$1,469,594. This amount has been reclassified as a debt discount and is being
amortized over the life of the notes. $355,752 of this amount was then expensed
in for the three months ended September 30 2005.

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

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------------------
                                                                   September 30, 2005

                                                              As Reported      As Restated
                                                             -----------------------------
<S>                                                          <C>              <C>
      Debt discount and deferred financing costs, net        $    729,522     $    301,663
      Total Assets                                              6,764,112        6,336,253
      Accumulated deficit                                     (23,060,364)     (26,111,344)
      Total Liabilities and Shareholders Impairment             6,764,112        6,336,253

      Interest and amortization of deferred debt costs            539,566          362,935
      Change in Fair Market Value of Derivative Liability              --       (1,311,762)
      Total (Income)Expenses                                    1,242,794         (685,470)
      Net Income(Loss)                                           (444,509)         644,262

      Net loss per Share                                             (.00)            (.00)
      --------------------------------------------------------------------------------------
</TABLE>